Most people have lived through difficult economic times of some sort. And everyone has at some point learned about the most significant economic downturn in modern US history – the Great Depression of the 1930s. In keeping with our unique business cycle theory, ITR Economics is forecasting that another Great Depression will start near the beginning of the next decade. We put together a comparison between the 1930s Great Depression and the upcoming 2030s Great Depression to give you insight into what’s to come.

 

Causes of the 1930s Great Depression

Coming out of the first world war, the 1920s were a time of ample growth in the economy. Most people thought the good economic times were going to last; some looked to “make it big” in the stock market, invested unwisely in other areas, and spent lavishly. Of course, this was not true of everyone, but such behavior was widespread enough in the US and Europe to lead to a serious problem when the good times came to end. Behind the consumer spending and investing by individuals and businesses were central banks that were ultimately very accommodative in their policies. Without their actions, the 1930s would have been very different.

As most people were unaware of the negative economic signs, the stock market crashed in October of 1929. Soon after the crash, Wall Street grew frenzied as investors faced heavy losses. This caused a ripple effect, and key banks soon failed, ultimately leading many to lose their money, jobs, businesses, and homes. The first Great Depression spanned a decade, finally concluding in 1939.

Did you know that ITR Economics was founded in part because of the Great Depression? Our firm was founded in 1948 by Chapin Hoskins, a managing editor at Forbes magazine. Hoskins was researching economic theory to determine whether there was a way to identify upcoming depressions and recessions. Having lived through the Great Depression, he thought someone should have seen such a catastrophic event coming. With our passion for helping businesses plan effectively ahead of upcoming economic turns, ITR Economics has kept this spirit alive, whether the future holds rise or decline. Both require lead time to plan and take appropriate actions.

[ Further Reading: 2008 Great Recession vs 2030s Great Depression ]

How the 1930s Great Depression Will Compare to the 2030s Depression

The causes of the upcoming Great Depression will not be the same as the original, and the two events will not “feel” the same. For example, due to certain federal regulations that weren’t in place 100 years ago, banks won’t be failing in the 2030s. On the other hand, we will have a new demographics issue to contend with in the 2030s; our aging population contrasts with the plentitude of young workers a century ago.

Predominantly, the next Great Depressions will be similar to its predecessor in the way it will be unforeseen and unexpected for the vast majority of people; for that reason, the emotional strain on people and the similar pain for unprepared businesses could parallel that of the 1930s.

Just as many of us will never forget the influence of COVID-19 on our lives, the Great Depression of the 2030s will impact the way we think, how we spend money, who and what we trust, and what we assign importance to in our lives.

How to Remain Hopeful During the 2030s Great Depression

Of course, the upcoming Great Depression will have a profound effect on mental health, which is beyond the scope of this piece. However, we can offer some practical suggests to help individuals best navigate what’s to come.

• Have the Right Financial Mindset
  • There will be work and opportunities. Not all industries will facing the same economic challenges.
  • There will be a lot of negative news about unemployment, the stock market, wages, and some business failures. Deal with the economic realities and consult actual data available from ITR.
  • Firms and individuals that are entrepreneurial will find opportunities, especially as they adapt to the needs of the marketplace.
  • Competitive advantages and value-add positioning will be key.
  • Scrutinize your cost-structure heading into the depression. High fixed costs will be difficult to roll back.
• Be Prepared Once the Depression Ends
  • Regarding personal finances – and this might seem difficult: save as much money as you can between now and the next decade.
  • The climb out of a depression is a time of tremendous opportunity. Look to invest or start your business after the Great Depression. You don’t want to look back with regret at a missed opportunity.
  • Knowing the low point of this economic contraction will give you a competitive advantage. Preparing your business now to capitalize when that moment arrives could put you ahead of the competition coming out of the depression.

Just as the 1930s Great Depression defined a generation, the upcoming Great Depression will define a generation as well. While the next Great Depression will be driven by very different circumstances, there are many things you can do for yourself and your business to establish advantageous positioning before, during, and after the downturn. Remember to follow ITR Economics; we can help you reduce risk and make practical and profitable business decisions, even during these upcoming tumultuous times.

