As stock markets plunge worldwide, the great danger for business leaders is that their constituents will get scared, and their fear may become self-justifying. If nervous customers stop buying, and lenders stop lending, and employees get distracted from their jobs – all because of a vague sense that something big and ominous is happening – then the machinery of the economy would slow down, and something truly big and ominous actually would be happening. But it isn’t inevitable. Leaders can impose psychological circuit-breakers that interrupt the downward spiral of fear.
The most obvious is to project calm confidence backed up by facts. Virtually everything your constituents are seeing and hearing in the media is frightening; the media love drama. A reminder of what’s going right in your business introduces a new perspective. Effective leaders never sugarcoat reality, and acknowledging any realistic concerns is mandatory. But pointing out the business’s strengths and noting that it’s well prepared in case it’s affected by turmoil in China or elsewhere is step one in restoring calm.
Leaders will want to think through what recent developments might mean for their business specifically. For example, we keep reading that China’s stock market drop indicates lowered expectations of the country’s economic growth, which would reduce demand for oil, and thus oil prices are falling, which is bad news for other economies. But hold on. It’s certainly bad for Canada and some Middle East economies, but the U.S. overall probably gains more than it loses from low oil prices. And what about your own business? It could suffer or gain in a big way. Similarly, uncertainty about China and other economies could drive big investors to buy dollars as a safe haven, as has happened before. Would a stronger dollar help you or hurt you?
More broadly, it’s time for leaders to conduct rigorous scenario exercises in which they think through possible second-, third-, and fourth-order effects of what’s happening now. In the U.S., home prices started dropping long before the financial crisis hit. Yet most business leaders and investors failed to think through the steps of how that downturn could be transmitted through the financial system in new ways, leading eventually to the world-shaking trauma of September and October 2008.
The dramatic news of the past week may yet amount to nothing. It was a bad week for the Dow, but remember that the market cratered even more steeply, and fell far lower, just last August. Does anyone remember? For now it’s time to step up preparations just in case, and to help those around you to calm down.
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What We’re Reading Today
United CEO recovering from heart transplant
United says that Oscar Munoz, who suffered a heart attack shortly after taking over as CEO in September, could return to work during this year’s first quarter or early in the second. General Counsel Brett Hart will continue as interim CEO; investors have called for a succession plan because it’s still unknown how fast Munoz will recover. Chicago Tribune
World’s most valuable company considers going public
It’s Saudi Arabia’s state-owned oil company, Saudi Aramco. With oil prices low, the move would be part of an effort to balance the kingdom’s budget. What’s believed to be a business worth trillions has long been one of the most secretive, withholding even revenue figures. The decision being weighed by deputy crown prince Mohammad bin Salman won’t come for another couple of months. The Economist
Another Chinese billionaire disappears
Chinese fashion chain Metersbonwe says it has been unable to reach chairman Zhou Chengjian or board secretary Tu Ke. Fosun chairman Guo Guangchang was shuffled away by Chinese police only weeks ago to aid in an investigation, leading to a similar announcement from his company. President Xi Jinping has led a crackdown on corruption, which has intensified following the summer’s market drops; there’s speculation that Zhou could be helping with, or a focus of, such an investigation. CNBC
Why Spirit parted with its CEO
Ben Baldanza grew Spirit from a startup to one the industry’s highest profile – and most reviled – low-cost carriers. But his public flaunting of negative feedback grew tedious as the stock began to tumble. The hiring of Robert Fornaro may also signal that the young airline is ready to grow up now that it’s in a fight with American Airlines over low-cost routes, and its attempt to grow revenue by 30% depressed profit margins. Fortune
Building a Better Leader
Do you have vision as a leader…
…or are you just full of yourself? Employees can tell by whether you rule by fear or faith and whether it’s all about you or the company. SmartBrief
Companies with a leader who has a strong character…
…outperformed those without one by almost 500%. Fortune
Women who make less than men for the same job…
…have a 2.5 times greater risk of depression, says new research. Reuters
Obama’s plea for gun control
In a town hall setting, President Barack Obama tried to sell his executive actions on gun control, which would increase background checks and limit unlicensed sellers. Obama said his actions are limited and criticized Congress and the National Rifle Association for strangling debate. While the NRA was invited to the town hall on CNN, it declined to participate. Instead, chief NRA lobbyist Chris Cox appeared on Fox News at the same time as the town hall, arguing that Obama wants to revoke the right to own a gun. CNN
Trump speaks in Burlington, Vermont…
…but attendees had to declare allegiance to the candidate before gaining entrance. Witnesses say security officers escorted people from the arena if they didn’t declare support for Donald Trump. He said he was just being loyal to his fans, but critics suggest his motive was to avoid heckling from Burlington’s largely liberal community. USA Today
Christie sets target on Rubio
After the PAC supporting Florida Senator Marco Rubio ran ads questioning Chris Christie‘s record as New Jersey governor, Christie quickly fired back. He noted Rubio’s inexperience and said Hillary Clinton would “cut his heart out.” Christie has risen in New Hampshire polls, leading other candidates to attack him more directly. NYT
Up or Out
Family Dollar CEO Howard Levine will step down after completing the company’s integration with Dollar Tree. MarketWatch
Danny Sabbah, IBM’s chief technology officer and general manager of the cloud unit, has retired. Also retiring in December was IBM’s security group general manager, Brendan Hannigan. Fortune
Fortune Reads and Videos
T-Mobile CEO curses out net neutrality non-profit
In a video posted on Twitter, John Legere said “Who the f*** are you anyway, EFF?” in response to a question from the Electronic Frontier Foundation. Fortune
San Francisco’s tactic in stopping illegal hotels
It’s asking Airbnb and other home sharing companies for help. Fortune
Lenovo is dumping Motorola’s brand name
It will now be referred to as Moto by Lenovo. Fortune
Target teams up with Soul Cycle
The collaboration will include 45-minute cycling classes and selling branded merchandise. Fortune
Physicist Stephen Hawking turns 74 today. Biography
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|Produced by Ryan Derousseau|