Syzygeist

Row Row Row Your Boat, Gently...

With uncertainty and complexity abounding, too much information flooding over most of us and the Global Happiness Index (GHI) challenged by much in modern life, it's worth noting that the best advice is often wrapped in a children's story or rhyme, which only endures to be repeated through generations and across cultures because it is quintessentially true. 

Few can beat the little song we used to sing in rounds while on summer holiday before anyone held a hand-held anything to amuse them during those seemingly endless hours in the car. (And kids singing verses together don't squabble.) 

This one has its origins in English nursery rhyme and American minstrel songs and supposedly first appeared in print in the U.S. in 1852.

Row row row 

your boat

gently

down the stream

merrily merrily merrily merrily

life is

but a dream. 

Why should this have become such a repeated mantra for children? Full of advice for getting through life, it has inspired many to reflect on its deeper meanings. As a sailor who has often rowed back and forth between shore and a sailboat, I have had plenty of time to think about it - and enthusiastically sung it many times with my own children when they were small.

Row row row 

Rowing requires both hands, applied equally for the most part (and use your back and legs if you want to bring real strength to the action) and a sense of direction. 

Balance! Don't pull too hard to one side unless you want to turn or you will soon be off course. Steady and rhythmical is almost always better than too much effort expended in bursts. Repetition and self control matter. Practice makes perfect.

Your boat 

Not someone else's. You're in it so you need to take care of it. It's the only one you've got. And it is uniquely yours - in what it's made of and contains and where it's going (or could go).You are on your own in most respects. So care for your boat like no other.

Gently 

Of all the adverbs in the language to appear here, why this one? Think about the way you conduct yourself. How does it feel, and feel to others? Considerate, tender, gradual, refined, of good family - and the word hints etymologically "of the same clan." So row with a sense of belonging among others - congenially.

Down the stream 

Yes, go with the flow, not fighting the current (although this may be necessary sometimes) but using the nature and direction of the stream to help you along. A stream is always moving and never exactly the same in any other place or at any other time.  So keep paying attention to the stream wherever you find yourself in it.

Merrily merrily merrily merrily 

"In a joyous manner" is one definition offered, but also consider that this adverb (any word that describes action) is repeated four times. No other word is given as much space or attention. So attitude matters a lot! And this attitude should live in the world of delight, pleasure, humor and joy.

Life  

Ah, life itself - everything around you that you see, feel, touch, smell, know, imagine, desire, fear, revile or revere...  

is but a dream. 

Images, ideas and emotions that seem to come upon us or that we may conceive spontaneously are all in us. This complex of perceptions are "real" but also "imagined" in the sense that they are the unique images we take from - or bring to - the world. That world is in us too. (Some might say it had its origins in us from birth, or even before that!) 

Is life not as we imagine it to be?

Row row row your boat, gently, down the stream… 

Merrily merrily merrily merrily - life is but a dream... 

Amen.

Four Principles to Guide a Life

Years ago I listened to noted columnist James Kilpatrick give a talk about writing. He said every good piece should follow the same formula:

"Let me take you by the hand and show you a place I know, which for seeing, will change you forever."

I would be delighted to think this is about to happen here and now for someone reading the words that follow!

In the autumn of 1996 I had just moved back East to New York City from California to work for Morgan Stanley after a 20-year career as a journalist and a half decade as a scenarios-to-strategy consultant -helping companies decide what they should do in light of the uncertain future.

It was a beautiful autumn day. I stepped off the curb in front of the public library, Fifth Avenue yawning full of traffic to the north and people bustling to work. I can still see all the details of that moment as clearly as on that day.

Four phrases appeared on the screen of my mind, as it were, and I stopped to write them down in a little notebook I always carried with me. (Retelling it now reminds me now of something that my scenario work has taught me - the most important idea can come from anyone at anytime, anyplace. But is anyone listening? And will they DO anything?)

The words were four separate thoughts in sequence, which have become principles in my business and I try hard to apply them in my life:

1. Clarify the Intention

2. Define the Sacred

3. Understand the Commitment

4. Act to Be

At one level - the words themselves, and the phrases, are simple enough. It is in their application that we can discover the value of them, as I have found in working with individuals and organizations over time.

Clarify the Intention.

It was Yogi Berra who allegedly said that if you do not know where you are going it is hard to know when you get there. We also learn that a journey of 1,000 miles begins with a single step - but a step of what kind, and in which direction? Directly toward the target, or just "west," as in "Go west young man?"

What is it you want and need to do, which in the doing will bring you closer to something you deeply desire? This may be a big question about what you want to become in your life, or a smaller one about where you want to live, or it could be an enterprise issue of defining a strategy for the next year or three or five.

