Olaf Groth has 27 years of experience as an executive and adviser building strategies, capabilities, programs and ventures across 35+ countries with multinationals such as Boeing, Chevron, GE, Qualcomm, Vodafone and Volkswagen, consultancies, startups, VCs, foundations, governments and academia. Groth is the founding CEO of advisory think tank Cambrian Futures and of concept development firm Cambrian Designs. He serves as professor of practice for global futures, strategy, technology and policy at UC Berkeley’s Haas School of Business and adjunct professor at Hult International Business School, teaching across the U.S., Europe, Middle East, Africa, and China. He is a member of the Global Expert Network at the World Economic Forum and the co-author of a new book called The Great Remobilization: Strategies and Designs For A Smarter Global Future which will be published on Oct 17 by MIT Press and distributed through Penguin Random House. He was a speaker at the Pundit, Professors and Predictions Dinner at the Forum’s Annual Meeting of The New Champions in Tianjin, China on June 28 which was moderated by The Innovator’s Editor-in-Chief. In an interview at the conference he spoke to The Innovator about globalization 2.0 and how executives and boards must adapt.
Q: What are the drivers of globalization 2.0?
OG: Globalization 2.0 is being driven by the six ‘C’ tectonic forces: COVID and CRISPR; Cognitive tech (a category that encompasses AI, brain-computer interfaces, and quantum computing); crypto (blockchain and Web 3.0); cybersecurity; climate change and the ‘Chinafication’ of the world. These forces collide and create the new operating system for global 2.0: The Cognitive Economy. The Cognitive Economy injects cybernetics for predictability, command-and-control across digital, psychological, biological, ecological and infrastructural domains alike, empowering those that design, own, operate or fund them, which leads to significant power shifts.
Q: How are COVID and CRISPR influencing globalization 2.0?
OG: The microscopic organisms behind the COVID virus didn’t care about borders and upended our vision of global integration. Through the prism of COVID and its management, its governance, its science, and the policy responses we experienced the amplification of a very significant disruption to globalization that had been under way for several years. There was a divergence in the way governments shared ground truth and in their responses locally and globally. We saw a shift of power from the macro level to the micro level. The U.S. federal government, for example, retrenched and the rules were written locally, county by county. While on a macro governance level we were failing, on a micro level and at the science level, we were largely succeeding. It was an amazing feat that the scientific community was able to produce a vaccine within six months. That disparity between the macro level of failing, with many governments turning inward and downward, is in sharp contrast to something Deng Xiaoping [the now deceased former Communist leader of the People’s Republic of China] once said: ‘It doesn’t matter whether a cat is white or black, as long as it catches mice.’ He used that metaphor to illustrate that what is important is helping people to prosper while staying safe. Looking through the lens of COVID there were many governments in North America and Europe which held their heads so high for being democracies while failing at providing for their people while peoples in China and other Asian countries, demonstrated that they care less about the format of government and more about the effectiveness of governance. Meanwhile, on the micro level, we proved that we could be effective with science and innovation. Two immigrants from Turkey in Germany defied the odds to accomplish what big pharma and big government could not and used the science behind CRISPR and AI to develop mRNA in a laboratory. It wasn’t top-down, it was bottom up.
Q: What about the impact of cognitive tech?
OG: Brain-computer interfaces will map the 100 billion neurons in our heads, while AI and quantum computing will allow us to figure out how they interact, how we can improve our brain capacity, how we can solve wicked problems in chemistry, transportation and medicine and how we might mitigate and adapt to climate change. Crypto and blockchain meanwhile are about decentralization. In my mind they are not primarily about technology, but about trust. A revolution is underway concerning governance, ownership, and trust. Trust is the most critical currency in the cognitive economy beyond money, data or anything else and we have wrecked trust on so many levels. Crypto, blockchain and Web3 are emerging because people don’t trust big corporates, big media or centralized government, because they experience a loss of agency and identity. But of course, decentralized systems pose risks too. How, for example, do you govern a national, much less global financial system if you don’t have centralized, situational awareness over the whole of the parts? How do you pull levers for growth and employment stimulation via democratically legitimized institutions if you don’t even know who all the actors in a financial, legal or political system are?
Q: How does cyber security play into the cognitive economy?
OG: Three sub-revolutions are impacting cyber. The first one is cyber has gone upstream in value chains and supply chains, such that if you are an auto maker you have to worry about the maker of the chips you put into your car getting hacked and attacked, maybe even the manufacturer of the equipment that makes the chips. Secondly, we’re seeing the emergence of ecosystem reconnaissance. Every organization is under attack. No company by itself has the power to keep everybody out. There is no way to win so we need to redefine winning. So, instead of just relying on individual firewalls we need to assemble a reconnaissance ecosystem for shared insights on threats and attack vectors. The third shift is that now we as individuals have become a market segment of one and are constantly at risk of having our privacy violated, our identities stolen and – soon — our DNA or brains hacked. We are already being tracked and triangulated as we move outside the firewall, where data analytics companies can make sense of our paths, our personalities, our goals and strategies. So, cybersecurity and privacy / confidentiality are converging beyond the firewall.
Q: How does climate change add to the complexity?
OG: Climate change is the biggest existential security threat the world has ever experienced. There is no way we can get around breaching 1.5 unless we figure out a way to become carbon neutral and stay there until 2050, through the use of AI, data science, blockchains and other digital and deep tech for monitoring, logging, auditing, sequestering, valuing, pricing and trading emissions. Unless we do that hundreds of millions of people from southern countries will migrate North over the next 10-15 years. Here too we will need to use cognitive tech to register and track migrants, get them work, get them paid and insured, guide flow and manage integration processes .
