May 25, 2012

Friday Scenario Warning: Check Your Ideology at the Door

Patrick Marren
Partner

Since we are in an election season, let's talk about ideologies. They are deadly to any attempt to anticipate the future. But we all have 'em. Fortunately, scenarios are the best way we know to counter this inevitable fact about humans.

 

Think of any person's brain as a giant system of matrices. When we're born they are more or less empty. As we age, we fill a lot of the slots with associations. When we touch a stove, we get burned: STOVE::BURN. When we eat chocolate, we're happy: CHOCOLATE :: HAPPY. And so on. Notice that our matrices contain a lot of empty space still, even as we age. The space for CHOCOLATE :: FAT normally does not get filled until we're much older. The space for BROCCOLI :: HAPPY may never be filled for some of us. 

 

But then at some point we go to school, and begin to get trained. This training is in large part a passing down of matrices about specialized subjects that have been objectively and scientifically tested over long periods. E :: MC SQUARED. SHAKESPEARE :: GREAT DRAMA THAT'S HARD TO READ. ROOMMATE :: STEALS STUFF FROM REFRIGERATOR. 

 

But once you graduate, you find that for most of the things you have to deal with in life, the matrices you've developed are highly unreliable. Is he or she the one to marry? Is this the right job for me? How do I deal with a difficult boss or a deft rival? 

 

And once you rise to a position of real responsibility, you're in territory where your necessarily limited and idiosyncratic life experience is simply not going to be sufficient to deal with your now broader portfolio of decisions. What do you do then?

 

Well, a lot of people, seeing a whole new realm of decisions, and looking at their near-empty matrix for dealing with those decisions, simply substitute matrices containing associations that are more appropriate for other areas, but with which they are far more comfortable. When people see something very new, there is often a natural tendency to flee to the familiar, to mistake the current intractable problem for a more tractable and familiar problem that they solved in the past to great applause. 

 

(This is where the Peter Principle kicks in. The Peter Principle states that "People are promoted to the level of their incompetence." Organizations tend to promote people who have had success in their previous jobs. But ultimately, as the management ladder is ascended, there will come a job that is qualitatively fundamentally different from what has gone before. Operations jobs are the archetype here. Superiority of process and technical prowess will suffice for a very long way up the ladder. But once you are promoted to the level at which you must make decisions about doing the right things, rather than doing things right, operational knowledge (and the "matrices" that accompany it) can actually be a hindrance.)

 

And then those people often start making unfamiliar decisions based on inappropriate "matrices" they have developed in other areas of their lives...such as according to political ideology.

 

Which brings us to the election season. 

 

There are two basic "matrices" developing in the land, the "red" and the "blue." When they are injected into business planning, they have the effect of putting severe blinders on decision-makers. Let's summarize them in the way we all know we want to: in purely destructively negative and scathing terms:

 

The "red" matrix says that Democrats are terrible for business; that they raise taxes; that they expand welfare dependency; that they are bad for the stock market; they want to regulate everything that moves; they are pacifist surrender monkeys; and that they will cause inflation and high interest rates.

 

The "blue" matrix says that Republicans only care about the rich; that they are anti-government; they want total deregulation; that they are militaristic and anti-peace; and that they will never raise taxes.

 

If you were writing scenarios of the future, and had a generic Democratic president, then, you'd expect high inflation, maybe also a depression, lots of people on welfare, higher taxes, terrorist attacks, and a lot of socialism.

 

If you were writing a scenario of a Republican president, you'd expect far lower taxes, smaller government, high unemployment, deregulation, war, and a society dominated by a rich elite lording it over a mass of the poor.

 

Now, these are essentially the campaign ads you are going to see this year - straight out of these simplistic matrices. Our side GOOOOOD; their side BAAAAAD. The one thing these overlook is that history shows that matrices of this type are notoriously unreliable:

 

- The "conservative anti-communist Republican" Nixon was the one who opened up Communist China and started detente with Russia; he also put in place wage and price controls, the single most socialist thing ever done in this economy outside of a time of world war; and he established the Environmental Protection Agency.

 

- The "liberal" Democrat Jimmy Carter pushed through the biggest percentage increase in defense spending since the Second World War in response to the Soviet invasion of Afghanistan. (You can look it up.)

 

- The "liberal" Democrat Bill Clinton campaigned on "ending welfare as we know it" and then made good on his word, signing welfare reform into law. 

 

- The "conservative" George W. Bush signed into law a gigantic pharmaceutical drug benefit and massively expanded the size of the federal government after the 9/11 attacks (adding the TSA, DHS, and increasing the size of the military and intelligence communities).

 

- The "conservative anti-communist" Ronald Reagan massively expanded the size of the government; pushed through the biggest tax increase in history, after initially cutting taxes; and then, against the advice of his closest supporters, negotiated with Mikhail Gorbachev on huge cuts to our and the USSR's nuclear weapons. 

 

- The "liberal socialist" Barack Obama has not raised taxes yet in his term, has continued the bailout of banks and has not pushed through any thoroughgoing re-regulation of the financial sector, has continued many of his predecessor's policies on the wars in Iraq and Afganistan and prisoner detention, and has ramped up drone strikes against overseas terrorist suspects.

 

- The Dow Jones Industrial Average has increased far more during the terms of Democratic presidents in the past 50 years than under Republicans; meanwhile, Sarbanes-Oxley, the regulatory bane of conservatives, was passed by a Republican Congress and signed by a Republican president. 

 

Now, it is true that I could have put up a different set of these presidents' actions that would have corresponded better with pre-existing political prejudices about them; but let's face it, those prejudices could never have anticipated the stuff above. 

 

So what are the conclusions we can draw here? 

 

Our political ideological matrices may warm the cockles of our hearts. But they are lousy guides to what will actually be. It doesn't really matter which side you are on; if you use campaign ads as a guide to the future, and then base any sort of important business decision on them, you could be in for a severely negative surprise. Presidents (even if they want to, which is usually highly questionable) never get to enact their raw partisan agenda unhindered.  They are not only shackled by the checks and balances of the three branches of government; they will inevitably also be overtaken at some point by huge outside events that render much of their plans irrelevant or inoperative (as the Nixon press secretary Ron Ziegler used to say).

 

The solution? You knew we were going to say scenario planning, didn't you? Well, of course we are - that's our own ideological-professional matrix at work. We here have our own irrational prejudices and political bigotries, but we try to balance them out when we write scenarios. We may have one scenario that flatters our own ideologies, but we try to fully populate our matrices so that a "liberal" president can do "conservative" things, and a "conservative" president can do "liberal" stuff. And we try to have a variety of other outcomes as well, some in the middle, some off at various ninety-degree angles. Example: We've written scenarios of massive climate change, but we always insist on accompanying them with at least one scenario in which climate change stalls out or even reverses.

 

So when you are doing serious business planning for the future, it's best to check your prejudices and ideologies at the door. Even if you REALLY KNOW that the other side is pure evil, and your party is on the side of the angels, in this world, it's really hard to find pure evil or pure good actually being realized. It's usually more of a muddle, and then it all gets rolled over by something else you didn't expect. 

Comments  | 

Peter Kennedy
Case in point: Back in the 1990s, the multinational business community in Brazil was petrified that labor leader Luiz Inacio da Silva ("Lula") would be elected president and lead the country toward socialism and policies against foreign companies. One of the scenarios we created for a major auto company played out a populist Lula carrying out pro-market policies...and the nation benefitting both politically and economically. It was a hard sell at the time, but our client grudgingly agreed to consider this...to their credit and ultimate strategic benefit. So, right, very little in the world of strategy is black and white (or red and blue). PJK

Thoughts?