Entrepreneurialism during a collapse

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Thriver's picture
Thriver
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Joined: May 17 2008
Posts: 3
Entrepreneurialism during a collapse

A question:

I am planning on starting a business that I feel is appropriate and fitting for these times. Yet, I wonder if this is the best time to start a business, or any business, for that matter.  Thoughts?...

 

Thank you, Chis Martenson, for all that you've done.  What an amazing resource.

 

switters's picture
switters
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Joined: Jul 19 2008
Posts: 744
Re: Entrepreneurialism during a collapse

I'm planning on starting a business in about two years, which should be right in the midst of the worst depression we've ever experienced.  Nevertheless, I'm actually quite optimistic about the prospects of the particular business I will be starting.  

Personally I believe that the businesses that will be successful in the coming years are those involved with products and services that are essential to life under any circumstances.  Local businesses that step in to fill the gaps created by failures/increasing cost of long-distance shipping will also thrive.  For example, right now all of our shoes come from China.  When those boats stop sailing there will be a big need for local shoemakers, who are practically nonexistent at present. There are many similar opportunities.

Now or the next few years is certainly not the best time to start a business, but that doesn't mean you shouldn't do it - especially if it's your best chance of supporting yourself and your family over the long term (as it is in my case).

Thriver's picture
Thriver
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Posts: 3
Re: Entrepreneurialism during a collapse

Thanks, Switters!

A few more questions:

  • How do we start, grow and mantain businesses during an economic collapse? 
  • How do we manage inventories, purchasing and shipping logstics if our currency fails and our banks fold? 
  • How does one take on the debt liablities of a startup under such conditions, even if the business idea is solid and relevant?   

Everything I read, especially on sites like this one, tells me that we are about to enter a period of EXTREME volatility and uncertainty. Am I drawing too bleak a picture, or will there be a strata of the economy that is still vibrant and functioning, no matter what happens?

 

 

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: Entrepreneurialism during a collapse

Thriver,

I think your concerns are valid.  We are entering a period of extreme volatility and uncertainty, and it's likely to be the worst depression we've ever faced.  

However, consider that during the Great Depression 75% of people were still employed.  Even in very bad times, people still need to eat, clothe themselves, seek care when they're sick, maintain their homes, and so forth.  As I said in the previous post, if your business is directly involved in meeting these basic human needs, you have a much better chance of being successful.

Access to start-up capital may be a problem depending on the scale you're envisioning.  I hope to be able to raise the funds I need through an SBA loan (Obama says he is expanding this program, but who knows where that money will come from?) and microloans from friends and family.  But this is only possible because my business is not capital intensive.

Managing inventories, purchasing and shipping logistics is indeed a difficult question if we experience a currency collapse.  I do not think all of our banks will fold, so it's very important to choose a highly-rated bank for your business and personal accounts to minimize that possibility.  See Chris's advice on this towards the end of this recent thread.

As you well know, starting a business in any economic climate is risky.  80% of small businesses fail within five years, and of those that survive, 80% more fail by the end of ten years.  That means that out of 100 businesses that start, only 4 will make it past ten years.  

There's not much doubt in my mind that those numbers will get even more dismal in the coming years.  As discouraging as all of this sounds, however, it needn't discourage us from starting a business if our idea is viable, we're willing to work hard, and we understand the risks involved.

Just my 2 cents.  I don't have answers to your questions specifically, and don't think anyone really does.  At some point I think we just have to take a leap of faith.

 

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Entrepreneurialism during a collapse

From the NY Times, December 4, 2008

http://www.nytimes.com/2008/12/04/us/politics/04green.html?hp

Proposal Ties Economic Stimulus to Energy Savings

By JOHN M. BRODER

WASHINGTON — President-elect Barack Obama and leaders in Congress are
fashioning a plan to pour billions of dollars into a jobs program to
jolt the economy and lay the groundwork for a more energy-efficient
one.

The details and cost of the so-called green-jobs program are still
unclear, but a senior Obama aide, speaking on the condition of
anonymity to discuss a work in progress, said it would probably
include the weatherizing of hundreds of thousands of homes, the
installation of "smart meters" to monitor and reduce home energy use,
and billions of dollars in grants to state and local governments for
mass transit and infrastructure projects.

The green component of the much larger stimulus plan would cost at
least $15 billion a year, and perhaps considerably more, depending on
how the projects were defined, aides working on the package said.

During the campaign, Mr. Obama supported a measure to address global
warming by capping carbon emissions while allowing companies to buy
and trade pollution permits. He said he would devote $150 billion of
the revenue from the sale of those permits over 10 years to energy
efficiency and alternative energy projects to wean the nation from
fuels that are the main causes of the heating the atmosphere.

