I keep looking for the pundits to come out in force to predict what 2012 is going to look like for business owners. Most seem to be hiding because I’m not seeing a lot of insightful predictions. Maybe they just don't
have any idea. Now, I do not put myself in the “pundit” class by any stretch and I don’t have any special insights into what might happen this year, but as a business owner I sure have been thinking about what to expect in the next 12 months.
I did happen to run across some predictions from a group of stellar economists responding to a poll by the Council on Foreign Relations. That seemed like a good place to start to think about 2012. The Council on Foreign Relations, in their own words, is an independent, nonpartisan membership organization, think tank, and publisher” with members as diverse as news anchor Brian Williams, Nobel Prize winning economist Michael Spence (whom I had the pleasure of having a conversation with when he won the prize in 2001), and actress/philanthropist Angelina Jolie. The Council’s goal is to promote understanding of foreign policy and America’s role in the world.
Their poll of economists identified
five key trends for the coming year. They are:
1. Increasing political polarization in the U.S. This is certainly no surprise given that the ideological division between the two major parties is huge. The concern here is that the government will not be able to pass a budget or fund its normal operations.
2.
Global Volatility. Again, no surprise, but the problem is that we’re definitely more at risk for negative
Black Swans, unpredictable events with huge downside risk. Political gridlock means that we may not have the capability to respond quickly to this type of volatility.
3. China’s growth is stressed. Some economists predict that in 2012 China will embark on a slower growth path under yet another set of leaders. China is definitely facing some challenges, not the least of which is its weakened financial institutions. U.S. businesses have a lot invested in China so its problems become our problems.
4. Not enough AAA assets. Whether you’re talking about mortgage-backed securities, equities, bonds, real estate, or currency, it’s going to be difficult to find a relatively safe place to park your capital. Moreover, economists are seeing an ever widening gap between saver preferences and borrower preferences. How will business owners fund their growth in the future?
5. More interest in risk. Because many of the traditional financial markets, such as Europe, are less attractive and more politically uncertain, investors are eagerly searching for yields and will do anything they can to get them.
These trends make a lot of sense, but let me put my two cents in. I believe the year will be dominated by the election, which means that not much will be accomplished from the standpoint of the government. That could be good or bad depending on your perspective. If you’re developing a new technology that depends on government research grants that depend on the government having a budget in place, you could have problems. If you’re a small business seeking loans to finance your business, it’s likely that banks will not want to take big risks this year in the lending department. Until we know whether the “Affordable Healthcare Act” is constitutional, businesses may resist significant hiring because the costs to business under that bill are significant.
The bottom line is this will be a year of great uncertainty and the businesses that will survive have already put into place what they need to be flexible and adapt to whatever happens. Now, I certainly don’t expect applause for that prediction. It’s actually the same one I made in
2009, and it certainly came true then and every year since. If you’re waiting for things to go back to “normal,” stop waiting. What we’re seeing is probably normal for the foreseeable future. Adapt and keep your eyes open. Opportunity is still out there; after all, it thrives in uncertainty. Entrepreneurs always find a way to persist and succeed no matter what gets thrown at them.
