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Noreena Hertz – Guest Economic Address at RiskMinds International

Live from RiskMinds International, we listened in to Noreena Hertz’ keynote presentation to learn about the three key trends that will shake up businesses across the globe, including the banking sector.

The forces that are likely to disrupt the economy over the next two to three years, will also radically change the environment in which we do business.

This was the stark warning delivered by guest speaker Noreena Hertz at RiskMinds International 2018 in Amsterdam.

There were three trends we had to be mindful of, she said, political, technological and geopolitical. But we also had to put Generation K on our radar. Never heard of them? Read on to find out why they are critical to the future of business.

The political spectrum

Politics is moving to the extremes, said Hertz. Not only are populists gaining seats in Europe and all over the globe, their existence is pushing existing parties further to the left or right, and polarising party politics.

“Why is it so worrying and relevant to you in this room is that it’s at odds with so much of what we value: reason, science, enlightenment, and facts. Nativist values are an anathema to those of us who see ourselves as global citizens,” she said.

Populism also threatened the fundamental rules of globalisation – free markets and free trade. In addition, populist politicians have big business in their sights, and this is affecting the overall mood music:

“Would the EU have imposed record fines on corporations if populist undertones had been absent? Would the UK’s bipartisan attack on technology companies be going on without populism in the mainstream? And would the UK’s conservative government have announced caps on energy prices if populism were not involved?”

And of course, there was another reason to be fearful: “History teaches us that a populist approach is likely to damage the global economy.”

But this was not the only disruptive force, continued Hertz.

Technological disruption

The exponential growth of technology was going to be even more profoundly disruptive with the arrival of a new generation of chips that could process data at a significantly higher speed and lower cost than now.

The implications of the ensuing wholesale deployment of artificial intelligence were really exciting. Leading oncologists, for example, believed it would transform the diagnosis and treatment of cancer.

But implementing AI would come at a cost. “I don’t buy that we are moving into a future where humans and machines will work happily hand in hand. Millions will be displaced, and not just in blue collar jobs. 45% of Reuters articles are now written by computers, 40% of their output is now read by computers.”

This raises big questions for society, she said. How will those that have lost their jobs now earn, how will AI make ethical decisions: “How will a self-driving car act in an impending accident, are you happy to leave it to an engineer at Google to decide?”

That said, while deep and smart insights were critical to success in business, and big data and AI would be an integral part of this, human judgement still had a critical role to play in analysing AI judgements, she thought.

Geopolitical risk

Hertz tabled the four largest geopolitical risks: Brexit, Italy, President Trump and Putin.

“How any of these ends up is impossible to predict. Will the UK actually Brexit? Italy’s economy is contracting, and they now have a detailed plan for how to implement a shadow currency. There’s real cause for concern.”

Trump, she said, was political risk number one: “We have now entered a new phase of Trump unbound, he has lost the temperate voices around him.”

Putin was hot on his heels, though: “Look at what is going on in Ukraine. Twenty-seven years after the fall of the Berlin wall we have entered a new Cold War, but the rules of engagement are unknown, and the weapons being deployed include cyber.”

Generation K

Hertz argued that there was another significant societal shift that ought to be on our radar – the emergence of Generation K.

Those born between 1994 and 2003 were already worth $150 billion in Europe and would soon make up a third of the global workforce.

If we wanted to engage this generation, we had to understand them, and Hertz gave us a window into their world.

“They have been shaped by technology, and spend one third of their day on social media and online. They shop online, socialise and find dates and jobs at the swipe of a screen,” she explained.

“But they’ve also been shaped by the worst recession in decades. Coming of age during the financial crisis, they have grown up in an era of low financial optimism – and existential threat. This is a generation forged by the London and Manchester bombings, by Bataclan, and by Al-Qaeda and ISIS.

“It isn’t that the world is objectively more dangerous, it’s that they experience danger in a fundamentally different way – it’s constantly played to them on their iPhones.”

Unlike millennials, who grew up believing the world is their oyster, for Generation K (who Hertz named after Katniss Everdeen from The Hunger Games), the world is less oyster and more dystopian nightmare.

But how is this relevant for the audience here at RiskMinds?

Gen K is profoundly anxious, says Hertz, citing research that says one in five high school students in the US has seriously contemplated suicide, while the UK has seen a trebling in the number of girls that self-harm.

“They are not just anxious about boyfriends, girlfriends, school and families, they are really anxious about global concerns. They worry about climate change and they worry about their own economic futures, they are fearful that they won’t be able to look after themselves in the future.”

This had implications for the workplace, she said, because companies had a duty to consider what practical help they could offer to address this level of stress. “You need to think about your duty of care, because stress in the workplace is going to be a major health and safety issue.”

But in addition, firms would have to deal with the fact that only 6% of Gen K trust institutions and big corporations to do the right thing.

Not only that, they stand willing to share bad practices they see within a company with the public.

“Equality is what they care about the most – for this generation equality is a birth right and discrimination a taboo,” explained Hertz. “Are you doing enough to speak to their concerns? Are you communicating it effectively enough? This generation, for whom sharing is the norm, are all too happy to share dirty internal laundry with the outside world.”

Hertz’s conclusions are the result of five years of research into this generation, and she advised that we “deploy their nose on what might be off in our organisations, before the media storm or fall in share price.”

To succeed in the future, firms need to employ a particular type of team: “There is one that outperforms any other one, and it’s made up of people who are different and diverse – through ethnicity, age, gender and mindset.”

Basic steps to success

The fundamentals are, she advised: “Sleep, eat well, and be mindful of your mental state. Carve out time to think.”

Not convinced? Hertz cited research which showed that, judges who had recently eaten were far more likely to grant parole to a prisoner.

“If you went before his 10am morning snack you had a 0% chance of getting parole, but if you appeared immediately after the snack, you had a 65% chance of being freed.”

A similar pattern emerged in pre- and post-lunch decisions. “It’s incredible to think something as important as liberty is affected by whether a judge has had his lunch.”

We also need to carve out time to think, said Hertz.

“If we don’t, we risk being like hamsters, on a wheel constantly doing but not knowing why. We risk reacting only to the immediate not what’s most important. We risk condemning ourselves to a state of continuous response rather than setting the agenda ourselves.”

Hertz offers up some practical suggestions on how to work better and think better. Instead of constantly checking emails, batch them: “There is compelling evidence that each time we check an email, it takes us 26 minutes to get back to the same level of focus we were at before.”

Undertake an email audit at work: “up to 50% of them could be coming from people a few desks away. Getting rid of those frees up valuable time to think.”

Employ a digital sabbath once a week (she suggests a Saturday): “you’ll be amazed how recharged you will feel.”

“So surround yourself with diverse team,” concluded Hertz. “Eat, sleep, be mindful of how you are feeling, grab opportunities and think your way through the challenges.”

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