Podcast: A Recession Is Coming - Here's What You Need to Know, an Interview with Alex Chausovsky
The first downturn will hit in 2019 and a full market depression will happen by 2030.
About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs that helps in exit planning, value building and financial management.
About the Guest
Alex Chausovsky is a highly experienced market researcher and analyst with more than a decade of expertise across subjects including macroeconomics, industrial manufacturing, energy efficiency, automation, and advanced technology trends. He has consulted and advised companies throughout the US, Europe, Brazil, China, and Japan for the last 15 years. Alex is currently responsible for providing reliable industry and company forecasts, presentations, webinars, and economic consulting services for small businesses, trade associations, and Fortune 500 companies across a spectrum of industries.
In his prior role, Alex led a group of analysts covering the industrial manufacturing domain. He was also the lead analyst for 3D printing at a major international firm. Alex regularly delivers keynote addresses at leading industry conferences and association events.
If you listen, you will learn:
- My visit to the Vistage Summit.
- Welcome Alex Chausovsky to the podcast.
- Alex’s business background.
- ITR Economics’ mission.
- How ITR collects their data.
- The current state of the economy and what to expect in early 2019.
- The economic slowdown of the 2020s.
- The economic crash of the 2030s.
- Why recession cycles are predictable.
- How trade policy affects the economy.
- The 3 factors that drive an economy.
- Why immigration is important to the U.S.
- The industries that are suffering at the moment.
- The reasons a depression or recession happen.
- Why timing is everything.
- Recessions are times of opportunity.
- How other global economies affect our economy.
- The steps that can extend government programs such as social security.
- How healthcare contributes to the problem.
- “People behave the way they are incented to behave.”
- Alex’s parting thoughts.
Alex Chausovsky: Eventually there will be a price to pay for all of this debt and when you combine that with the demographic changes happening in this country, we are still calling for a significant economic decline during the 2030s in the United States. And when I say decline, I don't mean great recession, 2008, 2009. I'm talking more like the Great Depression, 1929, that type of economic downturn that's going to be relatively prolonged as we work through the system with all of the baby boomers retiring and you know, pulling on social security and Medicare and Medicaid and all the other things that will happen when that occurs.
Announcer: Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Hey everybody and welcome back to the Life After Business podcast. This is episode 119. About a month ago, I was at the annual Vistage summit, which if you're not familiar with Vistage, it's a worldwide peer group association. I think they've got about 24,000 members and they had this event in Minneapolis where there's, I think it was 800 entrepreneurs in the mid-market where they brought some of the best content to the entrepreneurs and the guest speaker was Dr Allen Bullier and he has a ton of crazy credibility and knowledge that he's built up over the last 30 years. He and his twin brother owned a company called ITR Economics and they are practicing economists and we have on the show today, Alex Chausovsky. Alex, even though you helped be pronounced that a couple times. I hope I got it right and Alex is one of the top spokesmen for ITR Economics and as joined their team in the last couple of years and the reason that I wanted Alex on the show was because after I watched Allen's presentation, couldn't help but know that all of this information that they are talking about - about the economy, about where things are going - is so important to the entrepreneurs in today's world and to us who are growing and selling companies.
Ryan Tansom: Because there's a lot going on right now. Whether it's the trade wars or whether it's the presidential, uh, activity that's going on, or the, the chatter just that I hear in all of my client meetings and on the podcast of when's the hammer going to drop? Ray Dahlio just came out with his new books. So there's all this stuff going on. The baby boomers that are retiring, the tsunami wave of baby boomers are going to be selling their companies. 10,000 people are going to be retiring every single day because of the baby boomers. So what does all of this stuff mean? And Alex is on the show today to really break that down into digestible bits of information and because I really nerd out on macroeconomics and even the micro stuff because really that is the landscape and the competitive landscape of business. So we have to pay attention to that stuff to understand how should we maneuver, how should we evolve and how should we adapt to things that are happening in our environment and continue to grow and be competitive in our industries, in our business. And so if you're really interested in this stuff, which I'm assuming you are because you're an entrepreneur and you're competitive in nature, I was able to just really peel apart and ask all the questions that I have and that I know that a lot of my clients and you, the listeners have, which is what's gonna be happening over the course of the next few years? Are we expecting a downturn? What's gonna be happening over the course of the next 10 years?
Ryan Tansom: Are we headed for a great recession or a great depression? How was technology going to be impacting the landscape and the competitive nature of business? How is the baby boomers and the generational shift going to be impacting the labor force? The, uh, the competition of, of manufacturing, of freight, of all these different things. I really suggest listening to this whole episode because one of the very, very unique things about Alex, Alan, his brother and ITR Economics is because they are practicing economists. So they actually advise to business owners. They pull in data and they analyzed data wall working with business owners and entrepreneurs in the mid-market. So they're not just sitting there with a pipe and a big really nice Mahogany library, bookshelf, talking theory. They're actually practicing and they're showing people how effective their results are and how accurate they are after they've made these forecasts.
Ryan Tansom: So I really suggest you listen to the whole podcast. It's absolutely a lot of him, a lot of information, and I had a blast because I was able to sit down and just geek out with Alex about all these different big macroeconomic things that I know that all of us entrepreneurs think about on a daily basis while we wonder, is my whole world going to be changed tomorrow because of some unknown factor? So if there was any chance to look into the mirror and look into the crystal ball, this might be as close as you get and it's still just a big guess because a lot of different things could happen in that big black swan could come tomorrow and it should allow you to hopefully be able to make some interesting decisions or validate or potentially give you things to think about as you're modifying your strategic plans over the course of the next few years and potentially looking for an exit. So I hope you enjoy it. Without further ado, here's my interview with Alex.
Announcer: This episode of Life After Business is sponsored by GEXP Collaborative. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your timeframe to the buyer of your choice at the price you want.
Ryan Tansom: Alex, good afternoon. How you doing?
Alex Chausovsky: I'm good. How are you doing?
Ryan Tansom: Good. Excited to have you on the show. You and I had some fun conversations, um, right before we kicked it off. But the listeners were not participating in that. So for the listeners that want, you know, I was explaining to you that I had saw Allen speak at this summit about the economy and your guys' philosophy is gotten put in touch with you, um, boiler, the brains, the, and the, uh, the PR figure supposedly, right? Yeah. Just so excited to have you on the show to be able to describe to the owners and the listeners out there about all the different things that are important in the economy. All the data that you guys have in the research and your background is super interesting as well that ties into this. So why don't you give the listeners a little bit of your background of where you came from and then how you landed at DRI.
