The Impact of Debt on survival

Debt impacts the longevity and survival of individuals and businesses by increasing the risk of running into financial trouble. A study on long-lasting businesses in Japan, called shinisei, revealed that they endure for centuries because they hold ample cash reserves and avoid debt. Debt makes individuals and companies more vulnerable to financial instability and the possibility of default, closure, and bankruptcy. However, having some level of debt is not inherently bad, as long as it is appropriate for the size of the enterprise and its potential fluctuations in profitability and asset value. Howlzel points out that with no debt, individuals are more likely to survive volatile events over their lifetime. As the level of indebtedness increases, the ability to endure volatility decreases, limiting survivability to only the most stable environments. In essence, increasing debt narrows the range of possible outcomes one can withstand in life.