A Generation of Uncertainty

Part 1: Companies Prepare for Future that Can’t Be Predicted – Published on Spiegel Online International, by Dietmar Hawranek, Martin Hesse and Alexander Jung, Dec 31, 2012 (Photo-Gallery).

… The Age of Unpredictability:

Wolfgang Reitzle, CEO of the Munich-based Linde Group, agrees that the age of predictability is over. His company, which produces gases for the petroleum, chemical and food industries, has continuously increased its profits — and its stock market value has jumped six-fold over the past 10 years. But Reitzle says: “It has never been more difficult than today to give a precise prediction of future economic development.”  

For nearly a decade preceding the Lehman Brothers’ bankruptcy, economic development was characterized by high growth and minimal fluctuations. “Now it’s the other way around,” says Reitzle, who notes that there is currently only minimal growth, but this is accompanied by extreme turmoil on the markets.

It’s not just companies like BMW and Linde that find it increasingly difficult to plan and make strategic decisions. Banks and insurance companies along with consumers and depositors now only have one certainty: There are no certainties anymore.

Today’s economic situation is better than the prevailing mood, though — at least according to a survey by the Cologne Institute for Economic Research. But what good does that do us? If companies and consumers react to the gloomy economic mood — if they invest less and consume less — they can cause the actual situation to rapidly deteriorate.

To make matters worse: While the worldwide network of financial markets and the Internet boosts growth during an economic boom, it also exacerbates downward trends during a crisis. Insecurity has become the prevailing state of mind in Western industrial societies.

Admittedly, there has been growing confidence over the past few weeks that the economy will recover in 2013. But major setbacks are possible at any moment — for instance, Silvio Berlusconi could return to power in Italy, the conflict in the Middle East could escalate or growth in China could slow. And what will happen if President Barack Obama’s administration simply fails to break the bitter deadlock over the US federal budget?

An Anti-Crisis Program: … //

… (full text).

Part 2: Reliable Forecasts Virtually Impossible.

Links:

Book: The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb:

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