Then things began to change and a series of mini-flags started popping up, culminating in the release of Nelson Mandela, which was a gigantic flag. The High Road scenario moved from a remote possibility to odds-on favourite.
Then again, in mid-2001, Chantell and I said in The Mind of the Fox that the flag for a major terrorist strike on a Western city was firmly fluttering in the breeze, as terrorist organisations now had access to information about assembling weapons of mass destruction. The event occurred three months after we published the book, but not in the way we envisaged.
More recently, we identified the flag for a possible global recession to be declining asset values in America, since American consumers were only spending more by borrowing more because they were worth more. In January 2007, the flag went up for the first time when the price of property in the US started to decline. After six months of continuing decline, we were giving a 50% probability to a Hard Times scenario.When Wall Street turned later in the year, we upped the figure to 80%. In 2008 and 2009, the scenario became a 100% reality.
Now the flag is around nations defaulting on their sovereign debt. If they do so, we are in for a Perfect Storm. On the other hand, should the flag stay down, we may be at the start of a global recovery.
One final point: The connection between the flags and the subjective probabilities for the scenarios can never be precise. We say 10% is a wild card, between 10 and 20% a slight possibility, 20–40% a definite possibility, 40–50% a strong possibility, 50–70% a probability, 70–90% a strong probability and above 90% a near certainty. That way the odds we are giving are realistically approximate.
The trick is to identify the right flags and to monitor them on a daily basis for any change in their disposition. That is what makes a foxy futurist, but there is one other essential characteristic, which I shall talk about next week.
Lessons from Munich
| The difference between conventional scenario planners and foxy futurists is that the former are content to end with the scenarios and congratulate themselves on a job well done. It’s very much an academic exercise. The latter realise that scenario formulation is only half the task. The other half is discovering the best course of action and then putting it into effect. Foxy futurists are doers – not just thinkers. A classic example was a large company that recently asked me to advise them on a political scenario exercise. I gave them the name of the person who I thought should facilitate the exercise, but I also emphasised that they should put as much effort into disseminating the scenarios as in writing them. Alas, that has not happened. Pierre Wack, the finest futurist in the second half of the last century, once said to me that the only value in a scenario lies in what you do with it. In the middle of 2007, Chantell Ilbury and I were encouraging our clients to look at their options to combat the Hard Times scenario after we had raised the probability to 50%. Some of them were foxy and implemented changes to their strategy before the meltdown in 2008 and 2009. This did not just apply to businesses that took measures to protect their cash flows and balance sheets; it also applied to individuals who recalibrated their investment portfolios by moving into more conservative asset classes. |
At a strategic workshop that I facilitated for a property development company several years ago, I emphasised that you cannot just play scenarios on future possibilities. You have to consider your options in light of the scenarios and then decide what you are going to do about the situation.
The CEO, who was Jewish, nodded his head and related the following story: “My grandfather was a profitable tailor in Munich in the 1930s. He attended a speech by Adolf Hitler in the Munich square in 1934. He came away with a distinct impression that this man was going to do awful things to the Jewish population in Germany, much worse than what had already happened.
“He played the downside scenario. But it didn’t end there. He went home and discussed his anxieties with his family. Collectively, they decided to leave Germany immediately, eventually ending up in America. And that is why I am here today.”
That story has always stuck in mind in that it epitomises the difference between foxes and the rest. Just like the animal, which survives on its speed of response to the opportunities and threats that present themselves in the forest, the human version converts thoughts into action faster than any other sample making up humankind. So it is not just about having a sensitive radar system picking up signals from the external environment; you need to be fleet of foot as well. First movers never suffer as much as those that procrastinate.
Picking up from last week’s article on foxy futurists, I want to describe the extra arrow that Chantell Ilbury and I believe you should have in your quiver and which is an essential part of the matrix we introduced in The Mind of a Fox. Once you have established the scenarios that can play out in the external environment and applied subjective probabilities, you must move on to examining the practical implications of the scenarios for yourself, your family, your company – whatever.
We use a chart that has percentage probability on the vertical axis and potential impact on the horizontal axis. We then post each scenario on the chart, its position reflecting the relative probability that the client gives to the scenario and the estimated impact in terms of opportunities and threats. Low probability/low impact scenarios are put on one side. They are an interesting dot on the radar screen, but nothing more can be done about them at this stage.
As for the rest of the scenarios, we ask the clients to live through them like pilots in a simulation chamber. What are your strategic and tactical options, and which ones are best? We go through the drills one by one and then ask a critical question in the case of a threat: is there anything you want to do right now to moderate the impact of the scenario or take it out of play altogether?
Then, of course, comes the hardest part of all – acting on your decisions, like the Jewish tailor. Who is going to do what by when to get the show on the road? An interesting example is the set of South African scenarios we put on the table at the moment: staying in the Premier League, to which we attach a 70% probability; being relegated to the Second Division, to which we attach a 30% probability; and becoming a Failed State, to which we attach zero probability, treating it as a cautionary tale.
Some of our clients are more pessimistic than we are about the future of South Africa, so we invite them to come up with their own probabilities. We then ask them to specify exactly what actions they would take in the second and third scenario, and whether – to be consistent with their pessimism – they should be doing something immediately to contain or pre-empt the threat.
It’s a tough conversation because it is taking people way out of their comfort zone. But actions, as was the case in Munich in 1934, speak louder than words. Where there is smoke, there is fire, and that demands immediate evacuation.
The global flags
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Since I wrote this article, Chantell and I have become more pessimistic about global economic prospects. There has been no drop yet in the unemployment rate in the US and we have not seen a significant improvement in property prices. On the other hand, the threat of national defaults has grown in Europe. Accordingly, you will see in a later article that we now attach only a 20% probability to New Balls Please and 80% to mixed or negative scenarios.
We are often asked whether we have large research teams behind us working out the trigger events that can tip the future a different way. Do we have professional scriptwriters encapsulating the different futures that may eventuate in plausible and consistent stories, which highlight the causal chain in each case? Do we get organisation and management experts to examine the practical consequences of each scenario and recommend appropriate modifications to a company’s strategy?
The answer is no. We alone are the radar system. We alone try to look into the future in a transparent, unprejudiced manner. We use the normal process of news-gathering from the internet, television channels, radio
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