Economic downturns are bound to happen, but they don’t have to spell disaster for business and innovation.
Facing “uncertain economic times” is a scary prospect for businesses that rely on investment capital, strong consumer purchasing behavior, and a generally healthy global economy. But recessions and other periods of economic downturn and uncertainty aren’t always bad news for businesses or for innovation.
Certain hallmarks of economic recessions and depressions can make the environment ripe for innovation. These include, but aren’t limited to:
- As established industries and businesses struggle and leave gaps in the market, new opportunities for disruption arise.
- Economic downturns often lead to lower costs for resources, such as labor, office space, and raw materials. This can lower the barriers to entry for startups and make it more affordable for entrepreneurs to develop and launch new products or services.
- Recessions often come with layoffs and higher unemployment rates, which means talented workers are available and looking for new opportunities.
- Consumers shift from a focus on luxury to a focus on value. This can prompt businesses to develop new products at lower prices, which may rely on innovation and advancements in the production process.
- Businesses face pressure to operate leaner and more efficiently. This can translate into more investment in automation and technology to save money in the long run.
These are just a few of the ways a recession can lead to more and better businesses and innovations. We’ve covered some of the myths and misconceptions about business during a recession here. Now, we’ll show you some proof. Here are nine of the most notable companies and products that formed during a recession. You’ll recognize these major brand names and life-changing inventions. And it might surprise you to learn that they all came about through streaks of innovation spurred by economic downturns.
Early financial panics
- General Electric
Twenty years before the Federal Reserve was created, the U.S. banking industry was booming but far less regulated and stable than today. The Panic of 1893 was among several banking panics of the era, and is known as one of the most severe financial crises in U.S. history up to that point. This precarious economic situation didn’t stop Thomas Edison and his business partners from officially forming General Electric. Even though business activity dropped by 40 percent over the 16-month-long Panic of 1893, General Electric continued to innovate and, 150 years later, is still one of the world’s strongest companies.
The Great Depression should have been known as the Great Innovation
Maybe it was the world’s need for escapism, but for whatever reason, the years of the Great Depression (1929-1939) brought with them an abundance of new companies and products. Some would be the foundation for later inventions, and others are still thriving in their current form today. These are just a few of the most notable examples.
There’s arguably no better known, or more beloved, name brand worldwide than Disney. And if Walt Disney had let the Great Depression discourage his dreams, he never would’ve formed the multi-billion-dollar global powerhouse that Disney is today.
By the time the Great Depression started in 1929, Walt and his brother Roy O. Disney had been in business for six years under the names Disney Brothers Studio and Walt Disney Studio. In 1929, as the world’s economy was taking a turn for the worst, Disney took on the name Walt Disney Productions, and for the next 60 years, churned out animated and live-action movies, created theme parks, and acquired other media brands under its umbrella.
- The game Monopoly
What better way to distract yourself from the financial hardships of the Great Depression than to play a game where you get to be a real estate tycoon? This was the thought behind Charles Darrow’s game Monopoly. Side note: Although Darrow’s long been credited as the creator of Monopoly, more recent research revealed it was inspired by “The Landlord’s Game” created in 1903 by staunch anti-capitalist, Lizzie Magie.
In terms of the version of Monopoly we all know today, Darrow first pitched it to board game giant Parker Brothers in 1934 but got no bites. Instead of giving up (as easy as that would have been during such a down economic time), Darrow began producing copies of the game himself and sold 5,000 units within the first year. At that point, Parker Brothers took an interest and the classic Monopoly game was born.
- The electric guitar
The Great Depression is hardly known as an era of rock ‘n’ roll. But none of the rock legends would be anywhere without the electric guitar that emerged in the 1930s. Even with the global economy in crisis and World War II brewing in the background, engineers and musicians recognized a need: Guitars weren’t getting the credit they deserved because their low volume was overpowered by other instruments. In an effort to bring the instrument more into the musical forefront, musicians and electronic tinkerers played around with different ways to amplify the guitar’s volume. Ultimately, the first electric guitar (as we know it today) came onto the scene.
- FM radio
During the worst economic crisis the world’s ever known, it’s understandable that people weren’t spending their nights at expensive restaurants, clubs, or parties. Since the television hadn’t been invented yet, it was very common for families to gather around their radio for entertainment. There was just one problem. Amplitude modulation (AM) radio didn’t provide a high-quality listening experience.
