How To Be Recession-Oblivious
Some people say we’re heading toward a recession—and they’re right. In this episode, Dan Sullivan and Shannon Waller talk about what entrepreneurs can do so that they not only won’t suffer when the recession hits but will actually make even greater progress than before.
Here's some of what you'll learn in this episode:
- Why another recession is inevitable.
- What really goes on during a recession.
- How a recession is a correction.
- Insights from Dan’s experience of past recessions.
- How the value of higher education has drastically changed.
- What will eventually end the coming recession.
- Why the best possible things happen during bad times.
Show Notes:
What the world needs is people who know how to do something that actually creates value.
Recessions are a natural phase of economic, commercial, and technological growth.
When you have a jump in productivity, that’s a growth market, which is the opposite of a recessionary market.
A recessionary market happens when too many people are being overpaid for what's being created.
Recessions immediately force the fact that some things aren’t going to make it in the future.
Conditions due to COVID have permanently undermined the global supply chain networks.
We're going to be in recessionary and inflationary conditions for at least a decade.
Supply chains that are providing almost everything just in time on a global basis are getting strained to produce more and more results with less and less backup.
The number one cause of the recession are the institutes of higher education. And this is because they're being paid to educate people in worthless skills.
Resources:
Visual Thinking by Temple Grandin
Blog: “The 3 Most Important Questions For Growth As An Entrepreneur”
Episode Transcript:
Shannon Waller: Hi, Shannon Waller here, and welcome to Inside Strategic Coach with Dan Sullivan. Dan, there’s been a lot of talk, questions, concern about a potential upcoming recession. I wanted to talk to you about that and get your take. So, what are your thoughts on what’s happening in the word? I love how you peruse a cajillion sites. You’re very up to date on the news. I’d love to get your insight into, is there going to be one? If so, what can people do about it?
Dan Sullivan: Well yes, there’s going to be one, because it’s a natural phase of economic, commercial, technological growth. There’s a phase where something brand new is being created, and it’s more valuable than what presently exists. Not only that, but it creates all sorts of new value. Therefore, there’s a jump in productivity. When you have that, you have a growth market, which is the opposite of a recessionary market. A recessionary market happens when it becomes measurable that too many people are being overpaid for what’s being created.
Shannon Waller: Interesting.
Dan Sullivan: What happens, first of all, is that things which were really worth a lot in the marketplace are worth less, and people aren’t willing to pay. So, there’s fewer people willing to pay for something, and so sales are not made. So, there’s not revenues. Profitability goes down.
But the other thing is that, when things look really hot, and they look like they have real growth potential, then a lot of people are hired now, even though they don’t have capabilities. Because then they’ll be trained and be ready for even higher levels of economic growth. That happens. Then after a while, their pay outpaces the value of what’s being contributed. So, there’s a correction. A recession is a correction, okay?
Shannon Waller: Hi, Shannon Waller here, and welcome to Inside Strategic Coach with Dan Sullivan. Dan, there’s been a lot of talk, questions, concern about a potential upcoming recession. I wanted to talk to you about that and get your take. So, what are your thoughts on what’s happening in the word? I love how you peruse a cajillion sites. You’re very up to date on the news. I’d love to get your insight into, is there going to be one? If so, what can people do about it?
Dan Sullivan: Well yes, there’s going to be one, because it’s a natural phase of economic, commercial, technological growth. There’s a phase where something brand new is being created, and it’s more valuable than what presently exists. Not only that, but it creates all sorts of new value. Therefore, there’s a jump in productivity. When you have that, you have a growth market, which is the opposite of a recessionary market. A recessionary market happens when it becomes measurable that too many people are being overpaid for what’s being created.
Shannon Waller: Interesting.
Dan Sullivan: What happens, first of all, is that things which were really worth a lot in the marketplace are worth less, and people aren’t willing to pay. So, there’s fewer people willing to pay for something, and so sales are not made. So, there’s not revenues. Profitability goes down.
But the other thing is that, when things look really hot, and they look like they have real growth potential, then a lot of people are hired now, even though they don’t have capabilities. Because then they’ll be trained and be ready for even higher levels of economic growth. That happens. Then after a while, their pay outpaces the value of what’s being contributed. So, there’s a correction. A recession is a correction, okay?
