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2022 Mid-Year Prediction: Unintended Consequences

Issue 61: June 23, 2022

Over the past two years in discussions with clients and the 2040 team, I have continued to raise the point that “ it ain’t over until the lady sings.” Many have already sung with sighs of relief and many more have yet to sing. In either case, the songs increase anxiety and confusion when the last notes are ambivalent, and the outcome is not assured.

The Center Will Not Hold

In many instances after the proverbial ladies have sung, organizations rock back in a state of surprise and amazement. “What happened” and “why” echo in the executive suite. At 2040, it is a head-scratcher that organizations are so blindsided. The “why” is that leadership is not paying attention to societal, organizational, and even their own blind spots. To quote William Butler Yeats, “Turning and turning in the widening gyre, the falcon cannot hear the falconer; things fall apart; the center cannot hold.” Just as the poet describes, we fail to see and connect the dots until we actually can see and connect them, if it’s not too late.

The Ecosystem

My ongoing concern is the lack of recognition of how interdependent everything is across our society. This is my “critical thinking prompt” for clients to wake up and connect the dots. What we see all the time is that an immediate decision intended to solve a particular problem or a new solution is often put into action without the recognition of the upstream or downstream, sideways, or vertical influences and consequences. Most if not all factors and variables across our world are networked with connective tissue. We operate in a finite ecosystem interdependent on our relationships, synergies, and survival. Yet we think we are independent operators and don’t recognize how our actions can impact and influence others – even worlds apart.

What typically shows up in organizations is that we live in the moment and focus on the short term. We are often reactionary and act in response to public sentiment and opinion, and the loudest voices in the room. Decisions, responses, and actions in the moment often do not look forward. Discerning interdependencies and influences by looking forward take energy, and critical thinking and requires each of us to work harder, seek to know what we don’t know, and get out of our comfort zones.

The Rear-View Mirror

Let me take this to a more practical level. In early 2020, the world shut down in response to the Covid pandemic. That decision seemed immediate and necessary, regardless of the influences and consequences that might result. At that moment, governments around the world sought to avert a crash of the health systems and societal structures by enforcing quarantine measures. We often look to the past to inform our current viewpoints, assuming that what once was is still indicative of how we should take action in the present. So, governments modeled their responses to the pandemic of 1918 and what intelligence was available from prior pandemics.

Historically, we have been more interdependent and connected than we often believed. In the past, we didn’t have the technologies that resulted in instantaneous communications, shared information, or connections to far away locations. But we did have established trade routes that allowed regions to share their local wealth of resources with others and in return, receive the resources that they needed. What analog technologies we did have were shared across societies, for example, monetary systems and mathematics became shared foundations. Without lightning-speed technologies, things happened more slowly and we had to be more patient.

When governments moved their societies into quarantine, officials were faced with a new set of factors and variables that they hadn’t anticipated in a worldwide health crisis. The immediacy of survival was clear and present: the need for medical care, food supplies, paper staples, and information was critical. For the global pandemic of 2020, the past did not fully inform the present. The fragile worldwide market was exponentially larger and the supply chain more complex, and we operated in a technological global spiderweb that had few backups for a virus that killed 6.32 million individuals. Most organizations and governments were lacking the scenario planning necessary to protect their operations and even survival.

Individuals changed as well. They hunkered down at home. They reprioritized what to buy. They worked as essentials or nonessentials. After months of rampant illness and disruptions, people ultimately changed how they saw the world around them and what they wanted from life.

Unintended Consequences

In response to the crisis, governments and organizations threw strategy out the window faced with adapting to the new wild, wild west. Some factories converted to meet new demands, and others retooled to manufacture new pandemic-related products. Ever the optimists, we believed that our technological prowess would surely rise to the occasion to solve all the problems at hand. That was certainly the case with the rapid development of vaccines.

