Jeff Bezos’ Top Recession Tips
Jeff Bezos has been a popular interview subject for decades now, and when he speaks, it’s often wise to listen to what he has to say. The multibillionaire founder of Amazon was at one time the richest person in the world, although he currently “only” holds the No. 3 position behind Elon Musk and Bernard Arnault.
Over the last year, Bezos has told the press numerous times that the economy “does not look good right now” and that a recession may be on the horizon. Along with that gloomy outlook, Bezos also made some comments that could help consumers and businesses alike better weather any type of economic downturn. Here are a few of his top recession tips.
Delay Big Purchases
One of the primary tips that Bezos offered is to delay major purchases. Specifically, Bezos told CNN that “[i]f you’re an individual considering purchasing a big-screen TV, you might want to wait, hold onto your money, and see what transpires. The same is true with a new automobile, refrigerator, or whatever else.”
The financial reasoning behind this advice is sound. If a recession indeed arrives, it by definition means that the economy is slowing. In this type of environment, businesses tend to cut costs by reducing bonuses, overtime, pay increases and even headcount. In other words, incomes remain static or even fall, and job losses increase. In fact, Amazon itself announced late in 2022 that it would be laying off 10,000 workers, the most in company history. That is a terrible environment to be in if you’ve just spent all your available cash on something like new appliances or a car.
Build Up Cash Reserves
In October 2022, Bezos tweeted out to his own followers that it was time to “batten down the hatches.” He later elaborated on that idea with CNN, stating that in the face of worsening economic conditions, it only made sense for both businesses and consumers alike to build up their cash reserves.
This makes for prudent financial advice because in times of economic difficulty, cash is king. Cash reserves allow both businesses and consumers to weather economic storms. Without cash, you may have to go into debt, and that can start a financial spiral that’s hard to stop. Once the economy recovers, your cash flow may improve as well, but you’ll be starting with one hand tied behind your back. Not only will you have to pay back the money you borrowed, but you’ll also have to pay the interest, which can easily reach over 20% if it’s on a credit card. Building cash reserves in anticipation of a downturn, therefore, is a smart economic move.
Take Some Risk Off the Table
Bezos also suggested that both individuals and businesses should “[t]ake some risk off the table.” This doesn’t mean you have to sell everything you own and live in a cardboard box, but it does suggest that you shouldn’t leave yourself overly exposed to a deteriorating economy. For example, you may want to take some profits in your winning stocks, some of which may have popped by over 100% in 2023 alone. High-flyers like that are ripe for profit-taking in the corrections or bear markets that often accompany recessions. According to Bezos, “Just a little bit of risk reduction could make the difference.”
For Small Businesses: Avoid Acquisitions
Making an acquisition just before a recession could prove disastrous for a company, and Bezos suggests you avoid it if you’re a small-business owner. While a company’s financials may look good now, if the U.S. economy really does fall into a recession, those revenues and profits are likely to shrink, if not vanish entirely. If you spend a lot of money to buy a company before an economic downturn, your firm might be in a vulnerable position, as its cash reserves will be depleted. Additionally, the company you buy will likely be worth less money than what you paid for it. If you’ve got an acquisition target in mind, it might be better to wait until the recession has already hit before you step up to buy it.
The Bottom Line
Jeff Bezos isn’t an economist, but he is the CEO of one of the most popular and successful companies in the world. He has also grown his personal net worth to approximately $151 billion. And since he has been sounding the alarm on a weakening economy, it’s certainly worth listening to his tips on how to make it through a potential recession.
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