We explore the role of geopolitical intelligence in business today and how the evolution of globalization has changed the playing field for companies. In part one, Stratfor Editor-in-Chief David Judson sits down with Jay Ogilvy, director of Stratfor Worldview’s Board of Contributors. Then in part two, we hear an excerpt from a live webcast where Stratfor VP of Strategic Analysis Rodger Baker and IESE Business School Professor of Strategy Mike Rosenberg discuss how the geopolitical landscape for business has changed and how companies can adapt.
Moving Toward a Geopolitical Marketplace by Jay Ogilvy
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Emily Hawthorne [00:00:00] I'm Emily Hawthorne, a Middle East and North Africa analyst at Stratfor and this podcast is brought to you by Stratfor Worldview, the world's leading geopolitical intelligence platform. Individual, team, and enterprise memberships are available at worldview.stratfor.com/subscribe.
Jay Ogilvy [00:00:22] There's a line you can draw between the mom and pop grocery store for whom geopolitics is obviously irrelevant, and the Fortune 200 corporation for whom it's obviously relevant. And the main point I want to make is, that line has shifted over the last 25 years.
Ben Sheen [00:00:45] Welcome to the Stratfor podcast, focused on geopolitics and world affairs from stratfor.com. I'm your host, Ben Sheen and in this episode we're looking at the role for geopolitics and business today. You were just listening to part of our conversation with Jay Ogilvy, director of Stratfor Worldview's board of contributors. In part one of the podcast, he sits down with Stratfor Editor in Chief David Judson to discuss the business case for geopolitical intelligence and how globalization has evolved. Then in part two, we'll hear an excerpt from a recent live webcast with Stratfor vice president of strategic analysis, Rodger Baker and IESE business school professor of strategy Mike Rosenberg. They'll take a close look at the geopolitical landscape for business today and how business leaders can adjust. Thank you for joining us.
David Judson [00:01:38] I'm David Judson, I'm the editor in chief here at Stratfor and today, I've got the pleasure of having a conversation with Jay Ogilvy, chairman of our board of contributors. Welcome to Austin, Jay, good to see you again.
Jay Ogilvy [00:01:50] Good to be back.
David Judson [00:01:52] Jay, we've been having this internal conversation for some time about how to better and best contour the types and flow of our analyses for the many and diverse audiences that we have and of course one of the big audiences for Stratfor that is diverse in and of itself, is the business audience and we've been talking internally about the business case for geopolitics. As a guy who founded and ran a firm for a quarter century called the Global Business Network, I think it's axiomatic that you're going to have some thoughts on this.
Jay Ogilvy [00:02:28] Just a few.
David Judson [00:02:29] Just a few, so as the geo of geopolitics is changing before our eyes, how is the ways that businesses should be engaged and developing their understanding of geopolitics, how is that evolving in your view?
Jay Ogilvy [00:02:46] When the question first came up, the relevance, the use of geopolitics for corporations rather than just curious individuals. When I first heard the question, I thought well, gosh isn't that obvious because I've just been living it for 25 years, but I realized that no, it's not altogether obvious because the companies with which we spend most of our time were generally Fortune 200, very large companies, operating all over the globe, so the relevance of global intelligence, geopolitics was just obvious, if you're working say, with Royal Dutch Shell or Exxon Mobil, are you going to have access to those oil fields in eastern Russia or Venezuela or Bogota? Will you have access or not, it's not just a question of marketing all over the world, but sourcing, accessing. With those companies, the case for geopolitics is just obvious. What I think has changed over the time I've been in the space is that the case becomes obvious for many, many, many more companies. It's not just the Fortune 200 anymore. There's a line you can draw between the mom and pop grocery store for whom geopolitics is obviously irrelevant and the Fortune 200 corporation for whom it's obviously relevant and the main point I would want to make is that that line has shifted over the last 25 years. There are many many more companies that are now actively linked into the rest of the globe because of the process of globalization.
David Judson [00:04:35] You mentioned this, it was interesting, I had a conversation with a reader not two weeks ago from Turkey, manufacturing business with a turnover of roughly $10 million a year, not mom and pop but hardly Shell, who was really keen on our analysis of what's happening in Mexico with NAFTA as that relationship in North America is stressed does that create or not create opportunity for manufacturing platforms outside of North America to get in on the game in some way? This kind of brought a big chunk of the discussion home to me because this is a pretty small company.
Jay Ogilvy [00:05:17] And I have a friend who built a business before she married into a lot of money, but she earned quite a bit of money herself, starting a high-end lingerie company. In the early years, she was sourcing in Toledo or Debuke and selling in the United States and never a care about the rest of the world. Well today, she's doing most of her sourcing in China and actively debating the question, should she relocate from China to even lower cost markets. She's got to be geopolitically savvy to run her company.
David Judson [00:05:54] I also wanted to ask you the same set of questions from this angle, that while the globe is changing, maybe the structure of business has changed or needs to change, Mike Rosenberg, contributor who's actually written a book on geopolitics and strategy, teaches in the MBA program at IESE university in Spain. He argues that there was a time when companies that were globally engaged were better equipped to deal with geopolitical change and volatility because they had the old fashioned concept of country managers. As companies, particular multinational companies have moved to matrix organizations, where you've got the Europe, Middle East, Africa Vice President who flies in and out once a year and meets his team at a hotel, that sort of specialization and standardization has eroded their ability to have their ear to the ground. Any thoughts on that dynamic? On how the structural questions play into this?
