My remarks at the Ibramerc Market Intelligence Forum

Eric Garland Intelligence Analysis Leave a Comment

The following is a transcript of my remarks before the Ibramerc Forum de Inteligência de Mercado in São Paulo, Brazil last week entitled, “The coming golden age of analysis.” In this speech I discuss how the profession of intelligence has gone through a very dark period, and why the coming disruptions in the global economy will make sophisticated intelligence methodologies essential to success in the years to come.


ibramerc-forum-GarlandNão está escrito na minha biografia, mas eu sou um músico profissional. Como tal, eu gostaria de começar meus comentários em português, uma língua que é mais perto de música como qualquer na Terra. Durante anos, como todos os bons músicos, eu estudei a música e as palavras de Tom Jobim, Vinicius de Moraes, Djavan, Caetano Veloso, Gilberto Gil, e outros. Eu sempre amei a poesia da língua brasileira, o que mostra uma inteligência notável sobre o mundo e seu povo. Embora muitas pessoas não associam as duas disciplinas, música e análise, eu acredito que uma visão sutil e poética do mundo, como se encontra na música brasileira, é uma chave para análise da economia e da sociedade em geral.

No entanto, a minha profissão principal é analista de inteligência. Infelizmente, mesmo que posso cantar “Desafinado”, não posso falar sobre inteligência de mercado muito bem em Português. Gostaria de pedir o seu perdão e para permitir-me continuar minhas observações na minha língua materna, o inglês.

I’m very excited and proud to be at the world’s largest professional event for market intelligence. From what I have seen from the participants and the management, it may also be the world’s best as well. If anybody, anywhere, would like to dispute that, they can come to Ibramerc 2015 and see for themselves. They may have to learn some Portuguese in the process, but won’t that just be an opportunity to expand one’s global horizons?

My name is Eric Garland. Since this is my first time in Brazil, let me introduce myself and explain some of my background. In my work, I am called many things, but first and foremost, I am a professional intelligence analyst. I have worked for nearly 20 years in the field for dozens of global businesses and government agencies. My work has focused on all aspects of intelligence, from very tactical to the longest-range scenarios for the future. The specific vocabulary is really unimportant. What I do in this world is simple: I seek knowledge that will clarify or elucidate the mysteries of life. Now, in case that sounds too philosophical, most of the time those mysteries have a commercial application. But still, there it is – I practice the application of knowledge to mystery. Every day, I wake up more ignorant than the day before. This morning, I knew nothing, though I am trying to improve the situation. Perhaps by tonight, I may gather some more information and perceive some insights. Tomorrow, again, I will know nothing. Believe it or not, I enjoy life this way.

And, if I may speak to the other married men in the audience, it is good practice to admit that you know nothing. The subject will be brought to your attention quite regularly, I find.

If you search for my name on Google plus the world “intelligence,” you may find some material that is controversial. This is a very important speech for me as it is one of my first public appearances on the subject of intelligence since I wrote an article two years ago for a major American magazine called The Atlantic, about how most American executives are not listening to strategic intelligence. Tactical, maybe; strategic, no. In this article, I stated that in my experience, industry consolidation and government intervention, along with fear, made direct, scientific, fearless analysis on the strategic level a very unpopular thing.

If you have ever wanted to hear from some of your old colleagues, criticizing your profession in public is a very effective method.

Once this article appeared, I heard from the following three groups:

The general public, members of which wanted to know what American organizations seemed to be so ill-prepared for economic and military disruptions in the past decade.

Futurists and consultants from the competitive intelligence industry, several of whom angrily questioned whether I was drunk when I wrote the piece. This was particularly ironic, because in American language, competitive intelligence and “futures studies” or strategic intelligence are very separate industries. I actually stated that tactical, competitive intelligence remained very effective and relevant, while only its strategic relative was suffering. No matter, the CI field was scandalized. So much for our fearless analysis of assumptions.

The third group surprised me: I heard from people at the very most senior level of business and government institutions: corporations of which you have heard, countries which you know. They told me: “You are right. I cannot say this in public because of my position. But you are right. We are not listening enough to real strategic thinking. It’s a problem and it needs to change.”

It gave me great relief to hear that I was not imagining that intelligence could be so much more vital, from the perspective of both practitioners and decision makers. I believed – and continue to believe – that many of the problems of our institutions are failures of intelligence, failures of analysis.

In science, failure teaches us something about the world. In bodybuilding, muscle failure is what leads to rapid growth. And for our profession as well, recent failures need not be something to fear, something to be ashamed of – but merely the launchpad for something even better.

The title of this presentation is – The Golden Age of the Analyst – because that is what I perceive in the near- to mid-term future. Before I get into the future view, let us explore the perspectives of the past. “Analysis” is not an old profession; neither is “business executive.” There are some old professions with job titles that translate well across the ages and across many languages: accountant, physician, lawyer, architect, soldier.

