An architect's guide to survive a recession

A recession impacts almost everybody whoever is a part of the economic cycle, and the construction industry is no different. This is important especially for the architecture industry because of how cost-intensive construction industry actually is.

 

What is a recession?

A recession is a period of two or more consecutive quarters (6months) where the economy shrinks rather than grows. Global recessions can be triggered by things like a sudden change in oil prices, or a crisis of confidence in the market that’s what happened in the 1990s with the dot-com bubble.

Right now, it seems very, very likely that we are entering a recession. The concern which builds distrust in a market is ‘public health’ which is paramount. While it’s hard to know for sure what is going to happen with the economy in the coming months. Once the downtrends are established by international organizations for the next 6months, its declared recession and when it’s too late to announce it. Massive layoffs, business shutdowns, fall in prices of everything, lack of liquid cash in the market, etc. all are widely seen effects of the recession.

For architecture firms, the delay/stopping of client payments can be one of the most direct impacts of the recession. The clients we build for are losing money in the global stock market/their businesses (possibly due to quarantine measures). This leads to an inevitable ceasing of cash inflow in firms.

Fig.1: Illustrative representation of the general perception of recession by masses. 

 

What recessions are not

If recession is affecting everyone globally what can I do? This question is usually raised by a lot of people who can’t differentiate a recession from a bulldozer, and it's completely alright, to begin with. (At least this line of thought addresses a threat)

However, this interpretation is mostly misconceived. Recession is not the destruction of wealth, because wealth is not destroyed here. (Who’s burning money eh?) It's rather a massive shift of wealth from one hand to another. There are clear winners and losers in a recession. One person’s loss sometimes (many times) someone else’s gain. And that is where the inquiry begins.

 

Fig.2: A more realistic representation of recession - More like Autumn. 

 

What can you do?

The first thing to do is to let go of any judgement you might have about the way you’ve handled money/habits in the past. Don’t beat yourself up for not being prepared enough. Focus instead on what you can do now, today, to build up the financial habits that will help carry you through this period.

Truthfully, managing your money during a recession is very similar to managing your money in any crisis, however, all it needs is conscious realignment. The old rules will not work this time. There is no time like the present to check in with your financial habits and cultivate a sense of power and control of your financial life.

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With all that pep talk lets dive right in, the rules are laid in 4 crucial sections any recession action plan. Let’s dive right in:

 

1. Sustain

This strategy is most simple and the most go to one. It addresses keeping things the same for yourself as much as possible despite how shaky the world is.

Fig.3: Set of approaches during a recession.

 

If you are in a job: Try not to get fired. (Pfft! Yeah! That’s the most effective advice) It’s easier said than done. But guys, listen carefully - in a company when a layoff plan is decided it’s usually done by humans (in this case hiring managers), who are evaluating whom should be staying in already cash deficit company.

Here’s the good part, regardless of the layoffs architecture firms still need people to run them. And maybe that person can be you. Be indispensable at work. Be someone who can be relied upon, approachable, and is taking additional measures to ensure the ship sails. Maybe this can be those testing times to prove your worth and can be useful in levelling up to that next job or salary hike. 

Don’t impulsively shift jobs. There are fewer opportunities out there than ever before; which makes this step even more essential. Go any means necessary to keep your name out of that firing list. Make sure you are on the right side when the times turn.

 

If you are a student: Stay in college, it’s the best place to be when the world is entering huge turbulence. If you can manage your student loan somehow or get a research assistance to ship stay inside. If you exit now, the market already is suffering and that student debt may crash right on top of you. Wait for the right opportunity if the offers are not good, but do not begin with a below industry average pay.

Take that student assistance ship, or live in an institution hostel, cling on that college infrastructure (hostels, library, internet, canteen), network with professors for paid opportunities or internships outside the college. The only time you can live as frugal as free will be this.

 

If you are fired/Just got graduated: Unfortunately, that’s not the best place to be but nonetheless here we are. There are two ways to go from here. Duck or Push.

