Economic Outlook 2016

As you will see from previous posts, there are few surprises. The comments in the post of January 2015 still stand: global growth will be slow, at best. Too many countries have too many problems for a return to the relatively high rates of the past. There is no particular reason to be impressed with the reliability of these forecasts since the evidence and logic are so clear. Wishful thinking has no place in this discussion. The goal is to be neither optimistic nor pessimistic. The goal is to be correct. And while the forecast may be sobering, the truth is always helpful, or can be.
Mature industrial states, like Europe and Canada, will have painfully slow growth. Canada of course is particularly sensitive to low energy and commodity prices. China continues to struggle to both sustain growth and avoid volatility. India is making only modest headway; other newly industrial states are coping with the consequences of unsustainable boom. Russia is stuck in the twilight zone of personality politics. Most of these governments and their electorates are overwhelmed with the complexity of the challenges before them. Moreover, given this complexity, the economic environment becomes ever more unpredictable. As a result, the financial markets remain inherently volatile.
The American economy is doing relatively better than most other states and this helps all of us. But its challenges remain very high. The government is perpetually on the edge of paralysis. Cheap oil is a bonus stimulus, but its effect cannot be counted on long term. While U.S. employment growth is reasonable, many of these new jobs are in lower wage service industries. Moreover, this relatively adequate growth is still being fueled by abnormally low interest rates. As those rates rise, the effect is uncertain. Maybe it will be accommodated reasonably well; maybe it will chill growth substantially. There is no way to know, because, as noted before, the circumstances are unprecedented. So where does this leave the individual?
The answer is equally clear, if not exactly welcomed. If the overall environment is going to be difficult for the foreseeable future, then the onus is on individuals to look to their advantage. This means pursuing one’s career more aggressively. It means having a detailed plan to get promoted. It will often require using your own resources and time to invest in the development of your skills. In addition, you will have to be a person of ideas, new ideas. It will no longer be enough to repeat the ideas of others, or those you learned years ago in a classroom. If you relax your commitment and focus, you will dramatically increase the odds of a nasty surprise.
Moreover, your investments will have be chosen with exquisite care, forcing you to turn your back on the herd. And if you spend almost all of your income on your current consumption, then you are skating on the thinnest of ice. Warning, warning, danger, danger.


Monetary Stimulus: Prudent or Panic

The Bank of Canada has just lowered rates to protect the Canadian economy from being disrupted by collapsing oil prices. And the E.U. central bank has just announced it intends to massively expand the European money supply. Except for oil prices, nothing much has changed.

As I have long argued in this space, there is little reason to expect growth to resume its historical rate within the medium term. The only way we could get strong sustained growth is if every one of the world’s immediate challenges is resolved quickly. There are so many problems in so many places that this was always an optimistically unrealistic outlook. The E.U. struggles to avoid falling back into recession; China is under stress as it copes with dramatically [for it] slower growth, never mind the inherent contradictions in its public/private authoritarian system; the United States has neither a functioning government nor a coherent economic policy; most of the other high-growth economies of the world, like Brazil and India, have come to the end of their brief interlude of effortless growth; Russia is offline; the commodity markets are chaotic and stock markets understandably volatile. At least the American economy is generating respectable growth. But the U.S. economy cannot carry the global economy on its back, and has not been able to do so for years. And American growth is itself still inherently fragile. After being force-fed money since the last recession, we should not celebrate this progress uncritically.

Remember that when the storm hit in 2008, the deluge almost extinguished the fires of the economy. So we poured gasoline on the embers in order stay warm. Again and again we throw the gasoline of cheap money into the economy. Finally, after 7 years the U.S. economic fire looks sustainable. But given how much gasoline we poured on the campfire, the forest itself should have burned down.

What, Dear Readers, happens when the run of absurdly cheap money comes to an end? The simple answer is we do not know. We have never engaged in such aggressive monetary policy and so there is no precedent, no historical norm to guide us. Will we calmly absorb higher interest rates by gradually re-adjusting our spending? Or will we panic and drastically reduce spending? Who knows?

Notice the difficult choice the world now has before it. Interest rates will stay low because economic growth is so limited. Or interest rates rise because growth is strengthening and needs to be restrained. Either way, high sustained growth is excluded.

Recognize that I am not objecting to this degree of monetary stimulus. All things considered, it was necessary since the global economy was in grave danger. But this stimulus comes with heavy costs: the distortion of property and stock markets, the accumulation of high indebtedness and a literal addiction to cheap money.

