Deep Thoughts

Narratives, Scenarios, and Strategies

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“Essentially, all models are wrong, but some are useful”

-George E.P. Box

Models, predictions, and forecasts are always wrong, or, more accurately, they’re never completely right. That’s obvious since the map can never truly be the territory. Some are better than others, but no matter how hard we try and how much information that we gather, we’ll never construct a representation of reality better than the real thing. That being the case, forecasts therefore reveal more about ourselves and our present state of mind than anything about the future.

The Research Feature in the fall issue of the MIT Sloan Management Review, “Beyond Forecasting: Creating New Strategic Narratives” (link here – requires a one time registration or purchase Kindle article here for a few dollars), concerns a certain type of forecasting called scenario planning. The authors studied a tech company that was being hit hard during the 2001 economic crash and needed to find new strategies to navigate the rough seas ahead.

Their research revealed that

“future projections are intimately tied to interpretations of the past and the present. Strategy making amid volatility thus involves constructing and reconstructing strategic narratives that reimagine the past and present in ways that allow the organization to explore multiple possible futures.”

These explorations of possible futures, more commonly referred to as scenarios, are stories intended to describe possible futures, identify some significant events, main actors, and motivations, and convey how the world functions.

The authors note that constructing forecasts based on these methods usually doesn’t work very well because the future is uncertain and often unfolds in a way that is very different from current trajectories. The current paths are comfortable and familiar, so they are difficult to deviate from. Constructing scenarios of the future actually first requires constructing paths that connect the past, present, and future. The narratives are those paths.

”In comparing strategy projects within CommCorp, we found that the more work managers do to create novel strategic narratives, the more likely they are to explore alternatives that break with the status quo. In other words, to get to an alternative future, you have to create a story about the past that connects to it.”

Predicting, prognosticating, and prophesying have been around since time immemorial. The modern version of strategic scenario planning can be attributed to Herman Kahn at the Hudson Institute and his “thinking the unthinkable” about nuclear war by taking into account non-linear, disruptive changes that lead to an uncertain future. The first to bring scenarios into the business world was the pioneering strategy guru Pierre Wack at Shell Oil who coined the term. Wack was a colorful and imaginative individual who took Kahn’s insights and repurposed them to affect the quality of judgment rather than quality of predictions.

Among the many books, case studies, and articles on the Shell planning department, I just completed The Essence of Scenarios: Learning from the Shell Experience, a history of the scenario group culled from interviews of former members. Pierre Wack helped found it and headed it throughout the 1970s. The book concerns the entire history from then until the present, but it devotes a large part to Wack’s work and legacy.

In contrast to Kahn’s theories, Wack was less concerned about decoding uncertainty or getting predictions right and more concerned with making future uncertainty more relevant to the present situation.

“Wack was interested in scenarios as a way to ‘see’ the present situation more clearly, rather than as a basis for knowing about the future. The value of the scenarios is not in better forecasting what ‘the’ future will be, but in encouraging already smart people to learn by ‘seeing’ the present situation afresh, from the perspective offered by plausible, alternative futures , in a process that Wack termed ‘disciplined imagination’.”

With an emphasis on present adaptation instead of future clarity, their first attempts happened to be nicely prescient. Their November 1971 scenarios covering “Producer Government Take/World Economic Development” and their January 1973 scenarios for “Impending Energy Scarcity” presented different tracks for oil prices including: a low slow growth scenario based on the continuation of past agreements with producer countries, a track that the corporate leadership expected; and a high price growth scenario which factored into concerns that producer countries were reaching limits to how much more capital inflows they could absorb.

These scenarios involved explorations for prices through the late ’70s into the early ’80s. It’s important to keep in mind that, in keeping with the notion that they weren’t meant to be exact predictions, the high price track scenario still ended up being off by a factor of 20 as oil embargoes and inflation pushed prices higher than anyone could have imagined. Despite the fuzziness of the numbers, however, presenting a possible future far off from what was expected shifted thinking outside the company’s comfort zone.

There was some initial skepticism from top executives, but the scenario planning helped the company to think differently and conditioned them to adjust in flexible ways that they wouldn’t have considered previously. Consideration of the high price track eventually led to Shell investing in nuclear and coal which helped offset the political turmoil and price shock that would arrive in the mid ’70s.