Often in exploring this question - and it is valuable for executives of organizations to apply scenario thinking here - we discover that the intentions we thought we had are not as important as the ones we have determined to clarify for ourselves from this moment on, and pursue in a new way, for reasons that become clear in the present work. Our perceptions of the future can - and should - influence present action.

We want to "become," but become what? What is your intention, that you most need to express because in so doing you will fulfill what is very if not most important to you? You can apply this to a day, a week, a year or a lifetime. It's up to you - your clear intention.

Define the Sacred.

I directed a re-visioning effort at Morgan Stanley in the late 1990s to clarify the intention, so to speak, for the "new company" that was formed by the Dean Witter-Morgan Stanley merger. One company was all about retail investors, the other was all about institutional finance. Two cultures. What were they to become as one company?

They had different intentions, different value systems. A lot has been written about what happened there, and since, and I won't explore that now. My research at the time revealed that a visionary company is six times more profitable that one without a vision, and no visionary company succeeds without core values, lived and expressed by the people doing the work. Top-down, bottom-up, side-to-side.

What do we mean by "core value?"

A core value is one of a few closely held convictions that you actively express and do not abandon just because things are hard or the audience is hostile. You deeply believe it and stick to it. And you can't fulfill your vision - your intention, if you like - without core values.

So what are the few things that you believe deeply and do not want to abandon no matter what challenges you face because these values are deeply a part of you?

Perhaps you know them, and live them. Perhaps you know them and don’t live them. Perhaps you are not sure. They are worth thinking about, and worth expressing in your life if it is to become the life you want.

Understand the Commitment.

It is in some respects easy enough to declare an intention and lay claim to sacred beliefs, but the fulfillment of these requires resources - time, effort, expertise - and an understanding not only of
your course of action but of all the known elements required to "get there." 

It is not useful to declare an intention to be fit, and a belief in a healthy lifestyle, if you are not willing to do - and not do - the things required. We can all think of things we say we want to do but are unwilling seriously to undertake because of the commitment required. 

Before I went sailing alone in the ocean for the first time, I realized how much I had to learn, how much preparation the boat and I both required, and how the effort to prepare us would draw not only on all the

resources that I had but required that I add more abilities and understanding to my effort before it would become credible - or even safe - to undertake. 

As an old sailor warned me then, "The sea lies in wait for the unwary, but she stalks the reckless." It can be reckless to set off on a journey for which you are truly unprepared.

Act to Be.

Those of you who studied French philosophy might recognize this as the existential challenge. I heard it first clearly from a somewhat infamous land developer I interviewed in Hawaii after I arrived there
after sailing in alone from San Francisco.

His name was David Murdock. He was a controversial figure who had overcome considerable family tragedy as a young man and now was building hotels on Lanai amid objections that he was ruining one way of life in favor of another. I was interviewing him for a business story for the San Francisco Examiner for whom I worked then and he made a case for action that stuck with me.

"It's not bad to have an ego," Murdock said, "It's bad to have no ego. You understand this because you identified something you wanted and needed to do and you did it. You sailed alone in the ocean for 25 days to get here, and you got here, and now it is part of you forever. That is the lesson. Act to be." 

As it happened this decision I had made to sail alone to Hawaii and back at that moment in my life changed the course of it. It led me away from newspaper writing, started me on a book that took me 20 years to finish and also into scenario thinking as an business-like approach to uncertainty. This turned out to be a fascinating way to use possible stories about the future to change the story of the present – how you understand it and how you act on the possibilities before you. 

Scenario thinking, which was a perfect practice in many ways for a journalist - created an unexpected career that brought me to Morgan Stanley for one of the most extraordinary decades on Wall Street, and finally - or so far – here. As a consultant and writer and sometimes speaker – and father of three from two prior marriages - I am still trying to live certain ideas in my life to become the person I had in mind.

Or perhaps I should say, “have in mind” because intention is something we are expressing now, whether we are doing so clearly and intentionally or not. We are becoming as we behave. Intention is our guide, a compass of our own design. Perhaps if you accept this metaphor you should examine what seems to attract you most essentially.

These four principles are easy enough to remember and say aloud but challenging to apply. They are valuable insofar as you make them about you and your life, day-to-day, week- to-week, personally and professionally:

Clarify the Intention. Define the Sacred. Understand the Commitment. Act to Be.

It is up to you.

Is This the Way the World Ends?

The purported end of the world came and went last Saturday, and to the surprise of few, "the Rapture" did not come to pass.

