The Great Recession
In 2008, the US stock market pretty much immediately starts going to crap.
This doesn’t really bother me. I have my strategy, which amounts to buy-and-hold index investing, and I figure, Great! Stocks are on sale. But I’m about the only one who feels this way. Most people at work alternate between being pissed, depressed, and exasperated about the whole thing.
Here’s why. When the markets head south, company valuations go down. This makes them cut back on spending. The last thing any company wants to do is buy a new, unproven product when budgets have been tightened.
As a result, our sales pipeline evaporates practically overnight. We made two sales throughout the entirety of 2008 for a total of perhaps 120K in revenue over two years. This does not cut it for a company that has to make payroll on about 30 employees with an average salary around 70K. Mr. Math says this means we’re burning about 2.5 million a year after also including benefits and facility costs.
In the middle of 2008, the company direction suddenly changes. Originally, our executive team was trying to simply drive sales and become profitable. Now, though, the original vision looks more and more like an Impossible Dream. They make a sudden course correction, and instead try to sell the company to the highest bidder.
Toward the end of 2008, one company — our primary competitor in the market space, actually — became fairly interested in us. And why wouldn’t they? If they owned StartupVille, they could root through our technology, take what they like, and then destroy the rest with laser beams and thermal detonators.
But their offer came in low, so after two months of intense evaluations and scrutiny, they walked.
By the beginning of 2009, things are getting desperate. Almost everyone in sales is canned. Two of our dead-weight engineers are fired. Three other people manage to find new jobs despite the bleak employment market and gleefully jump off of StartupVille’s sinking ship. Everyone is worried that they’re going to be the next to be let go, or, worse, that their next paycheck won’t clear because the company’s run out of money.
It’s become a rather grim place to work, morale-wise, and this change in atmosphere affected people very differently.
StartupVille’s H1 Workers
Five of our engineers are Indians — like from India Indians, not the kind that we create offensive sports team logos out of.
And they’re in the United States on work visas — H1-Bs, to be exact. If they’re laid off, they have 30 days to find a new employer to sponsor their visa, or risk having illegal status.
In the current economic climate, the prospect of finding alternate work is daunting. In other words, these guys are terrified of the company going under, but there’s little they can do about things.
They’re visibly skittish on a day to day basis, and can be observed talking with one another in hushed tones. I think the unstable state of the company was the hardest on folks in this category.
A small number of people have been with the company from the early days, when it was founded back in 2004. And they’re seriously bummed — not just because the company might fail, but also because of changes in the type of work they are being asked to do.
When I was first hired, the veteran guys were still working hard to create new features to satisfy marketing and sales requirements. This is about as good as it gets for an engineer in terms of job happiness. They get to use their intellect and creativity to design something that’s never been designed before and integrate it into the rest of the system.
But now that we’re no longer trying to sell, because the focus has shifted from making sales to trying to get purchased by a bigger company, there’s no longer any driving need to add new features.
Instead we’re working on stabilizing the software, cleaning things up, making cosmetic changes to beautify the user interface and help the app ‘show’ better.
From an engineering perspective, this is sort of like being forced to switch from building houses to deciding what color to paint them. Home decorating doesn’t hold an engineer’s interest for very long — our veteran guys grew bored and restless rather quickly.
StartupVille retains a single sales rep.
Because the company isn’t trying to sell anymore, he simply has nothing to do.
The highlight of his day becomes lunch. Every day at 11:45 on the dot, he’d walk around the office and gather a group of people to go out to eat at a local restaurant or the building cafeteria.
I didn’t talk to him all that much, but he sure didn’t look happy most of the time. How would you feel if all of your teammates were laid off and you were the only remaining employee on a team of one?
And, further, you were bored out of your skull?
Probably not so good.
The Executive Team
There are four executives at StartupVille. Many of them only come into the office a few days a week, so it’s a rare thing to catch a sighting of one of them. When you do run into one, they turn their eyes and quicken their gait to get by you without striking a conversation; they appear to be intentionally avoiding the employees.
My personal theory is that they felt embarrassed about the state of the company and didn’t know how to discuss the future ahead with their directs without revealing one secret or another.
It was a weird dynamic. These were the same Go-Team-Go, Rah-Rah individuals who excitedly gave sales presentations and tried to fire employees up for the entirety of 2008, and then practically overnight they’d turned from cheerleaders into the walking dead.
I’m totally fine. I go in to work every day with a smile on my face. I’m the antithesis of crappy morale — I’m super-powered optimism and happiness.
On days when I didn’t have enough to do (many of them), I’d walk around and shoot the breeze with people. I also created a standing 3PM meeting in the kitchen for tea and conversation — in Outlook, no less, to make it official. And I’d gently rib people when they were unable to make it.
How could you have a conflict? What could possibly be more important than Tea Time? Like, with crumpets and stuff? This is CRITICAL BUSINESS and it is mandatory that you attend and enjoy yourself!
I’d like to think this contributed to holding the team together through these dark days.
