Margaret Heffernan (4:05)

Yeah, thank you. Well, thank you very much for inviting me to be on the New Books Network. I'm delighted to be here and to be talking to you. The beginning of my career I worked for the BBC in radio and then in television doing documentaries and drama. And I had had the incredible privilege really of working with some really world class writers, actors, musicians, designers. And over the years of working with them, I started to notice something which really grabbed my attention really for the rest of my life, which was that in many of the projects that we did, these were projects that would take years to make. So a drama series may take three years to make between thinking a bit, getting the money for it, casting it, producing it, and getting it out there. And I noticed that a lot of people that I worked with seemed to have a knack of producing something which on the day it came out, just seemed to be exactly what people wanted in that moment or what they needed in that moment, that it just seemed to have some kind of magical timeliness about it. And there were very particular people who seemed to be really good at this. And it planted a question in my head about how do they do that? Because the poster child for this phenomenon was a fantastic producer named Mark Chivas. And Mark was famous for many legendary TV series, but the one in particular was the original British version of House of Cards. And its very first episode, which is about the taking down of the leader of a political party and government, aired the week that Margaret Thatcher fell from power. Now, there's no way that anybody could have predicted that. And both Malk and many of his colleagues just seemed to have this capacity to think so subtly and far ahead, and that's really what made me start thinking, well, this is part of what we look to art for. I mean, we looked often to poets and musicians and painters for a sense of our times, of what's going on, not the news, but what's going on underneath all of this. What could it all mean? And so that thought has been in my head for a very long time. I was also lucky enough when I was running tech companies in the States to have some people working for me who I think were also phenomenally good at kind of sensing the zeitgeist. And this has nothing to do with. With market research or data per se, because market research is always history, right? I mean, most data, well, all data on some level is history because there is no data from the future. Yes, material makes us seem to have. Yeah, but they all seem to have their finger on the pulse in a way that was extraordinary. Anyway, after I wrote Uncharted about our inability to predict the future, this still stuck in my head, because I do refer to it in that book. It did stick in my head. Two things. One is that I don't think this is taken seriously enough, and the other is that I don't think the arts are taken seriously enough in terms of what they develop in human beings. And so I went back to the topic to say much more specifically, how do these creative people work? That seems to give them an insight or a foresight that certainly no other system can deliver. And as a consequence, what might we learn from them? Then in the UK and also in the US this was happening at a time where funding was being taken away from cultural institutions and where the education system, seeing, well, liberal arts departments were falling off cliffs, and where the notion that art had anything useful to contribute to society had gone way out of fashion. So I thought, well, I think this is all wrong. We're heading chronically in the wrong direction. We need the capabilities that the arts develop in us more than ever because we can't see the future. And so that's where the book started. And so I spent about a year interviewing artists of all kind all over the world to see what kinds of patterns emerged in terms of the way that they live and they experience thought, the world. And the result was embracing uncertainty.

Alfred Markus (8:46)

What is it about artists that they're tolerating uncertainty using their creative process? What is it? Do they have an implicit feel for patterns that the rest of us don't? Is it conscious? Is it unconscious? Are they open to improvisation, experimentation? The failure occurs? Do they look at it as an opportunity? What in particular do they do? Is it that they're more open and flexible than other people? All the above,

Margaret Heffernan (9:25)

Kind of. All the above. I think, first of all, they do frame uncertainty as opportunity. If something's uncertain, that means it's not nailed down, it's not defined, it's not known. So there's going to be some opportunity in there somewhere for innovation, for new ways of thinking or seeing or encountering the world. And what's quite interesting about this, I think, is that that is also a true scientist. There aren't a lot of scientists these days who want to go and examine the theory of gravity, right? That's pretty certain. There are lots of people who are interested in. In interrogating. In what conditions in the universe might you not find gravity? There are lots of. I mean, all scientists move inherently towards uncertainty because that's the only place where discoveries are going to be made. So that the art science division, which people often polarize, is entirely wrong. I think it's also the case that many entrepreneurs have a lot of similarities with artists in the sense that they're prepared to start something which they don't know if it'll work. They don't know if there's necessarily a market for it. They're prepared to see in uncertainty an opportunity for their own growth as well as perhaps the growth of a business. So they're attracted by uncertainty rather than repelled by it. And they're not trying to nail things down before they understand them. So they're highly driven by curiosity. They're very willing to kind of follow their instincts towards what they're curious about. The classic example is that artists will go for a walk without a particular destination. I guess the analogy I draw here is that when you go to a new place, there's kind of two ways you can tackle it. You can get the guidebook and then do all the things it says, or you could just spend the first half day that you're there wandering around and getting a feel for the place and just saying, where are the people? Where's the action? What's interesting, what's different? And if you approach novelty with that open mind, you're going to see a lot more. For a start, you're going to see a lot more. That is your unique experience. And you're not going to have cut off opportunity before you even know what it might hold. So they certainly approach the world with an open, curious, investigative mind, and they have the patience to do that for quite a long time. Not to have to jump to a conclusion, but Just to be where they are and think about what is this provoking me? What does that mean? What could it mean? Does it relate to anything else? I've seen what's really going on here. So they are kind of inveterate thinkers and observers and this doesn't make them anxious. So I think many of the people I work with specifically in business, one reason they can't do innovation is because they need certainty too fast. They can't sit with a problem, they have to fix it somehow. And that's not always a bad instinct, but it absolutely will kill off your opportunities for innovation. If your tolerance for uncertainty is so

Alfred Markus (12:57)

low, I mean, don't. Fear of failure and risk. When do you reach closure? How, how do they in the end reach closure and decide to, to say, okay, this is where, where, where things stand and I'm taking the plunge right now. There probably isn't a formula.

