View of the Week: On World Challenges & The Role of Leadership...

As we went to press today while on the "Virtual Beat" here in #Outsiders, we were witness yet again to the carnage on-going in Securities Markets.    The Dow lost over 300 Points and other markets around the World have suffered--as China has prohibited selling in light of the profound challenges in the markets. As we also went to press, we saw the latest from the IMF as it underscored the implosion in the BRICS Economies.     Our team has noted the challenges in Brazil throughout the Daily Social Grids.  The challenges in Russia, China and South Africa are ever so evident--India seems to be faring better although the social and security challenges (epitomized by the attack on the Indian Air Base by infiltrators from Pakistan) underscores the profound challenges being faced by India with this latest from West Bengal on the violence out there. What we received here at our Virtual Studios in the Daily Power Sheet from the Fortune's Geoff Colvin goes to the heart of the problem of such challenges-leadership and anticipating it all.   It is tough, yet crucial read for all to get a sense of how to anticipate challenges and not merely react and be ready to face it head on: We should never make much of a single day’s stock market moves. After all, even the crash of 1987, in which the Dow dropped 22% in one day, didn’t portend a recession, and there’s an old saying that the market was predicted nine of the past four recessions. But still, yesterday’s global plunge in stocks – down 7% in China, down 2.2% in the U.S., down 2.5% in Europe – is just one of several accumulating signs that just maybe a downturn is on the way. Among the others: -Manufacturing contracted for a second straight month in December, the Institute for Supply Management reported yesterday. Activity is now at its lowest level since the last recession. -Construction was weak in November, the Census Bureau said yesterday. -The U.S. economy apparently grew even more slowly last quarter than economists had thought. The Federal Reserve Bank of Atlanta yesterday revised its 1.3% estimate of fourth-quarter growth down to 0.7%. J.P. Morgan Chase cut its estimate from 2% to 1%. Does all of this add up to anything? It’s easy for business leaders to tell themselves it doesn’t. The economy is almost never hitting on all cylinders, and some recent signs are encouraging. Consumers are spending with enthusiasm; they may buy more cars this year than ever before, for example. But wise business leaders are always fighting our remarkable human tendency to delude ourselves about bad news. That’s why former General Electric CEO Jack Welch liked to tell his managers, “Confront reality as it is – not as it used to be, not as you wish it were, but as it is.” So obvious, yet he had to keep saying it. Even when conditions turn clearly terrible – historically terrible – many leaders still can’t fully accept the new reality. I’ll never forget J.P. Morgan Chase CEO Jamie Dimon marveling at such leaders at a Harvard Business School conference in October 2008 – the most acute moment of the financial crisis. “I am shocked at the number of people who are watching that train [recession] coming down the track, and they’re still worrying about their strategic plan for 2009,” he said. “We cancelled all that stuff – all of it – meetings, trips, travel, you name it, to focus on the fact that we’re in the middle of a real crisis.” The economists who declare recessions still hadn’t done so. He wasn’t waiting for them. Caterpillar came through that recession far stronger than through any previous one, and the reason is clear. Long before the recession hit, then-CEO Jim Owens had forced company managers to devise a “trough strategy” for bad times. They hated it. But when Cat’s business “really drove off a cliff” in the autumn of 2008, CFO Ed Rapp told me, “we didn’t have to scurry around. We said ‘Pull the trough plans and do it now.’” Maybe today’s troubling omens don’t mean anything. But the best business leaders will be those with the fortitude to imagine right now that they might.