Episode #280: LEADING IN 2024
WHAT CAN WE EXPECT?
At the end of each year, I spend time analyzing a variety of sources to come up with a view on the range of possible outcomes for the year ahead—across business, politics, and society in general.
Without trying to make any fearless predictions, I like to have some sense of how the world is trending: trend is your friend!
Using sources as diverse as The Economist, the Wall Street Journal, The Australian Financial Review, The Atlantic, Fast Company, and even Wikipedia, this episode provides a consolidated view of what awaits us, as leaders.
I start at the macro end of town, and then circle in on some of the issues that you’re likely to face with people, culture, and performance in 2024. And it’s the only time in the year that I provide anything resembling political commentary on the No Bullsh!t Leadership podcast!
This is more than just an invaluable, curated guide to help you navigate the coming year: it’s also guaranteed to make you the most interesting person at any dinner party!
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EPISODE #280: LEADING IN 2024
WHAT CAN WE EXPECT?
GAZING INTO THE CRYSTAL BALL… NOT!
Today's episode is going to be a bit of fun, but also hopefully super informative, as I take a look at what's likely to be ahead for economies, businesses, and leaders in 2024.
Without trying to make any fearless predictions, I like to have some sense of how the world is trending: trend is your friend!
Using sources as diverse as The Economist, the Wall Street Journal, the Australian Financial Review, The Atlantic, Fast Company, and even Wikipedia, this article provides a consolidated view of what awaits us, as leaders.
I start at the macro end of town, and then circle in on some of the issues that you’re likely to face with people, culture, and performance in 2024. And it’s the only time in the year that I provide anything resembling political commentary on the No Bullsh!t Leadership podcast!
This is more than just an invaluable, curated guide to help you navigate the coming year: it’s also guaranteed to make you the most interesting person at any dinner party!
RECAPPING 2023
The big surprise was that there was no recession last year, despite the fact that almost everyone had predicted there would be.
A major part of the world's ability to ‘avoid the unavoidable’ hinged on the US running a massive deficit – around 7% of GDP. This has propped up the economy and improved global stability. The Inflation Reduction Act, which was probably quite poorly named, hasn't yet resulted in the delivery of the major infrastructure works that have been promised, but it did inject a sh!t-ton of cash into the US economy.
But, as we all know, there's no such thing as a free lunch: the consequences are being felt in other areas. For example, productivity took a steep decline, as many had predicted. Anyone who wonders why this is the case should rely on Occam's razor, because the simplest answer is most often the right one.
Remote working has opened up a Pandora's Box of productivity issues, as productive hours worked deteriorated. This, combined with the introduction of hours of unnecessary meetings just to stay in touch has made people less productive. And a small percentage of poorly managed (but enterprising) workers are even holding down two jobs… apparently in less time than they used to spend working on one job. This is obviously going to further drain productivity.
I've read a lot of articles on both sides of the remote work debate, and I'm convinced that the productivity decline in OECD countries can be largely attributed to the root cause of remote work. But this isn't just a flash in the pan: this is a structural reset that we're all going to have to grapple with in the coming year.
The trend on protectionism and the global economy was exactly as predicted. We've seen a continued turn away from global trade. Some countries, like Australia, have even enacted policies to set minimum tax thresholds for multinational companies. And this is no doubt going to affect the flows of global trade, labor, capital, and intellectual property.
The China-US conflict escalated. However, I was very relieved to hear that the Chinese and US military are now talking again through their informal channels. The fastest way to a global conflagration is through misunderstanding, assumptions, and the isolation of the two main global powers.
Talking of wars, Russia's invasion of Ukraine is dragging on into another winter, and rich world democracies seem to be a little jaded. They appear to be losing interest, which puts ongoing funding and support for the war at risk.
It's fair to say that no one anticipated the 7th of October terrorist attack on Israel by Hamas. This ongoing conflict is a key source of uncertainty. At the time of recording this episode, the first attacks outside of the Gaza Strip had been reported. Stability in the Middle East is going to be a key indicator, and it'll take some canny diplomacy from the leading powers in the West to navigate through it unscathed.
This is the backdrop as we enter 2024.
HOW BIASED ARE YOUR MEDIA SOURCES?
Let's turn our attention for a moment to politics. You probably know that I don't like talking about politics: this podcast is about leadership. And there's not a whole lot of strong leadership in politics that we can see. But this year is super interesting.
There was a Forbes article that caught my attention: 2024 is the biggest election year in history. This article started from The Economist's Economic Intelligence Unit (EIU), so it has high credibility.