Margaret Heffernan (13:21)

I mean, probably there isn't a formula. But I, I mean there, there's, there are some things you learn from experience. But I think the first thing is there is always risk. Making the decision too early is risky because it may turn out, yeah, you can go in that direction. But actually, you know what, there's nothing new to be done there. So there's that risk. There's also the risk that you wait too long or you never make a decision. So there is no risk free existence. If you want to create something new, that's the first thing. I think what there is in business is a sort of asymmetrical visibility, which is companies can see the risk and even cost the risk sometimes of doing something new, but they rarely see and rarely cost the risk of not doing anything new. This takes you back to the innovators dilemma. But I've lost track of the number of companies who know they need to innovate. They know that they're dealing with a 20th century managerial model, for example, but they feel so viscerally the danger in doing that that they don't see or feel the danger of not doing it. So they feel the status quo is safe. And I think the status quo is a trap. But what artists will tell you is if you're patient, there comes a moment when you know you're ready to start. Now that decision absolutely carries an opportunity call. If the idea you choose to pursue is the wrong one, that can absorb you for years. But equally if you make the call too quickly, that can absorb you in years. So you kind of develop an instinct for when you know you're ready. But the first Couple of things you do. That's how the instinct develops. Basically. Go ahead.

Alfred Markus (15:25)

Yeah, like in, in the investment community, it seems like some of these firms that over time have extraordinary returns. It's based on huge amounts of data from the past, which, but, but I don't know, that seems to contradict this idea that, that, that I think it is very hard to mine the past to understand the present because the analogies are always a little bit off. But that's in a sense, all the data that we have is past data. Our imagination is limited by what we've seen happen previously.

Margaret Heffernan (16:05)

That's exactly right. And I think one of the things that was so interesting when I was writing Uncharted is in the course of writing it and talking about the, the how forecasts fail and mislead us. You know, people would always say to me, oh, but what about history? You know, history repeats itself. So I took myself off to some fairly eminent historians who just laughed and they said, you know, this is to your point. History doesn't repeat itself for the very simple reason that the people today, looking at history, know things that people in that polite point in history did not know. So they come to history with different knowledge and therefore make different decisions and therefore may be as catastrophic as the people whose history they're trying not to reproduce. So what historians told me is real life is always jam packed with contingencies. It is always uncertain. And thinking of history as a reliable guide is tricky. To your point, when people use analogy, they hugely overweight the similarities and casually dismiss the differences. And a classic case in point was the degree to which the Vietnam War was always being described as being similar to Munich, that America had to hold back the Chinese aggressor. And it's really fascinating in One of Robert McNamara's memoirs, When of course he had extreme and appropriately extreme regret about what he'd done as Secretary of State for Defense in pursuing the Vietnam War. He said, you know, the reality is we didn't know anything about Vietnam. We didn't know Vietnamese had hated the Chinese all their lives. We knew nothing about them. But this notion that we were standing firm for democracy was so compelling we didn't really think about anything else. Well, that's a classic example. I mean, another great example, which is much more recent, of course, was the West's gigantic misunderstanding of the so called Arab Spring. I mean, President Obama compared it to the Boston Tea Party. I mean, it's astounding how much it is not the Boston Tea Party. Everything about it is different. But Obama in his very rhetorical, romantic way, liked to see that, oh, this was people yearning to be free. Well, it might have been, but, you know, 18th century Boston is absolutely nothing, nothing compared to 21st century Tunisia. The people are different, the politics are different, the religion is different, the economics are different. We were idiotic in the simplistic analogies that were drawn in that period. And so guess what? We misunderstood almost everything in the entire region.

Alfred Markus (19:16)

I think Munich is used all the time and misused all the time.

Margaret Heffernan (19:23)

It's the go to metaphor.

Alfred Markus (19:26)

Yeah, it's probably being misused right now at this moment. We're speaking in the Middle East,

Margaret Heffernan (19:34)

I expect.

Alfred Markus (19:35)

So what about the 2007, 2008 financial crisis? Because the head of the Treasury, I mean, of the Federal Reserve at the time, was the world's leading expert on the Great Depression. And I think that analogy actually was very helpful in at least avoiding the worst that could have happened in 2007, 2008. So sometimes I think analogies probably are helpful, but they have to be understood well.

Margaret Heffernan (20:08)

Well, I think there's that. But I think also what was a catastrophe in the global economic crisis was ideology. And I use the word advisably because that's what Greenspan called it when he discussed his own error. So his ideology argued that the safest markets will always be unregulated markets, and the derivatives market was unregulated. And his belief in that ideology, his word, not mine, meant that there was a crash every two years between 1998 and 2008 in the derivatives market. But he didn't think it mattered. Well, yeah, it turns out it did matter. So we can have an ideology which is that history repeats itself. We can have an ideology that certain kinds of markets were safer than others. What both do is they stop us thinking with an open mind, critically about, there's some weird things going on here. Maybe we should try to dig into them and understand them better and in more detail. And I would argue that the open minded, curious inquiry, which is the mindset of artists, is a very good indicator of the kinds of ways of thinking that would serve us better in times of uncertainty.