The crisis manifested unintended consequences and unexpected collateral damage. Unemployment increased, spending patterns changed, individuals stockpiled supplies, and families saved money. The U.S. government felt the compelling need to stabilize society and save the economy out of fear that stagnation would lead to high inflation or a recession, yet both have come to pass anyway. Billions of dollars across a variety of programs were committed and dispersed to help individuals, families, and businesses survive. The flood of funds seemed to help or at least buffer the downward slide of economic and productivity indicators. Interest rates for borrowing money were taken to near zero, subsidy checks were sent to individuals, grants were provided to some businesses, and state and local governments were given large sums of money to balance the expected shortfalls in tax revenue.

Unintended consequences were also felt by individuals across society as they became more and more anxious about the unknowns of the pandemic. People who were stuck at home became stressed out. Families struggled with homeschooling. Workers had to adjust to virtual offices. People felt isolated and lonely. Everyone wondered what the new normal would be. Would the old normal become ancient history? Our technological tools kept society connected, but digital media was also a source of anxiety. The social and media platforms served as forums for public opinion about whether or not to take the health crisis seriously. Debates about the role of government were waged daily. There were vitriolic dialogues from maskers, anti-maskers, vaccine supporters, and anti-vaxers. Misinformation and fake news become commonplace. Civil discourse became a civil war. Society became polarized. Healthcare became politicized and society was fractious on every level. In many ways, we remain in this state of polarized, fractious discourse.

Although people wanted their voices to be heard, there was serious confusion about what was taking place across the world. The unstated personal mandate was to find others who shared the same thoughts, values, and beliefs – kindred spirits who would make us feel less alone. This furthered the polarization of opinion, deeply solidifying a lack of openness to the differences of others. We became divided, strongly partisan, disrespectful of others, and aligned with what was popular and trending in our media and social channels. It was a living exercise of the individual versus the demands of the group, and some aspired only to get back to what was routine and expected. Hell, be damned if others got Covid, didn’t have food to eat, or if their support systems were falling apart. As Yeats said, the center would not hold.

Organizations suffered as well. Revenue streams for meetings and conferences all but disappeared. Meeting professionals wanted to get back to planning and executing in-person events. Airlines wanted travel to return to pre-2020 levels. CEOs wanted their workers back in the office. Commercial real estate wanted to ensure leases were renewed. Organizations wanted a return to the predictability of the demand for their products and/or services.

Ambiguity is uncomfortable and anxiety is stressful and these emotions went off the charts during the pandemic. Our ecosystem was strained across markets, professions, industries, communities, and families.

Back to the Future

You may say, ok, I know all of this, I lived it. What’s the point?

Let’s advance to today and connect the dots to understand the influences, impacts, and consequences that we didn’t foresee. Where were our blind spots? What actions did we take out of perceived necessity, influenced by public sentiment, that were made without context? How did short-term decisions for personal and political gain sideline what was right for the larger population? In short, why didn’t we see the ladies marching onto our stages to sing their last songs?

But first, let’s add one more example that illustrates how we continue to make decisions in a vacuum without seeing or admitting to near-term and future consequences: namely, the unprovoked Russian invasion of Ukraine, under the guise of restoring the Russian Empire. This invasion, well, let’s call it what it is, war is having global unintended consequences and causing collateral damage. Most of us didn’t see it coming, or if we did, we ignored it. The pandemic, combined with the Ukrainian war offers four geopolitical/economic lessons about a range of blind spots and lapses in critical thinking that impact an organization’s health and welfare.

1. Economic Destabilization

Our national government flooded the country with borrowed cash that was quickly distributed to businesses, individuals, and state/local governments. The hope was that the cash subsidies would buffer the direct economic impacts, limit unemployment, stabilize businesses, and generally respond to public sentiment to “do something.” Any action was perceived by the public as impactful, even if it wasn’t. The goal was to help stabilize the economy, move the stock market forward for growth, and boost housing sales. Optimism that economic normalcy would once again reign was pervasive.

