navigating complexity T TRUS

2017

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05

Think:Act #22 How much do you depend on TRUST ? 2 Think:Act 22 in this issue

"We shouldn't be resistant to pre-suasive techniques if they steer us correctly. We should only resist them if they are used in deceptive ways."

ROBERT CIALDINI sullivan photo: Social scientist and author read more on page 70 in this issue Think:Act 22 3

" Leadership that builds the underpinning of confidence starts with accountability."

ROSABETH MOSS KANTER Professor of business administration at Harvard Business School read more on page 60 photo: getty images, boston globe boston images, getty photo: 4 Think:Act 22 in this issue

"Transparency can replace part of trust. Real trust is about long-term aligned incentives, where as transparency is about espionage, it's about making sure that the other person can't violate what you want."

DAN ARIELY Psychology professor and behavioral economist read more on page 82 photo: redux, laif, stephen voss stephen redux, laif, photo: Think:Act 22 5

"When you have a bunch of workers who are self-motivated, it just makes a better team."

EJ SNYDER photo: private photo: US army veteran and celebrity survivalist read more on page 66 6 Think:Act 22 in this issue

" It' s time to bring back trust, transparency and accountability, values that used to form the backbone of a humanistic society – and that of robust institutions and strong governments."

CHARLES-EDOUARD BOUÉE voth jan photo: CEO of Roland Berger coverphoto: gettyimages, bambu productions | photos: getty images, michael regan, arterra | illustration: martin burgdorff 48 44

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Think Food in for Numbers Thought

How should we respond to the challenges of urbanization? 39.4 by Richard Florida the distance in light by 2050, more than 6 billion people These global cities – many of them years that the Trappist-1 – two-thirds of the world's population yet to be built – hold vast promise, solar system is from us. The recently discovered – will live in cities, compared with half but it is not blind promise. They can star has several Earth-like today and just 15% a century ago. tip either way. As we embark upon planets orbiting it, so we Ninety percent of that urban growth the greatest epoch of city building just might not be will occur in the developing world, that the world has ever seen, our alone in space. especially in Asia and Africa. greatest challenge is to make sure As I explained in a recent presentation that they tip the right way. to the United Nations Economic and Social Council, this new wave of 12,000 ­urbanization has thus far failed to raise kilometers. The length living standards to anywhere near the of China's new freight line same extent that it did historically in the from Yiwu to London. The advanced nations. Simply put, these UK is looking to increase rapidly urbanizing parts of the world trade with China and has face a crisis of urbanization without begun discussions for a free economic growth. richard florida is the author of trade deal. China invested The New Urban Crisis, published $5 billion in the UK in 2014. To overcome this, cities and city building must become a priority for by Basic Books in 2017. He is the UN, the advanced nations and university professor and director international development agencies. of cities at the Martin ­Prosperity This requires a better capture and ­Institute at the University of Toronto use of data for predicting economic and a distinguished fellow at New growth, recognizing best practices York University's Schack Institute and training mayors, city officials of Real Estate. He serves as senior editor for The Atlantic, where he the percentage of and city builders on how to apply 86India’s currency that them to achieve sustainable urban co-founded and serves as was replaced as part of economies. editor-at-large of CityLab. demonetization late last year. India’s growth rate is expected to drop by 0.6% as a result. 13,000 the number of us cars sold in Japan in 2016. Japan sold over 17 million vehicles in the US in 2015. President Trump recently accused Japan of disadvantaging US goods.

AT A GLANCE 8 Think:Act 22 AT a gl ance Think:Act 22 9

Re- Thoughts to Thinking live by Buzzwords

Get to grips with industry lingo in a flash " Try not to with our stripped-down explanations of the become latest jargon. "Holacracy" a man of It's an agile organization structure, a new operating system that runs in ­circles, not in hierarchies, and it has the power to make success. any organization more efficient. A few big compa- Rather nies have taken it on.