But the Obama adviser who discussed the green energy project said Mr.
Obama would not await passage of a global warming bill before
embarking on the new energy and infrastructure spending. House and
Senate supporters of a climate bill said they would continue working
on legislative language but did not expect quick action on a cap-and-
trade law because of the economic emergency.

That means that the green-jobs program would not be financed with
pollution credits bought by power generators and other carbon
emitters, but instead would be added to the budget deficit.

Congressional officials working with the Obama administration said
the stimulus program was also likely to involve tax breaks or direct
government subsidies for a variety of clean energy projects,
including solar arrays, wind farms, advanced biofuels and technology
to capture carbon dioxide emissions from coal-burning power plants.

The programs will be a part of a larger economic stimulus package
whose outlines are faint but which is expected to cost $400 billion
to $500 billion. Mr. Obama has said that his goal is to create or
save 2.5 million jobs in the next two years. He has assigned to his
economic and environmental advisers the task of devising a proposal
that is expected to combine a shot of new federal money into existing
federal and state programs and the possible creation of agencies
modeled on New Deal public works programs.

"We'll put people back to work rebuilding our crumbling roads and
bridges, modernizing schools that are failing our children, and
building wind farms and solar panels, fuel-efficient cars and the
alternative energy technologies that can free us from our dependence
on foreign oil and keep our economy competitive in the years ahead,"
Mr. Obama said in a radio address last month, echoing a campaign
promise with a new sense of urgency.

The political climate seems favorable to an economic stimulus plan,
but large sums of new money touch off lobbying frenzies and energy
projects spur debate between conservationists and those who want to
more fully exploit domestic sources of oil, natural gas and coal.

Some experts said the record of government's intervention in energy
markets and new technologies was not promising, citing as a
spectacular example the Carter-era Synthetic Fuels Corporation, which
spent more than $3 billion without producing any commercially usable
amount of coal-based liquid fuel.

Ethanol and other non-oil-based fuels have also not proved their
commercial value, in some cases yielding less energy than was needed
to produce them, or, in ethanol's case, diverting land to corn and
driving up food prices.

The plan could also face resistance from fiscal hawks. In 2004,
Senator John McCain, Republican of Arizona, almost single-handedly
blocked a $100 billion energy package, saying the billions of dollars
in subsidies for ethanol and other alternative fuels were little more
than a special-interest boondoggle. The bill was revived a year later
at half the cost, and much of the money in it has not been spent.

"Now they're talking about some large amount of money — what, $100
billion? — and spending it on windmills, job training, whatever,"
said David Kreutzer, who studies energy economics and climate change
at the Heritage Foundation, a conservative research group. "But where
do you get the $100 billion in the first place? Are you going to take
$100 billion from some other part of the economy, are you going to
tax some people to pay for it? Are you just going to print it or
borrow it? The money has to come from somewhere."

The Obama team and Congressional leaders say they want a plan ready
shortly after Congress reconvenes in January.

Mr. Obama has said that, after stabilizing the economy and the
markets, putting the nation on the path to a more energy-efficient
future is his top priority. The House speaker, Nancy Pelosi of
California, said this week that rebuilding infrastructure and
creating green jobs was "the first order of business that we will
have" when Congress reconvenes in January. Several hearings are
planned even before Mr. Obama takes office on Jan. 20.

State officials say a lack of financing has stalled billions of
dollars in projects. Gov. Arnold Schwarzenegger of California told
Mr. Obama this week that the states were ready to break ground with
$136 billion in infrastructure projects that could provide new jobs
within two years.

The American Public Transportation Association, which represents
local mass transit authorities, said there were $8 billion in "ready-
to-go" projects that could preserve or create thousands of jobs and
provide more energy-efficient transportation.

Beverly A. Scott, the chief executive of Atlanta's transit agency and
head of the national association, told Congress in October that the
projects included diesel-electric hybrid buses for Chicago; a new bus
maintenance shop for Eugene, Ore.; and a set of crossover tracks to
allow San Francisco's rapid transit trains to turn around more
quickly and carry more riders.

The Obama aide said the residential smart meters were a relatively
small project that would not create a large number of jobs, but the
aide said they would be an essential building block for the electric
grid of the future. The new grid — a multiyear, multibillion-dollar
project — would more efficiently move electricity from its source to
its destination and would reward those who saved power or used it
during off-peak hours.

Senator Jeff Bingaman, Democrat of New Mexico, who heads the Energy
and Natural Resources Committee, said he was sympathetic to Mr.
Obama's desire to pump up the economy and reduce energy usage. But
Mr. Bingaman said he was wary of big government spending programs
without sufficient oversight or expertise.

"Just buying smart meters for everybody doesn't really move the ball
very far," said Mr. Bingaman, who will hold a hearing next week to
gather ideas for energy-related stimulus spending. "Realistically
speaking, getting money properly spent in a short period of time
requires some degree of competence in the government agency doing it.
The best plan is to start with existing programs that work, like
weatherization, and build on those."

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