Intelligence Under Pressure

"My mind rebels at stagnation. Give me problems, give me work, give me the most abstruse cryptogram, or the most intricate analysis, and I am in my own proper atmosphere. But I abhor the dull routine of existence. I crave for mental exaltation." — Arthur Conan Doyle

This week, a shorter version.

The markets: Consumers, retailing, and what comes next.

Personal Log: Our wake-up call - Tariffs what they can do.

Politics: We may have crossed into an alternate reality

AI and Society: Intelligence Under Pressure - Humans, Companies, and Institutions are feeling it.

Economy: Consumer, Retailing, and the Markets

Both Canada and the US are looking at dropping interest rates. On the consumer front, retailers are starting to call out a slow holiday season at Foot Locker and American Eagle Outfitters Inc. while lululemon posted a strong quarter and yet it was clear that domestic sales weren't, and international growth carried the brand. On another front Volkswagen plans to cut 10% of its workforce because of foreign competition and changing dynamics in the market.

Overall, Canada's retail sales were down -2.2% for September 2024. In the backdrop of back to school this isn't a good story. And to top it all off, the unemployment numbers were up to 6.8%, which means that interest rates are coming down as the nation braces against the threat of tariffs. In the US, payrolls were higher than expected.

The US will also be looking at dropping interest rates, although it is unclear by how much. Canada could be as much as 50 basis points, given the current state of the economy.

It is certainly a tale of two different nations. It is unclear how this next Donald Trump administration will impact global economies. Is it stabilization or destabilization, creating strange new alliances?

Personal Log: Our wake-up call!

If you are having nightmares just because at the Honorary Patriot of the Year Awards (ABC News), the crowd started to chant 51st, 51st, 51st! A 25% tariff is more to worry about. But what would it mean from an economic impact?

The auto sector, agriculture, steel and aluminum, oil and gas would all be impacted. Exports account for about 31% of Canada's GDP, so an economic slowdown would be immediate, followed by job losses and investment uncertainty. There would be supply chain disruptions, and Canadian companies might pass on the tariffs to Canadian consumers. Then, demand will both fall off and potentially trigger inflation, with the risk of higher interest rates.

How do we mitigate this by diversifying our investments and exports, and what drives our GDP growth? Moving heavily into leading with AI, robotics, and new energy generation sources and elevating our education system to ensure Canada becomes more favorable for foreign investment. We have relied too much on trade with the US, the services industry, and our natural resources. How long could a negative impact last? Five to ten years, longer if we do not begin immediately to diversify our trade strategies. All this must happen regardless of what happens in January.

A skeptic or one prone to conspiracy theories might think that this threat of tariffs and offer to become the 51st state are connected. Well, it certainly looks and feels like economic coercion. The incoming US President has also promised to return jobs to the US. So what's the long game?

If this keeps you up at night, I suggest we reflect on this quote from Ted Lasso: "There's two buttons I never like hitting, and that's panic and snooze." Otherwise, let's not get hung up about it, but let's not dismiss it either. Instead, let's plan faster and ask our elected officials to start working together on our behalf. Canada's deep political division is low-hanging fruit for anyone wishing to gain an advantage.

For your information, I am offering this Wall Street Journal article. On a view of Canada and what Donald Trump may be thinking.

Politics: We may have crossed into an alternative universe.

France: Ousted their Prime Minister (BBC), which created havoc in the country and for the EU. Bermier was looking to cut 60 Billion Euros from the budget. Austerity is not something voters are accepting. And it could be a problem for other nations across the Western World.

United States: Well, pardon, no, really, I would like to be pardoned. President Biden pardoned his son. President-elect Trump appointed his daughter's father-in-law to be France's ambassadorship, whom he had pardoned during his first presidency. Biden is being asked to consider pardoning others to prevent them from being targeted by the incoming President.

South Korea: From Marshall law to the impeachment of a president, only he wasn't impeached, and it all followed with an apology. At a time when North Korea has sent soldiers to Ukraine, you have to wonder what is going on and what kind of stability there is in the region.

Canada: Impasse others call it Christmas foolishness. While Ottawa's antics may be very entertaining, nothing is getting done, and instead being tied up by parliamentary procedures. I have news: that is not good governance from any side of the aisle. We elect and pay politicians to address the nation's business, not their agenda.

If there is a word on my mind about post-pandemic spending and inflation, it is austerity. Fundamentally, it means cutting everything to get the finances right again. The public cannot bear the brunt of that. But politicians will try to convince you that they know what's best for you. The question is, are we moving to a society where everyone is for themselves? Hmmm, and then what if you get hit by tariffs just because someone wants to wield power? Politicians make a lot of bravado statements; however, so few have ever delivered. And the worst thing about politics is that we expect immediate gratification. If only it worked that way. I can tell you from experience that tax cuts will never make you rich; earning more money makes you rich.

AI and Society - Intelligence Under Pressure

In Chapter 5, I look at our ability to learn and gain knowledge. But as I reflect on that chapter, I often wonder how much pressure we humans, the organizations we work for, and the institutions we rely on are all under pressure to do better and perform effectively all the time. But we and they can't. Why is that? In a nutshell, everything is limited by our knowledge, and things begin to fall apart when we don't have the right talent or fail to re-educate the right people in place.

That is my view of why organizations fail, and government institutions squander so much money on consultants and lose on failed projects. Because there is so much stalled talent through layers of bureaucracy, it is very difficult to create and sustain change. These environments create fiefdoms and silos in businesses too, which are very hard to pry out. You can cut government and organizational costs; it works only when you replace them with better talent and technology and embed a culture of accountability.

But to take my point about intelligence being under pressure. I discovered this week through a search on Statistics Canada that only 4.2% of retailers are interested in AI. Astonishing.

Thank you for reading this week's issue of the Business Brief. Your thoughts are always welcome.

For more information on the book, click on the image. December is our soft launch of the book, and January will be our broader launch with updates on new presentations.