 Welcome to the get the podcast for enterprise leaders delivering timely insights for today's global economy and tomorrow's competitive advantage. I'm your host Chris Kane, president of the Center for Global Enterprise. And today we are pleased to sit down with two of the three authors of an important new book, perma crisis, a plan to fix a fractured world. Mohammed L Ariane, president of Queens College and Cambridge and advisor to Alliance and Gramercy and former deputy director of the International Monetary Fund and Mike Spence, a Nobel Laureate, former dean of Stanford School of Business and currently a senior fellow at the Hoover Institute and as importantly a member of the board of directors of the Center for Global Enterprise, which we greatly appreciate. Mike and Mohammed, welcome. And we look forward to our conversation today. So you've written the book at a time when the world seems to be in a constant state of turmoil. Economic, social, scientific, political uncertainty surrounds us in so many aspects of our daily lives. In perma crisis you offer a plan for how to address the interconnected crises facing our planet, and how to create a future that relies on a different model for growth. Right from the very first sentence, you calmed my presumptions about reading a book that describes the macro forces making the world such a turbulent place. And this is no small feat, given the fact that escalating climate crisis to the war in Ukraine, and now the war in the Middle East, rising inflation and worsening inequality are all laid out as the challenges were all as individuals and as societies confronting. Perma crisis yet offers hope and a practical plan forward with a large dose of sobriety. It's an easy read because it's got an everyday voice to it. And so I enjoyed it tremendously and every CEO of a company, larger small individuals involved in policy making domestically and internationally are well served by reading it. So let's begin. Mohammed and Michael, let's start with the very basic question. Why did you each decide to write the book? Mohammed, maybe we can start with you. And thank you for having me, Chris. This never started out as a book project. What has started out as three friends during lockdown, coming together. And I would say the first year was a frustrating year, because we were talking about problems all the time we're talking about the way the global economy had been brought to a sudden stop There wasn't enough thinking about how do you reopen a global economy. We talked about the bad way in which vaccines were being distributed around the world, and how we were at risk of new variants. And then a year into all this, we all had this insight that we can boil down the issues we're facing this notion of perma crisis of cascading crisis to three hypotheses. And once we did that, we became much more hopeful, because we started talking about solutions. And like we say it is a hopeful book. Now I say what brought us together is friendship. What kept us together are three things. One is that we come from very different backgrounds. Mike is a superb economist who every call would bring insights to the call. Gordon is a very experienced policymaker, has a real sense of how policy is made and not made in the real world, and brought incredible insights. And I bought the ability to send out a Zoom call every week. The third thing that kept us together is hope. And then when we realized we had hope, we decided to write a book and then there was a moment of panic because no one had taken notes for the last year plus because we never intended to write it. I might just add Chris that Mohammed left out one important thing. And Mohammed's insight into the way the sort of macroeconomic policies work or don't work, both domestically and internationally was just a crucial input. And there's three legs to the book in terms of content. That leg is incredibly important. And a great deal of our discussion is centered around why are we making mistakes? Do we have the right frame of reference for a rapidly changing world with respect to the formulation of macroeconomic and monetary policies? Well, your joint decision to, after these conversations to come together and write the book, leads by example with one of your major tenants in the book, which is if we're going to move forward and solve some of these crises, cooperation and collaborations key in order to get there from here. So you're leading by example for sure. Maybe we can talk about the title. It's mirrored title perma crisis suggests and it lays out a litany of global troubles that the list is long and yet the tone of the book from these challenges is optimistic, as we were just saying. But how can you be so optimistic when about a future when these seemingly daunting challenges exist and are confronting all of us on a daily basis? Mike, you want to start? Well, I think part of the challenge that we all face is that when we have repeated shocks and crises coming at us, we sort of think everything's out of equilibrium. There's no framework for deciding how to orient yourself to determine what's important. Is it growth? Is it getting inflation under control? Is it fragmentation in the global economy? So part of our purpose was to say this is a confusing environment. But if we think hard about it, we can make a contribution to providing a framework for understanding what's going on around us for distinguishing between temporary shocks and secular trends that are powerful and important to understand. So that's part of it. And I think it's a necessary step before you plunge into the complex area of solutions. Mohammed, how's the book so optimistic with the daunting challenges that we're up and running? Well, we were highly motivated. All of us have kids, teenage kids, kids in their 20s and beyond. And we were worried about the world we were leaving them. We're leaving them a world with a climate crisis, a world with massive inequality, a world with political polarization, a world that has lost the ability to grow in a sustainable, inclusive way that respects the planet. And the list goes on, let alone a world that doesn't cooperate across borders. The good thing about my association and my friendship with Mike that goes back to 2006 is that Mike, almost like a clock, tells me things, simple phrases that stick with me for decades and help me think about the world. And he once told me the simple notion in game theory that you cannot solve a cooperative game uncooperatively. And