A globally connected economy coupled with a deep decrease in demand that led to a massive economic mess. No, this isn’t a description of the current COVID collapse of 2020 but one of the financial collapse of 1857. The Panic of 1857 is considered the first international economic crisis. As demand disappeared, businesses went bankrupt, and a depression set in that lasted for several years. Because of the troubles and fears, investment largely dried up. A young, John D. Rockefeller, whether brave or blind did what others wouldn’t. He leaned in to learn. He keenly but cautiously observed. At 25 he corralled over $500,000 from investors. The funds were intended to purchase oil drilling rights. Rockefeller was disciplined enough that he didn’t jump at the first opportunity to buy something. He actually returned funds to investors as he didn’t find an appropriate opportunity. Rockefeller’s prudence won him more trust and support from investors. Over the next 20 years, he patiently purchased 90% of the oil market in the US. Rockefeller openly credited The Panic of 1857 as being “the school of adversity and stress.” He went on to offer, “Oh, how blessed young men are who have to struggle for a foundation and beginning in life. I shall never cease to be grateful for the three and half years of apprenticeship and the difficulties to be overcome, all along the way.”
One of the ironies of business is reflected in the Chinese character that equates crisis with opportunity. Kyle Eschenroeder in his book, The Pocket Guide to Action, reinforces this idea when he writes, “The most powerful opportunities come when there seem to be none. When everyone else has thrown their hands up in despair you remain focused on taking action.” Though it rarely feels like it when we’re in the middle of a downturn, difficult times offer advantages. Scott Osman in a chapter in “Leadership in a Time of Crisis, recalls, “Constraints are, by definition, limitations on resources. My mentor, Clayton Christensen, claimed that the Great Recession a decade ago would have an unmitigated positive impact on innovation because, when resources are the most limited, the tension is greatest, and people are forced to rethink the way they do business. Rethinking results in innovation.”
It’s natural for us to want things to be easier. We don’t want to work any harder than we have to. Sure, we would like our work days to run smoothly and deal with satisfied and happy customers. However, when things are going well, change is less likely. If you’re trying to introduce your services to new clientele when the economy is good and life is easy for the customer, their interest in considering options is minimal. Change implies work and risk. The risk isn’t worth it, as things as they are, are pretty good presently. The work associated with any change is an added deterrent to action. Comfortable times lead to complacency and a disinterest in exploring options. This seems counter to most of our beliefs. Osman writes, “When times are flush and cash is plentiful, it’s hard to take risks and there’s a fear of failure. After all, why try something new when things are working well? When times are tough, it’s easier to make risky bets because you’ve got nothing to lose, but resources are hard to come by.”
Back in 1998, I left a good job I had in Toronto and moved back to Calgary with my pregnant wife in order to start a business in an area I knew little about and had even less experience. A colleague and I had come across an application of specialized batteries. These batteries were used to power tools used by directional drilling companies. As all aspiring entrepreneurs we had an abundance of ambition and an absence of awareness. We simply didn’t know what we didn’t know. Unwittingly we may have been displaying the observation of Steven Pressfield in his book “Do the Work”, “Ignorance and arrogance are the artist and entrepreneur’s indispensable allies. She must be clueless enough to have no idea how difficult her enterprise is going to be—and cocky enough to believe she can pull it off anyway.”
Directional Drilling is done in what’s known as the downhole environment. It is drilling down into a hole in the earth. It can be hundreds of feet deep. The deeper one goes, the hotter the environment is. All kinds of sophisticated engineering is in place to try to keep things cool and stable. The telemetry electronics which MWD (Measurement While Drilling) tools utilized were typically situated directly behind the drill head. This was the most abusive environment involving both high levels of heat and vibration. Furthermore, these work environments were typically remote – well off the beaten path, and involved a carefully choreographed cacophony of crews serving various functions. If one piece stopped or had a problem, the delay cascaded and curbed others from moving forward. The cost per hour and cost per day of these rigs was closely monitored as the dollar consequences were significant. All of which says nothing about the physical risks many of the laborers were taking in this dangerous and high stakes environment.
With our MacGyver like engineering and coaching from a client we were able to assemble our first order. Realizing that our customers were directly affected by the commodity price of oil and gas, the items their services were being used to try to uncover, we started to pay attention to the market prices of these commodities. The economic climate had become quite bearish and oil prices weren’t just seriously slipping, but crumbling. Oil dropped below $12 USD a barrel and they may have even broached ten dollars. These prices were woefully low and sentiment sour. People didn’t feel good about being in this industry and demand for drilling services shrunk. The reality of what we had gotten ourselves into began to sink in as our costs piled up and the dire economic conditions became all too clear. I started thinking what have I done quitting a good job after adding responsibilities associated with marriage and soon to be fatherhood.