What it forces immediately is that some things just aren’t going to make it in the future. Some businesses, some products, some services, and especially some jobs just aren’t going to make it in the market. They were good for a while. They were extremely valuable during the period of time, and they were valuable. Then they were okay. Then they reach a point where they’re not okay, and so they get shed. They get pruned. They get pruned and shed. Even since I’ve started my business, I think there’s been five or six of them. Some of them more extreme than others. The most extreme one was the ’08, ’09 prime-real-estate-triggered recession. The ’70s were really weird from inflation, and it was strictly mostly energy geared—that the cost of energy went through the roof because it was being controlled by countries in the Middle East. Loans got up to 18% in Toronto, where I live. You were paying 18% for loans and everything.
In recessions, usually loans become more expensive. They tighten up who’s credit worthy, so it’s harder to get loans. Then you’re paying more for loans. But I think that this one’s a big one, because I think the conditions of COVID, where you had lockdowns, I think it permanently undermined the global supply chain networks. I think that it’s a 50-year correction. I don’t think it’s just a four- or five-year… I think this is a 50-year correction. I think we’re going to be in recessionary and inflationary conditions for a decade, at least.
Shannon Waller: Does this have something to do also—and I’m not sure if it’s part and parcel, or if it’s just happening at the same time—but the dismantling of globalization that Peter Zeihan talks about?
Dan Sullivan: Yeah, very much so. The problem with globalization, where you had supply chains that were providing almost everything just-in-time on a global basis, is that there’s no slack in the system. There’s no surplus. There’s no backup to it. The reason is, it keeps getting strained to produce more and more results, with less and less backup.
What I noticed over about the last five or ten years, that the venture capital market in the technology markets was starting to resemble Las Vegas—what is going on in Las Vegas casinos. That is, you were making your money off the bet. You weren’t making your money off the thing to be created.
I remember, one of our clients has a massively unique and different way of creating conferencing, on a worldwide basis, where there’s an AI program connected to it. The AI actually will sense out what some people’s minds, that they want to be talking about, and then actually creates the agenda, and creates the actual marketing that goes out to a worldwide community and establishes dates and everything else. Then as the conference takes place, and people are talking, it’s capturing what they’re talking about and creating all the topics for the next conference. “We had it up and working for about two years.” I said, “Do you have IP protection for this?” He hadn’t. I said, “You’d better get IP protection for this.” We have a great, great IP lawyer in Silicon Valley. They set up a meeting, and they had about 12 people at the meeting—venture capital partners. They said to him, “So how far are you away from prototype stage? Where you can communicate with the market, what you’re doing?” He said, “Oh, no. It’s up and working. It’s been working for two years.” The IP partner said, “Well that’s going to be hard to sell. Something that actually works.”
Shannon Waller: Oh no.
Dan Sullivan: So more and more, the money’s being made on the betting of something that might work in the future. You’re heading for trouble here, because large amounts of money are being created, that have no possible payoff in terms of something that’s actually increasingly productive.
Shannon Waller: Yeah, so it’s like there’s no foundation for the expansion.
Dan Sullivan: Yeah. The recent thing that we had, with the crypto exchange, the FTX I think it was, they were taking in real dollars, and you were given a token to play with in the game. But Las Vegas does the same thing. They just call it chips. Guess what? Outside of the casino, the chips are worthless. When you win a game and you get way more chips, you haven’t won until those chips are translated into dollars on the way out.
Shannon Waller: That’s such a great point, Dan. So, major headwinds are coming, and they’re probably not going to go away any time soon. What’s the best strategy? How do people need to be thinking about this, and how can they take action? Because it’s a very different world than it was for the past, what, 40 years?
Dan Sullivan: Yeah. Well, I want to take a step backwards. Before I answer that question, I want to step back. The number one cause of the recession are the institutes of higher education: the colleges and the universities. The reason is that they’re being paid to educate people in worthless skills. They’ve started training people in very advanced, abstract theories. But what the marketplace in the real world actually wants is people who can actually have a trade, have a skill. But the universities are so far away, in terms of their faculty and their administrators, from the actual marketplace. They just see it as a very foreign world.
Shannon Waller: Yeah, 100%.
Dan Sullivan: The other thing is, they see the marketplace as a world of the past, and their theories are creating the world of the future. People are betting on these theories. But they’re like chips in a casino. They’re like the tokens in a crypto exchange. You can’t translate them into actual dollars. So, the students can get these advanced degrees, and they started their educational journey when they were four years old. They’re now 28, and they’ve got a couple graduate degrees. They’ve accumulated all these credentials, which are casino chips. But when they try to translate them and go out into the actual world, they’re worthless.