Alfred Markus (21:37)

Pete Bernanke, who was probably at the time the world's leading expert on the Great Depression, had much of the responsibility for decision making, was drawing on that. But I think the group that was involved also, they were experimenting. They were not bound by a rigid ideology of any kind. They sort of muddled their way through to an adequate outcome.

Margaret Heffernan (22:04)

Well, yeah, I think time will tell whether it was an adequate outcome. We stabilized markets so they started to look a bit like the more stable markets and to behave a bit like markets we understood. But I think it's too early to say how many opportunities we may have missed there. I don't think there are grounds to be smug that oh well, we cracked this one. We certainly found a way of dealing with it that probably created less immediate havoc than the 1929 crash. But I think we're still wrestling with some of the consequences of our resolutions.

Alfred Markus (22:51)

If there is a crisis, a major crisis, let's say national level, I mean a global level, like 2007, 2008, or even in a company where a company kind of crashes and its business model collapses, do you think they really can do much better than stabilize? Can they really come back to this is a theory that I'm actually proposing in this book I just wrote. My argument is that it's very unlikely to rise again to your great greatness. What your aim is to stabilize. And that's a noble aim because in many instances institutions disappear when the great crisis occurs.

Margaret Heffernan (23:35)

I think that's right up to a point. But I think when the institutions are stable, then you need to start asking the deeper questions. I think during or immediately after the 2008 crisis, with movements like Occupy Wall street and the movements that preceded it, which were anti globalization movements, I think there was evidence that there's some stuff going a bit wrong which is causing rising levels of inequality which it would behoove us to address. And in many ways I think the desire for stabilization of fall in 2008 was so extreme that by the time that was achieved, everybody'd forgotten that actually there were still some underlying problems which stabilization had not addressed and those have not gone away and they are eating us now.

Alfred Markus (24:26)

There were unintended consequences of continuous low interest rates which end up favoring the wealthy to the benefit in terms of stock market appreciation.

Margaret Heffernan (24:40)

Exactly.

Alfred Markus (24:43)

In my work on scenarios, I talk about developing multiple divergent stories about how the future might unfold. Not because any of them will come true, because the exercises expand your field of vision and helps you understand and test strategies against surprises. In fact, I draw on the three basic Aristotle. Aristotle talks about comedies, tragedies and. And romances and having three visions of the future and very bright and rosy one, a really bad one and a vision of the future. That's ironic really. That comes out completely in an unexpected way than you think. When you think about Rand Corporation, they used to do thousands of iterations which I think are beyond comprehension and, and probably not Useful. But I think that thinking in those terms, but not thinking of them in terms of prediction, but thinking of them in terms of you want to think about the best possible future, which is the romance, because that's what you want to achieve. So you want to aim towards it, and you want to think about the worst possible future, which is the tragedy, which is what you want to avoid. And you want to work for avoiding the tragedy. But you also want to think about the fact that what's going to actually happen is going to surprise you and you're going to be laughing about what occurred many years later. Is that similar to how maybe your insights about how artists view things? Or maybe it's not. But I was drawing on the arts. I think the scenario in and out of itself is a story. And understanding what stories are about is very important in looking at the future. It's not deterministic. And we can't pin our entire lives on one particular outcome. We will be constantly surprised. So how do you see it, the artistic practices like storytelling and composition, rehearsal, revision, how do you see those as leading to. To scenario work and strategic foresight, especially inside companies?

Margaret Heffernan (27:09)

Yeah, I think they have a great contribution to make. I mean, it's also one reason why I think companies badly need to get over their notion that they don't want any arts graduates, because boy, oh, boy, do they want people who can think of stories and illustrate stories, not just to explain what's going on, but to have more imaginative people around them who are much more comfortable playing with possibilities. So, you know, an artist has a very visceral experience that if when I'm writing a sentence, I choose a certain word, that choice of word forecloses lots of possibilities of the word that comes next. So every word is a decision. For a painter, every brushstroke is a decision. For a musician, every note is a decision. So they live that contingency all the time, and they're constantly playing with it. And play is a good word because they often get a lot of pleasure from it. So I could go here or I could go there. So they become very less frightened of possibilities and uncertainty than I think most executives. They understand that actually exploring the possibilities is part of the richness of the experience. And one of the things, when I was writing about scenario plan, which I'm a big fan of, I discovered I talked to an executive who used to run scenario planning for Syngenta, and I watched him run a scenario planning exercise, quite light exercise, with a bunch of executives working in teams. And for Some of the teams, this was fun, they could engage with it as a sort of imaginative eye opening exercise for one team. It was just impossible because the scenario that was presented to them was so alien they just could not think at all. And when you can't think at all, what you do is you just revert to what you've done in the past. And I see this in real life now in a lot of Ford room. We don't know what to do. So let's just do something we've done before because we know that worked well. The fact that it worked in the past is no guarantee it's going to work in the future. Anyway, I asked this gentleman, I said it was very interesting to me that some could really engage with this and become very imaginative and creative and some couldn't at all. Did you find that when you were doing scenario planning produce large corporation? And he said oh yes. He said, because some people, it just freaks them out, they're just too scared. He said the people I found who were best at it were typically people of any age or gender who really enjoyed computer games because they understood that a computer game actually is a very elaborate scenario. I know that if I turn right I get my head blown off. If I turn left I get a clear path. It's fun. So this sense of fun, this sense of possibility, I think is more important in strategy now than it's ever been because a very large number of executive committees and senior leadership team find their own thinking operating in an environment they've never seen before, deeply constrained by the need for certainty. And increasingly, I have to say, I think strategy is and must be considered an imaginative exercise. That doesn't mean data doesn't come into it, it doesn't mean your facts don't matter. But it does mean you have to aim or have an ambition to find a unique way forward in recognition of the fact that the times in which you're operating are unique. And if essentially the conclusion is businessy as usual, then that to me is a big danger sign that you have failed to take account of the very unique things that are happening around you right now. So if you really can't think of anything more or different than this is as usual, you really need to go back to the drawing board and you think about have I got the right people? Are we asking the right questions? Are we demanding enough of our own imaginative capabilities to offer something appropriate to our times?

