2020, Chapter 7:
FLUBARed
or, Perspectives on Four Disruptions
I was going to originally call this chapter, “Perspectives on Four
Downturns.”
But then I realized: the current COVID crisis isn’t a downturn. It’s a
disruption.
It may still result in a downturn, due to all the ripple effects of shutting down large sections of the economy, but nobody—and I mean nobody—has a crystal ball. We don’t know what’s coming, because we haven’t been through this before.
So, let me start by saying this: I hope you, your family, and your friends are all safe and healthy. That’s really the most important thing.
Yes, even if it feels like your staring into an abyss.
Yes, even if your life has literally been turned upside-down.
Yes, even if you can’t see any upside at all, and are ready for a full-on dystopian scenario.
And especially if this is
the first disruption you’ve been through.
A lot of our customers may have only passing memories of the 2008 financial crisis, and may not even have been born before the dot-com bust. And if that’s the case, they certainly don’t have any visceral feel for what happened in the housing crash of the early 1990s, and they definitely didn’t sit in their parent’s cars while they sat, white-fingered, watching the gas gauge drop as they crept forward in a huge line to the pumps where prices had doubled overnight in 1973 (nor did they get to see the prices double again in 1979.)
I’ve been through all of that, so I thought it might be time to say, “Okay. Deep breath. This may be a new thing, and a bad thing, but we’ll get through it, and maybe I can help with some perspective.”
Yes, I know, I am totally insane.
But here we are. Let’s dive into my experience with four disruptions and what I learned from them. Hopefully this can help some people get through our current FLUBAR-ing. At least it might provide a diversion while you’re sitting at home. Or, at worst, maybe print it out and use it as TP in the case of a truly apocalyptic outcome.
TL;DR: Too Many Words
As with many of my more practically-focused chapters, let me cut to the chase. If you don’t want to read any farther, here’s where I’m going:
- The human condition appears to be manic-depressive. Keeping this in the back of your mind will help explain a lot—and will start the alarm bells ringing when someone proclaims “the growth can’t stop,” or “we’ll never dig out of this.” The reality is always in the middle.
- There are gonna be disruptions. Some you can see coming (as above, whenever anyone publishes some fundamental idiocy like “Dow 100K” or “He Dies, She Dies, We All Die,” and/or claims that “the old rules don’t apply now,” yeah, time to bet on the opposite). Some you can’t, like the first oil crisis and the current COVID situation.
- Disruptions suck. You don’t want them. Not gonna lie. Not gonna sugar coat it. Whether it’s lives lost or jobs lost, people are gonna get hurt. Never root for a disruption. Never be happy with someone else’s misery. Help people if you can. Try to stay positive if you can’t.
- However, we can learn from the suckage. If we’re smart, we can learn from disruptions and get better. Whether “getting better” is defined as “being better prepared,” or “learning to be content with your life,” or even “actually doing better in the aftermath, period,” disruptions can be a catalyst for positive change. That said, it’s not the catalyst I’d choose, if given a choice.
“Well, hell, that doesn’t help me if I’m out of work,” you might say. And yes, I hear you. And we’re with you. I’ve spent the last couple of weeks setting up fundamental changes in the way we do business in order to ensure we stay in business—from working from home to getting set up as a Utah business.
Aside: please save the sales pitch for other states. I know, I know. I know I know I know. Utah is fine because it’s near our purchasing partner.
Aside to the aside: this does not mean we’re intending for all of the business to leave California. However, don’t be surprised if the smaller, less expensive products end up being “Designed in California, Built in California or Utah.”
Aside to the aside to the aside: please don’t turn this into a political screed on the advantages of various states. I like California. But I have no illusions about its business-friendliness. It is what it is. All businesses should make decisions on where they do business eyes-open. And not just on the bottom line. If you hate where you are, it will show in your attitude and your products. Call me crazy. Maybe I am.
So. Yeah. This ain’t fun. We didn’t ask for this. But we are doing everything we can to keep providing you the service, support, and, yes, sales, while making sure that everyone who works for us is safe, and complying with local ordinances. It ain’t easy. It’s a tough dance. But for the moment, we’re here, we’re safe, and we’re operational.
