American individuals and corporations are playing it safe, according to The Wall Street Journal, contributing to a slower employment rebound: “[After the recession] of the early 1990s, it took 32 months for payrolls to rebound fully. After the even milder recession of 2001, it took four years. Today, nearly four years after the end of the last recession, employment has yet to reach its pre-crisis peak.”
Companies are still holding back from hiring new people or expanding operations. They are also keeping more cash on hand. Apple, the top cash hoarder, has about $145 billion in cash. But Apple is not alone; corporate stockpiles of cash are up $1.78 trillion from last year’s $1.74 trillion, the Fed reports.
Intuitively, this comes as no surprise to me. All growth comes with some inherent risk, which can be difficult to face if you’re extremely risk averse, as people tend to be during tough economic times.
Why “Playing it Safe” Isn’t Really Safe
Explaining the negative effects of avoiding risks, The Wall Street Journal says, “Historically, risk-taking that supports high rates of churn – lots of hiring and firing, company formation and disruption – gives economics more flexibility to adapt to changing markets.” In other words, with fewer Americans taking risks and starting companies, the chances of success are slimmer and economic recovery is slower. In an economy with 1-2% growth, entrepreneurs are scared off by an uncertain environment and by competition from giant corporations. This is the vicious circle of every economic downturn.
Grow or Die
It’s easy to forget that plenty of successful companies have been started during a recession, among them Microsoft, GE, Ford and Disney.
Here’s my advice to business owners and executives: In a recessionary environment, you can’t afford to play “me-too.” You have to be bold. Stop trying to copy the competition — follow your dreams and do something different! Think about business as a bell curve of customer needs and wants. Monster corporations like Walmart and Amazon are serving the 80% of consumers in the middle, but there are still plenty of customers at either end. Who’s catering to the other 20%? That could be you!
There were already many other shoe stores when Zappos started up in 1999, and yet Zappos managed to be successful. The company is giving its customers what they want: Online shoe shopping with free returns and excellent customer service.
My point is that passion drives growth and growth is necessary for business and our economy. Of course, I am not advocating you throw caution to the wind. But inaction is not a strategy that leads to success, or even safety. “Grow or die” should be the mantra of every entrepreneur. Growth is in the very nature of business. Once a company loses its appetite for expansion, it almost certainly is settling into decline. So take some risks and do what you’re passionate about.