Global Risk Report 2020: Environmental Risks- Most likely, Most Impactful, Least Readiness

What can be more priority seeking than the fact that all top five risks identified in The Global Risks Report 2020, issued by WEF, are linked to environmental issues- beating Economical, Geopolitical, Societal, and Technological categories. 

As per the Report: 

Top five Risks in likelihood:  Extreme weather, Climate action Failure, Natural Disasters, Biodiversity loss and Human-made environmental disasters. 

Next five set of Risks: Data fraud or theft, Cyberattacks, Water crises, Global governance failure and Asset Bubble.

In terms of high impact, if materialized, although with relatively less likelihood: Weapons of Mass Destruction, Information infrastructure failure and Infectious disease spread.  

Climate realities are getting categorised as the planetary emergency for their known and unknown impacts across multiple areas of interests and with severe consequences:  Potential loss of life and immigration among those living in vulnerable low-lying regions, drop in crop-yields, water scarcity,  disruption in trade supply chains (with new options available through snow-melting in Arctic), increased insurance cost for assets build in vulnerable regions, and societal costs of inconvenience linked with extreme weather.

Decline in Bio-diversity may show-up in hard to predict sudden collapse, while not counting the loss of opportunity for human benefits on account of extinction of unexplored species.  At the same time, solutions suggested to stem bio-diversity loss may involve socio-economic costs: organic agriculture comes at the cost of poor yields, requiring more land to serve required produce.  Around 12 million hectares of tropical forest worldwide lost in 2018.  Disappearance of Amazon at rapid rate not only reduces the carbon absorption capacity of earth but also increases dryness in the atmosphere leaving ecosystem more vulnerable to fire and drought.  Wild forest fires further accelerate the loss of bio-diversity.

Insect decline may lead to flowerless world, with silent forests, a world of old dung and fallen leaves, and rotting carcasses accumulating in roadsides- as per David Wagner, entomologist at university of Connecticut.  Coral reefs, provides vital protection from coastal flooding and farm surge, facilitate breeding of fishes and contribute to US 36$ billion per year to tourism industry.  Even if global temperature stabilizes at an increased 1.5 c, coral reef could decline by 70-90%, as the ongoing estimates. 

Report suggests the need to recognize the economic value of nature, and natural capital stock movements to be counted as part of national economic health- so that economic benefits that comes at the cost of reduction in natural capital in the form of depletion in bio-stock and diversity are appropriately accounted for.

Governments, Central Banks and Corporates are examining the best ways to incorporate the financial risks of climate change and any disruptions that rapid shift of investments, policies and consumer preferences towards net-zero emission goals, in their assessments and disclosures.  

It is expected that such efforts would give enough impetus to make industries embrace circular economy features and encourage attempts to extract maximum out of natural resources through its revamp and reuse to extend its life-use than push for early replacement of half-used assets. 

If most of the climatic changes are linked to global warming, than movement to low-carbon consumption scenario becomes an attractive preposition. But transitioning towards low-carbon technologies would mean stranding assets, reduced investment returns, increased stress on pension funds stranded with investments in extractive industries, job losses, and shift in relative importance of minerals like iron and cobalt with technological innovation focus into areas like high-storage batteries and low-carbon alternatives to iron, glass and cement. 

Transition pains to low-carbon economy needs to be managed and spread over a protracted period, and we do not have much time, unless we start in right earnest, under comprehensive framework that allows for adjustments for the genuinely disadvantaged stakeholders.

In terms of Technological Risks, report brings out the concerns and issues coming out of increased fragmentation and incompatibility between cyber security regulations, framework and technology standards, which leads to higher transaction costs, greater cyber risks and sub-optimal investments in infrastructure and R&D. 

Ecological footprint of mass data generated for and by AI, for example, is considerable:  Training a single AI model can emit as much carbon as five cars in their lifetimes, MIS Technology Review, June 2019.  Quantum Computing can reduce the effectiveness of existing data security and critical infrastructure systems including military network, email and power grids, as it allows for higher capabilities and speed in solving mathematical problems which form the basis of mots encryption software today.

There is need for comprehensive, inclusive and agile global governance architecture to address the dynamic and intertwined security issues linked to 4^th Industrial revolution.     

