And I thought I had a dim outlook. . .
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http://www.nytimes.com/2003/04/07/te...html?tntemail0
NEW ECONOMY
Businesses Plan for the Unexpected
By STEVE LOHR
TEP back from the war in Iraq for a few moments, if possible. The larger picture ? a struggling global economy and no shortage of geopolitical tensions ? looks pretty dicey. Now, imagine that events veer toward something close to a worst case. What are the implications, and how could companies cope in such an environment?
That was the drill when a couple dozen business executives, academics and futurists gathered in New York for a two-day workshop conducted by the Global Business Network, a firm that specializes in so-called scenario planning. The resulting 36-page report, "The New World (Dis)- Order: Managing Risk in Tumultuous Times," has been sent to the firm's clients, including I.B.M., Ford, Coca-Cola, Procter & Gamble, UPS, Morgan Stanley and the government of Singapore.
Here are some excerpts from the gloom-and-doom script: Japan goes bankrupt. Al Qaeda cements alliances with Palestinian extremists and sets off a series of terrorist attacks, mostly in Israel, hoping to create a political split in the Western alliance to thwart Qaeda-sponsored terrorism.
There are more: The belief in globalization as a benevolent economic force is shaken further, rendering the International Monetary Fund and World Bank all but irrelevant. In the United States, a new government organization, the Home Security Advanced Research Projects Agency, is created to set the national agenda for technology research, shifting the emphasis from ubiquitous computing and biotechnology to focus on the security economy. Meanwhile, major cracks develop in the world legal order protecting intellectual property rights, threatening the livelihoods of companies like I.B.M., Microsoft and Merck.
"It's all completely plausible," insisted Steven Weber, a political scientist at the University of California at Berkeley who wrote the pessimistic, if plausible, story line for the workshop.
The meeting occurred in January, when a war with Iraq was assumed but projected mainly as a "catalyst for other shocks and challenges," according to the report.
"This is about the bigger picture," said Mr. Weber, who directed the workshop and is also a member of the Berkeley Roundtable on the International Economy.
Scenario planning is intended not to predict the future but to prod people to think more broadly, unconventionally, and perhaps view events with a new perspective. "These kinds of exercises prepare the mind's eye to see change when it occurs," explained Peter Schwartz, chairman of the Global Business Network, a unit of the Monitor Group, a management consulting firm.
The peril of even fine minds thinking too narrowly, Mr. Schwartz says, was illustrated by the giant hedge fund Long-Term Capital Management, which nearly collapsed in 1998 because its brilliant traders and Nobel prize-winning economists did not foresee events beyond their risk models. Their efficient-market theories proved incapable of coping with the turmoil in the global financial markets after Russia defaulted.
A participant in the workshop, Andy Hines, a senior manager for business development at the Dow Chemical Company, said he benefited from listening to experts in geopolitics and others from disciplines far from his own. "The real value is people who yank the conversation in places you never thought of," he said.
One such presentation came from Joseph Fuller, the chief executive of the Monitor Group's Action Company, who questioned the management assumptions of recent years. Mr. Fuller noted that a generation of executives has been taught that "speed is good, commitment is good, make your decision and go for it." Yet in more uncertain, turbulent times, the priority may be on keeping alternatives open instead of the speed of making single-path decisions. In 10 years, Mr. Fuller said, venturing a prediction, business schools will not teach topics like discounted cash flow calculations but will instead teach executives how to analyze their options.
A higher-risk world could require the rethinking of many tenets of conventional business wisdom. The canons of globalization included shopping the world for low-cost parts, developing tighter relationships with fewer suppliers, and deploying an itinerant corps of key managers and engineers who were willing to travel anywhere on a moment's notice to meet a customer or solve a problem. Those assumptions would all be challenged if more developing nations, in particular, became politically unstable.
Another arena of possible instability, according to the scenario planners, is intellectual property rights. For Mr. Weber, the crisis in the music industry over digital piracy and file-sharing software is just the beginning of the problem, which he says goes beyond the entertainment industry. Hollywood, software publishers and pharmaceutical companies have all assumed that the United States government, through international trade agreements, would be the trusted world policeman enforcing intellectual property rights.
Yet Mr. Weber points to what happened when worries over anthrax and bioterrorism surfaced in October 2001. After the Canadian government overrode Bayer's patent for Cipro, an antibiotic used to treat anthrax, some senators said the United States should follow Canada's lead. The Bush administration resisted and anthrax fears soon waned.
The incident, however, should be unnerving to corporations whose businesses are deeply dependent on intellectual property protection, Mr. Weber says.
"The conceptual and political foundation for intellectual property rights is really insecure," said Mr. Weber, who is writing a book on open source software ? code that is distributed for free.
Already, some legal scholars have advocated that the duration of most forms of intellectual property protection should be shortened. What, Mr. Weber asks, might be the effect on intellectual-property companies like Microsoft, I.B.M. or Merck? "It has the potential to be a bit like the crash in the telecommunications business," he observed. "Is there is an I.P. bubble in technology companies? There could be."
Or not. After all, times and situations change. Indeed, Mr. Schwartz is perhaps best known as the champion of "The Long Boom," which was the basis for a cover story in Wired magazine and a book published in 1999, written by Mr. Schwartz, Peter Leyden and Joel Hyatt. Its vision of almost unabashed technological and free-market optimism held out the possibility of what Mr. Schwartz called "a global economic boom on a scale never experienced before," running from the mid-1990's through about 2020. There is, to be sure, a long way to go on that one ? 17 years, either to realize the Long Boom vision or to refute it.
Then again, Mr. Schwartz and his Global Business Network also contributed its thinking to a government commission on national security that was led by former Senators Gary Hart and Warren B. Rudman. The commission's report, "New World Coming: American Security in the 21st Century," published in 1999, warned that the United States was "increasingly vulnerable to attack on our homeland," that "rapid advances in information and biotechnologies will create new vulnerabilities" for American security, and that "new technologies will divide the world as well as draw it together."
Of war, the Hart-Rudman commission warned that its essence would not change. "There will be casualties, carnage and death," the commission report said. "It will not be like a video game."
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