Mitt Romney, the presumptive nominee of the Republican Party, will defeat President Obama in the November elections by a margin of nearly 10%.
So predicted Rich Karlgaard, a columnist and Forbes magazine publisher who was the featured speaker during a Court of the Table and Top of the Table program on Sunday at the 2012 Million Dollar Round Table. The morning presentation--held on the second day of a five-day gathering of more than 6,500 of the world's top-producing life insurance professionals--offered insight about the direction of business and the global economy. Forbes also on touched on the opportunities and challenges that businesses will face in the coming years.
"Romney will win the election in November--the contest won't won't even be close," said Karlgaard. "I expect a 54% to 46% margin of victory.
"Obama is starting to make unforced errors that are hurting his campaign, he added. "Many on the left were outraged last week when he failed to lend support to public workers in their campaign to unseat [Wisconsin Governor] Scott Walker. And independents were perplexed when he said that the private sector 'is doing fine' in the current economy."
Karlgaard also expressed optimism about the GOP's chances for capturing seats in the House and Senate in the fall elections, but cautioned that Republicans will have a narrow window of opportunity "clean up the regulatory morass and the federal tax code" they inherit from a departing Obama administration. If they fail to act, he warned, "it will be the end of the GOP."
Turning to the U.S. economy, Karlgaard observed that, since the end of the 2007-2009 recession, America's GDP has increased by just 2%. He said the subpar performance relative to the 4%-4.5% norm can be attributed either to the ahistorical magnitude of the recent downturn or to a continuing uncertainty about the future among business owners.
"If you're a defender of the current administration, then you'll say--not without merit--that the severity of the recession and subsequent slow growth can be explained by the fact that everyone was trying to get out of debt at the same time," says Karlgaard. "But if you're a Republican, then you'll argue that businesses are paralyzed. They're sitting on their hands--not wanting to hire the next employee or build a new factory--because they're waiting for greater clarity on the direction of government policy."
If taxes and regulation of business become less onerous, then a return to a 4%-plus growth rate should be attainable. Likewise, Karlgaard said he took issue with pessimists who foresee "doom and gloom" and continuing "black swans"--rare events--for the world economy. International flash points that could give rise to region-wide conflicts--Afghanistan, Pakistan, Iran and North Korea--are, said Karlgaard, "already baked into the cake," meaning that investors have factored a potential deterioration in foreign affairs into stock prices.
He noted that, like many businesses based in Silicon Valley, he remains "bullish" on the chief engine of growth in Asia--China's economy--which he expects will slow in 2013, but continue to grow at a respectable 6%.
Karlgaard also questioned the impact of a default by Greece on its debt. He noted that Greece (among other nations) has defaulted several times on its debt in recent decades without calamitous results.
He added that German Chancellor Angela Merkel, a main player in negotiations on the European debt crisis, should not be pressured to bail out out Greece, as her first priority is to her own electorate. And most German voters, Karlgaard noted, remain opposed to financial support of Greece, a country that has for decades failed to live within its means and whose citizens are notorious for avoiding taxes.
Turning again to the U.S., Kaarlgaard said the current negative attitude on the domestic economy is akin to the pessimism that prevailed in 1975. Within the previous year, he noted, President Nixon and Vice President Spiro Agnew had resigned, the stock market had dropped precipitously, the country had evacuated its remaining civilian and military personnel from Saigon and unemployment stood at 11%.
"Howard Ruff, founder of the Ruff Times and a long-time advocate of using silver and gold as a hedge against an inflation-induced economic crash, said 'you haven't seen anything yet.' He predicted financial chaos for the U.S., but failed to foresee that the economy would restructure and recover in the coming years," said Karlgaard.
Amid economic uncertainty, American businesses must take steps to ensure their competitiveness and financial well being. To that end, said Karlgaard, they must strive in the coming year to becoming "5% bigger, faster, smarter and more empathetic" than they are today.
In the current economy, he noted, being smart equates to superior design, be it in the manufacturing and delivery of a product or service or in the execution of a business process. The standard-bearer of outstanding design, he said, is Apple: a company whose revenue and profit margins far outstrip competitors in the computer and consumer electronics industry.
"Design is being rewarded disproportionately in today's economy because technology and markets are changing so much faster than in decades past," said Karlgaard.
Also with a competitive edge, he added, are those businesses that know how to use analytics and data mining techniques to their advantage (e.g., to determine which customers are the most profitable to target or which employees are the most productive); and that know how to effectively organize teams to achieve certain outcomes.
Karlgaard observed that teams of between two and five people are generally optimal, for the "whole [the team] is greater than the sum of the parts." Too often, however, individuals are left to their own devices, resulting in failure.
He cited as an example Apple co-founder Stephen Wozniak, who successfully collaborated with Steve Jobs in the company's formative years to help make Apple a darling of the tech world. Yet Wozniak, whom Karlgaard described as "brilliant," repeatedly failed in subsequent ventures he pursued without the aid of partners.
Karlgaard noted that businesses increasingly must be able to compete both in terms of speed of innovation and price, the latter because the window of time in which a company enjoys a design advantage is growing smaller in a "commodity world that that is getting ever more brutal."
To recruit, retain and reward top talent, he added, companies also have to equip their sales people with "great technology." They additionally have to develop a culture of empathy, one that encourages trust between employer and employees and that cultivates staffers' long-term loyalty to the business.
Underpinning a culture of empathy, Karlgaard noted in closing, is a "moral purpose" that guides business actions.
"You must have a moral purpose in your organization if you want to feel really good about what you're doing," he said. "If you don't have a purpose, then you won't have empathy."