The way you see the world will always be affected by your profession to a certain extent. Agree?
Exempli gratia, doctors will view Coronavirus outbreak in terms of how it will affect the health of living individuals. For diplomats, they will try to analyze the newly-declared pandemic in terms of how it may influence the shift of geopolitical power.
Me? I’m just a 22-years old guy who’s currently working in marketing industry, but has also been paying attention to global economy and startup environment in general. My kind of “sport” is to find the next-big-thing and to always stay in the know about what’s trending and what’s on the brink of its sunset.
As a recent graduate, there’s a message that I want to deliver to every active student and fresh graduate out there about this massive outbreak and the upcoming recession.
Back when I was an undergraduate student, I had nobody to guide and teach me where to look. Without meant as disrespect, I often feel that what I studied on class, for the most part, was disconnected from what was actually going on in the real world. For example, in all 4 years of my study period, there wasn’t a single session where we were introduced to personal finance and macro economy (even though there are many opportunities that can be derived from having strong fundamentals in these subjects).
I suspect I wasn’t the only one to go through the same situation, and probably there are a bunch of you who are in the exact same position that I’m talking about. Enough complaining, this time I actually want to do something to help.
Disclaimer: I am by no mean an expert on economy or investment. However, I’m convinced that many final-year and penultimate students will find this post useful. In this post, I’ll talk about how you should navigate yourself in times of crisis like this Coronavirus outbreak, when the situation calls for a future-oriented mind and a keen-eye to spot emerging opportunities.
What I’m about to do is laying out a key formula to help students / fresh-grads to structure their thinking process in assessing the impact of Coronavirus outbreak and the upcoming global recession (if it’s not here already). Even better, this method can be applied in any situation especially during a case of emergency where the situation is rapidly changing on daily basis.
I want to help you capitalize on the prevailing opportunities that might come from the outbreak, and to keep you aware on the potential risks that are ready to attack at any given time.
Therefore, instead of answer key, I will give you a step-by-step to understand the train of thought behind the analysis.
Let’s get to it.
- Read news every day. Great decisions can only come by providing yourself with tons of hi-quality information. There are plenty of sources you can begin with: for 24/7 global update, there are cnn.com and reuters.com. If you’re interested in everything related to startup and investment, you might want to check techcrunch.com or a16z.com. Do you prefer larger-sized chunk of info and data? Try mckinsey.com for more in-depth research on multiple industries. The key is to be diverse on your source and make sure that you get all the fundamental data required to make a sound decision.
- Narrow down. Going ocean-deep on every topic you read is not only impossible, it’s also a huge waste of time. Once you scratch the surface of various sectors, start narrowing down to the ones you are interested in the most. For example, if you see yourself as a venture capitalist in the next 5 years, you might want to explore if Coronavirus outbreak might affect fundraising and startup environment in general.
- Think like a C-level. C-level executives constantly think and analyze. They’ve trained themselves to be sensitive to the implication of multiple issues and how it might affect their companies. For example, the CEO of Automotive companies will analyze the impact of Coronavirus from 2 major aspects: supply and demand. Next time you come across a potentially impactful news, you need to pretend to think like a CEO and ask “how will this issue affect my company / industry in the short-term and the long-term?”
- Ask yourself, “how will that affect me?”. The next step is to think the implication towards yourself. Although you have one specific industry / profession in mind, but you still can’t be oblivious to what’s going on in the outside world. This is where you need to connect your vision with reality, and to keep yourself aware of the potential risks. Ask yourself, “how will this impact me? How does this impact my professional development and future compensations? Should the worst does happen, do I have enough cash/reserve to weather through the storm?” Identify every potential impact you might be left with, and try to find ways to minimize / avoid the risk.
- Keep looking. There’s always a rainbow after rain. In fact, history suggests that post-crisis has always been the greatest period of value-creation for those who are prepared in advance to seize the next big thing. If, after going back-and-forth with your analysis, you don’t think your desired industry will be a major benefactor of the upcoming outbreak / crisis, maybe it’s time to look another way.
For illustration purpose, I will use a simplified case study to help you understand better how these formula can be applied in real-life situation.
