What 2024 holds and how to plan for it
2024 Global Economic Outlook
According to the International Monetary Fund (IMF), the global real GDP is expected to continue to grow at 2.9% in 2024, slightly down from 3% in 2023. This is still a good story after the 2020 decline of -2.8%, followed by a rebounce of +6.3% the following year, and +3.5% in 2022.
Zooming in North America, the U.S. real GDP is expected to grow by 1.5% in 2024, down from 2.1% in 2023. One main factor for the slower growth is Federal Reserve's efforts to combat inflation, which hit a 40-year high of 7.4% in 2021. The consensus is that the inflation rate will be around 2.6% in 2024, closer to the conventional target of 2%. Our national debt sits at 123% of GDP.
From a talent standpoint, unemployment rate was relatively low at 3.6% exiting 2023 and is expected to be at around the same level. That said, it is too early to tell whether the significant layoffs we saw in 2023 where over 250k jobs were eliminated, will taper off or not. This complex picture of labor and talent is nuanced in that while the labor market is very tight, the war of talents continues to feel severe for many companies, especially those who are with the right skill set and are open to hybrid work mode. College graduates on the other hand, continue to express ….
If one looks at the venture dollar volume as another indicator of the pandemic economic cycle, then the Q4 2021’s peak of $188B worldwide is far from “recovered” when compared to Q3 2023’s $73B. We do see some easing in the IPO market with Instacart and Klaviyo going public late last year, signaling the IPO market might open further. The general consensus is that there is still substantial amount of venture capital sitting on the sideline, waiting for the right time, or market clarity. The only exception might be the crowded space of generative AI. More on that later.
Looking at another big economy, China, the real GDP growth is forecasted to be at 4.2%, slightly down from 2023’s 5%. The more concerning number - inflation - is expected to inch up a little from 0.9% in 2023 to 1.9% for 2024. This will be a welcoming figure as otherwise the risk of deflation will have implications on more than just the country itself. Note that the national debt sits at 83% of GDP.
Geopolitical Situation
The war in Ukraine and the still-unfolding Israel-Hamas conflict are among the most significant geopolitical events continuing into 2024. The wars have already caused humanitarian crises, led to a sharp increase in energy prices, disrupted global supply chains, and resulting in great uncertainty while the world was trying to recover from the pandemic. The continued tension between the two biggest economies adds an additional overcast and needs careful and deliberate management from both sides. Finally, 2024 is an election year for both the US and Taiwan.
Planning for 2024
Long range and annual plannings are never easy nor exciting. But they become super important in time of uncertainty. Strategic planning should be just that - highly strategic. Make it light weight in terms of deep analysis, but sufficient for you to feel prepared to act upon, if certain situation arises, or opportunities materialize. My general recommendation is to do a combo - a 3-year long range planning no more than 3 pages, combined with an operating plan for the year, detailed enough for you to monitor business operations.
There are a number of areas CEOs should make sure they have thought through, or at least have an idea how to address.
What generative AI posture should you take? How relevant is it to what aspects of your business? Just because everybody talks about AI doesn’t mean you need to jump on the bandwagon. That said, critically assessing its implications both immanently and in the future will help you confidently lead in the right path.
What is your company’s superpower which makes up your competitive advantage? More importantly, does it have a natural market demand in solving a problem in a fantastic way? For even the best hammer in the world without a nail will not be the wisest investment. How can you continue to build on this core competency?
In the context of green energy transition, how can you accelerate it or capitalize on it? Conversely, what would be the cost on your enterprise’s future growth?
How can you better understand your customers so that you can double down your growth path? We often forget the delighted customers are what at the end drive our growth. Pushing your understanding and insights of your customers especially in this uncertain time will reap benefits as you chart the path to accelerate healthy and sustainable growth.
What would be the black swan event for your company? Given the geopolitical uncertainty, what implications would it have for your market, location strategy, supply chain risks, and talents?
In Summary
Yes the world can be in a better shape. But in grand scheme of things, we have come a long way since the Industrial Revolution. I’d encourage you to zoom out to gain a broader perspective, and leave you with the following recommendations.
Play for the long term with a heightened sense of urgency - don’t have knee jerk reactions. Take a long view and required time and investment to set your company up for success. At the same time don’t miss the window of opportunity. Continue to act with a strong sense of urgency in your execution
Hedge your doubling-down bet - formulate a strong conviction in your hypothesis and view of the future, and lead your resources towards that goal aggressively, speedily. At the same time, assume you’re wrong, and accordingly plan for the black swan event.
Rehearse intensely to improvise - be ready to react to sudden adverse events, or to capture opportunities that arise accordingly.
Be your own read team - look around to see who’s agreeing, and what others are not doing. Ask why, and look for reasons to believe otherwise.
Enjoy your ride - at the end the journey is equally if not more important than the results. Your team, friends, and communities will all be better off if you lead with optimism.
References:
IMF data mapper
Crunchbase article
McKinsey.com