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skeptics. It isn't unique unique isn't It skeptics. — Albert Einstein the say on, Hold Theoretical physicist photo: getty images, jorg greuel, lorne bridgman jorg greuel, lorne images, getty photo: 10 Think:Act 22 Think:Act 22 11 At a Glance

The Competing Against Luck Actual Redacted by Clayton Christensen, Taddy Hall, Cost Read Karen Dillon and David S. Duncan. 288 pages. Harper Business. $29.99.

Get down to they needed. It became clear to you buy your ticket Quicken that customers were not and you're ready to business looking for better accounting soft- ware. They just wanted to have fly. But have you ever Too busy to read strategy the confidence that invoices were thought exactly what you're books? No problem: Here's sent, cash collected, and bills paid. paying for with the ticket Clayton Christensen's tome This insight led Quicken to launch cut down to its essentials, in QuickBooks, a product with less price? The cost breakdown the style of the original. functionality for twice the price of for a flight is not, perhaps, other business software. It's gone what you might first expect. here's the main point: on to be a huge hit. Always ask yourself what job did So let's boil it all down to this: Perhaps it isn't surprising the customer hire your product A product that has been designed where the largest propor- specifically to fulfill a job to be to do? It's a simple question, but tion goes. You guessed it: it can help a company make sure done allows you to crawl into the it's innovating along productive skin of your customer. It says to taxes. lines. Let us explain. If you focus the customer, "We get you." Read on understanding the job to be this book and you'll get it. done, your strategy will no longer need to rely on luck. In fact, you'll $ 80 be competing against luck while Ticket price others are still counting on it. Sounds easy, but getting a good job definition isn't. Differ- Liability insurance ent customers often have differ- $ 0.25 $ 1.15 and other costs ent reasons for buying the same Plane insurance product. And some are unable to articulate what they want. And $ 1.50 $ 10 even when they state a reason, Crew salaries Cost of running their actions may tell a different the airline story. Then again the job might $ 2.50 $ 10 not be entirely functional. Emo- Fuel Profit for the tional and social considerations airline may play a role too. $ 11.50 So here's the thing: Close ob- Paying off $ 13.50 servation and research can help price of Airport costs you uncover what the true job is plane (landing fees, and that needs to be done. Then you so on) need to focus on the description, $ 14 because that can bring clarity. Aircraft $ 15.60 Here's a case study to back up maintenance Taxes and charges the thinking. Product developers fees at Quicken, the financial soft- ware company, found that small business owners were adapting the product for their company books – a workaround that didn't make sense because it was missing a lot of the ­functionality 10 Think:Act 22 Think:Act 22 11

Economic Impact

Best Practice

To meet or eat in China?

navigating business in china isn't easy. Luckily, we’re Fashion turns the tide on plastics here to guide you through the tricky cultural differences. If ocean solution?: Adidas has teamed up with Parley for the given the choice between a Oceans, an organization promoting ocean health, to transform plastic ­f­ormal meeting or dinner as the debris into must-have shoes. Adidas x Parley made from plastics forum for important negotiations, choose the din- salvaged from the oceans made its debut last year. ner. Here's why: You may have heard about the impor­tance of guanxi, or ­personal relation- ships, and this holds true in busi- ness. Yes, part of it is the alcohol, and endless toasting. As Henry Kissinger ­observed when he trav- eled with Richard Nixon to Chi- na: "If we drink enough Moutai, we can solve anything." Seriously, though, bonding over food is im- portant for the food-crazed Chi- nese. A popular refrain in Chi- nese business circles is that a big CEO's best working place is the dinner table. When nego- tiations get stuck in the board- room, the only place to get them ­going again is in the restaurant, ­apparently. So, enjoy those sea cucumbers and gulp down that "spicy" Moutai, a kind of Baijiu, the national liquor. And if you can't stomach that, then you're best off backing away from China.