“In October 1973, the first oil crisis began to unfold, and the entire organization became aware of the possibilities that scenarios offered. The 1973 scenarios report had provided a new frame of reference the mindset of the oil producer countries. This new frame was significantly different from the usual analytical frame the mindset of an oil company. The scenarios had enabled Shell executives to rehearse the future as a thought experiment rather than a crisis exercise. When the crisis actually occurred, Shell was able to collectively re-interpret the turbulent situation and to respond much faster than its competitors.”

In order to be taken seriously, the Shell scenario team had to relate to top management how the oil producers’ situation related to their own situation.

“In September 1972, Wack gave what those present remember as a three-hour, enthralling performance that was based on an image of the six scenarios as a river forking into two streams, each of which divided into three tributaries. The insight about hither oil prices and possible energy crisis… were integrated into one of these scenarios.”

This technique demonstrated the narrative of how the high price scenario was linked to Shell’s operations and how it could have sprung forth from Shell’s past. The key was teasing out the culture, values, and qualities of the past that could make that future plausible.

Similar re-interpretations of the past are what the MIT researchers found were most successful for their tech company. It wasn’t that they provided better predictions, but it helped provide a unifying vision and get everyone to buy into course changes that didn’t seem to fit before.

“the crash in the market for its existing products had forced everyone at CommCorp to reevaluate the company’s historical strategic trajectory. This questioning enabled one manager to reinterpret CommCorp’s history, not only as a provider of big-ticket hardware for the backbone of the Internet but also as a provider of communications technologies across the whole network. By seeing the company as all about “communications,” the manager was able to propose a project for improving access at the “last mile” of the network. This reinterpretation made a radical shift in a future vision possible: CommCorp could provide small-ticket, standardized products as well as customized, high-end technologies.

The narratives and scenarios became a way to define the company as it was today and illustrate a more coherent organizational structure. This is possible because of the rich potential of examining the past.

“strategy making is not about getting the ‘right’ narrative. It’s about getting a narrative that is good enough for now, so that the organization can move forward and take action in uncertain times. This recognizes that strategy will in some ways always be evolving and “emergent.”

Everyone loves to try to make predictions, but the real value lies in re-evaluating the past and restructuring past trajectories to provide for a launching point to navigate into the future. This “re-programming” the past is the way to deal with an uncertain future. Instead of forecasting futures that merely extrapolate from the status quo or futilely fighting future models that conflict with conventional mental maps, the use of narratives, scenarios, and strategies provides ways to create stronger and more harmonious models of the present.

The Continuing Mystery of Jewish Leftism

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Many of the comments on this post by Glenn Reynolds are quite good. Worth a read.

“Why Partyism Is Wrong”

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This is one of David Brooks’s better columns.

Politics is obviously a passionate activity, in which moral values clash. Debates over Obamacare, charter schools or whether the United States should intervene in Syria stir serious disagreement. But these studies are measuring something different. People’s essential worth is being measured by a political label: whether they should be hired, married, trusted or discriminated against.
 
The broad social phenomenon is that as personal life is being de-moralized, political life is being hyper-moralized. People are less judgmental about different lifestyles, but they are more judgmental about policy labels.
 
The features of the hyper-moralized mind-set are all around. More people are building their communal and social identities around political labels. Your political label becomes the prerequisite for membership in your social set.

There is much to this, though I would disagree that “people’s essential worth is being measured” by their politics. It would be more accurate to say that among nonreligious people politics is becoming a substitute for religion, an idea not unfamiliar to readers of this blog.

Where Brooks falls flat is in eliding the easily observable fact that the social politicization he discusses is much more characteristic of the American Left than of the Right. But there’s an election coming and the Democrats are set to lose big, so it’s time to anticipatorily attribute the outcome to societal problems rather than the policies of the losing party. Still, he makes good points and his column is worth reading.

Received Cynicism is a Bigger Problem than Anti-Americanism

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Rush Limbaugh was speculating today about the causes of anti-American sentiment in disaffected young people like the NYC hatchet jihadi. He attributes the anti-Americanism to leftist ideas and historical ignorance endemic to our schools. I think this is correct to some extent.

However, the jihadis and other violent anti-American Americans are extreme outliers. The vast majority of people on the Left are not nearly so hostile to American institutions and culture, though they tend to hold grievances against this country and its political system and culture that conservatives do not. Limbaugh makes the typical culturally tone-deaf conservative error of attributing to anti-Americanism that which could better be attributed to cynicism and ignorance.