Shannon Waller: Totally. The people who actually are good at the practical, tangible, concrete-
Dan Sullivan: Are despised.
Shannon Waller: …are despised. Because, I’m just finishing reading this phenomenal book by Temple Grandin, who I’ve been reading for 20 plus years, called Visual Thinking. She articulates this problem. She goes, “Well they get screened out because of algebra, which is an abstraction of numbers, which are also an abstraction.” So it just makes it-
Dan Sullivan: But the whole world depends upon arithmetic and geometry.
Shannon Waller: Mm-hmm. It’s interesting, because I know a lot of people who actually operate much better in the visual world. They struggle in school; they struggle in high school. They barely make it through. Yet they’re geniuses with their hands, and to see how things can be fixed. If you haven’t read Temple Grandin, I highly recommend it because she just gives you a great insight into how people think differently. But that’s actually what we need. And our school system, especially higher education, doesn’t support it at all. So, what I’m reading completely-
Dan Sullivan: What I would say is that people with real skills are now getting more and more highly paid. I give you– I just checked it out in Toronto and Chicago, that if you’re graduating from high school this year, and you take a six-week welding course, which is actually provided by the welding industry, at the end of 12 months, if you do what they say and you learn what they’re teaching, at the end of 12 months you’ll be making $60,000 a year; $60,000 for the first 12 months.
Then take a high school graduate who is going into four years of college. One is, that person is going to make minimum income, if any income, during the four years, and likelihood, will run up a debt, so that they’ll actually be in negative territory four years from now. By that time, the welder is making $100,000 a year.
What’s true of welding is true of carpentry, is true of being an electrician, a plumber, a mechanic. The reason is that the world doesn’t need university theories. They don’t need university abstractions. What they need is people who actually know how to do something that actually creates value.
My sense is, why there’s a big recession coming, is that we’ve produced, over the last 20 to 30 years, university graduates and graduate school graduates who, in the job market, might be able to say, “Welcome to Walmart.”
Shannon Waller: That’s harsh. Unfortunately, I have to agree with you 100%, Dan.
Dan Sullivan: “Do you want cinnamon or chocolate on top of your latte?”
Shannon Waller: They’re so frustrated-
Dan Sullivan: Nothing against Walmart or-
Shannon Waller: Baristas.
Dan Sullivan: Yeah, the baristas. I have nothing against them at all. They at least can do something valuable. So many graduates coming out of university are worthless.
Shannon Waller: They actually feel like they’ve been sold a bill of goods. Because it used to be, an education would guarantee you a job. Now, it does not. I know—actually, someone that we both know runs a very successful PR agency in Toronto. At least before COVID, it was great to have four years of education, because it does teach you critical thinking. But then she also wanted one year, in Canada it’s called college, so they would actually know how to do something. Which is kind of wild because university graduates don’t actually know how to do anything. Which is a shame.
A lot of what I read, and anecdotal evidence as well, completely backs up what you’re saying, Dan. People who do graduate university are really frustrated, because they thought it was going to be different, and they’re so much in debt. I know people in their mid-30s who are still paying off their student loans. Which is just a shame because they’re under this huge burden. Is it getting them the extra income? No, it’s not.
Dan Sullivan: I went to a four-year college. I started in 1967, and I graduated in 1971. I had been in the army before, so the G.I. Bill, which I was eligible for, paid for all my living expenses during four years. I borrowed the money for tuition. I got out, and I got a really great job in an advertising agency. I paid off the loan and also started my first business. But I was able to pay off the loan in about three or four years. It was a sizable loan; when I graduated, it was $16,000. But this is 50 years ago, so it’s the equivalent to at least $150,000 now. Somewhere around there.
I graduated on a Sunday. Moved to Toronto on a Monday, and I wrote my first ad as a member of a big global advertising agency. I had done all of the preparation to have a job waiting for me, the moment I got out of college. It was great. But you could do it in those days. You can’t do that in these days.
Shannon Waller: No, no, exactly. Well that’s interesting. I hadn’t put it together quite like that. It actually ties back to what you were saying about growth earlier. There are so many jobs open, and that expansion actually can’t happen because there aren’t the people to do the work.
Dan Sullivan: Yeah, and that’s what will happen. I would say this. That I think that the ones who are going to take the greatest advantage of the recession and do skills training, are going to be immigrants more than native-born people. The immigrants see everything as an opportunity. They don’t expect to have opportunity created for them.