baijiu is China's national liquor, and the most well-known brand is Moutai. But, be warned: Some brands are over 50 proof. photo: adidas, jason childs (2) jason adidas, photo: AT A GLANCE 12 Think:Act 22 TRUST title Story Winning Back Trust in Four Acts Understanding the stages of grief can help a company navigate a crisis. Disbelief, anger, bargaining and acceptance play a significant part in the journey, and it takes real character and leadership to turn a major drama into a business advantage.

b b Peter Shadbolt illustrations by Martin Burgdorff TRUST title Story 14 Think:Act 22 TRUST title Story

Bharat Puri, Former Head of Operations at Cadbury India

I t is a tragedy, but it has a resolution. first infestation and, as you might appre- And it can teach today's CEOs how to ciate, infestation is very common in food ­handle a crisis. Whatever the fates decide products," Puri, who is now the managing to throw at your business, if you take the ­director of Pidilite Industries, says. "It is right steps and turn disbelief and anger not something out of the ordinary." into action and acceptance, then you too "Unfortunately it became a massive can reach a perfect resolution. ­incident. We were on television, we were When crisis strikes in a Greek tragedy, on the national media – it was almost as if much depends on the leadership of the every Cadbury bar had a problem." hero. In the case of a business disaster, the If nothing, he said, the crisis afforded CEO has to take on that heroic role and him a deeper knowledge of the life cycle of navigate disbelief and anger to progress to the Indian meal moth. "By now I'm an bargaining and acceptance. ­expert on the subject," Puri says. "­Basically Crisis management can be cathartic – what happens is that if the aluminum foil and CEOs who have been through it say in the bar gets punctured, it releases this that if well-managed, disasters are often lovely odor of chocolate that attracts the opportunities in disguise. meal moth. They lay their eggs in there While the most extreme business and, 60 days later, these hatch as worms. ­crisis might not be as extreme as dealing The total number of chocolate bars with murder and revenge as it was for ­affected by this type of infestation was ­Orestes, nevertheless a plague of worms, a ­between six and eight." gruesome poisoning, or even an all-­ Even so, Cadbury had a massive prob- consuming destructive fire could­suddenly lem on its hands. The negative publicity ncient wreak havoc on your brand. Read on to dragged Cadbury's sales down 40% at a Greek tragedies – such as the ones by find out how some large companies have time when Diwali – India's main festive Aeschylus, Euripides and ­Sophocles – can had to deal with just such ­unpredictable season – should have seen a spike of 20%. tell you all you need to know about calam- catastrophes. The wildfire of bad publicity soon spread ity. The dramatic moves from hubris to ca- to India's regulators, who were demand- tharsis have important lessons that hold ing answers. "Food is a state subject in as true today as they did 2,500 years ago. DISBELIEF ­India and there are more than 20 states – Take the Oresteia by Aeschylus. When each of them wanted us to prove to them Athe hero Orestes' father, Agamemnon, Bharat Puri was heading up"The confectionary we didn't have a problem," Puri says. ­returns after fighting in the Trojan War, he giant Cadbury's operations in India in is greeted by his unfaithful wife who plots 2003 when some worm-infested chocolate Meanwhile, any tiny imperfection in the with her lover to murder him. Orestes is bars almost destroyed the multi-million bars added to the furor. Even fat bloom, the thrown into a state of crisis and disbelief, dollar company and ruined his career. unrelated result of the bar melting in but directs his anger towards action. He The public relations disaster very ­transit and then being refrigerated, was avenges his father's murder by killing his soon becameintensity a perfect media storm. "I ­perceived as being partof of the ­infestation mother and her lover. However justified was traveling at that time when we had the problem. "While I had been through situ- his act might seem, matricide was viewed ation management training, the intensity as a crime against nature and Orestes is of it completely blindsided me," Puri says. pursued by demons bent on revenge. "At the height of it, outside Cadbury House Faced with this unexpected consequence, in Mumbai, there were any number of Orestes prays to those Gods who might it completely­media vans parked around. You think, 'My help him. It marks the beginning of a bar- God, what is happening here!' And then, of gaining stage for justice. In the final act of course, the politicians jump in and then we the play, the Gods accept his petition and, had political demonstrators outside who through an enactment of justice and legal came to break our windows because osten- practice, Orestes accepts his new ­position blindsidedsibly we were ­poisoning their ­children. Ev- and exoneration as a righteous defender erybody jumps in – even now when I think of honor. me."about it, I get goose bumps." surviving the impact During a crisis, chances are your customer is just as concerned as you are. Don't hide – go public with words of reassurance. 16 Think:Act 22 TRUST title Story

