By Peter De Coensel,


The recession narrative is gaining strength. The IMF is expected to slash its 2022 4.4% global real growth estimate released end of 2021 any moment now. Expect a modest adjustment maybe in line with the ECB. The ECB, last Thursday, March 10, reduced this years’ euro area real growth figure by a modest 0.5%. According to the ECB, the eurozone is set for a still robust +3.7% real growth rate instead of the +4.2% pre-conflict. Expect more adjustments.

Research departments across US and EU universal banks subscribe to bigger fallouts and pencil in a global growth deceleration of about 1.5%. From estimates above 4%, the range of outcomes settle between 2.5% and 3.50% outcomes. The overall consensus still believes that growth engines remain resilient as EM and DM economies (re)apply sustained fiscal support and ample monetary accommodation refraining economic agents from expressing recessionary behaviour. This notwithstanding, before the pandemic, real global growth dropping below 3.00% signalled recessionary risk. The stagflation outcome becomes the dominant scenario. The read-through with market conditions as present during the 1970s is plentiful. However, as the market distils the impact of unanchoring inflation on potential growth and company profitability, labour conditions today are at the complete other side of the spectrum compared to the 70s.

Still, transmission channels under stagflation run alongside traditional lines of thought and centre around pricing power. Yet, labour market conditions across the globe are tight. Unemployment figures test new all-time lows in the US and the EU at 3.8% and 6.2% respectively. Faced with tight labour markets today but also longer term, I contend that companies should be careful when preparing for economic headwinds. During the upcoming stagflation episode, successful companies will combine pricing and margin power with talent power.

Talent power, or the ability to raise company productivity, efficiency, customer service levels and client satisfaction, will become the differentiating factor separating below average, average and winning business models

A generalised, short-term drop in profitability (lower earnings per share over the next 12 months) can normalise faster the moment in-house talent, the human factor, is nurtured but also new talent (from competition) can be onboarded. Talent becomes a key lever to gain market share.

Talent power has evolved to a necessary condition to achieve pricing power. Increased automation has led to a commoditisation of products and services. Automation in general and advanced process engineering specifically has shifted the balance of dependencies across input factors. Capital and natural resources remain abundant.

    • Natural resources as an input factor will require a transition away from fossil fuels towards carbon neutral solutions. Financial market and real economy interests have become aligned over the past years.

    • Capital and credit markets are intact. Accept the reality that central banks must normalise monetary policy, as misallocation of capital (speculation) has been growing since 2009.


That leaves us with labour as the factor that will separate leaders from laggards. Over the past 20 years we witnessed a slow shift in the balance from a dependence on natural resources and capital business models towards companies that mainly thrive on talent and the monetization of the corporate human intelligence. Talent that has the ability to process and transform data crafting intelligent client solutions and products. Data modelling directly impacts business and competitive intelligence. Data has substituted oil as the main factor that not only greases but also grows our economies.


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