Q: What do you mean by Chinafication. Is China going to dominate?
OG: There is this theory that China is going to dominate the world. I don’t think the ascent of China or the decline of America are going to happen in a linear fashion and according to common narratives. That’s overly simplistic. China is currently experiencing what I’ve called the Great Wobble. It is facing a wickedly complex set of issues, some of which are of their own making. Lockdowns as a mechanism of political control has led to discontent, depleted public mental, physical and other resources, slowed birth rates further, and hamstrung the economy. Challenges also include a massive distribution of resources across different sectors, different population groups and geographies. Beijing has sent the signal that the get-rich-quick mentality of software entrepreneurship is going to get deflated in favor of a new balance for more equity. As part of its industrial transformation China is taking power away from digital tycoons like [Alibaba founder] Jack Ma-in order to redistribute the wealth. Will the nation’s top talent roll with that or go elsewhere? What happens when the digital intelligentia gets “force-routed” and buying Lamborghinis becomes more tedious? What happens to all that creative talent when they can no longer get to a 10 x payout for creating everything from digital consumer services to high quality hardware products to more enterprise services and spreading these to the hinterlands of China? Meanwhile, as Xi is restructuring the economy toward other sectors and the hinterlands and growth recovers only slowly, what happens to the uneducated worker when they can’t earn a salary, buy a house and get married? It breads discontent in young people, whose employment rate is already terrible in China. On top of that, climate change disruption is happening. There’s tremendous opportunity in a clean industry transformation in the medium term of course, but in the short term it’s one more disruption. And then there is the Taiwan mess, a fragile and irresponsible partnership with Russian for oil and gas and arms, headwinds from the U.S. and Europe, and a self-made inversion of the population pyramid: the population is expected to drop from 1.4 billion to 800 million by the end of the century. because of the one-child policy and people not having children amidst lack of confidence about their future. Meanwhile, the US has its own troubles, of course, which are well known. But it is still the most productive, most transparent and most transparent economy globally, has the strongest military, will continue to control the world’s dominant reserve currency, not to mention the benefits of a still superior scientific establishment. Neither trajectory is linear, both are fragile and wobbly, and will require steady, rational hands on both sides, so as to steer clear of over-hyped fear and over-reactions.
Q: Who will lead?
OG: It will be a G2+X world, meaning that the U.S. and China will co-lead, maybe followed by India or potentially Europe. In this world of wobbly poles, we are going to be seeing permanently shifting circles of allegiance with second tier economies, like Brazil, Turkey and others switching ‘clubs’ on an issue-by-issue basis. Board members and top executives will have to navigate this. It will mean weaving “Alt Asia” – India, Indonesia, Malaysia, Singapore, Vietnam, Thailand, Philippines, New Zealand, and Australia which together have a bigger population and GDP than China – into the supply chains to create resilience. That doesn’t necessarily mean leaving China, depending on your industry and technology, but it does mean being ready to switch suppliers with agility on short notice. You can only do that efficiently with cognitive technologies and platforms that allow this brokerage and pre-qualification of partners ahead of time.
Q: What kind of corporate leadership is required?
OG: We need new leaders who will create an agile strategy and bridge that with smart tech. It requires seeing new patterns and principles, something that’s been called ‘Zeroth-Principles Thinking’, stepping away from old thinking patterns and reliance on old principles. It also means re-framing and recasting how we define efficiency. Leaders need to get trained in system diagnostics thinking, the ability to understand the different subsystems and their fragility. They also need to hone their ability to have empathy across clubs and tribes so as to cut mutual win-win deals that lead to business continuity despite external contextual discontinuity. It is a complex design challenge. It is easy for executives to listen to the complexity and put their heads in the sand and think ‘I am going to wait for someone smarter than me to figure this out.’ That is the wrong attitude and it’s going to get you into major trouble. If you go down this path you will get blown out of the water by smaller, more agile players that are ‘network native’ and are combining virtual, decentralized organizational forms with centralized situational awareness.
The time is now to assemble teams around the new strategic capabilities. Executives will need to surround themselves with system thinkers, foresight professionals, anthropologists who understand human patterns and movements, geopolitical experts who can analyze shifting Venn diagrams, supply chain ‘smartification’ experts and the data scientists, digital twin designers and simulation experts who can help create real-time and ideally forward-leaning situational awareness. These experts – people you never thought you would have to hire into your company – are the ones you need in your war room to prepare for the dynamic shifts of of the cognitive economy. They are the ingredients you need to make sure your business lasts and to ensure your business models are resilient. Think of them as a kind of “geo-tech” ( tech + geopolitics + geoeconomics) SWAT team that needs to be paired with the core operating managers. The SWAT teams need to be empowered and your operational staff need to be incentivized to listen to them and play nicely with them in a ‘buddy system.’ Unless these geo tech people become part of local units and local market they will be perceived as foreign and rejected. Executives need to make sure there’s no tissue rejection of the new organ, as it were. That support needs to come from the top. Leaders need to clearly say ‘I am sending these people to you to help make your work better, and I want to see results.’ Core business managers need to understand and accept what this new team is doing and why and how it effects their business in a world that is unforgiving to firms that miss shifts. There are no excuses. You can’t wish Globalization 1.0 back. That’s over. Mourn briefly, then accept that the Cognitive Economy is Globalization 2.0. Adjust to it now or perish.
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