Alex Chausovsky: My background is, as you mentioned, quite unique. I am a fairly recent transplant to the new England area where ITR is located. I spent the previous 25 years in Texas, first in Dallas event in Austin. I attended the University of Texas at Austin for my Undergrad and I got an MBA. And really that kind of differentiates me from most other economists in the sense that my background is not purely economic theory, it's more practical application of business acumen and reading the tea leaves, so to speak, on the economy, and then leveraging that information in terms of making better informed strategic decisions for your business. Prior to joining ITR, I worked as a lead analyst for major consulting firm covering the area of 3D printing or additive manufacturing, but specifically as it applies to the business world, not the consumer side of that interesting technology. And going back a little bit farther. I'm actually originally from the former Soviet Union. I was born in Kiev, Ukraine, when it was still part of the USSR and I immigrated to the US at 10 years old. So I think it gives me a little bit of a unique perspective on our economy, on our prospects into the future. And, and you know, I, I appreciate the awesomeness of America. I think more so than most people do. And so that really colors my worldview when we talk about our prospects. I really believe in the future of America.
Ryan Tansom: Which is super cool because I mean you think about all the dynamics of that go into economists and what they're forecasting. Like you said, there's a lot of theory and that's when I saw Allen speak and what you guys are all about at ITR is just, it's a different perspective, and I know we're going to get into a bunch of this, but can you listeners that might not be familiar with ITR, can you just give them what's the mission, what's it about? What are you guys doing and wears a lot of this knowledge and information coming from?
Alex Chausovsky: So we do a couple of different things that are. First we of course look at the overall economy and the markets that comprise it. We generate a lot of forecasts, typically three to four years into the future and we advise businesses what those forecasts mean for their prospects of growing sales into different verticals and really when to expect changes in the overall macro economic business cycle, but we also take it to a more granular level. We work with individual companies one-on-one in order to generate sales or volume forecast for their specific business. We leverage their data and we teach how to read their own information in in order to identify what their rates of change are telling them where they are in the business cycle, both for their specific business and for the markets in which they play and then advise them on the timing of when to make those critical decisions, when to buy, when to sell, when to acquire assets, when to kind of tighten the belt a little bit, so really the mission that we see for ourselves at ITR when it comes to working with businesses one-on-one, is to really help them become the best version of themselves. To grow the business over time and to create a lot of positive things all around for the employees, for the owners. Really help them leverage information that exists out there to make better informed strategic decisions and to minimize risk to the business.
Ryan Tansom: The fact that you're practicing, it sounds way different perspectives in the forecast and the things that you're doing, which I definitely saw when Allen was speaking at the summit. What would you say, I'm just curious. I'm Alex, like what would you say to someone that is saying all this forecasting? It's all BS. You know what? What do you say to those people that don't necessarily believe in all this stuff because I know the reason I want to ask that question. Can we get into a bunch of this stuff and how do you rebuttal that and then how do you explain where your information is coming from?
Alex Chausovsky: Sure, sure. Well, I think anytime you claim to be a forecaster or someone that can tell what the future holds, you have to be two things. You've got to be self-critical and you have to be very transparent with your results and one of the things that we do at ITR that I think is really unique, I don't know of any other economic forecaster that does this is we publish our accuracy rating every year. We look at the major economic series that we forecast. We calculate our accuracy and we put it out there. Really, we start every presentation that we do with this slide that touts a very high accuracy rating, um, you know, it's 94.7% 12, 12 months or four quarters into the future, uh, on, on the entire body of work that we do. And we've had this accuracy rating for more than 30 years.
Alex Chausovsky: That's how long we've been keeping track of this. So, you know, we do it not to pat ourselves on the back by any means, but rather to establish a sense of credibility, a sense of trust in our customers and, and a belief that the information and the forecast that we generate for them are reliable and they can be leveraged to make better informed decisions for the future. So, you know, different companies can have different accuracy ratings, but the fact that we are transparent and very self-critical as well, um, is, is really what I think makes us standout. And I welcome those types of questions from our clientele because I think it's a, it's a very valid question and it needs to be addressed at the front end before you can build a culture of trust between two people.
Ryan Tansom: No, I think that's super, super good point. Especially with all the information we're going to be getting into here because I want to make sure people understand that it's coming from a credible source instead of a, you know what? By the way, we have a bunch of people that are making money off of people's fears. You know what I mean?
Alex Chausovsky: Absolutely. Absolutely.
Ryan Tansom: Go ahead. Sorry, go ahead. We're on the last little note is a, where's the information coming from? I don't know if there's data points or sources or like I'm assuming there's a massive amount of effort that goes into compiling that information. I just kind of curious.
Alex Chausovsky: Absolutely. So we have a dedicated data department. Their job is to pull publicly available information, so sources like the Federal Reserve Board, the US Census Bureau, but then we also have a lot of proprietary data that we buy. So we actually spend money to acquire this data, whether it's construction related or specific vertical market focus. And then much of the data that we work with is coming from the companies themselves. So when we go to generate a forecast for a particular business, we asked them to provide their own, um, data stream. So let's say seven to 10 years’ worth of monthly sales data. We asked for a detailed breakdown of how their business separates into different sectors in terms of region and also in terms of the industry categories. And then we leveraged their historic performance as well as our leading indicators. The system that we've developed, which leverages specific series that have this predictive ability and an ability to visually show what direction and what part of the business cycle you can expect to be at a, at a particular point in time. We leverage that to generate our forward looking forecasts, whether it's for companies or for markets, for the economy as a whole,
Ryan Tansom: so that leads, I think what we can do for the listeners that want to understand what the order of operations that will go into this is, you know, you guys have, because this is what you're doing, your forecasting, you've got some overall opinions on kind of where things are headed, some of the big factors that are going to be impacting what's gonna be happening, and then there's the actual inner mechanics of how you're actually forecasting that which you've called the lead indicators. So maybe just what else, what is the, the, the opinion that you and ITR like what is forefront of what's going to happen over the next five, 10 years? Because I know that's kind of your benchmark as you're rolling out.
Alex Chausovsky: I want to start by looking at the near-term. Our current forecast is that the US economy, which has been in a accelerating growth trend for two years now since kind of the last economic cyclical low that happened in mid-2016. We've been now accelerating in our rate of change profile, uh, when it looks that applies to the GDP, it applies to kind of the business to business world as well, if you look at industrial production. We expect that I cyclical peak is in our near-term future. We think that it's likely to happen within the next three to six months. Uh, originally, if you asked us two years ago, we thought that it would have happened earlier, but the tax reform package passed by the administration has really stimulated the economy to, to expand and to grow for longer than is normal. We're now in kind of above normal from a period of time of rise kind of a situation.
Alex Chausovsky: And if we go, if the economy accelerates past January, it will be a record long accelerating streak. So we, we've certainly stimulated the economy. It's been a really strong couple of years. But as with everything that's good, eventually things do have to come to an end. We think that peak is coming in early 2019. We think that the majority of next year is going to be a classified as a slowdown year, so we're not calling for a recession by any means, but it is going to be a period of slowing economic growth over time and depending on which markets and which industries you're operating, we do think that there's the potential for negativity, especially if you're in that heavy industrial kind of OEM sector, machinery based type of markets that is likely to see some mild negativity when we get into the first half of 2020, but it's going to be mild and short-lived.