The world is not, however, out of the woods if you read Peter Nolan's superb Crossroads - the End of Wild Capitalism and the Future of Humanity. Nolan's thesis is that unrestrained capitalism, its extremes and its contradictions have put China, the US and the world of Islam on a collision course that gives the world "the choice of no choice." Either these three models of culture and capitalism will find constructive engagement or the world as we know it is in extreme peril - either from economic instability and social reaction, military conflict or environmental destruction, or all of the above.

Students of economics and geopolitics will find much that is familiar here in theory but Nolan's formulation of the world's current dynamics, risks to the system and limited options going forward - engage cooperatively or unhinge the world - are elegantly reasoned and argued. As holder of the Sinyi Chair at the Judge Business School, University of Cambridge, Nolan demonstrates great knowledge of and passion for China and its potential to find a harmonious route through capitalism's contradictions, although success here is by no means a given. He also argues convincingly that global capitalism requires global regulation in order not to run amok and roughshod over most of the world's population. 

In this part of his thesis is the intriguing notion that the major oligopolistic global corporations have an insurmountable advantage in the world and are increasingly stateless in their ambitions and interests. Developing economy companies are starting from so far back in some areas that they cannot hope to compete. And then, what?

Readers will also find fascinating economic and political history to suggest that the underlying approaches to capitalism pursued by China, the US and the Islamic world are far more importantly similar than they are different. Property rights, individual pursuit of profits, taxation and a drive to serve the common good all have a place in these systems (and Islam has found a way to embrace interest on capital by another name.) Their differences with regard to capitalism are more perceived and exacerbated by nationalisms and cultural bias than substantive.  But can these systems find ways to constructively coexist before it's too late?

Nolan reaches back as far as Biblical times to report the early histories of China, the Middle East, Europe and the infant United States, which has risen in the post WWII period to dominate the global system (and now spends $2 billion a day on military expenditures!). Moreover, the US, motivated by its thirst for oil, has alienated Islam with its unquestioning support of Israel and tends to view China as a rising threat rather than a potential and natural collaborator in meeting the challenges of global modernization. China's labor advantages will continue to depress advanced economy wages, and we shall have to deal with that.

In the last 30 years, progress has been made on many fronts. Millions have been lifted out of poverty as finance and technology have spread into the developing world. But wealth disparity has grown significantly (Egypt, by no means alone, is one example where one percent of the population controls nearly all the country's wealth); the environment has been severely degraded (decertification growing by great leaps in China, whose organic water pollutants equal those of American, India, Russia and Japan combined); and, global warming has emerged as man's unique threat to the world in which we live. In this the US has been slowest to recognize the threat, let alone take significant steps to address it, Nolan notes. 

The US has fomented an unregulated form of global finance capitalism that led to the great unwinding of 2008, which has not yet played out. This is one factor, along with US dependence on autos and oil, military power and a jaundiced view of the Middle east, that leads Nolan to conclude - quoting former US defense Secretary Robert McNamara, that there has never been a more dangerous moment in human history.

This book is riddled with fascinating facts and also broad arguments to challenge any conventional American view about the legitimacy of our approach to global finance capitalism and to others who may challenge us or require a different political approach on the world's playing field. You may finish reading this book as I did, convinced that if the US is not prepared to change some of our political and economic approaches to China and Islam, we may bring Judgment Day upon the world sooner than we think and in ways not yet imagined. That said, Nolan will help persuade you that nuclear Armageddon, as one way to end the world, is by no means out of the question.

Do the Next Right Thing Right

A joke my father once brought home on a little poster from his office said:

"Keep your eye on the ball, your shoulder to the wheel and your ear to the ground - now try to work in that position!"

It comes to mind amid further news of the Japan quake and nuclear aftermath, Libyan fly-overs and Yemeni revolution. Oh, and the US Congress is struggling to address entitlement reform as our fiscal balance spins further out of control, and...

As much news as there is in the world demanding our attention, our lives are still immediately in front of us - children to raise (my 12-yer-old son needs a guitar teacher), relationships to tend (tend them, keep them happy; get over that one, find another), and the logistics of daily life (someone just hit the car!). 

And just yesterday a potential Florida client who owns newspaper properties pointed out that all the information on the Internet, as alluring as it may be, doesn't necessarily contain the answer or insight you need, if you can find it. Along the way you will spend time you probably don't have being distracted by things that don't matter - or are simply wrong.

All of this served to remind me of a principle that sailing in rough conditions taught me: when things get ugly, slow down and do the right next thing right.