You are a final-year student of engineering major, and currently you are looking at automotive industry as your preferred destination once you graduate. Your rationale is simple: you’ve heard about its large annual bonuses and the promise of relatively-fast professional development should you perform beyond expectation.
Is it the right move?
Step 1 : Keep yourself updated
After absorbing global news and market research extensively, you now learn about the devastating impact that Coronavirus has had and will have. Coronavirus outbreak are eating away economy growth, and it’s very likely to have short-term to mid-term impact across multiple sectors.
Based on your research, you’ve concluded that the outbreak will most likely have these effects:
- Global recession
- Financial crisis
- Direct hit to consumer confidence due to uncertainty
It’s obviously a major alert for the majority of businesses in general, and to simply ignore these red flags would be ignorant.
Step 2 & 3 : Narrow down, and then think like a CEO
The next step is to think as if you are the CEO of an automotive company. How will this impact the company? How exposed is the company to external and internal dangers?
Knowing the exponential run-rate at which Coronavirus is spreading, it’s safe to predict that the most sensible way to contain the transmission is through nationwide lockdown and halting economic activities.
First is China, then Italy. You might presume that several other countries who’ve shown similar infection pattern to follow suit. CEO will usually analyze this issue from 2 sides: the supply side and the demand side.
For example, major lockdown in key supplier regions such as China will have a huge impact on their supply chain and procurement process. The same goes for demand, where it’s likely that China is one of their primary markets and the declining usage of transportation will have a direct impact on the company’s quarterly sales.
The next step is to predict how long this outbreak is likely to last. A recent report from McKinsey suggests that Automotive industry is estimated to “suffer” until late Q2 / Q3. A delayed recovery is expected to happen until winter season, when the disease might surge again.
From this analysis, you will gain a better grasp of reality and how the potential outlook might look like for the next 2-3 years. In fact, I’d argue that this one might be the most important step of the formula.
Step 4 : Ask yourself, “how will that affect me?”
Coronavirus (and recession) will put most companies into a stress-test, forcing them to have higher level of asset liquidity. What this means is that more companies will be more reluctant to give annual bonuses like previous years, if any. Therefore, you might want to reconsider entering this industry at least in short-term.
What you also probably don’t realize is that these turbulences will have a negative impact on your productivity as well.
Imagine you’re in the middle of financial crisis, and your company can’t even assure you that you will still go to the office tomorrow due to a steep revenue decline and an increasing pressure from investors to cut labor costs. Not only are you gonna get bogged won mentally, your focus will also be divided to think and take care of your families.
When things of higher priority call for your attention, one can imagine how much is left the tank to get the job done (the answer is: not much).
In that case, it’s a lose-lose situation for both the employer and the employee.
Step 5 : Keep looking
It’s far from game over. History shows that recession / crisis always presents new opportunities for those who’re prepared. What you should do is to spot another emerging industries by reading where the wind blows.
It’s about spotting what behaviors will appear and disappear due to Coronavirus. What industries are directly impacted from the lockdown and the decline in labor and productivity. What are the most pressing needs that might appear when companies need to survive through the crisis.
We know that Coronavirus encourages social-distancing, remote working, and more flexible arrangement of office renting. Crisis will also put our survivability to test, thus forcing us to ask for external help. Therefore, these are some industries that may ‘explode’ during the worst of times:
- Online e-commerce
- Remote conferencing platforms
- Wealth management
- Co-working spaces
On the other hand, we also know that Coronavirus outbreak discourages traveling, offline-shopping, and more impulsive buying behavior on secondary and tertiary goods since cash will be needed in emergency. Therefore, we can conclude that these are the industries that might go on to a decline at least for a short-term (per se Mckinsey):
- Tourism and hospitality
- Aviation / airlines
- Oil and gas
- Consumer products (ex: fashion)
- Consumer electronics
A distinctive feature of potential leaders is composure and rationality in times of crisis. False optimism due to personal bias for certain industries can lead you astray, especially when you don’t possess the financial cushion as others do. Luckily, you can always avoid this trap by staying ahead of the curve, and take a cue from how exceptional leaders capitalize during the hard times when everything seems to go upside down.
Stay safe everyone.
All the best,