Navigating your advice practice through a mega-threat decade
Financial and risk advice practices will have to recognise looming threats and seize upon opportunities as they present if they hope to thrive over the coming decade. This could prove a tough ask given more and more economic and financial market commentators are describing the prevailing economic, political and social settings as beset by extreme risk and uncertainty.
A year of burning issues, and mega-threats
Presenting to a recent RGA ‘Sight 2024’ webinar, author and financial journalist Bruce Whitfield borrowed from the title of a Noriel Roubini novel to describe the world circa 2024. Bruce labelled 2024 “a year of burning issues” before suggesting that professionals in the financial services sector would have to up their resilience and sustainability ‘games’ to navigate the emerging mega-threat landscape. PS, the title of the Roubini book in question is: ‘Mega threats: Our ten biggest threats and how to survive them’.
Thus began a rapid-fire 14 000+ word commentary on the domestic and global risk environment, all delivered at Whitfield-pace. Today’s newsletter will touch on the main issues raised during the talk before commenting on the grit, opportunism and strategic approaches that could help you to differentiate your practice from that of your peers, especially during tumultuous times. “The first challenge stems from demography; it is major issue globally that is weighing on growth prospects in many developed countries,” Whitfield said. “Japan is already seeing a contraction in its population, and there are fears that China goes the same way”.
Africa has long been touted as the continent that will ride its youth demographic to prosperity. Unfortunately, hopes that Africa’s high fertility rate and growing young population become a demographic boon have been offset by shortcomings in areas such as access to education, healthcare and technology. South Africa, with its serious youth unemployment problem, serves as an excellent warning of demographic-based expectation and promise versus reality. The country is in a decade-long GDP growth slump despite boasting an impeccable age ‘curve’. And youth unemployment is at record levels, surging to 60% or higher in certain areas.
Pushback on EVs and fossil fuels
“Climate change is a huge issue worldwide, and climate scientists are working ferociously for us to limit its impact,” Whitfield said, reflecting on a second global risk. He was among the thousands of people who jetted into Dubai for the COP28 Climate Change Conference, where decision makers reportedly reached a sensible compromise on fossil fuels. “They are not going to eliminate fossil fuels; but rather work towards reducing consumption of same,” he said. There has even been some pushback on electric vehicles (EVs) recently, as evidenced by Apple’s canning of its self-driving car programme, putting 2 000 jobs at risk.
The third global risk centred around the rapid uptake of artificial intelligence (AI). For this writer, the snippet that best illustrated the power of AI is that US-chip maker Nvidia (NASDAQ: NVDA) surged 248% over 2023. And the stock added another 77% year-to-date end-February 2024. “AI has been building for a long time, but suddenly [we have] the hype around Nvidia and microchips and the way in which the share price of Nvidia has rocketed; it becomes the third company in history to exceed USD2 trillion in market cap,” Whitfield said.
There are probably more opportunities than threats due to the rapid adoption of AI; but financial and risk advisers must be cognisant of the risk in not integrating AI and other technologies into their businesses.
On deglobalisation and geopolitics
“The global economy is becoming increasingly disjointed and dislocated,” said Whitfield, dashing through his slides on the interconnected risks of deglobalisation and geopolitical tensions. Entering 2024, the world was still wrestling with the dual impact of the Russia-Ukraine war and Hamas-Israel conflict. These wars have caused instability in their respective regions; contributed to major disruptions in the supply and distribution of goods; and risk drawing other countries into the affray.
The presentation considered these risks before reminding attendees there had only been two major global recessions since 1950: the 2008-9 Global Financial Crisis (GFC) and the 2020 COVID Crisis. Next up, political uncertainty on the back of elections. Businesses in South Africa and the United States, and many others, will be concerned over the outcome of their respective national elections set down for 2024. “About half of the world’s population is expected to vote in an election of some description this year, including ourselves,” Whitfield said. He added that elections make people apprehensive, particularly in fragile societies.
There was much to-and-fro on potential outcomes following the 29 May National Elections. Aside from a warning the audience not to trust the myriad pre-election polls, Whitfield said “the future of local politics, at least for now, most certainly involves coalitions”. And the composition of these coalitions depends on how far ANC support falls, and which of the smaller parties fare best. Whitfield had a proper rant about governments, which this writer thoroughly enjoyed.
