In an earlier life as an agricultural newspaper editor I remember being directed by the proprietors that we were never to use the ‘D’ word. Even when the dust was blowing tumbleweeds across farms and rain on a corrugated iron roof was just a dream, we constantly talked things up — that it was just another dry spell. Never admit to drought, was the dictum. Of course we knew what we were doing and so did the readers: together we were creating a shared illusion of optimism and positivity when it would have been too easy to throw our arms in the air in despair.
A self-fulfilling prophecy is the psychological phenomenon where if someone expects or believes something enough, their behaviour will change to the point where the belief or prediction will actually come true. Defined by psychologists and sociologists in the 1920s and 1930s, the theory was probably first used to explain the runs on banks in the Depression. Spooked by rumours that their local bank was running out of money, customers would rush to withdraw their cash and unwittingly achieve the very outcome they feared.
Self-fulfilling prophecies explain inexplicable success and failure in sport; unexpected political wins and losses; and (some believe) illnesses that patients thought they had…and therefore did.
If it is true that beliefs influence actions, it seems an unusual tactic by the new Federal Treasurer to dwell so heavily on the R word. Nothing is more likely to cause a recession (there I said it) than saying we are about to have one. But it seems our political leaders — not just here but in the vainglorious US and masochistic UK — are falling over themselves to talk things down.
Certainly there are undeniable headwinds facing us. The Russo-Ukrainian war has impacted the international economy, driving up inflation and our cost of living. Central banks have responded like Fred Flinstone using the bludgeon of higher interest rates to stop us spending. It seems that having survived the biggest pandemic in a century, governments are hell bent on bursting the balloon of pent up consumer optimism that could have repaired our economy.
To politicians and economics commentators and media pundits, get a grip.
Through the economic challenges of the late 1980s and early 1990s (when inflation ran at 10 per cent and interest rates topped out at 18 per cent), through the Millenium drought from 2001 to 2009, the Global Financial Crisis of 2007-2010 and the COVID pandemic, there’s been no evidence that negativity and pessimism improves outcomes.
Despite every challenge thrown at us (and I’m sure the current floods in the eastern states will be the same) people have demonstrated an incredible capacity to get on with living. During all the wars and disasters that have befallen humanity we refuse to give up. We find a partner, we get married or live together, we buy or build houses (often in areas we don’t initially want to live, but understand it’s a stepping stone), we start families, update our worn out cars and washing machines and fridges. We might tighten our belts by eating out less or taking fewer holidays but essentially we continue on…because what other choice do we have with our 80 or so allotted years. Most people do not want to live their lives in fear..they want to live with optimism and joy.
During these periods I draw positivity from perspective. Looking at what has come before is always a good roadmap for the future. So I was encouraged to read this blog from entrepreneur Kelly Bertog pointing out that some of the world’s longest lasting and most successful businesses started during recessions.
General Electric for example was started in 1892 by Thomas Edison just as the US economy was tumbling into the greatest depression of the 19th century. It’s now a $100 billion company that has reinvented itself as a power, renewables, aviation and healthcare multinational.
Determined in his belief that the automobile would be the way of the future, horse-drawn carriage manufacturer William Durant purchased the Buick Motor Company in 1904 and then in 1908, just as the world was tumbling into recession, he created General Motors as a holding company to acquire other automobile manufacturers and boost his market share.
It’s a well-known story that in 1928, brothers Walt and Roy Disney introduced Mickey Mouse in their short-animated feature Steamboat Willie. A year later in 1929, the duo incorporated Walt Disney Productions just as the Great Depression was starting. The fact that the world needed a good laugh enabled them to grow their business during the toughest of times. In fact film producers and movie houses had their golden years during this economic downturn because people wanted to escape.
During the US recession of 1958, entrepreneur Jay Pritzker purchased the Hyatt House motel near Los Angeles International Airport. Even with business activity and travel slowing during the tough economic times, Pritzker bought two more hotels in that decade. Eventually, the Hyatt chain grew to nearly 900 properties, and annual revenues exceeding $5 billion dollars.
