What are we prepared to risk in the Never Normal

Stanley McChrystal is a retired United States Army general and the author of ‘Team of Teams’ (which I deeply recommend) and, more recently "Risk: A User's Guide". Having, among other things, lead the combat against Al-Qaeda, it’s safe to say that he does know a lot about that latter subject. ‘Risk’ is truly fascinating, and it made me (re)evaluate the type of risks that I take as a private individual, and as a professional.

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Risk is a spectrum

McChrystal’s book brilliantly explains how risk is a spectrum. It’s not that you can only choose between A - which is safe - or B, which is a total risk. That’s not how life – or business – works. Take startup funding, for instance. Venture capital is very risky. But, then again, you could have huge returns, too. And private equity has a completely different risk profile: low risk, with nice average returns. And then you have banks, which give people a loan and hope that in 20 years’ time they will be able to repay that with a three and a half percent interest.

It's fascinating to see that enormous risk portfolio, which is only getting bigger and broader and wider. And that is what the book is all about. It's about how organizations, but also individuals, can think about what type of risk spectrum they are willing to take.

The greatest risk to any of us, according to McChrystal, is ourselves and our inability to react effectively. And according to him that is because of our problems with what he calls our “Risk Control Factors”: Communication, Narrative, Structure, Technology, Diversity, Bias, Action, Timing, Adaptability and, at the heart of it all, Leadership.

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(Source: https://chiefexecutive.net/)

I’m not going to go into all of them here (just read the book, trust me), but communication is obviously an essential one. The number one case that he makes in the book is 9/11, which was a failure because they had all the information but just couldn't put it together in time.

Diversity is probably one of the most underestimated risk control factors. Groupthink might very well be one of the biggest dangers in companies. You just have to think about the blatant and utterly shameful uniformity of Theranos’ board (all middle aged or older white men) to understand why Elisabeth Holmes was able to get away with her schemes for so long. And sadly, this groupthink and lack of diversity in boards is the rule rather than the exception.

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(Source: Bloomberg: "Can Elizabeth Holmes Save Her Unicorn?")

The risk control factor of technology is probably one of the most ambiguous one. Let me illustrate with two examples. Lieutenant colonel of the Soviet Air Defence Forces, Stanislav Yevgrafovich Petrov, became a hero because he decided to ignore the false alerts informing him that the US had shot 5 nuclear missiles at Russia. He trusted his gut feeling. And he was right.

But then there’s also the tragic story of Anatoly Stepanovich Dyatlov, the Soviet engineer who was the deputy chief engineer for the Chernobyl Nuclear Power Plant. He also trusted his gut feeling about technology, and in doing so caused the biggest nuclear meltdown in the history of mankind.

So what you have here is two Russians who ignored technology. Yet one became a hero and the other a villain.

And that was pretty simple technology, right? Today, we're getting into a world where the exciting developments in AI are at the same time creating a black box environment. One where our limited human capabilities to judge and to interpret are becoming an increasing liability.

Leadership in the middle

In all of these risk spectrums, leadership will play a crucial role. Leaders need to understand when it is riskier NOT to risk. And when they need to play it safe. Or how ‘innocent’ decisions can turn out really, really bad. Like in the case of retail bank Wells Fargo’s scandal. Their leader John Stumpf was pushing and pressurizing his team so hard to up-sell and cross-sell and perform that they ended up creating 1.5 million fake accounts. More than half a million credit cards were issued to people who didn't even exist. Stumpf, though, never felt guilty about that. He argued that he didn't do anything wrong. That he didn't create those 1.5 million fake accounts but ‘just’ urged his people to be a little bit more productive.

I truly believe that if we want to really understand how organizations can better function in the Never Normal, we will need a powerful cocktail of strong human capabilities like EQ (emotional intelligence), LQ (leadership intelligence) and RQ (risk intelligence). And our current crises are offering the perfect burning platform to inspire us to act on that.