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BY BILL MURPHY JR., WWW.BILLMURPHYJR.COM @BILLMURPHYJR

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BY JEFF HADEN, CONTRIBUTING EDITOR, INC.@JEFF_HADEN

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Fear gets a bad rap. It’s a so-called negative emotion, one that supposedly stands between us and our dreams. It is certainly true that pure fear doesn’t feel good, but that is the whole point of the emotion. Fear tells us to get the hell out of Dodge because Dodge is a bad place. Fear evolved over millions of years to protect us from danger. So, yes, fear is a feel-bad emotion, but also, and perhaps paradoxically, the engine in a whole range of pleasurable activities and behaviors—which inspire what we can call recreational fear.

Once you start looking for it, you’ll find recreational fear everywhere. From a very early age, humans love being jump-scared by caregivers in the form of peek-a-boo, and being hurtled into the air (and caught). They get older and take great pleasure in chase play and hide-and-seek. They are drawn to scary stories about monsters and witches and ghosts. They perform daredevil tricks on playgrounds and race their bikes toward what, from a parent’s perspective, is certain and violent death. As they grow a little older they get together for horror movie nights, stand patiently in line for roller coasters, and play horror video games. Indeed, most of us never quite lose our peculiar attraction to recreational fear—even if we eschew slasher flicks or dark crime shows brimming with murder, death, and gore.

So even though Dodge may be a bad place, we still keep visiting it, at least from the safe distance of play and make-believe. How come?

One hypothesis is that recreational fear is a form of play behavior, which is widespread in the animal kingdom and ubiquitous among humans. When an organism plays, it learns important skills and develops strategies for survival. Playfighting kittens train their ability to hold their own in a hostile encounter, but with little risk and low cost, compared to the real thing. Same with humans. When we play, we learn important things about the physical and social world, and about our own inner world. When we engage in recreational fear activities specifically, from peek-a-boo to horror movie watching, we play with fear, challenge our limits, and learn about our own physiological and psychological responses to stress. In other words, recreational fear might actually be good for us.

To investigate whether that is indeed the case and why, my colleagues and I have established the Recreational Fear Lab, a research center at Aarhus University, Denmark. We do lab studies, survey studies, and real-world empirical studies to understand this widespread but scientifically understudied psychological phenomenon.

In one ambitious research project, led by my colleague Marc Malmdorf Andersen, we set out to investigate the experiences of guests at a very frightening haunted house—Dystopia Haunted House in Denmark. We mounted surveillance cameras in the house’s scariest rooms, strapped participants with heart rate monitors, and distributed a bunch of questionnaires. The surveillance footage allowed us to see how guests responded to frightening events, such as a chainsaw-wielding pig-man chasing them down a dark corridor. The heart rate monitors told us about their physiological responses to such events, and the questionnaires allowed us to understand how they felt about it all.

They told us they perceived their experiences as a kind of play, supporting our notion of recreational horror as a medium for playing with fear. But we also wanted to go deeper into the relationship between fear and enjoyment. You might think that relationship is linear—the more fear, the better. But when we plotted the actual relationship between fear and enjoyment, it looked like an upside-down U. In other words, when people go to a haunted attraction, they don’t want too little fear (which is boring), and they don’t want too much fear (which is unpleasant). What they want is to hit what we call the “sweet spot of fear.” That doesn’t just go for high-intensity haunted attractions either. When you hurtle a kid into the air, you don’t want it to be too tame or too wild; when teenagers joyride their bikes, they need just the right amount of tummy-tickling arousal; when you pick a horror movie on Netflix, you try to go for the one that sits just at the right point on the scare-o-meter.

So, there is pleasure to be had from these vicarious visits to Dodge, but are there any other benefits? In several past and ongoing studies of the psychological and social effects of engagement with recreational fear, we’ve seen it improve people’s ability to cope with stress and anxiety. For instance, one study—led by my colleague Coltan Scrivner—found that people who watch many horror movies exhibited better psychological resilience during the first Covid-19 lockdown than people who stay away from scary movies. Presumably, the horror hounds have trained their ability to regulate their own fear from playing with it. We know from another Dystopia Haunted House study that people actively use a range of coping strategies to regulate their fear levels in pursuit of the sweet spot, and it makes sense that we get better at using those strategies through practice.

