"Always seek out the seed of triumph in every adversity" - Og Mandino
It was Joseph Schumpeter, a renowned economist, who coined the term "creative destruction" in 1942 to describe the constant process of business decline and failure, thus making way for new and innovative replacements. Like natural wildfires, this reinvigoration is just as necessary as the growth – economic or otherwise – that follows.
The current mood within the mature economies of Europe and North America is clearly dictated by the current travails of countries and their populations, both needing to unwind years of wanton spending fuelled by excessive debt. This has led many to conclude the so-called developed world will experience many years of flat or turgid growth – hardly a message likely to inspire confidence.
However, one may also see the forces of creative destruction at work. Indeed, the need for adjustment in a world of increasing longevity and greater material expectations has been predicted by some, and ignored by many, for a considerable period. In the West, and without wishing to trivialise the plight of those without jobs or genuine prospects, the challenge is now for entrepreneurial spirit and innovation to pick up where public spending left off. Times are clearly challenging but necessity is the mother of invention so opportunities will inevitably arise.
A recent article in The Economist ("Downturn, start up", 7 January 2012) addresses this very subject by highlighting how many established businesses started during downturns or bear markets. In fact, over half of the Fortune 500 list of companies, including General Motors and Disney, were started in tough times. Perhaps the next generation of successful, long-term businesses are being conceived now.
Take our own sector, which includes incumbents with long histories but now facing challenges to their business models – mainly through regulation and greater market scrutiny – at a time when their clients are also feeling the pinch. These are organisations that need to evolve or face the forces of creative destruction themselves. At Affinity, we believe our sector needs to get back to basics, focusing on a more traditional service-led approach whilst embracing those elements of technology likely to add genuine value and help clients understand and deploy their wealth effectively. Transparency, humility and the continuous desire for self-improvement are also qualities we feel will help our clients and allow Affinity to thrive.
And how about deploying investment capital effectively? Well, there are invariably pockets of opportunity, even when the overall picture seems gloomy. Investors using purely domestic markets – whether in the UK or mainland Europe – may find life tough so our guidance is to think global. After all, the ‘global financial crisis’ often referenced in Western media is more commonly known as the ‘North Atlantic crisis’ in China. It’s amazing how a perception of the same events can differ so widely.
At Affinity we make it our business to find those pockets of opportunity for our client portfolios, wherever they may exist, while keeping a keen eye on the risks involved – seeking triumph in adversity is simply what we do.