The USA is a political, economic and cultural wonder, but you need some history to appreciate this fact and our schools no longer teach it. If you don’t know much history, facile cynicism and the tendentious explanations of people who really don’t like the country become plausible. It’s difficult for someone who understands the origins of this country’s institutions and traditions to become a jihadi. It’s even more difficult to become a jihadi if you also understand the intellectually convoluted roots of modern Islamism.

Women, Islam, and the West’s Loss of Cultural Self-Confidence

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Young European women, as well as young European men, are joining ISIS, in numbers which–while not huge–are still large enough to raise concern.

And in the United States,  more Hispanics are turning towards Islam, and  more than half of Miami’s 3,000 Hispanic Muslims are female.  One converted-Muslim Latina, who holds a masters degree, explained the appeal of the religion partly as follows:

It defines their world on a clear grid of what’s permitted or ‘halal,’ and what’s prohibited which is ‘haram’. So they know exactly where they stand. So the Qur’an becomes this guidebook that tells you exactly what to wear, what to eat, how to wash, how to behave, when to pray.

From the above-linked article about European girls converting to Islam and joining ISIS:

The girls sought out IS fighters because the West seems  weak and unmanly and they pine for real men who are willing to kill and die for what they believe in.

Why? Europe’s got great health care, welfare, and lots of attractive young men and attractive women who, unlike the vast majority of women in the Middle East outside of Israel, are sexually available. So, why given a choice between a comfortable, if somewhat boring, life as a pharmacist in Hamburg, or fighting and dying in the desert, are thousands of Western Muslims opting for the latter?

Because, for all the awesome social services and consumer goods it can offer, Europe has become  incapable of endowing the lives of its citizens, Muslim or not, with meaning. A generation of young European Muslims are giving up their relatively easy lives in Malmö, Marseilles, and Manchester for the battlefields of Syria and Iraq, because Europe is devoid of values worth living—or dying—for. They are leaving for the same reason that Europe’s Jews are moving to Israel: Strength and a sense of purpose can be found  elsewhere, whether it’s ISIS, Vladimir Putin, Ali Khameni, or the IDF.

Karim Pakzad, of the French Institute of International and Strategic Relations, said some young women had “an almost romantic idea of war and warriors.  I think this has been true in many if not most places throughout the world and many if not most times throughout history…but today’s West, in many if not most of its subcultures, does not honor its own warriors very much these days.

The motivations of the women referenced in these articles are similar though not identical to the motivations of Arthur Koestler’s protagonist Hydie Anderson, in the 1950 novel  The Age of Longing.  (My review of the book is here.)  Hydie is a young American woman living in Paris, a former Catholic who has lost her faith.  She is not attracted to any of the American or European men she knows, but falls hard for a committed Russian Communist. Koestler makes it clear that Fedya’s sexual appeal to Hydie is due in large part to his cultural self-confidence:

“Listen, please,” (Fedya) said. “We have talked about these matters often before. You don’t like that we make scientific studies of human nature like Professor Pavlov. You don’t like revolutionary vigilance and lists on the social reliability of people, and discipline and re-education camps. You think I am brutal and ridiculous and uncultured. Then why did you like making love with me? I will tell you why and you will understand…”

“I am not a tall and handsome man…There are no tall and handsome men who come from the Black Town in Baku, because there were few vitamins in the food around the oilfields. So it was not for this that you liked to make love with me…It was because I believe in the future and am not afraid of it, and because to know what he lives for makes a man strong…I am not handsome, but you have felt attracted to me because you know that we will win and that we are only at the beginningand that you will lose because you are at the end…”

In my review, which was originally posted almost 5 years ago, I linked a British Muslim woman who said that ““Since 9/11, vast numbers of educated, privileged middle-class white women have converted to Islam”…she identified these converts as including women at “investment banks, TV stations, universities and in the NHS.” Her concern was not that they are converting to Islam…something I’d presume she would applaud…but that they were converting to “the most restricted forms” of the religion.

In the review, I said:

I don’t think Koestler’s protagonist would have been attracted to a fundamentalist Muslim in the way that she was drawn to the communist Fedya. The gap in values would have been far wider: while Communism is a bastard child of the Enlightenment, radical Islam is counter-Enlightenment, and does not make the kind of universalist, humanitarian, and secular promises that the Communists madethe cruelty is closer to the surface.But the loss of Western self-confidence has greatly accelerated since Koestler wrote, and today’s Hydies are unlikely to share the educational and religious depth of the woman Koestler imagined.