In the past 4 months in 2022, the world has experienced unprecedented crises such as virus mutation, war, and stock market diving, and many people have directly called out that the reality has become more and more magical every year. These unknown events are like monsters that suddenly strike from quiet places, disrupt people's normal lives, and further affect great changes in society.
And there is also a huge wave on the ocean that can swallow everything. When countless small waves in different directions come together and suddenly hit the reef or shore wall with force, it may form a wall of water of nearly a hundred feet. Such a wave, known to geographers as the "Rogue Waves," may destroy all ships on the surface when severe.
Pushing into the reality in which we live, as the world becomes more interconnected, social, economic, and technological undercurrents also drive the development of civilization. These undercurrents gradually increase, injecting more and more energy into the system, and new vortexes form below the surface of the water, shaping them into the next mad dog wave. Millennium events occur every decade, and once-in-a-decade events occur all over the world.
Therefore, how to predict the coming mad dog wave around you and prepare for the response in advance is undoubtedly something that today's enterprises, organizations and individuals must understand.
Identify mad dog waves
In the past, people always thought that sudden waves, like mermaids and ghost ships, were just legends among sailors. It was not until the end of the last century that researchers discovered that there was a certain pattern of manifestation of these waves.
There is a concept in physics called constructive interference, in which the peaks of two waves overlap each other, briefly producing a composite wave that is twice as large as the two waves. The essence of mad dog waves is the same – when the topography or cross-currents on the ocean floor direct a wave to a narrow gap, increasing their amplitude, the surface of the sea will rise a nearly hundred feet of waves in a matter of seconds, and most frighteningly, these waves are often difficult to predict.
Mad Dog Waves are not regular waves, just as system crashes are not regular events. What both have in common is that they are both compounded by several seemingly normal phenomena. To give two examples that have already happened, we can better identify the "mad dog wave" incident around us.
We seem to think that COVID-19 is an outbreak without warning, but the truth is that it was foreshadowed. On the one hand, the habitat of animals is widely destroyed, making it easier for the virus to spread from wild animals to humans. On the other hand, the increase in international travel and freight transport under globalization has accelerated the spread of the virus. In addition, an ageing population means a larger population that is vulnerable to infection.
In the economic field, national interests are volatile, and trade transactions can be changed in an instant. As new powers rise, citizens of mature economies demand more from their governments in a situation of slowing growth, and the social contract is being redefined around the world. This has also made the foreign policy of some countries change, such as the United States began to tighten the provision of key technologies a few years ago, making China's telecommunications industry face shocks, and the ensuing trade war is also intensifying the contradictions. And as the COVID-19 outbreak accelerates global competition for technology, workforce, education, energy, and natural resources, we will encounter more systemic crises over the next decade.
It is not difficult to find that macro trends are the sum of thousands of individual events, some of which have the potential to bring us opportunities or destruction. History does not repeat itself, but it is not without regularity, and it is useful to study the major undercurrents of the past and the systems in which they operate.
Therefore, if individuals and organizations want to identify the next wave of mad dogs, they need to do the following three things:
1. At least have an understanding of the main underlying trends of today;
2. Pay particular attention to events that lead to the interaction of two or more "undercurrents";
3. Build awareness of these trends in your organization so that the entire team can keep an eye on the signs of the next wave of trends.
Be wary of small "undercurrents"
Admittedly, we need to be in awe of the dangers of the Mad Dog Wave, but we can't miss potential opportunities by choking on food. So how to identify those undercurrents that can cause upheaval among hundreds of trends is crucial. The undercurrent in different environments and different eras is different, and it is necessary to grasp its dynamic trend, be vigilant against risks, and make steady decisions.
An important "undercurrent" in today's society
The economy is the first undercurrent. It is the most humane science because it studies how resources are used correctly and the motivations behind them. For example, the recently talked about population issue – demographics is the flywheel of the economy, which determines the cost and availability of the two most valuable resources, employees and customers. That's because in many countries, consumer purchases account for more than half of the economy, and in recent decades, the main drivers of economic growth have been increased incomes from global education and demand from population growth.
However, the average age of the population is rising in 20 large economies, including China. Declining fertility and aging population may mean lower interest rates, slower economic growth, increased government debt, etc. What kind of storms such an undercurrent will cause is self-evident.
The second undercurrent is technological innovation. Today we may be on the verge of a reorganization of human affairs, in which technology is playing an increasing role. But like the first three technological revolutions represented by telegraph and radio, telephone, and the Internet, new infrastructure and tight integration are essential for these new inventions to reach their full potential. For example, artificial intelligence technology (AI), which is increasingly deeply rooted in our lives, has driven the development of hundreds of other applications that rely on advanced pattern recognition capabilities, such as search, medical diagnosis, and autonomous driving.
AI has raised human productivity to unprecedented heights, and may even see that even in the context of slower growth, people's living standards will improve as the consumption of resources facilitated by AI automation declines. On the other hand, the increasing complexity of information technology systems has increased the dependence on suppliers. The economic, life, and social impacts of technological monopolies are potential risks that need to be noted.
