Thinking Ahead in a Time of Turbulence

Inevitable Surprises
by Peter Schwartz

The world we live in today is more volatile than ever. The security of free nations is threatened by rogue states, the global economy is in flux, and the rapid advance of technology forces constant reevaluation of our society. With so many powerful forces at work and seemingly unpredictable events occurring, to many the future seems dark, and its possibilities frightening.

Peter Schwartz disagrees. A world-renowned visionary in the field of scenario planning, Schwartz's startling and accurate predictions have been employed by government agencies and major corporations for more than twenty-five years. He argues that the future is foreseeable, and that by examining the dynamics at work today we can predict the "inevitable surprises" of tomorrow.

Timely and thought-provoking, Inevitable Surprises is a book that no one with an interest in business or the future of our society can afford to miss.

Chapter 1

In a world of surprises, what can we count on?

As I write this, in early 2003, the question has never seemed so relevant. Some have lost their life savings in the economic turmoil of the last few years. Others have seen promising jobs and businesses abruptly disappear. A few of us have lost family members or friends in terrorist attacks. Many of us took for granted the idea that the United States, as the most powerful nation in the world, was virtually unassailable by outsiders. Nineteen madmen shattered that illusion on a September morning in 2001. Has anyone seriously believed, since then, that New York, Washington, or other American cities will never be in danger again?

Leaders of organizations, from corporations to government agencies to nonprofits to unions, have seen our financial and market assumptions overturned. High-growth new media enterprises that were about to reshape the worlds of communication and retail suddenly went bankrupt. Time Warner and AT&T may well suffer similar fates to Enron and WorldCom. Latin America's economy abruptly entered freefall last year. Fourteen million African children have been orphaned by AIDS, a disease that nobody knew existed thirty years ago. The global middle class is burgeoning in, of all places, the immense socialist societies of China and India.

You may be reading this book a year hence, or five years, or perhaps more, when these specific stories will seem like ancient history. Yet the fundamental point remains: You, too, live in a world of surprises. For surprises are the norm. There will be many more moments to come when the assumptions you've lived by sudden fall away-inflicting that same queasy feeling you get when an elevator drops a little too suddenly, when an airplane hits an air pocket, or when a roller coaster moves past the top of the curve and lurches into its descent. There will also be beneficial surprises to come-when impossible, unthinkable opportunities and technologies suddenly become real, for you (or someone else) to cultivate, develop, and use.

Historically, upheaval is not a new condition. To be sure, there have been some relatively surprise-free centuries in human history; life for most people in medieval Europe was much the same as it had been for their parents. But since the scientific discoveries of the seventeenth century, complexity and turbulence in the world at large have been facts of life, looming larger and larger in people's concerns until today there is hardly anyone unaffected by them.

At the same time most of us still feel emotionally that things should be stable and certain; that once we're over the next hump of crisis, life will naturally return to tranquil normalcy. And there are things we don't want to see strapped into a roller coaster: Our country's security. Our companies and jobs. Our retirement accounts.

Is there a better way to live with this tension than just to hang on for the roller-coaster ride and react to every new surprise thrust at you? Yes, there is. There are still certainties-still facts and factors that we can rely on and even take for granted. For example, the quality of the natural environment-of air, water, and land use-in the industrialized world will significantly improve over the next thirty years. The use of "soft power" (moral suasion) will be more and more influential in diplomatic and military arenas, even as "hard power" (weapons and military technology) grows more prominent in the American federal budget. And the economy will revive: not in the same bubbling, effervescent form as it took in the late 1990s, but in a form that makes general prosperity seem once again accessible.

There are many things we can rely on, but three of them are most critical to keep in mind in any turbulent environment.

First: There will be more surprises.

Second: We will be able to deal with them.

Third: We can anticipate many of them. In fact, we can make some pretty good assumptions about how most of them will play out.

We can't know the consequences in advance, or how they will affect us, but we know many of the surprises to come. Even the most devastating surprises-like terrorist attacks and economic collapses-are often predictable because they have their roots in the driving forces at work today. On September 11, 2001, we saw the tragic consequences of ignoring those predictions. The terrorist attack that day was perhaps the most forecast event in history. A half dozen reputable commissions over the last twenty years had suggested that an incident very much like this might occur. Many predictions had singled out the World Trade Center (in part because it had been attacked once before), mentioned the use of airplanes as weapons, or specifically referred to Osama bin Laden. No one knew when the event would happen-it might be next week, it might be two years from now-but the details were foreseen. Yet most people, in both the Bill Clinton and George W. Bush administrations, focused their attention elsewhere prior to September 11: on domestic priorities, campaign priorities, and other military arenas including missile defense.

A few people in responsible positions did look ahead. For example, following the surprising end of the Cold War, the President and the Congress created a commission chaired by Gary Hart and Warren Rudman, to advise it on a new fundamental national security strategy. I led the scenario team for the Hart-Rudman Commission. Our report, released a few months after George W. Bush was inaugurated in 2000, warned that terrorist incidents represented the greatest threat to the United States. In one scenario we anticipated terrorists destroying the World Trade Center by crashing airliners into it. Our most urgent recommendation was that the U.S. needed new levels of capability in homeland defense.

The Commission's work, and other similar efforts by various critical agencies, did not prevent the attacks, but they did contribute to the decisive speed and competence with which the U.S. responded, especially in the first few months.

In the coming decades we face many more inevitable surprises: major discontinuities in the economic, political, and social spheres of our world, each one changing the "rules of the game" as it is played today. If anything, there will be more, not fewer, surprises in the future, and they will all be interconnected. Together, they will lead us into a world, ten to fifteen years hence, that is fundamentally different from the one we know today. Understanding these inevitable surprises in our future is critical for the decisions we have to make today-whether we are captains of industry, leaders of nations, or simply individuals who care about the future of our families and communities. We may not be able to prevent catastrophe (although sometimes we can), but we can certainly increase our ability to respond, and our ability to see opportunities that we would otherwise miss.

The global financial networks provide an ongoing example of this. Errors and panics continue to occur, but the financial world learns from these disasters. The 1929 financial crisis led to ten years of global depression; the 1987 financial crisis, which was arguably a greater calamity judged just from the lost market capitalization, led into a completely different outcome-a mild recession and then a boom. One reason for the difference: the financial institutions and regulators learned something from 1929. They are still learning. They will make many mistakes in the future, but they will not permit precisely the same kinds of abuses of research and accounting that led to the stock market crisis of 2000-2001.

Copyright © 2003 Peter Schwartz, published by Gotham Books, a member of Penguin Group (USA) Inc., all rights reserved, reprinted with permission from the publisher.

About the Author

Peter Schwartz is cofounder and chair of Global Business Network, part of the Monitor Group. He is the author of The Art of the Long View, and coauthor of The Long Boom and When Good Companies Do Bad Things. He has been a leading advisor to governments and major corporations. A highly sought-after speaker for business symposiums, he writes the monthly "Scenario" column for Red Herring magazine.