CRISES ARE COMING
We are constantly hearing about how another economic crisis is coming, or at least a recession, an economic downturn. In order to be prepared as an entrepreneur, or even a large company, you need to invest in “crisis-proof” technologies and innovations that you can surely rely on even in such a difficult period.
There have been two major global crises since 1900, but we have also experienced several major recessions too. These are inevitable from an economic point of view, they are almost part of the driving force of the system. What distinguishes recession and crisis is that the former is much larger in volume: banks are going bust, so the banking system also collapses, no longer able to lend to companies, so no company can deliver projects and they all together cause mass bankruptcies. There were such incidents in 1929-1933 and 2007-2009. All the others were cyclical, recurring, smaller recessions. However, when it comes to long-term business planning, it is difficult to avoid short periods of recession, so it is better to prepare for them.
By 2020 it has come to pass that the four major central banks: the Fed, the ECB, the Japanese and the British central banks, are assuming that an economic downturn is imminent. However, contradicting the fears of recession, the real economic indicators, although deteriorated, are not yet catastrophic. Wage growth is steady and accelerating and unemployment rates are very low in most parts of the developed world. The US economy has been experiencing the longest unbroken period of buoyant economic growth since June 2009, more than ten years. That’s why economists expect this surge to end over time, but US GDP continued to grow by 2.1 percent in the second quarter of 2019, so the US economy continues to soar compared to stagnating Europe.
Of course, this was the case in 2008 as well. Unfortunately, in spite of the good macroeconomic indicators, there is a long list of risk factors: the trade war, the threat of the Chinese currency war, and, of course, the unsettled Brexit. Although these have not yet caused any serious direct damage, they still leave companies and investors apprehensive.
UNCERTAINTY = RESSTRAINT OF INVESTMENTS
According to a composite index by JPMorgan Chase, 2019 saw a global decline in investment. If this trend remains long-term, it will not do much good in the long run: falling investments will necessarily push the economy into a negative spiral. As an investor, entrepreneur or even a simple private individual, the best thing we can do is to minimize our losses early.
In developed countries, real estate markets and equities are overpriced, and economic growth in many areas seems unsustainable. Today, only investments that do not lose their value in the event of a crisis – such as renewable energy, automation or robotization – are safe. Based on the experience of recent years, we believe that recession is coming to the startup world. After initial startup dumping in Silicon Valley, investors are now much “tougher”. They rather invest money in start-up companies that can make a profit early. The market has become very overpriced in recent years, so a downturn is expected, but no major crash.
Another important change for companies is that during the crisis, many people are thinking about their technological developments and more and more people are starting to automate. It is worth considering: what professions and responsibilities may be at risk, and what jobs would be lost in the event of a downturn? Basically, any profession that does repetitive work can be automated, meaning it pays off in the short term.
We can, therefore, consider safe investments those that have predictable and guaranteed returns and where we can expect it with a good reason that the issuer will not be affected by the crisis. Robotics and communication automation are just that: a crisis-proof, stable market, with constant demand, a quick return on investment, with the trends pointing toward this direction. In the future of the robotics, AI and Machine Learning-based technologies industry, all significant experts expect not only a growth that’s not only solid but also rocket-like. From this point of view, internal communication automation or a B2C chatbot for a large company is a good investment as it performs repetitive work on an almost infinite number of people at a relatively low cost while replacing high-cost human resources, and most importantly: reliable for the long term.
Határtalan Tudás @ Central European University – Deliága Ákos