in this forbidding business environment

I thinks this is a far more auspicious time for entrepreneurs than, say, 1999. "Office space is cheap, and talent is available," he points out. "And the signal-to-noise ratio is much better now that all the junk dotcoms are out of the picture.

In other words, retrenchment can buy you time, but it can't buy you a future.「The point is simple: Retrenchment makes you smaller, not better.」

But there are other reasons to be courageous. Says Peter Bernstein, author of Against the Gods: The Remarkable Story of Risk, "It is precisely when people are most scared that resources are the most undervalued." Look around: Talent is plentiful, and assets ranging from office leases to brand names to new technology are going at fire-sale prices. IBM (IBM), for example, has used the downturn to substantially bolster its software and consulting businesses with timely and cheap acquisitions. Last October, it acquired for $3.5 billion the IT consulting business of PricewaterhouseCoopers, a property that Hewlett-Packard (HPQ) reportedly came close to buying for $18 billion just two years earlier.

The bust occurred because there was too much cash -- way too much cash -- and too little genuine innovation.

In the past three years, GE has tripled the share of its R&D budget dedicated to bleeding-edge technologies such as nanomaterials, fuel cells, and molecular imaging equipment. GE's research chief, Scott Donnelly, estimates that 30 percent of his budget now goes toward such advanced science.

Business cycles ebb and flow, but as any R&D chief will tell you, the quickest way to waste money is to turn development programs on and off and on again. Yet stick-with-it tenacity is hard to sustain during hard times, when projects with promising but distant payoffs are all too likely to get flushed away. For this reason, top management must clearly identify opportunities that will be funded come what may.

While tight money can't guarantee a higher return, it does act as a kind of abrasive, polishing and refining ideas in ways that simply did not occur a few years ago.

If we learned anything from the Internet bubble and the telecom bust, it's this: An overabundance of resources turns the brain to mush. Conversely, privation spurs ingenuity.

Rather than whine about this skinflint CFO or that disbelieving VC, get creative. Find ways to test hypotheses about new opportunities without exposing yourself or your company to undue risk.

In the midst of all the hunkering down, we need to remind ourselves that we are still living in a world pregnant with possibility. The hard times will end. Billions of dollars in new wealth will be created. Focus too much on retrenchment, and your company will emerge from the downturn weakened, diffident, and uncertain of its future. Manage this period well, and your company will emerge lithe, impassioned, and raring to go. Those who beat the bear will be ready to ride the next bull.

we are still living in a world pregnant with possibility.