Business Musings: Economic Uncertainty
Note: I wrote this at the end of July. By the end of the first week in August, the doomsayers got confused by the stellar jobs report here in the U.S. A lot of the analysis is a confused “this doesn’t fit into our models,” rather than a discussion of how to find new models. I’m mostly leaving the post as it was when I put it on Patreon ten days ago, but a lot has changed since then, mostly in the tone of the reporting.
It’s a cautionary tale, really. I heard from a lot of you, panicked at the economic news, not realizing that what wasn’t being reported was the good news. Such as the fact that here in the U.S., gas prices have fallen for the past eight weeks. There’s other good economic news as well. Mortgage rates fell last week for the first time this summer. But as long as people still feel the pinch of higher prices from May/June, then the good news doesn’t get through. What follows is an examination, not of the news cycle, but how the news cycle impacts us and our business choices. So…here goes:
Gas prices rose worldwide at the beginning of the summer. When gas prices rise, the cost of almost everything else rises as well, because goods need to get shipped to market or they cost more to manufacture.
The causes of the rising prices were a perfect storm. The Russian attack on Ukraine, climate change (causing severe storms and record heat, both of which harm the supply chain and more), the fact that the big oil companies are profit-taking rather than trying to ease the price of energy, among other things are creating, if nothing else, uncertainty in the markets worldwide.
As I write this in late July, gas prices have decreased significantly, but the talk of recession has increase exponentially. So much so that The Columbia Journalism Review has taken reporters to task to unnecessarily fear-mongering consumers. The talk of recession, according to CJR, is almost as bad as a recession itself.
In fact, they cite some evidence that “hyping economic fear” can create more fear which can have a major impact on consumer behavior, perhaps creating the kind of downturn that everyone is worrying about.
The article came out in response to July’s Gross Domestic Product numbers, which were…unclear. Jon Allsop of CJR puts the problem this way:
Most important, the GDP numbers were hard for journalists to sum up because the economy as a whole is hard to sum up right now: it’s in a weird post-pandemic phase where different indicators are flashing different signs for a messy hodgepodge of reasons.
The reasons? Well, the prices are all over the map, gas is up from last year, inflation is up, mortgage rates are rising, the housing sector is slowing, and consumer confidence is down…except in one area, which I will get to below. But job growth has continued and here in the U.S., the unemployment rate is quite low
Once upon a time, economists used most of those factors to figure out whether we were heading into a recession or they would reverse engineer the events to figure out if we had been in a recession.
Now, though, all bets are off. Not only are the indicators all over the map, but the world is as well. The pandemic threw an unpredictable world into a place that is scarily unfamiliar.
We’ve moved into a new age, one that we don’t understand yet. As the article in CJR mentioned, a lot of companies have already become as lean as they can be due to the pandemic. So the usual responses to recessionary fears, such as laying off workers, happened in 2020 and 2021. Every company, from the smallest mom-and-pop to the largest corporation, are still in need of staff after the pandemic changes.
In economic terms, recessionary fears lead to layoffs, layoffs lead to reduced consumer spending, reduced consumer spending leads to less liquidity in the economy, less liquidity reduces inflation…and eventually, the economy evens out.
In real world terms, people lose their jobs, their income, and sometimes their homes. The impact on real lives is terrible and sometimes unjustified.
That’s not happening—or not happening yet. Because while consumers say they’re going to spend less, and some folks are out of fear of what might happen, consumer behavior right now is truly confusing.
In June, Harry Reid International Airport here in Las Vegas had its busiest month ever, with 4.68 million passengers flying in and out of the city—and that was with a serious leftover decline in international travelers. Reed Airport is the eighth busiest airport in the United States, which means that seven other airports had busier months than we did.
Travel is up. Waaaaay up. Dean calls it the Post-Pandemic Escape. Yes, yes, we know. Covid is still here and threatening all of us, but it’s not the same as a novel virus. Now we have vaccines and therapeutics, so people feel safer than they did in 2021 and certainly than they did in 2020. So people are measuring risk and trying to figure out if travel is worth their time.