  • The first writing of the ancient Sumerians was a tax record. Accountants have been with us since the very beginning.
  • The Roman physician Galen created some medical techniques that were not surpassed until the 20th century.
  • We have records of lawyers in the Roman forum. Even back then, the more you pay your attorneys, the better your chances in court. Not a lot of changes there.
  • The world has been marked by architects and engineers, everywhere from the Pyramids of Egypt to Notre Dame Cathedral in Paris, to the Duomo of Florence and Cristo Redentor.

Almost every person in civilization understands what these professions are and what their practitioners do for society. That is not the case for the professional analyst. Scientist, yes – philosopher, yes – but, analyst?

Except at events like this one, most people stare at me blankly when I tell them that my job title is “competitive analyst” or “futurist” or “strategic intelligence consultant” or any one of the many terms I’ve used in seventeen years. At cocktail parties, I usually just tell people I am a bassist, just to make things easier. Further explanations about what intelligence is rarely help – these jobs are too new, too abstract, too hidden from the broader public for people to understand quickly and easily. Yet, despite a lack of public understanding, our profession has great value, and that needs greater publicity.

So we are assembled here in São Paulo to discuss the role of the professional analyst, a person who works for a decision maker trying to guide a complex organization in a world full of mysteries. It may not be an ancient profession, but it is a critical one. Moreover, as the world enters further into this period of historic transition, the profession of analyst will become more important over time.

I am here to submit to you, my colleagues, that we are exiting an era and entering a new exciting phase of the global economy where more will be demanded of analysts. I believe that the successful companies – and nations – of the future will achieve competitive advantage through superior understanding of a changing world. Our profession will give it to them. Those organizations that fail to develop analytical capabilities commensurate with the times will falter.

For those reasons, I believe we shall see a new Golden Age of the analyst – and more than predict it, I think we can find ways to make it become a reality.

Tales from the dark age of intelligence

Now, if I see a future golden age for professional analysts, it is because we are living through an age that is anything but golden. Despite fifty years of increasingly sophisticated analytical techniques, the United States plunged itself into economic chaos in 2008 because of an absurdly predictable housing crisis and obviously reckless behavior in the financial sector. Europe found itself in similar crisis just a year later from some of those same financial behaviors, plus the structural weaknesses of their new, common currency.

There are throngs of analysts throughout our organizations, but one of the most predictable and destructive events in economic history went unheeded by most leaders.

  • Following the Dot Com, interest rates went to zero
  • Housing shot through the roof
  • Loans in the United States were given a much wider variety of applicants than ever before, including people who had never held permanent employment
  • Hundreds of trillions of dollars of derivatives – exotic financial instruments based solely on speculation – were sold around the world with almost no regulation
  • The structure of many loans was based on adjustable rates which would automatically increase

There was more than enough about this crisis to measure in advance, though almost nobody did. The results were nearly catastrophic.

My consultancy was based out of Washington DC for 10 years, with offices right next to the US Treasury and the White House. My firm predicted the crisis down to about the month. My greatest success in business was trusting this prediction enough to find my beloved employees new jobs before the fall of 2008. I knew that the market for intelligence was going to take a hit, and that they would be better off in a more stable industry. I suppose if I had been really clever I would have based a hedge fund on short-selling the housing market and derivatives, and then we would all be retired – you live and learn, I guess.

I was in Washington DC in the fall of 2008 and I was made privy to some of briefings going to the Congress – that the United States, and indeed global economy was on the verge of collapse within days if US banks did not receive a full guarantee of a bailout, no matter what was on their balance sheets. What did they mean by collapse? The end of the US dollar, the beginning of military rule, and food shortages that would kill thousands with the year. Perhaps one million dead in the United States only.

This was a shock – but if you were paying attention to the reckless behavior around US financial markets, especially the ratings agencies, mortgage markets and housing sector, as I was, then it wasn’t too much of a surprise. What was shocking to me, however, was the complete lassitude of strategic analysts about this grotesque failure. At the next SCIP meeting, for only one example, just weeks after the crash, there was almost no discussion of how such a seminal event could have been missed. Indeed, many people in the intelligence business told me, “It wasn’t my job to predict economic crashes.”

If it wasn’t your job as an analyst, then whose job was it? A house painter’s? A car mechanics? Your kid’s school teacher’s?

A much worse outcomes was that this major instability made uncompromising analysis unpopular in many organizations where executives came to prefer comforting platitudes to reliable information.

Let me tell you just three of my personal stories from those years just to show you the comedic side of an otherwise serious problem.

