DECEMBER 2015 / NO. 1
TAGS: TRUST, EUROPE, SCENARIO PLANNING, BLACK SWANS, GREY SWANS, MIDDLE CLASS, JAPAN, US, FED, ECB, CENTRAL BANK, QUANTITATIVE EASING, EURO, GREECE, EU, INVESTMENTS

Trust never returns

“I have learned in life that in contacts with people there is no alternative to trust. Trust comes slowly and leaves quickly and never returns to the place it has left.”
The statement is one of my favorites. Trust in society is under huge pressure. We can see some extremely negative developments which are out of the control of our politicians, who unfortunately do not have the courage to take the necessary tough decisions.
Leadership is lacking in Europe. For one of our clients, we have been active in navigating and facilitating a scenario-planning process towards 2025.This is a difficult path of potential actions because “scenario planning is not just a study of the future, but of the future success of decisions taken today”. During the scenario-planning process, we faced some Black Swans as well as Grey Swans, which could potentially harm the organization.
Below we list some Grey Swans:
  1. The shrinking middle class in the US, Europe and Japan. The implication: less spending by the middle class which will hurt the multinational companies in the long term
  2. Money printing by the FED, ECB and the Central Bank in Japan. In the financial world this is called QE, Quantitative Easing. The implication: shifting our growing debts to future generations
  3. The euro might implode. During the past few hundred years there have been tens of monetary unions, all of which have imploded. The implication: Greece will leave and other countries may follow
  4. The EU doesn’t deliver. Weak leadership makes the EU a “fighting union” unable to protect the middle class. The implications: sharing prosperity is getting out-of-balance, with increasing aging, less safety and security, and growing flows of refugees
  5. Social cohesion in Europe. People have lost their beliefs in a united Europe. The implications: limited investment and weak job creation. More disruption is desired to increase the future competitiveness of Europe
  6. Investments are under pressure. Companies are piling up cash despite low interest rates, households are reluctant to spend following the crisis in 2008. The implications: a collectively weakening in demand, resulting in 8-12% less output compared to the years before the crisis
According to McKinsey, European countries need to take three paths to change the current baseline growth of 0-1% to a new potential growth of 2-3% towards 2025: investing for the future (1), boosting productivity (2) and mobilizing the workforce (3). In the previous section, the 2015 IMD report on competitiveness confirmed that one of the key drivers to strengthen future competitiveness is to increase productivity.
“The only relevant questions about the future are those where we succeed from shifting the question from whether something will happen to ‘what we would do if it did happen’”
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