Seeing the opportunity to capture a large and eager audience, Edwin Armstrong invented and patented FM radio in 1933. This new technology provided much higher audio quality, particularly for listening to music. With a big leap forward in sound quality, the medium of radio continued to serve as the primary form of communication, entertainment, and information for most Americans throughout the mid-20th century. It also laid the foundation for the major broadcast networks and mega media corporations we know today.
When you think of the Great Depression, the Xerox machine isn’t likely to be something that comes to mind. But that’s exactly when Chester Carlson developed the process that would later be known as xerography – that is, photocopying. Carlson was a patent attorney with painful arthritis who originally began playing with the idea of photocopying documents to relieve himself from a tedious and (literally) painful manual process.
Even after he patented the first photocopying technology, it took years for the invention to catch on. This photocopier is a great example of how innovation during an economic downturn can pay off later once the economy is in a better place. Sure, Carlson didn’t become rich quickly from his Depression-era invention. But, in 1949, Xerox released its first copy machine, and the rest, as they say, is history. Even 70 years later, most offices and homes have some form of copy machine, often showing up as a multi-use printer/copier.
Recessions of the 1960s and 1970s
The 1960s and 1970s in America came with a string of recessions brought on by factors like rising interest rates, fiscal tightening after the Vietnam War, and OPEC’s steep oil price hike in 1973. Even though these decades had a few downturns, they were also filled with some of the most booming economic years the U.S. ever saw, which helped make some of the inventions of those touger times into household staples of today.
- Computer mouse
Douglas Engelbart developed the computer mouse during a period of recession in the early 1960s. The first prototype came out in 1964 and the full patent wasn’t issued until 1970. Obviously, the mouse became an essential tool for computer users, as it enabled more intuitive navigation and interaction with graphical user interfaces that were becoming increasingly common because…
- Personal computers
The machine recognized as the first personal computer (PC) came out in 1971, but it was a far cry from the personal computers of today (or even the 1990s for that matter!). Within a decade, machines like the Apple II and the IBM PC were on the market and revolutionizing personal computing for Americans at home and at work.
One reason computers continued to thrive during years of recession was, as New York Times author William D. Smith wrote in 1973, “Many areas of the business such as terminal manufacturing do not require massive capital investment to participate in the market.” As we’ve previously mentioned, recessions can be excellent times for new ideas to develop and take hold, particularly those that don’t have a high barrier to entry.
By November 1982, two decades of on-again-off-again recessionary conditions had drawn to a close. At this point, those who’d developed technology during the prior decades could reap the rewards of a consumer base ready to spend money. And businesses that invested in technology during times of recession were positioned to accelerate faster than ever with the efficiency gains they’d made while others were focused solely on eliminating spending.
The 2008 financial crisis and Great Recession
- The gig economy and its apps
Two of the most notable players in the gig economy emerged during the 2008 financial crisis and the subsequent Great Recession. While unemployment in the U.S. peaked at 10 percent in October 2009, and home foreclosure rates skyrocketed in 2009 and 2010, two innovative tech companies found ways to meet the needs of hundreds of thousands of Americans looking for more income by leveraging assets they already had, like their homes and cars.
If so many homeowners and car owners hadn’t been out of work and struggling to pay their mortgage, it’s possible that rideshare apps like Uber and homesharing apps like AirBnb might not have gained to the enormous success they did. Fortunately, these ideas emerged at the right time as people were available to move from traditional employment to a new type of gig economy.
Don’t let economic pressure slow down your modernization
If history is any proof, the current state of economic uncertainty won’t last forever and won’t be the last time businesses worry about maximizing their efficiency and cutting any unnecessary costs. But that’s no reason to pull back from new ideas, new technologies, and new business models. In fact, now’s a better time than ever to be smart about your investments and choose to put your money into only those places that’ll set you up for success when the economy begins to boom again. If you work at an insurance agency, insurance carrier, or MGA/MGU, one of the places you might have a lot of unrealized cost savings is in your compliance management. Whether you’re managing producers, adjusters, captive agents, independent agents, or dually licensed brokers, AgentSync Manage can help you do it more easily, for less money, and without compromising on your compliance obligations. See how!