At face value, everything seemed positive. However, everything was only situational. What the average citizen didn’t foresee or consider was how the workforce would transform how it thought about work. The work-from-home transition caused a series of unexpected shifts. Workers didn’t have to live where they worked. But connect the dots: Knowledge workers (and others that didn’t have to go into the office) were given access to easy money to use to buy a second home — or remodel an existing one – causing a housing frenzy. Housing prices rose dramatically as demand far exceeded supply. Higher prices and bidding wars raised prices even further, resulting in higher mortgage payments. Future buying power was a gamble predicated on the belief that the economy would continue to grow substantially.

What happened? Millions of homes sold above what they are worth, fewer buyers could afford new home purchases, and there continues to be a dramatic shortage of affordable housing. As the Fed moved to raise interest rates over this past week to temper inflation, the largest investment that most families have (their homes) will not produce a positive return in the near future. The situation has the potential to harken back to the mortgage crises of 2008 as many homeowners found themselves turned upside down. The other unintended outcome of the work-from-home model is that workers loved it and that activated a massive headache for employers who wanted their workforce back in the office where they could better control them. And today, commercial real estate remains in a state of crisis with its own headaches. And employers are forced to respond to their workers’ demands for flexible work arrangements.

So, now in terms of economic destabilization, we are facing the consequences of too much money pumped into the economy and easy lending. The indicators demonstrated recovery and growth, but reality set in. Prices have become inflated, demand doesn’t match supply, fuel prices are at historic highs, and grain costs are inflated along with raw materials. The stock market begins its downward swing, consumers reprioritize what they need, organizations stop or slow down hiring … and then the ladies began to sing.

2. Supply Chain Crisis

We believed that after a return to some normalcy, supply would meet our demands. The empty shelves during the height of the pandemic would surely be an unlikely repeat occurrence. We wanted to be fat and happy again and not feel anxious about having to revert to our evolutionary roots as hunters and gatherers in competition with each other. Despite our love for technological advancements and prowess, technology alone cannot solve the supply chain problem. Shelves continue to be empty. Whether it is a favorite brand, a type of fruit or vegetable, a new couch for the family room, or the latest device or gadget, we cannot get what we want, or we have to wait months for it to arrive. Technology is no saving grace. Connect the dots: The war has triggered dire consequences in supply chains as the result of sanctions, energy costs, food embargoes, and shortages of raw materials. These conditions created scarcity and therefore increased prices. The supply chain remains compromised and subject to more singing ladies that we have yet to hear.

3. Wage Revolt

A percentage of elected officials in the United States believe that to reduce poverty, the minimum wage must be a living wage and one that allows earners to feed, clothe and house themselves and their families. Leveling the playing field is viewed positively by many and seems simple — but it isn’t. To raise wages in a country where most of the economic engine is small and medium-sized businesses that are operating with razor-thin profit margins, prices charged to customers must be raised to compensate. Some experts believe that there is enough slack in the economy to contend with the price increases when times are good. But what happens when times are challenging? For example, in times when consumers are already paying higher prices and have less and less to spend? Inflation begins to spread just like Covid did.

Connect the dots: In attempting to instill a living wage, there is a failure among leadership to understand the more insidious underlying problem. The good intentions to solve this immediate problem appear to be motivated by receiving positive public sentiment and gaining more votes. It’s a blind spot Catch-22: raise wages, raise prices, and promote a vicious circle of inflation. But the real thorn in the side of the wage discussion is that there is a growing wave of workers (many entry-level, minimum-wage employees) who have no interest in working for an organization if the work is meaningless and leads to a lack of personal fulfillment or value. Who considered the Great Resignation in debating the minimum wage? Work is not exclusively about earning a salary. And workers have become empowered to call the shots with their employers for everything from DEI and sustainability to flexible work hours and establishing unions.