The last undercurrent is the replacement of the social contract. With economic and technological changes in the global political landscape, today we can see that a new social contract is being invisibly concluded. In doing so, it will challenge century-old assumptions about the distribution of power, power, and wealth.
Internationally, with the increase in debt and productivity inequality, historical events such as "Brexit" and "occupation of capitol hill in the United States" have emerged, which means that large enterprises and governments will need to redivide their relationship with the people, and wealth and resources will be reintegrated. In China, the emergence of phenomena such as "carbon neutral economy", "double reduction landing", and "wave of layoffs in large factories" also indicates that new opportunities and risks for individuals and enterprises are coming at the same time under the changing social contract.
Mad Dog Wave's Coping Framework
In the past few years, the concepts of "black swans" and "gray rhinos" have become deeply rooted in people's minds. Black swan events refer to high-risk events that are small probability and unpredictable, while gray rhino events are metaphors for potential crises that are high probability and have a huge impact. The Mad Dog Wave incident has something in common with the former two, except that it can be dealt with with with a clear framework model. Jonathan Brill, HP's global futurist and research director, answers this in his new book, Mad Dog Waves.
Brier believes that dealing with uncertainty is a key task for businesses and large organizations in the next decade. Successfully doing this requires not only knowing that change is coming, but also managers creating processes and developing habits that will enable operations, products, and marketing strategies to meet the challenges of the future. In response, Brill has compiled the corporate behavior innovation framework for dealing with the "Rogue Waves" into the "ROGUE Law" as shown below. He believes that this framework is consistent with the anti-risk thinking process of mature organizations:
"ROGUE Law" Schematic Table
The code that large organizations can build on is that they have been doing this kind of strategic modeling, simulation, and risk management. For example, private equity giant BlackRock assesses risk through real-time statistical models, which help ensure that their trading strategies make money in both good and bad times. Good modeling can help leaders reduce risk and answer three important questions:
• Uncertainty: How likely is the event to occur?
• Impact: If an event occurs, how much impact will it have?
• Timeline: Are the uncertainties and potential impacts related to the timeline being considered?
Only by solving all three of these problems at the same time can we gain useful insight into which opportunities to seize and which risks to manage. In his book Mad Dog Wave, Brill cites a case where he made risk predictions for an AR tech startup: Business leaders say their headsets are arguably the best and most high-end devices on the market, but their product planning and channels are not well managed. Brill used the "three questions" above to point the way in risk modeling for the company.
Timeline: Their third-generation headset will be available in 5 years, but by then the AR industry must have undergone drastic changes under the influence of the "technology undercurrent", so risk management must be front-ended.
• Uncertainty: In five years, 5G and even 6G technology will be popularized to disrupt the AR industry, especially in the high-end AR field, when the market will be full of "mad dog waves". Large cloud providers like Amazon will enter the content market, while network equipment manufacturers like Huawei will sell more client-optimized devices, while service providers like T-Mobile, Comcast, and Verizon will reduce hardware costs to ensure their profits.
• Impact: The above uncertainties mean that the development conditions of the AR industry will become more superior, but there will be more companies joining this track, and the competition will be more intense, so the price war is almost inevitable, and the overall stable pricing of high-end AR will no longer exist. At the same time, the change of industrial structure will also make AR companies gradually shift from simply marketing hardware or software equipment to the mobile market. In order to maintain their advantage, companies must constantly innovate in core technologies.
After the above risk predictions, the startup can clearly see where they want to start to build their own anti-risk model. Although the specific products have not been changed, a series of corporate strategies from pricing strategies to marketing plans will be adjusted according to risk modeling, making the probability of this start-up surviving under the industry "mad dog wave" greatly increased and has sustainable vitality.
epilogue
Great thinkers, leaders, and businesses all benefit from the same principles. They draw from the wide range of human experiences and use that knowledge to avert risk. As a captain's business leader, self-sacrifice to save the crew is not the greatest, the challenge is how to predict risks from small phenomena, adopt the right crisis response framework, and forge the ability of enterprises to "ride the wind and waves".
Individuals and organizations alike, there are always some people who can save themselves in the rolling tide, choose the right track, and even find a new outlet. Just as for thousands of years the Inuit were able to accurately traverse the Arctic tundra without map guidance. Not because they have some kind of God-given sixth sense, but because they have seen through the changes in the environment in one voyage after another. They found that there was often a hint of light blue at the sea-sky junction before the arrival of the great waves, and they also noticed that the water flow at the stern of the ship would change slightly, and before the "Mad Dog Wave" broke out, they had already reversed course or made an emergency call through the observation and prediction of the undercurrent.
The world is in the midst of major changes unprecedented in a century, and countless seemingly small changes may stir up huge and unexpected new waves. If we can understand how these changes will affect us and prepare our responses in advance, we can empower and grow in the midst of change.
This article is excerpted from Mad Dog Wave, published by CITIC Publishing Group in April 2022
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