In the spring of 2000, I recall participating in an intense boardroom debate on whether we should be concerned by early indications of a potential crash in the internet economy. The Nasdaq index was falling, and some high-profile start-ups were rumoured to be under pressure.
As a technology company, many of our customers were large, well-established organisations, which were being challenged by very different business models emerging using the internet. Meanwhile, “new-economy” start-ups were successfully raising very substantial investments, as our “old-economy” customers were threatened by disruption.
However, and regardless of some expert commentaries on the industry trends, I continued to believe our own business and customer base should be largely immune from any failure of new-economy-related start-ups.
Eighteen months later, at the end of 2001, we had had the September 11th attacks, the “dot-com” crash, and accounting scandals at some high-profile multinationals.
Investors were scared, and customers were very cautious. The technology industry was depressed as supply chains tightened. Companies had carefully tuned their operations to be “just-in-time”, in which inventories were deliberately kept low. Components and services were delivered only as necessary to prevent shortfalls. There was no elasticity in the system. It was as if each company was being driven without shock absorbers: fine on a smooth road, but painful and damaging over a rough ride.
Our non-executive chairman had deep experience in the semiconductor and hardware industry, which had a history of cyclical booms and depressions. He had coached us in the good times, which indeed we had had, that we should invest for the inevitable downturn and preserve cash resources. I remember that back in that spring of 2000, while listening to his considered advice, I felt that we were largely immune from what was beginning to happen elsewhere in the industry.
I believed we were special and different, and that consequently we need not be overly concerned. Eighteen months later, I accepted I had been wrong. Ultimately, we did manage to survive the 2001 technology recession, much due to the prudent advice of our chairman, including his reminder of an ancient king.
King Canute the Great ruled Norway, Denmark and much of Britain in the first half of the 11th century. His North Sea Empire had extensive trade links to Ireland, particularly after the political vacuum resulting from defeat of the Norse-Leinster alliance after the battle of Clontarf. Canute is proverbially renowned for his arrogance in setting his throne on a sea shore and commanding a tide to cease its inexorable rise to wet his feet, to the consternation of his advisers.
That events can be controlled by sheer willpower alone still remains an illusion even today.
Covid-19 increases its influence and impact on our societies and economies by the day. The potential for a very large number of deaths worldwide, and the likelihood of a deep global economic recession, should be causing concern for political and business leaders alike.
It is very human to believe, as I did myself in the spring of 2000 and despite the advice of my expert chairman, that somehow we are largely immune from what is happening elsewhere, that we are special and different, and that consequently we need not be overly concerned.
Preparing for the worst
But in the start-ups with which I am now involved, we are increasingly preparing for the worst consequences of the virus. Protection of our staff implies no travel, strong hygiene in the workplace, and remote working with each other and with customers and partners, using tools such as Slack, Zoom and Hangouts as much as possible. Protection of our cash positions requires immediate closing out of any imminent fundraising, managing costs as aggressively as possible, and fastidious collection of any monies owed.
In a time of crisis, expert advice and experience should be particularly relevant for political leadership. US president Donald Trump has asserted his mastery of the Covid-19 threat in the US, not least due to his own proclaimed genetic predisposition for scientific excellence.
His administration has dismantled much of the scientific expertise of the Centers for Disease Control and Prevention, and of the National Institutes for Health. There may be a heavy impact from Covid-19 in particular on the tech industry’s heart of Silicon Valley, and on the world’s financial services mecca in Wall Street, both of which are heavily dependent on a highly-travelled workforce.
In fact, the popular proverb of King Canute's admonishment of the rising tide is inaccurate. While legend has it that Canute did apparently admonish the rising tide, he did so to show his advisers his weakness, that he was not in fact all powerful, and that there were forces beyond his ability to control. As a king who supported the Christian Church (he attended the accession of the Holy Roman Emperor Conrad II in Rome), he wanted to demonstrate his humility before God.
Natural events cannot always be tamed. The proverbial misconception of Canute should be corrected, and his true intentions are an especially timely reminder to both business and political leaders today.