Advice from Elon Musk, CEOs on preparing for a recession

  • Some US CEOs are predicting that the economy is heading into a recession.
  • Elon Musk advises companies to have capital reserves that make them go through “irrational times”.
  • Start thinking about your willingness to take risks and prepare to slow down, says David Solomon.

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Recession

Coming – at least, that’s what some of the country’s top CEOs are saying.

In recent weeks, business leaders from Elon Musk to David Solomon have begun sounding the alarm about an impending economic slowdown. In fact, CEO confidence has fallen to its lowest level since the start of the pandemic, according to the latest survey by The Conference Board, a business research group.

The survey, which collected responses from 133 chief executives of primarily public companies between April 25 and May 9, found that a majority of chief executives believe the Fed’s plan to curb inflation by raising interest rates will lead to a recession, albeit a mild one.

The Conference Board’s chief economist, Dana M. Peterson, said in a statement that the executive’s outlook for the future is “bleak,” with 60% of leaders expecting the economy to deteriorate over the next six months.

Here’s what executives are saying about the possibility of a recession, and their advice on how to prepare.

Elon Musk thinks we’re already in a recession

According to the CEO of Tesla and SpaceX, the United States has already entered a recession, and things are about to get worse.

“What tends to happen is if you have a boom that has been going on for a long time, you are going to have capital misallocation,” he said this week at the Miami Tech All-In Conference. “It starts raining money on fools, basically.”

Musk said a defining characteristic of the kind of economic picture he describes is when people do “ridiculous things that are unhelpful to their fellow human beings” — usually, those “crazy businesses,” he said, would go bankrupt.

Musk’s advice for how to deal with recession? Create a useful product and make sure your company makes sense.

“Make sure you don’t run things too close to the edge from a capital standpoint,” he said, adding that companies need capital reserves to weather “irrational times.”

David Solomon of Goldman Sachs calls for caution

David Solomon Goldman Sachs

David Solomon, CEO of Goldman Sachs.

Michael Kovac / Getty Images


Goldman Sachs CEO estimates there is a 30% chance of a recession in the next 12 to 24 months, Andrew Ross told Sorkin on CNBC on Wednesday.

“There is a reasonable chance at some point that we will have a recession or we will have very slow and very slow growth,” he said.

His advice to fellow executives is to start thinking about your willingness to take risks — and start preparing to slow down.

“It’s not to say that it’s definitely going to happen, but certainly, I think if you’re running an important project, you have to look through a lens with more caution right now than when we were sitting here a year ago.”

Wells Fargo CEO says there’s no question of an economic slowdown

FILE PHOTO: Charles Scharf, Chairman and CEO of Benny Mellon, speaks at the 2019 Milken Institute Global Conference in Beverly Hills, California, US, April 30, 2019. REUTERS/Lucy Nicholson

Charles Scharf, CEO of Wells Fargo.

Reuters


According to Charles Scharf, CEO of Wells Fargo, the economic downturn will be “hard to avoid”.

“You have the Federal Reserve saying the economy is going too fast, and we need to slow economic growth. Rates are going to go up, and it’s going to change the dynamics of consumer and business health over a period of time,” Scharf said during the Wall Street Journal’s Future of Everything festival on Tuesday.

However, Scharf thinks many companies are heading into downturn with an advantage: flexibility.

“Hopefully, the fact that everyone is so strong going into this will provide a cushion so that any recession, if there is one, is short and not all that deep,” he said.

Lloyd Blankfein urges everyone to be prepared for a recession

Lloyd Blankfein

Lloyd Blankfein, Chairman, Goldman Sachs.

Photograph: Pascal Loner/Reuters


Goldman Sachs Chairman Lloyd Blankfein said on CBS’ “Face the Nation” on Sunday that the US economy is currently facing “a very high risk” of recession.

However, Blankfein remains optimistic, praising the Fed’s response and the “powerful tools” at its disposal to help avert a recession.

To this end, he advised to prepare but not panic.

He said, “If I was running a big company, I would be very prepared for it. If I was a consumer, I would be prepared for it.” “But it’s not baked into a cake.”

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