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Cloudy and clockwork flags
By Clem Sunter.
The renowned German mathematician, Carl Gauss, invented the bell-shaped curve in the 19th Century, which is at the centre of statistics. It pictorially implies that the highest probability for any future event is the average of past events- otherwise called the normal- and that the probability falls away on either side as a future event deviates from the normal. The higher the standard deviation, the lower the anticipated probability until it falls to virtually zero. The extreme ends of the curve are called tails. In the analogy of the bell, these would be represented by the rims of the bell on opposite sides.
Recently, a whole bunch of eminent futurists have been saying that the probability of extreme events has been rising since the future has become more volatile. The tails or the rims of the bell have grown fatter. One of the reasons given is that the immediate accessibility to information due to the internet and social media has exaggerated the consequences of having it. It is a recipe for mass action.
I would put it differently. What is actually happening is that the entire bell is being moved to a different position in the tower and the previous normal is becoming a new normal around which the bell-shaped curve falls away on either side. The value added by a professional futurist or scenario planner is to identify the forces that are moving the bell, assess the rate at which it is being moved and to provide some indication of what the new normal might be.
Then you have to decide how much your strategy has to be adapted to cope with the challenges of the new normal and the extreme possibilities that may surround it.
Clocks and clouds
It is easy to state but difficult to do; which brings me to the great Austrian-British philosopher, Karl Popper, who dominated 20th Century philosophy in many different spheres. He divided global phenomena into two types: clouds on the left and clocks on the right. Cloudy events are those that have a randomness about them that makes any prediction about them almost impossible to make. Think of how a cloud changes its shape during the day. It is ephemeral. Think of a swarm of gnats or a flock of small birds moving around. You have little idea of where as a group they are going to go next and even less idea of the future position of an individual gnat or bird in the group.
Clockwork events, by contrast, can be analysed into their moving parts. A chain of causality exists, which means that they have much more definite outcomes. They tick away in the background as perceivable megatrends changing the universe. Ignore them at your peril.
The mind of a fox
Without using Gauss and certainly not knowing about the thoughts of Popper, Chantell Ilbury and I came to the same conclusion about looking at the future when we wrote The Mind of a Fox fourteen years ago. We devised a matrix which thousands of people and companies around the world are currently using when looking at their futures.
The first step in the matrix is to identify the rules of the game or predetermined elements shaping the future. These are the clockwork flags that are in play irrespective of which scenario pans out. An example of this nature which we discuss in strategy sessions with our international clients is the grey flag which is causing the ageing of populations in Europe and Japan. This is inevitably leading to a new normal of a steady-state or zero-growth economy in both places. It really does not matter how much money central banks print to boost these economies, they will remain flat till the end of time. It is not an apocalypse because they are flat at an affluent level; but if you are looking for general growth in national markets, you must look elsewhere where populations are younger and increasing in numbers.
Interestingly, the weight of opinion in the workshops we conduct is that China will inevitably slow down on account of this flag, and will become the first country to grow old before it gets rich in terms of income per head.
Another clockwork flag ticking away in the background is climate change. Despite the naysayers, the bulk of evidence suggests that it is changing the game in the regions it is affecting. Australia is hotter, the Antarctic is melting, Indian Ocean island groups are diminishing in size as a result of rising sea levels and California has virtually run out of fresh water.
The second step in our matrix is to identify the key uncertainties with the ability to transform whatever game you are in. These are the cloudy flags which have popped up unexpectedly and nobody knows how they will play out. The only thing to do is to play scenarios of possible end games, in other words a range of new normals towards which the world may be heading. This constitutes the third step in our matrix.
An example of a cloudy flag which is a cause of enormous anxiety among our German and other European clients is the red flag represented by Mr Putin. His annexation of Crimea has completely changed the relationship between Russia and the West; and future scenarios range from the positive one where he sees the light and hands the Crimea back to Ukraine, to a worst-case scenario of a flat-out nuclear war between America and Russia triggered by Russian expansion into former Soviet bloc countries. Who knows? You have to watch the flag very carefully.
A second cloudy flag increasingly dominating the strategic conversations we facilitate is the religious flag which has been up since 9/11. Companies with interests in the Middle East, Nigeria and Kenya have absolutely no notion of what kind of new normal this flag is leading to and how to protect their staff from the serious harm arising from this flag.
That brings me to the two final steps in our matrix: what are your strategic and tactical options in light of the flags and the scenarios; and which options are you going to turn into decisions right now. Most importantly, who is going to do what by when to implement those decisions?
I have just returned from a fairly lengthy sojourn outside South Africa and more and more people are seeing the sense in our approach, whether they live in America, Canada, Europe, Australia or Mauritius. You have to get used to the idea that the bell-shaped curve of Gauss is moving in many different ways, creating new and unexpected normals. The only way to prepare for these changes is to look at the clouds and clocks of Popper, play the scenarios with the flags in mind and respond with the agility of a fox.