Uncertainty is Bad

Generally we don’t get into politics much on this site, but because of the nature of camera production, sometimes we can’t avoid it. Britain’s BREXIT vote last week is a good case in point.

Already we’ve had multiple camera company CEOs comment about the impact of Britain leaving the EU, and I’m sure we’re going to see more. Canon’s CEO said the “U.K’s decision could also bring a halt to the economy recovery that had been underway.” That was a bit of coded talk. What he meant is that Canon, among other companies in Japan, was hoping the European economies, including the U.K., would have enough GDP growth in the coming year to keep camera sales from collapsing further in the region. Moreover, the potential for increase in the value of the yen against the British pound and the Euro would make imports more costly, and thus profits on imported cameras tougher to attain.

Meanwhile, Hasselblad’s CEO was also talking about how BREXIT might impact pricing in the UK before the vote. Right now the new X1D is priced at 5990GBP, but given the pound’s decline against most currencies, that might have to be adjusted.

As you’re  probably aware from your regular news sources, the immediate impacts of BREXIT were felt in the strength of the dollar and yen versus the UK pound and Euro (although this yo-yoed back a bit late Friday, the pound is still significantly down in value from pre-BREXIT), in the relationship between the UK pound and the Euro, in quick initial selloffs in the stock markets worldwide, and in comments of a number of (mostly financial) companies that they may have to move employees out of London. Companies like Samsung were already considering moving their European headquarters out of London, according to the Korean press.

The problem with all those knee-jerk initial responses is simple: the actual impact of BREXIT is currently unknown and unknowable. All the market and corporate moves are and will be based upon unmitigated speculation. In these days of undisguised fear and dystopia, that speculation is likely far out of line with where the reality will end up.

But that’s exactly the problem that Canon was complaining about: uncertainty in any major economy essentially makes corporate planning a wild guessing game. We currently have uncertainties in a number of major economies (for differing reasons), so adding another one with even more uncertainty just makes companies wary of what the future portends, and they go conservative on investment and sometimes even innovation. (To pay back innovation, you need to know that the products you produce have a healthy upside, and weak markets are the antithesis of that.) 

For Britain’s photographers, BREXIT is totally unpredictable at the moment. The drop and then partial rebound in the value of the pound means imported cameras—and lets face it, they’re all imported now, even those Leicas and Hasselblads—could end up getting more expensive, but it’s impossible to predict right now. Companies like Nikon, who will cut any cost they see much like a paranoiac trying to kill all insects at their camp site, may look to see what they can now cut back in the UK, too. But that, too, is impossible to predict right now.

BREXIT could take as long as the mandated maximum of two years to actually define all the changes that will impact the British and European markets (longer if other countries attempt their own exit from the EU). And so what we’re left with is a great deal of uncertainty. 

Businesses hate uncertainty and so should you. It’s called “business blindness” because companies have no visibility as to how anything they do might or might not do will impact their results. Not that there’s any certainty in any market, but uncertainty is relative, and can be increased or decreased politically. There’s clearly a great deal of uncertainty in Europe at the moment that got worse, and that’s bad.

I need to note that the really sharp minds have a knack of turning uncertainty into profit, though. Why? Because uncertainty at the level we currently have with BREXIT typically causes overreaction, and that means that you can bet against the overreaction. The George Soros’ of the world are looking at the arbitrage opportunities and how to exploit the overreactions. I suspect the initial drop and partial rebound of the value of the pound was due to some of these speculators entering their bets. You and I? Well, we’re just wondering what this is going to do to the already overstressed camera companies.  

No one knows the answer to that, even in the boardrooms in Tokyo where this topic is obviously now at the top of the list of many problematic issues to discuss. Uncertainty is bad. You can’t make reasonable assumptions about conditions, thus you can’t make reasonable product decisions.

To my British and European readers: I have great empathy for your current position. You’re in the middle of a storm that currently has no predictable strength or length. It doesn’t matter which side of the BREXIT vote you were on, you’re in for an undefinable tumult for the time being. Hunker down, stay safe, and try to enjoy your photographic pursuits as usual. 

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