I’m used to recessions. I’ve been through a few. In 2007, my father was one of the thousands of middle managers to be fired from Intel — I knew from a lifetime as a tech industry kid that this meant a recession was coming. In 2008, my employer allowed me to pursue a side project to understand consumer behavior in a recession. We interviewed seniors who were children in the Great Depression and had lived through multiple recessionary periods. We interviewed college kids who were about to graduate about what they thought the future would hold. We interviewed people in the US, Europe, and Asia about what previous recessions had been like.
And there were clear patterns — high-end luxury goods still generally did okay, but “masstige” luxury brands and products would wither. More expensive spirits brands — especially what some in the industry call ‘brown sipping liquor’ would still do well, but on-premise consumption would decline. People would pursue education and training to upskill for a new role or industry. Experiences that felt immersive and communal would take precedence over stuff. People would do more bulk buying, finally get that Costco or Sam’s Club membership, clip coupons, shop “on offer”, and switch brands to something less expensive. New moms would roll the dice and get a second-tier diaper brand; new dads would join online groups and communities to find out which store had the lowest price on Pampers; families would drive farther to save a few cents on gas. They’d look at their bank statements more and cut some of their subscription services (back then, there weren’t too many of those, but Netflix, cable, and gym memberships were often on the chopping block). With the gym membership cancelled, they’d join a running club or get second-hand exercise equipment for their homes. They’d take up hobbies and think about making gifts rather than buying them.
These are well-worn, well-known recessionary coping strategies for consumers.
And because they’re so obvious, so reasonable, so predictable — it meant that businesses could make plans. Luxury brands could shift their marketing to focus on family, experiences, stories, heritage and home consumption over ostentatious luxury and fancy bars, restaurants and nightclubs. Retailers could develop a sales and couponing strategy to encourage store traffic. Grocery stores could do more x-for-1 offers, reshuffle the kinds of products on their end caps, and redesign marketing to help homemakers cut corners that cost extra. Subscription services could temporarily drop their prices on a “recession special”, or offer discounts for multiple subs. And so on.
Recessions are temporary
They could do these things not only because consumer behavior in recessionary periods is extremely predictable, but because recessions are generally temporary. You can’t tell from the start how long a recession will last (the average is about 11 months, and they come about every 6-7 years). You can’t be sure how fast the Fed will be to fiddle with interest rates or open discount windows or buy treasuries. You can’t know what measures the government might take to put more money in consumers’ pockets. But you know it won’t last forever. So you can do a certain amount of modeling: what if it’s only six months, what if it’s 2 years, what if they lower interest rates, what if the Congress passes a stimulus bill, etc.
So the biggest reason that a recession is better than what we have now is predictability. And I don’t even mean predicting how long these conditions will go on, but what the conditions will actually be. The President changes his mind daily on who will be tariffed, and how much, and maybe he’ll carve out your industry if you buy his memecoin, or stay at his resort, or golf at his course… or talk to him last and loudest.
This won’t be like 2008, or 2021, because nobody is coming to save us.
This Congress is no backstop — rather than talking about ways they will help offset the hits taken by the American economy, they are mostly doing nothing. They are allowing Trump to do whatever he wants, and when they do propose a policy change, it’s usually in the opposite direction of the models businesses assume.
They’re busy trying to dismantle the EPA, the ATF, and the courts; restrict ballot access; diminish women’s and the LGBTQ+ community’s civil liberties; pass tax cuts for the rich or repeal the income tax altogether, and diminish the incomes of the bottom 40% of American households. Tariffs will increase prices further, on top of an already lengthy period of inflation; each week renews a drama over whether the President will defy the Constitution (as we currently understand it — don’t worry, Humphrey’s Executor is almost certain to be overturned (whether SCOTUS has the guts to say so in the majority opinion or not) and fire the Fed Chair because he won’t lower interest rates.
There is no confidence that this government would take any action to stabilize or shorten a recession — indeed, it is this government that will bring it about.
They took our guns
This is why this chaos is so much worse than a recession — businesses will not have all the tools they usually have to adjust to recessionary consumer behavior.
When consumers stop spending or reduce their spending, businesses cut costs. I know this, quite painfully, firsthand. I’ve run my company for almost 13 years now; the first few were in the lingering post-2008 recession/recovery. Then there was the pandemic, which initially halted work, and then, because many businesses felt sure a recession would come, slowed work down considerably. We’d been limping along, feeling hopeful that as prices stabilized and consumers adjusted, business decision-making would become less cautious.
But the American people had other ideas — many decided their vote was not needed or valuable. Many decided their anger over the experience of a pandemic and inflation needed to be expressed in a vote for a feckless and reckless President and his sidekick Congress, who seem hell bent on creating that awaited/feared recession, and are largely unapologetic about it.
As it stands, we may not survive.
When you don’t have Congress, you can still plan
You can cut costs in a lot of ways as a business. You can switch to a cheaper supplier, a closer distributor; you can pause investments in R&D or delay a spendy product launch; you can furlough employees or close stores or warehouses (temporarily, you assure everyone); you can offshore some of your workers to lower labor costs; you can invest in technology and tools that allow you to eke out increased productivity (which will probably accrue to your benefit even more when the recession ends).