The reason why they’re immigrants is because they were willing to risk leaving behind everything they had to come to here, because in their mind, their chances were much better in Canada, the United States, Australia. The big immigrant countries. That they knew that they would find a way of being valuable, but it wouldn’t come over and go through four years of college to do it. They go out and start being useful right off the bat.
So, my sense is that the end of the recession will be when a significant number of young people—and by young, I mean between 20 and 40—redesign themselves to be more useful. Then the opportunities for growth are already there. The skills for growth aren’t there. The moment that the skills for growth collaborate with the opportunity, then you get another growth period. But I suspect that a lot of people with the most higher education are going to be left behind. The train’s going to leave the station, and they won’t get on the train.
Shannon Waller: Right, so find something practical to do. Yeah, that’s super great context, Dan. Thank you. It totally is validated by the people’s experience that I know, and some of whom are just graduating high school. They feel very lost at college. Oh, the other thing I was going to say about immigrants: they don’t have the same biases that we do. About, you need to have four-year university education, what have you-
Dan Sullivan: Well, first of all, they have no social status anyway. So, they’re not risking their social status, because they don’t have any to begin with. The other aspect about it is any improvement is great. They just have a sense that any kind of improvement, any kind of growth is great. But there’s going to be a couple of generations of people who are just going to be casualties of an over-investment in abstractions and theories.
Shannon Waller: Well said. I like that: “over-investment in abstractions and theories.” Yes. All right, so let’s go back to my previous question. If we are facing these headwinds, which we are, both in terms of the recession and inflation, how can a company, or someone who owns a company, really be strategic and set themselves up for success? My first thought is, let’s train people to do the things that we want them to do. But how can we set ourselves up to be really successful in this upcoming challenge, Dan?
Dan Sullivan: Stay in really, really close contact with your existing customers. Ask them three questions. What are the biggest dangers you have right now that, a year from now, you have to eliminate these dangers? What are the biggest opportunities you have right now that, a year from now, you have to have captured these opportunities? What are the biggest strengths you have right now that, a year from now, they have to get stronger? They have to be maximized? We call this the D.O.S. analysis. Just asking them the question, and giving them undivided attention, for an hour over breakfast, lunch, or dinner, will create for you as the entrepreneur, will create for you an enormous amount of business over the next year.
It’s not that your existing customers don’t have the money. They’ve lost the future to actually put the money out for. They’ve got lots of money. They’ve got lots of money. But they’ve lost their future. So, by asking your customers about their dangers, their opportunities, and strengths, you give them a new future. You’re the only one who did, so you get first dibs on their money.
Shannon Waller: That’s so powerful, Dan.
Dan Sullivan: Here’s the thing. I went through September, October, November, and I’m now in December, with about 350 very, very successful entrepreneurs. Not once was there any mention of the outside economic circumstances. It was not brought up as a topic. Even the news is just filled with it and everything. The reason is because by being in touch with their own customers and providing their customers with a much bigger future, simply by asking questions, they have created their own economy that’s oblivious to the outside economy. That’s how you never go into a recession in the first place. And you don’t have to come out of a recession, because it doesn’t apply to you.
Shannon Waller: How to be recession-proof. I love it.
Dan Sullivan: How to be recession oblivious.
Shannon Waller: That’s way better: How to be recession oblivious. Oh, that’s fantastic. It’s great, Dan. Because all of that is completely within your own control. The idea of having your own personal economic system, you called it, is so energizing for me. Yeah, love that. Awesome. I really like, Dan, that you haven’t talked about, “Have lots of powder to burn, make sure that you’re doing this with your hiring, or that.” I mean-
Dan Sullivan: Well, you have to have that in all times. Keep more of the money that you make. But that should just be an all-the-time policy.
Shannon Waller: What would you say about hiring team members? Not hiring team members? What’s your take on that, in recessionary times?
Dan Sullivan: Well, the two things Babs and I, who… We’re 33 years into this. When we have a recession, there are two things that we focus on. Number one is, every day, make sure everybody’s confidence is really high. So, a lot of positive feedback about improvements. A lot of positive feedback. Any gain gets praised and rewarded.
The other thing is come out of the recession with as strong a team as you went into the recession with. The reason is because half your competition is not going to get out of bed during the recession, and the half that do get out of bed, only half of them will be sober.
Shannon Waller: Ouch.
Dan Sullivan: No, I’m telling you. You just lose all your competition during recession. All really great companies make their biggest market gains during bad times.
Shannon Waller: Yeah.
Dan Sullivan: The other thing is that you’re willing, during recession, to try out all sorts of new things that have been on the back burner.