Okay. This is supposed to be a positive, uplifting chapter. So let’s say, “Hey, the FLUBARing gave us a kick in the pants to do what we probably needed to do for a long time, and it’s gonna end up good for everyone in the end.”
Or it will end like Thunderdome, and we’ll stay 100% in California. Either way, it’s worth doing.
On to the stories.
The Gas Crises (1973 and 1979)
Yes, I was alive in 1973. Yes, I’m old (something Tyler reminds me of all the time). And, before the first gas crisis, I was probably a typical American middle-class kid, blindly thinking that Nothing Could Ever Go Wrong and All Was Right With The World Forever.
I mean, my dad was an engineer. My mom didn’t work, because that’s the way it was back then. And we did OK. Not stellar, but OK. They had two cars—a Toyota Corona and a brand-new Ford Pinto. We had a small suburban house at the end of a street, on the very edge of the San Fernando Valley, with foothills rising above “the wash”—a wild area with trails and a stream, much-beloved by the children in the neighborhood.
And things were pretty steady. I remember my mom doing the finances on a sheet of graph paper every Friday, but it was just something they did, and they didn’t look super concerned about anything. My dad worked on the house and in the yard, slowly transforming it into something he really loved, with a big garden, a rock wall (built with boulders he carried up from the wash), and fruit trees.
And then, suddenly, mom and dad looked worried.
I didn’t know why, because I didn’t watch the news, that was boring stuff for adults. I just knew that now there were whispers about maybe jobs being cut (and that was crazy, people didn’t lose their jobs, I never knew anyone who lost their job, in the paradise of 1970s corporate America), and suddenly trips took on a whole new nail-biting perspective, as my mom and dad had to go on the right day (determined by your license plate number) to queue up at a gas station in an interminable line, in order to fill up. They talked about how they were super-lucky to have small cars, something I didn’t argue with, because, hey, I was a kid, and the backseat of a Pinto or Corona was perfectly fine, thankyouverymuch—later, when I got bigger, it wasn’t so great.)
What’s worse, was the gas prices started to be a burden. My dad commuted to work—like, 40 miles one way—a long, long way today in the insane Southern California traffic, but somewhat practical in the days of less freeway congestion.
And, as I saw my parent’s worry, I began to wonder myself. Colorful charts in National Geographic showed how the United States was using, like, nearly all of the world’s oil! And we were gonna run out! Real soon! And who knows what repercussions that might have!
I mean, the world was ending!
The gas crisis was just the start! Soon prices would skyrocket even more! Soon there wouldn’t be any oil at all!
And yes, I really believed this. And, even years after the gas crisis, when the second gas crisis hit, I really really really believed this. Movies like Americathon showed a future with no cars, no oil, and Mad Max did the same. It was what was coming. You could feel it. We had to go all-in on solar and wind! There was no other choice!
I had a huge argument with my dad about how we had to get off of oil, and develop alternate forms of energy. Interestingly, at the time, he was working at FMC with solar cells, so he knew a thing or two about their cost and efficiency, something that was lost on me at the time.
He sighed and said something like, “This’ll pass, the world’ll keep spinning, and we’ll laugh at this someday.”
I was livid. How could he ignore something that would clearly cause famine and destruction by the mid-1980s! Hell, Omni Magazine said so!
“Yeah, and lots of people say lots of things,” he told me. “But nobody has a crystal ball.”
I didn’t believe him at the time.
But he was right. The crisis passed, and the world spun on.
Aside: yes, I know, we may still run out of oil, we may need to go to alternate energy for other reasons, we may be still headed for a heap of trouble, but hey, the world didn’t end 40 years ago. That’s 4 decades. And, knowing that the first “peak coal” prediction was in the 1840s (yes, 1840s), yeah, well, again, nobody has a crystal ball.
Aside to the aside: again, let’s not turn this into a political/ideological screed. We're in this now. Let's concentrate on that.
Now, this isn’t to say the first oil crisis (and the second) were a picnic. Disruptions suck. And there was a ton of suckage. The 1970s saw stagflation (high inflation, low growth) that sucked away a lot of people’s purchasing power. Energy prices soared. Interest rates were insane (my first car loan, in 1981, was at 24%.)
“So what possible good came out of this?” you might ask.
Actually, several things.
- The crisis spurred the first serious development of alternative energy, and got it into the public consciousness. Without this crisis, maybe we wouldn’t now have viable solar on homes and electric cars.
