Dan Gerstein and Lance Mortlock on Technology Futures and Scenario Planning
In August of 2020, Bob Gourley was joined by technologist and national security expert Dan Gerstein from Rand Corporation. Dan is also the author of the recently released book entitled “The Story of Technology“ In March of 2020, Bob had a conversation with Lance Mortlock, a Senior Ernst and Young (EY) Strategy Partner. He is the author of the book Disaster Proof: Scenario Planning for a Post Pandemic Future, which explores ways scenario planning can help organizations be more resilient.
Threads that emerge in these conversations include approaches leaders can take to prepare for the future, the role of governments in the future of technology, the “technology wars” as they are currently waged, humanities place in this new warfare, expected outcomes from scenario planning, and what could be the next big disruptive event.
“When you look at the information age, you’re seeing society pull forward information technologies. And I think it is a really interesting concept. It means the government has to be a better consumer.”
Gourley: You have noted in the book and we have all observed, it used to be the U.S government R&D leads in demand generation. We’re a driving force, not just in national security technology, but all technology. It was the government spending money to really accelerate stuff. And now of course it is no longer the case and has not been the case for 20 years and it’s even harder now for the government to really steer what corporate worlds are doing in their R&D spending. So I want to talk about this dynamic of how can governments influence the future of technology, or you tell me, please, if that’s the wrong question, how can citizens steer the future of technology? It used to be that citizens would do that through their government. There are regulations and taxation and spending of R&D budgets. But now what are our options? If the government has far less influence on the development of technology, what do we as citizens do to make sure we get the outcomes? Any thoughts on that, Dan?
Gerstein: Let me go back to a little bit of, you know, the R&D system that we built, the research and development system. And, you know, if you go back to the end of World War II, we started this system based on the lessons that we’ve learned. And it grew to 1960, the government spent 65% of all research and development dollars leaving industry and academia spending 35%. Now, today it’s completely inverted. Today, academia plus industry now spend about 75% of all R&D dollars, and the government only 24%. And what that means is that the government doesn’t have the same pull that it once had. You look at a lot of the technologies that were developed, they came out of programs, the space program, they came out of military programs, global positioning systems, as an example, the internet is another example.
And you know, today what we’re seeing is completely flipped. The R&D dollars are in different places. And the demand is actually from society. When you look at the information age, you’re seeing society pull forward information technologies. And I think it is a really interesting concept. It means the government has to be a better consumer. There’s one other trend. And that is the global trend, you know, in the 1960s the U.S. spent 70% of all R&D around the world. And today the government or the U.S. still has the lead, but we are about $500 billion a year, whereas China is about $410 billion a year. And they are catching up and others around the world are catching up too. So it’s really something to think about as technology becomes more democratized, more available across the globe.
Gourley: So not only is it global and not only is the U.S. Government spending less on R&D and is now having less influence, but does anyone have any influence on where this technology is going? Let’s say somebody in a lab somewhere comes up with a better chip architecture and says, Hey, this is a better way to do compute on chips. Why would that have any influence on the direction of our current architecture? Those decisions are made by, you know, markets and that’s just one example. Does no one entity have control over this? Or does one government have control over it? No coalition of governments seems to have control over it. Who is driving the future of technology?
Gerstein: I would say the two big drivers are CEOs and shareholders. We are looking for corporate profits. And so there is a lot of drive that comes from that. What is also interesting is the government still tries to control technologies, things like export controls, or national laws that would prohibit certain behaviors. But on the other hand, many of those are becoming antiquated because they have not kept up with the pace of technology. Imagine we have a patent system where we grant patents for 20 years, but yet information technologies are changing every 18 months. So does it still make sense? I’m not saying we should get rid of patent laws, but we should reconsider what it really means to have a patent in a system that is moving so rapidly.
“…albeit the uncertainties and the complexities are different, in each sector, scenario planning is the type of management tool I think you can apply with success. There is a common thread there.”
Gourley: I noticed the first quote in the book is by a guy named Pierre Wack. Who is Pierre and why did you choose to start your book by citing him?
Mortlock: Yeah. there’s a couple of reasons for that. So, Pierre Wack used to be an executive at Shell and he was one of the founding fathers of scenario planning at Shell. I started my consulting career working with Shell in Europe in their integrated planning team. I very early on in my career had the firsthand opportunity to see the power of this kind of thinking in a large corporation. And that stayed with me over the last 20 years.
