Market Reset = Lowered Expectations

There was a great skit that the show MadTV used to do around a dating service that branded itself as Lowered Expectations with the Tagline “You’ve tried the rest, now settle for what you can get”. This show usually featured the biggest train wreck personalities you can imagine sending out video clips to get a date.

The example above sets a somber tone for the market on all levels. Unfortunately, I think a strong driving characteristic with humanity is the need for constant betterment, and the misconception that we should always be upwardly mobile. This is not only incredibly an incredibly naïve thought process but it’s also factually impossible. Sure you can trend upward but there are always setbacks that need to be overcome.

In my current situation after a meteoric rise into the position I had lusted over for many years, I found myself cresting the mountain only to stumble down the other side. My situation is a lot like most businesses right now.

The real question though is how should you be dealing with this momentary disruption?

Wait it Out Approach

I think this is where most businesses are, and it’s also where I’ve spent the last four months. The theory here is you rely on your cash reserves, cut back on spending a bit. The understanding is that since we’re in a downturn in the business cycle you can simply wait until the end and then surge with the upswing.

Push the Envelope Approach

This really has become the Warren Buffett mantra. The concept here is as things are depressed, there is a terrific opportunity to gobble up resources or companies at a previously impossible price point. By making use of these cost savings, you become well positioned to come out swinging while others are catching up when the market picks up.

Market Correction Approach

This is the Microsoft approach, based upon the assumption that the economy of the mid 2000’s “shot the moon”. What we’re looking at here is the idea that spending won’t return to previous levels and all business planning should be rethought to account for the market as it has been trending since 2008. This is where layoffs and drastic resetting of economic forecasts come in.

My Thoughts

Wait it Out Approach – I see this as the “can’t make up your mind” option. It’s for the people who are not bullish but not deeply pessimistic. I also think it’s a big missed opportunity for both employers and job seekers, as they are failing to address any of the current market forces in their decision making process. Don’t be fooled it won’t be business as usual for quite some time.

Push the Envelope Approach – I love this ballsy play by businesses. This way of thinking has Berkshire Hathaway up 46% in the last 12 months. Unfortunately, I don’t think this is a direction most companies are going in. When you see layoffs coming from some of the companies with the largest financial reserves, this shows that this approach is not widespread. Additionally I’d say if you’re a job seeker this may not be the best move for you. If you’re currently without a job and don’t have enough experience to compete with more established candidates taking additional years out of the workforce and collecting additional debt add-in substantial risk and offer lower benefit as degree inflation is occurring.

Market Correction approach – I really don’t like this approach by businesses, it will surely prolong the pain, and very well could result in an actual market reset. I think businesses like Apple have shown very effectively that investments in new categories and products can rapidly drive earnings with minimal risk, even complete busts like the Apple TV didn’t have a sizable negative impact on their earnings when taken alongside products that outperformed. Companies who are trading off future earnings for short term security, especially in tech are really decreasing their ability to compete long term. As for job seekers I think this unfortunately is the right mindset to have. Most companies can afford to have a couple bad quarters without destroying their brand, unfortunately a bad year for a worker can substantially impact their ability to find employment later, and stunt their career.