Alex Chausovsky: It's going to turn it around relatively quickly and we're back into a positive trend by the second half of 2020 and into 2021. So that's typically the timeline that we look at in the near-term about a two to three year outlook. Longer term. We're still very concerned and part of this tax reform bill. The good is that it stimulated the economy. The bad is that we're accumulating significant debt in order to do so and that really feeds into our narrative, which is something we've been pushing for more than five years now, which is that eventually there will be a price to pay for all of this and when you combine that with the demographic changes happening in this country, we are still calling for a significant economic decline during the 2030s in the United States. And when I say decline, I don't mean great recession, 2008, 2009. I'm talking more like the Great Depression, 1929. That type of economic downturn, that's going to be relatively prolonged as we work through the system with all the baby boomers retiring and pulling on social security and Medicare and Medicaid and all the other things that will happen when that occurs.
Ryan Tansom: Well, there's a lot to unpack here. I'm super excited about it. Let's go back to your near-term and we'll maybe just take this in chunks and for the listeners who, you know are all different spectrums of business owners, but there's a lot of baby boomers who tune in and they, you know, there's certain things that are just have to happen in certain timeframes coming down the peak. And so I think. Well, let's see, the interesting thing Alex, is because all I do all day long is talk to entrepreneurs in whether it's clients or whether it's on the podcast or the keynotes that I do. And it's crazy because it's so funny at the, the, the constant chatter right now is when's the hammer going to drop? Everybody's like, there's a lot of cash on the sidelines. There's a lot of people with angst because they don't know what's going to happen. So maybe let's take the 2019 slow down and then also that you said that the 2020 and 2021, it's kind of a little bit more upside, too. So like, why is there not a hammer going to drop and then what would result from the 2019 downturn and why would it continue to continued chugging forward and then we'll take the whole 2030 thing in a different chunk.
Alex Chausovsky: I think the first thing I need to explain is that recessions or downturns in the US economy are actually quite predictable. Um, all you have to do is look back at the last 40 years and you can kind of see this trend emerge. So we had a pretty significant downturn in '80-'81. We had another one in 1990-'91, another one in 2000 2001. So you can kind of see this 10 year economic cycles start to emerge. We, we should've had another, a cyclical downturn, you know, another recession in 2010, 2011 timeframe. But we kind of shot ourselves in the foot. We had the housing bubble, we had the financial crisis, we had misbehavior on Wall Street. And so that really pulled that next recession forward into the 2008, 2009 timeframe. But you add 10 years to that. Then we're now looking at 2019, you add another 10 years and we're now in the late 2020s, early 2030s timeframe.
Alex Chausovsky: So understand that the business cycle is a consistent thing. It is a sinusoidal wave that goes up and down that has the economy cooling for a period of time and then a period of rise happens and this is a repetitive thing going all the way back to pre-Great Depression times and within each one of these 10 to 11 year economic cycles, there are two to three mini cycles. So about every two to three years we'll have a, a period of slow down or in some cases mild recession emerge as well. So part of the call for the slowdown is based on the theory that these cycles tend to be separate from technology growth or separate from political events. They're just inherent kind of heartbeat of the American economy, if you would. And really the global economy, uh, acts in a similar way as well.
Alex Chausovsky: But that's part of the rationale that is causing us to expect to slow down. The other part of this, and I think probably the most visible one that I can point to right now is the current trade situation and the protectionist policy that the administration is leveraging and employing in order to win some concessions from our trading partners, which of course the president promised this was going to happen in his election campaign. He said that we are having our lunch eaten by the likes of Canada and Mexico, but also China and Japan and all the other countries that we have trade pacts with. So now that we have begun this process of putting tariffs on products coming into this country, we are seeing certainly some upward pressure on inflation that's making things more expensive and eventually will cause a bit of a slowdown in the consumption side. And the reason why that's important is that personal consumption activity is two thirds of US GDP. So the money that people spend eating out at restaurants, going to the movies, buying furniture, clothing, electronics, all the things that we consume that is the predominant driver of the economy. With prices getting more expensive, our demand will eventually slow and that will contribute to that slowdown in 2019.
Ryan Tansom: Super interesting because I got a couple of questions and you went back to and you said that that the heartbeat, which I totally get. Oh, I can picture is Ray Dalio's 30 minute Economic Machine chugging back and forth on that. Um, and by the way, for the listeners, I'll put a link into that. It's like literally a must watch because in 30 minutes kind of explains all of this that Alex talked about in cartoon fashion, which is probably more the likes of the people that are listening to the show. But I'm curious because there's a couple, there's a couple of books and things that I, you know, and things that I pull into that I, I'm personally curious about it, which is. So there's the heartbeat which you mentioned and business cycles which are, you said are not impacted by technology and such, which I... Because one of my questions is going to be, as you know, if you think of exponential technology where, I don't know if you've heard of Ray Kurtzweil or these people that are always document is pretty obvious in our world where technology is going, you got VR and AI and all this stuff that's coming down the down the the road. And it's like, okay, how can we, when you look at a hockey stick, how can you predict the future if it's going to be nothing like the past? So like I just want to know, how does that impact the business community?
Alex Chausovsky: So the really interesting thing, and I will talk about the most recent technological revolution, the age of computing I think is a good example because it, it just happened over the last couple of decades. And if you look at the cyclical profile of the US economy going back to I would say the late eighties through the nineties and into the 2000 decades, it still followed the very similar cycle. And yet, if you think about the type of disruption that computers have brought to our lives, I remember when computers were first starting to make mass adoption, you know, people were freaking out, we're going to lose, all these jobs are going to, the economy is going to look nothing like what it looks like today, where are people going to work, computers are taking over. The reality is the computer industry is obviously massive. It's created way more jobs than it replaced the created great opportunities, it created new markets that were not even possible. And yet, despite all of this transformational change, the US economy continued to run along its typical sinusoidal worm shaped business cycle, right? It did not deviate from that path. And I don't think that AI or uh, you know, advanced robotics or, or three d printing or any of these self-driving cars, anything like that is not going to have a, in my opinion, at least fundamental impact on our economy. The economy.
Alex Chausovsky: It is really driven by, I would say three things. Number one, you have to have population growth. And that part of that is favorable demographic trends, but basically more people means more consumption. So the economy will grow as long as we have more people. The projections right now are the US will go from about 330 million people today to about 400 million people by the year 2050. And so that just means more of everything, more consumerism, more, uh, more housing, more cars, more everything, right? You have to have the rule of law as the second key ingredient. By and large, I would argue that we have that in this country. And the third one being, you have to have resources, natural resources beyond oil and gas. And beyond the basic minerals. I'm talking about a plentiful food, uh, lots of drinking water to sustain the growing population. As long as those things are in place inherently that will keep the US economy on this, a cyclical pattern that it's been on for, for, for decades and decades.
Ryan Tansom: Now that you've articulated it like that. It's very interesting because, you know, the thing is, is people are always going to be people. They're always going to buy the same because our wants and needs are always pretty much consistent, so there's just different ways of consuming those, what the technology is.
