Now that we have had a week to digest the results of last week’s Presidential election, I think it is a good time to reflect on what we might have learned. Even though the votes are still being counted, it appears that the popular vote will be very close, with President-elect Trump coming out slightly on top (50.4% to 48.0%) over Vice President Harris. However, the Electoral College outcome does not look so close, with President Trump garnering a 312 to 226 margin of victory on the strength of sweeping the so-called “battleground states,” each by a margin of one to two percent of the vote. So, what the pre-election polls indicated was a toss-up, did not necessarily end up that way. In today’s column, I would like to address why the polls were “wrong” and why the electorate likely turned to President Trump at the end, as businesspeople can apply these lessons in their organizations.
First, let’s address the polls. For the third straight Presidential election, both the media and the electorate are complaining about how the polls “got it wrong.” Did the polls really get it wrong? Maybe yes or maybe no, but more importantly, let’s take a look at why we think they might have been wrong. First, we can look at the obvious explanation: margin of error. When you are sampling like polls do (looking at a subset of a total population), there is always going to be a margin of error. Also, the smaller the sample size, the larger the margin of error. That is why poll results are usually presented with a “plus or minus” margin or error. For instance, a poll may have said that Trump was up in a particular state by 2%, but there was a +/- 4% margin of error, that means in reality, Trump could be up by as much as 6% but could also be losing by 2%. Unfortunately, when poll results are reported, the actual margin of the poll is provided, but the margin of error is usually either not presented or, if in print or online, in a much smaller font. Therefore, in most cases, the polls were not wrong, but rather the audience (often through no fault of its own) did not consider the margin of error.
However, there is a case where the pollsters messed up. One major assumption of sampling or polling is that the sample is representative of the population as a whole. If a poll is way off, it is likely because their sample was not representative of the population. For example, the demographic (e.g., age, gender, political affiliation, income, etc.) dispersion of the sample was very different than those who actually voted. This may well have been the case of a well-publicized poll taken in Iowa shortly before the election that showed Harris ahead by 3% in the state, when Trump actually went on to win by more than 10%, clearly outside the margin of error. The lesson here for all businesspeople (and political observers) is that you need to take a sample that represents the population, and even when doing that, be aware of the margin of error or confidence intervals. In other words, when you are provided statistics, you need to know what is behind them.
The second lesson learned from the election came to me upon reflection. There was clearly a disconnect between the reports and data from the economy and what was being felt by the consumer. The average voter was feeling pinched by inflation and blamed it on the Biden/Harris administration. Even though inflation has come down over the last year or two, it has remained “sticky,” and I have been trying to figure out why, and if “Bidenomics” was to blame. After much reflection, I have come to believe that one of the hidden causes of inflation has been the significant amount of regulation that has been introduced in the last four years. Don’t get me wrong, I am not anti-regulation, particularly when the health and welfare of consumers and employees are at stake. However, overcontrolling by government entities tends to drive up costs as companies are continually required to monitor and document adherence to such regulations. One major benefit of the incoming Trump administration will be the elimination of many unnecessary regulations that are driving up costs and helping to cause more inflation. The lesson here is that in businesses, it is important to have policies and regulations that allow your business to operate properly but do not overregulate and create a bureaucracy that drives up prices and stifles creativity.
The third lesson I learned from this election is that you should not “double down” on a one-sided, unpopular policy. During the Biden administration, policy was very left-leaning, particularly economically. For instance, the inaptly named “Inflation Reduction Act” was built on government spending and centralized economic policy that could not garner a single Republican vote to get passed in the Senate. As the Democratic Party chose its Presidential and Vice-Presidential candidates, it leaned further to the left with their choices of Harris and Walz, when it was clear the country did not want to go further left. Their choices of candidates were particularly bad considering that about 45% of the electorate was not going to vote for their opponent. This is a cautionary tale for the Republicans as they now control the White House, House, and Senate. Rather than having an “elections have consequences” mentality, they should work to build some consensus or risk being in the same place the Democrats are now in four years. As businesspeople, rather than overplaying your hands when you have the advantage, you should work with others rather than alienating them and you will likely stay in power much longer.
Post-mortems of this election will continue for most of the next four years. However, I think we can immediately apply the lessons learned in terms of sampling, regulation, and consensus building to improve both the political and business climate.
