The world is pretty crazy right now, and it’s hard to know what to do. About anything. But even wait-and-see is doing something.
Or maybe, we can step up as leaders. Business leaders. And since everything is in flux, not just business, we can also be family leaders. Friend and community leaders.
Leading or not, we need a way to deal with the chaos.
The first step is understanding why chaos is even a problem.
America has decided to step down as a world power. Given our central role in the world’s economy, America shifts, and so does everyone else. Stock markets are dropping. Currencies are fluctuating. We’re talking decades of ripple effects. And that’s just the economy.
We don’t know what the world order will look like five years from now. We don’t know what our lives will look like. But different. Almost certainly, different.
Personally, I’m plenty scared. My whole life has been based on stories about the future:
- There’s always opportunity available if you decide to grab it.
- I have control over my future.
- My later years will be spent with family and friends.
- Physical health and fitness is possible, if you just put in the work.
- The world will generally get better over time, leading to more opportunity, health, prosperity, and safety.
In short, I’ve assumed that everything needed for a vital, fulfilling life is available.
Do Lunch or Be Lunch
But there’s the rub. When those assumptions are up-ended, everything else seems in doubt.
Will there be opportunity, two years from now? As I write this, GDP forecasts have dropped from +3% to 0% in the last six weeks.
Will there be health care, sanitation, food standards, and public health that can help support me in my old age? It’s looking unlikely.
Will my country even be conducive to community, mutual support, happiness and love?
We want to know these things so we can plan for them.
My Harvard Business School professor Howard Stevenson changed my thinking more than anyone else. He has a knack for reframing life situations in powerful ways.
In his book Do Lunch or Be Lunch, he suggests that the fundamental human drive isn’t survival, it’s predictability. Predictability is what helps us survive.
We don’t want to Be Lunch; we don’t want to be the hapless victim of the Saber Tooth Tiger.
We want to Do Lunch. We want to be the ones in control. We want to build, plan, and do so we can be the diners, not the meal.
Building and planning means knowing the future. Or at least knowing what the future is likely to be. That’s why science is great. Science tells us how the world works.
When we combine “how the world works” with “what we see, feel, and hear” (also known as data), we can predict future:
There’s a huge tree outside my window. The branches are near the house (observation). Close branches + wind = broken windows (how the world works). Knowing that, I can ask an arborist to trim the tree.
Note to self: Call the arborist. That tree’s getting a little too close.
It’s far from perfect, but it works better than anything else humans have tried.
Risk? Defuse it!
When you “Do Lunch,” that’s risk management. We do it everywhere.
Financial professionals are always looking for ways to get high returns with downside protection—that’s risk management.
Ever hear of a “hedge fund?” They started as funds designed to help investors “hedge their bets” against downturns in other investments.
Households save for a rainy day. Or for college, just in case our kids don’t get a full scholarship (does anywhere even give full scholarships).
We buy life insurance policies for our families, in case we get eaten by a Saber Tooth tiger.
We audition for Broadway, and also learn a marketable skill, just in case we don’t get selected as Elder Price in Book of Mormon. (h/t to my friend Pete, who despite being a “triple threat” singer, dancer, actor, also learned to code.)
We don’t like chaos because it screws up our ability to predict—and thus control—the future.
Change, even good change, can be bad
The ultimate in predictability would be if we could freeze everything the way it is. I watched the 2023 movie Barbie last night.
In it, the character Gloria (delightfully portrayed by America Ferrera) tells Barbie, “That’s life. It’s all change.” (Barbie’s response? “That’s terrifying—I don’t want that!”)
Nevertheless, the world changes. We can adapt to slow change. It gives us time to learn the new rules. Then we make new predictions and new plans.
Fast change is another matter. Too fast and our systems start breaking down without giving us time to learn the new rules.
The fundamental human drive is predictability. — Howard Stevenson (paraphrased)
When change is too fast, we stop investing for the future. Consider college: Who wants to spend four years and thousands to learn advanced skills that might be obsolete in ten years? When college is a path to success, it’s a no-brainer. When the job market changes so fast that college is a six-figure gamble? Not so much.
We can’t plan long-term during unpredictability, so we have to settle for short-term tactics. But that’s dangerous. Because short-term gains often come at the expense of long-term health.
The way to deal with chaos is to find predictability wherever you can.
Start from your bedrock
Find what you can predict and plan for it. Then find other ways to deal with the unpredictable.
If your supply chain is breaking down, or your retirement savings drops by 30%, use risk management for some short-term options. Then learn some new ways to think about strategy under uncertainty. We’ll cover my favorite later in this series.
In the book Anti-Fragile, Nassim Nicholas Taleb lays out a proposal for how we manage risk. It’s a barbell strategy. We deal with the extreme downsides and the extreme upsides.
First and foremost, we arrange our lives to protect against the worst-case scenarios. The risk of ruin. Things there’s no coming back from.
My own retirement strategy started with an investment account that I couldn’t touch until age 59 1/2. It invested in low-risk, long-term, dependably predictable investments. If nothing else worked, it’s protction against ruin.
The second part of Taleb’s strategy is the other end of the barbell: the extreme upsides. Always make sure you have some exposure to the best possible cases.
We’ll cover everything in the next few newsletters — protection from ruin, managing to find upsides through turmoil, and where to lean in as a leader.
But let’s start at the beginning. In the next segment, we’ll look at how to protect yourself against risk of ruin.