What was it exactly that allowed me to be so supportive? Why was I so happy?
Because of the power of The Stash. I had enough in savings to last me years and years without any paycheck whatsoever, so at the end of the day, the fate of the company didn’t really bother me all that much.
I’ve probably mentioned this about a thousand times already in this blog, but it bears repeating yet again: Having a pile of money socked away is the gift that keeps on giving.
It’s the single best thing I own.
One of the most popular subjects of discussion during this period was the state of retirement.
Not early retirement, mind you, but retirement altogether.
People were checking their 401(k) balances and seeing, in many cases, values cut in half. For someone in their 20s, this is no big deal, but for others, say, in their mid-thirties and upward, it’s fairly horrifying. You see the money disappearing and it feels like years of your working life are being vaporized by a plasma cannon right in front of your eyes.
There were two major schools of thought on what to do:
- Pull all of your money out of the market and instead go into cash and bonds.
- Stay put.
I opened a third school, which was to stay put but also shove any additional money I could come up with into the market because, hey, it was down.
When I said this to coworkers over lunch, most registered disbelief and heavy skepticism.
Coworker A: Where do you have any extra money? I’m trying to build up an emergency fund for when this place inevitably goes under.
Coworker B: The world is falling apart and you think the market is poised to go UP?!? That’s just stupid.
Coworker C: Even considering that you do have money to invest, why would you put it in index funds? Why not go with gold and commodity stocks like everybody else is recommending?
Coworker A, still stuck on their first point: Didn’t you just buy a house? What are you, Mr. Moneybags?
I admit it — it did make me a little nervous. I was going against the grain. As much as we try to honor our own intellect and rationality, the message of the herd is powerful and I felt its pull. I began to wonder all of the same things that everyone wonders when there’s a major market meltdown and it appears that the very foundations of the economy themselves might come crashing down — I wondered if this time was different.
So here’s what I did to guard against doing something stupid. When I felt my resolve failing, I re-read sections of Common Sense on Mutual Funds. This never failed to give me perspective and helped me to stay the course. It also gave me the confidence to repeat to my coworkers, day after day, the same message: They should keep any money they have in the market and not make any moves. As humans, we tend to overvalue recent events and undervalue history, and this usually leads to the making of mistakes.
For the record, since June of 2008, the S&P 500 has outperformed gold by about 2% annually, which may not seem like much but is actually a ton of money when you do the compounding over six years. Note that the start date here even predates the major dropoff occuring in early 2009 which means this data includes a horrific year and a half — in other words, I’m hardly cherry-picking data to make a point. If you had a million in the S&P 500 and left it there (reinvesting dividends), you’d have 1.53 million now, inflation adjusted. In gold, you’d have 1.3 or so. If you went to cash, you’d have less than a million. Bonds? 1.21 million.
Staying the course is the main reason I’m FI and ready to retire today.
Surviving this crash has made me confident that when the next crash comes, I’ll do the same thing.
And you should too.
Hi, I love your writing and this blog is rapidly becoming one of my favourites. I am glad I am not alone in enjoying doing *nothing* and liking pottering about. It’s very difficult to explain to people though. That’s why some blogs etc are a bit of a refuge in a crazy consumerist world. Please keep writing… You are very good at it.
Thanks for the kind words. It *is* hard to explain that you’re okay with doing very little and just enjoying being alive without work or too many other distractions. A lot of people have trouble with this idea. For years I tried fairly hard to pretend that I liked working and being ultra busy but, truth is, I really don’t. (God knows I’ve had my share of years where I did nothing but work… glad that’s just about over.) Keep up the “pottering” – that makes me happy.
I can relate to your comment about being judgmental about other people who are not as financially saavy. I have found myself constantly internally judging my coworkers and friends, even more so as I become closer to FI, and it makes me feel like a toxic person. Maybe this is just part of my personality that I have to live with and try to keep under control.
Right, I frequently wish I could turn that part of me off (the judging.) The best I’ve found I can do is a) catch myself thinking these thoughts and b) intentionally push them aside and continue to pay attention to the moment. It’s very difficult to make this level of awareness go away entirely. Fact is, you’re an expert in personal finance, and experts in any field can’t help but notice details in their areas of focus — whether they want to or not. All of that being said, it can get in the way of relationships sometimes. Might be one of the very few negative aspects of FIRE.
Sorry to hear about the infertility woes. We’re not even in the same category (having children should be possible–with assistance), but it was still very disappointing and frustrating. I can’t even imagine what it would be like to have no control whatsoever 😦
My sister in law has two children (boys), and we’re spending a lot of time with them. It’s not a perfect substitute for having some of our own, but they’re pretty awesome to hang around. Sorry about your own challenges in this area – it sounds like you have options to explore, which is encouraging.