Gourley: Right. You know in digging into Pierre Wack, I noticed that in his early days, his early career of support the strategy and scenario planning, he met with a famous DOD security planner named Herman Kahn who helped the US strategists figure out what to do in the nuclear age as it was transforming all military strategy and requirements. And I thought that must have been such an interesting conversation between these two guys because you have Herman Kahn at the Rand Corporation who is thinking through how the nation has to change and to move into an age of nuclear power and Pierre Wack, who is in a major corporation who wants to figure out how to prepare his corporation for an age of uncertainty. And it must have just been a fascinating series of conversations.
Oh yes. And that is the beauty of future thinking and the use of scenarios is just so transferrable across multiple disciplines. And I talk about in the book there are examples from British Airways, Rolls Royce to great British companies. I, I have to say that Bob, as a Brit. But also, other companies like the Port of Vancouver and Shell themselves. It is one of those tools that crosses industries and sectors albeit the uncertainties and the complexities are different in each sector, scenario planning is the type of management tool I think you can apply with success. There is a common thread there.
“We have to take this stuff more seriously. Are you ready for the next bust cycle? Or are you in fact ready for the next boom cycle? Because there is an upside when using scenarios and thinking about scenarios as well.”
Gourley: Yeah, Lance, I think it would also be good if there is an executive anywhere who does not understand why this is important. What would you tell them? How do you convince them that scenario planning is important, for example, do you say, look, we have all just seen what can happen in a pandemic, the cynical executive may say, “Yeah, but now that is over.” How do you convince someone that just because we all know about this crisis, there could be an unknown crisis in the future?
Mortlock: Great, great question, Bob. There are a couple of things that I would say. One is talking about the pandemic as you mentioned, there are two examples that I talk about in the book. The first example is the World Economic Forum. Klaus Schwab, the founder, and chairman of WEF has endorsed my book. In fact, he said that in his 30 years as being a strategy professor there has never been a more important time than now to use scenario and scenario thinking in the world. It is a passionate topic for me that I think is critical. Let’s talk about WEF specifically. So WEF teamed up with the Bill and Melinda Gates Foundation as well as the John Hopkins University about a year before COVID hit.
And they ran an event called Event 2 0 1 and event 201 was all about using scenarios to figure out uncertainties that would play out in the future. One of the scenarios that they talked about was this idea of a novel coronavirus that emerged from bats to pigs, pigs to humans in Brazil, and that it would turn into a global pandemic. International systems would shut down, travel would shut down. The symptoms would be light to begin with, which would allow it to spread, but then it would kill people on and on and on. A high degree of accuracy in terms of what actually unfolded. There is another example, the Center for Strategic and International Studies did the same thing a couple of years before COVID hit. And with a high degree of accuracy predicted what was going to happen or what happened with COVID-19. I share these two examples with you, Bob because I think it struck me when I was researching the book: we have to take this stuff more seriously.
So, the thing that I would say to CEOs and leaders around the world that would say, “yeah, you know, that was tough, but we got through it. So we arere good to go now.” Well, are you sure? Because there is the OPEC crisis in the seventies, the Latin American sovereign debt crisis in the eighties, then Mexico, the Mexico crisis, or the tequila crisis, it’s not a cocktail, it’s a real thing. Look it up. Like the.com bubble, the financial crisis, this keeps happening and it keeps happening with regularity. So, what I would say to a CEO or leader is how do you know what’s going to happen next? We keep having these boom-and-bust cycles. Are you ready for the next bust cycle? Or are you in fact ready for the next boom cycle? Because there is an upside when using scenarios and thinking about scenarios as well. And so that is how I would respond to that question.
“I am very interested in a humanity that is good for humans, not just one in which we sort of become the subjects of our technologies.”
Gourley: In the context of this current crisis [the Covid-19 pandemic], are there things that you would have written differently or would have projected differently or that this crisis would have caused you to change in any way or does it just underscore the importance of all of us thinking through where technology can take us?
Gerstein: I got done with the book and you know, publishing a book is a fairly long process. And in the intervening time, there were things that I wanted to say that I did not yet put into this book. And so I’m a slow learner. I’ve got another book on technology that I’m working on which I call tech wars. And so what I’m fascinated by is that you know, I think we’re in the middle of a technology war and it’s being waged throughout the globe. It’s for having primacy in certain technologies. Some of these are just game-changing. And so what I am very interested in and focused on are these ways in which we’re going to navigate this very difficult period when humanity has never had more capacity to do harm to itself and yet we only see governments react once the harm has actually been seen.
You see it with drones in which aircraft have almost been taken out of the sky, commercial aircraft, have almost been taken out of the sky, hitting a drone. You see drones landing in front of national leaders standing on stage giving speeches. You know, those kinds of things are harmful, but yet they were not regulated until we saw that harm. And I worry today that with capabilities such as biotechnology, that allows us to manipulate the genome with the internet of things, which has crept into our daily lives, and AI, with artificial intelligence. If you see the link-up of these three, we’re liable to see very changed humanity as we look to the future. And so I’m very interested in a humanity that is if you will, that is good for humans, not just one in which we sort of become the subjects of our technologies.
