Living Through Economic Cycles

Business brain, episode 618 for Wednesday, January 29th. Free Thinkers Day 2025. Greetings, folks, and welcome to Business Brain, the show where we take some ideas, we crunch them, we dissect them, we use them to help further tune our business brains so that we can keep on living that charmed life. Shopify.com BusinessBrain is our sponsor for this episode. That's where you can go to sign up for your $1 per month trial period. We'll talk more about that in a little bit here. Back here in Durham, New Hampshire, after being in Anaheim for the NAMM conference last week, I'm Dave Hamilton.

Hey, I'm still out here in Lafayette, California. I'm Shannon Jean. And I love, love, love that we are recording on Free Thinkers Day.

Free Thinkers Day. Well, well, we're actually not recording on Freethinker.

Well, I mean, we're airing. Yeah. We're releasing on Free Thinker. And you know, there's a price to pay for being a Free Thinker.

Oh, tell me about it. Big one.

My whole. Your whole life, you know, you. You'll be paying that price. And it's, it's a, a great thing to recognize and also to be prepared that you're going to pay that there's a price to pay if you want to. I always say if you want to lead an uncommon life, you really, you have to be prepared for people to be like. It makes people nervous, it makes some people get afraid. And most people do it because they care about you.

Right.

And they think like, oh my gosh, this is insane. You're gonna go nuts. But anyway, it's just a great day to be airing this episode.

It is. You know, I mentioned that I was at the NAMM conference last week and of course, we talked about going off to it before when we recorded. Before I left, I had an. It was a great experience. Everything that I sort of worked towards, especially over the last year. But clearly over the last, you know, 10 years with gig Gavin, maybe even longer than that, really, it was nice to see how welcomed I was into the community. And, and yeah, it. I felt like I was part of this, this community, even though I had never been there before. And all of that was great. There was one moment early on where I'm a big believer in what I'll call coopetition. Right. People that compete with each other, still helping each other with their businesses or at least being friendly towards each other and all of that and not cutting people out. I mean, you're not sharing your business Secrets with people. But, but introducing people, making relationships and all of those things. It's, it's the law of reciprocity. Right. You give and then, and then you get. Eventually. And it's not always a one to one relationship, of course.

Yeah. Right.

However, and most of this business, that, that business, the music business, is that in spades because it's a fairly small industry.

Sure.

And then you chop it up into the different segments like the microphone manufacturers and the headphone manufacturer, in ear manufacturer, pro sound manufacturers. And then it gets really small. And all those people know they're going to work together at some point. They either have worked for each other or they will work for each other. You know, it's because it, if you have expertise in one area, you're probably just going to bounce from one microphone company to another. You're not going to go outside that. I mean you might, but. So everybody sort of gets that for the most part. But there was one person early on who sort of snubbed me in a way of like, oh, well, you know, if you don't know about this, then I'm not going to tell you about it. And, but I, I really truly believe in coopetition. I am certainly a driven person. I am not. I wouldn't call myself overly competitive, at least not in a visceral way. However. Yeah, how however, I noticed something that happened and it has happened other times in my career, all of which have been pivotal moments. And that is in that moment when I felt snubbed by him, my first thought was f that guy. And my second thought, which was almost in parallel with my first thought was, okay, I guess what this means is now I've got to make a huge presence for myself in this industry again.

You want to win?

I need to win now.

You want to win, right.

And if he had been nice to me, I wouldn't. And he was nice. He just was not. He wasn't treating me as an equal. And it was like, okay, now I need to make it so that there's no question about what the relationship is here in this industry. And so immediately, and it did, in a sense frame the whole week next year at namm. The plans are already underway that we're going to be doing gig gab live events with, with various very high profile vendors and things like that.

Yeah, yeah, that's awesome.

And, and it was like. And it was just. I laughed throughout the week at this one tiny little moment that this guy will. He's certainly not thinking about it anymore. It wasn't A big deal to him. Yes, because it wasn't a big deal. And I'm not thinking about it from, like, I'll still be friendly with this person and all that stuff. I mean, you know, they showed their colors. I understand. Fine. I know. I know what box to put you in. We'll still be friends. It's all good. But it. It really did inform my week. Like, yep, I got to keep driving. I. I. Because I got to. I got to show that guy. Even if it takes five years, I'm going to show that guy.

Everybody needs a chip right here.

He put that chip there right as soon as I arrived.

Yeah, it's that concept. It's that concept of everyone needs an enemy, every team needs an enemy, every, you know, group needs something to fight for. You bring, you know, and mentally, we. I don't know if it's the human condition or whatever it is, but we're better when we have something to fight.

