Assumptions we need to question now

Assumptions we need to question now

My area isn’t geopolitics.?I’ve been hesitating to opine about the horrible situation in Ukraine. It took a lot of people by surprise because Russia’s invasion flew in the face of so many assumptions we had been making. Now would be a good time to revisit some of them.

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Like it or not, we’re in a space now where our ratio of assumptions to knowledge is terribly high. Human beings are terrible about handling assumptions – either we forget them altogether or we turn them into facts in our minds. Now might be a good idea re-assess the assumptions we’ve been making … and what we will do if they no longer hold.?Here are 10 to think about now.

1.?BRICS would be exciting sources of global growth

Back in 2001, Goldman Sachs’ Chief Economist Jim O’Neil?predicted that four countries?– Brazil, Russia, India and China – would provide rich rewards for those adventurous enough to invest in them. And you know what? He was right – for a while at least. The assumption that these four countries would be increasingly wealthy and westernized seemed to be working really well for the following decade. In 2010, South Africa was added to their number to have its acronym go from BRIC to BRICS.?

While the end of the BRICS dominance has been clear for a while (Goldman Sachs shut down its BRICS fund in 2015), any lingering faith in the idea is gone for good.

2.?Energy costs would remain fairly stable

Back in 2020 (who would think we’d have a reason to look fondly at 2020???)?pundits were predicting?fairly stable, even somewhat lower, energy costs. Now,?oil prices are predicted to rise?and depending on who you ask, potentially sharply. So can we imagine price increases in the 25%, 35% or even higher region? Higher gas prices?annoy consumers?and often have political ramifications.?

3.?Inflation? That’s so 1970’s

Amazingly, two entire generations of managers have never known a high-inflation environment. My colleague and co-author?Ram Charan points out?that the executive agenda in an inflation beset economy changes dramatically. Under inflation, cash is king and every mistake gets magnified. Ram is going to be presenting on his thesis?at a virtual event sponsored by?Chief Executive?on March 24. Well worth it if you have never had the experience of living in inflationary times.?

4.?Cyber-attacks affect other people

This was already a troublesome assumption before February 24, but we can safely anticipate that the capability to create havoc that was already well developed in Russia is going to be exacerbated as it reacts to global sanctions.?

5.?“I’m not influenced by Russian-originated disinformation”

Sadly, meddling in events such as Brexit and Russian interference in elections worldwide has not gotten the attention and recognition it should. As?Wired?reporter Tom Southern observes, “it controlled much of the day-to-day narrative in multiple countries through online disinformation. And many people had no idea. While a few big events like the US’ 2016 election and the UK’s Brexit helped bring this meddling to light, many remained unaware or unwilling to accept that Putin’s disinformation machine was influencing them on a wide range of issues. Small groups of determined activists tried to convince the world that the Kremlin had infiltrated and manipulated the economies, politics, and psychology of much of the globe; these warnings were mostly met with silence or even ridicule.”?

The good news? The Ukraine invasion has made a lot more people aware of the manipulation and more willing to stop it.

6.?Infrastructure will be there and connectivity will be ongoing

It is one of the big negatives of the digital revolution – once you’ve created digital systems, which are marvels in many ways – you are increasingly dependent on them. Digital systems also?lead to complexity?with the consequence that they behave in far more unpredictable ways. So what is your plan B if some vital piece of infrastructure (water, energy, transport) gets disrupted or hijacked? How will you communicate when the cell towers are down? What will you do when the power goes out for an extended period?

7.?Highly optimized supply chains will behave as planned

I thoroughly enjoyed?Christopher Mims’?book “Arriving Today” but it is also a chilling reminder of how deeply interdependent we are. As well, how any little glitch anywhere along the complex sets of interactions that bring goods to our doorsteps can throw the whole system into disarray. The problem was already bad before the invasion; it isn’t about to get a whole lot better with disruptions of airspace and communication. You can?watch my Friday Fireside Chat with Mims here.?

8.?Politics are politics and commerce is commerce

Business leaders have always tried to tread carefully when cultural and political issues arise. Most take the position that conflict over issues such as human rights, equality, the rule of law and other potential political issues belongs more to the public than the business sphere. After what was often years of investment (see BRICS, above) business leaders are now?sparing no words to express their dismay?at Russia’s actions and have moved to pull their companies out of the country.?

9.?Countries that trade together don’t go to war

This is an assumption that’s been with us for an enormously long time and has been used to justify the creation of commercial connections, often following conflicts. Author Steven Pinker?offers a somewhat more nuanced explanation, and also notes that Putin was a clear exception to this maxim, even back in 2015. The idea of “capitalist peace” emerged as scholars made the observation that?few democratically run countries go to war?with one another. Among the reasons are that much of the value exchanged by those countries, at least in modern times, consists of intellectual property, knowledge and data, in the wonderful phrase of?Erik Gartzke?“factors that are more expediently enticed than conquered.”

10.?Liberal democracy is the norm

For many of us, living in a relatively liberal society, even with its warts, is like a fish in water – “what water?” we might ask. We forget that this is not necessarily a given.?Stanford historian Francis Fukuyama?observes that?“People really like being in liberal societies after they’ve gone through either horrible nationalist conflict (as in the two world wars of the 20th century) or they’ve had to live under authoritarian dictatorship (as people in Eastern Europe and the former Soviet Union did under communism). This generational cycle has turned, and you’ve got this whole generation of people who don’t appreciate liberal democracy because they haven’t really experienced the alternative.”??