Shannon Waller: Right. Oh, I love this, Dan. This is so fun. Okay, so keep morale high. Praise and reward all gains and improvements. Have the goal to be to come out of the recession with as strong, or maybe even a stronger team than you went in with. Then try new things that have been sitting on the back burners. During a growth phase, sometimes you’re just keeping pace. But now, there’s hopefully time and capacity to actually experiment, is what I’m hearing.
Dan Sullivan: Yeah, well it’s interesting, because we’re saying this in public. But the public we’re saying it to are people who are entrepreneurs. During COVID, and as we’ve gotten out of COVID, people said, “Well how was the COVID period?” I said, “Oh god, I didn’t want it to end, it was so great. We made so much progress during COVID. The new capabilities,” I said, “and the new team members we hired during COVID? I don’t think we’ve had a comparable period since we started the company in the 1980s, as good as COVID.”
I said, “I was getting to the point,” I said, “I just hope this doesn’t end too soon.” People said, “Well that’s kind of cruel.” I said, “No, no. I’m not talking about how other people did. I’m just, you asked me the question, how was COVID for us? I said, ‘It was phenomenal. I just loved it.’”
Then people say, “Well what if we go into a really long recession?” I said, “It’s almost sugar on top of the dessert we already have.” I said, “Can we be this lucky? Can we be this lucky?” I said, “We’re just, we’re going to be sharks at a beach party here. It’s just amazing how much progress we’re going to make. I can’t believe how much progress is coming up, just because we’re having a recession.” Either people want to get to know me better, or they never want to meet me again, when I say things like this. But the truth is, that all the people that are in our Program have the same mindset: can’t wait for the bad times because the best possible things happen during bad times.
Shannon Waller: Dan, this is so incredibly refreshing and fun. I’m laughing. I’m trying not to laugh too loud. But it’s so great. I think if you’re a strong, resilient, D.O.S.-focused entrepreneur, this is a huge opportunity. Often when there’s a recession, other people are struggling. So, this is an opportunity to create value.
Dan Sullivan: The other thing is a lot of really great people get let go. So, the talent that becomes available during a recession is way bigger. It’s hard to find talent during real boom times.
Shannon Waller: Yeah, which has been true recently.
Dan Sullivan: Yeah.
Shannon Waller: Yes. I love it. So, take advantage and be recession oblivious.
Dan Sullivan: Yeah.
Shannon Waller: Dan, awesome coaching. Thank you so much.
Dan Sullivan: Thank you, Shannon.
In recessions, usually loans become more expensive. They tighten up who’s credit worthy, so it’s harder to get loans. Then you’re paying more for loans. But I think that this one’s a big one, because I think the conditions of COVID, where you had lockdowns, I think it permanently undermined the global supply chain networks. I think that it’s a 50-year correction. I don’t think it’s just a four- or five-year… I think this is a 50-year correction. I think we’re going to be in recessionary and inflationary conditions for a decade, at least.
Shannon Waller: Does this have something to do also—and I’m not sure if it’s part and parcel, or if it’s just happening at the same time—but the dismantling of globalization that Peter Zeihan talks about?
Dan Sullivan: Yeah, very much so. The problem with globalization, where you had supply chains that were providing almost everything just-in-time on a global basis, is that there’s no slack in the system. There’s no surplus. There’s no backup to it. The reason is, it keeps getting strained to produce more and more results, with less and less backup.
What I noticed over about the last five or ten years, that the venture capital market in the technology markets was starting to resemble Las Vegas—what is going on in Las Vegas casinos. That is, you were making your money off the bet. You weren’t making your money off the thing to be created.
I remember, one of our clients has a massively unique and different way of creating conferencing, on a worldwide basis, where there’s an AI program connected to it. The AI actually will sense out what some people’s minds, that they want to be talking about, and then actually creates the agenda, and creates the actual marketing that goes out to a worldwide community and establishes dates and everything else. Then as the conference takes place, and people are talking, it’s capturing what they’re talking about and creating all the topics for the next conference. “We had it up and working for about two years.” I said, “Do you have IP protection for this?” He hadn’t. I said, “You’d better get IP protection for this.” We have a great, great IP lawyer in Silicon Valley. They set up a meeting, and they had about 12 people at the meeting—venture capital partners. They said to him, “So how far are you away from prototype stage? Where you can communicate with the market, what you’re doing?” He said, “Oh, no. It’s up and working. It’s been working for two years.” The IP partner said, “Well that’s going to be hard to sell. Something that actually works.”