Against, even if that enemy becomes an avatar. Like, yes, my issue is not actually with that guy, but, yeah, he is the avatar now for what drives me. And I always say, you know, if you have to split, if you have to spend your discipline points and you have a limited number of those, if you have to spend those every day, it's really hard to get something done. But if you have some inner fire that is driving you to do it because you want to do it, then it gets way easier. It's like you with your, you know, tell the story in reverse, you know where you want to get, and it's easier to get there.

So that's right. And. And I think that when I say, you know, we talk about enemy or have a. It's a cause, and it's helped get the sense of purpose. And it doesn't have to be. Like you said, it's not a particular person. I'm sure that person's a very nice guy.

Totally fine. Yeah.

Yeah.

I'd have them over for dinner and have a beer with him.

Of course, you can use. You can pick entire industries.

Yes.

You can pick a whole concept. If you're like, you know, I. I always. It's not a cause that I rail against, is people feeling trapped, working for someone else. That's my. We fight that battle. You know, we're. We're going up against those things. And this mindset that it's. It's riskier to work for yourself than it is to work for someone else. And I believe the opposite. It's far riskier to. To rely on someone else for a paycheck than it is to create one for yourself.

Absolutely.

Oh, and so 100%. So you can, you can pick whatever you want, but having the cause and.

The that chip on your shoulder. You're right.

Yeah. It's not.

We did. It's like for something we did an episode about. I asked you like, Shannon, I need to put a chip on my shoulder.

Help me not to.

How do I do that? Right. Not that long ago. Well, I found the way. You know.

There you go.

Yeah.

That's it. That's it. It's great.

It is. It is. And but I, that industry really is. You know, I've been at what, the south by Southwest Conference 15, 20 times. I can't even count the number. That's cool. I felt more a part of the NAMM community in the first day than I ever will or have at the south by conference.

And is that because there's more artists at the south by concerts and more merchant type people at the NAMM conference?

I think so. I, I, there's a lot of reasons that I think that that happens. Some of it is what I mentioned where people are all going to work with each other in the end and it's not so siloed. Right. You know, everybody kind of has to be friendly with each other. And so it, that friendliness just sort of in informs everything. It's really was a fascinating conference. And I will definitely go back. I'm a fool for not having gone. And in previous years. All right. Have you ever wished that starting a business was as simple as hitting Buy now on a really good sale? Well, with our sponsor, Shopify, it practically is. I use Shopify for merch with two of my other businesses, and it's so flawless. I almost forgot what it was like to wrestle with clunky systems and endless setup headaches. Shopify lets you design your online store, manage inventory, handle payments, and ship orders all in one beautifully simple platform. Plus, with tools to connect your social channels, you can sell wherever your customers are scrolling. And did I mention shop pay? It's like a conversion wizard turning abandoned carts into cash. Here's the kicker. If Shopify could make tea, I'd never leave my desk again. But since it runs my businesses like a dream, that's close enough. And hey, established in 2025 has a nice ring to it, doesn't it? Sign up for your $1 per month trial period at shopify.com businessbrain all lowercase. Go to shopify.com businessbrain to start selling with Shopify today, shopify.com businessbrain. And our thanks to Shopify for sponsoring this episode. All right, you and I had a conversation pre show. Shannon, you were asking me. Yep. How can we make more money with this show?

Yeah, that's not what we always interested.

Well, of course that's not what this topic is about because it led us into a conversation. You said, well, you know, I feel like our listenership has been going up and it has. And, you know, and our longevity in the industry has been increasing as it does, you know, sort of by nature of linear time, doing what it thinks. And the answer is, you know, the question is, so why aren't we just naturally seeing revenues go up? And that led to a conversation about economic cycles. And I've had an interesting experience over the last, let's say, five years in the podcast business. Now I'm old. I've been doing this older. There you go. Wiser. I'm more experienced. I have many years of experience and I have seen economic cycles happen. I saw the, you know, within a year, about a year and a half after we started Mac Observer, I saw the dot com bust.

Yeah, I was there.

Thank. I know, yeah, thank goodness. We did some smart things accidentally before that, AKA not spending any of the money we were collecting, which was really smart. Stupid in the moment, smart in hindsight. Right, yeah, exactly. So we had a little bit of a war chest and obviously we were able to survive and thrive through that, but it required retooling the way the entire business has worked, including Backbeat Media. And then we saw the 2008 downturn. And then of course, we saw the downturn that happened certainly in the online industry, but macroeconomically too, in the 2023, 2024 range. And I watched an interesting thing happen in the podcast business. And so I'll relate this experience through that lens, but this is absolutely applicable to every industry everywhere.

