You are currently viewing We’re already in a recession, says Elon Musk — Here’s how to weather the storm |  by Lauren Como |  May 2022

We’re already in a recession, says Elon Musk — Here’s how to weather the storm | by Lauren Como | May 2022

And things could get worse — here’s how to prepare

Photo credit: Canva, author

Jlast week, Elon Musk attended (via video) All-In, a Miami Tech conference, and weighed in on the current state of the economy.

He said he believes we are already in a recession and will most likely get worse over the next 18 months.

He noted, however, that recessions are not always a case of “catastrophizing.”

“Recessions aren’t necessarily a bad thing. “I’ve been through a few. And what tends to happen is if you have a boom that lasts too long, you get the wrong capital allocation. It’s starting to rain money on fools, basically,” Musk says.

He went on to state that when things “spin out of control”, the economy has a misallocation of human capital “where people do stupid and pointless things for their fellow human beings”.

My personal favorite comment was that an “economy enema” should eventually “clean the pipes”.

Finally, but probably most importantly, he said that “bullshit companies go bankrupt and those that make useful products prosper.”

It’s the key and where the rubber meets the road.

Focus on adding value and solving problems to meet impending economic challenges

There will be plenty of unicorn tech companies that will suffer this next round of economic hardship.

When I lived in Silicon Valley, I saw these companies struggle, even in times of economic prosperity.

I saw former colleagues jumping from startup to startup because they were constantly being laid off due to declining revenues and budgets.

Many of these companies offer the weirdest products and services without a clearly defined target market. It’s all too common – many entrepreneurs start with the “idea” rather than their ideal “person” and the problems they will solve for them.

Even if you’re not an entrepreneur and work 9 to 5, continue to develop skills that are valuable to your employer or industry.

If you don’t know what you can do to add more value to your organization, ask.

During any layoff – unless they cut an entire team or department, they rarely remove employees who go above and beyond company expectations.

It’s a great time to volunteer to do those extra tasks that your other co-workers aren’t exactly raising their hands to do.

Return to work — in person

“Lauren, you tried for months to access this account and did nothing. What changed?”

This was a question asked by my manager when I took on an opportunity with a client two weeks ago.

“Now that the office is open again and we are allowed to meet live or virtually, I went in person,” I said.

“Huh, well…I won’t argue with that. I’m glad it worked for you.

I hope a reader will highlight this advice, as it is vital – there is absolutely NO substitute for working in person.

Virtual meeting has its pitfalls, that’s for sure. It’s impersonal. It’s easier to be rejected.

Heck, even if you’re not in sales, it’s still dangerous – it’s a lot easier to get fired.

I’ve said this many times to employees who work in my old supply chain department.

“You think you’re smarter than your boss by working remotely and sitting around in your pajamas all day with unbrushed hair. You consider that a ‘win’ for you. It’s not. You’ll be the first to get fired – it’s much easier to fire the person you never see, but only hear from on the phone.

And it is the truth.

It’s much more of an emotional and empowering experience to fire the employee who shows up for work, interacts with their leadership, collaborates with other team members, etc.

For the reasons above, this is why I don’t believe fully remote working is here to stay; instead, our world will shift to a hybrid working model.

Do not withdraw from the market

It’s one of the toughest emotional exercises you’ll face as an investor.

Watching your wallet shrink day after day can be heartbreaking.

I’ve said this in many posts, but it’s important to be pragmatic and focus on the long-term outlook for the economy.

The reality is that the 2008 financial crisis, the pandemic, etc. were just valleys in an overall upward slope.

The economy is cyclical and has always recovered historically, so I’m not overly concerned about the long-term prosperity of the global economy.

However, I will recommend that you keep 6-12 months in cash to account for any loss of income or emergencies.

I recently learned from a colleague that some of my other employees were selling stocks and other investments at a loss to pay their mortgage payments and other expenses.

Having to sell an investment at a loss stinks and is easily avoidable by not overloading your finances.

Take a scramble while times are good

Please save my fingers from having to type out a million ways to make money from home/outside of your daily job.

A common mistake I see a lot of people make is that they put all their eggs in their employer’s basket, and they get cozy and mellow when the money rolls in.

A profitable side hustle takes a lot of time and dedication to build, and it won’t happen overnight.

Regardless of what the gurus claim, you won’t make $15,000 a month overnight as an affiliate marketer, content creator, etc.

The moral of the story is… Start now, while you are in a good financial position, and not stressed or under pressure to “get there”.

Final Thoughts:

Is Elon right? Are we already in a recession? Who knows. What we do know is that recessions are inevitable – and even healthy.

We need to know the ups and downs of the economy. Tough times make tough people, and it’s a great way to refocus and get back to basics to make sure we’re adding value and serving our customers.

It is also a great way to buy diversified assets (index funds and possibly real estate) at a reduced price. As long as you plan to hold for the long term and are not a speculator, you will come out of the next recession unscathed.

One of my favorite ways to track my net worth, manage my investments, and optimize my cash flow (for free) is with Personal Capital.

Some of the best free features are:

  • Ability to track your net worth
  • Audit your wallet for excessive fees
  • Make sure your assets are properly allocated
  • Track and manage your income/expenses
  • Model retirement planning calculations to better plan your financial future

*The link to Personal Capital is an affiliate link. I love them!

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