The Economic risks highlighted in the report including rising trade tensions (decreasing trade volumes), lower investments (reduced levels of FDI inflows), weak confidence and high debt (both public and private), which could result in prolonged slowdown of the world.  In particular, US and China decoupling (and disentangling their economies and trade ) with each looking to design its own supply chain, 5G networks and investment institutions may also force other countries to decide which economic system to be part of or create redundancies to be part of both the paradigms.

Report, also recognizes the emergence of Narrower issue-specific, ad-hoc “coalitions of the willing” such as Franco-German Alliance for multilateralism, African Continental free-trade agreement, Quad, as poor substitute for truly global broad based multilateral institutions, whose effective in tackling truly global concerns is waning.

While the report has classified risks across five categories, each one of these risks when materialized can trigger other risks or acerbate their impact.   

Some of these risks would need action now for them to avoid their reaching tipping point of no-return.  Climate Action Failure could be one such risk!

MBA 101 in action: Running business - the HUL way!

Sudhir avers that it took him only 4 months to type the book although it took 20 years to write. In similar vein, it does not take long for most organizations to appreciate the advantages of running business in line with management principles taught in business schools- mostly under 101 courses, but most organizations may take lifetime to practice these  principles in letter and spirit. And this is the where Hindustan Lever has got the edge.

Most of the book lessons may not be new, but how Hindustan lever implements them come live through experience and practice sharing that Sudhir has brought out very effectively. Most companies, especially operating in developing economies, profess focus on growth, cost consciousness, meritocracy, differentiated workforce strategies implemented in sensitive and humane manner, grounded leadership, and importance of balancing character and competency while defining their definition of desirable talent.

Given the richness of experience Hindustan lever managers have in FMCG space- across all 4Ps of marketing, any conclusions or suggestions coming from their side merits deliberation. Defining marketing process as understanding customer needs and solving customer problems defined in-terms of Job to be done, is powerful way to differentiate it from its components, including publicity, advertisement or sales.

Some interesting insights that are worth reflecting, to understand their relevance in one’s business context includes:
1. Buyers are far more similar in behavior than you think- avoid over-segmentation
2. What matters is the quality the consumer gets and not quality designed in the laboratory
3. It is easier to get consumers adopt new category than to get them increase consumption
4. Price discounts do not recruit new consumers, encourage existing consumers to buy more
5. Lower price point is more important than cheaper price per kilo for low-income consumers
6. Build portfolio of brands at different price points to be resilient in times of crisis
7. Sales is a cost and not a revenue centre
8. Ensure availability of stock and not depth of stock- keep stock refilling cycle short.
9. Spend more on advertising deployment and not on advertising creation.
10. Look for reach than repetition in media plan- whisper to as many

Among my favorites is the practical suggestion of ensuring that decision has both the right and left brain backing – as Sudhir mentions that decisions are often created in inebriated state and validated and firmed up in sober state.

 Book full of insights that are real contradictions that become  obvious in hindsight!

Some leaders run a sprint, while others participate in relay race in endless game!

Simon has based this book on the initial work by Prof. James p Carse (Finite and Infinite Games:  A vision of life as play and possibility), and clubbed it with otherwise known management work by likes of  Jim Collins, Brown Berne, Adam Grant, to put together a compelling narrative in support of Cause-driven, visionary leaders, who believe in organization building for long run (aka level 5 leaders). 

Simons’ basic premise is that leaders either operate with infinite mindset or finite mindset.   The book shows how the two kinds of leaders differ in their decision making, team building and managing change and there are leaders from corporate world used to exemplify both kinds.  

In finite game- the goal is to win before the game ends, in infinite game, the primary objective is to keep playing, to perpetuate the game.  Finite games are between known players, played with well-defined rules and with clarity on how will winner be decided? Infinite games are played between known and unknown players, within general broad conventions and broad boundaries and players are free to join in or drop out at any time. The game of business fits into the definition of an infinite game, while a particular organization may or may not play with infinite mindset.

Targeting a particular weight by a certain date is a finite game, while living a healthy life is an infinite game.  In first case intensity of effort (or sacrifices) will work, while in second case it requires a consistent choice over a long time- almost lifestyle commitment. 

Infinite-minded leader works to ensure that employees, customers and shareholders remain committed to contributing through effort, wallet and investments, allowing organisation to serve its stated just cause- the vision it strives for through every action.

Organisations led by Finite-mindset Leader depicts:  Obsessive focus on quarter results, winning over competition key motivation, negotiable ethics, non-cooperative suffocating culture, in-human managers & profits before everything else.  Finite-minded leader plays to end the game-to win.     