It is simple enough to say, and not as hard to do as one might think. It means bringing the far horizon near, and focusing the mind, eye, hand and attention on the thing at hand that must be done next, and right, before the next right thing can be addressed. 

This has the effect of slowing down a turbulent situation and clearing away distractions that at a distance may loom as threatening or out of control - or both.

The good news is that there is always a "next thing" that has to be done right, and doing it right is worth all of one's attention, particularly if errors will be costly (even dangerous).

Slow down and live, you might say.

 



The Quake That Shakes Us All

I was asked to be on a 6 a.m. call this week to London that was cancelled because the European corporate client suddenly had to deal with Japan, its understandable workplace instability amid spreading fears of meltdown and contagion. I had not expected either the call or a related major meeting in Europe to be cancelled, but I was not surprised, given current volatilities around the world.

How prepared are people for the bigger reverberations of major events, and how to deal with them intelligently, of which the first step might be anticipation and planning?

I confess I have not yet read Kenneth Posner’s book, Stalking the Black Swan: Research and Decision Making in a World of Extreme Volatility, although I think it advisable for anyone who applies scenario thinking and other basic risk-management techniques to the rising uncertainties of our time. Posner's attempt, according to reviews, is to mix quantifiable and computer calculation with human instinct, experience and intuition. A worthy goal worth thinking about, and actually trying to do.

(Number me among those readers who attempted Nassim Taleb's The Black Swan and put it down before the end, partly because at a certain point before page 300 I thought I grasped the thesis well enough and because, frankly, Taleb is a writer who does not know why he would use one word if he could use 20. Of those, more than half will be about Taleb's superior view of uncertainty, about which he appears to be uncertain not at all.)

As a longtime scenario practitioner, I have an aversion to certainties of all kinds, partly because it is always the unexpected that changes the way we think and subsequently must behave. Humans must live and work in a constant tension between confidence about what they think they know and flexibility in the face of incomplete information, and sheer ignorance. But how to identify what you do not know well enough and should consider?

Enter Japan's earthquake and unfolding disaster. Were quakes of this kind uncertain? No, they were inevitable (and still are.) Were those plants "safe?" No, they never were, located on the geological "Ring of Fire" that promises serious quakes from here to eternity.

The quake's timing, however, was uncertain, and also the extremity of its effects. We must now all reconsider whether:

- A nuclear cloud will get into the atmosphere and increase cancer risks everywhere

- Anti-nuclear movements will extend globally as the world comprehends that it potentially shares in every other country's nuclear risks

- Nuclear plants should continue to answer the world's energy appetite, given what we now know, and know that we know

- Recalculation of insurance liabilities will render nuclear energy just too costly

- Makers of potassium iodide pills are suddenly a valuable stock investment (Or are you too late?)

I mean this last only partly facetiously. It says something about positive pricing effects in negative macro conditions.

Vital lessons may be taken from Japan's experience - which, pray, does not continue to multiple meltdowns and swathes of dead areas of Japan from nuclear contamination. One lesson might be in the approach that executives and managers take to major "uncertainties" that are likely to unfold at some level and at some point reasonably soon. Don't we know what some of them are?

As much as a U.S. Treasury-market collapse, Middle East (Libya, Saudi-Bahrain) disruptions, oil prices above $120/bbl, rapid global inflation, European financial meltdown and China disruptions are known to be real and proximate possibilities, many corporate and public policy leaders have not really taken the time to think these through. 

Scenario thinking continues to be an invaluable tool in the risk-manager's toolbox because it allows for the unthinkable to be more easily thought and for the unspeakable to be spoken in ways that may be heard and acted upon in time. Examples are many of risks that were contemplated with scenarios and where subsequent actions saved millions or produced strategic options that were acted on profitably. Lives might well be saved as well.

Maybe Japan's quake has shaken the rest of the world enough to reconsider how prepared we are, and are not, on some of these fronts. "What if?" remains a powerful question for managing future risk, but only if you really ask it - the right way with the right people around you - and think it through.

Then you must act.

 

Afghanistan: Engaged? Enraged?

Do you know why the US has troops fighting in Afghanistan? Do you support it?

At a recent weekend ski reunion in Nevada I asked this of some high school era classmates, (Phillips Academy, 1966), a relatively well informed and learned professional group, mixing law, public policy and private enterprise in almost equal measure.
I have found that many people, however well educated and apparently informed, do not know the official rationale for our being in Afghanistan. But polls suggest that opposition to the war hit 63% in December, 2010, as US (and other) soldiers continue to sacrifice themselves there and civilian casualties mount. With at least 919,967 people killed in Afghanistan and Iraq since the U.S. and coalition attacks, based on lowest credible estimates, the war should rightfully loom as a major campaign issue in 2012.

