Lessons from the history of business

Question 1

In this fast paced and fluid world, industries rise and fall in the course of a few months. How can you make sure that your business is successful? What’s the lesson? Give an example if possible.

Answer 1

By adapting to change. Change is the only constant. Successful firms lean forward and embrace the change. They seek the opportunities and avoid the pitfalls.

Examples:
→ COVID-19 caused the economic expansion to stop and the biggest drop in economic output on record. Unemployment skyrocketed, along with food and housing insecurity. Businesses had to adapt.
→ In late May, 2020, George Floyd was killed by police in Minneapolis, triggering protests against racism and police violence. So businesses began to examine their policies and products in an effort to root out racism. (e.g. Starbucks committed $1 million in Neighborhood Grants to promote racial equity)

Question 2

What happened during the Great Recession in the 1900s?

Answer 2

1- There was a crisis: burst of the dot-com bubble (an economic bubble related to the rise and fall of internet companies) in 2000, and the 9/11 attacks in 2001
2- Banks started giving out a lot of loans because housing prices were going up.
3- Borrowers who received loans could easily afford them at first, but when interest rates many couldn’t afford to repay the loans, leading to mass foreclosures
4- So housing prices dropped sharply. ​​The homeowners were in a terrible situation because not only could they not pay the mortgage, but their house was now worth less than what they owed.

Question 3

Subprime mortgage

Answer 3

a type of loan given to people who have a lot of debt

Question 4

Adjustable interest rate

Answer 4

after a few years the interest rate would increase

Question 5

Mass foreclosures

Answer 5

when homes are taken by lenders because owners can’t pay their mortgage