as we applied these things, we recognize that we can be optimistic because there are solutions. And the solutions come first and foremost from trying to bring a very difficult set of problems to things that you can talk about easily. And those are the three tools of the book, as Mike said. One is a new approach to growth so that we can grow in an inclusive fashion so that we can grow in a way that is consistent with the realities of our planet. Two is to stop making policy mistakes and often the same policy mistakes. Three is to cooperate better, not on everything because that's impossible, but on things where collective responsibility and collective action is needed. Let me finish on the title of the book. Third Truth Permacrisis was not the first title we discussed. The first title we discussed was changing the equation because we wanted to give people a notion that we were looking at an equation and if you can change a few things in that equation, you can imagine a much better world for your kids and for your grandkids. Then as publishers often do, they told us that title wouldn't sell. They told us that people would think that's a mathematics book and no one would even open the cover. So we had to say goodbye sadly to the title changing the equation and then ended up with Permacrisis, which was the word of the year in 2022. Well, with all due respect to you two, I agree with your publisher. I think the title is fantastic. I really liked it a lot. It resonated tremendously. The other thing, Mohamed, as you were speaking, the reader will immediately gather a sense of authenticity about what you all are saying in the book. I think that's one of the great references to the hope and to the future and the imperative we have to fixing these problems for our future generations, whether they're our children, whether they're our grandchildren, whether they're our neighbors. And it's a powerful force for keeping, at least powerful force, keeping me connected to the book in a very direct and personal manner. So congratulations to you. It really came through. What I meant when in my opening remarks about it comes to you with an everyday voice. The voice is really powerful in this book. So congratulations. You reference several secular trends or headwinds as you call them, constraining the global economy. And I was wondering if you could identify to the headwinds that you believe will be most important for our listeners and readers to think about as business executives, people who have to make decisions, operational decisions over the next three years or so. So whoever would like to take that on first, please feel free. I'll give that a shot because I was responsible for a few of those. I think the fading of the impact of the emerging economy growth, creating essentially a deflationary environment for a three decade period is one of the more important things to understand. And it impacts every part of the book. You look at this and you say, gee, you've got a generation and a half of people who lived in a world where inflation was basically not an issue. And so one of the things Mohammed spent a lot of time thinking about is, well, how do you change mindsets fast enough to catch up with the evolving reality so that we stop making mistakes? So I would say one very powerful force that many, many people have come to think of as sort of normal is in fact going away. And there are a whole bunch of them. You know, there's aging in 75 plus percent of the global economy. There's fragmentation and diversification, which is a very expensive thing in global supply chains. They're just not constructed anymore on the basis of economic efficiency. They're being constructed in pursuit of resiliency and national and economic security in various dimensions. But the other one I would mention and underline that I think we need the help of the private sector to reverse using powerful tools will come to in a minute is a powerful declining trend in productivity growth, which means that basically the growth of the engines that we're used to are in the process of stalling. And so I think whether you're a policymaker, whether you have a macroeconomic point of view or whether you're worrying about your competitive position that probably deserves to be at or near the top of the list. Mohammed, any thoughts? When I think of a lot of our listeners or CEOs who are business executive and they are thinking, well, how did this apply to me? There are three things that immediately will impact the bottom line. One is how they think about supply chains and how they think about the supply side more generally. We are now living in a world of insufficiently flexible supply. And that has, as Mike correctly said, has aspects that are being pursued both by governments and by companies. And that means the most important being the search for greater resilience, which means that the just in time efficient distribution of supply chains cross border that we were brought up on now has an extra resilience element, not only as good but also because at the government levels, nearshoring and French shoring, which is another way of saying we're going to put supply chains in places that we trust more in terms of geopolitical risk is becoming more and more important. So the first thing is just to recognize that the supply side is not the supply side that we've grown up with. It's a different supply side. The second thing to recognize is that the political and geopolitical environment is very different. The businesses really have to worry about the exposure to political and geopolitical risk, the weaponization of trade restrictions and sanctions being an example of that. The more delicate geopolitical situations that end up by becoming incredibly fragile. So one has to worry more about an element that most companies are not specialists, which is how to assess political and geopolitical risk. And then the third issue and this is really important. And it's something that Mike has done a lot of work on is how to use some major and Mike has identified three in particular major transformations in order to be labor augmenting to make sure that with the resources we have, we can do more. And these are the three big transformation that Mike has opened our eyes to, which are technology in particular, generative AI, life sciences and climate and the green transition. And I can't think of anybody else who has done as much thinking linking these innovations to productivity than Mike has. I want