- It also started the trend towards higher efficiency, less polluting vehicles, and it changed a lot of attitudes in the USA. A lot of people forget we were first to mandate fuel economy standards and catalytic converters.
- On a personal side, the stagflation turned my parent’s large, painful mortgage into something quite manageable over the course of a decade. People who held a typical mortgage at the time did benefit.
- It also spurred financial innovations like variable rate mortgages. And yes, I know, this isn’t a boon to all…but in an environment with very high inflation, it may be the only thing that works.
So does this offset the suckage? Depends on your point of view.
But nothing is ever 100% bad. Ever.
The Engineering Glut, Housing Crash, and Earthquake (1988-1994)
I got my engineering degree at about the worst possible time, at least in Southern California.
While I was in school, your career path in engineering was totally clear: you’d graduate, go work for an aerospace company, work your way up and maybe get a Masters if they thought you needed one, work your way up some more, and then eventually retire with a pension.
Yeah, stop laughing. Seriously, that was it.
Now, I was never really happy with this path, even as I got my degree, which is why I built speakers on my mom and dad’s patio (and sometimes in the living room, yeah, they had the patience of saints, or at least my mom did). I really wanted to do something in audio, which was why I spent my spare time making speakers, going to DAK and ogling the cut-price SAE electronics, or doing my own electronics, sometimes with hilarious results (my senior project was a single-ended noise reduction system—that is, it did not require an encode portion like Dolby, it worked in anything—and, after looking back at the backyard-made sun-etched boards a few years ago, I know exactly why the system was a little, ah, finicky).
But this clear path was taken away from me before graduation. Southern California had begun a long slide, losing much of its aerospace business. Suddenly engineering jobs were not so certain—and, in fact, they were damn hard to get. I eventually got a job at Magnavox APS—which was not an audio company, as you might expect, but a government contractor doing communications systems. But the pickings were super-slim. It was that or radar. I chose Magnavox, while also starting a speaker company for real.
Yeah. My first company, Odeon, started in the middle of a downturn.
This company failed, not so much due to the downturn, but because we were just so incredibly green. We knew nothing about starting a company. I mean, nothing. And we had no money. It was super hand-to-mouth. Despite that, we kept it rolling for a couple of years, making our own cabinets, doing our own finishes, hell, cutting our own Styrofoam for packaging (did I say we had no money). We eventually shuttered it because the strain of having full-time jobs and making no money was just so disheartening. I remember being both absolutely thrilled—and sad—when we decided to close shop.
Which means, even in that downturn, even with that first company, I learned a lot. Things like:
- Don’t start a manufacturing business with literally no capital. Yes, you can do it with small capital, but you need something to get started with.
- Don’t take money out of the manufacturing business if you’re starting with very low capital. You need to be able to tough it out with another source of income if you don’t have good capitalization. I wasn't paying myself at Odeon, but I was talked into paying the other partners. I shouldn't have caved on that. We should have all suffered until we had reasonable capital.
- Don’t try to do everything (making cabinets, doing Styrofoam, etc)—if you are doing this, you are either (a) crazy, (b) undercapitalized, or (c) not as efficient as you could be.
- Don’t ignore good advice. If we’d listened to some of our early input from customers and dealers, we may have cut down our line…and made it! Or maybe not. We were really really really underfunded.
- Don’t overlook the hints at where you can excel. An early dealer saw our brochure and said, “If you can’t make it in speakers, you can make it in marketing.” I dismissed this as crazy blather…and then later started a marketing company.
As Odeon faltered, another disruption hit SoCal, which was the housing downturn.
On one hand, I experienced great schadenfreude when my bloviating, cigar-smoking boss at Magnavox got his comeuppance on the 9 rental properties he had—especially when he was especially snarky with me about how “it’s so sad an engineer can’t afford even a small condo these days” when I started.
On the other hand, it wiped out a ton of home value, which put a real hurting on people who were counting on their houses as part of their retirement.
And on the third hand, as the housing downturn combined with the aerospace exodus, and, later, an earthquake, it brought insane SoCal housing prices down to a point where I could (finally) afford my own place—even after I’d just started my second company, Centric.
But I’m getting ahead of myself.