You can think of recreational fear as a kind of mental jungle gym where you prepare for the real thing, or as a kind of fear inoculation. A small dose of fear galvanizes the organism for the big dose that life throws at it sooner or later. So even though fear itself may be unpleasant, recreational fear is not only fun—it may be good for us. My colleagues and I even have preliminary results to suggest that some people with mental health issues, such as anxiety disorder and depression, get relief from recreational horror. Maybe it’s about escaping anhedonia—emotional flatlining—momentarily, and maybe it’s about playing with troublesome emotions in a controllable context. For fear to be fun, you need to feel not only that the levels are just-so, but that you are in relative control of the experience.

With research findings such as these in mind, we should maybe think twice about shielding kids and young people too zealously from playful forms of fear. They’ll end up in Dodge sooner or later, and they will be better equipped if they’ve at least pretended to be there before.

Mathias Clasen, Zócalo Public Square

October 25, 2022

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Innovation, indeed, thrives in recession: In July, government data confirmed that the American economy shrank for the second quarter in a row. Although this didn’t technically confirm a recession, it has raised worries within the business community. A looming recession may stoke anxiety, but business leaders and entrepreneurs should welcome the opportunity to drive their business forward by investing in innovation.

Francesco Fazio Business Transformation October 22, 2022

That may sound counterintuitive. After all, recessions are infamous for forcing companies to slash budgets and lay off employees. But history has shown that economic downturns are the ripest periods of innovative activity. From Snow White and the Seven Dwarfs (the world’s first feature-length animated film which was made amid the Great Depression) to companies like Instacart and Grubhub that innovated and thrived amid the COVID-19 economic downturn, recession can trigger new habits that persist beyond it and also fuel innovation.

This begs the question: What trends should companies be watching today?

Lay of the land as we approach 2023

First, on the macroeconomic side, every consumer is struggling with inflation, and this has a profound impact on where and how consumers spend. Eighty percent of Americans said they will rethink or reduce spending soon. Consumers expect high inflation to persist, meaning prolonged lower spending. Additionally, during the pandemic customers bought many substantial consumer goods – such as new televisions or bread makers – and won’t need or want to buy new goods anytime soon. In this context, it might seem more challenging for companies to maintain their business, let alone grow. But a few smart innovations can help turn this dilemma into an opportunity.

Customers are more concerned with price than brand loyalty, allowing companies to rethink how they are configured to deliver the same products at lower costs, and in a more agile way.

The company Flexe, the “Airbnb of warehouses” rents out 550 warehouses, worth 25M sq-ft, to shippers, helping cut costs, and has been a key partner to digital native, direct-to-consumer companies like Casper or Hims.

But to fully grasp how consumers are responding to this inflationary pressure, it needs to be contextualized as occurring in the wake of a pandemic. People have had years of meaningful experiences taken away from them and are engaging in a practice that economists have dubbed ‘revenge spending’. In August of 2021, the average American was spending $765 more than they had the year before. Of course, this was before a surge in inflation, but companies have ample opportunity to take advantage of this desire in smaller ways. Bed Bath and Beyond has continued to report that consumers are coming to its stores to indulge in little luxuries. During difficult times, consumers will tighten their belts when shopping for essentials and will stop buying large products but will still buy small indulgences as a reprieve from the difficult times.

Post-pandemic life bleeds directly into a second trend, the phygital future. Pandemic restrictions forced society to live, work, and play remotely whenever possible. Although this was an unfamiliar situation, the taming of the virus did not result in a total return to normal. NBA attendance is at 95.1% of its pre-pandemic height, OpenTable reservations are at 89.6%, and TSA Check-ins are at 87.6%; office occupancy rates, however, are only at 44.2%. These numbers paint a clear picture: people want to pair the joys of the physical world with the convenience of the digital, particularly in the workplace. Companies need to be thoughtful about how they can provide convenience in their digital offerings and how can they provide excitement and novelty in person.

In addition to a shift in living, recent years have seen a shift in people’s values. For one thing, consumers have become far more environmentally conscious. Between 2016 and 2021, there has been a worldwide 71% rise in consumers searching for sustainable goods and a 65% uptick in posts about biodiversity loss across the same period. In a 2019 survey, half of the respondents say they have switched the products they buy because they did not match their values, with the number one value cited being a lack of sustainability. Beyond social responsibility concerns, consumers are most interested in engaging with companies that reflect their identities. 68% of millennial and Gen-Z shoppers say that brand matters to their identity and how they think of themselves.

