Surviving a Black Swan

Michael Hyatt (MH) is a tech entrepreneur. To be honest, I don’t know much about him. I just know he’s damn successful financially. Sold his tech-company (BlueCat) for $400M.  

He’s a client of ours though (www.idetail.ca). He recently did an AMA (Ask me anything) where people were able to ask him for his insights regarding the current COVID-19 situation and how it impacts our economy. 

The AMA was livestreamed on Facebook on April 2 at 12:00pm. It was a 45-minute session. I had my notebook out. My notebook is a standard printer paper size. I listened intently and wanted to capture some key points. I ended up with 7 pages of notes. 

The AMA session was called:

How to Survive a Black Swan – Michael Hyatt

View it here: https://www.facebook.com/BetaKit/videos/222135432533209/

I’m summarizing Michael’s wisdom with some commentary:

Are we fucked? Michael says “No”. However businesses need to face this recession head-on and not delay. It’s survival of the fittest. This recession will test businesses as if it was day 1 of a startup. 

“Hope is not a strategy” – MH

“Indecision is not a strategy” – MH

“Inaction is not a strategy” – MH

We’re only 2-3 weeks into the escalation of COVID-19 currently. 

What are we facing?

2 million layoffs in Canada

10 million layoffs in the US

Canada to the US population is 1:9. For every Canadian there is, there are 9 Americans. 

However when it comes to current job loss: Canada is 2:10. It basically means that Canada’s losing jobs faster than the US. 

How does the current COVID-19 crisis compare to the 2000 Tech Bubble Crash, 2001 9/11 Twin Towers, 2008 Financial Crisis?

“2020 is nothing we’ve ever faced” – MH

US GDP Forecast vs Actual 2020

Q1 Forecast: -6%

Q1: Actual: -9%

Q2 Previous forecast: -24%

Q2 Current forecast: -34%

Crap! GDP is going to decrease by 34% within the next 3 months. Dammit! But we’re not Fucked!

Those who are waiting for things to just open back up May 1st or June 1st are delusional. Remember, hope is not a strategy. There is no evidence supporting that with evidence that contradicts that pipe dream. 

Fact: Canada has 1.1 million small companies (<100 employees). These companies make up 65-70% of our GDP. 

Businesses need to wake up. 

We have shifted from peacetime to wartime. 

The past 10 years had liquidity. “Cash was trash, everybody could get it somehow” – MH

We are in wartime now. That is no more. Companies are taking an immediate hit to their cash balances. Working capital depletion can be a strong indicator of insolvency. 

“Take your 2020 business plan and set it on fire” – MH

Michael is referring to your pre-COVID-19 plan. It’s useless now. Nothing in it is valuable. Set the whole thing on fire. You had some brilliant plan for marketing? Product development? Partnerships? Set it on fire. You still need those things, but just completely new ones. A completely new plan for a completely new economic landscape. 

Warface on. 

Set yourself an alarm. You do NOT want to be late for this meeting with reality. 

Model these forecasts for your business:

Sales down by 75%

Sales down by 50%

Sales down by 25%

Then see how much longer you have to live. No cash = liquidity = suffocated/dead business. 

Debt is and will become extremely expensive during this high level of uncertainty. The Bank of Canada’s interest rate is 0.5%. It’s almost free. The problem is that businesses and people don’t borrow from the Bank of Canada. Have you ever walked into a Bank of Canada branch to get money? No. 

You get money from TD, CIBC, BMO, etc. Do you think these private corporations are just going to lend to a broke-ass, almost-getting-laid-off economy? Businesses are losing customers, customers are losing jobs. 

What can businesses do? What to change?

Nothing is sacred on the balance sheet. – MH

Everything can be changed. Every line item needs to be scrutinized.  

Over-Communicate with:

• Leaders
• Lenders
• Customers
• Staff
• Everybody. 

Over-communicate CANDIDLY and HONESTLY.  

“These times will be longer and harder to climb out than what people are anticipating.” – MH

We will climb out of this into a different world. There will be social impacts. Consumer behaviour will change. 

Restaurants – > More delivery

Offices – > More work from home

Gyms – > Home gym equipment

Movies theatres – > Online

Doctors – > Video consultations

The reality is that we have never stopped an economy before. This is completely new to our political/economic/social norms ever since the founding of America (MH is using the US as an example here even though you may be Canadian). 

Here’s a double-whammy:

We have never stopped an economy before. ALSO – we have never restarted an economy before. How the hell do you restart an economy? It’s a very complex machine as every industry has been impacted. It’s not just 1 switch that you on and off (ie. printing money). 

Okok – so the world is changing. 

“Go on the offensive.” – MH

Put energy into Sales, Sales, Sales. 

Pivot your business. 

Leadership is born now. 

A leader must:

• Get business out of the crisis (stop the blood from leaking)
• Pivot
• Go on offensive
• Scrutinize up the balance sheet
• Get to March 31, 2020. 

Don’t be afraid to ask for what you need. 

Be aggressive.

Do not run out of money.

Do not be indecisive.

Do take action. 

“Trust is earned” – MH

You need to be a leader now.

Communicate to your investors and customers what you are doing. Keep them in the loop. Impress them with superior entrepreneurship.

Final Notes:

Doing more of the same (pre-COVID-19 strategy) is not enough. 

Act according to wartime. 

Make it or break it.

Question for you:

What are you doing to succeed during a recession?

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