Finite-minded players worry about disruptions, infinite-minded players expect surprises and even revels in them, for the aim of the first is to develop a stable company, for the later a resilient company.

Some of the interesting combinations of finite and infinite mindsets: 

1   In combat- one player may be playing with finite mind-set and other by infinite one- The first one may win some games, but will eventually drop out of the game, while the later endures.  Example includes the combat between US and Vietnam!, or at some stage between Microsoft and Apple.

2.       Professional CEO with finite mindset- following founders’ tenure with infinite mindset- Initial bump in the shareholders returns, embraced by wall-street, till the good-will and resources garnered before are not exhausted and then desertion happens – starting with talent, customers and finally profits.

3. Once the infinite mindset leader wins a particular play, there can be temptation to switch over to finite mind-set.  This is where the leaders resolve is tested, against the lure of attention and goodies associated with winners coming from media, investors and other stakeholders.

4.       Its ok or must have finite mindset, if one is playing a finite game (of football!).

5.       What if you have an infinite mindset, but stuck with boss or investors with finite mindset? 

Simon has identified five essential practices that would help develop infinite mind-set: (why only five? Why only these – cant say!)

1.       Importance of associating with a Just Cause- Essentially it is about having and truly believing in the Vision or Purpose of existence of the organisation- wherein all choices, decisions and resources are directed to serve that cause.  There are enough ways to find out, whether the stated cause or mission runs in the veins of the organisation or used as seductive marketing slogan. Infinite mindset gets attached with the Cause to such an extent - self-interests gets subsumed.  Simon beautifully illustrates how the US Declaration that all men are created equal, has been reinterpreted to break all barriers over time including race, gender, geography, opportunity and sexual orientation and the perfect vision of equality is still work in progress.  Simon provides some suggestions on how to ensure that JUST CAUSE is defined right to have the necessary pull, tangibility and relevance over infinite time-horizon.  Redefining CEO as C-Vision-Officer with CFO and COO as associates is an interesting suggestion. If you know your why? (courtesy Simon earlier book) you would naturally gravitate to the associated cause or vision. 

2.       Infinite mindset involves selecting a worthy rival and use his/its existence to learn and improve oneself and once ahead, find another rival to stay motivated on the continuous evolutionary journey.  Instead of choosing a competitor who you want to win basis some outcome metrics (sales, market share, etc), worthy rivals may be a set of comparing organisations with each one doing particular things better and forces one to focus on multiple opportunities for improvement.  Simon mentions US predicament in managing rivals in Coldwar 2.0 in the form of North korea for nuclear threat, China for economic challenge and Extremism for ideological supremacy, requiring different response than earlier world of Coldwar, where USSR seems to be representing all rivalry folded in one competitor.

3.       Existential flexibility comes naturally to the infinite-mindset leaders as they are focused on serving their Cause and welcome any development that would helps accelerate achieving that vision and do course change without much lament about sunk cost, or wasted efforts.   This kind of flexibility in not easy to come-by leaders that are playing finite game to meet certain outcome metrics in predefined period- to them this is unwelcome distraction to be ignored or restrict its influence on the existing course.

4.  Leaders with Infinite mindset focus on building trusting teams- where members are open to share bad news, seek help and share variant perspectives, while feeling psychologically safe that their actions will not be used against them.  Finite leaders create a sense of fear and mistrust within team as each member acts to safe his back, often resulting in hiding information and avoidance of accountability.  Finite metrics as dominant part of performance system within organisations tend to promote finite mind-set, resulting in organisations often celebrating high performers who may have severe trust deficit within their teams and peer group.  Simon would prefer low performers with high trust than high performers with low trust score, while both sets may be worthy of coaching stint. 

  5.       Courage is the essential requirement for anyone interested in moving away from the established norms, prevailing paradigms or simply trying do something that would upset the present set-up.  Hence, Courage finds mention in almost all How-to and paradigm-redefining books, including this one.  

 Standard examples like Apple, Microsoft, Blackberry, Kodak, United Airlines etc- are so often used by almost all management thinkers to prove their hypothesis,. Clearly these success stories and failures are not likely to be attributed to one-thing they their leaders or these organizations did  right or not- although quest for simple explanation continues among thinkers and researchers.

In conclusion, the book may not be presenting any novel idea or incisive insights but is reassuring for those already leading with infinite mindset and for others, it provides enough provation to self-examine motives and realign ones' leadership intent. 