About 10 of us had gathered in our former classmate's house and soon became engaged, if not enraged, by the topic, which recalled for us another conflict. Some of us had brothers who fought in Vietnam. Some of us did not have to serve because of the lottery then, or served because of it. 

Most of us had come to see Vietnam as unjustified, as well as unsuccessful. (One of our classmates had written "Loon," a recent first-person account of a high-loss battle in Vietnam and its grim legacy.)

Some of us now fervently believe the US should bring back the draft (perhaps as universal 2-year national service) so that our wars are not fought only by those who volunteer. One advocated the idea on the grounds that if everyone in the country had equal skin in the war game, the country might be more fairly and fully engaged in determining what wars we fight. 

Everyone seemed to agree that this would be good for the country. No one in the room seemed to believe that current leadership would be willing to broach the topic of the draft, or even of withdrawing, before the elections.

One of my classmates served in Congress and now, as an energy attorney, frequents the corridors of Washington and travels the world. He is the member of our group who predictably will have read the most relevant recent book on a topic and have the most informed and thoughtful view.
He cited the recent "Our Vietnam," by AJ Langguth, and reported some disturbing history compiled from original sources. According to Langguth, Kennedy never believed that the war against the North Vietnamese could be won. And he did not believe the "domino theory" that the fall of Vietnam would mean the loss of Asia to communism. He believed he simply could not afford politically to get the US out before the 1964 election because the Republicans would roast him.
By then, Lyndon Johnson, who as Vice President had tried to convince Kennedy to exit the war as un-winnable, found himself similarly trapped by a war that had escalated beyond the point of practical or political withdrawal. (Kissinger would later be instrumental in negotiating a pause in which the US finally could come out.)
This renewed sense of Vietnam history, where domestic politics interfered with common sense, provoked a number of reactions to the current situation. 

One former classmate active on Capitol Hill characterized many Democrats as believing "Afghanistan is an outrage." He wondered aloud if Obama, who promised withdrawal by July 2011, can survive in 2012.
"When you read how the Mideast revolutions are happening, how accelerated everything is, I find it hard to believe that Obama is going to skate through," he said.
As a few of us wondered aloud at the apparent lack of anti-war activism compared to Vietnam's protests, our energy lawyer quoted a recent conversation with author James Fallows on the topic, who said:

"You never know on a given day whether you should be living a normal life or doing something about the most important issue of our time."
Perhaps our war in Afghanistan is not "the most important issue of our time," but it must rank pretty high. How many have US soldiers have died there? The quoted statistics are:  4,683 in Iraq and Afghanistan combined, since "Operation Enduring Freedom" began on Oct. 7, 2001, and "Operation Iraqi Freedom" began on March 20, 2003. Of the total US deaths, 3,708 were reportedly due to hostile fire, and the remainder due to non-hostile actions (such as accident, suicide, or illness).
Perhaps the military deaths are the most important thing, though they do not embrace the thousands severely wounded or mentally affected for life. Officially, 30,490 U.S. service members have been wounded due to combat actions in Iraq and 2,309 in Afghanistan (32,799 total). (Source: Rod Powers, About.com) The civilian death statistics already mentioned are highly disturbing.
If you want the official rationale, you will find it here:
US President Barack Obama, declared on Dec. 1, 2009: “I am convinced that our security is at stake in Afghanistan and Pakistan. This is the epicenter of the violent extremism practiced by al Qaeda. It is from here that we were attacked on 9/11....It is important to recall why America and our allies were compelled to fight a war in Afghanistan in the first place. We did not ask for this fight. On September 11, 2001, 19 men hijacked four airplanes and used them to murder nearly 3000 people.”
In his press conference on military action in Afghanistan and Pakistan, Obama called the region a base for "Al Qaeda and its extremist allies" from which they train terrorists and launch attacks, now "the most dangerous place in the world for the American people" and "an international terrorist challenge of the highest order." An additional 17,000 US troops would be committed immediately, and training of Afghanis would be increased.

Addressing Al Qaeda, Obama said flatly: "We will defeat you." 

One might question if the US is suppressing or defeating terrorism as much as it is stimulating it, as some have suggested, by causing hundreds of thousands of civilian casualties in countries with which we are not at war. And can Al Qaeda and the Taliban be defeated militarily on their home turf?
Our discussion was inconclusive, although the sense of the room was that this issue may be bigger than current debate and lack of open protest suggests.
Is Afghanistan an echo of Vietnam, misguided and un-winnable, and now a tool of US domestic politics?  

