A Pitchfork Moment Has Arrived — Part 2
In Part 1 of this story, I outlined the reasons why I believe a “pitchfork” moment may well have arrived, in that the imbalances in our social contract have reached a breaking point. It’s one thing, though to say that may be the case. It’s quite another to consider what to do about it from a strategy point of view. In this article, I’ll walk you through the technique that I use, derived from Chapter 2 of my book Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen.
This one feels like a bit of a “thin ice” moment, because things are moving so quickly, but hey, I’m always up for an experiment.
What I’ll illustrate is how to do the following:
- Articulate two (or more) crucial uncertainties;
- Create a story about the future states that different values of the future uncertainties might imply.
- Define a “time zero” event.
- Work backward from that event to create an early warning system.
The first step in the process is to posit two potentially important future uncertainties, with different values for each. This yields four possible future states for your organization (you can think of this as scenario planning “light”). So for this exercise, I’ll take as one dimension whether the current model of “maximizing shareholder value” continues to prevail, yielding horrible economic results for the majority of the population, or whether we are on the brink of a re-imagined stakeholder capitalism. For the other dimension, I’ll consider whether the global economy suffers a sustained setback or whether it bounces back once the coronavirus threat has been resolved in some way.
That gives us a table that looks like this:
The next step is to create a short “story” about the future state each scenario represents, as summarized in this table.
Then, come up with what I call a “time zero” event for each scenario — in other words something that might be in a newspaper headline that represents either positive or negative signal of an inflection point.
At the time I originally wrote this, literally each of these “time zero” headlines represented real possibilities. The Collapse piece emphasizes that upward concentration of wealth chokes off consumer demand; and that investors are not investing in a particularly productive way. The Extreme Poverty article ponders how it is that such a wealthy nation tolerates so many people living in desperate circumstances. The Rendezvous with Destiny article observes that FDR understood the importance of more broad-based ownership of capital and means of production than that which existed during the Great Depression, and the boldness to take action reflecting this understanding. The Great Society 2.0 is reflected in many think tanks and other organizations urgently calling for a reset.
With the “time zero” events established, the task now is to work backward. Identify information that in your team’s view would represent leading indicators of the time zero event becoming more of a reality. If you start to see lots of indicators associated with that event piling up, the more likely the event is to be becoming more of a reality.
Interestingly, we are seeing weak signals that any of the four scenarios outlined above could be in our future. In fact, for all of them, I was able to find real, in-the-here-and-now headlines reflecting that scenario coming to fruition. The question for all of us now is whether we can create strategies that are robust in the face of all of these possibilities or whether we want to make a bet on one or another.
For instance, say we were considering the “rendezvous with destiny” approach, in which Franklin Delano Roosevelt infuriated his wealthy compatriots by using the powers of government to institute the earliest of social safety net programs in the teeth of the Great Depression and to hem in the unfettered operations of business, even as the global economy sputters. With the election of President-Elect Biden, this scenario looks far more likely than had the incumbent administration retained power.
Some indicators we can already see are:
- A rise in the popularity of governments to take coordinated action (this is definitely in the works — even the Wall Street Journal says that there are vital tasks that only the federal government can perform)
- Public servants experience an increase in their popularity as people begin to understand their commitment and expertise is crucial to navigating through the crisis
- Political pressure builds among policymakers to eliminate easy access to stock buybacks, even as executives in companies whose shares have been battered by the downturn turn away from the practice.
- Companies that look for government support face severe restrictions on being able to reward executives and shareholders before paying taxpayers back
- Investors such as Blackrock take a hard look at corporation’s cash reserves and general credit-worthiness
- Politicians start to chatter about reversing the US 2017 tax cuts and are joined by wealthy supporters such as members of the Patriotic Millionaires and Just Capital. The cuts remain unpopular with the majority of Americans.
- Living wage legislation is introduced and passed in ever increasing numbers of jurisdictions. Worker pay becomes mainstream news, with observers suggesting higher wages would benefit everyone.
- Concerns over sick workers buoy legislation requiring paid sick days.
- The carried interest special tax rate provision is eliminated
- Corporations announce they are planning to decouple their supply chains to build more resilience.
While these are not predictions about what is likely to happen (the world is too uncertain to predict with any confidence), it’s clear that we are in the midst of some kind of inflection point. We’re going to be asking questions about many of our taken for granted assumptions. These include that globalization and trade are always good. That air travel should be accessible to everyone. That we shouldn’t have to invest in building resilient systems, just efficient ones. And, as everybody who is home-schooling young children have come to appreciate, that teachers of young children shouldn’t make $1 million a year.