But when you have tariffs looming over you — on again, off again, how big, how small today, sir? — most of those strategies go away. A cheaper supplier is no longer cheaper because they’re in a high-tariff country. Cheaper labor markets are out too — you’ll have to pay hefty tariffs to import their goods. Those tech and tools investments will be limited — the machines are made overseas.
So now you have two problems as a business leader: a government that does not want to help you or your customers, and that also doesn’t want to commit to a simple, understandable, stable program that you could at least plan around. And the tools you usually have available are being yanked away from you.
It’s wildly ironic — the thing we do is help business leaders (CEOs, CMOs, insights leaders) make good decisions so they can grow. But those same leaders have been dosed with a powerful paralytic — they can’t even plan enough to ask for help.
What is left?
Layoffs and furloughs.
Store and warehouse closures.
Cutting other capex line items like marketing and R&D.
Discounting in the hope that the President will settle down, or the GOP will lose the mid-terms, or the eventual reduction of interest rates will boost spending long enough to weather the next 4 years.
And then you just hope you live long enough to still be around when consumers and suppliers and partners recover… someday.
What can be done?
There are ways to limit your exposure. There are ways to cut costs without diminishing the wealth of your customers. There are ways to plan when uncertainty is high. There are strategies for companies with large cash holdings to spend their way through and emerge stronger on the other side of whatever this is going to be. And there are ways to apply pressure to the government to stop its project of dismantling globalization and enforcing a trade blockade around the United States.
I’ve worked with companies to help them develop strategies for surviving recessions and inflationary periods, and pandemics. I can still help them now, but I need to say this very clearly:
Get in the arena.
Businesses have a lot of power. If they stopped tiptoeing around this man who thinks he can manage a 21st-century economy with 19th-century tools, who demands bribes and fealty, who is attempting to run a protection racket, not a government — then they could stop this pain right now. They could demand he stop this — withdraw their support, cancel their memberships, sell their memecoins, go in front of every camera and microphone, look Joe Rogan right in the eye and tell his audience that Trump is driving the richest country in the world into poverty and isolation; that if they think it’s tough now, with high prices and low wages and unbearable debt, just wait.
But they would have to first understand that there is no long-term gain to be had through short-term advantages (e.g., thinking that you’ll poach your competitors’ clients and customers, that because your supply chain is mostly facing 25% tariffs and not 145% tariffs you have a competitive advantage, etc).
Business - even in America - has a long history of thinking it would get richer if only there were an authoritarian government. Business always thinks it can wield government. And business is always wrong. In the end, the authoritarian wields business — but the authoritarian, no matter what he said in the opening credits of his reality game show, is never a great businessman. The journalist
has observed that fascists are terrible at judging risk; there is no place where this is more true than economic risk. The German fascists favored autarky; so too do some Trumpists. But we do not live in a world that could possibly accommodate autarky and also create wealth or economic stability. This was true in the 1930s, and it was true in the 1830s, and this truth may well be at its apex right now. You can not isolate a country and make it rich.I’m at a conference this week in which the attendees seem to be very well off, very profitable. Their chief worry is not tariffs, it’s AI. But because at this moment they are all quite fat and happy, they are convinced that they will figure out how to exploit AI to their advantage. I think they’re wrong on two counts: I think AI will exploit them to its advantage; and I think we will eventually see American service businesses, especially our world-historically disruptive digital services businesses, slapped with tariffs by Europe and China. No sector is safe.
Meanwhile, the rest of the world can start to negotiate new trade deals, build their own technologies, offer incentives for companies to build factories and warehouses and stores on their shores, build up their own militaries now that the American military is no longer available, hire away our best and brightest researchers and academics, and experience a new European and Asian and probably even African century. You can do that when you’re on the free side of the Iron Curtain. You can’t do it when you’re inside it, penned in by uncertainty.
So you have to think differently, about what you do, and how you do it, and who you do it for. You have to think about what you are actually up against. And you have to lay out the scenarios:
What do you do if he relents?
What do you do if Congress guts Medicaid and SNAP?
What do you do if the tariffs continue?
What do you do if he evens them all out to 20%?
etc. etc.
And you have to — maybe more than ever — get real about what’s going on with your customers and your partners. They will be able to tell you what’s happening on the ground, and how fast it’s happening, and how deep it goes.
But in the end, it’s up to the leaders of these businesses to decide to act. And right now, the thing we do not have enough of, especially from business, is action.
Because they know what to do in a recessionary economy, but they don’t know what to do in an isolated one.
As I was editing this piece, I saw this:
Trump White House blasts Amazon on tariff cost report
“President Donald Trump personally called Amazon founder Jeff Bezos on Tuesday to complain about a report that the online retail giant was considering displaying U.S. tariff costs on its product listings, a source familiar with the matter told NBC News.
Within hours of the call, Amazon publicly downplayed the scope of its plan — and then announced that it had been scrapped entirely.”
This is not the way.