Will Obama sustain the hostilities until after the election in 2012, as much as it is supported on the right and opposed on the left? 

Does he believe he has any choice?
Do you?

Have you written your Congressman lately?

These Authorities Have to Go

Libya's Gadhafi struggles to hold on to power the only way that dictators of force can hold on, which is with more force. Just how brutal he will continue to be, and how effective, is still to be determined.
How far will this go, and to what effect? 

The debate over the economy is still fully on between the recovery and double-dip camps, but the spreading uncertainty from Libya to Saudi Arabia may favor the latter. Chinese economist Andy Xie points to Mideast (37% of the world's oil production) instability and potential gas price increases to infer that stagflation may be just around the corner. He notes that the oil shock of 1973  triggered a market crash and laid the foundation for stagflation thereafter. OECD countries now have leverage levels that are 50% too high, and must come down, he observes. That is deflationary on its own. Meanwhile, the US continues to flood the world with dollars, which is inflationary.
What is important here is the degree of uncertainty in the system. The Libyan crisis will have its own effects in that country, and has roiled Saudi Arabia, whose leadership has just announced new levels of largesse to keep the population in line.
But what is really going on here globally?
Authority the world over is being questioned and challenged in new ways - faster, more broadly and deeply - in a new era of communication. In the mid-1990's, we postulated that the Internet would act as a universal solvent to erode authority structures of all kinds, from the top down, bottom up, inside out, and so forth. Power would shift to the "end-user." This was long before Google made answers available to most questions or Twitter allowed differing versions of the truth - as well as lies and distortions - to spread at the speed of light, 140 characters per Tweet.
We now know quickly - as can anyone anywhere who wants to ask - that the Greek government has to meet a major hospital deficit in a hospital that has 42 gardeners but no garden. We know American public safety officers bulk up their hours in their final years so they can retire on pensions of 100 percent or more. We know that Democratic state senators fled Wisconsin in order to dodge their responsibilities to address budget deficits, apparently believing in the power and efficacy of denial. Technology guru Mary Meeker has just published a report to suggest that America Inc. is functionally bankrupt on the costs of Medicare and Medicaid. These two entitlements were approved largely by and for Baby Boomers with apparent disregard for intergenerational fairness, let along practicality.
It's all coming home to roost, all over the world. It has to.
The point here is that "the authorities" have made a mess in many places, not limited to Libya. Gadhafi & Co. did not bother to build infrastructure with its oil billions, leaving a poor and uneducated populace now with a void to fill, when/if Gadhafi falls. (See here the first CNN footage in Benghazi, where Gadhafi has already been pushed out.) His is not the only regime to abuse power and abrogate the responsibilities of leadership. So his is not the only regime to sow the seeds of crisis, which cannot and will not be avoided.
The question now is, what will we do? Violence in the streets is the only choice for those who have no other choice. The US mess hopefully will be addressed by those who stay in the room and try to fix the problems with real solutions. But Wisconsin is not the only state where protesters have picked up the vibe from Middle East and staged long and persistent demonstrations against failed leaders. And material support - in the form of pizza for Wisconsin protesters - is pouring in from Egypt, Turkey, and around the world.
Authority that underestmates this unprecedented connectivity, both in how it connects and educates people, is learning fast that a new model is forcing its way forward, outward and down. It is not contained or slowing, only expanding literally at the speed of light. How does your "official future" fair against the potential for stagflation and continuing global unrest?

The Zone of Expectation

At the encouragement of a key client with whom I have been actively working for the last two years, I am starting the New Year with a fresh blog. Count me among those who fear there are too many blogs out there. We are information over-rich and over-run, and short on time. Could we please have one simple insight once in a while that actually helps?

Don't count on one here. But I am emboldened by a recent exercise undertaken just before Christmas with a crowd of Morgan Stanley-Asia executives who are variously still with the institution, or not, since they last worked together there in 2004. A scenario look into the near-term future produced what for me was - is - a real insight.

The topic that drew us together - and an interesting framework of uncertainty that we employed - was the dynamic between China and the US. These have been the two fierce pedalers (not to be confused with peddlers) of the global macroeconomic bicycle. 

That the bicycle nearly fell over in 07-08 was a function of the faltering dynamic - the US economy, fueled by consumer credit, buys low-cost-labor Chinese manufactured goods, and the Chinese accept dollar-denominated assets in return. And the global financial world turns.

With the value of financial assets suddenly plunging, and the dollar weaker, and credit shut off to US small businesses (the growth engine of the US economy), everything had to pause, and the bicycle began to tremble. That it did not fall over (yet, some would say) was credit to government liquefaction - governments print money and pump it into the economy fast.