Jay Ogilvy [00:07:05] I have seen it happen in a couple of the companies I've dealt with that move from country managers to area managers and the cost there is in a loss of local intelligence. There's clearly a loss of local intelligence. Another structural shift in the business world that I think is relevant is the move from the kind of dematerialization move, the move from manufactured goods, automobiles, food, to informational goods and services, financial services, stuff that you don't need to move around the world in a container, but you can flash across the globe in half a second, speed of light with that dematerialization of large chunks of the economy, it accelerates the process of globalization, makes us more interlinked around the globe so that we need greater sophistication in geopolitical intelligence.
David Judson [00:08:07] Which takes me to another piece of the puzzle, Rodger Baker, Vice President for Analysis here at Stratfor has talked a lot about how the era of globalization as we sort of perceived it in the 1990s as it began emerging as a concept kind of came to not an end, but a inflection point with the 2008 financial crisis. And we've been struggling with globalization and it affects in free trade and we see that in our domestic US politics, we see it in European politics and we see it in many, many places, that maybe we're moving not away from globalization, but to a different kind of globalization that doesn't have the same assumptions of a more standard world, but one with lots of continuing engagement and instantaneous communications around the globe and people can flash information and financial goods around the globe or get on airplanes but the landscape is getting more diverse in terms of the standards and the tariffs and the rules and protectionism is rising in many, many places. Thoughts on how that is part of the discussion we need to be having and thinking through.
Jay Ogilvy [00:09:24] I think you put your finger on it. The shape of globalization has moved beyond the Imperialist idea that we can take one pattern for all, that what's good for Peter is good for Paul. Instead get more sophisticated about cultural differences and historical differences, religious differences. These things make a difference in what people want, what people are willing to pay for and if we don't get more sophisticated about those differences, we miss a lot of the opportunities that are there in a more globalized economy.
David Judson [00:10:07] Could we think about this, in a meeting we were having earlier today, we got Parag Khanna, his book, Connectography, talks a lot about the combination, I don't know if you phrase it this way, but he talks about the combination of centrifugal versus centripetal forces at the same time.
Jay Ogilvy [00:10:26] Right and the informational forces are centripetal, we're all in each others faces on Facebook and Twitter every day but the cultural and populist and nationalistic forces are all centrifugal. People are saying, we want to do it our way. You see Brexit, you see the separatist movements in Catalonia, this centrifugal dynamic is something that I think Parag Khanna has very deftly put in front of our eyes.
David Judson [00:10:58] You used the phrase one time, it may have been in the context of a conversation about his work, ye will be known by one's Federal Express bills or words to that effect.
Jay Ogilvy [00:11:09] Yeah, this is Manuel Castells' wonderful work and his great monumental, three volume The Information Age, where he lays out what he calls the space of flows rather than looking at the borders that separate different countries from one another, we should be looking at that river of information that connects London to Moscow, New York to San Francisco, San Francisco to Hong Kong, it's those rivers of information that he calls the space of flows and I just like to encapsulate it in that phrase, ye shall know them by their FedEx bills.
David Judson [00:11:50] Or the DHL bills. There was an internal memo that you circulated on this not too long ago, in which you, I love this phrase, "To ignore geopolitical forecasting is like ignoring the weather forecast before setting off on a picnic."
Jay Ogilvy [00:12:07] Pretty obvious. I don't know about you, but I don't like to get rained on at picnics.
David Judson [00:12:13] Yeah we'll try and figure out ways to build better umbrellas here.
Jay Ogilvy [00:12:18] Also, I don't want to just talk about the rain, but the sun, I think a greater geopolitical intelligence opens up not just dangers but opportunity. We shouldn't forget that.
David Judson [00:12:30] No, absolutely. This has been a great, if all too brief conversation, Jay. Again, thanks for coming down to see us here in Austin.
Jay Ogilvy [00:12:38] My pleasure, I love to get back.
David Judson [00:12:40] Yeah okay, thanks.
Ben Sheen [00:12:49] In his conversation with Jay Ogilvy, Stratfor editor in chief David Judson noted a conversation with the vice president of strategic analysis, Rodger Baker about how the era of globalization reached an inflection point with the 2008 financial crisis. In part two of the podcast, we'll hear an excerpt from a live webcast conversation with Rodger Baker and IESE business school professor of strategy, Mike Rosenberg about what underlying forces have changed and what business leaders can do to navigate today's increasingly complex international environments. Navigating those emerging global developments and long term shifts in geopolitical power is part of our daily work here at Stratfor. To learn more about individual team and enterprise access to Stratfor Worldview, our premier digital platform, visit us at worldview.stratfor.com/subscribe. Now to our excerpt from a recent webcast with Stratfor's Rodger Baker and Mike Rosenberg.