During the first years of the housing downturn (yes, years—more on that later), I had shed Odeon, and I got out of Magnavox as soon as I could, moving on to Sumo and starting my audio career for real.
Sumo didn’t pay much more than Magnavox, at least at first, but it was what I really wanted to do: make audio gear.
But pay was a problem. Because even in a downturn, houses weren’t cheap. I would go look at condos pretty much every weekend. I’d look at houses in distress in cool areas I wanted to live in, including half-finished remodels, partially burnt homes, homes with no kitchen, homes that were 400 square feet, homes that looked like Motley Crue had partied hearty in them for like, 6 or 7 years, you name it.
But interest rates were high, and anything that was even a tiny bit iffy was a no-go for someone just out of school and with my income. So, even though I tried, nothing happened.
But life went on. Even in the middle of a grinding downturn, I moved up at Sumo, got into a better rental house (shared with Eddie), started doing some work at Theta, and began playing with layout and design software (and writing) to support the nascent Cobalt brand.
And I realized I liked marketing.
Like, a lot.
And I was pretty decent at it.
That’s how I started thinking about starting a marketing company. I had some money saved (unlike when I started Odeon), and it wouldn’t take a ton of money to start (unlike Odeon), and it could have almost immediate income (unlike Odeon).
And so, in 1993, I began operating as Centric. I did some work on the side for Theta. I did a little work for 3D Systems (yes, that one), and I decided I really, really liked it. And the clients seemed to like it too.
In January 1994, I decided to go full time at Centric. This was a big decision. I remember taking a long drive out San Francisquito Canyon, going deep into the mountains, coming out on the other side near Lancaster, wondering, What the hell am I doing? I remember driving home into the sunset, the road ribboning out in front of me, reflecting the warm rays of the sun, and thinking, Is this really gonna work?
It didn’t help that, about a week later, there was yet another disruption.
Yes. The 1994 Northridge earthquake. I remember waking up in bed and looking out over the San Fernando Valley, watching as they turned all the electrical grids off. Everything shut down in big square patches, like a dying quilt.
Back then, we had no cable TV (by choice), and, of course, no internet. The first thing I did was try to call my parents. I got them on the landline briefly, enough to determine everything was OK. Then I called my girlfriend on my cellphone (woo hoo, bigtime now, right?). I was able to get her briefly as well, before they shut down the entire cellphone network.
I still didn’t know where the earthquake’s epicenter was, so I went out to my car and tried the radio. The early reporting was that there had been an earthquake in Los Angeles.
My stomach dropped. If the epicenter was actually in Los Angeles, as in downtown, and it was still powerful enough to knock over cabinets and speakers in Sylmar, then that meant it was The Big One, and LA was a goner.
That earthquake was the first time I actually had the thought, Holy hell, is this the end?
I got in the car and drove up to Santa Clarita, to check on my girlfriend and other friends. The freeways I figured would be down, so I took surface streets. That was a good choice, as the freeways were impassable at the time. And on those surface streets, I drove by collapsed homes, fire hydrants spraying into the sky, telephone poles askew, and and entire community of mobile homes on fire. It felt like the end. It felt like nothing would ever be the same.
But I saw my girlfriend, I saw other friends (some camping out in the front yard in case the house might fall down), and they were OK. I went home, where Eddie had already cleaned up, and gone up the mountain to a friend’s well to get water (we’d shut off water and gas after the quake). Shortly after I came home, the electricity came back on, and soon we were watching laserdiscs (remember those) and drinking, as if nothing had happened.
But something had happened, and I wondered about the future. Even if the epicenter was Northridge, and not Los Angeles, even if this wasn’t the big one, what did that mean for my spanking-new business.
Still, what could you do, except keep on going? Heck, the next week, I went out to Rancho Cucamonga to talk to a prospective client (XLO Electric, remember them?) I mean, I had to make a go of it.
But it was super rough.
Rough as in, the bank account, which I thought was pretty flush, hit single digits before the money started flowing in.
Rough as in, I still didn’t really know what I was doing, so I made a ton of mistakes. I screwed up photo shoots. I botched files. I lost layouts.
But I fixed them, even if I had to work late into the night, even if it was burning money, even if there seemed to be no hope.