I was hired by a company to provide a workshop on future trends following the crash of 2008. Clearly, the executive said to me, the world is in upheaval and we need people to get ready for turbulence. “Shake them up! Scare them a little!” he told me. I covered some basics of how organizational foresight works and then l launched into a few basic strategic trends. The first was one of the most important in America: an aging population. There are 70 million Baby Boomers, and Generation X, my age, only counts for 35 million. Millions of Americans turn 65 every year. This is shaking everything up, from automotive to healthcare – and it was shaking up their customer base, too.

This was the moment when I was thrown out of the boardroom. A man with grey hair – a senior vice president – stood up and began angrily shouting that “there are no aging populations, aging populations mean nothing, consultants are only there to scare you, and nobody is aging!

All the company needed to do,” he said, was to “get their numbers up. And never talk about aging! Now get to work!

As it turned out, not everybody in the company wanted to be scared. I mean, come on guys, imagine if I told him how close we were to the US dollar collapsing in 2008? He couldn’t even handle the idea that people get older over time. We were not in the territory of “advanced analytics.”

The board of directors of an bank asked me to discuss the future of risk assessment for their annual meeting. In my opening remarks, I stated that the crisis of 2008 showed that our current tools for risk analysis were clearly insufficient given the severity of the crisis. The president of the company stopped the presentation half-way through, because nothing of that pertained to them. They were fine, there was not much risk in the global economy, and they didn’t need to talk about it any longer.

Around the same moment, I was working quite a bit in Europe, where the Greek economy had not yet gone into upheaval. When I attempted to discuss the impact of America’s very recent crisis on European banking, which would happen at the same time as the breakdown in the economies of Greece, Spain and others, I was told, “Do not bother us with your AMERICAN problems.”

Protestors were in Syntagma Square a few weeks later.

This behavior continued for what to me felt like an eternity, but if I have any good news, it is that I perceive, in many parts of the globe, a rising curiosity among executives again. The constant stress of traumatic change may have distracted them at first, but as more people realize that we are not in a recession nor a recovery, but a transformation, executives appear to be getting back to fundamental questions:

  • Just what is happening in the global economy?
  • What do I know?
  • What am I ignoring?

This is great news, though just to deal with the inglorious recent past, neurology gives us some clues as to why analysis flies out the window in the face of stressful situations. As much as we need a brain for complexity in something as unfathomably large as the global economy, our brains are physically designed for the short-term. In response to short-term threats – say, a wild animal entering into the room – our bodies release adrenaline and stress hormones, and our brain function moves away from from the prefrontal cortex, where higher-order thinking is processed, to the parts of the brain concerned with combat, territory and tribal loyalty. I believe that the stressful situations of 2008 ironically caused people to lose their capability for long-term thinking – but happily, it appears to be returning.

What comes next in the global economy will require not only the capacity for advanced thinking we developed with 20th century techniques, but for even more sophisticated techniques and approaches.

The end of linear mechanistics and the emergence of advanced analysis

During the unprecedented economic growth of the mid- to late-20th century, managers sought methods to repeat their successes. The notion of “best practices” was born, followed by a fetish for metrics to assure that growth targets were being met year after year.

Who sets “best practices?” For most business executives, that probably means theories developed at a major university and practices from enormous enterprises, often American. To achieve success, the thinking went, mimic those companies already seeing success. Assume that you are competing in the same world as those companies and follow their rituals.

For several decades this worked very well, and year after year managers developed ever-more sophisticated techniques to continue linear growth. The old culture of charismatic, leader-driven organizations was gradually replaced by large organizations full of MBAs armed with similar buzzwords and techniques, all expected to run the same playbook in any company.

I submit that many of these metric-driven best practices were entirely dependent on secular, linear growth that resulted from petroleum, technology, and a surprising post-Cold War peace. Particularly in the United States, Europe and Japan, such techniques no longer assure growth, and this is confusing, even upsetting to us. Like a medicine man doing the same rain dance with increasing intensity, confused why it does not work, many companies place increased effort into metrics and top-down control. A look at many corporate balance sheets suggests that the only way the situation appears normal is through heavy debt loads and zero interest rates. Yet we can expect, for a little while longer, more measurement, more cost-cutting, more offshoring, more shortcuts, longer hours.

Based on several strategic economic trends that are affecting the global economy, I believe strongly that things will no longer seem linear or normal. While we may never see a crash of trillions worth of derivatives again – if we are lucky – we may in fact see other types of financial crises. A European country may indeed need to leave the Eurozone when a final bailout no longer pushes the problems out to the future. The United States Federal Reserve Bank will, at some point,  no longer be able to keep asset prices high through its manipulations of the market, from interest rates to the purchase of financial instruments. Japan’s aging population may turn their national economy from stagnation to serious dysfunction.