Let’s talk Pushing hard. This can be seen as going against the tide at this moment, but people who have riding debts and credit card bills to pay, you need an income source! Reach out to 5 most reliable contact sources you may have and get any job you can – freelance, a gig, or part-time – Go berserk and any means necessary. Invest a little money if it needs to. The chances are less but some jobs are still out there. It will not be easy, it will creep you many times with shame of rejection, but don’t let that feeling in.

Use that multidisciplinary hat of an architect, who’s good with everything branding, graphic design, product design, speaking, etc. Many industries that are recession-proof in this pandemic. Pharma industries and Agro goods are thriving, and they always need help with marketing, logistics, or operations. Don’t care about the portfolio at this moment. Get any cash flow that you can.

 

2. Duck down

While general wisdom says to control unnecessary spending and expenses – the time is really good to make a review of how your expenditure is being utilized. It’s also worth your time to see if these habits contribute to your future roadmap. Start building an emergency fund. Sell unnecessary stuff to unlock money from things that are not being useful anymore. The ideal size of an emergency fund is 3 times your current salary.

If you are thinking to begin a side hustle now, it’s better to wait and find the best movement in the market to tap. Do not choose a crowded space. It’s even worse to begin a 6-month long side hustle only to leave it because of disinterest/laziness. By no means, this should be interpreted as hibernation.

Manage debts properly. Governments are now allowing this option to defer installments, use them to the fullest and get that extra cash in hand.   Keep healthy debts going, like a mortgage. Try hard to get rid of credit card debt as they have a very steep interest rate. The entire goal is to get your burn footprint as less as possible for the coming months.

 

3. Invest (Most crucial)

If you keep saving money/time and expect different outcomes, things will not change no matter how you want them. You have to place your money and time in some other form – either in Growth or Alternatives, someway that outcomes start becoming different.  

3. 1. Yourself:

Recession pushes the entire industry to change. What that implies is the jobs will change too and the demanded skillsets will. The emerging industries will require new skills. The entire trick here lies in predicting the maximum shift your industry can reach to 10 years from today, and backtracking how can you be relevant in that time/era.

You can learn how existing architectural practices are adopting new techniques. Or how new construction companies like Katerra, Samara, Sidewalklabs, etc. are developing alternative construction typologies. Imagine the maximum and build the right skills and relearn everything.  Adapting is not just the only but best way to surviving anything on your way.

Don’t just learn, implement them as much as you can. Do it. Take that web course, buy that book – finish reading it, participate in a competition, and execute things you learnt. Do all you can to change the odds of not being stuck in a recession again.

 

1. 2. Something else:

Still not sure? Invest in entities beyond yourself. Architecture has always taught us to think and exist solo. And maybe that’s why architecture suffers so much as an industry in financial terms. This may be the time to work collectively to make a change. Invest time in your existing company, go beyond your job, and help your team out to build something extraordinary. Find someone inspiring? Offer a hand out with sheer collaboration in mind.

Walk into a company you believe, and work against equity. Learn how they are navigating through these stormy times. What keeps their motivation and innovation up in the face of hurdles.

 

4. Attack

As soon as a looming recession starts coming to close, the economy starts booming again with the new status quo. Make sure you catch the right bus this time and diversify enough to not get caught by one industry slowdown. How speed you adapt will be the entire changemaking factor on this one. Choose the right job, practice all of the above, invest more and keep learning. 

 

Fig.4: Small preparation can make big differences - Illustrative example

On  a concluding note, the entire game is to do things slightly different, building upon your past experiences and consciously realigning for the next decade or even longer. Recessions are bad for a lot of people as its like having an intense fever. On the brighter side, it helps a lot of us a chance again to rise at the top even bigger by market hitting the reset button. All it depends on the way you take it. Hold tight, stay safe. Go like hell.

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Interested in learning more about recession and impact on your personal life, a few resources that can get you jump-started:

1. Recession-Proof by Jason Schenker
2. Recession-Proof Graduate by Charlie Hoehn

 

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