Alex Chausovsky: Right, and what I would add to that is that when you look at these advanced technologies, the adoption timeline, in my experience, at least when I was covering three d printing, is always longer and slower than what the hype would have you believe. So you know when you. When you talk about the next generation of AI or a self-driving vehicles, I think that eventually, yes, they will be part of our lives, but we're talking about decades into the future. We're not talking about imminently three, five years from now. It takes generational transformation in order to adapt and incorporate that type of change into our lives. And I certainly, I'll, I'll tell you this much. I'm 39. I have two small kids. I do not feel comfortable putting my two children into a driverless car. Right? So maybe they will feel comfortable and perhaps their children will feel comfortable. Even if the technology is there, I'm not convinced because there's still plenty of human drivers out there and human error will always trump technology, unless it's, you know, a pure technological place. So my only point is when you think about additive or AI or self-driving cars, it's coming, but it's not in our immediate and certainly not within, in my opinion, not within the next five to 10 years.
Ryan Tansom: When I had to reboot my iphone this morning, I'm not putting myself in a car drives by itself.
Alex Chausovsky: No, that's not to say that we haven't had great transformation. I mean the iphone that you speak of, it's essentially only 10 years old and you think about how much it has changed our lives. Right. So it certainly does change, but the economy has not performed any different over the last 10 years than it had prior to that. Right. The cycle remains the same.
Ryan Tansom: And this is probably a good kind of slow transition into the, the even the bigger picture of towards the 20th, into the 20s, 30s and the big macroeconomic things that are all due to the demographics. But even before we go down that route, know I was interested to hear that you said that. So I know that we've got, you know, 330 million people in America that we're going to go to 400 because I know the population growth and immigration all that, it's a challenging thing. You know, I actually saw Kashkari speak in twin cities here and he was talking about that population growth is always a big thing. And I go back to, I don't know if you've ever heard of this book called Factfulness.
Alex Chausovsky: No, I'm not familiar with that.
Ryan Tansom: So this gentleman wrote this book and I can't remember what his background was, but it was kind of in your guys' realm, what he was talking about, you know, all of this kind of leveling off and as essentially going back to the, you talked about the resources, but when there's infrastructure from sewers and clean drinking water and medicine and education... like the amount, like the world's getting so much better these days and people don't necessarily realize that it's wild. But the pop, he talks about the population kind of leveling off at like the world population at like 10, 11 million and then essentially people just replacing themselves. But, you know, I just didn't know that the US was going to be growing that significantly over the over the next 10 years.
Alex Chausovsky: Well, of course there are, there are speed bumps that potentially could prevent that, you know, you look at the birth rates in this country and they are now low enough to where they're not going to be able to sustain that type of growth just by growing people here. We have to continue to have people move to this country. I think that's a critical component of our view of the future is, you know, the idea that, you know, and not, not making this a political statement by any means because I know that there are a lot of strong feelings out there. But obviously I am an immigrant to the United States myself. I am certainly very grateful and appreciative of the opportunities that I've been given. But I truly believe that, um, you know, at our soul who we are as a country is someone that welcomes immigrants, that is built on the idea of inclusivity and that people can contribute to this great place that is America. And so I hope that we find a way to reimagine, rework the immigration system that will allow us to continue having talented people come in and contribute to the great feature of this country because we need them from a macroeconomic perspective. We need immigration in order to sustain population growth for the long-term in America.
Ryan Tansom: Well, yeah, I totally, I mean, will it get set aside from whatever political side you're on. We need that in order for more people to buy more stuff and to continue to grow.
Alex Chausovsky: And especially when you look at the job market, that's the real tangible way of thinking about this. There are critical sectors of the economy that are really suffocating right now because they cannot find the workers. So whether it's skilled manufacturing workers, there's nearly half a million manufacturing jobs open right now that companies cannot fail because they simply don't find the right qualified skilled labor for those positions or even larger volumes of openings in the trucking industry or in construction or in agriculture. I mean these are again vital organs of the US economic body and they are really struggling right now. They cannot keep up with the demand that exists in many cases, especially if you look at trucking and construction because there's simply not enough people to field those jobs and the kind of people that typically take those positions which are manual labor type of positions and you know, heavy physical work, are immigrants. So you know that there are multiple ways of looking at it. But we do need to find, find a way to fix our immigration system.
Ryan Tansom: And so was that the job? Almost everybody, every single peer group, like everybody's like jobs can't find any workers. It's like the number one thing that everybody says, well, let's, let's take that data point and kind of roll it into the next, you know, essentially five to 10 years, the baby boomers, a lot of those business owners that are here, they're struggling with all this stuff, running their company and you got these big, huge trends at their age. What's going to be happening? Can't find the workers. How does, how does that correlate into this big no, essentially depression you're talking about. And how does that demographic cliff line up with those different numbers? Because you know, if you think about like, and why would there be a recession when there's people when it's screaming up that much and they need jobs. You kind of fall my, my logic?
Alex Chausovsky: So there's a couple of things that need to be addressed here. First of all, I have some comment that just the sheer numbers game is not the only problem because if you look at the total number of millennials, they're actually larger than the baby boomer generation by about 10 to 15 million people. So as far as body for body replacement, uh, I think it's not going to be an issue that the issue is finding ways to attract millennial talent into the positions that are currently available, right? Because millennials want to go after the so-called sexy jobs, right? Technology and liberal arts and, and, and ways to improve the world and to make it a better place to live. They don't always think about manufacturing, construction, trucking or agriculture as a way of doing that. So I think that's a great challenge that we're going to have to figure out is how do you position these, these jobs as well, paying a stable as, as a means of providing that kind of longterm American dream of owning a home, having a nice yard for your kids and your dog to play in, you know, and that kind of thing.
Alex Chausovsky: So I think that's a separate issue. The longer term viability and kind of what we think is a is going to cause, you know, I've really difficult economic environment in this country in the 20 thirties is the fact that the baby boomers that are retiring at the rate of 10,000 people per day, every day for the next decade, they're all joining the ranks of social security and Medicare and Medicaid and so the government continues to have to spend more and more and more of its budget on funding those programs and if we don't do something fairly drastic over the next decade to change it, then the government is going to have no option except to do two things. Number one, cut. Spending in a lot of other areas from military and defense to the arts to science education. But they're also going to have to raise taxes because it's going to have to raise its income in order to facilitate these higher payouts for Medicare, social security and Medicare, Medicaid.
Alex Chausovsky: You know when you have a government with one hand cutting spending and with another hand or increasing taxes, especially during a time when inflation is up. You know, I think that that's part of our, uh, of our thesis is that coupled with all of this will be higher pricing environment and we're already starting to see some of that happen, you know, certainly the trade and the tariffs that are in place right now are exacerbating the increase in prices. We think that inflation is going to be more visible over the 2020s than it has been in in this particular decade and the combined effect of all of that will be um, this prolonged economic downturn in 2030s lasting anywhere between five to seven years is our best call right now.
