One of the more interesting topics of recent conversation is the idea that this economic crisis really has no model or pattern that is discernable from past downturns and crises.
I was listening to Nassim Taleb (The Black Swan) this past Sunday morning on Fareed Zakaria's (The Post-America World) GPS show: He and the other roundtable members made some very compelling points about the unique nature of the current crisis. And after listening to some other folks, and thinking about some recent work I have done, there are some critical new ways of thinking you need in this crisis.
1. There is no model or pattern for what will happen 2009-2010 - we simply don't know what to expect with any degree of probability. 2. The Great Depression and market crises since, e.g., 1987, 1997, the dot.com bubble, et al, do not have realistic lessons for us today because of the fundamental shifts in globalization and the inter-dependence of the world's financial systems in the past 5-7 years – the underlying systems were really different this time 3. Even though we knew the increasing speed and intensity of both globalization and the deepening inter-dependence of the world’s financial systems, tools, regulations, oversight and deep awareness and understanding simply did not keep pace – and in most case were studiously avoided 4. Tools and responses that worked in the past (including massive spending, e.g. stimulus packages and bailouts) may not have the desired effects this time - they worked before because the money went to work in the marketplace and to “main street” quickly – so far not much if any of the trillion or so dollars spent worldwide on rescues, bailouts, stabilization, loans, etc. has made it way into the marketplace (except perhaps to continue to fund executive bonuses). Until it does, it’s going to be a real slow and long recovery 5. Remember that these past responses also helped to create the next bubble. Hopefully, this result is being considered and the systems configured to keep that from happening as quickly as in the past (bubbles are going to occur, but we can hope to slow the next one) 6. The thing to do now is to explore the possibilities of what 2009-2010 - 2015 could look like, and create new and innovative responses and tools, at both government and organization/company levels. This would also include a new idea of just what a financial system should look like given the continued inter-dependence of the world systems and globalization 7. Typical "hunker-down" and "do nothing" hoping for "normalcy" to return responses and actions is a losing game since no one can say what the next normal will look like! The one thing we know for sure is 2009 and 2010 won't be what was before! 8. And if you do play the hunker down and wait game, you'll be passed like a bullet by competitors that go through the process of considering the plausible differences, have the multiple strategies and actions ready, so once the tide begins to turn and the new shifts occur, and new heretofore unseen opportunities begin to emerge, they are ready to act. Another thing that seems clear is that we are in a very complex global environment in this crisis, more than we thought just six or nine months ago. This has some very real considerations for how we think and act. 1. In complexity, early warning signals may not mean what they did when things were "complicated" or even when things were "normal" - they may mean nothing at all, or something entirely different. Complexity causes fundamental shifts away from environments where simple cause and effect rule. In complex environments, cause and effect are only discernable after the fact - what we can call "retrospective coherence". 2. It’s clear that signals aren’t working the way they did 9 months ago. 3. In complexity, new signals emerge that have not been seen before, are missed, and bad things happen! They aren't seen because humans are hard wired to ignore things that are new, that they have never seen before, etc., as part of the cognitive processes left over from those great party days hunting and gathering out on the plains. We want to make sure we see the lion stalking us, and what other tribe moved through our territory last night. You can see this phenomenon at work on any news cast or panel show - everyone is talking abut what happened, not what will happen - they can’t read the signals, and they are missing the new ones - there is no model or pattern for them begin to envision what's coming. These two facts (and they are proven through social, psychological and neurological research) are a key reason you need many diverse minds (we call it cognitive diversity) with diverse education, experience, etc. in your organization’s conversation. It's also why scenarios are so important, especially right now. Scenarios provide the new mental patterns or models of plausible new and different futures - once the models and/or patterns exist, then we can understand what signals, events, etc. can portend the scenario coming true, moving off the path slightly, or jumping to another - the key is that we are no longer missing things because we haven't seen them before. One of the key components of scenario planning are narratives, and describing the events that can be signals one way or another, and developing the wildcards - all allowing signals to be seen that would otherwise be missed, and developing new ways of seeing old signals. Without this, we'll miss new signals, and mis-read ones we have seen before. And 2009-2011 will indeed be different, with new signals and signals telling us something very different than last time, if we have the processes in place to see them.
It's also why scenarios are so important, especially right now.
Scenarios provide the new mental patterns or models of plausible new and different futures - once the models and/or patterns exist, then we can understand what signals, events, etc. can portend the scenario coming true, moving off the path slightly, or jumping to another - the key is that we are no longer missing things because we haven't seen them before.
One of the key components of scenario planning are narratives, and describing the events that can be signals one way or another, and developing the wildcards - all allowing signals to be seen that would otherwise be missed, and developing new ways of seeing old signals.
Without this, we'll miss new signals, and mis-read ones we have seen before. And 2009-2011 will indeed be different, with completely new signals along with signals we've seen before that are telling us something very different than last time - if we have the processes in place to see them.
This is a vivid evocation of some of the challenge of working with the unknown. It is always with us, in fact, but we go through periods where things seem to operate relatively predictably, and we are lulled into thinking that they will always continue that way. Then we have a rude awakening from a phase transition, which makes us aware of a much bigger field of play than we care to consider. The same dynamic occurs in our personal lives as in business, and each can give us valuable clues and training for working with the other. We do need to train our minds, as our well-developed and culturally supported habitual impulses are to ignore what is inconvenient to consider. So the background to successfully using scenario planning and dialogue, and making the diversity of an organization a powerful strength is a deep commitment on the part of leaders to an openness and bravery to go into some personally and organizationally difficult investigations and actions. Unless you are incredibly lucky, that is what always lies on the path between where we are and the innovation and creativity that opens up new possibilities of where we could be. Without the right attitude, I would suggest that all the methodologies may yield a few benefits, but will be largely a waste of time, because there won’t be the oxygen to give new thinking life.
Posted by: Michael Chender | December 30, 2008 at 10:37 AM