Understand Consumer Behavior:  What Do You Offer?

Creating affordable, entry-level versions of your offerings can be a valuable – if not necessary – step to take in a recession. Once people feel comfortable with your product and better economic conditions allow them to pay more, you’ll reap the rewards. For instance, Duolingo offers a free language learning service as well as an ad-free premium version.

Does your company understand what customers want to buy (i.e., products or experiences)? This is especially relevant in figuring out if your customers are more interested in owning products or having experiences. Lululemon has branched out from just being a clothing company into being a lifestyle brand. They have opened experiential stores, where customers can take a yoga class, drink smoothies, and browse traditional products. Companies should consider how their brand can be a product as well as an experience.

Leverage the Phygital: How Do You Engage?

To counter package thieves, Amazon started the practice of drivers taking photos to confirm that parcels had reached their destination. By taking a photo, drivers could show users where their packages had been placed and could confirm that they had successfully delivered the goods. With this feature, stolen packages would no longer result in large numbers of complaint calls, disputing if the package had arrived, allowing Amazon to save costs on labor and having to re-send packages.

Does your company understand how its consumers want to be served? Some consumers value human interaction and, recession or not, are willing to pay a premium for it. In an era where online banking is easier than ever, Capital One has cafés in its banks for customers who want to come in, do their in-person banking, and get some work done. Not only does this allow them to sell food and beverages, but it also gives them a greater opportunity to sell high-touch financial advisory services to their in-person-oriented clientele.

Express Your Values:  What Do You Stand For?

Are your company’s values authentic, clear, and consistent? These efforts need to go beyond palliative buzzwords and should be grounded in the real work the company does. Warby Parker has its ‘Buy a Pair, Give a Pair’ initiative. For every pair of glasses bought, Warby gives someone without access to corrective lenses a pair. This initiative allows customers to feel like they’re contributing to a larger movement, in this case, the democratization of eyesight, through buying Warby’s glasses.

Finally, how can your company leverage its employees and – dare we even say its customers – to co-define what the company should stand for? Values can’t (only) be imposed from the boardroom down. Starbucks is an excellent example of an employee-values-driven company. Their baristas, or partners, are at the center of Starbucks’ management team, as they see them as key custodians and expressions of the brand.

Asking tough questions about how your company can innovate during a recession can be daunting, and their answers even more so. Fortunately, there is a method to figuring out how your company can reinvent itself in turbulent economic times – we call it our ‘double-diamond’ process, a design-led approach to discover and validate innovation bets – see figure 3.

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Are great leaders born or made?

In our experience, working with leaders who range from start-up entrepreneurs to CEOs of multi-billion-dollar companies, the answer is: both. We’re all born with a unique set of characteristics that influence our potential as leaders. But CEOs who take self-reflection and accountability seriously also have the power to enhance those strengths, shore up those weaknesses, and grow along with their companies.

As part of your prep for your annual planning session and a BIG 2023, take a moment to reflect on these four key ideas that could lead you from good to great next year.

1. Separate “management” from “leadership.”

“We choose to go to the moon,” said President John F. Kennedy in a famous 1962 speech.  Did JFK then start building rockets and training to become an astronaut? No. He left that to NASA.

That’s the difference between leading and managing. Leaders communicate a vision so BIG and inspiring that it attracts and motivates everyone in their orbit. Then, they delegate responsibility for the daily, actionable activities that will realize that vision to managers. Of course, there are instances where management and leadership overlap. At the CEO level, there will be times when you have to manage how your c-suite executives coordinate with each other and execute key tasks. The CEO is also ultimately responsible for managing the most important internal and external business relationships, from shareholders and bankers on down to making key hires. And at the management level, effective team leaders should inspire employees to go above and beyond, challenge themselves, and connect the work they do to the company’s greater mission.

But leadership can — and will — suffer if the CEO spends too much of his or her valuable time managing. We often encourage CEOs who have drifted away from core leadership responsibilities to create a Stop Doing List. This simple but effective exercise can help you identify tasks that you should be delegating, as well as unnecessary activities that should be discontinued.

