A relatively new factor which has become critical in decision making is volatility. Social, supply chain, economic, psychological and other factors used to experience fairly constant variation in a period. The pandemic, climate, social, economic and other factors are currently experiencing extreme volatility which must be considered. Commodity prices like lumber and cotton are varying 50-100 % within a few months compared to 10-15% a few years ago. The stock market is down 20-30% this year compared to a traditional range of 10-15%. Inflation and interest rates were fairly constant for 10 years and have recently more than doubled. Social and political events like climate change, the pandemic, and Ukraine have caused major disruptions in our society.
Managing this volatility requires an understanding of changing parameters.
There are clear demographic trends that need to be considered. Most importantly, diversity is not just some political issue. The growth of minority groups, urban population, the south, and the decline of the white population are actually critical factors in understanding marketing and analytical challenges.
Embrace diversity. We need to be aware of our environment and recognize where there is inequality. And then, work to create equitable change, improve measurement and understanding. Improved analytics gives us the capabilities to better understand populations and responses. For example, Hispanics represent 18% of the population and Asians 8%, while blacks represent an almost constant 12%. These segments are more concentrated in certain geographic regions, but need more attention in every focus. Hispanics also represent 17% of the under 18 population and only 4% of the over 70 population.
Wealth distribution is becoming increasingly more unequal. 10% of the population control 80% of the wealth in this country. The pandemic has only accelerated this trend.
2019, 2020, 2021 and 2022 should be looked at together. Getting excited or depressed about one year is erroneous. In general, the four years together provides a more positive and reasonable perspective than just one year. For example, many firms in areas like finance and real estate are experiencing weak results in 2022. However, they ignore the great results in 2021 that more than offset 2022.
The Internet and its usage, especially among younger people, will continue to explode. Nearly every consumer-based market is dominated by businesses that are capitalizing on the Internet of Things, like Amazon and Google. Similarly, sharing services like Uber, Airbnb, Amazon, and thousands of other businesses are disrupting their individual markets. In contrast, Facebook and Twitter seem in extreme transition.
The Pandemic and its impact are not finished. The most prominent evidence of the Pandemic, sickness, quarantines, masks, and death are dramatically declining. However, we may hugging too quick to dismiss long term lingering effects: Entertainment, going out, hugging, are only gradually returning to normal. Work from home, virtual meetings and more internet shopping seem part of our society. Some of the most bothersome impacts are in declining math and English scores, and rising death rates.,
Remember that interacting parameters have as much impact as individual. Bias, change, potential, etc. all affect decisions and outcomes. For example, analytics advises us to pursue the most likely outcomes. However, intuition, passion, and effort underscore most venture capital successes.
Volatility needs to be understood to improve decisions. Understanding the risk, the rewards, and the importance of issues can improve outcomes. Don’t allow fear, uncertainty, or tradition to lower your potential and prevent you from trying something new. The realities and changes in volatility like populations, the economy, political environment, and social values should all be reviewed and considered regularly. The most important thing to keep in mind is that many variables are changing faster and more often than ever before. So, not only do you need to understand volatility, you need to keep up with the latest changes.