SLID with Dr. Erevelles on how to “Predict the Future in Business”
View(s):The Sri Lanka Institute of Directors in association with the Institute of Chartered Accountants of Sri Lanka recently featured Dr. Sunil Erevelles, better known as the ‘Guru on the New Economy’ who spoke on the ‘Future of Business’ in Colombo.
Dr. Erevelles said that over the last four years there has been a global financial crisis resulting in meltdowns in many countries.”Therefore the questions most of us are faced with today are ‘how we make decisions for our company amidst these changes’ and ‘is it actually possible to predict the future’,” he said.
Dr. Sunil Erevelles at the presentation.
Many people depend on predictions by economists in order to look into the future, but what most people do not realize is that 93 per cent of the time these predictions have turned out wrong.
According to Dr. Erevelles this is due to the fact that economists’ thinking linearly as opposed to a more geometric outlook.
According to him past economic activity such as unemployment and customer sentiment is not the most suitable method to predict the future. “It’s a chicken and egg problem. Does unemployment predict the future? Or is it the other way around?” he asked stating instead that it by the use of factors known as the ‘fundamental causes’ that one will be able to do the above with precision.
Using data from different countries such as the USA, Brazil, India and China, he explained that no matter how you look at the economy and its growth, it still consists of three aspects which are consumer expenditure, government expenditure and net exports. “If you look at a country like China, 30 per cent of its GDP comes from exports and Taiwan has a 65 per cent export based economy. In the USA if you look at the last 30 or 40 years, net exports have been marginal and really steady. Consumer expenditures account for 70 per cent of the economy and government expenditures accounts for 30 per cent. In other words it is the consumers that drive the US economy,” he said.
This position however differs from that of Britain, France and Canada with their vast social systems and aspects such as free healthcare and education.
Dr. Erevelles is of the opinion that the world is presently more at risk of deflation rather than inflation. Commenting on gold, he noted that it may not be a good investment in the future because it is actually a hedge against inflation. “What will shock the economist more than anything is at the end of all this, the dollar will be the only safe haven in the world and the dollar will go up by 2022. If there is one thing for sure, too much debt and too many dollars floating around are bad for the dollar. As these dollars get wiped out and banks write off huge assets, the number of dollars will come down. At the end of all this, in the long term, I am 100 per cent sure that the US dollar is going to go up.”
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