Dare to be Vulnerable, its worth and can be learnt!

Imagine if one knows how to manage and leverage Vulnerability (with its uncomfortable feelings), what would it mean to the way one builds connections, develops creative ideas, handles difficult conversations, leads teams…….amplifying boundaries!  Its worth it and it is doable- that is the big inspiration from the book, that Berne Brown would like us to takeaway. 

Some of the key insights that Ms Brown brings to light:

1.       Courage is not opposite to fear.  Instead it represents the set of behaviors and responses that one display, when in fear.  Courage can be built in all, and is not decided at birth. And yes, courage is contagious, too. 

2.       Courage is built on the individual’s ability to do vulnerability, live in sync with personal values, act and promote trust and finally ability to rise strong from set-backs (kick-ass) that are inevitable.

3.       Vulnerability is an emotional exposure, when faced with uncertainty and risk, and where the outcome is not in ones’ control.  Berne emphasizes the need for doing Vulnerability by the leaders in the organization context, that would go long way in connecting and closing with teams and ensuring openness, innovation, trust and enabling non-judgmental culture.  Neither Vulnerability is sign of weakness, nor is it license to indiscreetly sharing the personal experiences and emotions.   

4.       Contrasting Daring Leadership with Armored leadership indicates the difference in behaviors that go a long way in explain their effectiveness and impact on those led.  Armored leaders act as being a knower, chasing compliance & control, rewarding exhaustion as symbol of self-worth, and zig-zagging and avoiding conflicts.  Daring leadership is characterized by learners’ approach, shared purpose, cultivating commitments, straight talking and empathy, including self-compassion. Daring leaders work from the assumption that people are doing the best they can- leaders with ego, armor or lack of skills do not make that assumption. 

5.       Shame, that reinforces in us the feeling of not been generally good enough, is behind our love for embracing armor.  We need to guard our inadequacies as secret from the world, for the fear of being ineligible for their love and connections, if these gaps get known to the world.  This shame driven thinking is limiting, debilitating and leads to smallness of being and cheap behaviors (including blaming and shaking others or excessive comfort eating).  In contrast, feeling of guilt is a positive emotion, as it involves acknowledging the specific gap that is followed by commitment to actionable gap fulfillment plan.

6.       Empathy seems to be the real antidote to shame.  Empathy is about connecting and staying with the emotions that other is experiencing than rushing to alter the emotions or fix the concern.  While Berne lists the empathy skills, what is more interesting is the empathy busters; fathom saying these quotes while empathizing:  It’s not that bad,  you are over-reacting, I have been through worse, I imagined you were stronger, and do this to fix it up! 

7.       We need trust to be vulnerable, and we need to be vulnerable in order to build trust. 

8.       More than half the population do not take conscious effort to define and recognize their personal Values- something that defines them and provides the filter to use while making tough calls.  Book provides the list of values as reference and for readers to identify their top two values, which requires deliberative and intense effort, especially when trading off between equally appealing values.  Once in touch with values, leaders are able to understand their reinforcing and contrasting behaviors and also their boundaries of acceptance.  Berne explains the concepts using her two values- courage and faith- with great alacrity and incisiveness.

9.       Importance of Trust has been written much about.  Berne brings to us set of behaviors that are learnable, measurable or observable, which would help build trust.  It includes being consistent in ones views on what is acceptable and what’s not, doing what one says, owning to ones gaps, and preferring courage over comfort.  Further it involve respecting confidentiality of stuff shared in confidence, not jumping into conclusions about other and finally being generous in assumptions about others behaviors, and intent (including self). 

10.   Finally how to rise from the fall- low feeling that we often experience in this journey.  Labelling the emotions right and precise, would mean half the job done. This is where having adequate level of emotional literacy becomes important. Can u consciously look at the uncomfortable emotion and call out it as jealousy, fear, hate, resentment, disappointment, anxiousness, frustrated, regret, hurt, or worried?  What is behind anger and sadness? Try this after you are feeling bad after a meeting that has gone well- you would get insight into your own self- values- emotions and help design more effective coping mechanism.  It works, indeed.  

While for those who have gone through other books by Brene, there may be some repetition- but for others, it has lot of fresh ideas and actionable suggestions.  If nothing else, it not only take topic like courage from the genes-attribution to learnable realm, and provides good start-up kit, provided one is ready to experiment.  

Book worth taking along as you retire for year end vacations and plan for courageous, bigger and bolder next year!