Why Uncertainty, Not Risk, Is Slowing Growth with Matt Wolf of Elliott Davis 6-20-25 - Becker Private Equity & Business Podcast

Summary4 min read

Summary of "Why Uncertainty, Not Risk, Is Slowing Growth"

Podcast Information:

Title: Becker Private Equity & Business Podcast
Host: Chanel Bunger
Guest: Matt Wolf, Elliott Davis
Episode Title: Why Uncertainty, Not Risk, Is Slowing Growth
Release Date: June 20, 2025

Overview

In the June 20, 2025 episode of the Becker Private Equity & Business Podcast, host Chanel Bunger engages in an insightful conversation with Matt Wolf of Elliott Davis. The discussion centers on the distinction between uncertainty and risk in the current economic landscape and how this distinction is influencing business investment and growth. Wolf delves into the macroeconomic factors contributing to pervasive uncertainty and explores the potential long-term implications for businesses and the broader economy.

Key Topics and Insights

Defining Uncertainty vs. Risk ([00:18])

Matt Wolf begins by clarifying the difference between uncertainty and risk. While risk involves identifiable and measurable factors that businesses can plan for, uncertainty encompasses unpredictable variables that are difficult to quantify or anticipate. Wolf explains:

"It’s just so much uncertainty that we can’t write unrest in the Middle East, trade war, tariff statuses. That doesn't fit neatly into a planning spreadsheet."
– Matt Wolf ([00:18])
Current Geopolitical Climate and Business Confidence ([00:18] - [01:15])

Wolf highlights how the ongoing geopolitical tensions are casting a "cloud" over business operations, dampening both consumer and business confidence. He emphasizes that this environment of uncertainty makes strategic planning and investment decisions more complex and fraught with unknowns.
Transition from Risk to Uncertainty in Macroeconomic Regimes ([01:15] - [03:00])

Discussing the shift in the macroeconomic environment, Wolf contrasts the previous era where risk and macroeconomic factors were intertwined with the current state where uncertainty has become more pronounced. He notes:

"In the prior era, the prior macroeconomic regime, they really were one and the same. The rate policy and other factors were the same thing as business risks. And now it's very different."
– Matt Wolf ([01:15])

This shift means that businesses can no longer rely solely on traditional risk assessments that factor in predictable economic policies and can now face setbacks from unanticipated geopolitical and economic developments.
Impact on Business Investment Decisions ([03:00] - [04:30])

Wolf explores how uncertainty is leading to hesitation in making significant business investments. He contrasts the current scenario with the post-global financial crisis period up to the pandemic, where artificially low interest rates led to reduced investments as businesses did not need to invest to maintain profitability. In the present context of positive real interest rates, Wolf warns that:

"Businesses need to make that investment in order to kind of generate wealth, rise, increase standard of living, businesses need to make these investments. But it's really hard, it's really difficult because of this uncertainty."
– Matt Wolf ([03:00])

This environment may foster another cycle of underinvestment, stifling growth and innovation.
Long-term Economic Implications of Prolonged Uncertainty ([04:30] - [05:07])

Looking forward, Wolf discusses the potential long-term consequences if this period of uncertainty persists. He anticipates that prolonged uncertainty could lead to sustained underinvestment, which would negatively impact economic value creation, standard of living improvements, and shape the consumer landscape over the next decade.

"What are the sort of second and third order effects of this paralysis by uncertainty that we might not be feeling quite yet, but we will def. We could, I should say definitely feel over the next, you know, five to 10 years, if this period of uncertainty becomes prolonged."
– Matt Wolf ([04:30])

Notable Quotes

On Uncertainty Clouding Business Decisions:

"The uncertainty is paying like a cloud over, over business."
– Matt Wolf ([00:18])
On Geopolitical Uncertainty:

"We can't write unrest in the Middle East, trade war, tariff statuses. That doesn't fit neatly into a planning spreadsheet."
– Matt Wolf ([00:18])
On Past Underinvestment:

"Businesses just were not investing in themselves in the way that you would expect after a crisis."
– Matt Wolf ([03:00])
On Prolonged Uncertainty's Future Impact:

"What are the sort of second and third order effects of this paralysis by uncertainty that we might not be feeling quite yet..."
– Matt Wolf ([04:30])

Conclusion

In this episode, Matt Wolf provides a comprehensive analysis of how uncertainty, as distinct from traditional risk, is currently hindering business investment and growth. By delineating the differences between risk and uncertainty, Wolf underscores the challenges businesses face in making strategic decisions amidst unpredictable geopolitical and economic conditions. The discussion highlights the critical need for businesses to adapt their planning and investment strategies to navigate this complex environment effectively. Wolf’s insights serve as a poignant reminder of the long-term economic ramifications that sustained uncertainty could impose, emphasizing the importance of fostering resilience and adaptability in business operations.

