A Forest Fire Analogy
“It's how you deal with failure that determines how you achieve success.” - David Feherty
After the 2008 crash I presented the idea, to a group of EU business and Government leaders, including UK Prime Minster Brown, European President Barroso and French President Sarkozy, that maybe the world economy needed this “forest fire” and that it should not just be extinguished to go back to the existing structure with the existing leadership. I explained that in the past, the perceived wisdom when managing nature, was to extinguish forest fires quickly, however that thinking more recently had changed to only extinguish the parts of the fire that caused human and severe wildlife damage. This is because most animals can survive most forest fires, and forests are designed for them. Without forest fires, forests stagnate and eventually die, because these fires replace the old trees and vegetation and allow room for the new ones and thus create evolution.
This is very similar to how innovation and disruption works. In the 2008 financial crash the entire economy and banking systems were under threat and the damage happened virtually overnight giving leaders almost no time to react. I actually remember one of the leaders, who was sitting opposite me and focusing on me, saying that this is not the time to make those who created this problem pay. The world economy is like a patient dying on the operating table. First and quickly we must save the patient. Then we can make those who did this pay. They successfully managed the first part but somehow forgot to do the second.
This time, with the COVID crisis, this is not the case and we actually have more time, space, knowledge and technology to consider, plan and manage for the next phase of modern humanity (compared with the sudden catastrophic banking failure of 2008). With the possibilities, opportunities and threats of Artificial Intelligence around the corner starting now may be propitious. And whilst tragic on a human level, the COVID virus disproportionately impacts the old, the existing forest, rather than the young, the new forest to be. With 81% of the global workforce having had their workplace fully or partly closed and the governments already acting fast and effectively (financially at least), maybe this time the world is more open to this paradigm shift.
An interesting example of this is Microsoft. When Bill Gates was at the end of his tenure as CEO there were hundreds of very senior managers, who had started in the early days of the company, still around. These people represented an almost impenetrable barrier to the fresher thinking and dynamic staffers, who found their careers held back by lack of available positions. Bill’s departure saw many of the senior management leave and made space available for new blood. Microsoft has gone from strength to strength, changed its entire model and is still almost the most valuable companies in the world.
Ray Dalio suggests that we are heading to a global depression, that has happened many times the most recent in 1929-1932 with a 10% fall in the economy and double digit unemployment; the characteristics are the same: printing money, 0% interest rates, a long period before the economy and market exceed previous highs. There will now be about 3 years for redistribution, then there will be the rebuilding. This will require creativity, inventiveness and adaptability, which is humanity’s greatest force, if we can operate well together. He believes it will pass – as money and credit are just digital and accounting - and we will have a new world order. This he says can be healthy in many ways, as over time people and institutions get weaker, and the systems need to re-orientate. (This is similar to the forest fire.)
Today we are now calling this The Great Reset.