One of the most profound books I read while in graduate school (around 20 years ago – yikes!) was The Art of the Long View by Peter Schwartz. This book taught me how to make important decisions in an uncertain world. We are often faced with less than perfect clarity about the future but must move forward in the fog and make decisions nonetheless.
I have found the key to getting through the haze relies on building stories around multiple plausible future scenarios, as discussed in Schwartz’ book. While carefully designing and researching the stories, surprises and unexpected gaps of understanding are brought forward. In the end, the point is not to pick one’s preferred scenario and hope it comes true. Nor is the point to find the most probable future and adapt to it or bet the farm on that either. Rather the point is to make strategic decisions that will be sound for all possible futures. Because speculating on the future is simply gambling, I have found I am better equipped to succeed when I execute according to this Long View” process.
Long View thinking is invaluable at Singer Burke as tax and financial planners, portfolio managers, and investors in private companies. We are constantly considering worst, best and middle-case scenarios for the economy, assets classes, business plans, and our clients’ income. We then try to prepare for all of the above. I believe this type of conservative approach, while sometimes dismal, makes us reliable. Given the enormity of the responsibility we shoulder looking after our clients’ financial futures, I can’t think of any other way to do our jobs.
Long View techniques can of course be applied to so many decisions/strategies in so many fields. For example, profitable businesses must consider whether to distribute profits to investors (through dividends or share repurchases) or re-invest in themselves. When Companies consider only short-term stories, they are quick to distribute profits as Wall Street loves the yield; investors are happy with monies in their pockets; and CEO option packages balloon. However, if not reinvesting in the Company means that competition will have a greater chance of beating on five, ten, fifteen years down the road, then distributing profits now has put the Company at risk long-term. Considering the Long View may have revealed a story around the need to invest in robotics or new software vital to securing competitive advantage abroad.
Another area of obvious and critically important application of Long View techniques is environmental stewardship. Aside from one’s arguably moral obligation to protect the earth for future generations of humans and other living creatures, environmental degradation has important economic impacts. Consider a Long View whereby loose regulation facilitates the aggressive consumption of finite natural resources for energy production rather than the investment in technology to create clean, renewable sources of energy. In the short-run, big oil company’s profits are increased and a few jobs in coal mining towns are saved. But developing stories with a Long View reveals the possibility of an America that becomes more and more dependent on foreign technology for renewable energy production, becoming less energy independent once again and losing a huge opportunity for job creation from a burgeoning renewable energy industry.
This brings me to the point of this blog – to suggest that Scott Pruitt, the US Environmental Protection Agency Administrator, needs to change course. Despite his agency’s tens of thousands employees and multi-billion dollar budget, it is clear to me that he is not utilizing sufficient resources to consider the Long View, and I fear we will pay dearly for his short-sighted (and seemingly self-interested) approach.
One indication of his limited scope occurred earlier this month when Pruitt announced his agency’s plans to repeal the 2015 Clean Power Plan, an important rule to hasten America’s transition from dirty coal to natural gas and thus reduce greenhouse gas emissions. In the face of an overwhelming majority of scientists linking human activity to rising air temperatures and melting ice caps, how can Mr. Pruitt justify his apparent efforts to trash the Clean Power Plan!? The EPA’s own projections for climate change caused by human factors (see chart below) suggests that carbon consumption will need to be reduced; and of course, the sooner the better![1] Anything else is just kicking the can down the road. The rest of the world (195 nations – including Syria, which announced it would sign earlier this week) is moving forward with the 2017 Paris Agreement on Climate Change and commensurate regulations to support it. Even China will be phasing out fossil-fueled cars by 2025.
Regulations like the Clean Power Plan encourage innovation in renewable, cleaner sources of electricity. The Long View reveals a story whereby America continues its addiction to temporarily cheap fossil fuels but loses the timely opportunity to build competitive advantage in new technology. The Administration touts the importance of energy independence and job creation, but if policy doesn’t encourage innovation in the energy sources of tomorrow, our economy could be left dependent on expensive, foreign technologies created by non-American workers in the future.
[1] This chart is only available on the archived version (January 19, 2017) of the US Environmental Protection Agency’s website. The current EPA website for climate change reveals a Site-Under Construction” placeholder with the following statement: Thank you for your interest in this topic. We are currently updating our website to reflect EPA’s priorities under the leadership of President Trump and Administrator Pruitt.”