Just as an aside, don't forget the website www.mediabiasfactcheck.com. This independent website rates virtually every available information source. Before you form an opinion about anything you've read, it's worth checking out how accurate and credible that information source is likely to be.
It's also important to know whether the source of information typically leans to the left or right of center, philosophically.
The Economist, which is one of the most credible and unbiased sources of information, released an important article several weeks ago, and it's probably flown below the radar. The analysts from the Economic Intelligence Unit used a comprehensive research technique and crunched many millions of data points to work out whether the media in the USA is predominantly left or right leaning. The article was titled, American Journalism Sounds Much More Democratic than Republican.
This is sort of cool, right!? The data analysts compared terms that were used mainly by Democrats (or left-wing lawmakers), with terms that are mainly used by Republican (or right-wing lawmakers). For example, when talking about the issue of abortion, Democrats tend to use the term “reproductive rights”, whereas Republicans use the term “unborn baby”.
When talking about immigration, Democrats tend to use the term “undocumented immigrant”, whereas Republicans use the term “illegal alien”.
By analyzing how often these terms appeared in various media articles, the researchers found that the language is mainly left leaning. That won't come as a huge surprise to most of you. Once you get beyond Fox News and The Daily Wire, there aren't that many obviously right-wing news sources.
What's even more interesting is that between 2017 and 2022, this left-leaning ideology in the media has become even more pronounced. For example, in 2017, CNN used predominantly right-leaning language, believe it or not. But, as of last year, it was solidly entrenched on the left.
Knowing this just helps you to assess the bias and reliability of any information you consume. But I digress...
THE BIGGEST ELECTION YEAR IN HISTORY
Where was I? The biggest election year ever.
76 countries are going to go to election in 2024. This is over half the world's population. 4.2 billion people will get to vote, including India and the USA. Once again relying on data from The Economist's Economic Intelligence Unit. They track 71 of these countries, and they've determined that 43 out of the 71 elections are likely to be fully democratic.
But 28 elections won't be free and fair, so they're unlikely to bring about any regime change.
For example, there's an election to be held in Russia, but the odds of anyone but Vladimir Putin winning that election are nonexistent. After initially having Putin as the odds on 4-11 favorite, most betting agencies have since closed their books. It's also interesting to see how the EIU rates certain countries. The USA is rated as a “flawed democracy”, whereas Taiwan is rated as a “full democracy”.
The US election is of particular interest, of course. I watched a few of the Republican primary debates between the candidates trying to secure the Republican presidential nomination. At this stage, it looks like it could well be a rerun of the 2020 Trump-Biden election.
Trump is way ahead of his Republican rivals in the pre-selection polls: so far ahead that he didn't even bother to show up for the debates. He has double-digit leads over both Ron DeSantis and Nikki Haley, the two frontrunners.
Of course, Joe Biden is the sitting president, so it's going to be super interesting to see if the Democrat party is actually going to allow him to run for re-election. You'll struggle to find anyone on either side of politics who doesn't think his age is a problem.
And, despite the fact that the US economy is performing pretty well, his approval rating is incredibly low. At his inauguration, Biden's net approval rating was +23% (which represents the margin between the 53% of voters who approved of him, and the 30% who didn't). But as of the 4th of January, his net approval rating is -17% (which is the difference between the mere 38% who approve of Biden, and the 55% who disapprove).
Who knows where all this will land, but it's going to be fascinating to watch the race, and it's likely to be decided by a few swing voters who aren't aligned to either party.
From my perspective, the most troubling thing from an economic and business perspective is the fact that, regardless of who wins the US election, there is likely to be further suppression of free trade. In fact, in Trump's second-term manifesto, he outlines a policy position to implement a 10% blanket tariff on all imported goods.
This sort of protectionism would be disastrous, plunging global economic progress back into the dark ages. It wouldn't just be awful for America's trading partners, but also for the US itself: less competition; higher prices; increased inflation; and an even greater decline in productivity would be unavoidable consequences.
Of course, the US election isn't held until November, but the reaction of markets and consumers is going to be evident well before this, when the names of the two candidates are announced by their respective parties.
10 GLOBAL BUSINESS TRENDS
So that's my political commentary done for another year: that last couple of paragraphs is all you're going to hear from me. Let's get back to business.
There are a few key trends in global business right now, and there's an Economist article which identifies Ten Business Trends for 2024. I just want to give you a quick run through these, so you know what they are:
The world's central banks are going to start to reduce interest rates as inflation slows. With global inflation still at 5% however, consumer spending is going to remain cautious.