Morgan Stanley Asia Chairman Steve Roach was on Bloomberg television moments ago to warn that the worst may be far from over - that the governments that pumped money in should begin to suck it out - now - to avert another dreaded bubble, and the bursting that necessarily follows. (Roach had been invited to our convocation at the Asia Society, but he had been unable to attend. Still he sent stern warnings about an over-stimulated Chinese economy and troubles to come.)

The insight that came to me during the session was an echo of history. In a Japan 1997 Morgan Stanley scenario exercise, a roomful of similar Japanese and Asia market experts proclaimed two key uncertainties: whether the Japanese economy would recover or decline, and whether Japan's governmental institutions would instigate meaningful reforms (or remain mired in bad practices.)

The scenario technique produced its own "zone of expectation" from the collective insight. This zone suggested that, as one participant put it, "there is no plausible upside for 3-5 years." Based on that view, Morgan Stanley ducked a proposed acquisition of Yamaichi Securities (the one that cost Merrill Lynch $1.2 billion in losses) and stayed highly profitable in the next three years in largely merchant banking activities. It paid off richly not only to see how things might not get much better but to commit to that view and behave accordingly, which Morgan Stanley Japan did under the leadership of Thierry Porte at the time.

At the Asia Society, the group discovered a similar "zone of expectation" for the global economy. Given the issues facing China and the US, the zone that emerged was implicitly negative, suggesting that for the next 1-3 years both economies might struggle and their relations might be corrosive if not combative.

Ignore this zone at your own risk.

This is just one scenario, of course. But I found myself thinking that I (and others) should take seriously the collective intelligence and intuition gathered in the room - representing about 1.5 centuries of recent financial market/Asia experience. Consider that the group might have seen clearly, if through a glass darkly, that the negatives for now outweigh the positives.

So what? Be cautious about the "Asia rescue" story that is being told, and "recovery is here" proclamations. The scenario treatment can bring to bear enormous collective insight in ways that top-down organizations, individual "experts" and off-the-shelf consulting approaches do not. So my opening salvo in 2010 is - "recovery buyer" beware.

How "New" this year?

I do not like to bring this up on the dawning of the New Year (it's barely Jan. 5 here in Brooklyn) but a serious challenge for 2009 will be our willingness to think the unthinkable in realistic and creative terms, and act on our convictions despite all the uncertainties. No one is suggesting this will be easy.
I woke a little before 3 a.m. thinking about a client who did not call me back last year after I led a session with a roomful of his clients. They were mostly CEOs in the information industry in whose companies his firm holds significant private equity stakes. I had been retained to stimulate them to "think the unthinkable" about their businesses for a couple of hours before their "real" meeting began.
It was early October in '08. The "unthinkables" were mounting: AIG's bailout, Wachovia, Lehman gone bust, Bear Stearns, Fannie Mae, Freddie Mac, to name a few, with WaMu then the largest US bank failure ever. Reserve Primary had "broken the buck" and people were beginning to wonder, as investors pulled $130 billion from US money markets in two days, well, where is a "safe" place to store cash?
Still, interest rates had not yet dropped nearly to zero and Bernie Madoff was not yet a worldwide household name. I can't detail the precise totals of new currency printed by the US government since the crisis began to unfold, but please note: it took two centuries for US monetary base to grow to $800 billion and in the last three months it has nearly doubled to $1.5 trillion - an implied annual expansion rate of 300%. This fact alone sets in motion its own new set of uncertainties.
These musings led me to recall another meeting in the spring of 2006, in which a convocation of  managing directors from one of the Top Five global financial institutions wrestled for two days with two major uncertainties likely to influence their business – would the US-China dynamic as the primary engine of global growth remain positive and healthy, or decline in serious ways? Would the US capital markets model (political, economic, regulatory) remain dominant in globalization, or come under attack, and perhaps decline seriously? A cursory look at the matrix implied here quickly revealed the dreaded "lower left quadrant" scenario, where a deteriorating global growth dynamic would converge with slippage of US influence in the world. What might happen to them in that world?
(Sound familiar?)