Alfred Markus (31:35)

Most corporations are dominated, especially at the top, by people who have degrees in business, who I've trained over Time and engineering, they're technically trained or, and they're legally trained. And all of those professions I think lead to caution. And that may be part of not only caution, but a desire for certainty and foreclosing options. How would you change the mix? Would you bring in? I mean, just bringing in people might just be seen as, you know, okay, here's the, the local artist or like board. Sometimes, you know, you'll have a woman on the board or an environmentalist on the board, but they're not taken seriously. You know, how do you, what you want to do, I think is have the engineers and the business people and the lawyers think creatively, think like artists rather than necessarily bringing in the token artist or.

Margaret Heffernan (32:45)

But yeah, but I don't think it's either or. I mean, I've worked with some companies that again, particularly in the field of innovation, have brought artists in because for example, in the area of medical devices, they have a lot of scientists who are very good at thinking about what the science tells you, but they're not necessarily very creative in thinking about. Okay, so if we think we have a therapy for addressing this condition, what are all the different ways in which that might be delivered and what are the different advantages of those? And I know Roche has done this in the past and the evidence from those experiments, which they clearly were, have been fantastically positive, which is that the engineers and the scientists loved working with artists because it pushed them. And let's not forget we're all born creative. So it's not like creativity is some sort of extra limb that only a few people have. I think we do a huge amount within our education systems to squash people creativity. But I also think it's a very fundamental piece of good management to rejuvenate it. So that's one piece, I would say, you know, if I think of a board that I chair currently, I did bring in an artist to do a board session because I thought frankly our strategic thinking was really pretty old fashioned and rigid. Now the artist wasn't there to tell us what the strategy should be, but to help people think about it differently. And part of what emerged from that was a sense that everybody on the board is writing the story of this company. So what's the story going to be? Let's think about it that way and figure out how we get there. I also think that, I think the divisions, the very kind of polarized divisions that are imagined between artists and scientists and engineer are pretty flighty in the sense that again, having run tech companies, I would say some of hands down, the most creative people I've ever worked with in my life have been engineers. They love solving problems. But what's really fascinating to me is the number of times that people from quite technical background will solve problems outside their domain expertise. So the rise of open innovation platforms has demonstrated beautifully that, you know, there are two examples of a company trying to find a biomarker for the treatment of Lou Gehrig's disease. The problem was solved by a plant biologist. Now obviously Lou Gehrig's disease is not a plant disease, but he could think about the question differently. Similarly, a company trying to find more effective ways for clearing up oil spills. The problem was solved by a cement engineer. It's not a cement problem and it's not a cement solution. But people who work with cement know a lot about viscosity and it is a viscosity issue. So they were able to do something which the experts in oil could not see. So it isn't just that we need more creative people and more support for creativity, but we need more creative assignments of people beyond their domain. And in fact, what most managerialism accomplishes is it figures out your square on the chessboard and it doesn't let you wander from it. And I think that's a huge waste of talent, creativity and potential.

Alfred Markus (36:32)

The managerial ethos is about control

Margaret Heffernan (36:37)

and

Alfred Markus (36:37)

that makes it very difficult. And I think also about Steve Jobs. I don't think technically he was at the top of his game, but he had an artistic flair in many ways. I think about my father in law who he does design it for a living for medical device companies, but he's a painter on the side. He's heavily into painting. I think those two are something very compatible. I never thought of that before until he described. Yeah, go ahead.

Margaret Heffernan (37:16)

I think you're right about Jobs. I don't think he was an artist, but I thought he had the capacity to think like an artist. And I don't think you have to be an artist to be able to think that way. But you have to be prepared to, as I say, embrace the uncertainty and see what's in here that we can use. What are the realms of possibilities that we haven't explored? And the other thing, of course, that made him very much like an artist was his capacity to do something or just consider doing something that nobody had asked for. And I see extreme timidity in many boardrooms where, well, we can't do anything unless we have the data that supports our decision. But if you're going to be an Innovator. You're creating something that doesn't exist yet, so there isn't going to be any data to support you.

Alfred Markus (38:10)

I think Gary Hamel makes some of the same points about if you were in the coffee business, you would have never thought Starbucks was going to work because where's the data that says anybody will spend $10 for a latte?