2. Inspire an “emotional commitment.”

On a recent episode of Wisdom From the Top With Guy Raz, legendary IBM CEO Lou Gerstner explained the invigorating effect that high-level leadership can have on a company. “Great leaders imbue the organization with an emotional commitment,” Gerstner said. “They create passion. They create a sense of belonging, a sense of achievement, a sense of challenge.”

The strength of that connection between you as a leader and the people working for you has become a key differentiator between companies that are suffering through the Great Resignation, and companies that are taking advantage of an unusually deep talent pool to reenergize and prepare the next step towards BIG. Yes, a decentralized workforce full of high achievers who know they have options expect more autonomy and more holistic benefits than they have in the past. But they also want to feel like what they do matters: to the company, to the world, and to you as the CEO.

Bolstering emotional commitment starts with your communication rhythm. Make sure that meetings at every level of your organization reserve space for employees to be heard. And in your own conversations with team members, set aside a few minutes to ask people how they’re doing, what they need to succeed, and what kind of additional support you can provide.

Finally, if you want to send a really strong message to your whole company about commitment and accountability, step down from the podium at this year’s annual planning session and let your CEO coach facilitate. Spend that day or two in the trenches with your employees and they’ll feel more connected to you and to the part they’re going to play in your company’s march to BIG.

3. Give your company what it needs.

One reason that many CEOs have trouble separating leadership from management is that they started their careers doing both. There might have been a time when your company genuinely needed the CEO to pitch potential customers, design products and services, or even pack boxes for tomorrow’s shipment.

But as a company passes key growth points, it requires something different from its CEO.

In the transition from working out of a bedroom to clearing that first million in revenue, the “CEO” is still deeply involved in everything. Then, as you perfect your market fit and grow into a 10, 20, or 50-million dollar business, the CEO has to let go, build out the executive team, while also generating enough momentum to maintain a growth trajectory.

External circumstances will also play a part in how you lead. If your industry is about to undergo a major transformation, your company might need the CEO to devote more time to learning and R&D. During the early months of COVID, you probably devoted extra time to crisis management while accelerating your digital pivot. Hired-gun CEOs need to work with founders, board members, and shareholders to create a unified vision of where the company should be going.

And CEOs eying an exit might focus on finding the right balance between preserving the company’s legacy while preparing it for the future.

Adapting a leadership style to challenges and opportunities doesn’t mean that the CEO abandons their long-term vision for BIG. It means that the CEO is insightful enough and humble enough to understand when change is necessary. The target can stay the same. But there may be more effective ways to lead your company towards it.

4. Reassess yourself.

A common theme that connects good leadership traits is a CEO who isn’t afraid to admit that he or she doesn’t know everything. And that kind of vulnerability isn’t easy to cultivate. The BIG job comes with so much pressure and responsibility that projecting unwavering strength and confidence at all times often feels essential. But the best leaders learn when it’s time to lower that guard and connect honestly, both with key stakeholders in the business and with themselves.

Working with a CEO coach who’s gone through the same journey that you’re going through now is perhaps the most effective way to add accountability to your leadership package. As part of our Make BIG Happen System, we help our CEO coaching clients reexamine the core identity of the business, as well as their connection to the company, their vision for its success, and potential improvements to their leadership style that can help the company get to BIG faster. In many cases, we even encourage CEOs to give themselves the same TTI Success Insights tests that they use when hiring new staff. Understanding how and why you react to various stressors is often an important step towards managing, harnessing, and improving your innate leadership traits.

Because, ultimately, no leader is ever a finished product, just like no successful company is ever really done growing or evolving. Holding yourself accountable will keep those trajectories in sync as both you and your company continue to Make BIG Happen.

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“We have always considered Patagonia an experiment in doing business in unconventional ways.” These are the words of Yvon Chouinard – the founder of multi-billion-dollar outdoor apparel company Patagonia. He has often done things differently and even said, “I never wanted to be a businessman.”

Recently, you might have read that Yvon “gave away his business.” While that’s not entirely true, he did do something quite impressive.

Yvon transferred 100% ownership of the company to two new entities. He gave 98% of the company’s shares to Holdfast Collective, a social welfare organization fighting climate change, and the remaining 2% to the Patagonia Purpose Trust. It’s still a for-profit company – but now, one with a unique environmental justice mission.

Patagonia will continue to give 1% of profits to grassroots organizations – and all remaining annual profits will support solving climate change. The purpose behind this is to contribute to a thriving planet. The Patagonia founder believes that ongoing resources are necessary to make this happen, so he has chosen to restructure the company.

