On growth, macrotrends, and the future

With Corporate America facing unrelenting disruption and uncertainty across the global business landscape, the KPMG Board Leadership Center (BLC) asked author and luminary Dr. Vaclav Smil for his views on the state of the dialogue today around macro risks and realities shaping the future. A Distinguished Professor Emeritus at the University of Manitoba, Smil has authored more than 40 books on the history of energy and materials, technology innovation, natural resources, and public policy—including, most recently, How the World Really Works. Known for his direct style and data-driven analysis, Smil’s work continues to inform the thinking of business leaders and policy makers focused on global issues and the future, including Bill Gates, who calls Smil his favorite writer.¹ His thoughts on macrotrends and challenging conventional wisdom may be helpful to the reality-check conversations that are becoming increasingly important in boardrooms today.

BLC: Apropos to the title of your book, How the World Really Works, are the debates around pivotal, yet polarizing, issues—such as climate, energy, technology, and food—sufficiently grounded in reality and facts? How rigorously and effectively do you think “conventional thinking” is being challenged today?

Smil: Absolutely no. Low levels of scientific literacy and poor understanding of basic math in the US are well documented. See the latest PISA [Programme for International Student Assessment] results testing 15-year-old students around the world for their reading, math, and science proficiency²—and these weaknesses are not miraculously reversed by high schools and universities, in many ways they are actually reinforced. And the information gaps are now filled by clicking on myriads of websites offering dubious or outright misleading claims. This all means that it is much worse than simply accepting uncritically, conventional thinking: too many people now believe what are not only improbable but impossible claims. Diligent consumers of US news will supply their cherished examples of “disruptive” changes that have not disrupted anything.

BLC: “Growth”—whether by market cap, annual revenue, or customer base—continues to be the widely-accepted indicator of a company’s performance and success. Are there other measures of success that should carry greater weight than they do today?

Smil: Of course: sustained maintenance of product or service quality, employee and customer satisfaction, retention of trained employees, brand longevity, the quest (readily measurable by many variables) for minimized environmental impacts and maximized durability, repairability and recyclability of physical products, ability to explain these missions to customers.

BLC: Can you share a few thoughts on what organizations tend to get wrong in scenario planning?

Smil: The most obvious is the combination of difficult-to-imagine changes: one might get one improbable event right, but nobody can get a combination of improbabilities. Think of January 1990. Whose corporate scenario planning team would have gotten all of these developments right: the permanent stagnation and relative decline of Japan (just a month after Nikkei reached its all-time peak); the peaceful demise of the USSR; China (just seven months after Tiananmen killings!) to become the recipient of trillions of dollars of US investment; the World Trade Center rammed by Saudi terrorists legally present in the US and taking flying lessons; seemingly endless wars in Iraq and Afghanistan; the rise and faltering of the EU; the emergence of global warming as a truly apocalyptic concern, etc. Yet, it has been the very combination of these improbable events that has shaped the world’s trajectory since 1990. Scenario planning? Who planned for the combination of all of the above?

^{The views and opinions expressed herein are those of the interviewees and do not necessarily represent the views and opinions of KPMG LLP.}