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Hey all,
I was just thinking, I’m at issue 22, it takes around 2 to 3 hours to write each one of these. so that’s 44 to 66 hours so far. TBH, it’s not a bad investment of my time.
Anyways, today we’ll be looking at the business lifecycle and how it will impact you.
This might be the most important newsletter I have written so far.
Let’s Begin
First, let’s take a very basic look at the business growth stages. There are four stages in the image below [source]. The initial stage where there are little or no profits, the growth stage when things really take off, the maturity stage and finally the decline stage.
This is the nature of things, even the ‘decline’ stage.
This pattern is so well known that even the mighty Facebook acknowledged this in 2011 when they took over the old Sun Microsystems campus in Menlo Park, CA. Instead of replacing the old Sun Microsystems sign they just turned it around and put their logo on the other side. Why? To act as a reminder to itself and its employees of what happens if you fail to innovate.
So what happens during the decline stage? Well, it becomes a challenging time and one of three things typically happens.
They prolong the maturity stage, just hanging on as long as possible. But without innovation or something changing, they will eventually decline.
They decline, the market doesn’t need the product any more, the market has become saturated, or for whatever reason it is. The business just shrinks and/or dies.
The company finds a new innovative product or they find a new market for their product which sees the company grow again. Things become good again, perhaps for a while.
And as Din Djarin and his nearly extinct fellow Madelorians would say “this is the way”.
Examples
My earliest exposure to this was when I was 18 years old working at BAE SYSTEMS in Brough, East Yorkshire. The company built aeroplanes, the Brough site specifically built the Hawk fighter/trainer jet.
To build aeroplanes you need to set up your site to build a specific aeroplane.
The Hawk jet was introduced in 1976. By the time I was working at BAE SYSTEMS, the Hawk was already 20 years old.
Thinking about the four stages above, the need to set up a site for a specific aeroplane and that aeroplane was already 20 years old - which stage would you think that part of the business was in when I joined? Maturity or decline?
By the end of the 3 years I was there, I had seen about 1,000 people made redundant. Within 3 years of leaving, I saw similar high numbers made redundant. In 2020 it was announced that “Aircraft manufacturing to end at BAE Systems in Brough after 104 years” [source].
But that wasn’t the only time I saw this…
My first ever job was as a trainee mechanic, I was 16. That garage isn’t there now.
I worked at Burger King for a while when I was younger, the one I worked at is not there anymore.
I worked for the local council teaching computing, and within a year of me leaving the site had closed down. >50% of the staff left the org with some being relocated. (I think the full training department is gone now)
During one summer of my degree, I worked at the region’s biggest paint factory, which isn’t there now. (Admittedly it burned down, but they didn’t bother rebuilding it - it wasn’t doing great).
I taught at college for 5 years, within a couple of years of me leaving they had scaled back on the courses I was teaching and it looks like my old immediate team got laid off.
It caught up to me once, I changed roles and within 9 months the business decided to lay off my tier of management.
Last November I saw 11,000 people get laid off from Meta, and so far in 2023, I’ve seen about 5,000 people laid off with another 5,000 planned to go in 2 weeks’ time.
And let’s not forget, 1,056 tech companies laid off 164,591 employees in 2022
So far in 2023, 661 tech companies have laid off 192,334 employees [source]
Over the past 20 years, I have seen numerous businesses cycle through all of the four stages.
Over the past 20 years, I have seen thousands and thousands of people be made redundant (laid off) as a result.
“This is the way”.
So what can you do about it?
For me, this remains the most prominent question on my mind right now.
I’m 43 (at the time of writing, 44 at the time of you reading this), let’s say I didn’t get my shit together until I was 20, so I’m 23 years into my working life. The retirement age in the UK is 66. So I have another 23 years to go.
Where is my head?
I’ve seen hundreds of thousands of people made redundant just over the past 4 months alone.
I’ve seen multiple companies I’ve worked for close down, or scale back and many colleagues laid off.
