I own
two small businesses in Scranton, Pennsylvania.
They both share the same space, and it's bizarre
because one got hit with demand, and the other
had its demand entirely crushed.
So one business is called Maker Stock, and
our customers, our universities, we sell materials
like acrylic and plywood to university maker
labs, engineering schools and architecture
schools.
And the other business is Xootr Scooters,
and we sell kick scooters to adults in urban
environments.
The Maker Stock business basically went away,
our customers literally closed their doors,
and the Xootr business, everyone said, oh
my god, I don't wanna be on a subway, and
went looking for alternative transportation.
So in the same building, we've seen two businesses,
one get boosted and one get crushed.
I've had to think about two critical questions.
One is, do I actually add staff to track demand?
And I basically decided no, and my guys have
also decided they would much rather work overtime
and really scramble to avoid having to have
any layoffs in the future.
So that's one issue.
The other, though, is the supply chain issues.
So most of our components come from China,
and we've come to really worry quite a bit
about how fragile that supply chain is and
I've been trying to think through to what
extent should I plan around a 100 year storm.
You know, I hope this is a 100 year storm.
Should I really think about reconfiguring
my supply chain in the future to avoid potential
disruption?
So that's on the boom side, on the bust side,
it’s also a tough question because at Maker
Stock, I suppose we have three scenarios.
One is we fold the tent and say, we won't
weather this, and we shouldn't throw good
money after bad.
The other scenario is to say, no, this might
last six to 12 months, now is the time to
get lean and strong and prepare for the future.
And the third scenario is a pivot, which is
to say, what assets and capabilities do we
have and is there something else we can do
to survive the weather?
It really is very situational.
There are some businesses that are uniquely
positioned to do something, be quite responsive
to the crisis.
So for instance, actually the Maker Stock
business, it turns out we had a lot of this
mylar film, this clear mylar film that's used
in face shields.
We didn't have it for face shields, we had
it for other purposes.
We were able to very quickly pivot to supplying
some of the people making PPE and that turned
out to be a pretty good thing.
But I think for some businesses, if you're
in hospitality, I don't know that there's
a pivot here that is going to be realistic.
I think often in entrepreneurship, I've weathered
a few downturns in a few recessions and one
lesson I've learned is you cut deep and you
cut deeper than you think you need to cut
when you face a crisis like this.
And I think that's probably the bigger pitfall
I see is people who are basically burning
cash overly optimistically at this point.
I try to be a realist with entrepreneurs.
This is your base rate of success.
And I'm usually a little bit pessimistic relative
to what they believe their base rate of success
is.
I also teach a model, I call it the VIDE model,
which says that value, V, in entrepreneurship
is a function of three buckets of factors,
I, which is the idea itself, you could think
of that as the pain point, D, what you do
with the idea, your skills and capabilities,
and then that E is the exogenous factors,
which I think of as the weather, factors outside
your control.
And my students have historically rolled their
eyes at the E. They're like, "Yeah come on.
What could that possibly be?”
And they're not rolling their eyes anymore,
they're realizing, "Wow yeah, some little
virus in a bat 8,000 miles away can crush
my business and it has nothing to do with me."
I don't think there's much evidence, maybe
a little bit to the extent that we’re more
globally interconnected, so maybe they diffuse
faster, but I really don't think there's evidence
that we should expect pandemics of this scale
to recur at higher frequency.
But I do think there's some lessons to be
extracted.
I think one of the problems is, these business
cycles in the recessions, the disruptions
to the system, don't occur frequently enough
that very many of us get to experience three
or four of them in our careers, and so we
need to find a better way to communicate to
young people that these things do happen and
that there's tremendous value to being lean
and flexible in the event that some disruption
occurs.
It may not be on the scale of Covid, but there's
always something.
And so I think tempering optimism with a sense
of there is going to be something, it's going
be outside your control, and being resilient
and lean to navigate it is an important quality
in entrepreneurs.
I have been seeing a lot of creative
problem solvers jumping to help, and that
certainly is an entrepreneurial impulse, and
some of those efforts will result in value
creation and business creation.
I also think it's a fantastic opportunity
for some people to have the excuse really
to pursue their passions or to develop the
tool kit they need to be entrepreneurs.
I think there's this collective sense that
we as a people globally, we got serious about
something, we put our minds to following certain
norms and conventions, and we actually changed
the outcome.
So that's a super positive thing.
I also think there's been renewed focus on
things that matter in life.
Really focus on what are your skills, and
those skills better be tied to recognizing
problems and solving those problems, and those
are the skills that make you most useful in
a crisis, and that I think make you most useful
in general, in life.
And so we were in a period of a lot of irrational
exuberance, a lot of capital available, a
lot of people could get by on swagger.
And I think those times are gone, and I think
that's in general healthy.
So that's the advice I'd give.
