Keep walking! Away from the bad times towards good times. Keep walking!

When markets are in recession, what can we leaders do?

For this lets understand what actually is a recession? Recession is essentially a slow down that happens across various parts of an economy.

People tend to spend less, lesser transactions take place, this means business may have lesser revenue and/or cashflow, hence then may pay lesser and delay outflows, this further lead to people spending less and so on. Similarly, when a gloom in economy prevails, FIIs and FPIs, out of their RoI mandates and pre-programmed entry/exit criteria, may exit certain sectors or countries, causing some of the lead indices to crash, which generates further panic and drives further selling and so on. When this money moves out of the markets and/or the country, the currency may get affected, making imports and foreign debt more dearer, causing further increase in prices and/or slowing down of demand or activity. Can't you see a chain reaction that is more potent than Uranium isotope 235?

What can break this chain? More business for sure. But is that the main factor? May be not.

Sometime 'lack of confidence' or a 'perceived fear' may be causing more danger to the economy than real joblessness or real demand reduction or real inflation/deflation. These perceived fears such as 'markets will be bad' or 'people will not buy cars' 'real estate is doomed'  or 'there will be big unemployment in retail' will lead to certain cautious approaches being adopted by SMEs, promoters, and senior level managers, that these cautionary steps trigger a series of application of brakes on some of their 'planned spends', or 'planned launches' or 'hiring' etc with an intent to improve ROI or liquidity positions of their companies. In other words, brakes being applied on the accelerating economy.

These fears, like Covid 19, can multiply very very fast (in fact emotions travel way faster than covid-19). One day if Nifty loses 1000 points, that will itself lead to the herd mentality of investors selling further and there you see nifty losing another 3000 points in the next 4-5 days. It has nothing to do with real demand or unemployment or salary cuts. When nifty loses 1000 points in a day, instant fear is generated in the minds of crores of people in the form of 'something is going to happen' - and this triggers a lot of further steps leading to more panic. Anything that happens in the financial markets tend to create more panic and this can actually trigger a slow down in the economy. (on the contrary, financial markets are actually supposed to a mirror or an indicator of the real economy - but the movements are quite driven by P/E which is an indication of future performance - i.e. hopes or fears or expectations of people). Likewise, when markets are growing slow and steady, people tend to think 'all is good' and continue their activities more confidently, leading to further steady growth.

So what can we, thousands of leaders in the world do to reduce the extent of fear?

1) Give hope to people - tell your employees, vendors and investors, bankers and bosses that all is good. And that we'll work towards the best. Tell them Let us all continue our jobs like how we always did. Or at least urge the stakeholders to take a cautiously optimistic view. If 50,000 of us give hope to 500 or 1000 each, there is a lot of positivity around. If we can all undergo a lock-down for 45 days, for us to give hope and create positivity is much much more easier.

Having convinced stakeholders to take a more positive view, what can we do next?

2) Work harder and smarter for a few weeks - Do we know what made Japan bounce back post WWII and become the 2nd biggest economy of the world (now 3rd or 4th)? It is the sheer discipline, attitude and hardworking nature of their people. They just put their heads down and worked hard - they unlearned and re-learned certain skills, found out ways to do many things faster, cheaper and better. For this to happen, we need a system of leaders and bosses who believe in themselves and can inspire the team to continue what they are doing. 

In other words, lets keep walking - the times may be good, the times may be bad. Let's continue our walk, our journey. Let's give hope to everyone around us - to invest more, to spend more and to work more. When lakhs of us, do this with a lot of passion, economy has no option, but to bounce back. But if we live in caution or fear, we are affecting everyone and we are causing the doom that we are fearing.

Remember cause and effect theory - think and do good, the outcome will be good.

...And just keep walking - and keep hold your head high!