Margaret Heffernan (38:27)

Exactly, exactly. No, I mean, there are endless examples of this, and they become the war stories of very successful entrepreneurs. But part of the problem with measuring a company only by its revenue is that the revenue chase becomes a trap of its own and introduces a gigantic aversion to experimentation, a loss of skill in experimentation. And as I said before, it causes people to forget that the status quo is probably the deadliest trap that they're facing. That to keep doing what you've always done is kind of crazy. When the world is changing, if you

Alfred Markus (39:13)

are a top leader, you face the pressure from Wall street and from the analysts, and they want to see that you're doing something safe. There's the example, my colleague has studied this, Mary Benner of. Of the analysts rejecting Kodak's desire to move into digital photography because it was outside of what they did ordinarily, even though they had the capabilities to do so. But can there be too much. I was thinking as you were talking about this, let's say Mary Barra at General Motors versus Elon Musk. I think Elon Musk is trying as hard as he can to say, I'm not in the automotive industry, but she is in it. I mean, she can't quite get out of it. And he may be too, flying too high right now. And then there was Jobs. I think Jobs did a great job of convincing Wall street to be patient with him. You know, they weren't always patient with him, Wall street, but he did a very good job.

Margaret Heffernan (40:27)

Well, I think there are a whole bunch of issues raised by that. I think the first is that Mary Barra wouldn't be in a position she's in if General Motors had actually stuck to their development of the electric car and there'd been no need for Elon Musk to essentially kick start that industry.

Alfred Markus (40:44)

That's true.

Margaret Heffernan (40:46)

So that's a gigantic. I think the world will look back and see Detroit in general as a massive failure to innovate. The great innovation I remember in the 2000s was the cup holder. I mean, this is just pathetic when you think of the number of brilliant people who worked in an industry like that. So a lot of what you're saying illustrates, yes, you can go too far and you can go not far enough. The status quo trap, I think is gigantic. I also have encountered in my working life a very large number of so called leaders who really use Wall street or their board as alibis. They call themselves, yeah, they call themselves leaders, but they're not. They're followers. They're absolutely followers. They've never had an original idea in their lives that they're not leaders, they're just managers. And I think they should be comfortable with being called that. But they can manage what is known. That's a very different thing from working with what is unknown. But what's unknown is where the opportunity lies and you can't manage that. You actually can't travel to the future and force it to your will and then manage within that. You have to have some imagination or the absence of it will kill you. It's probably the greatest resource most companies lack.

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Margaret Heffernan (42:42)

K Pop Demon Hunters, Haja Boy's Breakfast Meal and Hunt Tricks Meal have just dropped at McDonald's. They're calling this a battle for the fans. What do you say to that, Rumi? It's not a battle. So glad the Saja boys could take breakfast and give our meal the rest of the day.

Podcast Host (Disorder) (42:56)

It is an honor to share.

Margaret Heffernan (42:58)

No, it's our honor.

Alfred Markus (43:00)

It is.

Margaret Heffernan (43:00)

It is our larger honor. No, really, stop. You can really feel the respect in this battle. Pick a meal to pick a side

Podcast Host (Disorder) (43:10)

and participate in McDonald's while supplies last.

Alfred Markus (43:12)

Do you think companies can hedge their bets if you will? I mean, I talk a lot about that in my own work, but they have to simultaneously exploit what they're doing now to at least please shareholders and maintain some level of profitability and maintain some level of revenue. But at the same time, they have to be able to explore new opportunities because the existing opportunities aren't going to work. But that balance is really hard to strike, I think. I think Barrett was trying to do that at gm. I mean, I think she was moving finally in the direction towards electric vehicles. But right now she's being defeated.

Margaret Heffernan (43:58)

Well, and also at the first sign of danger, she bottled it, which also is not. It shows a deep discomfort with doing anything original. But actually one of the things I was really fascinated by was in the same way that I was fascinated by TV producers who could start a project that three years ended up write, you know, write. What was needed is one of the companies that does this exceptionally well is 3M. And people have always said about 3M. God, isn't it amazing how fast their innovation cycle is? And the answer to that question is no, it isn't amazing at all. They don't innovate fast. What they do is they innovate ahead of time. A very large number of the things that they invent don't work. And they don't work because the market isn't ready. And instead of doing what a large number of companies do, which is just bury the project seven miles deep and pretend it never happened, they do extensive, thorough post mortem asking the question, what would have to change in the ecosystem for this product to be really viable? And then they wait and they watch. And extraordinarily, what frequently happens is slowly but surely the market conditions do change and the product for the market does develop. And then they take out this half baked product and take it to market. But they already have the knowledge, they already have the expertise, they already know how to solve the problem. So it looks like they're really quick, but they aren't quick, they just started much early. So. So in the same way that I think leaders need prepared minds and companies need prepared strategies, innovation requires preparedness, which means you start before you have to. And of course, for me, the triumphant story was the develop of MRNA viruses which came to the fore during the pandemic, which everybody thought, wow, isn't it incredible we did this so fast. Well, no, we didn't do it that fast. The Wellcome Trust and the Gates foundation together and many national governments contributed to a gigantic research project into a MRNA vaccine platform in 2017. And the way they hedged their bets, because they knew they couldn't develop vaccines for everything. And they knew because at the time the average period required to develop a successful vaccine hovered around 10 years. They knew, they. All they knew was we have to start early because by the time the disease is here, if it has pandemic potential it's too late. So they had a really great heuristic, which was, okay, which are the diseases that have pandemic potential, lots of diseases down, take those off the table and which are the most likely to occur. And they looked around and seen where had there been weak signals that particular diseases might be on the go. And they chose six. And we are all very lucky that of the six, one was coronavirus, because they thought it has pandemic potential. And we've seen through SARS and MERS that there's something in that domain that's kind of not quite going away. So let's make that one of our six. That's a very brilliant strategy. What are the things that have great potential, could have great impact? We can't do them all. So let's narrow them down to the ones which had some, but not comprehensive data support and which we know could really shift the market. You're not always going to get it right, but it's going to give you a huge insight into your market. And it's also along the way going to teach you a lot about emerging technologies that you can't find out just by reading academic papers about them. So there are loads of stories like this. I mean, Apple, since we're talking about it, decided it wanted eventually to have an entire product line where everything they were using was recycled. So heading into that area, which is incredibly dangerous and ambitious, all sorts of things happen. They realized they couldn't continue to use. They couldn't use aluminum, which is usually what made their rat dolls, because it recycles really badly. So they thought, okay, so that means we need to invent a recyclable aluminum. Well, that's a tall order. But they took it on board and they found a way, working at the atomic level, of creating a kind of aluminum that's recyclable. In the same time, they created a joint venture with Alcoa because of course, they had a lot of shared interest in this stuff. So just by dint of being willing to start asking the question and try to start answering it, a whole field of opportunity opened up before them. They didn't just do the market research, say, can't do it, can't recycle aluminum, it gets dirty too fast. We just can't do.

