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Every CEO in the world needs to understand what the future of the global marketplace is going to look like. That is true in every aspect of how we think about the global order. Literally, you cannot be the CEO of a global business today if you don’t spend real time understanding how geopolitics are shifting. It’s fundamental to the global marketplace. That is not always true, but when it is true, it is true for a while.
Geopolitical cycles don’t happen often, but they’re long cycles. Economic recessions on average happen every seven years since World War II. We recognize them. We have fiscal, we have monetary rules and tools to respond to them. We all understand that. They can be very short. Geopolitical recessions when they happen are about the unwind of an existing global order. And watching that, understanding it, recognizing it, and then actually trying to respond to it is a matter of a minimum of a decade and probably more like a generation.
Interrogate the obsolete
When I started Eurasia Group in 1998, I’m not sure that global business leaders needed to think strategically about geopolitics. Most of the relevance of geopolitics at that point was country risk in relatively less stable countries, in emerging markets, in developing countries, and then occasionally when a confrontation would happen as that conflict related to the rest of the world. But it wasn’t macro. And that’s no longer true because the institutions of the global order no longer serve the purpose of a changed global order.
We are now in a geopolitical recession. So in the same way that you need to think strategically to know what parts of your worldview need to change, institutions need to change because the world is changing, but they don’t. Institutions are even stickier than your worldview. Because when you create an institution, you want to make that institution function to serve your purposes and you don’t want other people to be able to change it in the future because what if they have more power than you? They might be able to change the institution in ways that you wouldn’t like. You try to ensure that the way it is now persists for a long time. And if you die, you die.
But of course what that means is these institutions become obsolete. What is happening now is the gap between the balance of power in the world and our global architecture is so great, that the institutions are falling apart, and we need new ones. And that means that our alliances and our priorities and our norms are all open to question.
Survey the political landscape
I think one of the most important things to help you assess a piece of information, a crisis, is what are the different things that are driving the actors? What are all the reasons that there is resistance to making a decision? And what are all of the reasons why that decision makes sense? You want to understand what they all are and some of them might not really matter. You have to start with the landscape.
And then you want to understand the other actors that matter. Which ones have real influence and what are the arguments that they’re actually using to try to promote that view? This is a complicated one, right? There’s domestic politics, there’s oil and energy, there’s alliances, there’s international environment, there’s the Iran deal, there’s the Israel relationship. So first, know the landscape, know all the arguments.
Then also know where there are holes in your information. There will be certain things that are unknowable to you as opposed to those that are knowable, but aren’t known by you. Maybe some of those are knowable to other people, you better talk to those people. Being very, very forthright with what pieces of information you think are actually unknowable, will be unknowable by everyone. It really behooves you to come out and actually say that. Like saying that these things cannot be known and people that pretend they’re knowable are wrong and are misleading you is a very strong piece of information.