who's the scapegoat now? Trying to pass the blame may only succeed in tightening the grip of public disapproval. Neil McLeod, senior consultant at ­crisis T ake responsibility and reputation management company from the start. PHA Media, says that during the ­stages of disbelief – when the road ahead looks fraught with expensive ­options – it pays to look the problem straight in the eye. Rather than going to ground or seek- ing advice from overly cautious legal ­departments, it's essential for companies to put a face to the problem and show leadership. "Consumers really have an ­issue with this," he says. "They want to be reassured by a CEO or someone high up in the executive chain, speaking publicly, talking to the media and saying, 'We messed up but this is what we're doing to make it right. These are the reassurances I can give you.'" Public perception, he says, is every- thing when it comes to crisis management and, more often than not, only a full and truthful account can restore public confi- dence. "You've got to face up to it. You've got to give the facts as you know them, and you've got to have full and frank disclo- sure. You need to act swiftly and­d ecisively. You need to tell people you're trying to get to the bottom of the situation. You need to make it clear that anyone who's been ­affected by this will be contacted, and the company will do the right thing." At this juncture, prevaricating or seem- ing evasive are not options. "Quite often you'll get companies that hide," he says. "They will be advised by lawyers to be care- ful, they'll be told not to open themselves up to further liabilities, but when you've got to weigh up the future of a company against the threat facing it, the PR head has to speak louder than the legal department."

ANGER Often trust can dissolve through no fault of the company. In these instances, where the business has been the victim of a large-scale crime, the temptation to turn the anger outward, to find other victims or to apportion blame, must be avoided. In this, the Tylenol crisis of 1982 ­remains the gold standard. Before the Think:Act 22 17 From anger to action: a case study in optimal crisis management

Total cost of Johnson & Johnson’s Tylenol almost fully product recall during the 1982 regained its market share 30% tampering crisis. within one year. Tylenol’s drop in market share following reports of deaths in the Chicago area in 1982. 81% crisis, Tylenol, one of ­Johnson & Johnson's "First and foremost, you want to protect leading brands, was the most successful the customers in the marketplace in which over-the-counter ­painkiller in the US. The you're operating," he says. "The financial painkiller ­accounted for 33% of the com- effects of that may be significant in the pany's ­year-on-year profit growth.$ It ac- 100short term, but what you're protecting is counted for 37% of market share and out- the long-term future of your company." sold the next four leading painkillers million Taking the initiative, he says, is essen- combined. In the autumn of 1982, for rea- tial and framing the debate in a way that sons still ­unknown, cyanide-laced cap- ­places the interests of the consumer sules had been resealed into Tylenol Extra ­center stage can make or break a ­company Strength packages and placed on the struggling through a crisis. shelves of pharmacies in the Chicago area. "I think you've got to get stuck in, and By the time the crime had been iden- you've got to start leading the debate tified, seven unsuspecting consumers had ­before the media leads it for you," he says. died horribly and Johnson & Johnson was Anger-Plus "As Warren Buffett said, it takes years to in the invidious position of having to build up a reputation, and it takes ­minutes ­explain to the world why its leading brand Tim Ward, chief executive of the UK's to destroy it." was suddenly killing people. Quoted Companies Alliance, a nonprofit Likewise, anger directed at a company organization that represents small- to when the business is at fault also needs to Johnson & Johnson's then chairman, mid-cap companies in the UK and Europe, be managed keeping the same precepts in James Burke, immediately formed a seven-­ says that Johnson & Johnson's action was mind; work from a basis of integrity and member strategy team with the simple ­unprecedented. "It might look very sensi- there is little to fear. brief: "How do we protect people? How do ble now, but at the time they took an Merlin – the parent company of the we save the product?" ­incredibly brave decision. They simply theme park Alton Towers in the UK – had Consumers were alerted not to buy said, 'We are going to take every single first-hand experience in managing this ­Tylenol and the company embarked on a ­Tylenol container off the shelves,'" he says. kind of crisis in June 2015 when its roller- recall of 31 million units. Within six "They didn't try and blame anybody coaster was involved in a collision. months it reissued the painkiller with a else. They just said this is how we're going Engineers failed to notice a carriage tamper-proof seal. At a time when most to deal with the issue because customer that had stopped midway through the companies would have regarded the case health and safety and families come first. ­14-loop ride. Assuming there was a prob- as a criminal investigation, Johnson & "It's been used as a case study for years lem with the computer, they overrode the Johnson's initiative swung public opinion and shows that the company has to get on stop mechanism, setting another train in behind it. Far from being perceived as an the front foot." motion. Sixteen people were injured opaque corporate monolith with a plum- He says research by his alliance in the crash, including two teenage girls meting share price and a bottom line to showed that 28% of market capitalization who needed leg amputations. In April protect, the public came to view Johnson for listed companies in the UK was based 2016, Merlin admitted breaching the & Johnson as another victim in the case. on brand equity and reputation alone. Health and Safety Act and was fined Within two months its share price had ­recovered and within a year its market share, which had plunged to 7% from 37% following the poisoning, had climbed 30% back to 30%. 0.1% Today, the Tylenol brand name is still of Samsung Galaxy Note 7 devices Samsung’s one of the most trusted over-the-counter were estimated to be affected during 2016 reported Q3 2016 consumer products in America. reports of exploding batteries. drop in profits.