Alfred Markus (49:21)

Sounds like the model that you're talking about is that you're not predicting a single future. You're predicting multiple futures and you're creating capabilities that will allow you to cope better with these multiple futures. That's the COVID vaccine and Then when you, when you actually go about moving towards innovation, that, that the actual journey is not going to be quite like you expect it to be. And there'll be many things that open up that you didn't anticipate prior and, and to the time when you were originally thinking about. You have to be willing to take those detours, and those detours may be the most fruitful of the outcomes.

Margaret Heffernan (50:03)

The thing is, you won't learn any of that if you're waiting for certainty. You just can't. It's like Christopher Columbus couldn't have found South America by sitting in his room and thinking about it. He didn't know really what he was going to find. He didn't necessarily even know what he found when he found certainly wasn't what he was looking for. But the one thing you know for sure is you're not going to discover new territory by sitting in your bedroom and just thinking about it.

Alfred Markus (50:34)

Actually, that's a very good example. He certainly wasn't looking or didn't think he was going to find a new world. He was looking for an old world. And there are times. The timing issue I think, though is important. Like. Because, you know, being from the University of Minnesota, I've thought about 3M for a long time. I've done some work with them in the past and I think unfortunately some of the innovation in the culture was wrenched out of it by. They had an MBA, McNerney, who stressed quality and efficiency and took away some of the experimental elements in the culture.

Margaret Heffernan (51:14)

But.

Alfred Markus (51:14)

But even 3m, but he didn't last very.

Margaret Heffernan (51:18)

But he didn't last very long.

Alfred Markus (51:20)

No. He went on to destroy another major company called Boeing. That was his next stop, the MBA mentality. But 3M, even, I mean, major story that one of my colleagues, Andy Van told, I don't know if you know about, he passed away. He was really brilliant thinker about innovation. And Andy read us a story about cochlear implants. But 3M started with cochlear implants for plants. And it took, I think the story as I remember, took 50, 60 years before it actually became a reality. And 3M, you know, at certain point in time they gave up. This is. And sometimes timing is very important in all of this too, because I would think, like the story of AOL and Time Warner, I think that merger was really. AOL acquired Time Warner. People don't think of it that way, but that's what happened. Because all at the time was so overvalued. But that was visionary. They really anticipated everything that was going to happen subsequently, but it was a total flop because it was too early. So timing, I think, is another important factor here. Timing is very hard to figure out.

Margaret Heffernan (52:46)

Well, I don't think it's very hard. I think it's impossible. But I think what it shows and what the way in which artists work shows is that you have no options. If you just wait, you will always be late. So the issue is, how much can you start at once? How much tolerance for risk can you afford? How do you price that into ordinary operations? And one of the things that 3M has always been very prudent about was looking at and creating a budget specifically for innovation, recognizing that they could simultaneously satisfy the market and keep ahead of the game without breaking the bank. So they were hedging their bets to use their framework. What I think is really kind of alarming is the number of companies who think, oh, no, we want to be all or nothing. It's like, well, why would you do that? There's almost no other domain in life where you would do that. What you want. If you can accept that you don't know the future, and that's the first mental stumbling block. You accept you don't know the future, then what you want are options. And how you balance those options requires strategic imagination. But I'm just staggered that people that so many super intelligent, experienced chief executives still think, no, let's just stick to our knitting core competencies. I'm not saying core competencies aren't core, but the world is moving too fast to rely on the past as your guide to the future.