Shannon Waller: Oh no.
Dan Sullivan: So more and more, the money’s being made on the betting of something that might work in the future. You’re heading for trouble here, because large amounts of money are being created, that have no possible payoff in terms of something that’s actually increasingly productive.
Shannon Waller: Yeah, so it’s like there’s no foundation for the expansion.
Dan Sullivan: Yeah. The recent thing that we had, with the crypto exchange, the FTX I think it was, they were taking in real dollars, and you were given a token to play with in the game. But Las Vegas does the same thing. They just call it chips. Guess what? Outside of the casino, the chips are worthless. When you win a game and you get way more chips, you haven’t won until those chips are translated into dollars on the way out.
Shannon Waller: That’s such a great point, Dan. So, major headwinds are coming, and they’re probably not going to go away any time soon. What’s the best strategy? How do people need to be thinking about this, and how can they take action? Because it’s a very different world than it was for the past, what, 40 years?
Dan Sullivan: Yeah. Well, I want to take a step backwards. Before I answer that question, I want to step back. The number one cause of the recession are the institutes of higher education: the colleges and the universities. The reason is that they’re being paid to educate people in worthless skills. They’ve started training people in very advanced, abstract theories. But what the marketplace in the real world actually wants is people who can actually have a trade, have a skill. But the universities are so far away, in terms of their faculty and their administrators, from the actual marketplace. They just see it as a very foreign world.
Shannon Waller: Yeah, 100%.
Dan Sullivan: The other thing is, they see the marketplace as a world of the past, and their theories are creating the world of the future. People are betting on these theories. But they’re like chips in a casino. They’re like the tokens in a crypto exchange. You can’t translate them into actual dollars. So, the students can get these advanced degrees, and they started their educational journey when they were four years old. They’re now 28, and they’ve got a couple graduate degrees. They’ve accumulated all these credentials, which are casino chips. But when they try to translate them and go out into the actual world, they’re worthless.
Shannon Waller: Totally. The people who actually are good at the practical, tangible, concrete-
Dan Sullivan: Are despised.
Shannon Waller: …are despised. Because, I’m just finishing reading this phenomenal book by Temple Grandin, who I’ve been reading for 20 plus years, called Visual Thinking. She articulates this problem. She goes, “Well they get screened out because of algebra, which is an abstraction of numbers, which are also an abstraction.” So it just makes it-
Dan Sullivan: But the whole world depends upon arithmetic and geometry.
Shannon Waller: Mm-hmm. It’s interesting, because I know a lot of people who actually operate much better in the visual world. They struggle in school; they struggle in high school. They barely make it through. Yet they’re geniuses with their hands, and to see how things can be fixed. If you haven’t read Temple Grandin, I highly recommend it because she just gives you a great insight into how people think differently. But that’s actually what we need. And our school system, especially higher education, doesn’t support it at all. So, what I’m reading completely-
Dan Sullivan: What I would say is that people with real skills are now getting more and more highly paid. I give you– I just checked it out in Toronto and Chicago, that if you’re graduating from high school this year, and you take a six-week welding course, which is actually provided by the welding industry, at the end of 12 months, if you do what they say and you learn what they’re teaching, at the end of 12 months you’ll be making $60,000 a year; $60,000 for the first 12 months.
Then take a high school graduate who is going into four years of college. One is, that person is going to make minimum income, if any income, during the four years, and likelihood, will run up a debt, so that they’ll actually be in negative territory four years from now. By that time, the welder is making $100,000 a year.
What’s true of welding is true of carpentry, is true of being an electrician, a plumber, a mechanic. The reason is that the world doesn’t need university theories. They don’t need university abstractions. What they need is people who actually know how to do something that actually creates value.
My sense is, why there’s a big recession coming, is that we’ve produced, over the last 20 to 30 years, university graduates and graduate school graduates who, in the job market, might be able to say, “Welcome to Walmart.”
Shannon Waller: That’s harsh. Unfortunately, I have to agree with you 100%, Dan.
Dan Sullivan: “Do you want cinnamon or chocolate on top of your latte?”
Shannon Waller: They’re so frustrated-
Dan Sullivan: Nothing against Walmart or-
Shannon Waller: Baristas.
Dan Sullivan: Yeah, the baristas. I have nothing against them at all. They at least can do something valuable. So many graduates coming out of university are worthless.