Renewable energy consumption will climb by 11% to a new high, but fossil fuels are still going to be used to meet 80% of total energy demand.
IT spending is going to pick up, rising by about 9%. Artificial intelligence is going to generate a bunch of hype and tons of scrutiny, but it's not going to deliver much revenue.
There's going to be an infrastructure spending gap of around $3 trillion, which represents the gap between what's required and what's actually going to be spent. To plug its infrastructure whole, Asia's gross fixed investment is going to expand by about 4%.
Revenue in the advertising industry is going to increase by 5%, primarily as a result of the US presidential election campaign, and major sporting events like the Paris Olympics.
International tourism is going to bounce back to create record revenue of $1.5 trillion fueled by pent-up post-pandemic demand.
Health spending is going to increase significantly. With 10% of the world's population aged 65 or older, healthcare will make up one tenth of global GDP.
America's going to allocate $886 billion to defense spending to support Ukraine and keep pace with China, whose neighbors (including Japan, Taiwan, and the Philippines) will also bolster their defense spending.
Government subsidization of the electric vehicle industry is going to increase the penetration of EVs, and one in four new cars is going to be a plug-in.
With 60% of America's firms allowing working from home, 20% of American offices will remain empty. The EU's less relaxed employment policies are going to keep its vacancy rate around 8%.
BIG TICKET BUSINESS RISKS
I found a great article in the UK Telegraph, written by Matthew Lynn. It's called, rather cheerily, The World is One Wrong Move From Catastrophe. But it’s a great article, because it identifies a couple of really important risks that we need to pay attention to.
The first is supply chain risk and, in particular, the threat to seaborne trade. Recent attacks on trade vessels around the Red Sea and the Suez Canal could add billions of dollars to logistics costs, as ships are diverted around Africa. On top of this, Iran has threatened to close the Straits of Gibraltar, which separates the Atlantic Ocean from the Mediterranean Sea.
We could be facing shortages of critical components. First, there's the very real possibility of a blockade of Taiwan. And, in case you aren’t aware, Taiwan produces 60% of the world's microchips, including 90% of the super advanced chips that can't be manufactured anywhere else.
Then, there's the fact that China has been cornering the market on rare earth minerals. These are the essential ingredients required to manufacture renewable energy products, such as batteries and wind turbines. If your company is aligned to renewable energy or transportation, you need to keep a close eye on this one.
Another global risk is the ever-increasing threat of serious cyber attacks on critical infrastructure. This has become even more likely in 2024 due to the new wave of AI-enabled tools and capabilities, and it could make security breaches both easier and more frequent.
And then, of course, our classic financial risk – there's always the possibility of a collapse in the financial sector. The article identifies a key risk in private equity (PE) markets. $7.1 trillion worth of assets are held by PE, and the industry itself is quite highly geared overall, with significant debt levels. Of course, the cost of servicing this debt rises as interest rates rise, so the likelihood that one of the big PE players is going to default on their debt is increasing.
LEADERSHIP IMPACTS CLOSER TO HOME
How is this going to affect you and your day-to-day leadership?
I want to start with just a quick word for our Aussie listeners, who make up over one third of the global audience for No Bullsh!t Leadership. Great articles in the Australian Financial Review, one of which is, Five Big Tests For Small Businesses in 2024.
Small businesses in Australia are going to be subject to a range of issues, and many of these ring true for other developed economies as well. For example, cash constraints are going to persist, as small businesses absorb the rapid price rises, but they can't necessarily pass these increases onto customers.
Peculiar to Australia is a punitive set of industrial relations changes, which will increase the risk to all businesses, but especially small businesses that rely on the flexibility of their workforce.
And the amount of red tape being thrust onto all businesses through well-meaning legislation in the areas of privacy, superannuation, cyber security, and workplace obligations, are going to be especially costly for small businesses.
Managing these changes will no doubt put a burden on your business, but you can't take your eye off that ball.
Let me move to a Fast Company article, Five Leadership Trends to Watch in 2024. Of these trends, I particularly like the first one. Apparently, in 2024, it's going to be important for leaders to develop new skills… like being able to show people that they care about them while at the same time managing for accountability.
Yeah, no sh!t Sherlock. It sounds like a quote from my book, which I wrote four years ago.
They'll also require the ability to build culture with less contact time than they may have had pre-pandemic. It's funny – although it feels like we are well past the days of COVID lockdowns, we're still outworking the impacts of the pandemic. But, more on this shortly…
The article also identifies a trend to reimagine leadership development. This is definitely an essential component of preparing leaders to meet the challenges ahead. But look, it's not rocket science.