An even grimmer prognostication is offered by?historian Peter Turchin, who suggests that war (and other major disruptions) are often the catalyst that sets forth the conditions under which societies can be peaceful and unified. Survivors of terrible conflicts and their children have vivid memories of how awful war was – those memories have faded by the time their children grow up.?

Any bright spots?

Not many, but I’ll give it a try. Seeing the reality that an unprovoked attack on a peaceful country could actually happen in our time may be?encouraging “the west” to unite?in opposition to a common enemy. In the resistance to the invasion, we are witnessing daily acts of courage, grit and leadership.?The Sunflower lady?is already iconic.?She cursed out Russian soldiers and asked them to put sunflower seeds in their pockets so that something would grow there when they die in Ukraine. That’s the stuff of which folklore is made. Ukraine’s President Zelensky has mastered the?leadership and symbolism?of legends.?

If they were a little hesitant about speaking out after January 6, many Business leaders now seem to be realizing that undemocratic?failed states and kleptocracies aren’t going to be great for business, let alone their shareholders.

An idea that I find fascinating, however, comes from economist?Carlota Perez, who has developed a long-wave explanation of technological progress.?For an overview, see?here?and?here. Briefly, she describes capitalist technological progress as proceeding in waves. New technologies, such as railroads or methods of mass production emerge. They are long-odds bets and lure what she calls “investment capital” to put money and other resources behind them. Inequality dominates and frenzies emerge. Bubbles and irrational investments (from a probability of success point of view) characterize this period.

During a phase she calls the ‘turning point,’ this comes to an end with a crash or some other cataclysmic event that eventually redirects capital to what she calls ‘production capital’ as a new regime is installed, leveraging the over-investment in the previous regime. With thoughtful leadership on the part of governments (who play quite a heroic role in her narrative), all of this can create the potential for a completely rewired economy and the prospect of a new ‘golden age.’?

I wonder if a crisis on our doorstep might create the conditions for a move in that direction.?

Carlota’s book is?Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.?I’ve barely scratched the surface of its richness here.

And so…

While no one knows how this will all play out, a good exercise to do for yourself or with your leadership team might be to go through each of these assumptions and ask yourself what your “Plan B” would be if these assumptions are no longer part of our taken for granted reality.?

Learning More – on line and in person

Meanwhile, we have now launched a set of learning modules around the theme of discovery driven planning and customer insight. They are short, on-demand, based on great research and experience and available now. You can experience what they are like with our demonstration module, which contains two short lessons from my book “Seeing Around Corners.” A link to the demo is here:?https://www.valize.com/hub

We’re also getting great uptake for my weeklong “Leading Strategic Growth and Change” course run by Columbia Executive Education. A week to learn about the skills and tools to venture confidently into new spaces. More information here: https://rita-mcgrath.mykajabi.com/lsgcprogram

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This article , reflected together with her thematic ideas on '' seeing around corners'' is deep. Each of these points were embraced by us mostly as truths yet the invasion of Ukraine by Mr Putin is beginning to expose deeper cracks in each. Without delving to the core , let me select BRICS. How many investors globally would still salivate for BRICS as a potential ground for future investments considering Russia is one pillar of it , leading aggression in Ukraine? Reimagining how sanctions will hack that russian economic ambition and how other globally respected firms and partners are ditching the kremlin leadership will never spur meaningful intentions towards purposeful engagements with BRICS.

Edward Regula

Strategy | Complexity | Risk | Multi-disciplinary Integration

3 年

In hindsight, were those assumptions or wishes/hopes?

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Chander Nagpal

Unlocking Human and Organizational Potential - 10x Innovation | Artificial Intelligence | Accelerated Strategy Execution | Business and Operating Model Transformation

3 年

Insightful Rita as always. I am not geopolitical expert either, but certainly as business leaders we all need to acknowledge the developments around us and RESPOND and REIMAGINE appropriately. Thought of sharing few reflections and raise a couple of questions for you. 1. As the saying goes, hindsight is 20:20... Not that Russia's aggression wasn't visible over years (so has been China's, North Korea, Iran etc.) But, an actual war which will disturb and disrupt the business landscape in such alarming proportions - certainly not a black swan BUT perhaps a grey rhino!!. Do you think (or aware) if the Russian crisis was in the top 3 or even top 5 risks to be managed for any organization from both strategic and operational supply chain perspective? 2. As you mentioned in the bright spots - west has started uniting. We have already seen COVID crisis making global organizations review their supply chains and have started working on reducing single party dependency (aka China). Do you think, we are moving backwards in terms globalization and civilization. Becoming more closed than open. Becoming more protective instead of collaborative!.

Prof. Rita McGrath, very insightful lessons! The time to learn to unlearn things has been shortened in such a way that now it does not take one generation for an idea or assumption to sustain, but many generations of ideas are to be learnt and unlearnt in one generation. The better we adapt to it, the better we become. Just another thought, if an asteroid was to strike the earth today, what assumptions could go wrong or right in the short term and the long term? Climate Change is one such asteroid that is going to hit us soon, that we have closed our eyes to. So it augurs that assumptions are always relative to the time and space they are made. And if these two keep on changing dynamically, the assumptions need to keep changing dynamically as well.

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Myles Suer

Serving CIOs driving agile transformational businesses. Emeritus #CIOChat Facilitator. IDG Contributor. #1 CIO Influencer. Top 100 Digital Influencer. Research Director at Dresner Advisory Services.

3 年

It is interesting stakeholder analysis aims to surface stakeholders and the assumptions held for identified stakeholders. And then assumptions are ranked for certainty and potential impact on a strategy. But without diversity in evaluating assumptions you end up with a snail darter—something unexpected that changes everything. Can stakeholder analysis help see around corners and surface risky assumptions?

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