In a context of war, geopolitical instability, persistent inflation or strong economic volatility, consumption no longer has a rational basis and is greatly affected by the reflex of fear. In the end, you are always conditioned. And it is a derivative of perceptions. In other words, on the one hand, we suffer from an exaggeration of psychological security (the war is far away and it gets here first!…), but, on the other, we live in permanent fear, given that the Portuguese people are among the most fearful people in existence, with fear explaining a good part of the actions of the Portuguese consumer. Therefore, it explains behaviors. For example, much of the resistance to entrepreneurship comes precisely from fear.
There are relatively clear predictors of these behaviors.
The first is uncertainty. When people are unable to anticipate prices, income or employment, they tend to postpone non-essential purchases, reinforcing savings (which can never be achieved), precaution and concentration on the basics.
The second is the loss of purchasing power. Rising prices, especially in food, energy, housing and credit, compress disposable income and force more defensive choices. The consumer compares more, switches brands, reduces quantity, drops the line and buys less on impulse.
The third is the perception of scarcity. Even when scarcity is not real, it is enough to be perceived to change behavior. We then see the hoarding, the advance purchase, the search for stocks domestic security and greater sensitivity to immediate availability.
The fourth is the erosion of trust. And fado. When confidence falls, the consequence is also a fall in the willingness to take risks: fewer long-term purchases, less family investment, more prudence. In parallel, the demand for promotions, formats low cost and channels that give a feeling of control. It’s our fate.
The fifth is emotional fatigue. In prolonged stressful environments, consumption becomes erratic. Some withdraw completely. Others compensate emotionally with small (or large) consumptions that give them back some normality, pleasure or status. Here, the timing of the war and the closure of the Strait of Hormuz will dictate much of what will happen from now on.
All this shows that consumption does not respond only to price. Responds to context, perceptions, expectations, anxiety and fear. Very scared.
This is where financial training is sorely needed, knowledge of the logic of cycles, the biases we are subject to in order to increase our ability to read the context, improve decisions under pressure, distinguish permanent noise from a sporadic whistle, manage budgets, perceive risk(s), plan, compare, negotiate and choose better.
In volatile times, financial, economic and managerial training is not superfluous. It never is. More now. It becomes a defense mechanism. It helps families, managers and professionals not to react just out of impulse, fear or the herd effect.
Those who understand inflation, supply chains, interest rates, risk and consumer behavior decide best. And whoever decides better protects their resources better.
In an unstable world, consuming well is also a skill.
Skills are built. They are built throughout life. And that’s what we try to do in executive education. If we were always growing, we probably wouldn’t need extensive management knowledge and financial literacy. There would only be Midas touches.
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