When we developed Leadership Beyond the Theory in 2018, we foresaw the need for a combination of high-tech delivery of hard hitting (but simple) content, with personal instruction and implementation guidance.
I must say, it's going to be a welcome change when companies start to embrace a learning methodology that actually works, and offers the potential for long-term benefits to their leaders’ skills, capability, and performance.
The other trend I like is the need to think about performance management differently. The article cites the move away from performance reviews. Command and control no longer works, apparently (as if it ever did,) but now they say people will be motivated by “status, autonomy, certainty, relatedness, and fairness”.
That may be true, and if you say it fast enough it sounds easy. But, remember, all self-esteem comes from achieving difficult things – tapping into that requires high order leadership skills. There are a couple of really useful podcast episodes you should track down if you have an interest in this area:
WHERE ARE WE WITH REMOTE WORKING?
I want to finish with a quick word on the work from home issue. Many companies are becoming more demanding on their working arrangements, requiring greater time in the office. There was a fantastic article in The Economist in November last year, The Fight Over Remote Working Will Heat Up in 2024.
How much in-person attendance companies and teams require depends on many things. But, in my view, it has to be driven by the practical realities rather than just blanket policies.
Obviously, if you work in the construction industry, for example, it's pretty hard to pour the foundations for a bridge pylon from home. But many white collar workers are going to have to face into this tension.
It really has to be a case of horses for courses.
For example, if you work in an R&D team that is charged with delivering disruptive innovations, you might need to be in a common location way more than other teams, even in the same company. That's if you want to be successful, of course.
Regardless of the drivers, we're starting to see increasing employer demands for in-office attendance. As many of you would know, I'm a huge fan of irony, and one company that's requiring a very structured approach to office attendance is… Zoom! Isn't it ironic that the company that enabled us to work effectively from home is committed to in-office attendance? That's because… they get it!
There are many things that can be done from home, but building culture, developing talent, managing performance, and innovating are not among them.
The research shows that the gap between the number of days employers are prepared to let their people work from home, and the number of days employees would ideally like to work from home is still significant… but it's not insurmountable.
On average, across the countries surveyed, there's only roughly one day a week difference (or less, in most cases). Unfortunately, it looks like it may be decided by a power struggle based on labor market buoyancy: as the unemployment rate increases, companies will be more assertive… and employees may just be more inclined to suck it up.
But this is not a recipe for high performance in any person’s language, so I would advocate the following approach:
Your requirement for face-to-face attendance should be based on the demands of the business, the team, and the individual. What do you need to do in order to balance team and individual performance with employee satisfaction and well-being? Where is that sweet spot?Make sure your demands reflect the needs of the business to perform, compete, and thrive. You're still trying to run a business, protect profits, and generate growth. Simply pandering to your people isn't in anyone's best long-term interest.
Each case should be treated on its merits, bearing in mind that any perceptions of favoritism or unfairness can demotivate your team.
You need to communicate the “why” to your people, and show that it's not just an illogical policy, but that your requirements have a basis in performance.
Use any face-to-face time judiciously. Don't just get people to come into the office so that they can perform exactly the same tasks they carry out at home. That's just going to breed cynicism and discontent.
Make sure you continue to lead by focusing on results. Not on unreliable lead indicators, like… time spent at the desk? Your high performers are going to show themselves really quickly, as will the ‘tourists’ who are just along for the ride.
IT’S A BIG YEAR AHEAD!
2023 definitely had its challenges, but it turned out better than almost everyone expected. 2024 is going to be challenging on many fronts, and this is going to affect consumer sentiment. This in turn will affect demand. So, many companies are going to batten down the hatches to weather the storm.
Being bold in this environment and taking calculated risks will pay off – if you have the confidence to be counter-cyclical. But there are a lot of landmines to avoid as well.
The well-worn principles of delivering value, creating organizational momentum with fast, prudent decisions, and strong accountability in execution will still be the keys to success.
Keep doing the work on yourself, and be the leader who can nail 2024… for you and your people!
RESOURCES AND RELATED TOPICS:
UK Telegraph article:
Economist articles:
Three Economic Risks Facing America in 2024
The Fight Over Remote Working Will Heat Up in 2024
Metrics to Keep an Eye On in 2024
American Journalism Sounds Much More Democratic than Republican
Fast Company article:
Forbes article:
AFR articles:
Poll Results:
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