Defensive Growth: A Lesson from the Great Depression

My paternal great-grandfather—known as “Pop” to his family—worked for E.I. du Pont de Nemours and Company his entire adult life. Beginning his career in their gunpowder manufacturing operation and ending at the Chambers Works facility, he was one of the many factory workers that built America’s early 20^th-century industrial might. Pop was a “company man” who believed in his employer. There’s a family story about him that has been passed down for many years. It goes something like this…

Shortly after the Black Tuesday market crash of 1929, Pop pulled my great-grandmother aside and tasked her with an errand. He handed her an envelope containing all of their cash and asked her to visit their banker the following day. She was then to withdraw the near entirety of their savings and purchase as much DuPont stock as possible.

My great-grandmother’s task was no small errand as it involved a cross-town bus trip and would take most of her morning. So, the next day, she set out to visit the bank. Later, she returned home empty-handed as the banker smoothly talked her out of buying the stock “because it wasn’t in her best interest.” That night, Pop learned she’d been turned away, and, while slightly agitated, asked her to return the following day and not accept “no” as an answer.

The next day, my great-grandmother was again turned away by the banker. He refused to broker the transaction because he was “looking out for her” and it was “a terrible time to buy.” That night, Pop returned home from his shift at the factory to learn my great-grandmother had again been rebuffed. This time, Pop had a message for the banker (the exact words of which are not appropriate to share here). It went something like this, “If I have to take time off from work to come down to the bank, you will not enjoy our conversation. Sell us the stock.”

That next morning, my great-grandmother returned to the bank a third time. After a contentious conversation, she returned home victorious. As you might expect, they bought at the best possible time and saw many positive returns from that decision. However, that’s not quite the end of the story.

When I was a child, my father relayed this story to me and added one important piece. When my father was a boy and Pop told him this story, my dad asked him, “Why did you buy the stock when everything was falling apart?” Pop’s answer was, “That’s easy. The country was in a terrible jam and DuPont was a solid company. If their stock didn’t come back, then we were lost. What else was there? I had faith that we would get through, and the stock market would come back.”

Wow. Not too bad for a farmer with a third-grade education turned factory worker. Let’s take a beat and talk about this story.

Five Elements of Defensive Growth to Consider During COVID-19 and Other Uncertain Times

Notwithstanding the paternalism (and likely misogyny) of my grandparents’ banker, there are several core lessons to draw from their experience. I’d like to focus on one of those lessons, which I think of as “defensive growth.”

At its core, defensive growth is the idea that to safeguard what you’ve built, you need to take an informed risk that’s future-focused to mitigate against existing risk. During the COVID-19 pandemic and its subsequent economic disruption, I believe that this is the best way to safeguard stakeholder interests. Further, I believe that my great-grandfather also understood this. For him, that meant investing in an organization that he not only understood and believed in but also knew to be an undervalued key economic pillar. For leaders in today’s climate, the same premise applies—yet in a slightly different way. Let’s break down the idea of defensive growth into its five key elements.

1. Defined Values

Pop understood what made DuPont tick, and he valued what they were about. He also valued hard work and knew that he and his fellow employees were committed. In a way, he asked himself these questions: 

• What are your values and the values of your organization?
• Do you truly understand these values?
• Are these values solid or shaky, and what informs them?

2. Pragmatism

Pop was a pragmatist. While lacking in formal education, he had plenty of common sense and “street smarts.” He leveraged this pragmatism into a worldview that enabled him to ask questions like:

• What do I know about the current state of affairs?
• What do people need right now?
• Who is best positioned to meet people’s needs?

3. Risk Tolerance & Opportunity Analysis

It would have been very easy for Pop to keep his money in the bank, be grateful that he had a job, and wait. Instead, he allowed his pragmatism to inform his analysis of risk and opportunity. He considered:

• What is the downside of this risk?
• What is the upside?
• What is the size of this opportunity?

4. Self-investment

Even though Pop invested in a corporation, he had a personal, emotional connection to it and essentially invested in himself. While he was not a member of the Board of Directors, he understood the organization’s work, output, and capabilities. He challenged himself with one key question, “How can I invest in myself (and my organization) during this turbulent time?”

5. Action

This may seem self-explanatory, but elements one through four are irrelevant without a bias toward action. If you find yourself stuck and struggling to take action, you need to ask yourself, “Why?” If you can’t answer that question, find someone with whom you can discuss it, because you won’t get anywhere without someone else’s perspective.

Manifesting a Defensive Growth Mindset

Defensive growth might seem like a fancy way of saying, “Look for opportunity.” However, it’s much more than that. It’s a mindset that a high percentage of organizations that I work with are actively cultivating. This mindset manifests in the hiring of key personnel, investment in new equipment, expansion through acquisition, and much more. I’ve been fielding many questions about these topics, and I keep returning to Pop’s story and the five key elements outlined above.

If you’re seeking to protect stakeholder interests, I encourage you to take a step back and carefully consider the idea of defensive growth. During times of uncertainty and risk, there is always opportunity. You simply need a framework to analyze it before moving forward. Just be sure that you take action after your analysis, and don’t accept an answer of “no” from well-meaning experts. Not sure where to begin? I’m always here to help you get started—reach out anytime!