The 1973 Middle East oil crisis and resultant stock market crash didn’t stop Bill Gates and Paul Allen from developing their new computer software business Microsoft, which launched on April 4, 1975, days after the recession was considered officially over.
It’s easy to dismiss these as phenomenons of the golden years of business during a long lost, nostalgic 20th century.
But in more recent times we’ve seen similar success stories.
Ryan Van, writing for Lawpath, points out that it was only in 2009, just as America was recovering from the GFC, that Uber revolutionised public transport and food delivery. Love it or hate it, Uber now has more than 100 million active monthly users worldwide.
Another post-GFC start-up was Airbnb, launched in 2008 by three college students who had an idea to rent out a mattress in their living room. Soon after, Brian Chesky, Joe Gebbia and Nathan Blecharczyk started Air Bed & Breakfast.
Closer to home, Van points out one of the most successful Australian survivors of multiple recessions (including COVID) has been JB Hi-Fi which launched in Australia in mid-1974. Australia was in an economic recession, recovering from the 1973 oil crisis when founder John Barbuto’s opened a store with a simple mission – deliver a unique range of music for the lowest price possible.
In 1973, passionate surfer Gordon Merchant and his wife Rena started Billabong, again during the international recession caused by the oil crisis — again an international success.
The 1982-83 post Vietnam war recession did little to deter Gerry Harvey and Ian Norman from starting their home retail chain, Harvey Norman. Today, the pair have launched nearly 200 franchises across Australia and more than 100 stores in offshore locations…and employ 5,500 people.
There are of course thousands of other businesses who didn’t just start during a recession but ploughed through it, to be rewarded with success (and a lot of grey hair).
The real challenge during recessions is seeing opportunity and acting upon them. There are some common trends that emerge out of these business success stories.
Convenience drives customers, and General Electric, Hyatt and MYOB recognised that making their customer’s lives easier was a strong selling point.
Being first to market with new technology was the story of General Motors’s success. It is also the reason Microsoft and MYOB have retained market leadership as they keep innovating and leading.
Price and affordability, while still delivering value and quality, are also threads common to Hyatt, Airbnb and Cotton On.
And then there’s the lure of escapism presented by widely divergent companies such as film-maker Disney and beach-wear manufacturer, Billabong.
Marketers have spent the last decade using data to connect them with customer needs, punting on giving consumers what they want before they even ask. Digital marketing is so precise that it can define the exact needs and location of a consumer and then show up on their virtual doorstep offering them products they never thought they needed.
However, things may be changing. Professional services firm Accenture warns in one of its recent Insight reports that post-COVID, a new paradoxical behaviour is emerging amongst consumers that business is struggling to understand.
Banks have been told by Big Data that consumers want convenience but in fact what they really want from their financial institution is trust.
Trust in airlines is also the primary need of travellers. Yet Qantas spends too much of its marketing budget assuring us it is “The Spirit of Australia”, without delivering on its promise of getting us from A to B without cancellations.
Companies that sell consumer goods are obsessed with the convenience of online shopping, yet increasingly consumers want to see more sustainability rather than range and choice.
This lack of connection between companies and their consumers is creating unrest in the boardroom. Accenture says 88 per cent of executives think their customers are changing faster than their businesses can keep up.
The take home message is that to win the hearts and minds of consumers during a changing economic and political environment, businesses need to be less customer centric and more “life-centric” — understanding the micro differences between people that are not covered by boxes such a Gen Y and Z.
Evolving products such as Youi, the insurance company that personalises your motor policy based on usage, is one such businesses that recognised human difference. Credit approval and home loan apps are similar responses to the need to take control of your life when you want to. Accenture also references Blue Buffalo, a pet nutrition company that provides information on how to manage the family dog or cat via content shared on a digital app. Scratch is a similar Australian company that delivers pet food to your door, offering convenience as well as quality and value.
Certainly there are challenges ahead but also opportunities. Businesses and organisations that understand the resilience of their customers and offer to partner with them, to make their lives easier and more affordable, more meaningful and purposeful, will triumph.
The only self fulfilling prophecy that we should live by is that we are brave and courageous. Positive persistence trumps pessimism every day.