Here’s the truth. Econ doesn’t have a word for whatever we’re in…because whatever we’re in flouts the so-called laws of economics. Quarterly results look great; job growth is “up;” and financial markets are ebullient. So why are so many still worse off than they were before? Why hasn’t all this “growth” actually translated into a real feeling of prosperity? And – as so many CEOs would like to know – is there any way to make money in this era of perma-semi-stagnation?
Most leaders seem to think they have three choices:
Option 1: Shine it with gold and sell it to the super rich. Make it a “luxury”! Rebrand! Make the logo platinum! Add a fleet of maids and an entire army of butlers to it, if you have to!
Witness the rise of the ten thousand dollar cocktail, the million-dollar pair of jeans, luxury doggy spas (Wagsworth Manor: “a luxury retreat for the furry elite”). Nokia tried it with phones—and went down in flames. The UK tried it with an entire economy, turning the once great city of London into a ghost town of global oligarchs who own entire blocks, but spend barely a few weeks there. It’s a strategy of appeasement: trying hardest to placate the strongest.
Why doesn’t the gambit of merely trying more and more desperately to please the every idle whim of the super-rich work? After all, they’re the people who still have money left, right? It doesn’t work well for a simple reason: there simply aren’t enough of them, and they simply can’t spend enough on consumption, to make up for the world’s falling middle classes. Your profit margins might rise, temporarily, but soon you’ll be furiously adding another platoon of maids or regiment of butlers, daubing platinum gilding on top of the gold leaf. It’s a losing game played more and more desperately for a shrinking prize.
Option 2: Sell to the rising global “middle classes” instead! Forget appeasement…let’s flee! To the very edges of the world, if we have to.
Except when you think about it, that doesn’t work either. The rising “middle classes” are significantly poorer than the ones that are falling. A middle class person in India makes maybe $10k a year and a middle class person in America used to make $50K. So sure: you can flog the same junk to the so-called rising global middle classes. But before that’s a valid strategy, they’ll have to rise a lot faster and a lot further than they probably can, given a stagnating global economy.
Option 3: Fleece the falling. After all, it’s true that they might be falling — but they’ve got credit cards and home equity. And on the back of that debt, says the most desperate junior vice president at Useless Widget Co, we can grow our profits! It’s the story of the “growth industries” of the last decade. The pawnshop economy. Casinos, payday lenders, private prisons, insta-on-demand-McWorkers serving everyone else who can barely afford them five dollar triplex mega soy mocha latteccinos. Fine print clauses in impossibly long contracts to hit people with hidden fees.
Can you earn a few extra pennies by fleecing people? Sure you can, Scarface. But here’s what you can’t earn: an organization worth building. Consider the sad, predictable story of embattled payday lender Wonga. Your customers will despise you. Your employees will hate working for you. Society (or at least Germany, Sweden, Australia, and Canada) will fight you. You’ll be vilified…and sooner or later, the regulators will force you to change. It’s a losing battle; one fought merely for marginal pennies of short-term gain that are already shrinking.
Finding cleverer, crueler ways to turn a more poisonous profit?
That’s not what strategy’s about at all.
Strategy is about building an institution that can compete. Competitiveness isn’t merely short-term profitability. It is about all the things that underlie lasting, healthy prosperity. It means having not just a “vision statement” but a passion. Not just a mission but a point. It’s about doing something that matters.
Appeasing, fleeing, and fleecing are precisely the wrong strategies for an age of stagnation—because if you employ them, what are you, really? Just another agent of stagnation. And so, sooner or later, your destiny will inevitably be stagnation.Go to Source