Clem Sunter

The Flagwatching Bulletin: July 2016

2016-07-18 10:31

Clem Sunter

One of the points I repeatedly make at presentations about the future is that strategic decisions are normally about the direction you take in the long term, whereas tactical decisions are about how to get there in the here and now. As such, today’s world is relatively unimportant in the domain of strategy. It is the world that could exist in five to ten years’ time that is critical.

Moreover, that world is a moving target requiring the skills of a sniper to assess where the target will be when the bullet arrives. You have to take aim at the future before you fire. Even then you are dealing in probabilities, not certainties. You may have to take aim again if you miss. Nothing is stationary; and sometimes you may have to change your mind altogether and abandon the project.

That is why the risk of getting a strategic decision wrong can often harm a company or individual far more than any other risk. The evaluation of this possibility should be at the heart of risk management.

For example, when establishing a new mine, the current metal price is inconsequential. It is the likely price of the metal ruling at the time when the mine is commissioned that is relevant. The same long-term principle applies to starting a new business, choosing a career or spouse, or deciding where to invest your money for retirement. You have to picture the world down the line in order to have any chance of making the correct strategic decision now.

Despite its simple logic, this argument is often ignored because we are emotional and tend to be caught up in the heat of the moment. The great Scottish philosopher, David Hume, once wisely remarked that reason is the slave of passion. As a species, we are not programmed to look objectively ahead and choose the best way of playing a game that does not even exist today. We either place too much reliance on the game continuing as it is; or we forecast the game to change in line with our wishes and are dumbstruck when our wishes do not come true.

Think of David Cameron and the result of the Brexit referendum. He took the gamble and quit a disappointed man.

Hence, my main purpose in life is to say that a person has to abandon the self to think about the future. Good futurists are spiritually detached and make projections with no hint of personal bias. As such, they examine the present reality with a mixture of reason and instinct to isolate the current trends and events which may have a bearing on how the future pans out. Their feet stay firmly on the ground as they reach into the future.

I call this process flag-watching, where you identify the forces changing the game as we speak and tease out the consequences five to ten years ahead. Clockwork flags are the ones with fairly specific causal chains extending into the future, whereas cloudy flags have a wide range of possible outcomes. Both have to be considered in a neutral manner with the objective of producing the most plausible scenarios for the time span under consideration.

 Here is a sample of the ones I included in the book Flagwatching, published in November 2015, to ascertain how different this century might turn out to be from the last one.

The religious flag

The collision between religions started spreading out from the Middle East to the rest of the world in the late 1980s. Now no week goes by without the flag hitting the headlines, the latest tragedy occurring in Nice, France. Even the attempted military coup in Turkey appears to have been caused by rivalry between secularism and religion. As I said in this column in May 2013, self-radicalisation is potentially very dangerous as it is impossible to pick up the signs of a specific individual taking the leap from abstract idea to ghastly deed. The measures required to reduce the probability of this scenario become extremely costly in terms of money and denial of freedoms which are the foundation of democracy. Indeed the cultural integration brought about by globalisation in the last century is now at risk of being undone with the increasing polarisation caused by this cloudy flag.

The red flag

Rising tensions between Russia and China on the one hand and America, Britain and Europe on the other mean that the world is back in a second cold war after a brief interlude of peace in the 1990s. The triggers were Russia’s annexation of Crimea and China’s territorial ambitions in the South China Sea. History shows that many hot wars are started by random events and no single century in the last 2 000 years has been without conflict. Already we are seeing near misses in the Baltic Sea, NATO is mounting record military exercises on the edge of Russia’s borders and the Eastern Mediterranean is congested with American and Russian warships engaged in the Syrian conflict. The stakes in this century are much higher if nuclear weapons no longer serve as a deterrent to war.

The grey flag

This clockwork flag comprising the ageing of the world’s population is having a bigger impact on the global economy than any other flag. It has slowed the Japanese and European economies to a virtual halt, and it has halved China’s economic growth rate. The idea that central bankers can reverse the effect of this flag by bringing interest rates down to zero and pumping cash into the system is derisory. The latest statistic is that two-thirds of all the people who have ever lived on this planet beyond the age of 65 are alive today. Pensionable age is rising, governments are reviewing the qualifications for welfare programmes in aid of the elderly and empty hospital beds are scarce. All that central bankers have achieved with their easy money policies is to ensure that for retired people in the race between poverty and death, poverty will probably win.

The anti-establishment flag

The wave of anger associated with this flag is sweeping the world because of growing inequality between the super-rich and the rest. It caused the shock of Brexit, as the north of England vented its spleen on the establishment in Westminster and the City by voting to leave the EU. Theresa May has recognised the significance of this flag by sounding more like Beatrice Webb, my famous Socialist great-great-aunt, than Maggie Thatcher in her initial utterances. Sometimes it is right to be left! Donald Trump is still in with a chance of becoming the American president despite the establishment’s outrage over many of his views.

The green flag

Probably the biggest contrast between this century and the last one is that the previous one started with a global population of around 1.5 billion people versus this one with 6.5 billion people. Our planet is beginning to show signs of strain particularly when it comes to climate change. Temperatures in places like Australia and the state of Arizona are at record highs; small island groups in the Indian and Pacific Oceans are beginning to disappear through rising sea levels; and extreme weather events creating hectic droughts and floods are increasing in frequency. Texas recently had two one-in-five-hundred-year rainfall events in three months. From a long term point of view, this clockwork flag is the most important of all in changing the game; but it is also the most lethal in that the gradual nature of its rise up the flagpole encourages neglect.

The porous border flag

As the global population expands and the inequality between countries grows, we are witnessing the migration of people on a scale that has not been seen for centuries. This is changing the political dynamic in places like Europe and America and has created an enormous refugee problem in many other countries. Nobody has an answer to this uncomfortable issue, but the flag will only be lowered when living standards and quality of government improve in the poorer countries. Meanwhile, it is increasing societal tensions in the rich ones.

The world of work flag

For young people, this flag has more influence on their futures than any other one in this century besides climate change. The world of work that existed in the last century has simply disappeared as a result of technology eliminating a vast array of conventional jobs. This clockwork flag is set to rise further with artificial intelligence in robots. It means that you have to create a job rather than get a job and for governments everywhere the emphasis should change from job creation to new business creation. Schools and other educational institutions will have to teach their students entrepreneurial skills. The statistic that demonstrates the widespread nature of this flag more than any other is that 80 per cent of the new jobs being created in the US economy are in the small business sector.

Conclusion

All these flags have to be watched on a continual basis as the future unfolds. Any piece of news associated with them should be interpreted for the impact it may have on the game you intend to play during the next five to ten years. Equally, the possibility of new flags emerging should not be discounted. Some may even demand that you move to another playing field.

Flag-watching is a natural habit for foxes with their bright eyes to detect change and their willingness to adjust to it. One thing that pleases my co-author Chantell Ilbury and me is that the approach we recommended in The Mind of a Fox, which we published in June 2001, has received a boost from an unexpected quarter.

Research released subsequently by Philip Tetlock, America’s top futurist, shows that open-minded foxes are more likely to get the future right than inflexible hedgehogs with their grandiose visions. He studied the accuracy of over 82 000 expert forecasts to come to this conclusion.

 

Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.

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