Shocks, Cr!ses, and False Alarms: How to Assess True Microeconomic Risk
Philipp Carlsson-Szlezak and Paul Swartz
Harvard Business Review Press (July 2024)
How and why assessing macroeconomic risks requires highly developed judgment
Carlsson-Szlezak and Paul Swartz have wide and deep real-world experience with all manner of organizations that were struggling to avoid or overcome barriers to accurate assessments of macroeconomic risk. As they explain with exquisite precision, they focus on what it would take for true crises to happen — “not simply on the question of whether they will happen…So, it is true that macroeconomics lacks the elegance of a solo performer, like physics. But it plays well in a band. We must bring in a broader set of perspectives and methods to make it shine…Leadership is abuut navigating uncertainty. If the future were readily predictable, there would be nothing special about leading — it would be mere execution. Assessing microeconomic risk is no different. It involves a mix of knowledge, skill, and experience. — in short, judgment.”
They hope you and other readers will benefit across the following dimensions:
1. Develop new analytical skill(s)
2. Negotiate the macroeconomic risk landscape with confidence
3. Think like a rational optimist
4. Hear our views
These four are briefly discussed on Pages 12-13 and throughout the lively narrative.
These are among the passages of greatest interest and value to me, also listed to suggest the nature and extent of Carlsson-Szlezak and Swartz’s coverage:
o Good Macro at Risk (Pages 3-15)
o Navigating Shocks, Crises, and False Alarms (4-7)
o How to Assess True Macroeconomic Risk (17-30)
o Letting Go of Master Model Mentality (20-21)
o Emerging Markets: Actionable practices (24-25)
o How Cycles Die: Critical Risk Profile (33-54)
o Why Policy Recessions Still Matter (38-40)
o The Gravity of Growth (57-70, 79-90, and 245-246)
o The Enduring Appeal of Magical Growth Models (67-77)
o When Technology Lifts Growth and When It Doesn’t (79-80)
o Remember, Stimulus Is about Willingness and Ability (115-125)
o Why Tactical Stimulus Sputters (127-129
o Inflation (137-148, 150-153, 157-158, and 247-249)
o Remember, Capital Allocation Will Have to Be More Disciplined (167-168)
o The Threat of Debt, Imagined and Real (169-179
o Learning to Love and Live with Bubbles (181-191)
o The Rise of the Convergence Bubble (197-202)
o Trade, Not as Bad as It Sounds (219-229)
o The False Alarms of Dollar Death (233-235)
o Remember, Dollar Obituaries Will Remain Premature (238-239)
Keep in mind that, in Shocks, Cr!ses, and False Alarms, Carlsson-Szlezak and Swartz do not offer a comparative analysis 0f major economics and their relative potential, nor do they devote separate chapters to key topics such as artificial intelligence (AI), climate change, and the Chinese economy. As indicated previously, their purpose is to help you and countless others to navigate macreconomic risk effectively.
They urge all executives to “embrace a more grounded approach to macro risk…macroeconomics is about udgment — not prediction [because] judgment is the basis of better decision-making (avoiding costly traps), and it can reduce experienced volatility (enabling smoother leadership). Nobody controls economic volatility — but leaders can choose what they focus on.”
I congratulate Philipp Carlsson-Szlezak and Paul Swartz on Shocks, Cr!ses, and False Alarms. It is a brilliant achievement. Bravo!
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Here are two suggestions while you are reading it: First, highlight key passages Also, perhaps in a lined notebook kept near-at- hand, record your comments, questions, action steps (preferably with deadlines), page references, and lessons you have learned as well as your responses to key points posed within the narrative. Also record your responses to specific or major issues or questions addressed, especially at the conclusion of chapters.
These two simple tactics — highlighting and documenting — will facilitate, indeed expedite frequent reviews of key material later.