David Koren

Thoughts on Recession

I remember back around 1999 or 2000, when I was walking home one night from work, and I felt like every other car I saw was a limousine filled with drunk, screaming, dot commers celebrating their IPO or their second round of venture cap financing or whatever, and I thought to myself, "Make this stop! Make this silly Fantasy Island world go away!"  And it did, pretty shortly thereafter.

Through a friend in California I got invited to what I now think of as "the last party of the dot-com boom" at a rooftop penthouse in NoHo. The company that hosted it (I think it was Excite@Home) was already going under. My friend, who invited me to the party, had already been laid off. The party was her last day on the job. But, they had already paid for the party, so why the hell not? It was a hell of a party. I'm glad I saw it. It set a new standard for me of corporate parties, at least.

Anyway, why is this important now? Well, it seems like we're headed into a recession again (or we're already in one, potentially). And I can't help but think about the last time we were in this particular place on the economic curve, sliding downward, rapidly. There is certainly a sense of economic gloom in the air.

I've worked through two recessions already, and this will be my third. I first started working in architecture in 1992, when layoffs were common until 94 or so. Then, as I mentioned, there was the dot-com implosion. Now the housing bubble breaking and the credit crisis...

Just like when I thought "Make this stop!" in 1999 or 2000, I certainly had a similar feeling when I heard in late 2007 that Goldman Sachs was giving out an alltime-high $12.1 billion, or an average of $400,000 per employee, in its annual bonuses. Or when I heard in 2007 about the fact that apartments in luxury buildings in New York City are selling for more than $2,000 a square foot (sometimes MUCH more). It can't go up and up forever. What goes up has to come down, at some point.

And, though there's pain involved in a recession, there are a number of things that are good about the contraction. I have to say that I really like the return to reality, the recalibration that happens when people reevaluate their values. The value of a dollar, for example... In a booming market, a dollar is, well, just one more dollar. You need a dollar? Sure, here's a dollar. Sure, why not buy that cool new gizmo? Sure, why not buy the big car? Sure, why not get the premium gas? But when things get tighter, people think about those dollars differently. They have value. Every dollar counts. It forces people to ask the tough questions, and to engage in conversation. Do we really need that thing? Are we serious about expanding into India? Do I really need a new car?

When things are good, it's really hard to be cheap. When you're out with friends, it's really hard to be the person who doesn't want to split the check evenly. It's really hard to buy the lowest-cost choice in the category you're looking at (think car or TV or computer). But when things get tight, all those rules shift. Be as cheap as you want! Choose the answer that works for you! Pay only as much as you think is fair! Nobody can blame you for being cheap in a recession. You actually have MORE socially acceptable choices, not less.

And at work, it's actually easier to make decisions, because the final arbiter of decision-making is financial, the bottom line. This may seem limiting, but I think it's actually liberating. In a boom, who's to decide whether it makes more sense to invest in India than Russia? "Both are expanding! Invest in both!" But resources (time and money) are always in fact limited, and a recession points that out, focusing the discussion. "Look, we've only got so much money to spend here... What should we do with it?"

I suppose what I'm saying is that, while recessions create an environment of scarcity, and focus us on what we have and what we do not have, forcing us to make tough choices, I actually like tough choices, and I like the discussions and decision-making that accompany making tough choices. I think it's good for us, and I think it's good for me. But don't worry, I'm sure there will come other periods of wild economic abandon where we will again lose ourselves in orgies of consumption... and that's fun for a while, but hangovers can be fun too...

Is Differentiation a Myth?

I just came across an article on RainToday called "The Myth of Differentiation" by Mike Schultz. The article basically posits that we shouldn't talk about our firms as "unique" or "different" because most people use these words incorrectly. Fair enough, but that doesn't mean that the process of identifying how your firm is different from the client is useless. (In fact, it's vitally important!)

So, I got up on my soap box, pressed the "respond to this article" button, and dashed off this response:

In the first part of his two-part “Myth of Differentiation” series, Mr. Schultz muddles the meanings of the words “unique” and “different” and narrowly defines differentiation as a communications process (“differentiating to the client”), ignoring the value of differentiation as a process of introspection—figuring out what makes you different from the competition so that you can better position yourself to your market or client.

First of all, the words “unique” and “different,” while synonyms, do not have identical meanings. In order to be “unique,” something must be different from every other thing in existence. Answering the question, “why are you unique?” is nearly impossible, because the comparison set is so huge—the entire universe. So I think that the word is usually used poorly in marketing, to describe a firm that isn’t really unique (or, at least, probably couldn’t tell you how it’s unique).

But the word “different” sets the bar lower, on a scale we can deal with. Something is different only in terms of how it compares with other things in the same limited category. In thinking of what makes a firm different, we consider the direct competition, and think about what makes us special. This is an absolutely necessary part of positioning your firm for a market or a specific client. Otherwise, you’re just talking about yourself, without a competitive context, and you have no way of anticipating how effective your words will be in reaching your client. Once you know how you’re different, you don’t necessarily need to say to the client “We’re different because…” but your understanding of how you’re different can inform ALL of your communications.

I agree with Mr. Schultz that calling yourself "different" or "unique" does not make you either one, but I do believe that an introspective process (informed by research, of course) about how you compare to your competition is invaluable in developing client-focused messages that differentiate your firm from the competition.

The real problem isn’t with the words, it’s with using them incorrectly to describe things that aren’t actually different or unique.