You would likely also know that I’m failing miserably at this. I've learnt that there is pitifully little that’s written for the individual during a recession, even while there seems to be a limitless well of information for business owners and investors.
(Note: I’m close to giving up on this program right now, but if you know of any resources that might be helpful, feel free to ping me at cedric [at] this domain).
As the odds of finding a definitive resource tend to zero, I’ve begun to reason about this coming recession from basic principles. Here are a couple of things that I've been thinking about.
Career Moats Aren’t Necessarily Recession Proof
Longtime readers of this blog would know that I’m all about building a career moat. This stems, in part, from the damage the Asian Financial Crisis did to my family. (As Morgan Housel puts it: “wounds heal, scars last”). Housel is right: scars last a long time; I’ve obsessed over moats ever since.
In the past, job security came from not losing your job. Today, job security is the ability to get your next job, not keep your current one. There are many ways to increase the probability that you get a next job. Your network is one. Luck is another. But the only consistent way is to have rare and valuable skills — that is, skills that the market actively desires.
This market-oriented way of looking at things leads to some obvious implications. In normal times, you can predict the demand for your skills. In a recession, this becomes more difficult to do. Even the most talented restaurant designers, for instance, can’t get a job in today’s F&B armageddon.
This is something that I’m extremely cognisant of, right now. My career moat is my ability to set up and run software development orgs in South East Asia. I've kept this moat in my back pocket as a safety net, which is what lets me sleep at night now that I've gone off to build a business of my own.
(If I fail, I tell myself, I can always go back to a company with a desperate need for my skills).
But the honest truth is that my career moat will count for less now, because venture capital is drying up and companies in the region will stop expanding.
… But Career Moats Help You Get Back Up
If the region recovers, and if companies decide to expand their engineering offices again, then my career moat will track upwards in value. This is not guaranteed, of course. I’ll have to keep close watch on the industry as the recession progresses.
The point I’m making here is that your career moat dips or grows in value in relation to what the market does. Sometimes this results in a net increase (managers who specialise in creating good remote organisations are probably winning right now). Other times, this just means a net decrease in value.
The tricky thing about all of this is that skill markets are not perfectly observable. You’ll have to go hunting for trends. I’ll probably schedule a bunch of meetings at the end of this year, assuming COVID-19 blows over. And in those meetings, I’ll be listening carefully for the organisational changes my friends are experiencing at their companies. If things are growing, that’s great. If they’re thinking of reducing costs by opening engineering offices in cheaper SEA countries, that’s also great. Anything else might not be.
If you already have a career moat, you should probably be doing the same.
… If You Can Last the Drought
You know how financial experts say that you should keep three to six months worth of monthly expenses for emergencies? And that you should build that war chest at the beginning of your career, and top it up whenever your personal expenses go up?
Well, times like these is why that advice exists. If you don’t have a career moat and you want to build one during this time, having that war chest takes some of the pressure off. And if you already have one, having a war chest helps keep you afloat until demand for your skills rematerialises in the economy.
Go After Complementary Skills
If you're going after a career moat now, remember that the best skills to go after are the ones that the market will value after the recession ends. You can’t necessarily predict this — the world is complex and the future is uncertain, but you should certainly keep the general idea in mind.
A simpler version of this is to go after complementary skills to your current role. If you've been working for a bit, it's likely that you'll have a better understanding of your industry than most. So ask yourself: what complementary skills would make you more valuable to the employers in your job market?
Focus on that.
If you can’t focus on that, then you’re going to have to play your career on hard mode. This means switching to a new field, which usually means going back to school for a bit. But bear in mind that career moats are made from rare and valuable skills — and the skills that are taught in a school are by definition not rare — though they may be valuable.
Start With Emotions
If you're using this time to build a career moat, you'll probably have to start by regulating your emotions. You can’t master new things if you’re constantly feeling depressed about the pandemic or about the economy.
Start with cultivating healthy coping strategies. The coping strategies from Cognitive Behavioural Therapy (CBT) are pragmatic and useful, and using them by no means imply that you are weak.
Self-help CBT has been shown to be marginally effective, depending on the individual. If you want a book to breeze through during this work-from-home period, I recommend Cognitive Behavioral Therapy Made Simple, but there are likely other books that fit the bill. The core idea in CBT is that your perceptions and your reality are two different things. CBT hands you tools to separate the two, and to catch your perceptions before they affect you.
I’m aware that your situation could be vastly different from mine. I’m stuck in a Malaysian lockdown and slightly depressed by it, but I don’t have people who are ghastly sick and I don’t have loved ones serving on the frontlines of the healthcare system. I think that it’s important to acknowledge that it’s possible to feel two things at once. You can be cooped up and depressed as well as grateful that the virus has spared you and yours. That doesn’t make your emotions any less of an obstacle.
The one reframing exercise that’s I’ve found incredibly useful during this period is to view all news as ‘valuable tacit experiences’. Whenever you hear old investors talking about the 2008 crisis, they always talk about how the young analysts in their firms have no experience of a real panic, and thus have no idea what it’s like to operate in a time of mass hysteria. Abstract knowledge of a recession is a very different thing from, well, actual experience.
So I tell myself that I want to know how it feels like to be in the midst of an economic meltdown. I follow the news about the markets and about the progress of the pandemic in my country and others and invariably find myself depressed. But then I catch that and tell myself that I’m collecting this experience for the future; that I’m collecting it so that I know what it means when people say “the market panicked back in 2020, and destroyed $300 billion in value” — tacit experience beats abstract numbers any time. (See also: ‘this is what 5% feels like’).
I don’t know if this works for you, but the point here is that you’ll have to find your own way to reframe the experience you’re having. Do that in a way that works for you, that enables you to go after your goals.
Turtle Up In a Profit Centre
One recession-proof technique that seems to work is to become essential to a profit centre within your company. The friend who pointed this out to me learnt this at Intel over a decade ago. He noticed that while layoffs may occur within the corporation, the people who worked directly on the WiFi chipsets never seemed to be affected. They were likely protected because WiFi was seen as hugely important to Intel’s future success.
So how do you know you’re in a profit centre? To quote the great Patrick McKenzie:
Peter Drucker — you haven’t heard of him, but he is a prophet among people who sign checks — came up with the terms Profit Center and Cost Center. Profit Centers are the part of an organization that bring in the bacon: partners at law firms, sales at enterprise software companies, “masters of the universe” on Wall Street, etc etc. Cost Centers are, well, everybody else. You really want to be attached to Profit Centers because it will bring you higher wages, more respect, and greater opportunities for everything of value to you. It isn’t hard: a bright high schooler, given a paragraph-long description of a business, can usually identify where the Profit Center is. If you want to work there, work for that. If you can’t, either a) work elsewhere or b) engineer your transfer after joining the company.
If you’re fortunate enough to be critically important to one of your company’s profit centres, then you likely don’t have to worry about having a three-to-six month emergency fund. You're likely going to ride out the storm in the warmth of your company's embrace.
(See also: What The CEO Wants You To Know).
I should warn you that this piece is written from ‘first principles’, and not written from practical experience. This makes it dangerous for all the reasons that I’ve outlined in Beware What Sounds Insightful.
But I think most of this is common sense.
With that in mind, I wish that you — and all you love — stay safe throughout this pandemic. Pursue a career moat now if you have to; watch the demand for your skillset in the markets if you don't.
I’ll see you next week.