Wow, what a bizarre situation waiting out the startup company’s survival/failure… I was on a sinking ship (along with my husband, who I met at work) and we both bailed after a certain point. They were discussing outsourcing our main work to India (with disastrous results, I might add) and I broke down and jumped ship shortly before it got to that point, but the husband held on for almost 2 before finding a better place… and the company was dissolved within 6 months after he’d left. We weren’t FI at that point, so not really much choice, but it does make me wonder if we’d have stayed and rode it down if we had been FI. I heard that there was a nice little severance package – but only about a month’s worth of pay, so not enough incentive to hang on.
And the kid thing. Been there, done that, and still beyond angry at the fact that we can’t have children. And punch-in-the-gut bonus – blew lots of money in the process of just trying. Much sympathy and empathy for you and your wife.
Hey FG. I’m really sorry to hear about your own, as you put it, ‘kid thing’ troubles. I don’t think you ever really get over it — you eventually just learn to deal with the disappointment. Re: outsourcing, I find it interesting how many frustrating experiences overlap between jobs and industries. I know that it saves companies money, but there’s a significant cost in terms of morale, productivity, and service. It was smart of you to leave when you did. Just another reason to want to achieve FI, so you no longer have to worry about your current company pulling the same moves and putting your job at risk. FI means your job != your survival, which is a rare and awesome achievement. From what I understand, you’re practically there.
I love that discussion you had with your manager about your stash. I recently had a conversation with one of my coworkers that went like this.
Coworker: So how long could you last if you lost your job?
Me: Well it’s hard to say….if I cut way back, maybe two possibly two and a half……..
The expression on people’s face is always same….total confusion. I just smile inside and carrying on with my day.
There was not one part of that conversation I didn’t like.
Have you considered adoption or fostering? Just curious.
I am miserable – depressed, want to set the place on fire miserable – when there’s nothing to do at work. I HATE standing around and pretending to work, partly because it’s usually just busy enough my bosses will bitch if, gasp, I talk with another co worker. Fuck retail.
Can you tell I love my job?
Sorry work sucks to that extent. Prior to landing office-jobs, I worked retail in spurts through high school and college, and being idle in that sort of environment is definitely more difficult. In some jobs, you can, in the privacy of your cube, fritter away time. But I still remember in retail that if there’s nothing to do you still need to stand around on the floor and wait. This makes time pass agonizingly slowly. Totally feel your pain. Re: adoption, not seriously, no. The truth is we spend most free weekends with my SIL and kids (our nephews) and somehow that helps a lot — two adorable boys, 6 and 8 now, old enough to play foursquare with, young enough to not yet be embarrassed about hanging out with an aunt and uncle 🙂
I got a good chuckle from your reference to playing Four Square with your nephews. (Though maybe you are referring to some app?) At the risk of revealing my online identity, I can say that I was Four-Square champ for two days one summer at the youth center growing up. You likely heard of me. 🙂
Just to confirm how loyal livingafi was to StartupVille, I will let the readers know that we used to hang out pretty often during this period (and still do). Since I have kids we would stay in most of the time. I remember a night when StartupVille was in its death throes. LoyalEmployee already knew that the sale to Mega was done and didn’t tell me. I work at Mega, doing something unrelated, but still I was surprised that he could keep it in. The next morning I checked Y! And saw the news that the acquisition occurred.
I should mention too that I worked at SoftwareCompany as well. I started in 2004, right as livingafi was leaving. And just for completeness, my other option at the time was at FinancialCompany, so when that didn’t work out, I think you can guess who I passed that opportunity on to… To say the least I find the irony that we have hop-skipped jobs over 10 years remarkable, and pretty accidental. Given my similarity, it’s great to have a friend that is doing this. I am getting a free education (price of a couple beers, bought in NH). Glad to read these and see how things are moving along.
I love that you had such a positive impact on your manager. My husband also had Tea Time on his calendar for a while at his previous job – I think it did great things for morale to get together just to shoot the breeze.
I’m in a Do Nothing job now and it’s pretty sweet. I consider looking for a place closer to home once in a while (half an hour on Rte 3 and 128 each way) but there’s no way I could find something this cushy.
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Like thegoblinchief, working at a job with no work makes me depressed beyond belief. So drained and de-energized! Gah.
Anyways, I’m definitely enjoying passing the time by reading your blog. Thanks!!
Side note: not sure if you cover this later, but did you have a totally mustachian wedding, or did the union ding the bank account a little bit??
We spent about 2K on our wedding with thirty-ish people which is a decent amount per head — we kept costs down by instead being sure to not invite too many humans. Immediate family and inner circle friends only. She didn’t want a nice ring, though, so I saved money there. “Let’s buy a house with that money instead,” she said. That’s my kind of woman 😉
BTW, sorry to hear about your own job-related woes. Keep your head up, though, you’re on a path that will lead you out of this. And you can always look for other opportunities along the way. God knows I did.
Wow, well done! We spent $7k on a 50-people wedding (open bar – need I say more?) but with the generousity of our guests, ended up breaking even.
In four months I’m moving to a bigger city with more opportunity, so I’ll be into a new job soon enough 🙂 Your experiences definitely inspire me! Many thanks.