For those familiar with Patagonia, this should come as little surprise. Since the inception of the company, Yvon – now 83 – has been consistent in his approach to leading a purpose-driven, compassionate, and committed company. His activism while running a profitable business has been exemplary; it’s capitalism with purpose at its finest.

Yvon Chouinard’s leadership style is exceptional.

Here are four important lessons:

Leadership lesson #1: Maintain integrity through purpose and values

From the beginning, Yvon has led Patagonia with a deep commitment to his vision and core value of environmental consciousness. While many companies have started pledging profits to purposeful causes only in recent years, Yvon has been doing this for decades. His commitment is flawless, so his values remain strong.

How has he demonstrated this commitment? 

Since 1985, Yvon has pledged 1% of all sales as part of the 1% For the Planet initiative. He also hasn’t shied away from standing up for his beliefs. Whether lobbying or suing the federal government when they announce plans to reduce the size of two national monuments in Utah or moving trade shows and conferences to states that support the environment, Yvon has never been afraid to stand up for his values.

Patagonia has done practical things to demonstrate their continued commitment to their purpose, including the Tools for Activists annual conference, their books, the move in the 1990s to organic cotton, and the level of transparency regarding how and where they manufacture their clothes. This commitment to purpose, consistency in messaging, and transparency has created a solid foundation of trust in the brand and is an indication of the reliable leadership behind the brand.

Leadership lesson #2: Don’t be afraid to go against the norm

Reading that a billionaire business owner has “given away his company” isn’t something you see every day – but Yvon likes to innovate in business. He isn’t afraid to be unique in his approach. His philosophy has always been to do things differently.

How has he done it? 

Patagonia, as a brand, has committed to the philosophy of reducing, reusing, and recycling. As a for-profit company, asking people to buy less could have been a risky proposition. But that has not been the case for Patagonia. It has continued to grow successfully despite its leader’s altruistic inclinations.

Patagonia was one of the first companies to focus on how to reuse and recycle older items. In a seemingly odd business strategy, Yvon wanted to stop people from throwing away damaged items and buying new Patagonia clothing. He created a repair guide, program, and scheme for their customers: if a zip breaks, get it repaired – free of charge. The company set up repair tutorials, FAQs, and product questions, so people could do it themselves if needed.  This brilliant idea ended up boosting sales and revenue.

Leadership lesson #3: Prioritize employees and workplace culture

Yvon treats his employees with the same respect he treats the planet. Patagonia became a company known for its quality workplace culture because of the structures and overarching mindset Yvon put in place. He reportedly doesn’t care when his employees work, as long as the job gets done. His preference is having motivated and engaged employees in his workforce, rather than rigid policies.

There are small ways Yvon has achieved this: for example, with flexible working: letting his staff go surfing when “the surf is good” (hence the title of his book ‘Let My People Go Surfing’). But he’s done the big things, too: in 1984, he set up the Great Pacific Child Development Centre. At the time, it was one of only 150 office-based childcare centers in the US. Patagonia has thrived on supporting parents and offering extended maternity and paternity leave and achieving gender parity and pay equity.

Yvon doesn’t believe in working to burnout. As a leader, he believes in the value of modeling that a work-life balance is essential, from the top. He even takes time out of the office from June until November each year – a time when he likes to fish.

Leadership lesson #4: Re-evaluate business process when needed 

Over the several decades that Patagonia has been in business, Yvon has demonstrated that he is always learning, adapting, open to change, and willing to take on fresh ideas. No leader can stick to one path and expect consistent success. When there are roadblocks, as faced by every business leader, the secret is to re-evaluate how you do business and implement new concepts.

When a recession hit after Patagonia’s rapid and vast growth in the 1980s, business slowed down. Previously, the company had been growing by 50% each year, but this started to stall.

Yvon re-evaluated. His business had grown significantly, so he slowed down when new opportunities started coming back his way and chose to stabilize how the company moved forward. His plan was to future-proof Patagonia to withstand changing economies. This worked beautifully.

Yvon is correct when he says there are two kinds of growth: “one where you grow stronger, and one where you grow fat. You have to look out for growing fat.”

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Written by Dr. Samantha Madhosingh.

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