to come back to the growth topics and we'll touch a little bit on technology in a second. But as Mike knows, at the Center for Global Enterprise, we do a lot of work on supply chains and the transformation of supply chains. And Mohammed, you touched on the demanded supply constraints that are confronting supply chains right now. One of the ones that is shaping the externalities of a supply chain really is around a globally integrated economy becoming a more regionalized segmented economy. And there's a lot of focus on what are the ricochet effects of that for a supply chain owner and sponsor. But if the global and in your title, if the global economy or the global society is fracturing and moving toward more regionalization, what could be some of the advantages for a business person to think about of regionalization that maybe businesses could or should start planning to leverage. So maybe we could look at the positive side of segmentation or regionalization and how one would achieve competitive advantage in that framework that most businesses will say they have very little capacity to effect. If you look at this from an emerging economy point of view, it's clearly a mixed picture, but the diversification of supply chains away from China, which is 30% of global manufacturing is an enormous opportunity for them. And they've recognized it. So I think businesses that are alert to the fact that they are in some sense this is too strong, Chris, but back in the game is a big opportunity. And while, you know, at a macro level, we may say the whole system is less efficient. In fact, from a dynamic point of view, this may both both create enormous opportunities for growth and development on one side of the ledger and increased resilience for the kind of multinational and global players on the other. So it's not unambiguously a bad thing. And let me add one other thing. This fragmentation and regionalization doesn't have to go to an extreme. We don't have to break the world down. Some form of extreme de-globalization doesn't look like it's in the cards. And even the policymakers now, including on the American and Chinese side are trying to ring fence the areas they're really worried about in technology and related things that have to do with national security without, in some sense, contaminating the rest of the global economy with those kinds of restrictions. So it's not an easy world to navigate in, but it is one, I think, that offers real opportunities for emerging economies, for businesses in those economies, and even for the multinational players who are basically the architects of the kind of global economic system. Mohammed, any thoughts? Let me just add, and I agree with everything that Mike said, that first and second mover advantages are going to be really important in this world. And this is where mindsets come in. As you know, a lot of businesses that face a paradigm change, a regime change for victim to behavioral mistakes. And there's three classic behavioral mistakes. One is a blind spot. You simply don't see it. I suspect most businesses can avoid that. The second one is the reframing. You see something. It's uncomfortable. So you immediately reframe it in your business model into something else that is more comfortable. And then you lose the insight. The third, which is what most successful businesses that fail, end up falling into this trap is what's called active inertia. You see something that you know you have to adjust to. You come up with a plan, and then when you try to communicate it and implement it, you don't do that well enough. And next thing you know, you end up in the middle. And we have lots of examples of very successful firms ending up in that trap. So it's really important to step back and have the open-mindedness and especially the cognitive diversity to understand that we no longer looking at the world of ever closer economic and financial globalization. We're looking at a different world. We're looking at a world, as Mike said, that will fragment in certain areas and will stay globalized in other areas. And that's a world that means that you have to think differently about the distribution of potential outcomes. And if you've got to spend a lot more time on the tails, both positive and negative, Mike mentioned a very positive tail, which is certain countries and certain businesses in certain countries literally have people coming to them. They're not pulling them there because these people are being pushed there out of other areas that have become less hospitable on there. So again, the minute you understand how the world is changing and what are the key drivers of that change, then you're much better able to navigate the changes that are necessary, and the upside is considerable. Yeah, thank you for that. I think the book has a really powerful dimension of talking about surprises and inertia and the inability for even the most successful and leading edge companies historically to make really bad decisions of inaction based on inaction and missing the shift. So for listeners, I think to Mohammed's point here about what allows you to fall into blind spots or what allows you to fall into the apathy of inertia, the book covers this very well from a management perspective. Let's go back to talk about growth, Mike. You raised that before and I wanted to come back to it. In the book, you argue for growth aware of the costs, such as inclusive and sustainable versus the traditional approach of growth at all costs. Can you talk a little bit about how AI, referencing technology, how AI factors into the growth equation and maybe what elements of growth will lead to more inclusion and sustainability? So the backdrop of this in this part of the book with something we all share, so it's not my idea, is that we have these powerful tools, including especially the sequence of enormously impressive breakthroughs in AI culminating so far with gen AI. But anybody in that world will tell you we're not through. So this is not the end of the road. And it looks to us on careful examination that these technologies have the potential to produce a powerful surge in productivity. And if done right, and that's an important qualification, they can produce inclusive growth patterns. And this is a slightly to separate subject. There are very likely to have an important role in the energy transition that's required with respect to sustainability. Now, but the important thing I think this stress Chris for this audience is it's