Most folks have felt that it is. Dean always calls the time between the middle of May and the middle of August the Time of Great Forgetting for writers, because they get distracted by proms, graduations, summer travel, family reunions, and the like.
This year, it was the Time of Great Forgetting on steroids. The travel numbers are just beginning to reflect that. People, who haven’t seen family for more than two years, have decided that Covid and the economy be damned. They will travel to see their loved ones, no matter what the cost.
Dean and I have been discussing this strange summer for some time now. It feels to us—in the shorthand of our relationship—like the response to the First Gulf War here in the U.S.
That response tanked our first business together, the original Pulphouse Publishing. For several months, people stopped buying collectible items (which was what we sold—collectible books). They also stopped buying mail order items.
Our income went from a record high to almost nothing in a few months. We had a bloated business with too many employees and an office with rent that was too high. Rather than laying off staff in a timely manner (which is painful for all concerned) and trying to find cheaper digs, we took out loans, thinking everything would get better.
After all, we had hundreds of thousands in accounts receivable…money, it turns out, that we would never receive.
Our businesses are in better shape now. We never let ourselves get that kind of bloated anymore. And like many companies, we trimmed our businesses to the bone in early 2020 as the pandemic started.
If we were succumbing to the current economic fears—and we aren’t—we wouldn’t have much to trim. No loans for us either. We learned the hard way that in uncertain economic times, the best thing to do is work your way out of it.
Work smarter and harder.
I’m writing about this because so many of you have asked me what indie writers and writers who run their own publishing business should do in uncertain economic times like these. I started getting these letters as the gas prices rose. Then I got more as everyone started screaming about inflation.
People under 50 in the U.S. have never experienced an inflationary spiral. Our Federal Reserve has sacrificed jobs and livelihoods to keep inflation under control. If it started to creep up, then the Fed would use monetary policy that would encourage businesses to trim their workforces. This is one of the many reasons for the huge income inequality in our country, which is not a subject for this particular business blog.
The key here is the point I made above: because of that policy, very few working adults remember what it’s like to live with inflation. The very idea of inflation has people terrified. And we’re talking about 5-8% inflation, not the kind I experience in my youth.
At the risk of sounding like someone who tells you they walked uphill in the snow both ways to get to school every year, the inflation we’re suffering through now is mild compared to the spirals I saw as a young college graduate embarking on her first career.
We were told that our generation had no hope of ever owning a house. We would definitely earn less than our parents, and we would never get ahead economically. (Does that sound familiar to some of you? I’m hearing the same thing now.)
When I was in college, the inflation rate was 13.3%. Home mortgage rates were 18%. The problem was severe and it was caused by a surge in energy prices, just like now. Unlike now, though, the job market was dismal.
It was one of the things that made me freelance. I figured I wouldn’t be able to get and hold a job, and since I wasn’t going to be able to buy a house anyway, why not give freelancing a try? I saw the cruddy economy as an opportunity rather than something to be afraid of.
And perhaps that’s the key to all business success. Instead of looking at each change in the economy as a problem to be solved, a crisis to be endured, it’s better to look through the problem to find the opportunity.
That’s why I started writing The Freelancer’s Survival Guide back in the Great Recession, because I knew some newly unemployed folks would try freelancing, and I wanted them to succeed.
Running a business requires optimism, a way of looking at the world, both good and bad, and finding something positive. Sometimes it takes work. (It certainly did in the worst of the pandemic.) But often, it just takes a mindset shift.
I make that sound so easy. It is not. And there are other considerations. I alluded to them above.
Whenever a crisis hits—be it an unexpected downturn, a difficult inflationary period, a stupid global pandemic—the best thing a business owner can do is take a step back and assess their own business.
Here are the questions to ask:
- Am I spending too much money? Do I have indulgent expenditures? Am I paying for a service that was great two years ago, but is overpriced now? Are there recurring payments that can be cut without harming the business itself?
