By Prof. Vicente Falconi, FALCONI’s founding partner
“We can’t predict the future, but we can create it.”
Jim Collins and Morten T. Hansen
In “Great by Choice,” the American professor Jim Collins recounts his nine-year research of 20,400 US companies. The research was designed to answer the question, “How is it that some companies grow vigorously in uncertainty, even chaos, and others do not?”
The conclusion was that those who maintained robust cash flow and moderate but steady growth were the real victors after a few decades. Jim Collins and his team proved that companies strongly benefit from safe financial practices and slow and predictable growth.
This is no different for countries. Companies (public or private) need predictability to have the confidence to invest, and the same applies to states. No one wants the country to grow 10% one year and 1% the next. Major changes in the economy caused by imbalances tends to bring about more difficulties than benefits.
Countries and companies are complex systems. For a company to invest does not mean simply putting money into a project. It is not a trivial event; rather, it involves the lives of many and therefore cannot be done solely on the basis of optimistic promises or forecasts.
With government, it is no different. Imbalances and variations always cause complications. When the economy worsens, the government has to spend time and money going to the aid of sectors in danger of failing. Nothing is free. Everything has a cost and all this aid requires imposing a tax burden, either today or in the future, on the rest of society.
Just as a ship captain studies the weather conditions to determine his course and speed, business owners observe the political scenario, the transparency of public accounts, the country’s fiscal condition, inflationary pressure, interest, and exchange rates, among other factors, to make their decisions. To move forward successfully, it is necessary for the sea to be calm and predictable.
Continued growth, even if moderate, is important for everyone. It is, perhaps, the main social policy that a government could strive for.
If we want to grow, we have to mobilize capital. Only by creating stable economic conditions and enabling a safe growth forecast will the government dramatically increase the ability to attract capital to the country. Predictable growth has value in itself for the investor.
I have never heard words against social policies from any businessperson; much to the contrary. However, we have all heard numerous complaints about the unpredictability of the economy and the lack of growth prospects.
Brazil is a country of 200 million inhabitants and the seventh-largest economy in the world. It is like an ocean liner that does not allow very rapid changes of course, which would be expensive for everyone involved.
All that a government needs to do is work hard in line with its political beliefs, but within the fundamentals of the economy, with goals on simple and visible indicators so as to create a safe environment and the expectation of growth, albeit moderate growth.
No one is asking for the country to have a Chinese growth rate, but rather to grow a little each year, always at the same pace, as suggested by Jim Collins, so that we can work calmly and smoothly, improving the lives of all in tangible ways.
VICENTE FALCONI, 74, is founding partner and chairman of Board of FALCONI Consultants for Results. This is one of three letters on sound management addressed to the President of the Republic of Brazil. Read the other two:
Text published in the Folha de São Paulo newspaper and website – Opinion – 12/02/2014