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Here comes the downturn


Here comes the downturn – TechCrunch

It’s remarkable how fast the tenor of the times has changed. Only a few months ago we were in a boom that seemed like it might never end. Now the yield curve has inverted; the markets have gone bear; and Google Trends has the word “recession” at its highest level since 2009. There seems to be near-universal consensus that a major, worldwide economic downturn is coming.

When exactly? Who knows? Late 2019 or early 2020, says the smart money; much sooner than that, quoth the doomsayers (including a truly remarkable percentage of CEOs.) What effect will it have on tech, in particular? Ah, now there’s a very interesting question indeed.

You can make a pretty good case that technology, as an industry, will actually see a net benefit from any downturn. Note how tech essentially ignored the Great Recession of 2008 and kept on thriving, despite much of the smart money at the time warning us that the tech industry as we knew it was all but doomed — who can forget Sequoia Capital’s infamous “R.I.P. Good Times” deck?

The theory goes: every industry is becoming a technology industry, and downturns only accelerate the process, because software is eating the world, and recessions bring fresh carrion we don’t even have to hunt. It’s plausible. It’s uncomfortable, given how much real human suffering and dismay is implicit in the economic disruption from which we often benefit. And on the macro scale, in the long run, it’s even probably true. Every downturn is a meteor that hits the dinosaurs hardest, while we software-powered mammals escape the brunt.

Even if so, though, what’s good for the industry as a whole is going to be bad for a whole lot of individual companies. Enterprises will tighten their belts, and experimental initiatives with potential long-term value but no immediate bottom-line benefit will be among the first on the chopping block. Consumers will guard their wallets more carefully, and will be ever less likely to pay for your app and/or click on your ad. And everyone will deleverage and/or hoard their cash reserves like dragons, just in case, which means less money for new or struggling companies.

Above all we might be hurt by the mindset more than the money. Bruce Sterling once observed, of the debt calamities of 2008, that the interesting thing was that physically, hardly a molecule had changed — and yet we all agreed that we had all transitioned from a world of plenty to one of despair. Similarly, on paper, any recession’s numbers really won’t be so bad. Heck, even if GDP shrank an impossible-to-imagine 10%, that would take us back to the dire wasteland of warlords and mutants that we last suffered through in [checks notes] er, 2013, which didn’t seem like such an dystopia at the time. But we’re geared so much for growth that even stagnation feels like disaster.

The lesson is pretty clear: it’s coming, and it will bring both misery and opportunities, depending on some combination of its vicissitudes and how well you are positioned for it. Don’t be overstretched. Don’t be in (too much) debt. Don’t be flailing. And this is probably a worse-than-usual time to bet the company on any particular project, or pivot. But at the same time, for better or worse, we in tech are, currently, carrion eaters high up in the food chain. That bright light in the sky, that oncoming meteor, brings a kind of ugly promise. Let’s try to make the best of it, and not just for ourselves?


n

When exactly? Who knows? Late 2019 or early 2020, says the smart money; much sooner than that, quoth the doomsayers (including a truly remarkable percentage of CEOs.) What effect will it have on tech, in particular? Ah, now thereu2019s a very interesting question indeed.n

You can make a pretty good case that technology, as an industry, will actually see a net benefit from any downturn. Note how tech essentially ignored the Great Recession of 2008 and kept on thriving, despite much of the smart money at the time warning us that the tech industry as we knew it was all but doomed u2014 who can forget Sequoia Capitalu2019s infamous u201cR.I.P. Good Timesu201d deck?n

The theory goes: every industry is becoming a technology industry, and downturns only accelerate the process, because software is eating the world, and recessions bring fresh carrion we donu2019t even have to hunt. Itu2019s plausible. Itu2019s uncomfortable, given how much real human suffering and dismay is implicit in the economic disruption from which we often benefit. And on the macro scale, in the long run, itu2019s even probably true. Every downturn is a meteor that hits the dinosaurs hardest, while we software-powered mammals escape the brunt.n