Shannon Waller: They actually feel like they’ve been sold a bill of goods. Because it used to be, an education would guarantee you a job. Now, it does not. I know—actually, someone that we both know runs a very successful PR agency in Toronto. At least before COVID, it was great to have four years of education, because it does teach you critical thinking. But then she also wanted one year, in Canada it’s called college, so they would actually know how to do something. Which is kind of wild because university graduates don’t actually know how to do anything. Which is a shame.
A lot of what I read, and anecdotal evidence as well, completely backs up what you’re saying, Dan. People who do graduate university are really frustrated, because they thought it was going to be different, and they’re so much in debt. I know people in their mid-30s who are still paying off their student loans. Which is just a shame because they’re under this huge burden. Is it getting them the extra income? No, it’s not.
Dan Sullivan: I went to a four-year college. I started in 1967, and I graduated in 1971. I had been in the army before, so the G.I. Bill, which I was eligible for, paid for all my living expenses during four years. I borrowed the money for tuition. I got out, and I got a really great job in an advertising agency. I paid off the loan and also started my first business. But I was able to pay off the loan in about three or four years. It was a sizable loan; when I graduated, it was $16,000. But this is 50 years ago, so it’s the equivalent to at least $150,000 now. Somewhere around there.
I graduated on a Sunday. Moved to Toronto on a Monday, and I wrote my first ad as a member of a big global advertising agency. I had done all of the preparation to have a job waiting for me, the moment I got out of college. It was great. But you could do it in those days. You can’t do that in these days.
Shannon Waller: No, no, exactly. Well that’s interesting. I hadn’t put it together quite like that. It actually ties back to what you were saying about growth earlier. There are so many jobs open, and that expansion actually can’t happen because there aren’t the people to do the work.
Dan Sullivan: Yeah, and that’s what will happen. I would say this. That I think that the ones who are going to take the greatest advantage of the recession and do skills training, are going to be immigrants more than native-born people. The immigrants see everything as an opportunity. They don’t expect to have opportunity created for them.
The reason why they’re immigrants is because they were willing to risk leaving behind everything they had to come to here, because in their mind, their chances were much better in Canada, the United States, Australia. The big immigrant countries. That they knew that they would find a way of being valuable, but it wouldn’t come over and go through four years of college to do it. They go out and start being useful right off the bat.
So, my sense is that the end of the recession will be when a significant number of young people—and by young, I mean between 20 and 40—redesign themselves to be more useful. Then the opportunities for growth are already there. The skills for growth aren’t there. The moment that the skills for growth collaborate with the opportunity, then you get another growth period. But I suspect that a lot of people with the most higher education are going to be left behind. The train’s going to leave the station, and they won’t get on the train.
Shannon Waller: Right, so find something practical to do. Yeah, that’s super great context, Dan. Thank you. It totally is validated by the people’s experience that I know, and some of whom are just graduating high school. They feel very lost at college. Oh, the other thing I was going to say about immigrants: they don’t have the same biases that we do. About, you need to have four-year university education, what have you-
Dan Sullivan: Well, first of all, they have no social status anyway. So, they’re not risking their social status, because they don’t have any to begin with. The other aspect about it is any improvement is great. They just have a sense that any kind of improvement, any kind of growth is great. But there’s going to be a couple of generations of people who are just going to be casualties of an over-investment in abstractions and theories.
Shannon Waller: Well said. I like that: “over-investment in abstractions and theories.” Yes. All right, so let’s go back to my previous question. If we are facing these headwinds, which we are, both in terms of the recession and inflation, how can a company, or someone who owns a company, really be strategic and set themselves up for success? My first thought is, let’s train people to do the things that we want them to do. But how can we set ourselves up to be really successful in this upcoming challenge, Dan?
Dan Sullivan: Stay in really, really close contact with your existing customers. Ask them three questions. What are the biggest dangers you have right now that, a year from now, you have to eliminate these dangers? What are the biggest opportunities you have right now that, a year from now, you have to have captured these opportunities? What are the biggest strengths you have right now that, a year from now, they have to get stronger? They have to be maximized? We call this the D.O.S. analysis. Just asking them the question, and giving them undivided attention, for an hour over breakfast, lunch, or dinner, will create for you as the entrepreneur, will create for you an enormous amount of business over the next year.
It’s not that your existing customers don’t have the money. They’ve lost the future to actually put the money out for. They’ve got lots of money. They’ve got lots of money. But they’ve lost their future. So, by asking your customers about their dangers, their opportunities, and strengths, you give them a new future. You’re the only one who did, so you get first dibs on their money.
Shannon Waller: That’s so powerful, Dan.