Ryan Tansom: Well, and think about this, Alex, when you, you're going to attract... talking about inflation, I'm going to kind of just take it a couple of those data points and then swing back in my own logic in order to attract and retain these people in these service jobs or manufacturing or whatever it is. All of a sudden now you're paying 75. Yeah, to 90 grand for. HVAC technicians, plumbers and truckers. And that is the direct cost of goods to the consumer. It's all that different kind of stuff swirling around and...
Alex Chausovsky: it's actually a lot more complex than that from the inflation, so labor costs are one of them, material cost increases, shipping costs. I mean I'll look at logistics this year. We had regulation that went into effect that requires electronic logging devices on all commercial trucks. Basically what that's done is that it has cut capacity in the trucking industry by pushing some independent owner operators out of business and that has that action by itself as essentially resulted in about a 10 to 15 percent increase in the cost of shipping goods in this country. That's just this year alone. So you add logistics and shipping...
Ryan Tansom: I heard that there was a 30 percent trucking because now they get those electronic things and they have to like essentially they can live on the road so long and a lot of people were fudging stuff. So like, yeah, yes, it's a big deal.
Alex Chausovsky: I don't know the exact percentage numbers, but I can tell you that the big fleets were all kind of preparing for it long term, but the smaller fleets and the independent kind of self-proprietor owned trucks, they really weren't. And as you said, there was a lot of um, let's say creative freedom taken was logging their travel times and with these logging devices, it is no longer profitable for them to do some of the routes that they were doing before. So, you know, it's, it's, it's really creating some significant pressure in that, in that part of the market. But again, it's just one of many, many factors and that's before we start talking about the tariff-induced inflammation, which we now have a list of companies, you know, well-known brands, every person buys day in, day out all saying we have no option but to raise our prices because we cannot continue to eat the increased costs related to the tariff activity.
Ryan Tansom: So that's all kind of tying into that bucket of the inflation and the different challenges going on there. I also, there's this, there's these big stats that are out there, Alex, that anybody that's essentially getting hammered by the exit planning industry and what that is, is very ambiguous at this point. It's not a mature market, but there's, you know, whether it's insurance specialists or um, yeah, financial advisors or bankers or all these advisors are really concerned about their primary clients, which are the heart of the economy, which is the baby boomer business owner, not miss, you know, they're, they're kicking out cash and they're buying stuff. But there's a huge discrepancy. Like, okay, like I've got all this cash flow, but they have zero. Most people on that. There's a very cloudy understanding of value and transferable value to their businesses. So there's the stats that I have heard and that have kind of floated around.
Ryan Tansom: There's about 27 million companies in America. Of that, there's like, I don't know, 10 or something like that that are like, my wife was a photographer was a sole proprietor and they're just, it's just, you know, they're artistic, you know, in a bunch of these huge chunk of people that are sub a million or two in revenue. That's the SBA, the Chamber of Commerce, those kind of people that essentially it boils down to like 10-12 million companies that are privately held in the mid-market and essentially four or five million of them are baby boomers and they're going to have to transition like there's going to have so like there's this wealth that's being spent, but there might not necessarily be transferable value to potential buyers because of the complications there and I don't know how that, how that lines up with what you guys are talking about the and I'm curious in your demographic understanding of that, but I don't know what your thoughts are on that.
Alex Chausovsky: I certainly think that based on the conversation that you and I had prior, there are a lot of pitfalls in the exit strategy and the road to exiting a business is typically much more difficult and much longer than people tend to think of it and you need to have expert opinions because there's all sorts of rules and loopholes and regulations that you need to be aware of from a taxation perspective. From, from a maximizing the value proposition of your business and getting the best multiple perspective. So my advice would be, uh, realize that there is a lot going on, a lot that goes into it and start taking the steps immediately right now to start preparing yourself for that eventual transition. Even if you don't see it happening in the next three to five years, you've got to have all the information at your disposal. From a macroeconomic perspective. I think that the timing will be important. Our advice is, uh, you know, when you think about, uh, the expectations that we have for that significant downturn, you know, try to find a way to leverage people's optimism to your advantage. So look at the economy track and see where it is in the business cycle and then have the timing mechanism be that you want to sell your business during a high period in the business cycle. So we're going through that right now. We're hitting that cyclical peak over the next three to six months. Obviously that's really close in. Not a tangible or feasible way to do it, but we do expect a, another rising trend to develop in the economy as we head into the late 2020, uh, early 2021 timeframe. So perhaps you look three, four years into the future and try to capitalize on that. If you are in that closer to that five to 10 year timeframe when you want to exit, just make sure you do so before this great recession hits. Ideally you find someone that you don't like selling your business to that person and then offer to buy it back for half price, you know, during the downturn.
Ryan Tansom: We've got to implement this new strategy.
Alex Chausovsky: Keep in mind that I'm really, at the end of the day, recessions represent a tremendous opportunity. So even if you are retired and exiting the business, whatever asset class you're looking at, I mean, think about the people that were positioned well for the '08, '09 downturn. They had just sold their business in 2006 or 2007. They had a lot of cash on hand, very little debt. They were able to buy up assets, property and businesses and all sorts of different types of, uh, wealth-creating instruments at the low point for pennies on the dollar. And now think about where those people are 10 years down the road. They're, they're sitting very pretty. So understand that despite the fact that it's a scary thing out in our future, you can actually profit from it if you start preparing right now and have a good strategy going into it. In fact, a Allen and Brian Bolio, the two brothers that own ITR economics, they wrote a fantastic book. It's called Prosperity in the Age of Decline. It talks about this thing in much more detail and more importantly, it gives you some specific advice about what you should be doing to prepare yourself, you know, looking at different asset classes, looking outside of the U, s, um, and a way for you to profit during this difficult period in our nation's economy. So I would highly recommend you check that book out.
Ryan Tansom: Sound advice, right? I mean, it goes back to the bare bones of what Buffett always freaking out. A couple things that I want to unravel there too Alex, is that okay, so if you're... Call it like, I mean, you know, essentially a 57 to 62, which is a lot of the owners here is going to have to get there shit together like now start going into like if they want to exit in three to four years and then you know, hopefully they'd sell them at high. What are some of the suggestions because it'd be, and I want to get into the more behind the 2030 kind of uh, variables because you know, they're not going to be know potentially. I guess everybody might be different but I don't know if these individuals are going to be on a spending spree when they're 65 or 70 because they're probably more like hunkering down and making sure that they just have a fun life. So how to like, how does that impact, you know, that it made me what we just rolled right into the 20 slash 30. Like how, what would your recommendation be for someone that has that kind of situation, that kind of timeline. And then we can kind of, I want to unpack what's going on in that situation.
Alex Chausovsky: Essentially what you're describing is someone who is more concerned with wealth preservation than generating immense returns, right? You've worked hard all your life. You've sold a business, what do you want to do with that money? And that is to say you don't want to lose it. You want to hold onto it for as long as you can. You want to be able to enjoy the fruits of your labor and live the type of lifestyle in retirement that you want for yourself. And so, you know, again, you think about the type of asset classes and the type of places around the world that will not have the issues that we're talking about right now. So, uh, just to kind of couple of examples, Australia for instance, has very little government debt, very little national debt. Switzerland is in the same position. You think about countries that don't have the demographic changes.
