We must, I’m told, plan for the future, as if some other period of time might seem more worth planning for.

Right now, the future most business managers are planning for is next week, or, for the more visionary, next month. This is as it should be. Many businesses are in the metaphorical emergency room, where stopping the arterial bleeding gets priority over curing a long-term illness like cancer.

And yet …

The decisions executives and managers make today should be informed by their view of what’s in store once the immediate crisis has passed. To that end, and because I really wanted to write science fiction, and because there’s still only one Subject worth writing about, here are some thoughts about the post-crisis future and how it should influence the decisions business leaders are making here in the self-isolated present.

In round numbers, when SARS-CoV-2 eventually recedes from view (in case you haven’t kept track, SARS-CoV-2 is the virus, COVID-19 is the disease it causes, and coronavirus is the family of viruses SARS-CoV-2 belongs to), I see three major competing What Happens Next scenarios. Call them Survivalism, Normalism, and Transformationism.

One at a time:

Survivalists are going to pivot from a dystopian future in which nuclear war has wiped out much of our societal infrastructure and norms to the same dystopian future only with a pandemic as the cause. Self-reliance (including a strong immune system) will matter more, social adroitness will matter less; the adjective of choice will be “grim”; and living off the grid will be less isolating than expected because those choosing the survivalist lifestyle will experience an influx of new, like-minded neighbors.

Business survivalism puts us in Great Depression territory, where dramatically reduced commerce leads to greatly reduced personal income, wealth, and spending, which leads to a vicious cycle of even more dramatically reduced commerce.

Survivalist business leaders expect a slow, protracted recovery. They should reduce their workforce to the numbers needed to supply a much smaller marketplace.

Their strategies will be pseudo-Maslowist, figuring most spending will be for needs, with wants and desires a distant second and third, too miniscule to be worth catering to. Probably they’re already adjusting their products and services catalog to fit.

For Normalists the current pandemic is a temporary disruption. They need strategies to get through the next few months, not to adapt to changes to societal fundamentals.

And while nobody has ever deliberately turned off the economics motor before, normalists are confident we’ll all figure out how to re-start it once we can stop dealing with the threat of contagion.

Business normalists should be thinking about the best ways to ride things out so they can ramp up quickly once the recovery starts. This means furloughing employees rather than laying them off, converting others from full-time to part-time status, renegotiating services contracts and licenses, optimizing raw-materials inventories based on a post-recovery demand forecast, and figuring out how to quiesce production facilities now so they can be re-started with as little delay as possible then.

Normalists should also include a chapter 11 contingency in their plans. (Expectation: massive use of the chapter 11 mechanism will help the economy recover by sharing out pandemic-induced economic damage, not that I have any serious expertise in such matters.)

Transformationists? They figure the pandemic will accelerate trends we were going to have to come to grips with anyway, the most important of which is the decreasing need to employ human beings to do all of the work that has to get done. The second most important is that consumers, and especially younger consumers, want more experiences and less stuff. That’s fine if you’re in the entertainment business or are a tourism destination, although the future of cruise lines is debatable.

But even if you’re Disney you rely on retail revenue along with the theme park entry fee.

Those who figure the past prefigures the future will explain that all previous waves of technology have created more jobs than they destroyed. Although the transitions were painful, the new jobs did appear.

But increasingly capable machine learning and robotics mean fewer and fewer humans will be needed to create the stuff retail outlets will be selling less of.

Transformationist business leaders should be doubling down right now on the investments they’ve already been making in artificial intelligence and robotics. They should also, right now, start to re-conceptualize their businesses in terms of how they fit into a less-stuff/more experiences consumer marketplace.

Meanwhile, transformationist savants will start thinking about how to configure an economy so that people don’t need to work to make their lives work.

And not only an economy, but a society and culture, too.

President Donald Trump, at a March 19th briefing, said, “Nobody knew there’d be a pandemic or an epidemic of this proportion.”

This is not an accurate statement (see, for example, last year’s Worldwide Threat Assessment of the US Intelligence Community, 1/29/2019), which, given President Trump’s falsehood rate of 15 per day since taking office shouldn’t be all that surprising.

And yet, in Donald Trump’s defense (you have no idea how hard it was to type those words) …

But before we get to that, here’s a quick recap of how organizations plan their risk responses. It isn’t, in principle, particularly complicated: Risk managers:

  • Establish their planning window.
  • Enumerate the relevant risk categories and specific risks.
  • Estimate each risk’s probability of occurrence within the planning window.
  • Forecast the harm should each risk become real.
  • Determine the logical level of investment for dealing with each risk.
  • Decide which of the four responses to risk is most logical (or are most logical — combinations are allowed):
  • Prevent, also called “avoid” — reduce the likelihood of the risk becoming real.
  • Mitigate — reduce the harm should the risk become real.
  • Insure — for a fee, share the financial harm that occurs when the risk becomes real with a third party.
  • Accept, also called “hope” or “ignore” — do nothing.

Speaking of risk, I’m taking on quite a bit with the above analysis, namely, that members of the KJR community who are more knowledgeable about the subject will blister me for such a ghastly oversimplification. If you’re among them, please share what you know in the Comments.

Where was I? Oh, yes, the Trump administration’s response to the threat of a pandemic, which was to ignore it, in spite of, as explained last week, its statistical inevitability.

Among the questions this raises: How many businesses insured themselves against the threat of a pandemic, prevention being impractical for your average business, and mitigation … for example via supply chain diversification … having severe scope limitations.

My guess: Not many.

The plain, sad fact of the matter is that most businesses, most of the time, have to accept more risks than they respond to through prevention, mitigation, or insurance. Among them:

  • Nuclear war.
  • Stray asteroids.
  • Your sole remaining IMS expert calls in rich from the Caymans.
  • Malware invades the GPS system, resulting in randomly calculated driving routes that disrupt shipping for your products and supply chains.
  • IT’s planners didn’t know their predecessors “solved” their Y2K problems through the use of a “pivot year,” which solution expired last year (and thanks to Al Vyssotsky for bring this to our attention in last week’s Comments).
  • The company you outsourced IT to pulls an Enron and goes toes up.
  • A voice in your CEO’s head tells him to slaughter the rest of the executive leadership team with a machete during its annual planning retreat.
  • Mutant chimpanzees declare war on humanity.
  • Two words: Disco revival.

It’s something you can count on: The next risk that turns into reality will, in all likelihood, be a risk you Accepted because, like most businesses, you can’t afford to plan for every risk you can think of; probably you can’t even afford to plan for all the ones you know are serious and likely.

Does this mean risk management is a pointless discipline? Of course not.

But along the way to effective risk management, before making specific plans for specific risks, should be commitment to these management basics for any Accepted risk that had the poor manners to become real:

(1) Don’t deny; (2) focus your best experts on the problem, whether or not they occupy the most appropriate boxes on the organizational chart; (3) give them whatever resources they say they need without quibbling or negotiating; (4) clear away any institutional roadblocks they bring to executives’ attention; and (5) set the right example — shut down any and all attempts to blamestorm the cause of the situation.

While your experts dig in, you and your fellow leaders should be communicating honestly and directly with employees about what’s happening, what the company is doing about it, and what to expect, to the extent you’re in a position to know what to expect.

Meanwhile, I’m going to take my own advice about not blamestorming our current situation.

No matter how hard I have to bite my tongue to take it.

# # #

But feel free to bait me in the Comments section!