Longer term we will struggle to break this addiction. For the moment, slow growth means low rates continue. So what does the individual do? Look aggressively for profitable investments. Support start-ups and small high growth companies. Develop a career strategy that builds a strong competitive distinction. Make sure that no matter what happens you will be in demand for expertise and knowledge that cannot easily be found elsewhere.


Finding Your Passion

[This post was written in response to the email that is being generated by the Waterloo TEDx video, Why You Will Fail to Have a Great Career.]

Since pursuing your passion is a necessary, but not sufficient condition, for a great career, it becomes logically essential to find your passion as a starting point.

Nevertheless, many persons struggle to find their passions. What mistakes are they making?

Often they assume that finding one’s passion is a matter of luck. They see that some persons seem to have found their passions as children. Often, others just seem to just trip over their passion as they move into adulthood. The process seems random and difficult to see as a methodical process of search.

Yes, some are lucky. Teaching is their passion and as a 5-year old, they wake up in classroom and they are home for life. And even as they have new experiences, they notice that their first love grows only stronger.

Others have the luck of being born into a family in which a family member or friend shows them a domain that immediately engages them, or slowly sneaks up on them. In the absence of the lucky circumstance of their family, the search would have been longer and more challenging.

But notice that some who pursue a childhood or family “interest” do so only as a convenient default choice. It was there and so they chose it to avoid further thought or uncertainty. It is hardly an interest and never mind a passion, although they may speak of it very positively – the better to tell themselves or others that they made a “wise” choice.

The majority do not have the advantage of circumstance, and therefore have no choice but to search for their passion methodically.

Many of these persons fail to find their passion because they either fail to search methodically, or they do not search persistently. Some will simply not commit the time and energy to a search that can often be frustrating. In fact, they want their destiny to find them; they do not want to find it themselves. But only rarely does destiny come knocking.

You cannot find your passion idly staring into space, hoping for it to appear as a revelation, expecting it to appear from one book, article, blog posting or casual conversation. Passion is rarely found in a bar or on Mother Google’s home page.

Those who search and find their passion place themselves in intensely stimulating environments, and stay there until the job is done. It can be intellectually exhausting.

There are many such environments. Some read voraciously; others seek out many persons in many situations and engage them in intense conversation. Some do both. Others visit every major museum and gallery in North America. They find their passion by immersing themselves in a panoply of human experience.

But you cannot just read, talk or experience. You must also have your mind in high gear. You must be fully engaged, reading and thinking to a purpose. You must be constantly saying to yourself about whatever book, fact, argument, person or experience is at hand: Why? What if? Why don’t they?

Yes, it is intense. And yes, too few are practiced in this art, no matter their level of education.

But you will never find your passion in the modern way: by surfing or browsing. Recognize the superficiality implied by those words and by our impatient thoughtless world.

You will have to stand against the popular culture to find your passion. Too many do not have the independence of mind or force of commitment to do so.

Take the time you need. Recognize your mind’s natural tendency to resolve its painful uncertainty by rushing to judgment, even to the judgment that it is time to give up.

How will you recognize your passion when you encounter it? Usually, it is quite easy. One moment you are reading in hopes of finding a topic of great interest; then you find you are reading and do not want to stop. It almost feels as if you cannot stop. Or you find yourself in a regular conversation, and you start talking with excitement about an idea or possibility. Or you find yourself in an activity and you lose track of time itself.
The rule of passion is simple: the mind cannot stop thinking about that which it loves.

It is what you would do even if you won a lottery.

For some the realization is sudden, as if they reach a critical mass of experience and it coalesces into a complete and compelling vision. For others, it is a slow process, each piece coming into view separately until the puzzle is revealed.

Even with a passion identified, there is a common pitfall. Some persons know or find their passion, and then with little thought, relying on no more than popular opinion, they dismiss the passion as one that “cannot be turned into a livelihood” with any reasonable degree of assurance. And they move on to try to find a second, more practical love. That is not necessarily a bad choice since one could certainly have more than one love. [It does though seem unfortunate that some struggle to find one passion, and others have multiple ones.]

But before you look for a second love, you should carefully, intensively and creatively examine whether your first found love could support a career. Research the experiences of those who have found ways to pursue as livelihoods the strangest of passions. Never take conventional wisdom as anything other than folklore, to be tested against your logic, information and experiences.

We must also reiterate in conclusion that passion is necessary for a great career, but it is not sufficient. There’s no magic here. Success also demands patience, persistence, focus, discipline, independence of mind, resourcefulness, experimentation and high creativity.