And I learned:
- That it isn’t impossible to make big changes. Even in a downturn. Even in multiple downturns. Even if that big change involved starting a business I had no expertise in, no clients, and no idea really how things worked.
- That you can be happy at many things. I liked engineering. I really liked marketing, too. I still like both. I like the aesthetic side and the creative side, as well as the technical and production side.
- That one disruption isn’t the end—nor are multiple disruptions. Hell, the first 6 years out of college for me was almost all rolling disruptions. Despite that, I advanced in my job and started a successful business.
A little more than a year after I started the company, I was able to buy a townhouse. It was, also, the least expensive townhome ever sold in the complex (like, seriously, seriously the cheapest one), because the combination of 6 years of aerospace flight, real estate crash, and earthquake finally brought California real estate down to something approaching sanity.
But that wasn’t the end of ups and downs at Centric.
The Dot-Com Bubble Bursts (2000)
Ups and downs in the agency biz are normal. After we got our feet under us in 1994, we had a business rift in 1995, we had an OK 1996, a great 1997, but fumbled a bit in 1998. Part of this was growing too fast and learning what we could and couldn’t do. Part of it was launching another business—as a print broker—that didn’t work out well. Part of it was just the reality of managing a fast-changing, creative business of strong personalities, together with clients that could be flighty, with budgets that could vary widely from year to year.
But, by 1999 we were cranking. We were doing amazing work for a huge range of clients, including some really groundbreaking internet work for Compaq, Siemens Solar, Autodesk, MSC Software, several optical networking companies, wireless networks, projectors, hell, even some dot-com startups. The money was flowing and budgeting for internet stuff usually went something like:
Client: “How much will it cost?”
Us: “Here’s a crazy number that you’ll never accept in a million years—”
Client: “Cool, when do we start?”
Yeah. Pure craziness. That should be a hint.
Now, we were fairly savvy. So savvy that we didn’t take dot-com startups that weren’t funded, we didn’t take stock as compensation, and we didn’t do a ton of dot-coms, instead preferring our broad mix of tech companies.
We were also very conservative in our hiring and expansion—so conservative, we were a bit of an oddity in an industry where “web developers” went from 1 to 8 to 40 to 300 employees literally in a few months (eeek, when you see that happening, again, that’s a sign the manic phase has peaked). We were bigger than we’d ever been, but we only had 22 employees.
Which is how, in the space of about 6 months in 2000, I went from the village idiot to the local luminary.
At the beginning of 2000, we’d introduce ourselves to clients, tell them what we did, and go through our staffing. And, very frequently, they’d look kinda confused, and ask something like, “Wait, a sec, you do web development…and you only have 22 people?” The implication was, of course, Wassamattau? Watchudoinwrong?
But by mid-2000, after the NASDAQ had been crashing for a few months, we’d introduce ourselves, tell them what we did, staffing, yada yada. And then, very frequently, they’d look kinda confused, and say something like, “Wow, you do web development, and you still have 22 people? You must be doing something right!”
Yeah. Because when that crash came, it came fast. Web development companies that hit 300 or 800 people overnight literally dried up and blew away entirely. Web stocks tumbled. Tech stocks reeled. An entire industry was decimated.
Old media smirked and pronounced the internet well and truly dead.
Aside: yeah, that was dumb of them. Never get too self-satisfied. Never get too cocky. More on that below.
Now, here’s the interesting thing: because we’d been so conservative in our hiring, and since we hadn’t put all of our eggs in the web development basket, we were fine. So fine that 2000 was our biggest year ever. I mean, that was the first year that I felt like the money shower was full on. I traded the condo for a house, I took some vacation time and did some neat trips, and I met Lisa and got married. For the first time, it seemed like things were sustainable, that we’d keep growing and expanding and everything would be fine. I mean, we were smart! We hadn’t been taken out in the dot-com bust! 2001 would be great!
Oh, you know what’s coming, right?
Oh yeah you do.
Here’s what happened: the optical networking market crashed hard. Like, boom, gone. Like companies with 200 or 300 million dollars in investment capital behind them went poof. And we had 7 optical networking companies as clients.
By the end of 2001, we had 0 optical networking clients.
Worse, our largest client, which made equipment used in optical networking, was hurting. Worse, one of our key employees left and took a semiconductor company with him.
2001 was one of our worst years.