Chanel Bunger concludes the episode by expressing gratitude to Matt Wolf for his invaluable perspectives, leaving listeners with a deeper understanding of the intricate dynamics between uncertainty and business growth.

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Transcript4 lines

[00:00]
A
Hello and welcome to the Becker Private Equity and Business Podcast. My name is Chanel Bunger, and today I'm excited to speak with regular guest Matt Wolf of Elliot Davis, who joins us weekly to share insights and economic trends that he's keeping an eye on. Matt, thank you as always, for joining me today. Why don't you take it away and tell us about what you're seeing out there?
[00:19]
B
Yeah. Thanks, Chanel. We've really been spending a lot of time looking at uncertainty and what it means for both consumer and business confidence, right? Particularly with the current geopolitical climate. The uncertainties are paying like a cloud over, over business. Right. We got a FOMC announcements or decision unsurprising to keep rates steady. You know, inflation is, is some areas decelerating, some areas accelerating. We're looking at energy inflation, all of these sort of business risks, but then trying to delineate that from uncertainty. And it's probably worth, I guess, a little bit of an expanded conversation on the difference between those two topics, because in the prior era, the prior macroeconomic regime, they really were one and the same. The rate policy and other factors were the same thing as business risks. And now it's very different. So, like, for example, if we're leaders of a business and we're trying to make a decision about should we invest a million dollars into this new ERP and CRM system, for example, and we can model out all the ways in which reducing our customer acquisition cost or improving inventory turns will create margin and improve cash flow and how that might create a return on investment for this investment. We can make business decision around that. Right? We can, we can say, okay, we understand the situations in which this investment is a good idea, in which it's a bad idea, and we can evaluate the return on that investment and make a decision about whether that million dollars makes sense for us or not. That is a risk, right? Those are, those are risks, right. There's risks of, does the project run over? Is it going to be more expensive? Will the customer acquisition costs not fall as much as we had hoped? Right. Those are risks that we can plan for and model. But in this environment, there's just so much uncertainty that we can't write unrest in the Middle east, trade war, tariff statuses. That doesn't fit neatly into a planning spreadsheet. And I think the longer term macroeconomic concern is the extent to which this uncertainty paralyzes business investment and business decision making. You know, we could see another cycle of under investment, right? That was a large problem that we Saw between, you know, post global financial crisis, really up until the pandemic, was businesses just were not investing in themselves in the way that you would expect after a crisis. Now, the reason for that was because of artificially low interest rates, businesses just didn't need to invest in order to improve profitability, to expand, to create value for stakeholders. They just didn't have to make those investments. Well, now we're in a positive, real interest rate environment. In order to create value for stakeholders, businesses need to make that investment in order to kind of generate wealth, rise, increase standard of living, businesses need to make these investments. But it's really hard, it's really difficult because of this uncertainty. And certainly that has implications for short term business decision making. Right. Like I said, do we invest in this new technology or not? Do we open up a new plant or not? And that, that has impacts over the short and medium term. But what we're also watching is, you know, are we going to go through another cycle of corporate underinvestment? And what does that mean going forward in terms of economic value creation, in terms of standard of livings, in terms of, you know, what the, what does the consumer look like 10 years from now and what does that mean for longer term business planning is something we're, we're really watching and, and thinking through. Right. Again, the difference between risk and uncertainty and what that cloud of uncertainty is doing to businesses ability to manage and measure risk. And what are the sort of second and third order effects of this paralysis by uncertainty that we might not be feeling quite yet, but we will def. We could, I should say definitely feel over the next, you know, five to 10 years, if this period of uncertainty becomes prolonged.
[05:07]
A
Got it, Got it. Well, Matt, I want to thank you as always for joining me today and for sharing your insights on the Becker private equity and business podcast. Thank you.
[05:16]
B
Thank you.