‘Geography seduced everyone’ – is emerging market bias blind-siding your firm?

There is a notion in business that is often useful, but rarely observed – the idea of signal and noise, or rather being able to distinguish between the two. The not-remotely-new point I’m making – well illustrated in Nassim Nicholas Taleb’s not-remotely-new book, Fooled by Randomness – is that in making informed decisions, leaders should endeavour to shut out the ‘noise’ of short-term, rapidly changing information, which is typically near worthless. Instead they should focus on the longer-term, underlying trend, which can be worth a great deal if you can find it.

Such thoughts occurred while reading a recent piece in The Economist that tackles one of the dominant concepts in business over the last two decades – arguably the dominant idea – that western businesses must focus their growth and investment in key emerging economies. As the article ‘Emerge, splurge, purge’ notes, so prevalent has become this orthodoxy that it has escaped any real debate: ‘Corporate strategy is usually a contentious subject: there are fierce debates about how big, diversified or leveraged firms should be. But geography has seduced everyone.’