However, the upside to the economic downside is that customers were open and receptive to change. This was a fundamental business lesson. When things are good and the economy stable, people are much more reluctant to change. They are happy with things as they are and just want them to continue. However, when things are ugly, there’s struggle and hardship, then people becoming willing to consider and actively explore options for improvement. This is the environment in which we found ourselves which benefitted us tremendously. No one was unwilling to give us a chance. The dire economic climate maintained an interest in us from our customers. They wanted us to succeed. They needed us to be able to provide a quality product at a competitive price. If things had been better, we never would have been able to break into the industry. Our only way in was exclusively the result of the industry being beaten down. The troubled times bred both interest and support from our customers which didn’t just keep us afloat but allowed us to flourish.
The default connotation of crisis is negative. We see them as bad and something to avoid.. The word originated from the Greek Krisis which meant decisive moment. This is a more constructive view to take of a crisis. It empowers and imposes responsibility as opposed to weakening and making a victim. Former Intel CEO, Andy Grove, noted, “Bad companies are destroyed by crisis. Good companies survive them. Great companies are improved by them.” Introducing our services in an environment that is difficult is something we should seek to embrace. Customers are open to change when they’re desperate. We should look for the silver lining in the clouds of dour business climate.
Insureds are frustrated with the costs and challenges of accessing insurance. Insurers are trying to manage economic forces they can’t control. They are trying to provide steady services in a world where claims frequency is increasing coupled with climbing cost of claims. Brokers are caught in the middle. It is a difficult business climate. We see the economic conditions constricting our efforts like a Boa suffocating its prey. We’re held firmly and mercilessly against their grasp and it’s all we can do to catch a gasp of air every once in a while. We cringe each time the phone rings as we fear picking it up just to listen to one more insured unleash their frustrations for having to complete new insurance applications, provide more private information, and face larger premiums with more restrictive payment options. In the broker world, if we were to try and lean in to challenging economic conditions and a hardening insurance market, what could it look like? We can reasonably expect to hear from disgruntled customers. With rising rates, we’re seen as the bad guy. Our retention levels lower as frustrated customers explore options. How can we prepare ourselves to not retreat, but to relish this reality as an opportunity?
With respect to existing customers we can try to provide as much advance notice of the “bad news” as we can. Providing updates about market conditions and what one is likely to anticipate as a price change can help “manage” customer expectations. Doing this months in advance of renewals helps set the stage for conversations as the renewal date approaches. Mention to customers what you are doing on their behalf to ensure the best and most affordable options are being researched for them. Note that you are (and be prepared to actually follow through) looking at other options and getting multiple quotes for them. Let them know if you anticipate needing to collect updated information in order to help an insurer provide better and more accurate coverage. Share empathy for their anticipated frustration and seek to offer objective information as to why market conditions are the way they are. Let them know that this is difficult for everyone. You could also seek to encourage perspective of insurance over time. That is, view insurance as not just a purchase today for the coming year, but see the cost over several years. Yes, it may be higher today. However, if we can take steps together we can control these increases and work to lower things over time. The clearer you can make the reality of economic circumstances for them coupled with your commitment to do the lion’s share of work to find options for them, the less likely the insured will be to take on the burden of hunting down other options on their own. They want, more so than a good deal, confidence that you are working for them. That you care and share their interests. This is the time to be proactive and lead conversations with customers. Can they consider increasing their deductible or adding other policies for insurance they may be purchasing elsewhere? How can you help them help themselves obtain the best and most affordable coverage possible?
Taking these and additional steps will hold your retention rate while other, more timid, brokers reluctant to honestly engage in a bad news environment will frustrate their insureds. This brings us to the likelihood that more new customers irritated by their present insurance situation will be knocking on the door exploring options. Ensuring capabilities and efficient workflows are on hand to manage incoming requests for new business quotes is the goal. Yes, increasing numbers of potential new clients may come calling. No, you may not be able to wave a magic wand and solve their problems. They will start frustrated and may remain so. Your goal may be simply trying to empathize with their circumstances within the reality of the economic climate in which we find ourselves. Yes, you, too, share their frustration. It’s difficult. It’s tough everywhere. We want to help you not just today, but for years down the road. In order to do that, let’s get started understanding the details of your insurance needs today.
Doing these things doesn’t necessarily guarantee that we’ll achieve outlandish results. It will, however, give ourselves a chance. Ryan Holiday affirms this in a March 2020 article where he writes, “That is the duty and goal of great leaders—they take the ordinary, frustrating, complex, difficult, and surprising situations that life throws at them and turns them into something. They never miss an important opportunity for leadership—internally or externally. They are always getting better and stronger, no matter what happens.”