4. Fossil Fuels

Consider another example of the complexity of our interconnected ecosystem. This week Germany began promoting a return to using coal to produce the energy it needs and reduce its reliance on Russian energy, particularly natural gas. The shift counters two significant policy actions taken by Germany years ago. The first was its committed shift to shut down its nuclear plants in response to the Fukushima reactor failure when Japan experienced both an earthquake and tsunami. The reactor crisis influenced Germany to re-establish its reliance on oil and gas and thereby deepened its relationship and dependence on Russian energy. The second action was its strong commitment to the Paris accords to reduce carbon emissions with the dependencies to find alternative energy sources, including solar and wind.

Coal is a major contributor to high levels of carbon in the atmosphere, while natural gas is generally considered clean burning. Let’s connect the dots: Russia controls the natural gas energy market sector for most of the EU. With energy prices trending high and consumers becoming more and more frustrated and vocal, governments feel the necessity to respond with short-term actions to keep consumers (voters) happy and give the appearance that government can save the day. But it’s a Faustian choice: Ignore the Paris Climate Accords to reduce carbon and transition to clean energy or pay the consequences to the environment and future generations with a return to harmful fuel sources.

Bonus Blind Spot

The geopolitical/economic unintended consequences are complex, macro problems. Let’s look at one last example that is closer to home. In our urgency to return to what was normal, organizations that offer events and conferences quickly moved to re-establish physical events with the belief that the audience they engaged with pre-Covid is ready. Although there have been some examples of success, no organization has been able to attract the number of attendees it once had. Again, connect the dots: post-Covid, people have reassessed how they spend their time and how much time they are willing to commit to any professional activity. Before the pandemic, many organizations were caught up in the event hamster wheel, spinning and spinning from one task to another, rinsing and repeating the wash cycle over and over again. They duplicated what they always did, even if it didn’t work. Why then are they surprised the resurgence of live events is not hitting it out of the park?

Today, individuals are more mindful and discriminating about what is important. In the haste to return to physical events, many interdependent factors have to be considered. One is travel, which is skyrocketing in cost if the flights haven’t been canceled. Another is the value of the experience. Individuals have become either savvier or more cynical about what an in-person event should deliver. Although some must attend to sell, the buyers have become choosier and more particular about the cost-benefit ratio of spending several days with thousands of strangers trolling the halls of lackluster convention centers or hotels.

Connect the Dots

My lesson in this recent history is to reveal the blind spots that derail us and cause us to make terrible decisions. We simply didn’t think to exercise critical thinking and see the influences and interdependencies that our decisions could impact. In our haste to return to normal, solve real or perceived problems, and react to new disruptions, we do not view these challenges holistically using systems thinking.

When I teach my students, every week I encourage them how important it is to pause, take a few moments to critically assess any situation, and think clearly about how their actions have influences and consequences.

My 2022 prediction is that until we face the facts and consider how our personal defaults influence our decisions, organizations and their management will continue to move forward without recognizing their blind spots ignoring that the lady is scheduled to come and sing to them. Sadly, we will continue to be in shock and surprised by events that occur. Without connecting the dots, we will perpetuate unintended consequences and collateral damage. Hindsight is 20/20, but a heavy price to pay when mindfulness, awareness, and critical thinking could have averted expensive short-term decisions.

20Forty Continue Reading

The Truth about Transformation

Book Preview Excerpt

Organizations, whether private companies, non-profits, charities or governments seek to transform to take advantage of new opportunities, including technological advances. Often, technology is the major driver of change that results in transformation. As a result, the organization often fails to achieve its objective and goal to truly transform. You see, technology remains an enabler, not a silver bullet. True transformative change requires understanding of the human factors at play, human conscious and subconscious behaviors, how humans inter-relate and how society itself and all of its members are changing.

Our workforces are changing, the expertise we need is becoming harder to acquire and roles are shifting. In addition, before and because of Covid in 2020, the world around us is becoming very different, a new reality is taking hold, one that will fundamentally change who we are, how we work and yes, how we seek to ensure organizations transform for today and for the future.

The Truth about Transformation, a new book by Kevin Novak, will soon become available. Enjoy a short preview.

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