As global politics continue to gyrate, the pace of change poses ever-greater
challenges to accurately predicting the future. Many forecasters have gotten
into the habit of declaring—ex post
facto—that they got "it" right, when in fact they failed to
accurately predict the course of events. Given the multifaceted nature of the
world today, predicting the future is quickly becoming a fool's game and
calls for a new paradigm.
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 several books. Read his full IRMI.com bio.