- Is the business bloated? If you’re large enough to have employees, then you might have too many employees. If you have an outside office, do you need it in this age of Zoom meetings and working from home?
- Are there business practices that you’ve kept, even though they’re out of date? This wasn’t such a relevant question when Dean and I were dealing with the First Gulf War, but it’s very relevant now. There has been a lot of technological change that has reduced the costs of both goods and services, and some of those changes have happened in the past year. It’s always good to investigate new tech, just to see if your business can cheaply and easily adopt it.
- Are you putting out too much product? Too little product? Products that will no longer sell? When the pandemic started, we immediately assessed our product line at WMG and ended up trimming quite a few projects that were Good Ideas At The Time but wouldn’t be cost effective in what we saw as a new economy. It was a smart, if painful, decision. We also cut our in-person workshops because that handwriting was on the wall. Although, jeez, we didn’t expect that handwriting to extend to two years worth of walls.
- What is your business doing well? What are you doing right? You have to know this so that you don’t trim away the positive stuff. Go through the books. See what benefits your business. Then do your damndest to keep those projects and workers and other things.
- Keep the projects of your heart. If you started the business to do something you love, then don’t cut out that project. Keep it. Because if you only keep the stuff you did to fund the project you love, your business will quickly become drudgery.
- Don’t panic. The economy is ever-changing. It will have an impact on your business, yes, but maybe not as big an impact as you might expect. Publishing (traditional and indie) is pretty recession-proof. People always want to read and books have gotten cheaper in the past twenty years. So chances are that even if the economy bottoms out, your publishing business will be just fine.
All the questions I received in the past few months had an air of panic. I even heard it from some personal friends, all of them under fifty. These inflationary pressures are new to most people, and they were responding with the kind of panic that was also present in the financial media (mostly among reporters who were, unsurprisingly, under fifty).
The most unsettling thing about what we’re going through, from my perspective, is that this post-pandemic world is unpredictable as hell. Why this feels like the First Gulf War to me and Dean isn’t because we’re afraid of losing our business (again).
It’s because what that war was for us was a demarcation where the old rules no longer applied. We all had to grope around until we figured out how the new world works.
I’m reading article after article from economists and business experts and financial advisors, and no one agrees on what’s going on right now. The people in charge of the economy worldwide don’t agree either.
We have never seen an economic change like this one. We thought we had a handle on the way that the world would ease out of the worst of the pandemic. Business people looked to the economic pressures of the 1920s, until they realized it did not apply.
Then, the world had a devastating war that killed off (in Europe) most of a generation of young men…followed by the pandemic. For a while, in January, it looked like we would have a pandemic, followed by a world war. That world war fear eased, but left an energy crisis that we’re all still dealing with.
We don’t have historical models to follow. Part of that too is that technology has changed the world dramatically. I’m communicating with all of you now by writing on my computer, and then posting on my website. You’re reading this somewhere in the world (not here) without the benefit of a printing press and a distribution chain and a paper copy (unless you print it yourself).
Technology has made a lot of things cheaper. It has also widened the brain trust, so that solutions come faster. Or at least suggestions come faster.
I don’t know what your businesses is like. You might have an Empire on a Laptop, as one friend called his one-man writing operation. You might have a dozen employees like another writer friend of mine has. You might contract out much of what you do, so that you’re free to compose without giving much thought to cover design or uploading.
I can’t give generic advice for all the different kinds of publishing businesses out there, let alone for other ones. All I can do is say this:
Yes, we’re in a period of economic uncertainty. The key word here isn’t economic. It’s uncertainty. We can’t rely on past patterns to give us insight into the future. This truly is a different world than any we’ve experienced before.
So we are going to grope around in the dark for a while. Eventually, we will figure out what’s happening and what the best response is.
My best response might not be yours. Nor will yours be the same as your best writer friend’s.
The key is to remain calm, be optimistic, and look for the opportunity in the changes.
There are always opportunities, even in the strangest time period.
You just have to find them.
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“Business Musings: Economic Uncertainty,” copyright © 2022 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / alexskopje