Recessions = Innovation for Penny Stock Companies

Necessity may be the mother of invention. So too may recessions. After all, it was the Great Depression that helped to give rise to the Twinkie, Monopoly and the photocopier.

In fact, electric razors, tampax, car radios, and chocolate chip cookies were all created or invented during a recession or depression.

One article I read noted that over half of the companies listed on the Dow Jones Industrial Average were formed during a recession or depression. By some accounts, the worst of economic times—the 1870’s and 1930’s —were actually a rich period of invention.

Urban studies theorist, Richard Florida, in his latest tome, “The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity” suggests that Wall Street’s recent melt down will help trigger a new catalyst for change.

Other recent books, including Gregg Easterbrook’s “Sonic Boom,” have argued that American dynamism can overcome big shocks, but Florida argues that recent events have provided exciting opportunities to strengthen American socioeconomic fortitude.

Florida notes that peaks and valleys are part of the lifecycle of any society as "obsolete and dysfunctional systems and practices" collapse and are replaced by "the seeds of innovation and invention, of creativity and entrepreneurship."

He explains that The First Great Reset occurred in the 1870s, the Second in the 1930s, and a Third is now developing. During the first reset, rising industries like railroads, petroleum, and steel were consolidated, old ones failed, paving the way for a period of remarkable innovation and industrial growth.

The Second Great Reset gave rise to even greater innovations. "For starters, [it] saw massive improvements in economic efficiency. Advances in power generation and machinery generated huge economies of scale." Despite budgetary cutbacks, spending on R&D actually doubled over the course of the 1930s.

The Second Reset also saw the modernization and expansion of America's educational infrastructure. More and more Americans completed high school, with the percentage of high school graduates increasing from approximately 20% to more than 50% between 1920 and 1950.

By the time the U.S. entered World War Two, the essential components of the Second Great Reset were in place.

"The wonderful growth of the post-World War II period was due largely to the tremendous backlog of innovation developed in the late years of the Great Depression," said Rick Szostak, an economics and technology historian at the University of Alberta.

With recessions come cost cutting, tighter time schedules, faster deliveries, efficient utilization of resources, and innovation. While people don’t need turmoil to be innovative – economic stress does help some thinkers to be more progressive.

Recessions can also help executives figure out how to improve products, services, and processes. Ideally, the creative thinking that’s needed to weather the storm of an economic downturn can lead to new markets and revenue streams.

What lessons can penny stock investors glean from the Second Great Reset? That the current wave of market upheavals and shifts are providing opportunities for innovation and growth.

Further…how area economics going to change the face of America? And how can innovative penny stock companies (and penny stock investors) take advantage of the Third Reset?

According to Florida, after the Panic of 1873 (farmers moved to cities) and the Crash of 1929 (city folk spread out into suburbs) the American map was redesigned, and Florida thinks that is already happening again.

During the Third Great Reset, Florida envisions more and more Americans opting not to take on car and mortgage payments, choosing the flexibility of renting and the less stressful commutes of mass transit to free up funds for more cultural experiences, and less living space - but more ways to express themselves.

A similar Great Reset, Florida suggests, may be happening with respect to another big expense, cars. How does the next generation want to express themselves? With shiny new loud mags, fuzzy dice, and rear window Hello Kitty bobble heads?

A J.D. Power survey of Blogging and Tweets shows a significant shift in tastes. Young adults are far less car-focused than their parents and grandparents. They worry about the cost, the environmental effects, even the image of being a car owner. What’s really cool to them is exotic kayaking trips, DIY vegetable gardens, new restaurants — opportunities to brand themselves and text the news back to their friends.

Florida said the effects of the two previous "Great Resets" in 1873 and 1929 took decades to ripple through the country. The digital age and our global connectedness means the third great ripple will not take nearly as long to come to fruition.

If you’re game for a challenge, for penny stock investors, this means looking for innovative companies that target both the global and niche markets of today’s ever evolving consumer.

That kind of game-changing innovation opens the door to penny stocks in every sector.