How Big Tech Survives Every Recession Thrown At It
In 2008, The Great Recession caused a global economic downturn that devastated world financial markets as well as the banking and real estate industries. The crisis led to increases in home mortgage foreclosures worldwide and caused millions of people to lose their life savings, their jobs and their homes.
At the same time, the stock markets crashed, bringing the stock prices of thousands of companies down with it. 64,318 business bankruptcies were filed in 2008 alone, a 56% increase over 2007’s 28,322 filings. Dozens of companies never recovered from this recession, with 17% of companies going bankrupt, becoming acquired, or becoming private.
With that being said, there are a few companies - 9% in fact - that flourished during and after the recession, according to this Harvard Business Review study.
This graph below attempts to illustrate the successes of some of these companies, while also showing the failures:
This limited sample of just a few of the S&P 500 companies at the time shows how companies like Apple and Amazon bounced back from the recession and soared to new heights. And it’s no mistake that these very companies that did well after the recession are some of the largest companies in the world today, nearly 12 years later.
And this is a trend that has shown to repeat itself over several separate recessions — Big Tech almost always emerges from recessions stronger than ever. The reason for this in the recent recession is simple — with the increased reliance on technology due to the stay at home orders all over the world, traffic to apps, social media, and video streaming platforms are at an all-time high. Increased strain on companies’ servers have also led them to look for external solutions, like Microsoft’s Azure or Amazon’s AWS, all further lining Big Tech’s pockets.
However, the COVID-19 recession has had extenuating circumstances that were unique to the situation and not the same as during the Great Recession. While it is obvious why Big Tech did well after this recession, it is not as clear why it did as well in the Great Recession, seeing that the circumstances were completely different. Fully understanding why Big Tech performs well during recessions in general will require extensive data analysis and an intimate cognizance of the economy. Until then, this leaves multiple questions like:
Does a company’s performance after a recession solely rely on its leadership?
Does the tech industry as a whole perform better after recessions?
Do some industries perform better after recessions due to their very nature?
Does the nature of the recession itself have an effect on what companies perform better following it?
Following the publication of this post, I will dive deeper into the data and attempt to answer these questions in my next blog post.
