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..forecasts are toooften wrong. That is especially so in the post-GFC world where most forecasts are proving off track. Apartfrom most of us picking the 1% rise in the official cash rate last year, interest rate forecasts have almost allbeen wrong since 2008. Seven years of failure. Worldwide...
And where are all those people now who predicted Auckland house prices would collapse? Probably stillrenting, watching home ownership move out of their reach, with their partner asking ‘Are you really surehouse prices will fall? Really sure? Still?”
I burst out laughing when I saw this one!
Something more serious and relevant:
There are many more examples. The point is this – a broader extrapolation of what I wrote over five yearsago thankfully in the context of interest rates, and for a couple of decades with regards to exchange rates.You cannot base your business growth and risk management strategies strongly upon a particular set offorecasts proving accurate. You need to explicitly note unpredictability and build two key things into yourbusiness.
-Resilience. The ability to withstand and quickly respond to unexpected changes.
-Customer centrality. Use surveys, loyalty programmes, big data, whatever to get as close to yourcustomers as possible in order to make sure you are actually delivering what they want, know rightaway when you are off track, and can understand quickly when the broad market has changed.
-Resilience. The ability to withstand and quickly respond to unexpected changes.
-Customer centrality. Use surveys, loyalty programmes, big data, whatever to get as close to yourcustomers as possible in order to make sure you are actually delivering what they want, know rightaway when you are off track, and can understand quickly when the broad market has changed.
reinforcing your own intelligence gathering systems, perhaps partnering with a firm which can dothat for you, and building resilience into your plans.
Rest are just grim economic stuff.
ShocksYes it seems true that there are more shocks occurring these days such as terrorist attacks, diseases, debtmountain collapses, and so on. But the bigger issue from here on may be shocks combined with a radicalreduction in the ability of authorities to mitigate their impact.
Interest rates are already low if not zero, or inthe case of the ECB deposit rate, negative 0.2%. Government annual deficits are less than over 2008-11 butdebt levels are higher.
Ability to absorb shocks with deficit spending is reduced.In contrast to the case that a collapse in Greece now would (will) do far less damage than if it had happenedin 2010, a new Lehman Brothers Bank collapse could cause more because of this lack of fiscal andmonetary buffers.
Money printing would attempt to fill the gap along with unwinding of the manymacroprudential controls central banks are putting in to do a job previously they used interest rate rises for.The upshot of these many factors affecting the economic environment in which we operate is as notedabove.
Predictability has declined sharply. You must not tie your business strongly into one particularscenario.
You need to embrace flexibility, boost customer information flows, establish an innovationchain and network, and challenge the traditional Kiwi characteristics which we may have been ableto survive with in the past but which if they persist will confine us to mediocrity and a volatileprimary and tourism sector-dominated economy over the coming century.
Interest rates are already low if not zero, or inthe case of the ECB deposit rate, negative 0.2%. Government annual deficits are less than over 2008-11 butdebt levels are higher.
Ability to absorb shocks with deficit spending is reduced.In contrast to the case that a collapse in Greece now would (will) do far less damage than if it had happenedin 2010, a new Lehman Brothers Bank collapse could cause more because of this lack of fiscal andmonetary buffers.
Money printing would attempt to fill the gap along with unwinding of the manymacroprudential controls central banks are putting in to do a job previously they used interest rate rises for.The upshot of these many factors affecting the economic environment in which we operate is as notedabove.
Predictability has declined sharply. You must not tie your business strongly into one particularscenario.
You need to embrace flexibility, boost customer information flows, establish an innovationchain and network, and challenge the traditional Kiwi characteristics which we may have been ableto survive with in the past but which if they persist will confine us to mediocrity and a volatileprimary and tourism sector-dominated economy over the coming century.
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