Technology is presenting very interesting trade-offs. So let me give you an example from genomics. So if I told you that I want your genome and I’d like to be able to bring it in and put it into a database and store it with 327 million other American genomes so that we could help you with personalized medicine. That would be interesting to you probably because we could probably find ways to be able to relate a genotype (that is the gene sequence) with a phenotype (that is the observable characteristics) that causes disease, et cetera. But if I then tell you, Hey, wait, I’m going to take that data, and I’m going to correlate it. I’m going to find out how honest you are. Maybe there are certain parts of the genome that are able to tell the likelihood that somebody may be deceptive or perhaps be able to say that they are susceptible to this disease. So they’re not insurable. You know, those are things that I think most of us would recoil from, but yet the offer of personalized medicine is very interesting.
“…if you believe that China’s emergence is going to play out, I think business systems, trade flows, business norms, political norms will change. And it is not that far away. We are talking about this decade. So, China would be number one.”
Bob Gourley: We have a monthly meeting that we run with our OODA Loop members, and we talk about anything of interest to the group. And this last meeting, we talked about risk and multiple potential scenarios of things that could happen. And we kept coming back to the need for resilience overall, no matter what scenario you’re talking about, a need for resilience in business processes and technology. We kept hitting on the topic of security. If we’re all vulnerable to cyber-attacks and ransomware and losing our intellectual property, then we’re not going to be optimized for any scenario. I just felt like cybersecurity is becoming fundamental. Even without scenario planning, you have to do that, or you don’t have a chance at being competitive in the future business environment. Your thoughts on that?
Lance Mortlock: Cyber is a huge area. I mean, I think about how much time treasury and talent we spend at EY on cyber. It is huge for any big professional services company and any corporation that is digitized in some significant way. I think about the energy industry, I spend a lot of time in mining and oil and gas, the amount of technology that’s been invested in autonomous trucks in the mining industry, digital grids, robotics process automation, advanced analytics, IoT, augmented, virtual reality technology, digital twins on and on and on and on. It is great. It drives efficiency and effectiveness, but it drives the risk profile from a cyber perspective way up. And these companies are trying to tackle that. I mean, we saw in the U.S. recently, one of the pipeline companies [Colonial Pipeline] shut down because of a cyber-attack. I mean, it would have been crazy to think about that ten years ago and it’s happening right now. Right? You have to take that more seriously. It’s a big issue.
Gourley: I think it is one of the biggest issues. It could be the next big, big disruption event. In your opinion, what is the next major disruption event that corporations will face?
Mortlock: Well, it would be boring if I said cyber now. There are three things that I think about a lot. One would be China. 2028 China’s economy overtakes the U.S. From certain perspectives, they already have. But very quickly they will have a bigger military, a bigger Air Force, and a bigger Navy. So suddenly the world order that I think has been successfully managed by the U.S. for several decades could change. And that’s not to say it is bad or good, it’s just going to be different. So, if you believe that China’s emergence is going to play out, I think business systems, trade flows, business norms, political norms will change. And it is not that far away. We are talking about this decade. So, China would be number one.
Number two would be energy transition. As a guy that spent a lot of time in the energy sector. I think there’s a lot of momentum building around environmental, social, and governance (ESG): sustainability, net-zero, de-carbonization, whatever you want to call it. And if we are really going to tackle climate change. If you read Bill Gates, his book about the climate crisis, he talks about if you thought COVID was hard. Like the climate is really hard to tackle. And if we are really going to tackle that, we have to fundamentally change human behaviors. What food we eat, cement, how much cement we use, the steel we use, where we get it from how we consume energy, a fundamental change in society, and it is picking up momentum. And I think COP26 (the UN Climate Change Conference of the Parties on October 31 through November 12th) later this year in Glasgow will be a key signal for where we go in the future.
And the third we have already mentioned, not cyber, but AI. I think that we are marching towards fundamental change with autonomous vehicles, as an example close to home for you, Bob: in the U.S. 30% of the male population in the U.S. is a driving population. They make their living, driving trucks, taxis, Uber, what have you. When you automate that and you take that workforce out, what they are going to do instead. Some talk about the gutting of the middle class. I think that is a source, depending on how quickly we get to fully autonomous cars, general intelligence, superintelligence. It is a source of big, big disruption. I don’t think we quite conceive yet what it will mean.
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