Rodger Baker [00:13:47] I'd like to begin by talking a little bit about how we're seeing the world system today and how we've seen it change to get to where we're at right now. If we go back to the Cold War, the Cold War was actually a very stable period of world history. It sounds a little anachronistic but the two large powers, the United States and the Soviet Union in many ways constrained some of the extremes of what could happen in disruptions around the world. When the Cold War broke down, you started to see a fracturing of the countries and the spaces that had been squeezed between those two large powers. The world was seeking a new structure or a new balance. What came out of the Cold War was a large United States, a United States that in many ways had no peer power. What stabilized that was, effectively three pillars of global power that emerged, it was the United States as the strongest military entity, it was Europe and the European Union in particular that in many ways shaped politics and regulatory structures around the world and influenced that and it was China as the economic pillar of the world. This created this new stable system that people understood, that people were able to make decisions about and around and see how things were going to be playing out in the future. The global financial crisis however, crashed that. It first pulled the United States down, then the European Union and when the European Union went down, that finally pulled the rug out from underneath the Chinese and their long running export economic model.
Rodger Baker [00:15:18] What has come out of that now is that there is no stable pattern yet in the world. We have a Russia that is working to reassert itself around its borders and boundaries, not necessarily because it's aggressive in trying to expand but because it knows it has a major demographic crisis coming in the near future and it's trying to secure itself. We have a China that is being pulled out in a way that it hasn't seen in much of its history because its supply lines, its economic patterns have reached across the globe and it now finds that it needs to match that with political and in the near future, probably military power to secure that space. We have a United States that has been engaged in conflict for a decade and a half and then after long, extensive times of overseas operations, the United States will often pull back internally. It really doesn't matter which president was coming into the United States, it was going to be a bit of a retrenchment of US activism on a global scale. We have a European Union that is facing the challenges of a resurgence of nationalism and subnationalism and we're seeing rather than the full expansion of this new multi-national state, we're seeing the disintegration of the European Union. It may not go away, but it's not going to its full extreme ideas of effectively eliminating the concept of underlying nations, which in many ways were what in the past has been a source of crisis and conflict across the European peninsula. In the end, what we have is a world right now that is unbalanced, that's destabilizing
Rodger Baker [00:16:52] and that in many ways is trying to seek a new equilibrium.
Mike Rosenberg [00:16:56] And Rodger what strikes me as I look at these issues, is while you and your guys at Stratfor and governments and journalists and military expend huge amounts of time looking at this issue, looking at others, new equilibrium might come about, most people in big business kind of pretend it's all going to go away and live in a world where they don't recognize any of these pillars and are just trying to do business around the world as if there will never be any major conflict in the world, there will never be any major disruptions. It's really as if there were two separate universes, the way things run an international way. One who is completely obsessed with what's in the news cycle and what's going on and another which is basically assuming that business as usual will last forever. We've got companies with tremendously complicated and fragile supply chains who are reaching across borders, they've got executives who fundamentally don't pay too much attention to these things until they blow up and when they do blow up, these companies are taken by surprise. In my experience, most industries and most companies simply don't pay a lot of attention to this except perhaps in specific sectors such as oil, gas, mining and the financial services industry. Rodger, I understand you have some experience talking to people in these businesses and maybe they do a little bit better job of balancing or integrating geopolitical analysis to business analysis.
Rodger Baker [00:18:32] We've traditionally found, at least when we founded the company, that it was extractive industries in many ways that were the ones who first recognized very clearly the need for this type of broader based geopolitical analysis and intelligence. In many ways that's logical. These are companies that have a very long ROI on their initial investments. They're going into places that are not well-developed and they need to understand not only today and not only right now or the legality or the profit margin at this moment, but they really need to be able to see into the future. In many ways, that's one of the strengths of geopolitics in helping businesses look forward. When we talk about geopolitics, in some ways what we're talking about is not what you hear often in the media. Geopolitics is not the same thing as international relations current events or war and conflict. Geopolitics is a study that draws on the intersection of organized people and place over time. In other words, it's how has a place and the population of that place developed over decades, over centuries, over millennia and how does that impact and shape the way in which those people, those places act and interact with each other, perceive the risks and threats, perceive the opportunities from countries around them.
Ben Sheen [00:20:02] That's it for this episode of the Stratfor podcast. If you'd like to hear the complete, hour long webcast with Rodger Baker and Mike Rosenberg, we'll include a link in the show notes. You can also find more of their writing on this topic as well as columns from Jay Ogilvy and David Judson on Stratfor Worldview. If you're not already a Stratfor Worldview member, be sure to visit us at worldview.stratfor.com/subscribe to learn more about individual, team and enterprise level access. You can even contribute to the conversation by sharing your insights in Worldview's forum section. That's where you can engage with other readers as well as Stratfor analysts, editors and contributors on the latest developments. If you have a comment or an idea for a future episode of the podcast, email us at email@example.com or give us a call at 1-512-744-4300, extension 3917 to leave a message and if you have a moment, also consider leaving us a review on iTunes or wherever you subscribe to the podcast. We really appreciate your feedback. For more geopolitical intelligence, analysis and forecasting that brings global events into valuable perspective, follow us on Twitter @Stratfor. Thanks for listening.