Yeah, sure.

What I noticed was, you know, we had 2018 was pretty good. 2019 was rocking. Like that was one of, if not certainly our best, the podcast industry's best year ever, and probably Backbeat Media's best year ever, I think. And then 2020 started. We were still rocking, things were doing good. We had a two week pause in at the end of March when COVID lockdowns were announced and all that stuff. Nobody knew what was going to happen. And then it became very obvious what was going to happen. Everybody's going to be home for a very long time. And then all this money started being poured into the market. So that businesses could. I looked at all that money and we talked about it on the show as sort of, you know, a preventative for unemployment. It was like paying unemployment while people still had jobs. Right. Because why not? You're gonna. The money was going to go to them either way. Might as well keep the companies going so that things can continue to thrive. And things, especially in the online industry, did for about another 18 to 20 months because it was the only place people could really spend their advertising dollars.

Yeah, right.

Yeah, it was, it was friggin awesome. Great. We were, we were, we looked like geniuses, but really what we were was just order takers in the right spot and the money flowed. We were able to charge a high premium for many shows, including this one. And then the macro economy took a breather. Right. And that impacted every business. And the advertising business is, I always say, we are leading indicators. We see it before it happens to everyone else. Whether it's going up or down, we get to see.

Absolutely. Yep.

And it's just how it be. It's fine. I, like, I, it's something I've learned and I don't necessarily like it when it goes down, but I, I understand that this is not the first time I've seen it because it's not the first time I've seen it. However, there were a ton of people in our industry who, you know, maybe a year, year and a half ago, like November, October, November of, of, of 23, where I would talk to him about, okay, yeah, things are slowing down. Oh, no, you know, no, our business is basically flat, you know, maybe up just a couple of points. I'm like, we're down 30%. Like, I know this and I know we're not doing anything wrong. We spent a little bit of time asking the question, like, what have we done wrong?

What's going on?

What's going on? And the answer was, oh, it's not us, it's that people were either telling us their businesses were down 30% as well, or they were lying. It was one or the other. And they. And lying makes it sound malicious. It wasn't. What I realized was, oh, wait a minute, there's all these people in that industry, some of which are in very influential or powerful positions, you know, controlling lots of dollars in one way or another, who have never been in the business world during a downturn. They entered the business world after 2008 and this was their first time seeing it and they didn't know how to process it because it is scary. Even if you have been there before. It's scary, but it's especially scary when you haven't been there before. And maybe I shouldn't say anything. If I say nothing, maybe it'll just get better, right?

Yeah.

And. And it took a while. It took another six months before those same people that were saying, oh, everything's fine, were saying, like, I guess it's okay to talk about the fact that the whole industry's down. It's like, yep, that's what I've been trying to tell you.

Yep, that's right. And I think a couple of points you made that are really important is like, I tend to internalize everything. I'm. Hey, you know, when, when you want to criticize, look out the window. Or what is that? When you want to criticize, look in the mirror. Compliment, look out the window.

Window, sure.

So when this stuff happens and I've been through these same cycles before, I've been. And I, you know, coming out of COVID same kind of thing, I first start, I'm always like, what am I doing wrong? What's not working anymore? Because everything changes, right? Nothing stays the same. What some technique you figured out for a while that's killing it eventually will stop. Either everybody starts doing it or your. Your unfair advantage goes away and you have to create another one. But the point that struck me that your comment is being connected in the industry is very important. Otherwise, you don't have, like, you just. All you're going to do is think it's your fault if you don't have other peers to speak to and to share information. Like your point earlier, in coopetition, you need sounding boards and peer groups and ways to have those conversations so you can realize, oh, okay, it's not us. It doesn't mean you don't have to act. You absolutely have to have to act.

Yes.

Yeah, yeah. And hopefully you're acting before because if, if you've been through it a time or two before, you could start to see it around the edges. Like, hey, these steady customers or whatever, they're changing their habits. What's happening here?

What happened? Right?

So you start and you want to talk to them, right? They're. They're like your first leading indicator, like, what's going on? Oh, our budgets are cut, or, hey, we're bringing everything this, or we're taking everything in house. We're not using your services anymore. We're trying to save money. You start to see that enough. And then you should start talking to the. Your peers. Just like, are you guys seeing this too, or is something different. And I, you know, many industries are headed to commodity status always, always. And you don't want to be there when it becomes a commodity. You want to take advantage of it when it's a profit center and kind of shift your way into something else as it becomes a commodity. And economic pressure, I think, accelerates that. And so if you talk to people and get involved, it'll help with your framework and your thought process. Because it sucks. Because you know what comes next? Oh, I can't have all these people working for me.

