{ in·deed·a·bly }

adverb: to competently express interest, surprise, disbelief, or contempt


Ten years ago I raised $100,000,000 with nothing more than a slide deck and a smile. Today I can’t raise $1,000,000, even though I have five complete products used by dozens of megacorp clients.

The CEO frowned into his glass of Rioja, as if the answer to the puzzle could be found there. He was feeling the squeeze. He had bootstrapped his latest venture, having learned the hard way to avoid venture capital vultures and private equity vampires. Happiness is not found in misaligned commercial terms, where one partner is focused on operating a going concern, while all the others think about is racing towards the exit. The difference between entrepreneur and investor.

His firm was undeniably successful.

Beginning half a decade ago, when inspiration struck the founder as he stumbled through Akihabara after enjoying a little too much sake. Today it employs more than fifty staff to produce and sell software in the cloud to monied megacorps all around the globe.

Established in an exotic location, far from the technology hubs of Silicon Valley, Tel Aviv, London, Berlin, or Bangalore to lower costs and improve retention.

Applying flexible working conditions by design from the outset, to attract talent overlooked by the mainstream.

Carers. Deviants. Disabled. Migrants. Mothers of young children. Failed entrepreneurs. Idealistic grad students. Recidivist retirees. Workers with gaps on their CVs for all manner of reasons.

Big brains at bargain prices, simply because their lives hadn’t followed the standard pattern.

The firm had ridden a heady growth wave fuelled by free money, frothy markets, and irrational exuberance. Seeing the founder lauded and applauded. Described in gushing yet meaningless terms such as “thought leader” and “visionary”, while his firm featured near the top of numerous “Top [n] FinTech companies” lists. Sponsored lists all, but sharing the page alongside all the cool kids of the moment.

Alas, all good things must come to an end, and so it was for the remarkable ride of the founder.

Inflation returned. Interest rates rose. Megacorps tightened belts and reined in their spending.

Within a year, the economic environment had changed dramatically.

The ranks of fellow CEOs from the same era thinned, as one by one the founders foundered.

Occasionally acquired. Usually for talent rather than intellectual property, market share, or brand value.

More often folding. With a merciful sudden bang, or a merciless painful drawn-out whimper.

Vanishingly few made it to the fabled big exit, with life-changing paydays for founders and backers alike.

Borrowed money was no longer free.

Investors require a risk premium, demanding higher returns to offset their increasing cost of funds.

At the same time, inflation has seen the price of just about everything rise. Rent. Insurance. Equipment. Travel. Even wages, though grudgingly, and seldom keeping pace with the increased living costs endured by employees.

Which leads to an instinctive knee-jerk reaction: economise.

A reaction that cascades along supply chains and compounds across economies.

Do more with less. Then once that avenue has been exhausted, simply do less.

Which is short-sighted, and ultimately self-harming. Creating a doom loop.

Increasing the price of money is the economic textbook answer to combating rising prices.

Make companies pay more for their financing. Make homeowners pay more for their mortgages.

Which leaves less money available to invest or spend on everything else.

Reducing demand, and easing the upward pressure on prices. Taking the heat out of the economy.

Get it right, and growth slows but does not stop. Braking into a corner, so we can accelerate out of it.

Get it wrong, and growth gets thrown in reverse. Contracting rather than expanding, as reduced demand creates collateral damage. Bankruptcies. Foreclosures. Poverty. Unemployment.

But here is the thing. Human instinct is to preserve our chosen way of life for as long as possible.

Which means dipping into savings. Then liquidating investments. Attempting to sustain the unsustainable for a little bit longer. Trying to ride out the storm, without changing priorities or doing without.

Savings act as a shock absorber, by design. Having some means it takes longer for the effects of interest rate rises to impact behaviours. The bigger the cushion, the longer we can delay change.

Until, eventually, the shock absorber is exhausted. Or we grudgingly concede that tougher times are here to stay. Either way, we are forced to re-evaluate our lifestyle choices and financial priorities.

Spend less. Purchasing the same quantity while sacrificing quality for price.

In business, this squeezes out the niche and the overpriced. Ego projects give way to essentials. Keeping the lights on. Keeping the engine running.

At home, this impacts where we shop and what we buy. Wholefoods surrendering customers to Waitrose, then Tesco, then Lidl, then Iceland, then Poundland, then finally to charity food banks.

Fresh traded for frozen.

Fruit replaced by fried food.

Used by dates evolving from edict, to warning, to mere marketing.

Despite what advertisers and Instagram influencers may have you believe, luxury is optional.

Buy less. Reduce the quantity. Fewer suppliers. Purchases both smaller in size and frequency.

In business, squeezing out those with shallow margins or precarious cash flow positions.

At home, creating tough times for those reliant on discretionary spending. Builders. Domestic cleaners. Personal trainers. Coaches. Therapists. Tutors. Home delivery riders. Ride-sharing drivers.

Invest less. When essentials consume more there is less left over. Money trees don’t get planted.

In business, research and development get deferred or postponed. Expansion cancelled or delayed.

At home, savings, overpaying mortgages, and pension contributions are the first things to go. Stealing from our future selves to preserve the lifestyle of today. Sensible if we’re struggling to feed and house our families, but the truth is savings get traded for creature comforts long before real hardship bites.

Earn less. Those investments not made mean capital gains foregone and cashflows not generated. A simple question of opportunity cost. The difference between buying a fish versus buying a fishing rod.

In business, new products don’t materialise. New innovations don’t become the revenue streams of tomorrow. Leaving firms vulnerable to competitors more fleet of foot or deep of pocket.