Alfred Markus (54:34)

So this essentially comes down to creating capabilities, having lots of capabilities, so that when the opportunities arise, the options are available for you to seize them because you've already prepared by having the capabilities. But that still raises the question. I just did a podcast on innovation where the person was talking about intellectual property, especially patents. What is the capabilities, in a sense are intellectual property. But what kind of intellectual property and what kind of patenting? Those decisions too, too are fraught with difficulty because they're investment decisions. You can have the wrong group of capabilities that you've created that aren't going to work no matter what. I keep thinking about Musk. I feel so conflicted about Musk, but in a way, that's what he's doing. He's creating all kind of capabilities, and he keeps switching, I mean, in terms of what he can actually deliver. But those capabilities may come through in the end,

Margaret Heffernan (55:57)

and some of them definitely will not.

Alfred Markus (55:59)

Yes, I think he's leaving the electric vehicle industry right now. I don't think he wants to be in it. And I think with the decline in sales, that's fine. I'm a technology company. I'm into robots and autonomy and spacecraft. That's my. And into the AI. That's my industry. I'm not an automobile company at all. I'm not going to get stuck in that rut. That's a bad industry to be in. But it can go too far too, I think. And it can be sort of at some level a con game.

Margaret Heffernan (56:41)

Yeah, I mean, I think in many ways Musk represents the problem. He definitely doesn't represent the solution. I think he illustrates the problem, which is you can be too reckless, but you can also be too conservative. And I guess my concern is that I see those two poles getting further and further and further apart. And I think that's quite dangerous, I think, to kind of stick to your knitting company. And we see this a lot. We see it in management consulting companies a lot. We see it in law firms enormously. We see it in all kinds of big heavy traditional manufacturing industries and retail industries. You know, they kind of can't they operate as they haven't had a new idea in the last 20 years. Years. The last big idea they had was we better have a website. So that I think is a significant problem. And because the new stuff is sexy, it gets a lot of attention. But actually the drag on the economy is that the other end of the spectrum, you see corporations who really do seem to imagine that they're so important to the universe that they should be absolutely beyond the law and they have no sense a responsibility to the market, to the society they serve. And they're completely out of control. Now. They're very creative because they don't think they can do any wrong. But they are doing wrong. We've seen them doing wrong. We continue to see them doing wrong. I mean we have one of the two most successful companies and most admired companies in America, one of which is Johnson and Johnson Label a criminal enterprise having killed more people with its products and have died in American wars operating apparently with impunity. We see AI companies daily talking about yeah, we do eliminate the human race, but ho hum. And nobody thinks that there's something wrong with this. So we have over the, over the last 20, 30 years kind of either decided to just bury ourselves in a basement or just decide the law doesn't apply where geniuses, we can do whatever we want. Neither of these things serve society and neither of them gives business a good name. And neither of them seems to give any even lip service to the notion that without a functioning society, you don't have a market. I haven't seen anybody rush to set up business in Syria lately. And I haven't seen anybody rush to set up their latest, I don't know, tech company in Gaza. Companies have a vested interest in a stable society, but neither the conservative nor the reckless companies are doing very much to ensure they have a market in the future, producing goods and services that people can trust. That, it seems to me, is a bigger problem.

Alfred Markus (59:45)

There's some good examples. I was going to ask you also maybe you can comment about Bezos, because I think that spirit of experimentation and kind of the scorn for the analysts was. And it kind of worked over time because he said we're not going to be profitable immediately and we're just going to keep experimenting and live with it. And he was very transparent about it. He told his stockholders exactly that. That's what he was doing. And sometimes they lost faith, but basically they stuck with them. I don't know if the current people CEO Jassy, is going to continue that. But what about the tech companies now, their massive rush into AI? I mean, it is a big bet they're making. And if you actually look at the financial part of it, it's very, very risky because they're putting investing enormous amounts of money in it and their balance sheets don't look very sound. And you'll get the articles every once in a while in the Wall Street Journal about this, that we should be nervous about it. And I think generally that's our view of AI. We don't know where it's really going to lead, but it's an amazing capability. So let's do it. What are your thoughts about. Well, I threw a lot out there, but.

Margaret Heffernan (61:09)

Well, I think first of all, they're kind of hoping history repeats itself in the sense that's true. You'll have a market bust and then everything will settle down and everybody will become more rational. It's a misreading of history and I think it's a delegation of responsibility. I think AI obviously has potential and absolutely aghast at the arrogance with which and recklessness with which it's being pursued. I think it's immediately dangerous in the sense that it terrifies people. It definitely terrifies younger generation who are being told with apparently great glee and delight, ha ha, There aren't going to be any jobs for you. This is a really cruel and unethical way to treat your potential customers and the people on whom you will depend for any income if your business is ever going to make any money. And it's extraordinarily vicious and ugly. So I think that why these companies are being managed is just, it's gross and disreputable. I think the tech may deliver some benefits. Whether or not they will end up being worth the harm that they cause is a very moot point. And in many ways I think about this in the same way that I think about the fossil fuel industry, which is, yeah, at the beginning it all looked great. When news came in that actually was doing quite a lot of harm, the decision was made not to care about it, don't worry about it, we're just going to ignore it, we're going to lie and say it's not true. And the consequence of that is we now are facing a climate crisis which has got steadily worse, which we are contributing to and which nobody seems to care about except going back to it younger generation that can look at forecasts around climate and see that this isn't happening 100 years from now, this is happening to our children. Now the rough side of the climate crisis is going to be fundamentally defining of their lives and we are sitting here thinking about going to Mars. I can't imagine anything more irresponsible for the greater glory of somebody who doesn't seem to have any capacity for self restraint or concern for the harm that he does to other people, individually or collectively. I think it's a huge failure of market economics. I think it's a huge failure of our society and I think it demonstrates a fundamental truth about capitalism which is it's insatiable and it won't stop until it crashes. So it always crashes.

