Start Up That Startup

It's a good time to do new things.

Rachel (her name is changed) is a childhood friend of my sisters. Putting it mildly, the late 20-something likes to party. My wife and I had just finished a major renovation of our house and needed a dog sitter when we went on vacation. “Hire her,” said my sister. “She’s great.” “No parties,” were our parting words. We shouldn’t have been surprised when we saw our brand-new never-used kitchen filled with strangers on Facebook, the dogs she’d been hired to sit wandering lost in a sea of beer cups.

That was over a decade ago and since we’ve watched her on social media as she meandered through life. There was the hippie commune, the short-lived marriage to a man old enough to be her father, a job growing cannabis before that was entirely legal, and a thankfully fleeting fascination with guns that disappeared before anybody got hurt. Social media updates like “woke up naked this morning in a field and can’t remember exactly why: lovin’ life!” were not uncommon.

She eventually moved back to her home state and fell into a marketable enough skill as a bartender. She liked her work and seems to have done well at it, earning enough money to buy a modest house and start to live a reasonably normal life.

Then came COVID. There wasn’t much work for laid-off bartenders and she bounced from thing to thing, doing her best to bring in enough money to feed and shelter herself and her dog.

One day, not long ago, Rachel posted something entirely different “I’ve made more money in the past month than I did in the past two years and it’s doing something entirely legal!” she wrote. Rachel had discovered day trading, especially in crypto, and found her massive following of people online were highly influenced to listen to her recommendations for obscure coins. I thought about warning that stock promotion may be illegal but didn’t. Even with the potential liability, this seemed like one of the more financially and legally sustainable gigs she’d found.

Now, restaurants and bars in her area are looking for workers, and especially experienced bartenders. She isn’t interested: that was her “old life” and she’s found something new. She stopped collecting the unemployment that not long ago kept her housed and fed a couple of months ago saying “too much hassle for too little money.”

Granted, based on historic patterns, Rachel’s newfound career as a day trader may be short-lived. But she realizes that and is already looking into getting more formal securities certifications. It may have taken longer than usual, but Rachel is growing up.

The COVID plague is morphing into an economic rebirth. We hid in our living rooms like a cocoon for over a year. Overworked stressed-out worms crawled in but butterflies are flying out.

As COVID wanes, a generation is weaning out of dead-end jobs and has no intention of returning. Those cooks a restaurant laid off when money got tight? Some opened up shop on their own in dark kitchens while others retrained as coders. The experienced one’s restaurant owners let go when the going got tough are gainfully employed elsewhere. They’re earning higher wages and better benefits than their prior employer ever paid. Your dishwasher’s retrained as welders. The hostess traded her pen for a hammer building houses. The stock person is now an in-demand saucier.

A friend overheard a restaurant owner in a college town complaining McDonald’s was “poaching” his employees by “paying too much.” His state is one that will cut off extended unemployment benefits soon but, the owner conceded, nobody expects that to have a meaningful effect on qualified applicants. The wage differential is already high enough, said the restaurant owner, that anybody who’d “rather work than sit on their ass” is already back to work and the rest probably won’t opt for long hours at low pay served alongside a generous helping of verbal abuse.

As business writer Erik Sherman writes for Forbes, describing those who refuse to take jobs under the old system as a “major uncoordinated labor strike,” there’s a “cannibalistic paternalism on the part of employers that assumes they have a right to drain the last vestiges of energy, life, and nerve from those they consider below.” Their unwillingness to return, coupled with many finding better or at least different employment options, creates a new world.

Mr. Smith’s invisible hand is, paraphrasing Mr. Brooks, doing that voodoo that you do so well by giving some people a pat on the back and others a well-deserved spank on the tuchus.

COVID functioned like an economic forest fire, leaving immense pain in its wake but, as it wanes, new sprouts with plenty of room for growth. That doesn’t mean the world is out of the woods: India and Brazil especially remain in dire shape. But there’s finally a light at the end of the tunnel; Americans aren’t even wearing masks anymore and European regulators are announcing schools can open at full capacity this fall.

Economist Joseph Schumpeter famously wrote about business cycles: “Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they could weather a particular storm.”

There are a few misconceptions about these cycles.

The first is that we think of them as somewhat human-made which they often but not always are. The early 80s recession, the dot-com bust, and the financial crisis come to mind. However, COVID is a reminder that we remain human beings subject to natural forces.

The second misconception is more interesting. We tend to think of business cycles affecting firms and, yes, Schumpeter did focus on firms. But the same applies to people. We saw those enormous lines at food banks not long ago. Yet innovation and creation are thriving and moving quickly to more than fix that problem. Many people aren’t unemployed; they’re differently employed in better paying more meaningful work. Rather than destroying a firm, Schumpeter’s fire burnt away the ability to offer poor wages and working conditions, trimming it down like a laser does a tumor.

Post-recessionary periods are historically the very best time to start a business. Today, there’s cheap commercial space, cheap capital, less competition, and enormous demand. Sure, you may have to pay workers more but that’s not necessarily a bad thing because you get to set prices at a level that works to pay them — explaining to customers your prices support better wages for the staff — whereas prior businesses may find long-time customers turned-off by a price increase. If your to-be customers are extremely price-sensitive then you’re probably looking at a red ocean of competition and should pivot to a more sustainable strategy.

None of this is to argue that either COVID or COVID fallout is entirely gone. It still ravages the world and payrolls have yet to catch up in many sectors. However, thanks to vaccines, green sprouts are beginning to blossom. Now is the time to jump on them, to seek out your new blue ocean of opportunity.

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