Tommy Weir: A Perfect Storm

The last day of pearling season was traditionally a day of joy and celebration. The people of each town in the Gulf eagerly awaited the safe return of their men who had been pearling at sea for the past six months.

But in November 1928, it was not a day of celebration; a perfect storm greeted the pearl divers putting a cloud over Dubai and the industry they were all dependent on.

During that summer, while the pearling fleet was at sea, a cheap alternative from Japan, the cultured pearl, poured into the international markets wiping out the natural pearl industry.

Fashion houses failed to arrive for the end of season buying period when the residents of Dubai made their annual haul.

The effect on Dubai was immediate and catastrophic.

Local pearl merchants had been borrowing money to buy more boats and employing more men to collect more pearls. Their crews, who were away for six months, were paid half their salaries on departure – borrowed from moneylenders at a high rate of interest – with the second half paid on return.

In November 1928, there was no payment of salaries and no money to repay the “loan sharks”. An economic shutdown was in effect.

Pearling was the backbone of the Gulf economy and, during the early years of the past century, accounted for 95 per cent of economic activity. An unforeseen perfect storm settled over Dubai one year before the Great Depression.

Could a perfect storm be brewing today? In response to Western sanctions, Vladimir Putin is discouraging Russians from travelling to over 100 countries. Coupled with these Western sanctions, the Russian ruble is hitting all times lows. It could be a cold winter for many Russians.

On the other hand, growing Ebola fears have people cancelling travel plans taking a precautionary stance to see how this deadly virus will be contained.

Meanwhile, the world is also faced with the unrecognised state, but recognised terrorist group ISIL, the most violent extremist force to hit the Middle East, which has obviously resulted in travel warnings.

I doubt any of the pearl divers who left the shores of Dubai in June 1928, thought they would come back without a market.

On their journey back from the sea, they rejoiced through songs approaching the shores expecting a celebration. Three men -Kokichi Mikimoto, Tokichi Nishikawa and Tatsuhei Mise – the men behind the cultured pearls – ruined the economy of the Gulf and drove thousands into poverty.

Fortunately, our economy is not built on any single economic activity; but we do rely heavily on travel and tourism. Are the world’s events – Russian Sanctions and currency devaluation, Ebola and ISIL – rising together to create a possible thunderstorm?

This should be of particular concern to retailers, hoteliers, and the travel industry and any business that serves, supports or relies on those industries. Here in Dubai, that is nearly all of us.

Knowing there is a remote possibility that you will be navigating your company through a chaotic time, the question arises, what should you do?

Play a game. Well, I don’t necessarily mean the likes of “Monopoly” or to gamble on your business. Rather, you should engage in strategic scenario planning, a business simulation. Paint out scenarios that are inside the realm of possibility.

For example, “what if the Russians failed to travel during their winter holiday?” Or a graver example, “what if Ebola concerns spread and travel bans become the norm?”

Then, along with your executive leadership team, rate the probability that these scenarios may actually materialise.

This risk assessment exercise highlights whether it is prudent to adapt your plans given the potential scenarios you laid out or to dismiss them. Separating probability from possibility is the business equivalent of determining fact from fiction.

If you feel your scenario is probable, that it has merit, then you will want to create an actual Plan B. Or what Caterpillar calls a “trough plan,” so that you are ready for the time between economic peaks.

After determining what you could do to steady the ship – your company – in the midst of a perfect storm, you will want to repeat rating the probability. Instead of determining the likelihood of an event, you will now assess the probability that your plan would succeed under those circumstances.

As an optimist, I always hope a perfect storm does not come on our shores. But as a leadership advisor, I have a responsibility to help CEOs be ready to lead their companies in the midst of any confluence, and the knowledge that the best will prevail.