not inevitable. And so let me put it this way. If generative AI in particular is gone into with a kind of automation mindset, then basically what we'll do is we'll go around looking for opportunities to replace human labor with machines. First, it'll create enormous resistance in terms of implementation, which everybody in the corporate leadership world will understand. So that's one problem. Second thing is, you know, if you go in with that, then you're it's a severely limited version of the applications of productivity enhancing AI. The ones that impress me, the ones we talk about in the book are the ones where you which I call a powerful digital assistant model. It's the augmentation version, but there is a bias that runs in the direction of automation. And so we don't want to do that. And then the third thing I think that's really important if we want to get the full benefits of this in an inclusive and sustainable way is in past episodes of digital adoption. Let's call it before the AI period. This pattern tended to be frontier sectors and firms running ahead and adopting quickly, not necessarily making mistakes, but you know, pretty aggressively tech, finance, some other sectors. And then you had other sectors lagging behind, or we had big businesses that it could afford to conduct the experiments and explore the possibilities in a whole bunch of other businesses. Let's call a medium sized sort of left behind without the resources and without mechanisms. If we reproduce that pattern of divergence, we a won't get the productivity surge because the hallmark of these new technologies is they have applications across the entire economy. So we try to unpack that a little bit, both in terms of mindset going in and opportunity coming out in the hope that we'll, you know, with the help of corporate leadership and the tech sector and policymakers produce what we think of as a kind of benign but very beneficial version of this. In the book, you talk about sustainability and security, but there's little mention about cybersecurity and the growing plague of cyber attacks that we see hitting public private and public sector organizations. So, given the framework that you are presenting about growth aware of the cost, it would seem to me that cybersecurity is a relevant one of those costs, and maybe you could talk a little bit about how you see cybersecurity being part of that mix for business leaders and government officials to take it to. Mohammad, can we show you Chris that's a really good point. In fact, you just given us something that we will have to have in our second edition of the book, because cyber is really important, and going back to what Mike just said about the general AI, if you think that generally right, it can do 90% good, good to the world and 10% bad I'm just picking numbers arbitrarily, part of the 10% is it makes the cyber threat, even bigger, because increasingly people who work for you, even yourself will be getting emails that sound like they come from people who know you, they would have understood what you've done, what you react to, and they'll create links, and they'll create backdoors into our enterprise that are simply to tempt me, not to click on. So you're absolutely right about this cybersecurity issue. What one has to remember is that most transformation have both good and bad. I can't think of a single transformation that has had just good. And we have to manage the bad. And as people get more comfortable with the strategy where I can guarantee you that the next updates from white update town halls on cybersecurity will include examples of how AI makes that sweat, even more dangerous. Mike, any thoughts before we close. Yeah, just a couple building on what Mohammed said, we'll certainly add an extensive discussion of cybersecurity and the next round. Cybersecurity can be defined sort of narrowly or more expansively and the narrower definition it's talking about either disrupting the digital platforms on which you're actually running an organization, or even the whole economy, or something related to data and data theft. That's an important very important set of things that you know the perfectly honest truth Chris is we thought if we went into that territory, we'd have to do a lot of homework and probably use up half the book to the kind to get to the bottom of it. But the thing I wanted to say is there's a more expansive version of cybersecurity has to do with who has access to the technologies. And a fair amount of what is talked about in the part of the book that deals with international, the way the international economy and interdependence constructed has to do with disruptions in flows of technology that have that have security implications narrowly cybersecurity, you can see a clear bifurcation in the world in of AI you can see a pretty clear bifurcation and attempt to sort of not let advanced technology flow to the other side in quantum computing, quantum computing is a sort of game changer at some point, in the cybersecurity area I would guess, at least from what I read, but me having to do with encryption and the ability to break encryption. So the bottom line is, I think you've made a good point that we probably need to pull this all together and admit, as I'm Mohammed said that that the successful use of these technologies regardless of which ones they are, requires a balanced approach to encouraging the positive uses of it, and restricting and regulating and protecting against the inappropriate risky or even dangerous use though and I would say the same thing about gene editing. And I think that's a view that would be shared by most people in the biomedical field, as I would about the digital technologies as well. Well, we'd be happy to continue the conversation on cybersecurity gene editing. You have a number of references in the book about the power and the opportunity of Africa, the impacts of aging, all of which are should be very much in the minds of business leaders and CEOs as you're making decisions about how to invest and execute excellently in a world that is very dynamic and very different. Mohammed and Mike, thank you for joining us today on the get and I encourage all of our leaders to read Permacrisis, a plan to fix a fractured world. It is the right book at the right time. You've been listening to the get sponsored by the Center for Global Enterprise, celebrating 10 years of convening global enterprise leaders around the most important business transformation issues.