At home, we remain trapped in the daily grind for longer. Real wealth is created via capital gains, which can only be generated once investments have been made. Financial freedom is a feeling, created by cashflow. The larger the proportion of our income that is generated by investments, the freer we feel.

The CEO was struggling. Sad. Stressed. Confessing that, in darker moments, suicidal.

Existing clients were cancelling or reducing their spend. Slashing profit margins. Cruelling revenues.

New clients were hard to find and harder to land. The sales funnel was empty. Few prospects. Little hope.

His firm’s specialist niche was perceived as a “nice to have”.

The unique selling proposition of their offerings had proved to be convenience and precision. Luxuries both.

During tough times, precise enough is good enough.

Compliance becomes a question of risk appetite. How large the fine? How likely we’ll be caught? Roll the dice. Hope for the best.

His firm’s products were now being approximately replicated using Excel, operated by a small army of low-cost commodity resources in “right-shored” locations. Not the ideal long-term solution for his clients, but sustainable for long enough that his business would run out of money.

Feelers had been quietly extended. To potential investors. To competitors. To clients. Exploring mergers. Inviting takeovers. Walking the tightrope of seeking a lifeboat without mortally wounding the firm with rumours of impending demise.

Those approaches had been rejected, or responded to in kind.

It might be a buyers’ market, but few could afford the asking prices.

Fewer still were willing to meet them.

Buy when investments are cheap” is good advice, but easier said than done. Requiring both confidence and cash. The former is simple, if not easy. The latter, less so.

Next week the CEO faces the unenviable task of shedding some of his employees. His motley crew of misfits had become a tight-knit family. Each willing to walk through fire for their firm and its founder.

People he had come to know and love. Celebrating and socialising with their families.

People who in many cases would struggle to find alternative employment, even at the below-market wages he paid.

Little did they know, but closer to home the CEO was feeling the economic squeeze himself.

His mortgage payments had tripled as interest rates climbed. Utility prices skyrocketed. Bills had soared.

Yet while he outwardly ran a successful business, lenders were less than trusting that the future looked as promising as the past.

Demanding more certainty. Seeking less risk. Lending at lower multiples.

He couldn’t afford his current repayments for long.

With the vast majority of his wealth tied up in the firm, nor could he afford to inject the additional equity required to refinance.

It wasn’t a great time to sell up his family home. Prices were down. Buyers were scarce.

Disrupting the lives of his wife and children would be painful. Changing neighbourhoods. Changing schools. Changing friends.

Starting over somewhere cheaper.

Somewhere less.

It could be worse. At least they wouldn’t be hungry. Or homeless. For long. For now.

But the CEO feared he was too old to start over. Too stubborn to swallow his pride and apply for a job. To bend the knee and call someone else “boss”. To seek permission rather than instruct. To follow orders. To be managed and overruled. Performance reviewed and judged.

He had friends who complained about how hard life had recently become. Tone deaf, they lamented that their private jets and holiday homes had become unaffordable. Prestigious private school fees unsustainable. Their struggle was real, yet many failed to recognise they had it far better than many.

But everything is relative. Things can always be worse.

More than any other factor, our levels of contentment are influenced by who we compare ourselves to.

But knowing and believing are two different things.

It was hard to know what to feel.

What to believe.

The latest edition of a popular magazine featured the CEO’s smiling likeness alongside a gushing puff piece describing a glowing future leading to inevitable greatness. Meanwhile, his mailbox was full of red letters, and his bank statements awash with red ink. Any glow was the result of him feeling radioactive. His misfortune contagious. Impacting his family. His firm. All those around him.

How could someone so outwardly rich be feeling so poor?

How could a firm so undeniably successful, in a buoyant economy, at the best time to be alive in all of recorded history, be witnessing dark clouds of impending bankruptcy gathering on the near horizon?

His story was not supposed to end like this. Where was the happily ever after?

Where indeed.

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  1. Calt 2 November 2023

    Once again, you’ve crafted a post that beautifully combines eloquence with an intriguing message. Thank you for sharing!

    I totally understand, partially first-hand, the pain that comes with this new economic landscape. At the same time, I can’t help but consider the possibility that these changes might ultimately be a positive force for our economies in the long run. Embracing scarcity could puncture several bubbles, shifting investments from mere promises to tangible results. From nice-to-haves to actual needs that weren’t sexy enough to be priorities.

    Perhaps this is a wake-up call from the illusions we were living before, for both people and companies. What do you think?

    • {in·deed·a·bly} 2 November 2023 — Post author

      Thanks Calt.

      The return of money having a price will slay more than a few zombies, which isn’t a bad thing… unless you own, work, or supply one of them! Approaches like “hyperscaling” start to look dubious, as costs climb to keep loss making companies propped up while they burn through vast sums of cash attempting to land-grab a significant market share.

      It may also let some of the air out of asset bubble tires. Which again is probably a good thing in the long run, though uncomfortable for current asset owners, particularly those who were late to the party and bought at the top.

      The main challenge with inflation is it impacts those at the shallow end of the socio-economic spectrum more than deep end. There is less discretion in their spend, simply because they have less to spend and we can only economise so far. Which in turn spawns social problems and crime, while also challenging the ability of social service providers to help. Which is uncomfortable in the short term, and a real problem should it play out over a protracted period of time.

  2. A 5 November 2023

    Inflation is taking from the ‘have-nots’ to give to the ‘haves’. Assets and retirement move ever further away.

What say you?

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