Flywheel of Reinvention
Bonnie Murray, Founder & CEO, Raccord Inc.
December 31, 2022
With a roll of the dice, the Fed landed on (un)lucky number 7 for 2022, causing a tectonic shift, brought on both by structural changes in the market and significant macroeconomic headwinds not seen since the stagflationary days of the 70’s. Previous support has now become fault lines, exposing the fragility of our normally distributed world. With the S&P ending the year breaking a key Fibonacci golden ratio and private markets recalibrating, disruption is at the forefront. Only creativity and innovation can power the flywheel of reinvention, meaning, not changing what is but building what isn’t.
Quantum entanglement is the only way to describe the macro environment we find ourselves in. With energy dependencies and war-time necessities taking a back seat, our focus has quickly shifted to inflation and the consequential effects. The conforming loan (government supported) vacuum has been turned off, equating to roughly half of the $11T mortgage market. Couple that with $52 billion in commercial real estate loans rolling over in the next 24 months (according to Trepp) and a shadow economy within the private markets, the world sits in wait for actuarial science to take hold. Aside from the brief COVID induced recession, this year will mark the end of a 13 year bull market that began in March of 2009. Analogous to the GFC days when debt was cheap and massive liquidity existed across every investment vertical, valuations this year sat at historical highs. What always follows is a painful period of deleveraging, illiquidity and subsequent repricing. Real estate, the world’s largest asset class, saw cumulative declines of 30-40% between August 2008 through June 2010. Alas, through the smoke, some of the most disruptive technologies of modern time were born, AirBNB, Uber, Slack and Square, to name a few. Chaos and necessity breed innovation.
As the economic pendulum swings across the globe, there is one corner of the market with brazen defiance, yet more disruptive. Proptech and the rapid pace of invention has upset the equilibrium in a seismic way. Data as an asset and predictive analytics will be a competitive advantage, built to value capture and optimize processes that no longer work in today’s environment. Like a war chest to draw on, new AI tools adept at identifying valuable insights and devising solutions beyond the scope of the human mind are being created to solve problems that may not present themselves during times of irrational exuberance. As Jeff Bezos once said “Invention is in our DNA and technology is the fundamental tool we wield to evolve and improve”.
As organizations react to existential threats, entrepreneurs step outside the walls of comfort, pushing the boundaries of what’s possible, trading conservatism for creativity to build the future. Data has become the protagonist of this next chapter and new innovations will help organizations optimize human capital, discover new opportunities and create strategies that support a more purpose-driven pursuit of success.
Happy New Year!