Dan Sullivan: Here’s the thing. I went through September, October, November, and I’m now in December, with about 350 very, very successful entrepreneurs. Not once was there any mention of the outside economic circumstances. It was not brought up as a topic. Even the news is just filled with it and everything. The reason is because by being in touch with their own customers and providing their customers with a much bigger future, simply by asking questions, they have created their own economy that’s oblivious to the outside economy. That’s how you never go into a recession in the first place. And you don’t have to come out of a recession, because it doesn’t apply to you.
Shannon Waller: How to be recession-proof. I love it.
Dan Sullivan: How to be recession oblivious.
Shannon Waller: That’s way better: How to be recession oblivious. Oh, that’s fantastic. It’s great, Dan. Because all of that is completely within your own control. The idea of having your own personal economic system, you called it, is so energizing for me. Yeah, love that. Awesome. I really like, Dan, that you haven’t talked about, “Have lots of powder to burn, make sure that you’re doing this with your hiring, or that.” I mean-
Dan Sullivan: Well, you have to have that in all times. Keep more of the money that you make. But that should just be an all-the-time policy.
Shannon Waller: What would you say about hiring team members? Not hiring team members? What’s your take on that, in recessionary times?
Dan Sullivan: Well, the two things Babs and I, who… We’re 33 years into this. When we have a recession, there are two things that we focus on. Number one is, every day, make sure everybody’s confidence is really high. So, a lot of positive feedback about improvements. A lot of positive feedback. Any gain gets praised and rewarded.
The other thing is come out of the recession with as strong a team as you went into the recession with. The reason is because half your competition is not going to get out of bed during the recession, and the half that do get out of bed, only half of them will be sober.
Shannon Waller: Ouch.
Dan Sullivan: No, I’m telling you. You just lose all your competition during recession. All really great companies make their biggest market gains during bad times.
Shannon Waller: Yeah.
Dan Sullivan: The other thing is that you’re willing, during recession, to try out all sorts of new things that have been on the back burner.
Shannon Waller: Right. Oh, I love this, Dan. This is so fun. Okay, so keep morale high. Praise and reward all gains and improvements. Have the goal to be to come out of the recession with as strong, or maybe even a stronger team than you went in with. Then try new things that have been sitting on the back burners. During a growth phase, sometimes you’re just keeping pace. But now, there’s hopefully time and capacity to actually experiment, is what I’m hearing.
Dan Sullivan: Yeah, well it’s interesting, because we’re saying this in public. But the public we’re saying it to are people who are entrepreneurs. During COVID, and as we’ve gotten out of COVID, people said, “Well how was the COVID period?” I said, “Oh god, I didn’t want it to end, it was so great. We made so much progress during COVID. The new capabilities,” I said, “and the new team members we hired during COVID? I don’t think we’ve had a comparable period since we started the company in the 1980s, as good as COVID.”
I said, “I was getting to the point,” I said, “I just hope this doesn’t end too soon.” People said, “Well that’s kind of cruel.” I said, “No, no. I’m not talking about how other people did. I’m just, you asked me the question, how was COVID for us? I said, ‘It was phenomenal. I just loved it.’”
Then people say, “Well what if we go into a really long recession?” I said, “It’s almost sugar on top of the dessert we already have.” I said, “Can we be this lucky? Can we be this lucky?” I said, “We’re just, we’re going to be sharks at a beach party here. It’s just amazing how much progress we’re going to make. I can’t believe how much progress is coming up, just because we’re having a recession.” Either people want to get to know me better, or they never want to meet me again, when I say things like this. But the truth is, that all the people that are in our Program have the same mindset: can’t wait for the bad times because the best possible things happen during bad times.
Shannon Waller: Dan, this is so incredibly refreshing and fun. I’m laughing. I’m trying not to laugh too loud. But it’s so great. I think if you’re a strong, resilient, D.O.S.-focused entrepreneur, this is a huge opportunity. Often when there’s a recession, other people are struggling. So, this is an opportunity to create value.
Dan Sullivan: The other thing is a lot of really great people get let go. So, the talent that becomes available during a recession is way bigger. It’s hard to find talent during real boom times.
Shannon Waller: Yeah, which has been true recently.
Dan Sullivan: Yeah.
Shannon Waller: Yes. I love it. So, take advantage and be recession oblivious.
Dan Sullivan: Yeah.
Shannon Waller: Dan, awesome coaching. Thank you so much.
Dan Sullivan: Thank you, Shannon.