In the previous article (this article), I explained how to predict the future during a turbulent era. It is more effective to prepare for the unexpected rather than the imaginable anxieties.
That made me consider how to live in such a period. Let’s talk about it.
Why does bankruptcy occur alongside record profits?
Sometimes, we want to know the logic of strange phenomena in the world. Events that look contradictory sometimes happen simultaneously, especially in a turbulent era.
One recent example is the coexistence of bankruptcies and record profits in the same business field.
For example, my brother, who manages a pastry shop, told me that the baking industry has recently reached a record high number of bankruptcies. On the other hand, his shop had many customers, although it was facing a severe labor shortage.
Similar contradictory things seem to be happening in various traditional industries. A labor shortage means many customers. In other words, the more severe the labor shortage the industry faces, the more profit it can generate. It is the opposite of bankruptcy, which is caused by loss.
That makes us want to know why bankruptcy occurs alongside record profits and labor shortages.
The concept of a confusing period answers the question. It tells us that we need to live based on the worst-case scenario. Although I have mentioned this topic several times, I will explain it from another perspective. It might help you live well in a turbulent era.
Two types of periods
In a confusing period, people who live humbly and frugally have an advantage. In other words, we need to avoid hiring people or expanding the business carelessly.
To explain this logic, let’s introduce the concept of two eras, which I introduced in the previous article. There are two types of periods, as shown in the following image:
- During a stable period, things change continuously. That makes it easier for us to plan and generate a steady profit. The economy tends to boom in this period.
- During a confusing period, situations can change suddenly. That makes it difficult for us to plan and generate a steady profit. The economy tends to experience a recession.
The concept of a confusing period tells us why bankruptcies coexist with record profits in the same industry.
Situation that changes in the short term
During a turbulent era, the situation can change significantly in a short period, especially in traditional industries.
For example, the pandemic may lower sales, but subsequent overtourism can increase profits. At such a time, sales can fall again abruptly due to new government regulations. Then, international conflicts may bring them a boom, but a financial market collapse may decrease their profit. There are also differences depending on the area.
In this situation, it is risky to hire many new staff and try to pursue profit just because sales are increasing. It can plunge in a few months or a few years. Even so, business owners must pay their employees. If sales decline, they will be unable to cover salaries or other costs. That triggers bankruptcy.
The situation varies in each area. Some local areas are free from regulations, while others are heavily affected. Even if a conflict zone is devastated, the surrounding areas can experience an economic boom due to war-related demand. The situation differs for each case.
That is why many bankruptcies occur despite record profits, even within the same industry.
How to live in a confusing period
That shows us how to live in the turbulent era.
During this period, small scale and flexibility become strengths. We need to consider the unexpected. Short-term greed often destroys oneself. In other words, people who live humbly and frugally have an advantage.
In this period, we can increase profits by surviving and adapting. Competitors who cannot adapt to the situations will gradually disappear. In addition, a sudden change is the time to show our creativity. We can enjoy changes.
If we want to build our business independently, one effective way is to secure local connections and to help them. People appreciate flexible suppliers. We can become such helpers who offer solutions tailored to the situations.
Conclusion
That is why bankruptcy occurs alongside record profits and labor shortages.
In a confusing period, people who live humbly and frugally have an advantage.
This perspective might help you live well in a turbulent era.
Thank you for reading this article. I hope to see you in the next one.