I’ve done well, avoided some layoffs and I’ve recovered when needed.
I’ve invested heavily in myself, both in time and money - completing an MSc, PhD and MBA in the past 10 years alone.
But I expect the nature of businesses to continue, those four stages.
I expect in the next 23 years to see businesses decline, and people be laid off - after all, “this is the way”
I expect myself to be caught up in those layoffs at some point.
I ask myself:
Can I recover from a layoff at 43?
How will that be different when I’m in my 50’s?
What about 60?
Who wants to employ a 60-year-old data scientist?
So I think, what are the options?
Option 1 - Ride the wave(s)
I was recently reminded by a good friend and colleague - sometimes you can ride the wave.
Think about it, while this newsletter has focused on the latter stage of the four stages, there is a lot to be gained by understanding the cycle and even joining a business in one of the earlier stages.
Take Dustin Moskovitz as an example. Facebook's first CTO and Zuckerberg's former roommate. He was at Facebook during the introduction stage. They didn’t make any money during that stage, but today he has a net worth of $16.2 billion.
So the advice is to be aware of the business’s life cycle. It can be a guide to know which company to join, and perhaps when to leave.
Option 2 - be prepared
Let’s admit it, you know it’s coming, we all do. I showed you why and I gave examples of hundreds of thousands of people who it happened to. It is coming.
When I ask myself, “who wants to employ a 60-year-old data scientist?” - I know I won’t be the same me when I’m 60, I’ll be different, and I will have changed somehow. So it’s not a serious question.
After all, I’m not the same person who worked at Burger King or McDonalds like I did 20+ years ago.
Want to know something crazy?
I know so many people who are the same person they were 20 years ago.
Do you know a teacher, an engineer, a shopkeeper, or an office worker who’s been doing that same job for 20 years? I know lots of people like that.
I’ve also seen entire sectors/industries disappear from regions. I’ve seen educators leave and not be able to find jobs in the region. I’ve seen thousands of engineers leave all on the same day, in the same town and there not be enough work around for them.
So my advice, be prepared. Be different. Continue to grow and develop.
Option 3 - Diversify the risk
This is where a lot of my attention is right now.
Think about it, for most people your livelihood is directly tied to your one source of income, your employment.
Therefore, your family’s livelihood is directly tied to your one source of income, your employment.
But we know, as I showed you, that is subject to change. Businesses change, they have their own life cycle and by extension, your livelihood is subject to change.
Subject to change due to factors largely out of your control.
The common form of diversification is to have two people’s incomes in a household. Perhaps you’re in a relationship where both people work. But this isn’t always the case. And even if so, it often doesn’t give a lot of wiggle room - right now between 58% and 62% of Americans are living paycheck to paycheck.
Other forms of diversification come from a side hustle.
There are a whole bunch of benefits to doing a side hustle which goes beyond financial gain, I’ll cover them in a later newsletter.
But let’s take a couple of the basic benefits. You could earn a little extra cash. An extra 100 per month in whatever currency (£/$/€) goes a long way. But, it could give you the foundations to scale from if anything did happen with your income from your employer.
Today is not the day for listing all those side hustle ideas. But Shopify gives 24 ideas and Forbes gives 29 ideas.
For me, it starts with finding your passion.
In short
Businesses change, and it will likely impact you or people you know. But there are things you can do about it, and even ways to maximise the opportunities from it.
Fin.
I hope this was a useful email. These newsletters do take a while to write, and I really appreciate you all taking the time to read them
Every now and again someone reaches out and says a positive thing about them. That brings me so much happiness. After all, I gain nothing from these emails other than trying to share some thoughts which hopefully improve someone else’s life/experience/views/thoughts/whatever it is.
I hope you all have a great weekend.
Best
John
You're probably f*cked but haven't realised #22
Interesting career John! I've always wanted to fly a Hawk, lovely aircraft.
Riding the wave seems like a challenge, how do you judge which companies are going to make it - without having the diversification that VC's do?