Something Afoot Contrary to Common Expectations
Lately, it seems that there are several terms being used a fair amount to describe the current business environment, which start with "un": as in "unknown", "uncertain", "unpredictable", "unprecedented" and "uncharted". The proliferation of words starting with "un" in the business press indicates that there is something afoot contrary to common expectations. Figuring out exactly what the "something" is that is causing such turbulence, may not be necessary; it's complexity is such that once it is "figured out", the original configuration and influences of the query will have long since changed.
In an attempt at linearity, we can generalize the current "something" into a combination of crude oil and commodity prices, financial market instability and the ever-changing complexity of globalization. However, this generalization does not provide most business decision-makers with actionable knowledge, since these factors are definitively uncontrollable. Moreover, simplifying the situation can result in the illusion of control, making it seem like there is a quick "fix".
Attempting to quickly "fix" problems associated with complex situations, like our global economic developments, can make problems worse and create more spin-off problems. This is because most hurried attempts to "fix" complex problems are aiming to make the present (today) and future (tomorrow) more like the past (yesterday). This is natural; a problem, on this scale, is only a problem because of a past benchmark that anchors expectations. Crude oil at $130 - $140 a barrel would not be a problem for consuming countries if it had halved in the last year instead of doubled.
A reason the price of crude oil is a problem for much of the developed world is because established business models of many industries (e.g. transportation, automotive, chemical, energy, agriculture) hinge on cheap oil. Many of the proposed (political) solutions aimed to "fix" the problems, caused by record oil prices, are actually problem extenders. For example, lowering the price of transportation fuel by repealing taxes or providing a tax holiday, releasing strategic reserves or even aggressive drilling will temporarily relieve businesses and consumers from short to medium-term economic hardship but will do nothing to change overall consumption behavior, thus making the eventually transition away from oil much more difficult, expensive and tumultuous. These types of fixes rely on the past, in this case cheap oil, as the benchmark and are attempts to make tomorrow more like yesterday.
In the case of oil, the long-term challenge is to foster profitable business models that are largely independent of fuel and energy costs and focus on aspects that can be influenced, at the company level, by actionable decisions. This would be in lieu of tumbling along, hoping that a quick fix might work. This may seem implausible and unimaginable, but it is worth some intellectual incubation.
Originally published May 28, 2008