11 Business Challenges in 2011: Ignoring Politics

This is the first of 11 posts about the challenges that business leaders will face in 2011. (Government and non-profit leaders will face some but not all of these.)

Politics gets way too much attention from business leaders. The challenge is to keep an eye on the political issues that influence your business, without getting distracted by current news. The temptation to follow politics is even greater when political power is as mixed as it is after the November 2010 election. Decisions could well go in either direction.

Politics has much LESS impact on the economy than most people think, certainly than you would think after watching some politics-oriented talk shows or listening to a blowhard on the radio. In the short run, like over the course of the business cycle, government spending and taxing has relatively little effect, much less than you were taught in your old college economics course. In the long run, good policy helps an economy grow faster, and bad policy retards growth, but even here it’s important not to go overboard. Whether the president is Obama or Bush, most business gets done exactly the same way. My shopping and my working continue without too much change, at least for most of us.

It’s easier to get this point if you turn off the television and switch your car radio from talk to music. A   

few years ago, back in the George W. Bush era, I got a call from a major television network asking if I was available to talk about the President’s new budget proposal. But first, they needed some idea of what I would say if they interviewed me. I replied that there were points in the budget that were good, and other points that were bad. The producer said, “Sorry, we are looking for one person who is solidly for the budget, and one person solidly against.” Well, only a political fiend is solidly for or against any big amalgam of proposals, which a budget is. The result of this adversarial approach to the news is that everyone is told that the budget is hugely important, and that it’s either the savior of civilization or the death knell of a decent society.

There are some political issues that a business leader must follow, however. First, those that impact the business directly, such as industry-wide regulation or new health care rules. Even here, though, most business leaders get too caught up in listening to their industry’s lobbyists. For example, suppose Congress wants you to pay a tax every time you sell your product. That’s bad, right? Well, maybe not as bad as you think. Your industry may be in a position to pass that tax on to customers. (Or maybe not; engage an economist to help you estimate how the tax burden will be split between buyers and sellers.)

When I speak at business meetings, I get far more questions about the political enviroment than I get about how changes in the economy are impacting business. That’s OK for cocktail party chatter, but it does not help you run a more successful company.

www.businomics.com
“Dr. Bill Conerly is the consultant who connects the dots between the economy and business decisions. He holds a Ph.D. in economics from Duke University and was formerly Senior Vice President at First Interstate Bank.
Dr. Conerly is author of Businomics: From the Headlines to Your Bottomline—How to Profit in Any Economic Cycle (www.businomics.com/), which provides business leaders with a framework for understanding current economic news. He is co-author of Thinking Economics, a multi-media high school economics curriculum used in 24 states.”

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