I gotta lay some people off. That's right.

I can't afford this big build. I can't pay the rent or I can't pay the mortgage on the building we have, or.

Yeah, when you are victim and victims, but I'll use the word because it's efficient. But when you are victim of someone else's budget cuts, eventually you will have your own budget cuts if you don't change anything. And so, yes, I like this idea of, you know, blaming yourself or looking inward, however you frame that, because it, that is the thing that will, for me anyway, that motivates me to find creative solutions.

Right.

And some, and look, sometimes those solutions or sometimes what happens in an industry, in any industry when, when there's an economic downturn is that the, some businesses will, will stop, they will close some businesses.

Absolutely.

Some businesses will be acquired. There'll be some version of consolidation. Right. You know, and some businesses will hunker down and figure out a way to, okay, well, if our business was able to serve, you know, 100 customers, how do we take the resources we have and serve 200 customers so that we can pay for the resources that we have? Right. Don't bring on new things. And sometimes that's doable and sometimes it's not. And you got to figure that out and all of those things. But that's, I mean, there it is a catalyst for change. And not all of that change is positive for any one perspective. Right. If you're the person that runs the company that lay people off, that sucks. If you're one of the people that gets laid off also, that sucks. Right? Like all of those things happen, but they happen. And then usually unless the whole industry craters, which is rare, but it certainly could happen. But usually what happens on the other end is when the economics turn around, then you're positioned to really take advantage of it because you've made yourself this profitable machine, or at least break even machine that can survive an economic downturn. Maybe you can Thrive during it, too, which is great. But if you can survive it, then when things open up, man, you again look like a genius. Right. And, but, but somebody said something to me a long time ago. When it rains, fill up your buckets.

Yes.

Don't.

Your bank account.

That's your bank account.

Your bank account so that you can. Because there's also tons of opportunities when economic downturns happen. And I'm speaking from a business owner that's lived in the excess inventory surplus, you know, taking advantage of opportunities. I'm an opportunistic buyer. Whether it's, whether it's excess inventory that didn't sell or your business that you can't keep running.

Right.

So if you have that bucket that you filled up, you can really make those economic downturns work for you, and you have to survive them. And it's another reason why I love diversifying within your business into different areas, different opportunities. Because when one of them slows down, you know, when our school business, when school budgets all started to get pressured down, down, down, down, different school districts had less kids. Well, my wholesale parts business was going up because I was selling in other areas. So it's always having, you know, this, this balance of things. If you're just focused on one thing and you don't expect it to change, you're going to have a hard time.

Yes.

So don't. Yeah, yeah, yeah.

It's, it's. Send us your questions about this. There's a whole lot more we could talk about about this, but, you know, we don't want to. We don't want to impose on your time more than you've expected us to. So there you go.

I'll leave you. It. It's not your fault when it happens, but it's your fault if you don't act.

Yes.

And if, you know, if you don't take the actions and if you've seen it before in those, like I said earlier, those indicators, you have to be quick and you have to communicate because your people know what's going on around. They see it, too. And if you think you're hiding it by not talking about it, oh, no, that's just, that's just not true.

Yeah, no, I'm, I'm very frank with, with the team. It's like, okay, well, you know, the economy sucks this year. And I'll tell people. Yes, look, we, we lost as a business. We lost money in whatever year, you know, whatever happened, 20, 23, we lost money in our business. Okay. It's fine. Like, I always. I always say it as calmly as I can.

Sure.

Because it's not news to me. Right. So I've already processed the loss. It's like, okay, well, we lost money, obviously, we're able to keep everybody employed. We're used to this. We know how to ride this. Or at least we think we do. Plus, all the things that we've already been doing together are the things that will set us on a track to success going forward.

That's awesome. Yeah. I'd love to hear your stories, how you adapt to economic uncertainty, downturns, whatever it happens. Feedbackusbrain show Speak out.

Yeah.

Let us know what you think.

I will say, as someone who is in a line of business, that is that leading indicator. I am seeing signs of things aiming up and that started probably mid November, early December. So it's very early days of those. Those positive signs. But they are positive signs and there are several of them for us. So maybe that means something good for you and we can all keep on living that charm life. We will see you next week.