Yeah. From glory to gruesome in one year. We tried to tough it out, but eventually we had to make cuts. Eventually we learned to diversify—to move out of tech companies exclusively. Which led to strong growth again. And it led to us discovering we were good at more than tech—and that we liked it. Hell, some of the best people we worked with were in the organic food industry. I would never have guessed I would enjoy working in food so much.
So what do we learn from this disruption? Lots and lots of things:
- Start prepping for the worst when people proclaim the rules have changed. When someone says “ignore history, house prices can only go up now,” or “the stock market with climb forever because everything is fundamentally different,” or “the internet changes all the rules, experience doesn’t matter,” grab your wallet and buckle down. There were tons of signals that the dot-com crash was coming, but most people didn’t want to see them.
- Don’t get caught up in the mania. Okay, you’ve grabbed your wallet. Now you have to be strong. Because when someone buys a stock at $273 one day and sells it the next day for $415, you’re gonna say, “oh hell, this is still going crazy, will I miss out?” Yes. You will miss deals. Nobody can ever call the absolute top or the very bottom. (But the tells for the absolute top and bottom are the same—both are when people proclaim that it can never change.) If we hadn’t played it conservatively in growth and staffing, we might have not survived, rather than having to make some cuts and moving on.
- Don’t get too cocky. Even if it seems like the disruption has passed you by, don’t crow about your brilliance. Disruptions have ancillary effects (like the death of our optical networking clients), and they may still be coming.
- Be patient; play the long game. Disruptions take a long time to unwind. We didn’t see the same level of internet development for five years after the 2000 bust. Similarly, housing prices take years to unravel in a downturn.
The Global Financial Stupidity (2008)
The Global Financial Crisis? No. Call it what it was: the Global Financial Stupidity. Only true idiots can spin up a disruption out of nothing. Yeah, let’s loan big money to anyone for a house based on no proof of income—and then let’s sell derivatives of this to anyone willing to buy them.
Lawnmower Dog voice:
Oh yeah, this will work out great.
Now, again, any sane person knew that something was coming. I knew it when Lisa and I went to look at some big overpriced houses that were going up nearby. There was no possible way we could afford it, not even as the head of the largest agency in the area.
I told the salesperson this. Doing a mental calculation, I said, “Well, there ain’t no way we’re going to be able to swing a $7K a month house payment.”
She blinked. “But it’s nowhere near that.”
“Oh yeah it is, come on, I can do basic math.”
She grinned. “Oh no, with a negative amortization loan you’re fine. It’s only about $2K a month.”
“Wait a sec, does negative amortization mean what I think it means?” I asked. “As in, you make payments…but the amount you owe goes up?”
She nodded, perfectly happy (and apparently seeing nothing alarming about this.) “Exactly.”
“But the amount you owe goes up!”
“Yes,” she admitted. “But your house value goes up as well, so everything works out.”
I looked at Lisa. She looked at me. My brain exploded.
We walked out without another word, knowing we were heading for a world of hurt. It was, I believe, 2005—a year before the housing crash that preceded the Global Financial Stupidity.
But we had to get a lot more stupid before we got better. Hell, we had early twenty-something employees at Centric buying and flipping houses (before the bottom fell out, and they lost everything.) And brokers trying desperately to sell us on derivative-backed securities, even after the bottom dropped out.
Now, during this time, Centric had evolved into a diversified agency, and was doing rather well after our 2001 stumble. 2005 was a great year. It was so great, we decided to “take the next step” and move from our converted industrial space to half a floor in the Academy of Television Arts and Sciences building in North Hollywood. My office looked down on the huge Emmy statue. It was all very cool, and we figured we could get into some of the entertainment biz down there.
Yeah. You see the stupid. In retrospect it’s obvious.
When you’re in it, it’s less so. I mean, hey, we always did cutting-edge stuff, which is why we did some of the earliest social media work, which led us to entertainment. It’s also why we got into virtual world development, which was hot for like a microsecond, but again, it led to entertainment (and we did some insanely cool work for companies like HP and nonprofits like David Rumsey Maps. Who else gets to rebuild Yosemite from 1880s maps?
And we did some other big crazy jobs, like creating a kid’s virtual world from scratch for Bandai. That was the biggest online development we’d ever done. Things were cranking, we were getting known for leading-edge stuff, and hey, what could go wrong?