Even if so, though, whatu2019s good for the industry as a whole is going to be bad for a whole lot of individual companies. Enterprises will tighten their belts, and experimental initiatives with potential long-term value but no immediate bottom-line benefit will be among the first on the chopping block. Consumers will guard their wallets more carefully, and will be ever less likely to pay for your app and/or click on your ad. And everyone will deleverage and/or hoard their cash reserves like dragons, just in case, which means less money for new or struggling companies.n

Above all we might be hurt by the mindset more than the money. Bruce Sterling once observed, of the debt calamities of 2008, that the interesting thing was that physically, hardly a molecule had changed u2014 and yet we all agreed that we had all transitioned from a world of plenty to one of despair. Similarly, on paper, any recessionu2019s numbers really wonu2019t be so bad. Heck, even if GDP shrank an impossible-to-imagine 10%, that would take us back to the dire wasteland of warlords and mutants that we last suffered through in [checks notes] er, 2013, which didnu2019t seem like such an dystopia at the time. But weu2019re geared so much for growth that even stagnation feels like disaster.n

The lesson is pretty clear: itu2019s coming, and it will bring both misery and opportunities, depending on some combination of its vicissitudes and how well you are positioned for it. Donu2019t be overstretched. Donu2019t be in (too much) debt. Donu2019t be flailing. And this is probably a worse-than-usual time to bet the company on any particular project, or pivot. But at the same time, for better or worse, we in tech are, currently, carrion eaters high up in the food chain. That bright light in the sky, that oncoming meteor, brings a kind of ugly promise. Letu2019s try to make the best of it, and not just for ourselves?n”,”protected”:false},”excerpt”:”rendered”:”

Itu2019s remarkable how fast the tenor of the times has changed. Only a few months ago we were in a boom that seemed like it might never end. Now the yield curve has inverted; the markets have gone bear; and Google Trends has the word u201crecessionu201d at its highest level since 2009. There seems to […]n”,”protected”:false,”author”:18174465,”featured_media”:1762430,”comment_status”:”open”,”ping_status”:”closed”,”sticky”:false,”template”:””,”format”:”standard”,”meta”:”outcome”:””,”status”:””,”crunchbase_tag”:0,”amp_status”:””,”relegenceEntities”:[],”relegenceSubjects”:[],”jetpack_publicize_message”:”Here comes the downturn by @rezendi https://tcrn.ch/2V5nUvJ”,”categories”:[352,17396],”tags”:[],”crunchbase_tag”:[],”tc_stories_tax”:[],”tc_event”:[],”jetpack_featured_media_url”:”https://techcrunch.com/wp-content/uploads/2018/12/down-3765608_1280.jpg”,”jetpack_publicize_connections”:[],”shortlink”:”https://tcrn.ch/2V5nUvJ”,”rapidData”:”pt”:””,”pct”:””,”featured”:false,”subtitle”:””,”fundingRound”:false,”seoTitle”:””,”seoDescription”:””,”tc_cb_mapping”:[],”associatedEvent”:null,”event”:null,”authors”:[18174465],”hideFeaturedImage”:false,”relatedArticles”:[],”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts/1762429″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/types/post”],”version-history”:[“count”:1,”href”:”https://techcrunch.com/wp-json/wp/v2/posts/1762429/revisions”],”predecessor-version”:[“id”:1762431,”href”:”https://techcrunch.com/wp-json/wp/v2/posts/1762429/revisions/1762431″],”authors”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/tc/v1/users/18174465″],”replies”:[“embeddable”:true,”count”:1,”href”:”https://techcrunch.com/wp-json/wp/v2/comments?post=1762429&order=asc&tc_hierarchical=flat”],”https://techcrunch.com/edit”:[“href”:”https://techcrunch.com/wp-admin/post.php?post=1762429&action=edit”],”author”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/tc/v1/users/18174465″],”wp:featuredmedia”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/media/1762430″],”wp:attachment”:[“href”:”https://techcrunch.com/wp-json/wp/v2/media?parent=1762429″],”wp:term”:[“taxonomy”:”category”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/categories?post=1762429″,”taxonomy”:”post_tag”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tags?post=1762429″,”taxonomy”:”_tc_cb_tag_taxonomy”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/crunchbase_tag?post=1762429″,”taxonomy”:”tc_stories_tax”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_stories_tax?post=1762429″,”taxonomy”:”tc_event”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_event?post=1762429″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true],”_embedded”:{“authors”:[“id”:18174465,”name”:”Jon Evans”,”url”:”http://rezendi.com/”,”description”:”Jon Evans is the CTO of the engineering consultancy HappyFunCorp; the award-winning author of six novels, one graphic novel, and a book of travel writing; and TechCrunch’s weekend columnist since 2010.”,”link”:”https://techcrunch.com/author/jon-evans/”,”slug”:”jon-evans”,”avatar_urls”:”24″:”https://secure.gravatar.com/avatar/df4f08903b7a5c3d7078165edcf5bcf7?s=24&d=identicon&r=g”,”48″:”https://secure.gravatar.com/avatar/df4f08903b7a5c3d7078165edcf5bcf7?s=48&d=identicon&r=g”,”96″:”https://secure.gravatar.com/avatar/df4f08903b7a5c3d7078165edcf5bcf7?s=96&d=identicon&r=g”,”links”:”homepage”:”http://rezendi.com”,”facebook”:”http://www.facebook.com/rezendi”,”twitter”:”http://twitter.com/rezendi”,”linkedin”:”http://www.linkedin.com/in/rezendi”,”crunchbase”:”https://www.crunchbase.com/person/jon-evans”,”position”:”Columnist”,”cbDescription”:”

