Running with the bulls

Entrepreneur, June, 1999 by Scott S. Smith

THINK TODAY'S ECONOMY IS BOOMING? HOLD ON! HARRY S. DENT JR. SAYS HERE COME THE ROARING 2000s.

WHEN HARRY S. DENT JR. PREDICTED IN 1989 THAT A LONG-TERM STOCK MARKET BOOM WAS ABOUT TO BEGIN, EVERYONE THOUGHT HE WAS CRAZY. THE BESTSELLER LISTS WERE FILLED WITH DOOM-AND-GLOOM VOLUMES, AND DENT HAD TO SELF-PUBLISH HIS FIRST BOOK, OUR POWER TO PREDICT: REVOLUTIONARY NEW TOOLS FOR PREDICTING OUR ECONOMY AND THE FUTURE OF BUSINESS.

Dent also foresaw tailing mortgage rates, the elimination of the U.S. government's budget deficit by 1998 and the decline of Japan's economic prowess. He restated that rosy outlook in his first commercially published book, 1992's The Great Boom Ahead: Your Comprehensive Guide to Personal and Business Profit in the New Era of Prosperity (Hyperion Press). Although still swimming against the evidence, it sold 300,000 copies. Now on the bestseller lists is The Roaring 2000s: Building the Wealth and Lifestyle You Desire in the Greatest Boom in History (Simon & Schuster). This time, everyone is paying attention.

Dent argues that by 2008, the Dow Jones average will be at 40,000 - at least. If that prediction seems wildly improbable, Dent makes it credible by backing up his assertion with historical data, some of which goes back thousands of years. He says economies go through remarkably predictable cycles based on the progression of spending habits of each generation, in conjunction with society's technological progress. The baby boom generation is now in its peak spending period, buying better homes and providing college educations for its children. This generation's massive economic power is being leveraged by computers and the Internet, which are bringing about a revolution in the way business is conducted.

Dent's thus-far razor-sharp predictions have been built on a solid foundation of business education and experience. After graduating first in his class from the University of South Carolina in Columbia in 1975, Dent earned an MBA from Harvard Business School. At the business consulting firm Bain & Co., he consulted and did forecasting for Fortune 100 companies before becoming CEO or chief accounting officer of several fast-growing firms, including publishing companies, a computer chip manufacturer and a real estate investment firm. Now 46, Dent is president of the H.S. Dent Foundation, a business research firm, and publishes the H.S. Dent Forecast, a bimonthly newsletter.

We asked Dent to share his insights on what the economy and business will look like in the next decade.

SCOTT S. SMITH: What are the key trends that make an unprecedented economic boom inevitable in the next decade?

HARRY S. DENT JR: There are six major trends. The first is the changes in information technology. It's easy to demonstrate from the study of long-term trends that computers will become 100 times more powerful than they are now and that 80 to 90 percent of all U.S. households will eventually be online. Computers will take over much of the left-brained, routine work that now occupies managers and technicians so we can concentrate on what computers don't do well, which is right-brained, creative, complex decision-making.

SMITH: Does this mean computers will become much more difficult to operate?

DENT: Actually, many will be simpler and easier to use, which will be a factor in mass acceptance.

That underscores another trend. In The Innovator's Dilemma, author Clay Christianson shows the strongest business strategies come not from high-tech niches but from low-end markets. For example, you have Southwest Airlines competing locally with buses. Wal-Mart [successfully] opened stores in places Sears didn't think were viable for a mass-merchandise retailer. These companies showed you can come into a low-end market that's unprofitable for other businesses, and with superior software, an Internet presence, direct service or some other innovative strategy, you can be successful by delivering [your goods or services] at a low cost with better service and customization. When these kinds of businesses rise into the mainstream, traditional companies can't compete because they have the wrong infrastructure, technologies and management styles.

SMITH: How do you see company structures changing in the coming millennium?

DENT: The next economy will be built on what we call the network model, which is a third trend. Management decides the culture and direction of a company, sets the rules that allow good decisions to be made on the front lines, and supports them. Responsibility and accountability, even the P&L, should be down to the individual, or at least the front-line team. Every employee becomes a business and every customer a market, and management gets out of the way.

Those who specialize in assisting customers searching for certain types of products or services are what I call browsers. Their job is to figure out what their customers need and then find an individualized solution. People who provide those products and services, whether [from their own company] or from other sources, are servers. Browsers will be advocates for the customer, not sales representatives for their own companies, which servers might be. In financial services, for example, you can't be selling a mutual fund or making a commission on trades and remain objective. What's needed is a financial advisor who will assess the customer's needs and put together the right package from a huge array of choices, regardless of the source.