The MDs quickly evidenced antipathy for the matrix and the process of thinking through its implications, perhaps because their business model – and their livelihoods – would become quite unpleasant (if not untenable) in at least two of the scenarios implied (particularly the one that has in fact developed, in which numbers of them have lost their jobs.) This is not surprising in one sense, since the most unthinkable circumstances are often those in which we won't do very well.  In psychology this is often referred to as denial.
What I watched unfold among these bankers when faced with this particular scenario framework was a two-step cognitive process.  The first step involved an intense interrogation of the "rightness" of the framework. Were these really the key macro uncertainties?  Once the framework had been explored and discussed, the second step involved painful deliberations about whether this thinking process, if pursued, could possibly suggest prudent actions.  While the discussion was eventually allowed to proceed, general resistance managed to preserve the bubble of group think. Whatever else might be true, they were not willing to take these possibilities seriously.   This particular crowd of leaders could not, or would not, look down into the dark possibilities that were clearly latent in the world system. I left the meeting thinking about reasons to short their stock, which has fallen about 65% since that day – one of the truly valuable investment insights never expressed openly (til now) and not acted upon. (Was I, too, in denial?)
Since then, several different versions of these scenarios have been broadly used by various practitioners to encourage executives to think "outside the box" of their own official futures in 2008-10. Not all are equally capable or willing to take this on, useful as it may be.

I am trying to get at something here, which came up again in a very recent meeting with a group of bankers from another top-tier institution, charged with expanding capital markets businesses. The most senior and outspoken member of the group asserted that the firm had excellent plans in place that "just needed execution!" I asked politely whether it was more important to prosecute those plans or - given how different the world had become in recent months - try to figure out what in their operations had to be radically different? What did they need to stop doing, or start doing, that would amount to real change in behavior? This question provoked uncomfortable silence, but several of the people at the table nodded in a way that suggested they might proceed down this path if enough of them dared to do it.  
In any engagement of this kind, we may struggle to find exactly the right set of uncertainties, but I do not see how most businesses can proceed in 2009 without aggressively addressing this question: Given that things have become so different from what we imagined, and unprecedented in ways likely to become more so - don't we need to radically rethink the assumptions under which we have been operating? Now?
This is the challenge many of us face in this New Year. "New" arrives with a capital N in more ways than anyone bargained for. It demands more new thinking – and new acting – than in any recent times past. I suspect that many people remain unprepared for the efforts involved, but the refusal to think about radical change is almost certainly not the answer.  The best we can do is to begin.

A Case for Vision, Fearlessly

I have been working for months with a top level executive who has been redefining his strategic challenge in the context of the last 10 years on Wall Street - what he feels he has and has not achieved. He wanted to reset the bar for himself and the organization he heads, personally, professionally and globally. And he has set out to do so in a visionary way.
Now he must convince the organization above and below him that this is the way to go - at least for the next four years.
 Along comes the most extreme crisis in financial markets in his lifetime - a perfect storm of collapsing asset values, weakened balance sheet and challenged business models. How should he handle this confluence - of ambition for the organization, and himself - with conditions that incite fear amid uncertainty, as well as greed amid perceived scarcity? If the pie is to shrink - as it surely must in the near term - how is he to get other leaders in the organization to step up and work together more productively and collaboratively than they ever have? If REAL change - a transformation and restructuring partly demanded by adverse markets - must be their response, how can they define and deliver this optimally?
Presumably this challenge faces many leaders in many organizations in 2008, not just on Wall Street. Let's assume we know we must restructure in the face of collapsing budgets. How to do that in a way that does not sell out the future for the present, nor backslide to old or timeworn practices that must be replaced by new ways of operating?
This requires clear intention, conviction about the path forward, and commitment to follow it.
We have evidence that short-term thinking amid profitable times has too often failed to build foundation for the future. What about short-term thinking in UNprofitable times? Won't that produce even worse results for the medium to longer term? The danger is that companies will fight to survive to see tomorrow, only to discover on the day after they have either eaten their seed corn or failed to plant for the next harvest, whether in human resources or technical capability or investing in markets for the more distant future.
These challenges can be addressed by conducting the right strategic conversations at the right levels of the organization - top down, bottom up and side to side. Executives and managers must:

• Clarify strategic intention (often scenarios help here, provided a vision has been set);

• Define the sacred (profitability is only one index);

• Understand the commitment (experience and talent are just two dimensions of required organizational capability); and,

• Act to be, where leadership by example is a sine qua non.

I find myself working hard with my client to identify and address the many dimensions of the challenge, some transparent and some opaque. In the perfect storm you must determine what is the next right thing to do, and then you must do it right. Much of this is in the content of your plan and how you communicate it. You must make sure your vessel is ready to go the distance, and your crew with it. This means you have thought about the risks, the range of uncertainty, and the actions that ensure the present AND the future. Failing to acknowledge the darkest possible scenario now - a real depression? - would be foolish. But in such times of stress strategic advantage is to be gained by thinking fearlessly about the future and bringing along the people in your organization needed to help create it.