One reason to look at things realistically is "life can be harsh, and that is good to know..." The good part is when you have a rational, realistic view of what is happening, you can adjust accordingly.
Had you already started your business, you would be in the information flow about your industry. You would hear about who is thriving, and who is failing. Although we taxpayers' children will have less material benefits and services in the future since the government will be bailing out billionaires, there will be no help for small business. (Why should they help small biz, and of course we do not need it anyway...)
The only reason a business should fail in these times is that the business took on too much debt, defined as more debt than can be serviced by reduced revenues. The business likely invested in means of production, infrastructure, perhaps even an expensive advertising campaign to gain market share. In any event, a failing company that fails has assets available for dirt cheap, or even free.
Although we have no idea what is coming next, the best and brightest are placing bets which reveal what they believe. Many people say "buy stocks now, we've hit the bottom, soon the markets will start back up... don't miss out." Predictions are for a recovery in late 2009, or 2010. Warren Buffett has encouraged stock buying. At the same time though, Warren Buffett has made a huge bet the stock markets will not recover until 2019. That is right, Buffett acts as though the markets will not recover probably until after he is dead.
Most people have no idea what they are up against (Madoff appears to have confessed to keep his sons out of prison, how many more are out there?) If you have not started your business, according to Buffett it's not too late to get into the flow and take advantage of the circumstances.
If you are planning any business acquisitions, renting space, buying equipment or furniture, anything... feel free to email me with a rough outline of what you are contemplating and I will argue for some nice reality-based hardball negotiation points and strategies.
As Drucker said, entrepreneurs do not take risks. In this economy, there is absolutely no reason to take any risks at all. Everything should be pay-as-you go, if you pay at all. Starting a business now, you are doing enough and the free markets will provide all the subsidies you need.
Tuesday, December 16, 2008
Entrepreneurs Take No Risks
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From the Financial Times article it seems Buffet is actually betting the markets will recover by 2019. He is selling puts (a type of option) on the market. Those buying the puts are insuring themselves against the risk the market will be lower in 2019. He gets a $4.5 Billion float or premium for his risk. He will presumably use the float to buy a few select companies at what he deems cheap valuations (a further vote of confidence in the economy or at least in his ability to pick securities). Of course since he is making a bet the markets will go up, he has a large incentive to encourage people to buy stocks. As always, buyer beware.
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