Alex Chausovsky: Well, it's places like Mexico, it's places like a lot of South American countries. It's places like India, places like Europe, certainly, which is where a lot of a baby boomer retirees hope to go after their retired, you know the demographic environment in Europe is even worse than it is here in the US and it's also worse than the US in China and in Japan. So you gotta think about it from a regional perspective. You've got to go towards the trends that are going to be favorable and you really have to start thinking about, okay, even if I don't generate immense returns, how do I protect that money by looking at the type of assets and the type of industries that are going to be around for the long haul. So things like healthcare certainly is part of that conversation. Things like technology will still be around, education will still be around. So that's the type of advice that I would give someone in that age bracket is play the major trends, focus more on the preservation rather than investment for growth type of approach. And then of course, think about what parts of the world will be less subject to the kind of strain economically speaking that we're going to be experiencing at that time.
Ryan Tansom: So then let's see, go into that strain in my eye. I saw this interview with Dahlia because he just launched his new book. Um, I think it was something understanding debt cycles or something like that. Um, and he, and he and Allen had very similar messages and I'm curious in how, you know, to get, to dive more into your guys' thoughts on that, but I think everybody's kind of waiting for the hammer to drop, like the financial crisis, which you've kind of alluded to that over the next three years. It's not going to be anything dramatic like that. And Dalio said something like it's gonna be this long, slow suffocation almost and there's going to be more social problems because of health care and education and job, like all the demographic, all these different things. So it's gonna look completely different than what people are probably expecting. So I don't know, that's just Kinda my take and that's the extent that it goes. And I kind of really see where he's coming at. So what are some of the things that are. I'm assuming you've got a lot more data and a lot more ways to educate or explain that little clip that I saw him.
Alex Chausovsky: Yeah. So I agree with the thought that you know, it's going to be unlikely that it's going to be a sudden kind of falling off a cliff type of event. Although you never know in the, in the interconnected global economy, there are certain statistics out there that are truly scary to me. For example, in Japan last year there was the first year that adult diaper sales exceeded baby diaper sales. This is a pretty crazy statistic when you think about it because that is a society that is hugely anti-immigration. So they're very closed off society and they are projected to shrink at the pace of a quarter of their population dying off every single generation. So that is a scary thought in the light of we're in an interconnected global economy, right? So even if we are not subject to any sudden kind of catastrophes here in the states, are we totally insulated?
Alex Chausovsky: If the dominoes start to fall in Japan or in China, would their debt crisis there were talking about us dead being out of control. We're now at about 120 percent in the debt to GDP ratio. You look at China and you factor in government public and the shadow banking sector, and their debt to GDP ratio is nearing 300 percent. Some people say it's even more than that. Right? So how will the Chinese government be able to orchestrate continued growth through that type of debt? Debt accumulation. I'm not so convinced. They also have their own demographic problems with the one child rule and you know the preference for the male child as well. So I think it's important to recognize that we are interconnected.
Ryan Tansom: What was the stat that Allen said about the male to female ratio in China was just mind boggling to me.
Alex Chausovsky: I don't know the exact number, but I know that there's going to be a lot of...
Ryan Tansom: 120 million or something like that?
Alex Chausovsky: The shortage of women that basically exists, but I can tell, you know, 120 million angry, frustrated, unloved men walking around is good.
Ryan Tansom: You don't want to be on Tinder for that one.
Alex Chausovsky: No, you don't! You don't want to be the government either because that is a very easy source of them for them to express their frustration because they blame the government for the lack of women because of the one child rule. So you know my. My point is you have to understand that the US has to be taken into context with the world. We account for 25 percent of the global economy. Europe is another 25 percent, China is about 15 percent, Japan roughly five to eight percent. So when you add it all together, these are the major powerhouses of global economic growth engine and if you have several of those cylinders, stall out China, Japan, Europe, is the US going to be able to keep the whole thing going on it's own? Not likely. Right? So it's possible that that we're going to have contagion and then the important thing is start preparing now, preparing aggressively, right, and do the type of things that even if it doesn't happen on the timeline or to the severity of which we are calling for, you're still going to be better off. That's the key here is that the type of things that we're advocating, lots of cash on hand, very little debt. Look, look at asset classes that perform well in an inflationary scenario. If you follow these basic principles, you're going to be better off over time and that's the key message is let's imagine that we find a way to orchestrate a turnaround. Let's imagine we reform our political system and we come up with the with the type of concessions that are necessary in order to save social security and Medicare and Medicaid, in order to address the retirement and the healthcare costs crisis that this country is currently facing. You're still going to be better off by implementing these actions now than at that point in time, whether you are a baby, we were nearing retirement and looking to exit a business or if you're a young person like you and I and are going to be in our peak earning years during the time when this is likely to all unfold around us. So that's the key message is the advice that we're trying to give you is sensible, whether it happens on the timeline and the severity we call a for it or not.
Ryan Tansom: So what, what is like the basics of planning, right? Get your head out of the sand and look up that way it doesn't hit you and you can at least be to the different environments that are coming down, coming down and impacting you. But the, you know, what are the. So you had mentioned you have, right before we kind of got started, there was some of the big factors that are going to impact this 2030. So there's social security, there's the baby boomers, but like what's really underneath like is there, you know, some of the data points that you're tracking to kind of, to tie that kind of situation together for the u s yeah, because you mentioned that intertwined too.
Alex Chausovsky: Well, I'll give you an example. One of the core issues is social security. Obviously it forms a major part of income for a lot of people in this country. Millions of people depend on social security as their primary income source. Um, and, and certainly, uh, that social security program when it was designed, it was not envisioning the type of demographic shift that we're going through right now. And so basically the congressional budget office that kind of does economic projections for the US government, it's a bipartisan institution. They've said that in 2019, given the current state and the current laws surrounding social security, that is an inflection point, meaning that a post-2019, the money that is paid out by social security as you know, as payments to retirees is going to be eclipsing the amount of money that the government collects in social security taxes.
Alex Chausovsky: And with that kind of approach that the system is expected to run out of money by the early 2030s - sometime between 2032 and 2034, I believe, where the years. So they've shown also that that is only assuming the status quo, that we don't make any kind of changes, but they've shown that there are some things that we can do that will greatly extend the lifespan of social security. For instance, right now the 12.4 percent total social security tax, which is shared evenly between employer and employee at six point two percent each. That is applied to the first $130,000 worth of income. The CBO showed that if you simply remove that cap and tax the entire income stream, you will be able to extend the viability of social security by two decades. If you take a little bit more of a drastic approach and increase the rate from 12 point four to 15 point four percent, which means one and a half percent more for the employer, one and a half percent for the employee.
