During the April MIT Sloan Alumni Online series presentation hosted by Jackie Selby, EMBA ’21, Senior Lecturer Hiram Samel, SF ’06, PhD ’13, discussed corporate scenario planning as it relates to his class, Building and Using Imagined Futures: Thinking Forward in a Post-Global World.
Scenario Planning is a method of thinking about the future in order to help predict obstacles that you might not rationally consider. To do this successfully without judgement or bias, scenario planning often incorporates working with other people.
“The most important thing to understand about scenario planning is that it’s a process, not a result. You get scenarios as a result, but it’s really a mindset,” said Samel.
Hiram Samel, SF ’06, PhD ’13, Senior Lecturer
Credit: Ed CollierSamel came across scenario planning while he was a professor and fellow at Oxford University’s Saïd Business School. The goal of this kind of thinking is to help you consider uncertainty and different environments, how they can change, and how those changes affect you or your business.
Samel described himself as a second-career academic because he spent the first half of his working life as an entrepreneur building and managing companies.
“What I discovered from running companies is that, often, as much as we’d like to think we know what’s going to be in the future, we really don’t,” he said.
Scenarios go where forecasts cannot
During his presentation, Samel showed a clip from the 1964 political satire film Dr. Strangelove, depicting the moment where the president of the United States calls the Russian premier to tell him that a U.S. general had sent an atomic bomber squadron to attack Russia without authorization. He used this scene as an example to describe plausible futures during the height of the Cold War. At the time, base commanders had full autonomy over nuclear weapons in the U.S., so it was entirely possible that this situation could happen. However, the general public was unable to comprehend the plausibility of this future until the movie came out.
“In many ways, people cannot think the unthinkable without looking to something beyond just data,” Samel explained. Dr. Strangelove was a way to make the public understand what was really at stake during the Cold War.
Samel described scenarios as the antithesis of data, and therefore, “the task of scenarios is the exact opposite of what we do at MIT Sloan.”
Scenario planners have to think the unthinkable, projecting what could happen instead of analyzing what has happened. They have to think qualitatively, not quantitatively. Samel recommended avoiding thinking about scenarios the way you might think about probability.
He described three types of scenarios:
- The world of insurance or probabilistic risk
- The future of novelty or intention
- The feral future
In the first, you can gather information, change probabilities, and assign an expected value to each option. In the second, the futures are things that you can’t foresee, but that you know could occur. In the third, you can’t predict second-order effects—otherwise known as unintended consequences.
The feral future is the most important future in scenario planning. Samel used the example of when the Soviets invaded Afghanistan to describe it. Americans armed the Mujahideen to fight the Soviets, who then morphed into the Taliban, and then America ended up sending troops to fight the troops they had armed in the first place. This, said Samel, is a feral future.
The goal of scenarios is to help you think primarily of the second and third kinds of futures, because oftentimes relying on data like in the first future leads to failure. Examples of this would be the 2008 financial crisis or the 2020 presidential election. In these examples, pollsters and economists used data to forecast a future that did not come to fruition.
Scenarios vs. data
During his talk, Samel quoted one of William Faulkner’s well-known lines from Requiem for a Nun: “The past is never dead. It’s not even past.”
The line is often used as a reminder that the past is a constant influence on the present. Samel pointed out that the past comes with us as we move forward, but at the same time, the future comes at us, and using everyday data will tie you to the past.
Whereas data is finite, scenarios are unlimited. The goal is to create a mental map of different possible futures that you thought you couldn’t imagine, and the best way to do that is with a group of people with diverse points of view.
Looking at a situation from multiple perspectives, like with a group of diverse thinkers, can help reframe your thinking. For example, the Taj Mahal is one of the most beautiful structures on Earth, but if you look at it from the other side of the Ganges River, you might see all the trash on the riverbank.
Samel referenced a model called the futures cone, which depicts layers of different kinds of futures all stemming from one place over time. There are six types of futures:
- Preposterous
- Possible
- Plausible
- Projected
- Probable
- Preferable
He recommended staying in the Plausible futures range to avoid normative outcomes that might be affected by confirmation bias or preposterous outcomes that could never happen. To do so, you need the help of other people.
These skills can be used for a multitude of things, including career planning, business projection, and general decision making, among other things.
Theory and practice at work
Samel described scenario planning simply: When there’s a pothole in the road and you drive over it, you feel it in your car. But, if you had a very good image of a pothole and laid it over the pavement, if you imagine it just right, you could still feel that pothole in your car. Scenario planning is as simple as imagining potholes in your future.
“What's important is the manner of thinking,” said Samel.
Training your mind to develop these thinking strategies, even though many imagined futures won’t come true, will ultimately form an incredibly useful mental model.
“That prospect of getting out in the world and being both in theory and in practice is important,” noted Samel.
He also mentioned that having an MIT Sloan education makes a positive difference because of the education students get in system dynamics. Concepts like feedback loops, reinforcing loops, stocks and flows, first and second-order effects, these are all things students learn from system dynamics classes.
Furthermore, because of MIT’s mens et manus—mind and hand—mentality, students naturally combine finance with industry. Manufacturing is by nature done with both your mind and your hands.
“It's important to think through the MIT ethos, which, quite frankly, is different from any other school that I know of,” said Samel. “I think MIT has a lot to not only offer the U.S., but to offer the world.”
He finished his talk by urging the audience in the direction of continued commitment to education, whether it be for yourself, your employees, or your greater community, because in doing so, you will be more comfortable and prepared to tackle the world’s ever-developing technologies.
“I just encourage you to stay invested in education at every level, wherever you are,” he said.
