Alice Rivlin: How Do You Succeed In Business During a Recession?

5:11

Interview Transcript

Topic: Managing and Thriving in a Down Market

Rivlin: I’m Alice Rivlin, and I’m a senior fellow at the Brooking’s Institution.

Question: How can companies balance their budgets in a recession?

Rivlin: Well, budgets are all alike there’s never enough quite enough revenue to do what you really like to do so working with the budget whether it’s a company or a school or the federal government is always a question if looking at how can you do the things you need to do more efficiently so that cost are less and how can you get more revenue? In a down market, that’s pretty hard because the revenue is falling and super efficiency may not get you to balance.

Question: What is the best way to approach risk in a recession?

Rivlin: Companies tend to become suddenly risk givers, companies and banks and others and afraid to take risk in a recession. That’s not necessarily the right response but it is a natural one if you’ve been burned to hold back the government is trying very hard at the moment to overcome this risky version on part of businesses and banks and consumers. People are just very worried right now about doing anything whether it’s buying or producing and that is inhibiting the recovery.

Question: Are there benefits to starting a company during a recession?

Rivlin: The benefits of starting a company in a recession may well be that nobody else is doing it or that you get the benefit of the talents of people you couldn’t afforded to attract when the economy was really going well but here is some really creative people that want to get together and help you get your business off the ground and they are willing to work for relatively little because they haven’t got anything else to do.

Question: Who are the winners and losers of the next economy?

Rivlin: If the United States is to keep up in the global raise, we have to be very entrepreneurial and very oriented toward technological change. That’s our forte anyway. I think President Obama is right in emphasizing increase a contributions to science. We need our start up companies which make a lot of the positive changes in the economy. The general industry is that will benefit least I think are probably at least for a while, luxury retail and the things that sort of went over the top when we were having a big boom.

Question: Are business opportunities expanding outside the U.S.?

Rivlin: We’ve seen very high gross rates in developing countries especially recently China and India that’s going to continue they have. The Chinese have been very dependent on exports for growth. They will have to shift more overtime toward investing in their own economy and their own consumer sector and that will not be easy, but we will certainly see continued high growth rates from economies that have a lot of potential, a lot of people and a lot of resources and need to maximize the use of those resources. The developed economies like the United States and Europe will probably grow slower but if we get our economy back in shape and our banking system functioning again, we can certainly have positive growth.

Question: How can workers stay motivated during difficult times?

Rivlin: It’s probably always hard to stay creative and stay motivated but it maybe most difficult when things are going really well. When they are not going well, when there are obstacles to be overcome, a lot of people are at their most creative.

Discuss

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Julie Hansen on April 15, 2009, 6:07 PM

We started The Business Insider about a year before the recession started. Rivlin is right that there are benefits to starting a company during a recession, especially around hiring. The talent pool is far richer than two years ago. The applicants are stronger AND they are no longer reluctant to embrace digital media, because the downward spiral of traditional media has accelerated during the recession and they have fewer options in print media. Some have lost jobs at print publications and are realizing that they with the contractions in their industry they may never have another print job again. And others are realizing that the opportunities are more alluring in digital media. As former Doubleclick CEO Kevin Ryan says, “Who really wants to spend their life fighting to grow a traditional business by 1% a year when you can build something from scratch? The internet is growing faster than any traditional media and more information is flowing online.”

Other recession benefits:

office space is cheaper
services cost less
some contracts can be renegotiated
easier to watch expenses
here is less competition
chance to grow market share while others retrench

Finally, a recession demands focus. When the economy is going at full-tilt, companies are tempted to spread too thin, get distracted, expand into marginally profitable or unprofitable and tangential businesses. In a recession it becomes urgent to focus. Companies are more disciplined and rigorous in their approach to marketing, hiring, and generally running their business as they should – as cheaply (efficiently) as possible.

Some of the biggest brands in tech were founded during recessions: Apple and Microsoft during the mid-seventies; Google during the dot-bomb recession. We’ll see what emerges from the carnage of this recession.

—Julie Hansen, COO/Publisher, The Business Insider

John Shepherd on May 4, 2009, 9:36 AM

Many industries outside tech also started in a down market. Fact is, one major benefit of having a business in a down market is that you actually have to make sure you have a viable business model. As crazy as it seems , a down market can be a big benefit for companies that have solid business models—it shakes out the companies that are just relying on raising money to grow. That isn’t realy growth at all.

Jack Sallay on May 12, 2009, 4:40 PM

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Rivkin hits the nail on the head when talking about taking risks in a recession, and perhaps even starting a company. If the idea is strong enough funding will always be available – and great employees can be found cheaper than in boom times. A down turn forces companies to take smart, usually smaller and more calculated risks. A great example of this is the recent boom in online advertising. More than a few corporations are no longer willing to spend as much on traditional platforms, but when they see the low online rates, why not take chance?

Elizabeth Reid on June 10, 2009, 8:16 PM

Ms. Rivlin and others in this discussion have commented about companies being able to attract more talented employees and paying them lower salaries during a recession. Is this really a good strategy? I doubt it. When the economy improves, these people will be the first to leave to other companies now paying better salaries. I believe it is an issue of treating others with respect and paying them what their skills are truly worth. Sure you may save money now, but in the long run they will leave and you will once again have to hire employees with less experience and expertise. Profiting on the misfortune of others never brings about good results.

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