‘CIMA offers courses in macroeconomics. I think the subject sounds fascinating, but is it useful to know about GDP forecasts and the balance of payments? Most senior managers don’t seem to care.’
It could be that the term puts them off. “Macroeconomics” sounds very academic and theoretical. However, senior managers would be familiar with and use SWOT analysis in their strategic planning.
Since half of this framework – opportunities and threats – arises from the external environment, SWOT analysis draws heavily on macroeconomic data, such as unemployment, GDP or inflation. As do other corporate planning tools such as PEST or PESTLE.
Macroeconomics is fascinating. It’s the study of what influences an economy, what makes it fluctuate in the short term and grow in the long term.
Many macroeconomic indicators are very informative. Leading indicators help predict what is likely to happen in the economy – for example, a slowdown in the housing market seems to predict a recession is looming.
Lagging indicators reflect the impact the economy has (after a few months) on unemployment or business failures. It will be several months after the economy has hit rock bottom that these two indicators are at their worst.
Again, useful to know. Organisations base their strategies (exploiting their strengths and ensuring their weaknesses barely matter) on the opportunities and threats they face.
Analysis of the macroeconomic environment enables organisations to appreciate, and to an extent predict, how investors, lenders, suppliers, customers and competitors will react to interest rates, inflation, stock market indices or measures of productivity and new orders.
For example, just think how useful the Purchasing Managers’ Index is – a basket of measures which include productivity levels, employment and new orders from customers and is therefore really informative about current activity and confidence in the manufacturing and service sectors.
The best primer is CIMA’s one-day Masterclass course: Economics, An Introduction.
CEOs of big businesses have good reason to worry about fiscal policy, yield curves and the like – they sell papers, for one thing.
The challenge of macroeconomics is that it’s an abstract domain, approached discursively. At times that makes it feel more like astrology than meteorology. (Certainly economists are about as good as soothsayers at predicting storms.)
Unless they start young, scrappy entrepreneurial types rarely have the patience for it. I got lucky. Niall Fergusson joined the faculty at my business school just as I arrived.
An excellent communicator with a svelte line in corduroy suits, he led the class through a series of case histories on ailing economies. It was dense, dry, and abstruse. I found it so interesting that I seriously considered doing a PhD.
Whether or not I ever end up running a company large enough to need to worry about big waves, what I gained from studying macroeconomics was familiarity with a set of concepts for understanding complex, dynamic systems – ideas I apply in various contexts on a daily basis.
In that respect economics is quite like another broad and seemingly unrelated academic field, empirical psychology.
That has also unexpectedly helped me understand how and why people make decisions, and in turn how to sell to them more effectively.
So if you prefer freighters to dinghies, if it’s an intellectual hinterland you’re after, or if you just look good in corduroy, you’ve nothing to lose except your marbles.
Greg Marsh is the co-founder and CEO of onefinestay, a fast-growing start-up which turns your home into a hotel while you are away on holiday (onefinestay.com). He is a former venture capitalist with Index Ventures. He was a Fulbright Scholar at Harvard Business School, where he graduated top ofhis MBA class.
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