Why you need to look beyond the business model (and why you should study whatever you want)

Earlier today, I was talking to an entrepreneur who asked me why I studied public policy given my passion and background in business and startups. I asked him to explain why he thought his company would be around in two years. After he was finished, I briefly summarized what I thought the future of his company looked like. Unlike the entrepreneur, who only talked about his business plan and supply chain model, I discussed the sociological trends that influenced his ideal customer’s buying behavior and the expected policy changes that would occur on an international scale, points that he had barely thought about.

In complete honestly, I studied public policy because I get bored very quickly. Every prospective business student at UChicago jumped on the economics bandwagon, even though we all quickly realized that solving Lagrangians had virtually nothing to do with analyzing technological trends, forecasting product growth, or building Leveraged Buyout Models. The best thinkers can approach business and strategy from multiple points of view, and I have found that understanding global public policy and sociological trends is as important, if not more, than understanding supply-chain processes or knowing how to price a bond (which you can learn on YouTube in 20 minutes).

Take oil, for example. When the crude oil price per barrel started plummeting at the end of 2014 and even more in 2015, researchers and traders were very concerned with whether oil prices would ever rise back again or whether they would remain permanently depressed. In every energy report, the experts talked about supply and demand economics and how lower prices were slowly bankrupting American and Canadian companies. But what every (or almost every) Wall Street expert failed to note was that three short years earlier, a Tunisian man by the name of Mohamed Bouazizi lit himself on fire right outside his town’s office and burned, sparking the global phenomenon known as Arab Spring. The protests, no doubt, started due to immense poverty and years of oppression by the police and government, but quickly took over the Arab world. By 2014, Tunisia and Egypt had both seen their governments overthrown, Yemen and Syria were embroiled in civil wars, and every other country in the Arab world faced some type of protest, but to significantly varying degrees. In obvious sociological terms, citizens are generally less likely to protest in the face of better economic conditions and/or superior militaries.

No one even needs to see the numbers to realize this. But if you want some numbers, 87% of the Saudi Arabian government’s revenues come from the oil industry. 86% of the Bahraini government’s revenues come from the oil industry. This revenue is immediately poured into infrastructure development, military spending, and other significant private projects in attempts to reduce their reliance on oil. Oil revenue kept the protests in Saudi Arabia at a minimum and allowed the combined Bahraini and Saudi Arabian military to quash the potential civil war in Bahrain. Middle Eastern countries today are wealthy beyond words because of their dominance in the petroleum export industry. These drops in oil price happen every now and then, as seen in 1986 and 1998, when the markets suddenly get flooded by overproduction. However, given the urgency and volatility of today’s political climate, there is no chance that OPEC and others fail to maximize their individual revenues. Without money coming in, these economies wouldn’t be able to pay for their expenditures, directly putting their governments at risk; oil is their chief source of revenue.

Go broader. Think carefully about Attorney General Jeff Sessions — but also the cyclicality of American elections and how in the next 4–8 years we will likely have a Democratic president and AG again anyways — before investing new money in the marijuana sector. Look into the 2016 sources of funding for Cleantech companies and evaluate whether they will still be around in 2017 and 2018. You can apply this mindset to any industry and virtually any company today.