A small problem with a big impact 18 Think:Act 22 TRUST title Story

Chang Sea-jin, Author of Sony vs. Samsung

£5 million ­($6 million). ­Merlin Corporate Within days of releasing its Galaxy Note 7, "It worked really hard to build its brand. ­Affairs Director James Crampton says that the company found itself in one of the [Today] the company doesn't just produce while the ­iconic theme park had contin- biggest corporate public relations smartphones nor was the Note 7 its only gencies in place for just such a ­crisis, the ­disasters ever. Reports came trickling in phone," he says. "In a connected, social company was ­ultimately led by doing the that the device sometimes spontaneous- media-driven world that thrives on bad right thing for the people affected by the ly combusted. Samsung's first response: news, its poor handling of the Note 7 saga accident. ­Delay shipments in order to carry out has become a black mark against the Sam- Crampton says admitting liability was ­further tests. sung name. This risks undermining key an important part of the process and the Samsung put technicians onto the intangibles like customer loyalty, ­prestige, company took full responsibility on the problem but, try as they might, none of desirability and positive brand recogni- day of the incident. He adds that the them could replicate the issue. Samsung tion. This is especially serious for a com- ­company chose not to rely on long consul- testers concluded the problem was due to pany that positions itself as the sole com- tation with lawyers and other advisers. a faulty battery. They switched suppliers. petitor in the premium end of the "We didn't underestimate the size of the The solution failed. smartphone market able to take on Apple, ­incident itself," he says. "We recognized More reports came in of exploding a company widely regarded as having the that it was a bad accident and that, more phones. With more issues being reported, most valuable brand in the world." importantly, the people under our care Samsung increased the terms of the bar- Samsung acted quickly in some senses, were injured because of it." gain. It stopped production of the Galaxy but in its communications it appeared He says Merlin Chief Executive Nick Note 7 and issued a recall kit (complete guarded and slow, says Chang. "The first Varney immediately attended the scene at with fire-retarding packages and special rule of crisis management is to communi- Alton Towers and took the lead in all gloves) to millions of users. cate openly and transparently. This is even ­important communications"The with the poor more important in the tech world, where ­broader public. "At the earliest opportuni- A ccording to Chang Sea-Jin, professor bad news becomes viral very quickly." ty, we said to people that we admit full of business at National University of Like many large companies, Chang says ­responsibility and we will do everything ­Singapore and author of Sony vs. Samsung Samsung has a tendency towards ­undue we ­possibly can to helphandling those affected by – a business history that examines the secrecy and aloofness. this accident and we have been ever since. ­divergent fortunes of the two electronics "For example, the first Note 7 recall in That's been our mantra and the rationale giants – Samsung has now seriously jeop- the US was launched without the required behind all our decision-making. It's been ardized a hard-won reputation. Its attempt ­coordination with the Consumer Product tough. It's beenof tough for the a lot of people Noteto bargain with the problem 7 could prove Safety Commission," he says. "Likewise, internally but it's absolutely been driven to have long-term consequences. the recall was initially branded an by the natural human