Alex Chausovsky: That will add roughly 50 years of viability to the social security program. But the issue is both of those things are essentially tax hikes and the people that are targeted with those are the high income earners. You know, because we're talking about people north of $130,000 a year in income. And so these are the type of people that fund campaigns, that vote, that really drive the political process in this country. And so unfortunately, given the current state of our politics, we have a, uh, you know, senators and congressmen that are more concerned with self-preservation, meaning getting reelected and providing a nice quality of life for their family than they are with doing the type of things that need to be done to address these fundamental flaws in the system. So I hope that we kind of get our wits about us and sometime in the next decade or so, we do have public leaders that will come to the table and say, look, this is, I know it's not going to be pleasant and it's going to be painful in some cases, but these are the things that we need to do in order to guarantee long-term viability for these critical programs. But it will come at a cost.
Ryan Tansom: Yeah. There's so much there and you're right. I mean like... I'm at other individually, do I want more taxes? No, but do I want the better of our society? Yes.
Alex Chausovsky: It's always that trade off.
Ryan Tansom: Right, and then if you're just a pure lifestyle politician. I mean, you're not going to run on that.
Alex Chausovsky: You definitely will not.
Ryan Tansom: How about, Alex? You know, health and, you know, the education stuff, I mean like there's others know there's all these challenges were like, you know, you've got like long-term care for the boomers. I mean it is astronomical. I mean like my, both my grandparents before they passed you know, memory care is 12 grand a month, how long are they going to be like, it's just like how, you know, how does that impact the, the forecast that you're dealing with?
Alex Chausovsky: It has a huge impact of course, because of longer life expectancies and, and uh, the, the higher costs of taking care of people that live for a longer period of time are, are certainly a critical component of all of this. But I think that, you know, a lot of that has to do with just the fact that healthcare pricing in general, whether it's health insurance or services or prescription drugs, is all really kind of fundamentally broken in the century. I think a lot of that is driven by the litigiousness of our society and the fact that doctors have to pay hundreds of thousands of dollars a year just for malpractice insurance, right? So none of that actually has to do with anything touching the patient. Right? Nothing about patient care. These are immense costs built into the system before a patient doctor interaction is even looked at, but, but it is a part of it.
Alex Chausovsky: And what's really my, in my opinion, the big issue here is that all of this is going to drive us further into debt as a country. The government to fund Medicare, to fund Medicaid. We're going to continue to going further into debt. This is happening at a time when, again, interest rates are rising. So for instance, there was a fascinating article recently that said that the way that we're going right now, in just a couple of short years, we're going to be spending more money on financing the debt, meaning just making interest payments on the 20 trillion plus national debt that exists than we are on our military. So last year for, to give you an instance, a about seven to $800,000,000,000 worth of spending from the federal government on military. Our debt servicing costs are going to eclipse that in the next two to three years. It's really fascinating that we continue to do this and really calls into question the decisions that are being made right now in the sense, again, not to be a political commentary, but rather when you simply look at the numbers, right?
Alex Chausovsky: This tax reform bill, it's certainly lifting the economy in the short term, which is great. I love the people feel really good about where we are, but it's also going to cost us about one and a half trillion dollars in additional debt because you can see that tax receipts from businesses and individuals are already down for the national government as part of that package. So, uh, you know, does it make sense to inject artificial stimulation into the, the blood of the economy when we're already growing to two and a half percent or do we want to maybe save something like that for when the next downturn hits? So, you know, it, it, it's really a judgment case for each person. I know that some people are benefiting from it, others are being hurt by it, uh, and so again, I'm not making any kind of political judgment here, but we have to take the bigger picture into account.
Alex Chausovsky: Unfortunately. And this is my, uh, my observation, I think because I was not originally from this country, is that the decisions? Yeah, the decisions that we make tend to be driven by the political cycle. So a lot of stuff that's going on right now is leading up to the congressional elections in the mid. The midterms, the next set of decisions is going to be influenced in large part by the 2020 presidential election cycle. So we make, we make these critical decisions short with short term thinking. When you look at other countries around the world, they tend to plan way further in advance. They have strategic plans. You know, you look at China, for instance, strategic plan 2030, strategic plan 2040, strategic plan 2050. They think decades into the future. I wish that we did more of that. I wish we had more of a strategic approach and were less influenced by what's going on in the political arena.
Ryan Tansom: No, I totally agree with you. And I just went back to that one of the old stats you mentioned. So China's 300 percent versus our 200. Their strategic planning might be a little broken.
Alex Chausovsky: Yeah. There are certainly making some mistakes of their own.
Ryan Tansom: I agree with. You. Totally agree with you.
Alex Chausovsky: Yeah. Yeah. I mean I think it's not to say that the Chinese are making all the right decisions by any means. They've gotten to where they are today by polluting their country immensely. Right. And, and what, what kind of impact does that have. Their shortsightedness about the child policy, the one child rule, you know, all sorts of crazy things that are changing. But I think that because they have less upheaval in their political system, they're able to adapt a little bit more long-term thinking to making policy decisions. That's the only point.
Ryan Tansom: And you're totally right because I mean honestly Alex our public companies are run that way. A lot of these privately held companies, they, they play the tax game on an annual basis. Not about value creation. I Mean it's a, it's all fundamentally incorrect thinking about like, okay, okay with the look this far in advance and we have to like, calibrate our decisions in light of that long trajectory, not just 12 months.
Alex Chausovsky: You hit the nail right on the head. I mean you look at this tax reform bill, even there major corporations are predominantly using the windfall to buy back stock and to pay out dividends rather than doing capex, which is what would actually stimulate economic growth. And it makes sense. People behave the way that they are incentivized to behave. So when the decision makers of these public companies are compensated primarily in stock, of course they're going to focus on getting everything that they need to do to get that stock price up and dividend payouts and stock buy backs generate lift to stock price. So...
Ryan Tansom: yeah. What is your thoughts? I'm just so curious about it is when I look at like. So a lot of our work, you know, we get into the personal balance sheets of business owners because we're like understand the calibration and the value of the company. How do you tie that to lifetime cash flow to make sure that they can actually unwind out of this company? You know, when you look at the personal balance sheets of a lot of Americans, that tends to kind of freak me out honestly, because you know, you say, okay, like there's baby boomers, okay. You know, you're all these retirement stats from advisors out there that no one saves for retirement. So that's okay. That's okay. Got that. That's a problem. Those people are going to go on social security and they're barely going to buy anything because they have no money.
Ryan Tansom: And then you throw in these business owners were used to spending 200 grand a year that they all of a sudden can't harvest the value out of their company and you layer that on top of the healthcare and all this. I just don't know how people are going to be able to buy anything because I, you know, so that's the whole like long-term of the baby boomers. But I look at people that are working, you know, pretty significant. I'd say high income earners in the mid, you know, in the thirties and forties called like, you have to raise kids. You have to literally make like 150, 200 grand. It seems like too, like, okay, do everything you're talking about like raising kids, daycare, you're, God forbid you're maybe saving, that you're, you've got mortgages, you've got your house or I'm sorry, you got your student debt, you've got all of this stuff and you're just like, I don't see how this whole thing works between the boomers and that whole situation.
