Economic volatility is a timing shadow over all decisions. Even though timing is widely known to be critical to the outcome of decisions, it is rarely mentioned in the context of entrepreneurial firms. When it is mentioned, people resignedly dismiss it by asserting that timing the economy is beyond reliable prediction. Yet no entrepreneurial calculation, no managerial practice, can escape the probability that economic volatility may prove to be 50% of success, or that an economic plate shift may utterly destroy a fine market innovation implemented on bullet-proof stratagem.

Bubbles and panics are inevitable.[1] Government intervention in the economy has long been known to lead to unintended consequences. Among these is that intervention creates false signals.[2] Yet many people, before they move to action, demand precise predictions as to what is going to happen, how much, with what impact, and when. No prediction can answer all four of those, and wisdom does not expect or require such precision. The advantage goes to those who are not right, but are simply more right than others. This is not as difficult as it may sound; a lot of people do not know and therefore don’t consider the issues. They cede the field, almost by default, to those who will seek that knowledge. Managers who hold themselves to the standard of being exactly right lose this elemental advantage.

Too often failures are diagnosed as the outcome of poor execution or an idea that was lacking to begin with. In reality, they are often the result of running out of time to make corrections when economic volatility turns the environment temporarily against the firm. Conversely, many great successes are more the result of fortuitous timing than astute management or brilliant innovation. But to see fortuitous as merely lucky is to ignore the processes of preparation that lead to profoundly good timing. Success varies by fate, but the fact of it rewards preparation.

If the entrepreneur starts a firm with a well-timed idea and managers gain results by well-timed execution, both bear the consequences if they fail to apply the same rigorous thinking to the economic context. The exercise is not too hard for the entrepreneur; economic volatility can be readily tracked as prices, demand, and credit. Management’s calculations, with their bias toward efficiency of costs, are effectually micro-predictions of the future of prices, demand, and credit. The entrepreneur’s calculation of efficiency of innovation is a micro-prediction whose outcome is measurable in prices, demand, and credit. It is enough to say that economic volatility will affect all entrepreneurial firms at one time or another. It matters little that a firm appears to be economically isolated. Economic volatility is invisible to some owners only because they fail to look.