Today's oracles confront a dizzying array of information in
an attempt to make sense of the future. Looking for precedents
in unprecedented times exposes the shortcomings of managing risk
by looking in the rearview mirror. It has gotten to the point
where there is so much information out there, it is impossible
to consume it all. And yet, most of this information is little
more than a regurgitation of news and dated analysis—which is
often passé as soon as it is produced. However, average
consumers of such information rarely recognize the difference
because they don't have the luxury of spending enough time
consuming the information.
It is increasingly becoming the
case, given how complex the world has become, that having real
insight into the future calls for little more than an
appreciation for history, some "street smarts," and good
old-fashioned common sense. This seems to have gotten lost in
the blizzard of quantitative indicators and seemingly endless
stream of pontifications available in the information markets
today. Many of these "wise men" wish us to believe that they
possess some kind of magical insight into the future when, in
fact, many of them don't know any more than the rest of us.
The truth is, no person or entity can possibly know everything
that needs to be known to accurately predict the future. Even
the intelligence agencies often get it badly wrong. The tendrils
of the global supply chain are now so interconnected that the
Pentagon recently unveiled plans to protect the web of world
trade as a top national security priority. So, how can the rest
of us hope to get it right?
Part of the answer surely resides
in the rise of social media and the "nuggets" of information
that are the result of free-flowing thought by ordinary people.
A billion imaginations bloom on Facebook, LinkedIn, and Twitter,
and perceptions can quickly become reality. With mobile density
nearing 90 percent globally, this new paradigm of near perfect
interconnectedness is the new form of intelligence that, if
properly harnessed, can hold an important key to remaining a
step ahead of the competition.
But, equally importantly, we
should all be paying even more attention to the lessons of
history, which is the best source of information and guide to
the future. History teaches us that we will often end up where
we started. For example, in Iraq, the mistake of creating
artificial country boundaries that tried to forcefully integrate
Kurds, Sunnis, and Shia was bound to fail eventually. In
Malaysia, granting preferential rights to Malays at the expense
of the Chinese was a policy that could not possibly exist
without a backlash. And, in South Africa, white majority rule
could never last.
The Role of Politics and Economics
What do all these examples have in common? They are joined by
human nature and the notion that people will eventually rise up
when a situation is grossly unfair. We don't need an expensive
information provider to tell us that. In our view, all we really
need to know is the difference between right and wrong and the
nature of human nature to have real insight into what direction
events will ultimately take a country.
Traditionally, the
interconnection between politics and economics is what has
driven markets, but today, the impact of development,
environmental issues, and sociocultural dynamics must be
included in the mix. Taking a static view toward forecasting the
direction of markets that does not include this range of
variables will likely lead to failure. Each transaction is
unique, and each risk profile is specific, so using a broad
brush to paint a risk landscape will rarely yield the desired
result.
Simple use of intuition and the "smell test" may be
more accurate indicators of risk than all the quantitative
methods so often used to interpret the world today, which fail
to introduce texture and common sense into the equation. Our
advice is to study history and listen to your gut. Your chances
of being right are as good as, if not better than, an
overemphasis on numbers—and a lot less expensive.
*Dante
Disparte is managing director of
partner solutions with Clements Worldwide, based in Washington,
DC. Daniel Wagner is chief executive officer of Country Risk
Solutions, a cross-border risk advisory firm based in
Connecticut, director of global strategy with the PRS Group, and
author of the new book
Managing Country
Risk. Read his full
IRMI.com bio.