A world in crisis requires real leadership

These are trying times. People are scared and rightfully so. COVID19 is only a small part of that fear. Beyond COVID 19, many companies do not have the balance sheets to weather the economic storm that is on the horizon, which itself will force people out of work at the same time that they were just barely hanging on. Rising unemployment and slowing demand will cause businesses to make further cuts. Many of those same employees, already overextended in debt, do not have safety nets. All over the world, there is a crisis of leadership. Political and otherwise. Meaning - their fear is rational.

Leadership at any time is hard. People do not hear what you say in exactly the way you mean it. They hear what you say through their own filter and emotions and sometimes, mistake the message entirely. In times like this, that difficulty is compounded because with fear and panic spreading around the world at lightning speed, fear becomes the filter. Almost every person in your organization, whether that organization is a company, public institution or country is experiencing that same fear - telling themselves their own stories about what might happen next and wondering how they are going to make ends meet if the worst should happen. That fear itself impairs quality decision making and often makes the situation far worse because people become paralyzed or make irrational decisions. It then feeds back on itself, because each person thinks they are making quality decisions themselves while believing it is everyone else that is not. 

I saw it myself with my team in 2000 during the dotcom crisis and again in 2008 during the housing and credit crisis. In both cases, we were not as well prepared as we should have been - either because of our technology or balance sheet. It wasn’t that hard decisions didn’t have to be made. Ultimately, it was the communication of those decisions in a way that gave hope to people was key to leading the team through challenging times because it allowed people to remain at their best. 

I realized that in times like this, I needed to step back in a calm way and understand what the world would look like in the future, to be able to get out of the day-to-day insanity of a crisis. Even though the pressure was immense at those times, it wasn't really about me anyway. While the stress made it easy to become more self-absorbed, it was always about others. That perspective allowed me to understand that I had to over-communicate in a genuine, hopeful and loving way. It was not that I had all the answers – it was about communicating, often, in a way that gave people hope for the future. Doing that in an honest and calm way to ensure that they could operate at their best. The ideas that came from allowing them to release their tension, in many cases created the best opportunities.

For anyone who has read my new book, The Price of Tomorrow: Why Deflation is Key to an Abundant Future, you probably saw this crisis coming and were more prepared.

A couple of excerpts from the book:

“With credit continuing to advance globally, it is only a shell game as to where the next crisis originates. In fact, the shell game is now moving to currencies themselves and the entire economic system that is built on top of them. A financial system based on credit is just an exchange of money today for money later. I give you dollars today and temporarily lose the utility of my money in exchange for having more later. You have the inverse: the benefit of more money today and less tomorrow as you pay back the loan with interest. This system works on trust—trust that you will pay what you said you would pay. It is the same whether that trust is in a person, company, or government. Remove trust and it affects the credit-worthiness of an individual or company. Remove trust from a system and the entire system can unravel very quickly.” 

“Monopolies that have flourished for a long time are often overturned very quickly because they fail to recognize an impending transition. Tipping points can come from anywhere and can come quite suddenly, often with little warning of the cascading effects. But what happens when, instead of the monopoly being a business or a small part of an overall economy, the monopoly is our entire interconnected economic system?"

You also know that what comes next is predictable. Either:

1. A Depression (not recession as is currently being called) or
2. MASSIVE monetary easing and stimulus 

In scenario #1) again from my book:

"Asset prices collapse. Loans on those assets become non-performing. Most of the banking system collapses. Only the best loans can be repaid. Many people are wiped out as the collapse destroys all who took unnecessary risks. Some of those are you and me and pensioners, people who mis-understood the risk we were taking with some of the exotic investments that we were told were safe. As well, many more are wiped out because of the lack of liquidity in the system, meaning that some investments deemed safe also fail. This result might produce a depression so severe it would make the Great Depression look like a walk in the park. But in that environment, hard dollars would explode in value and those who had savings and cash would pick up extremely low-priced assets and mispriced deals and make their fortunes" 

Or in scenario #2) We have the inverse – money becomes cheaper, asset prices explode in value and the system is “saved” by kicking the can down the road for another day. 

Both of these decisions – whether to print money or not, are out of your control – and your team's control. They also lead to wildly different outcomes of where to invest or to not invest. Those are the facts.

We can only prepare and do our best in light of those decisions. But it also might be worth fully considering our “luck” when questioning our own past decisions in business and where we might have won or lost because of a similar bet. 

I fully expect that central banks will choose scenario #2 and do almost whatever is needed to keep the system going by trying to re-inflate the system because they cannot imagine the consequences of not doing so (but again, we’re playing with probabilities and even though the probabilities are high, that bet is uncertain) 

Even though times like these are tough, they also create some of the most amazing opportunities. Under the cover of a crisis, it is easier to do the things needed to ensure that a company can thrive in the future and do it fast. In business, sometimes that means extending cash by doing a down round quickly, sometimes it means delaying expenses or making cuts and preserving the core. Remember, it's not that you might not have to make hard decisions along the way - it is the way in which you make and communicate those decisions.

Times like this also create unbelievable buying opportunities because if we can imagine what it looks like for us and our teams with fear in the market, we can also imagine what it looks like for others. Because of that fear, companies tend to make bad decisions either 1) because they project the existing business in its worst-case into the future instead of changing it and make irrational decisions or 2) because of balance sheet impairments and that become opportunities for others to pick up businesses at fire-sale prices.

I am fortunate to be able to work with some of the most incredible companies, people, and high integrity, passionate leaders that truly care about the world in which we all live. In a world that seems to be breaking down, their quality leadership matters more than ever.

People crave it because it is genuine.

Remember that in the end, it is the impact you have on others that will matter most in your life.

So take a deep breath and do what matters most.

Lots of love,

Jeff