brite fisher

The Bright Side to the Economic Downturn?

The markets are going crazy with ups and downs (mostly downs), governments are bailing out their banking systems and countries with a sound banking system are still needing huge cash injections to keep things rolling.  Things are getting pretty bad.  They're likely to get worse.  Is there an upside to the economic troubles we're having?  I'd say yes.

We're already starting to see some of the benefits; the most obvious being the price of gas.  In one day I saw the price drop from $1.30 / L to around $1.00 in my area.  This is a pretty huge change and the savings will help people in a big way through these tough times.  My hope is that this is just the start, other goods and services will be feeling the crunch as people cut back on high end goods for a while, this should lead to lower prices as they try and spur sales.

I also think the startup world is going to benefit from the turn in the economy.  Sure, companies are going to go out of business, people will be laid off and things will be pretty tough in general but something had to happen.  If you take a look at the money that's been tossed around the last few years it's kind of ridiculous the valuations and ideas that have gained funding.  Is there anyone out there willing to give Facebook a $15 billion valuation anymore?  I sure hope not.  Then there's a all the copycats and really silly ideas that have been coming out lately, some even getting funding.  All of this is making it really hard to see the interesting, innovative companies through all the crap that's out there.

Another interesting thing that's going to start happening is mergers and acquisitions.  Startups with some really interesting ideas and technologies will become more appealing to the big guys as prices drop.  This might not be quite as good for the startup themselves, but many of them could really benefit from being in a larger organization which would help them in the long run.  Larger companies are also going to have to streamline their organizations, cut costs and improve profits in a tough market.  Again, this is hard on the people involved, but when things turn around and the market improves these companies will be leaner and more profitable, able to create a whole slew of new jobs.

In the sort term things are going to be tough, that's just a fact, but hopefully there will be some good in these trying times.

[Disclosure] I am not an economist, financial planner or anything like that.  I'm just stating the way I see things, the right or wrong of it I'll leave up to you.