Alex Chausovsky: Ryan, it's true. And The care stuff and all the other things that you just described hit very close to home for me. I feel like I'm surrounded by buckets. Right? And I'm trying to drip a little at a time into all of these buckets. 529 plan and 401k and paying down the mortgage here and saving for this appliance that broke here. And it's overwhelming to think about all of that. You know? So and yeah, this is exactly why our advice is to people. You've got to think long term, you've got to start right now. And you've got to be as disciplined as you possibly can, and that goes for your individual finances as well as, as well as your business finances. So you know you've got to get all your ducks in a row because that's what's gonna allow you to outperform everybody else when the thing really hits the fan.
Ryan Tansom: As we're wrapping up, I just have a blast. I think we could probably do this for a really long time. We've talked about a lot of stuff and you guys have a lot of data and a lot of opinions on different things. So if there's something that we talked about that you want to highlight for the listeners or if there's something that we missed and you want to make sure you want to leave them with, what would it be?
Alex Chausovsky: I will say is, first of all, we talk about a lot of negative things and we do tend to have a lot of negativity in our lives right now. You know, especially if you're listening to the media, whether it's on the right or the left when you're online or television or in print. There's a lot of negative things. But understand that we live in the best country in the world, to raise a family, to own a business, to really become the best version of yourself and so be grateful and appreciative of that. I think that's a key takeaway for me that I hope people get from this conversation, but the other part of this is understand that there are forces in play that you're not going to be able to control and the only thing that you can control is how you prepare and react to those forces.
Alex Chausovsky: And so leverage the tools that we use at ITR. Leverage your own data analysis, looking at your company performance to understand where you are in the business cycle. Whether that means to get the right timing for investment or to sell your business. If you're ready to exit the industry and make sure that you are looking for things that are leading indicators, we can help with that. We've got a great product. It's a web-based application called Data Cast. You upload your information in there. It actually suggests leading indicators for you based on the business cycle and how well the two series matchup, so leverage that to again, get additional insights that your competitors or your, uh, you know, that you wouldn't have otherwise, um, but also have a longer-term plan in place. I think that's the best part of advice that I can give you is don't think about the next year or two.
Alex Chausovsky: You've got to have in the back of your mind when things really culminate and whether it's severe or not as bad or whether it's really long in duration or shorter than we expect things there is going to be eventually a price to pay for all of this debt and demographic change that we're going through. And you've got to be prepared for that. So, um, you know, do what you need to do now and over the next decade or so, so that at that time, your position the best and that you can actually leverage it to make a profitable venture for yourself when everyone else is suffering.
Ryan Tansom: Those are words of wisdom. Alex, I love it. One little plug for you guys too, because we didn't really get to talk too much about the leading indicators, but you guys have got some pretty cool tools that you're using so you know, you know whether people want to go and what is the best way for them to get in touch with you. Getting into. You can even give a like a little bit more of an explanation of that if you want. Because at her I saw some of those graphs in there. Pretty bad ass.
Alex Chausovsky: Our website has a lot of great information about the various products and services that we offer. We certainly offer speaking services, so if you want us to come and present at your next company strategic meeting or a sales meeting or at a conference that your association is putting on, we can do that. The leading indicators is really what ITR is known for, so it's basically finding economic data series that are accurate predictors of future activity for either your business or the markets in which you play in. I mentioned the Data Cast tool that we're. We've developed, again, it's on our website, www dot itr, economics.com. We're actually offering, I believe, uh, uh, a promotion right now where you can get a two week free trial for that, so certainly no, a no risk for you to give it a shot and then engage with us, have a conversation, tell us about your business. We want to learn and we really want to help you make it the best thing that it can possibly be through improved decision making. So that's what we're aiming to do.
Ryan Tansom: Love it. How about yourself? What's the best way to get in touch with you?
Alex Chausovsky: Hi, you can reach me through the website. I'm one of the featured speakers there. My email is achausovsky at itr economics. We'll make sure to include that in the materials podcast. Exactly. I'm on Linkedin and I'm on twitter. My handle is at achausovsky, so I hope you reach out. I hope you've benefited from the, from the information I shared today, and certainly hope that you implement some of these things into, into making a better future for yourself.
Ryan Tansom: Alex, I had a blast, man. Thank you so much for coming on.
Alex Chausovsky: Fantastic, Ryan. Thanks a lot.
Ryan Tansom: Episode gave you a lot to think about because of all of the different variables and factors that are coming down the pipeline that could impact you, your business, where you're at in your life cycle of your business, your industry, but then also your life and how your business fits into your… Where you're at in your whole overall life and where you want to be doing. And I think there's some huge takeaway is one that I just really want to make sure that that hits home is that if you think about the things that Alex and I were talking about of the different monumental things that could potentially and probably will happen, especially with the demographic cliff that's happening, is with your business. If you think about reverse engineering into your eventual liquidation, whether it's a family transfer, third party, private equity competitor, doesn't really matter.
Ryan Tansom: Is You have only a few years to get to that point where it's on top and you might be able to get the multiples that are happening right now in the industry. But what is the actual reality of you maintaining this business for the next 10 years? Is it something that is even within the realm of possibilities because of your industry, the technology, the demographic cliff, your clients changing, technology changing. So really building a company to sell right now, doing the preparatory work is crazy important because this isn't something where you're going to be able to wake up in four years and just hopefully get the best situation because out of all dumb luck that you were able to match, make and get the price that you want. This isn't going to take very intentional diligent work to march towards an outcome that you want. So take all the things that Alex said.
Ryan Tansom: Take our framework from Growth and Exit Planning Collaborative. Go to our website, check it out, figure out what can you be doing now to prep yourself to at least be ready and have a rip cord. So should something happen. Your locked and loaded and ready to go and able to be nimble with different variables that are coming. Because I mean, I sat in that one of that Vistage peer groups and I heard this gentleman who is heavy manufacturing say, yeah, with these new tariffs that changed my whole business immediately and this is like a $50,000,000 company so you don't know what could happen tomorrow. So be ready so that we. Everything that you've built is ready to be maximized with the value of a potential buyer and even if you have a site that you have set on an ideal transition or transaction or value, you know that you can juke and jive should something out of the blue happen.
Ryan Tansom: So go on, check out Alex's website because they've got some crazy information about how their forecasting and making big decisions, whether you're looking at an acquisition, new products, new locations, new things that are you're developing, making sure that you're doing that in light of the bigger global things that are happening. Go onto our website, check out the process, started diving into our Ultimate Guides. Learning as much as you can because you're going to be responsible for the outcome and you don't have to take ownership if you have gotten yourself to the point where you're working on the business. These are the things that you should be doing on a daily basis, so hope you enjoyed it. I hope you enjoyed all the information that Alex shared. If you have some time and check out our website, go give me a rating on itunes. Otherwise I will see you next week.
Written by Ryan Tansom
Ryan runs industry-specific podcasts on his website which pertain to mergers and acquisitions, and all the life lessons he wish he had known then. He strives to bring this knowledge to his listeners in a way that is effective and engaging by providing new material each week from industry experts.