Alfred Markus (63:53)

History may be working in very strange ways right now because the price of energy may be sticky at a very high point for a very long period of time. And it may as a consequence operate sort of like as a global carbon tax which possibly policymakers have never been able to introduce. And as a consequence there may be greater adjustments than we, it may foretell at least if not the end of the fossil fuel age, but a little bit of the breaking of the fossil fuel age. It's just a thought I've had. Do you think I'm totally off base here?

Margaret Heffernan (64:37)

No, I think that may be true in America. I don't see any kind of prudence, creativity or imagination being used in that respect in the United States because it's fuel self sufficient and it clearly doesn't care what the impact of its energy consumption is on the rest of the world. So everybody's going to be harmed by that. So Europe will do its best, Africa will do its best. A lot of countries will move much faster towards renewables. And indeed China, thank God, is moving faster towards renewables. But as long as America is happy, go lucky and gushing carbon into the atmosphere, we are all going to pay the price for that.

Alfred Markus (65:18)

In human terms, it's possible it will change. We have to look at that as

Margaret Heffernan (65:23)

one of the main. It is, but hang on a second, because I think this is where the climate lobby has gone very wrong, which is they have always suggested this is 100 years out, this is no longer 100 years out. There are no respectable scientists in the climate field saying this is several generations away. This is the general our children. It's happening now and our children are going to bear the brunt of it. And we have politicians making decisions that will literally harm their children's futures. And that is another lack of a vaccination. What can I say?

Alfred Markus (66:01)

So this has been a great conversation. I think we have to have tolerance and concern for the listeners to the length. But what are you working on right now? What is your current passion? I mean, you've had such a fantastic career and you've done so many interesting things, but what's consuming you right now?

Margaret Heffernan (66:24)

I'm trying to think about what, given the spectacular mess we're in right now, what might give people joy and hope? It's a very hard conversation to have with myself. I mean, I have, you know, so I'm trying to think about what are those things and how might I contribute to them. I also, you know, I mentor chief executives around the world, four or five at any given time, and try to help them make better decisions. And I work with some young executives in organizations who are trying very hard to have their voices heard. Because if these are the young leaders of the future, they're going to need some very different capabilities than the ones that we have right now.

Alfred Markus (67:10)

So what does give you hope? I think that's a very important question. It's one I struggle with, definitely.

Margaret Heffernan (67:17)

I think it is fundamentally human creativity, which is we do have a capacity to do incredible things against incredible odds. We are going to need that more now, I think, than ever in the history of humanity. So instead of marginalizing and trivializing creativity, I think it's well past time that we double down on it because we're going to need it. We have gigantic problems to solve and business as usual isn't going to solve them.

Alfred Markus (67:49)

And perhaps AI in that sense can help, although I think there are many ways it can be harmful.

Margaret Heffernan (67:55)

Yeah. And the jury's out on that. I think whether it will end up being a net gain or a net loss. Certainly if we don't find ways to craft AI governance, I mean, if all the people who invented this stuff say it could kill us all, I think it kind of behooves us to sit up and pay attention and say that this needs some boundaries and some governance and some oversight. And we have to stop thinking, oh, no, it'll all be all right. Only children think that in fairy tales.

Alfred Markus (68:26)

I mean, it's absolutely true. That was true of the Internet and that's. It turned against us.

Margaret Heffernan (68:31)

Well, I say this with some feeling because having one tech companies at the beginning of the Internet, I, I think I'm, you know, I think I'm a bit like a fossil fuel company. I thought it was all going to be great and a thousand flowers would bloom and wonderful things would happen. And I was wrong.

Alfred Markus (68:49)

So was I. Yeah, go ahead.

Margaret Heffernan (68:51)

So as somebody who is wrong and having had a father who worked in the fossil fuel industry who was totally heartbroken to discover what his industry had contributed to, I think it behooves us now to start saying, okay, so let's imagine we're wrong. It's one of the great business questions of all time. If we were wrong, what would we wish we were doing now and then? Could we please get started? We don't have all the data, but we have enough.

Alfred Markus (69:23)

Progress is not linear. I think.

Margaret Heffernan (69:25)

No, that's right.

Alfred Markus (69:27)

I think that's a myth that I grew up with, that progress was inevitable and linear.

Margaret Heffernan (69:32)

It's. My husband, who is a scientist, has a wonderful basic adjective. He says, progress is not linear. It's lumpy.

Alfred Markus (69:42)

That's a very good way of saying it. I think with that, we'll come to an end. Margaret Heffernan, thank you for joining me. On the cusp between strategy and ethics. The book is embracing how writers, musicians, and artists thrive in an unpredictable world. For listeners who are wrestling with how to lead, plan and act when the future cannot be forecast, it offers both a humane perspective and a rich set of practices drawn from the arts and from Margaret's long experience in business consulting. For listeners, I'm Alfred Marcus, and this has been on the Cusp on the New Books Network. If you have comments or suggestions for future episodes, please contact me at amarcus@umn.edu.