I’ve been thinking about resilience a lot this year. Adaptability and resilience are always helpful traits but this year we’re seeing their importance so clearly – whether in business, society, or personally.
When I designed IT systems, we worked to eliminate “single points of failure” – where a system would break due to one weak spot. We didn’t design based on an assumption that everything would go right, we looked at everything that could go wrong. How could we make a system redundant and resilient, one that could withstand multiple failures and still operate properly as a whole?
Global businesses have spent the last few decades building very efficient supply chains so goods are at the lowest cost and arrive as soon as possible. The disruptions of a trade war with China and Covid-19 prompt us to rethink that strategy and use multiple paths of sourcing supplies so that an outage in one country doesn’t affect the whole chain.
It’s also interesting to watch how businesses, big and small, have adapted to the pandemic and social distancing. While many, sadly, have gone out of business, there are many others that are changing their business models to stay afloat until we return to “normal.” Restaurants are focusing on takeout and outdoor dining, distilleries are making hand sanitizer, and mall owners are taking a stake in retail businesses to keep the malls open.Ideally, every setback is an opportunity to create more resilience going forward.
I believe capitalism works best when free markets are balanced by effective regulation and a strong safety net. We have systems like Social Security, Medicare, and unemployment insurance to help increase our country’s economic resilience. This year we’ve added other measures like stimulus checks, increased unemployment benefits, and mortgage forbearance. I hope we learn from the pandemic and put systems in place that help the most vulnerable among us when times are toughest. A resilient economy makes us stronger as a nation.
This year feels very unsettling and volatile for me – a constant struggle between my emotions and my rational side. I’m not sleeping as well. I miss socializing with friends and my group bike rides. I miss being able to shake hands. I’m trying to adapt and assess what I can do differently to stay sane and happy. Cycling, yoga, eating well and a strong network of friends are there because I enjoy them but they also help me stay balanced when the going gets rough.
Have you become more resilient this year? I’d love to hear what’s worked for you.
If you’re interested in making your personal finances more resilient, here are a few tips:
- Have an emergency fund: When the stock market keeps going up and the world is calm, an emergency fund seems unessential. This year has reminded us why having cash around to pay the bills in case of losing your job or other unanticipated expenses can help you sleep better at night.
- Review your asset allocation. It should be appropriate for your goals, time horizon and risk tolerance: There’s nothing like a 30% drop in the stock market to test whether you’re comfortable with your stock allocation. Having some bonds and/or cash mixed in with stocks reduces volatility and allows you to rebalance during downturns.
- Understand which expenses are essential and which are discretionary: Knowing where you can and are willing to cut back if things get bad helps you understand ahead of time how vulnerable you are in an economic downturn. Living within your means is always a good idea.