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Currents versus Waves

By Society of Bank Executives posted 07-26-2022 18:01

  
Currents versus Waves
Paul C. Godfrey, Development Advisor

Currents versus Waves

Dr. Paul Godfrey

Development Advisor, Society of Bank Executives

 

In this post, I want to discuss a common challenge facing executives: focusing on the right things. I have a CEO friend who shared with me an insight he learned early in his career that benefited him almost every day; “learn to tell the difference between currents and waves and pay attention to currents.” This advice is both timeless—always helpful—and timely. It can help you make decisions today. Many executives today are at the point of exhaustion. First, it was COVID lockdowns, now it is new variants that still impede the lack of business as usual. Exhaustion also stems from labor shortages, supply chain challenges, and now a macro-economic environment that’s becoming more hostile each week.  

Differentiating between the “waves” of today—fads and short-term crises—versus longer-term “currents”—deep economic, political, social, or technological changes—provides a partial antidote to the exhaustion. In this post, I’ll lay out some basic physical properties of currents and waves, and in the next post, I’ll offer some insight into current waves and deeper currents.

Properties of Waves

Transverse waves come about when the material being carried by the wave runs perpendicular to the energy stream fueling the wave. Transverse motion creates chop and churn—waves that roil and shift direction. We see media pundits and politicians whipsawing between various crises of the day; this world lives on waves. They emphasize the most current and surface-level issues and create sound bites that shock.  The chop of this cluttered environment makes forward motion difficult, and uncomfortable and requires greater navigational skills. Bad information and piecemeal data that comes out in dribbles and drabs contribute to choppy waves. We see churn as the time it takes to fall, from 60-point headlines to 12-point analysis, continuing to shorten. Reliance on popular media reports, or the latest political speeches, condemns us to live in a world of transverse waves.

Longitudinal waves, as you might expect, are those where the material being carried moves along the path of the energy flow. These are the waves surfers love: they “ride the wave” into shore, harnessing its energy for productive work/fun.  Business leaders can ride these waves when they find opportunities to use the current situation to advance strategic priorities. One longitudinal wave we face today comes from a tight labor market. Deepening your organization’s commitment to your people helps you solve problems related to turnover and eases the hiring of new ones. That means paying employees well, updating benefits to reflect current realities, and focusing on training and development to help them find purpose and success in their roles.

The implication for bank leaders is clear: get off transverse waves and leverage longitudinal ones.  A story illustrates my point.  Have you ever wondered why the Notre Dame/ Navy rivalry is one of the oldest on the gridiron, even though Notre Dame leads the series 80-13-1?  It’s because Navy helped Notre Dame move from a transverse to a longitudinal wave. First hit by the financial pressures of the Great Depression and then seeing its student body leave to fight in World War II, Notre Dame was running out of money and faced closure. The US Navy rescued their rival by setting up a training base on campus, which provided the needed funds to keep the doors open. Notre Dame schedules the Naval Academy every year to repay that kindness, for almost seven decades. 

Where’s your Navy or Notre Dame?

Properties of Currents

Waves transmit energy, currents create it. Currents are the deep, long-term forces, principles, and trends that generate energy. It’s easiest to illustrate this with an example. This week I read that, in addition to COVID and the Monkey Pox, African countries now face an outbreak of the Marburg Virus, somewhat akin to Ebola. The rapid co-occurrence of dangerous epidemics and pandemics certainly cause waves, but they’re driven by some underlying currents.

More toxic bugs.  As medicine has gotten better over the last century, we’ve eliminated or mitigated the impact of mild to moderate bacteria and viruses. Common bacteria can be killed with antibiotics, and we can now vaccinate against many viruses. What we’re threatened by now tends to be new, uncommon, and highly virulent bugs that hit humans hard because we have no natural or man-made defenses.  These microbes are tough and resist easy fixes.

Habitat Changes. COVID, Monkey Pox, the Swine Flu, Bird Flu, and now the Marburg Virus have been endemic in the animal kingdom for centuries. Making the jump to humans in most cases has been difficult because humanity has avoided contact with the wild, undomesticated animals that carry these unique and dangerous viruses. Global population growth pushes back that frontier and we find ourselves living much closer to disease-transmitting creatures.

Global integration.  In a more genteel age, we had epidemics that impacted a lot of people in a limited area. Now we have pandemics (the prefix pan means “all”), or infections that impact lots of people in lots of places. The ever-increasing ease of global travel energized COVID; it also fueled globalized manufacturing chains (with their scale economies and geographically leveraged skills), financial institutions that created arbitrage profits around the world, and globalization opened diverse markets for goods and services, from asparagus to zippers. Guarding against future pandemics means altering what has evolved into a very sophisticated and efficient business ecosystem.

The implication for leaders is equally clear:  spend your time identifying currents, figure out what waves they generate, and get longitudinal to those waves. For example, more toxic bugs mean more innovation, science, and medical devices. How well do you do financing biotech companies or medical equipment startups? De-coupling from global supply chains has huge implications for business financing, from commercial real estate to working capital loans. Where are you ready?  Vulnerable? Smart bankers will be thinking now about how to lead their clients through that transition.

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