“Governments are becoming less relevant,” he said. “They are bureaucratic and inefficient; they should be policy setters not intervenors in the economy; and they should be governing rather than trying to compete in the economy”. The ANC government was singled out for significant criticism for its never-ending “nonsense” around the National Health Insurance (NHI), ongoing calls to nationalise the South African Reserve Bank (SARB) and the proposed state bank, among others.
Blind luck versus action and knowledge
Whitfield has interacted with countless business leaders in his role as anchor of The Money Show on 702, and to inform his books, ‘Genius’ and ‘The Upside of Down’. As such, he offers valuable insights into the reasons why South African businesses are so transportable around the globe. “It is because of the superpower in the founders [of these businesses] and the founder mindset,” he said. One example, shared with Whitfield by Brian Joffe of Bidvest, was that company’s decision (during the GFC) to put up notices in its offices stating: “Bidvest does not participate in any recession”. The company chose to navigate recession rather than get caught up in it!
There are, of course, many naysayers who will dismiss the founder mindset as blind luck. Whitfield described luck as an area where grit, opportunism and strategy collide, and suggested there were three key components to it including blind luck; the luck that comes from action; and the luck that derives from knowledge. “The idea of blind luck, and with whom you associate at a very early age, is pivotal in the start that you get in life; what you do with it afterwards is entirely up to you,” he said.
Tiger Woods’ luck comes from action, by “hitting millions of golf balls until you never want to see another golf ball again ... and persisting”. The corporate equivalent is putting in the hours to become a specialist in what you do. “Some people choose to advance themselves, to grow their learning, to commit to lifelong learning; and that is also a pivotal component of luck,” Whitfield said. He summarised entrepreneur’s success “as an element of blind luck; a big element of the actions that they have taken; and the process of growing, developing and ensuring they know their industry, intimately”.
Uniqueness trumps the Voodoo doll
So, the next time you find yourself twisting a pin into a Voodoo doll of your most successful competitor, rather think about where that person’s success stems from. It may also be worth reflecting on a fourth element of luck, being uniqueness. Uniqueness is having the courage to be different and is a trait that makes the great stand out from the rest. Per the presentation, few people become truly, commercially successful if they approach things in the same way as everyone else.
At this point, you might be wondering how your business can get ‘lucky’ during tough times? A healthy dose of realism seems indicated. First and foremost, you must expect downturns to last longer than forecasted. You must be proactive and avoid getting stuck in Dr Seuss’ waiting place. “There is no value whatsoever in sitting around and waiting for something to change,” Whitfield said. He also offered “the ability to maintain a long-term focus and be ready for a recovery plus an optimistic view that the future is going to be better than the present” as key elements of business ‘luck’.
An opportunity mindset is important too, with strategic opportunism described as “the ability to remain focused on the long-term while being flexible enough to solve day-to-day problems and to recognise new opportunities, as well as being able to differentiate between the new opportunities and the things that risk leading you in the wrong direction”.
Why can’t you be more like Stoffel?
Overall, the better your grit, determination, focus and strategic thinking, the better luck you will experience in your practice. “All of the great corporate leaders of our time, the people who have built great businesses, have exhibited enormous grit at huge personal cost,” Whitfield said. This notion is supported by Mary Barra, the first female CEO at General Motors, who said: “You need to do the work; hard work beats talent if talent does not work hard”.
Whitfield concluded with seven components for success including effort; collaboration; hiring better than yourself; integrity; kindness; optimism; and relentlessness. His parting advice was for you to approach your business in the same way that the honey badger approaches life: show absolute, relentless determination and be resourceful. Google ‘Stoffel the honey badger’ if you do not know the story. “In our environment, opportunism is your strongest asset,” he concluded. “That along with the characteristics of the African honey badger will stand you in good stead”.
Writer’s thoughts:
There are many homegrown South African brands that have done well on the international stage, including Bidvest, Nandos and Investec. Are there any emerging financial services brands you would back for international expansion? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.
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