(Oh, lots, I thought uneasily, remembering the first dot-com bust. I should have listened to myself a bit more.)
And then, boom, the Global Financial Stupidity.
Again, like the dot-com bust, it didn’t hit us at first. I watched while real-estate prices tumbled and markets burned through a few trillion dollars of capitalization, biting my nails and wondering when the hammer would fall. But the clients kept spending, the jobs kept coming, and 2008 ended up not so bad at all.
So maybe we miss this one? I wondered. Maybe all this new widgets and social and virtual worlds and more workaday stuff like ecommerce and such might mean we dodge this bullet?
Of course not.
2009 was a bloodbath. It was the first time that I saw all sectors of the market dry up. We tried to diversify further…but nobody was spending. We tried going after obscure industrial niches that hadn’t been hit hard…but they were clutching their wallets too and prepping for the worst. Projects were cancelled, clients rolled their marketing in-house, and revenue blew away.
No matter what we did, we couldn’t get traction. People were interested, sure, but maybe next year, or they would bite…at a price that wouldn’t pay any staff. Nothing in the here and now. Nothing to keep the doors open.
And there we were, with a monumentally expensive office, and a pretty large staff.
Holy hell, this might just be the end for Centric, I remember thinking.
We tried like hell to keep everything stapled together for 3 months, 4 months, 6 months. But by midyear, things were grim. Our expenses were killing us.
So what did we do? Simple: radical change.
In fact, I did three things:
- Slashed expenses. This was not pretty. This included layoffs. It also included what was known as “going on zero salary for a while.” This is what me and my business partner did when things were tough. It had happened before. It was what we did. Everyone suffered. I also got us out of our lease and got an inexpensive space back in Newhall, near where we’d started out. (And we made huge changes in the way we worked—more on that later.)
- Started Schiit. Or, to be more accurate, I started exploring ideas for the company that would be called Schiit. We started with no name. Just a couple of ideas, a few sketches, some basic test equipment, soldering irons, screw guns, and a desk in the garage. Because, I figured, maybe it was time to look at something that I loved to do again. I’d been listening to headphones for writing, and a friend had gotten me a tube amp, and that seemed really interesting…so that’s where we started. I figured Schiit might become big enough to be a hobby business, maybe make a car payment or something like that. I had no idea what we’d become.
- Began writing a couple of novels. There’s not a ton of money in writing, but I had a 2-book deal, it was some money, it was real, and there was (maybe) the chance of getting Hollywood interested in it. The novels got done, the Hollywood deal did not, and that’s the last serious science fiction writing I did. But it was another thing that I figured might pay off, in case Centric folded and the-company-that-was-to-be-named-Schiit went nowhere.
Now, what’s interesting is that both (1) and (2) above paid off. Centric, relocated to our old home, much smaller and leaner, and with an entirely new business model, did very well. Hell, 2010 and onward were all profitable years, some very much so.
Furthermore, a lot of Centric’s success came from our entirely new way of working, which we would never have embraced in the past. It took near-obliteration to change the way we worked—for the better.
And, you know what? The way we started working is a bit of a preview of what I see happening in the FLUBAR disruption. I mean, here’s what we did at Centric:
- We took a tiny, inexpensive space to reduce office costs. It was big enough for all of us to gather there, but much too small for all of us to work there for any length of time.
- We allowed people to work from home. Hell, we wanted people to work from home. 10 people in a 1000 square foot office wouldn’t be pleasant for long periods of time. So the rule was: work from home. Be available during business hours. Let us know if you’re not. Make your deadlines. That is all.
- We got everyone together once a week, on Mondays, except for our east coast creative director, who Skyped in. This was the only time we were all physically present. People could come in if they wanted—and sometimes we had critical products that meant we needed staff working closely together—but working remotely was the rule.
What’s more, this new way of working allowed us to hire better people, at lower cost. When a creative director is mulling a $150K job that they know means they have to be in the office 6 days a week, 10-14 hours a day, a $90K offer for 1 day a week and a rational schedule (we had virtually no overtime or weekend work) would frequently win them over.
So why no Centric today? Simple. Schiit got bigger and better. I wanted to focus. Running two companies was rough (not as rough as running a failing company, doing a startup, and writing novels, I have to admit, but still rough). In the end, Schiit won.