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Real recession happens when it’s a surprise. Most people are already out of markets or hedging bets heavily (although we may see more moves into bonds and out of stock). This will prevent the large scale waste of money we had in 08. After tax season and after American politics sees a conclusion to the Russia investigation, we’ll still continue the boom in mid 19 and 20.n”,”link”:”https://techcrunch.com/2018/12/23/here-comes-the-downturn/#comment-645835″,”type”:”comment”,”author_avatar_urls”:”24″:”https://secure.gravatar.com/avatar/296dbe2c8e2d35f78556c9c676b345ac?s=24&d=identicon&r=g”,”48″:”https://secure.gravatar.com/avatar/296dbe2c8e2d35f78556c9c676b345ac?s=48&d=identicon&r=g”,”96″:”https://secure.gravatar.com/avatar/296dbe2c8e2d35f78556c9c676b345ac?s=96&d=identicon&r=g”,”techcrunch”:”avatar”:”https://ct.yimg.com/cy/1768/39361574426_98028a_64sq.jpg”,”company”:”(no company found)”,”title”:”Architect”,”user”:”S5HO7GZYNNXPTU26WBOWGL44NV”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/comments/645835″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/comments”],”up”:[“embeddable”:true,”post_type”:”post”,”href”:”https://techcrunch.com/wp-json/wp/v2/posts/1762429″]]],”author”:[“id”:18174465,”name”:”Jon Evans”,”url”:”http://rezendi.com/”,”description”:”Jon Evans is the CTO of the engineering consultancy HappyFunCorp; the award-winning author of six novels, one graphic novel, and a book of travel writing; and TechCrunch’s weekend columnist since 2010.”,”link”:”https://techcrunch.com/author/jon-evans/”,”slug”:”jon-evans”,”avatar_urls”:”24″:”https://secure.gravatar.com/avatar/df4f08903b7a5c3d7078165edcf5bcf7?s=24&d=identicon&r=g”,”48″:”https://secure.gravatar.com/avatar/df4f08903b7a5c3d7078165edcf5bcf7?s=48&d=identicon&r=g”,”96″:”https://secure.gravatar.com/avatar/df4f08903b7a5c3d7078165edcf5bcf7?s=96&d=identicon&r=g”,”links”:”homepage”:”http://rezendi.com”,”facebook”:”http://www.facebook.com/rezendi”,”twitter”:”http://twitter.com/rezendi”,”linkedin”:”http://www.linkedin.com/in/rezendi”,”crunchbase”:”https://www.crunchbase.com/person/jon-evans”,”position”:”Columnist”,”cbDescription”:”

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