Would a Recession Really be a Bad Thing? (And the Agriculture Guys Got it Right)

Came across this interesting commentary on Hong Kong's The Standard. This guy doesn't think that a recession is such a bad idea. In fact, in his opinion, it's part of life:

"Fluctuations in the economy are normal and natural. Even in the primitive, Biblical economy, "seven years of plenty were followed by seven years of famine."

Despite this, at least since the 1930s, fluctuations have been thought of as "a bad thing."

Accordingly, governments have sought to prevent them. The essential reason why fluctuations have been thought to be bad is that recessions are wasteful. As the economy dips below its maximum output, there is a loss of production compared to what could have been.

Labor and machines lie idle, and incomes and spending fall.

If you are a fully paid-up member of the anti-growth brigade, such reductions could be viewed as a good thing: less greed and consumption, less pressure on the environment, and more scope for increased importance to be attached to non-material values."

This is probably the first article I've read that takes a level-headed look at our current situation. No doubt there are people who would be ruined by a recession, and they do have my sympathies, but recessions are part of a very real economic cycle. Nothing stays the same forever and that's why we have to look at sustainability.

I have very vague memories of science classes in school but I remember learning about crop rotation. Now, I am hopeless with plants. But the reason why this has stayed with me for so long is because the concept behind crop rotation is a universal one. It's the simple fact that nothing lasts forever. This is why companies with the most staying power are those that have managed to find ways to diversify their products and services, e.g., GE and Siemens. Not only do these companies add to their portfolio, they also constantly reassess their business directions and are not afraid of jettisoning small parcels of their companies to streamline their business model. Case in point, last year GE sold off its plastics division to SABIC and Siemens sold off Siemens VDO to Continental.

In more pressing times, some companies have also successfully reinvented themselves to pursue directions completely different from earlier paths. One of these companies is Motorola. Granted they currently suck pretty bad, Motorola used to be a Fortune 50 company (it's dropped to Fortune 100 now). This telecoms giant actually started out by making car batteries. What a segue, huh? BMW used to make airplane engines (in this case they were forced to stop making them, but hey, you can't fault where this has led them) and the name 3M Company comes from the company's original name, "Minnesota Mining and Manufacturing Company". DuPont, the chemical giant, first made gun powder.

Investing gurus always talk of diversifying. These companies prove that this sound advice. Now, if only I had enough eggs to fill many different baskets. :)