So. Yeah. Lots and lots of lessons from this one:
- When the disruption happens, expect that it will hit you. Yes, even if things seem fine for a while. Yes, even if don’t see how it could possibly affect you. Like the example before, don’t get cocky. You don’t know how things are gonna go. Best to prep for the worst case, just in case.
- Even when things look their worst, there’s still hope. I seriously thought Centric was going to go under. I mean, seriously, it’s hard to explain how shattering this is. I mean, Centric was 15 years old. It was 1.5 decades of my life. It was, in many ways, my child. (Lisa and I don’t have kids.) Watching it shrivel was a stab through my heart, every day. But not only did we make it through, we made it through stronger—and hatched a new idea that took over our lives, and I think for the better.
- Take time for serious re-evaluation. No. Seriously. Stop. Turn off the Netflix. Tune out the yammering of the press. Remember, nobody has a crystal ball, and nobody knows how it’s gonna end. Instead, close the door, get a coffee (or tea or beer), and take stock. Are you happy? Will you be happy if everything goes back to the way it was? Is there something you’d change right now if you could, regardless of how the disruption turns out? Multiple somethings? Is there anything you can do that you can do, right now, to build a better foundation for the future? Multiple things? What would you like your life to be like, when things get back into the manic phase once again? Write down notes. Make sketches. Do what-ifs. Talk to your family. Talk to your best friends. And make some new plans (or decide you’re happy with your current ones.)
- Don’t be afraid of radical change. So do you want to change something? Change it. Can you do something? Do it. Yes, I know, maybe it won’t work (but you don’t know until you try), or you might not have enough capital (for the plan as it is, but maybe the plan can be changed), or you may think that it’s completely crazy (but many good ideas are). You can plan and plot and what-if and baseline and chart and graph and benchmark forever, but action is best. Make. The. Changes. Keep. The. Good. Lose. The. Bad. That’s the way it always works.
The Disruption Du Jour
Okay. That title may be too cutesy. Because, no schiit, this is a bigger disruption than I’ve seen in my lifetime. And, worse, you couldn’t really see it coming. This is like an earthquake. Boom, suddenly you’re in it.
Aside: please, please, please no political screeds. Nobody has a crystal ball. We’re all in this. Let’s get through this before we start pointing fingers, or second-guessing actions, or complaining that the outcomes didn’t match the models. There will be plenty of time for that later. Get a Twitter account and get ready to complain/blame/adulate/elevate if that’s your thing. Just please don’t do it here.
In short, let’s accept this ain’t no joke. A whole bunch of countries didn’t shut down big parts of their economies for a joke. And let’s accept that this is something that you couldn’t call. Sure, the Dow might have been a bit overvalued, and there may have been a bunch of cars sitting on dealer lots, and some people may have been wondering when the economic shoe would drop, but it wasn’t like there were warning signs for a new virus out of nowhere.
So, please, don’t take this lightly.
I sincerely hope you, your families, and your friends are safe. If they are affected, I hope they return to health quickly. I hope we can all fight this, and get back to our daily lives.
That’s really the most important thing right now: I hope we all get through this.
In the meantime, I’m making changes to make sure everyone is safe, that our business continues to provide you service and support (and yes, sales, if you still want to buy things), and I’m wondering what will happen in the future.
Remember: no crystal balls. I don’t have one, either.
And, at the same time, I’m looking back at all the other disruptions, and thinking, “Oh yeah, another one of these.” Even if it’s different, even if it’s bigger, it’s a disruption. I'm hoping you can find some comfort, or some ideas, or maybe just a bit of diversion, from the stories of all the disruptions I've been through. In the meantime, I'm making the changes to make sure we can keep running, providing support, service, and sales, come what may. And spending some time wondering about how all these lockdowns are going to affect everyone. As Lisa says, it only takes a couple of weeks to make a new habit. What might our new habits be?
Hopefully we can find some hope in the good—advancement of telelearning, remote working, telehealth, a new focus on family and friends, heck, a focus on health in general, and, of course, a chance for many people to pause, evaluate, and make positive changes (thank you, Lisa, for pointing that out.)
I don’t know how it will come out. But I remain hopeful.
Wishing you the best of health,
Jason