When the last vestiges of defense have been removed, when we can no longer deny the radical turn of the future, then I believe we will see a new Golden Age of the Analyst. It will not be the result of a clever article in a major publication. It will not because it is made trendy by a new software application. It will arise, as so much does, out of necessity.

So, what will the advanced analysis of the future look like?

If the goal of 20th-century market intelligence was to “manage competition in a growing global economy,” then the goal of 21st-century market intelligence will be to “understand the narrative of a transforming global economy.”

Finished intelligence, that which we provide to leaders, is ultimately about a story.

  • Who are the characters?
  • What are their motivations?
  • Where are they going?
  • What role can we play in that story – and to what benefit?

In the 20th century, we assumed growth and focused on analysis of emerging markets and competitors. That simply will not be enough from analysts trying to understand the global economy in the near future. The new era of analysis demands that we help decode the confusing story of markets and institutions going through rapid transformation.

Let me ask some questions to highlight what I mean:

  • Which is more of an “emerging market” – São Paulo, or Detroit, Michigan, which just declared bankruptcy?
  • Are China and the United States, allies, competitors, adversaries, or something else entirely?
  • In 2008, given the instability of the global banking regime, the Federal Reserve Bank of the United States made considerable loans to European banks. What exactly is the relationship between these corporations, nation-states and central banks?
  • In 2008, the United States government, using funds from its taxpayers, bailed-out Citicorp, which was at the time owned 25% by Middle Eastern sovereign wealth funds.  If U.S. citizens underwrite the investments of Middle Eastern governments, are those governments of the Middle East liable for the investments of the United States?
  • China is currently the top growth market for European luxury goods. Is it still a communist nation? If not, does that word have any meaning anymore?
  • Thomas Piketty’s work in “Capital in the 21st Century” shows a concentrated global capital structure that is very similar to the beginning of the 20th century. Should we expect similar political movements, labor organizations – or even war?

I do not have the answers to any of those questions. However, I suspect that the most successful organizations of the future, be they private firms or government entities, will be those with the best capacity to come up with useful answers. The one thing I do not predict today is that Porter’s Five Forces will be the analytical tool best able to lead you to a strategy in such a world. Neither to I predict that mimicking a “best practice” will lead you to healthy profit margins and prosperous communities. That’s right, I am unconvinced that reading a book about “how to think like Steve Jobs” will be what makes any company in Brazil as successful as Apple.

The fact is, we do not yet possess the tools to analyze this level of complexity. They will be designed by individual organizations that are in unique situations. “One size will not fit all,” as they might say in fashion. The tools will likely be specific to the industries, activities and cultures of a specific company. That which works for Petrobras may have very little in common with a material science company in France working on Nanotechnology. A strategy for India may have little to do with one for Estonia. What they will share in common is complexity, uncertainty and brand new territory. While the age of the colonial pioneer is over – there are no more unknown continents, no more dark jungles of mystery – we actually have infinite territory to discover in the land of creativity and strategic vision.

Here, history actually has many wonderful examples to guide us. In Singapore, Lee Kwan Yu saw a way to make his tiny nation-state a major player in a rising Asian economy, and created a strategy that would seem impossible to anyone else. He envisioned a country where disparate ethnicities could be united by a strange language – English – and where regulatory regimes would make the place ideal for banking and shipping. He turned a simple port town into a nation with an annual GDP of $300 billion.

Royal Dutch Shell saw a looming energy crisis in the 1970s using its strategic scenarios group and achieved global success as a result.

Just in recent history, Nokia saw the end of the Cold War and the demise of its major customer, the Soviet Union, and responded with a complete transformation of the company to exploit mobile telephony.

Apple saw the strife in the recorded music industry because of the emergency of the MP3 and leapt ahead of record companies and home electronic giants to create the iPod and a profitable distribution network.

There are many more examples, and one characteristic that describes them all is visionary. They have an ability to understand the world and their role in it that is superior to many other organizations. But another characteristic is analytical capability, supported by leadership.

This is where we come in as analysts. If there I one thing I have discovered in almost twenty years of this field, it is that analytical capability does not just happen spontaneously. It is built carefully, over time, and at great cost.

It is for these reasons that I see, despite recent failures, a golden age on the horizon for analysts. If history serves as a guide, the organizations achieving the greatest success will be the ones with the greatest capacity to produce vision and strategic response. That will come from professional, trained analysts.

How will you know whether this forecast is correct? Watch in the coming years, and see which organizations thrive, and which falter as they attempt to execute old strategies based on a shallow understanding of a changing world.

Look at which groups invest in analysis, and which figure that they can just repeat old successes with old techniques.

Time will tell. I will be watching. My money is on this profession.

Further to my comments at Ibramerc, the coming Golden Age of the Analyst is why I am forecasting that intelligence analysts will never be replaced by software.