Fioramonti’s article this week focuses on the dangers on relying on simplified figures such as GDP to assess the development and the wealth of a country and make business decisions.
“When businesses base investment decisions on indicators such as the gross domestic product (GDP) they miss the forest for the trees. GDP is a very myopic measure of economic performance, which counts profits but excludes costs. Moreover, it flattens society and the market, thus giving the impression that growth affects all businesses (and people) in the same manner. In fact, there can be good and bad, equal and unequal, sustainable and unsustainable GDP growth.
“The “Africa rising” debate animating the investment community these days is a case in point, insofar as it does not pay attention to issues of sustainability and distribution, which are likely to hamper the performance of these “rising” economies. “
“Even good numbers can be misleading: indeed, numbers, by design, (over)simplify reality. In a numbers-driven world, only what can be measured counts. A metric-dependent business is more likely to forfeit long-term goals, which are harder to quantify, for short-term returns.”
Read it all on BusinessDay