reaction to do the "What has to be remembered is that ­"exchange program" – attempting to put a right thing." Samsung was a no-name brand 20 years clunky public relations spin on what, in While the impact onsaga the brand has ago,"has Chang says, adding that the electron- many consumers' eyes, was the sale of a been considerable, the company is expect- ics giant was once known for churning out potentially dangerous product. That went ing to trade at normal levels by 2018. low-end components. from bad to worse when it became appar- ent the replacement phones hadn't fixed become the problem." bargaining The recent case of Samsung, meanwhile, ACCEPTANCE stands at the other end of thea spectrum. black Its attempt to bargain its way out of a prod- Owning a problem is halfway to solving it uct disaster by releasing an even more and Cadbury's comeback showed how each problematic and hastily thrown together small success fed into a virtuous circle. Even- fix remains an object lesson in everything tually, as Bharat Puri explains, the business to avoid. Whilemark the tech giant didn't ­ignore against snatched victory from the jaws of defeat. the problems it was facing, it chose to He says that once the company had ­negotiate with its consumers rather than ­established that there was a serious prob- ­to rebuild their trust or to get in front of lem, it immediately launched what it the ­problem.the Samsung called Operation Vishwas (the word name." TRUST title Story Think:Act 22 19

accept the unexpected Just because you didn’t in- vite the crisis doesn’t mean it isn’t there. Own the problem and find a solution. 20 Think:Act 22 TRUST title Story

A case of sweet success: putting customers first 6-8 Cadbury chocolate bars infested with meal moth worms were discovered in India. 40% immediate drop in sales in affected areas.

increase in sales since the 2003 incident.

for "trust" in Hindi) and began to rebuild the brand starting with its own staff. "I think we had about 300 salespeo - ple back then," Puri says. "I asked all of them to go out and buy 1,000 rupees' worth of chocolate from different out - lets." With a brief to take the chocolate and feed it to friends and family, the salespeople­ were told to immediately re- port back to Puri if there was a problem. "Of course there weren't any problems, but it gave them a lot of confidence in the ­product," he says.

The next step was to lay down a set of principles by which the Cadbury team could act and refer back to at any time in the process. "The first principle was that we were going to do what was right by the consumer. It's a given that eventually the bull by the horns Putting the bureaucrats and the press would300% go away, consumer first is the shortest path to but when the ­c­onsumer comes back to us, regaining confidence and turning tragedy then the problem is truly over," Puri says. into victory. Don't wait to take action. Think:Act 22 21

Dimitrios Tsivrikos, Consumer and business psychologist at University College London

"The second was that we wouldn't do any- back to where it was within 12 months. C lawing back a damaged reputation can thing that was short-term and that we "Actually, in eight months we came back be a painful and expensive process. The would later regret. Thirdly, we made sure and today Cadbury is three times the size consequences can include a plummeting that all the teams were in step and that we of what it was." share price, a quarterly profits warning were all on the same page. We were getting and a product ­recall, and the shockwaves back consumer research every week and from such a ­corporate debacle can be felt we were mining it for three simple sets of TAKe action for years. data: Would I feed it to my child? Would I Nevertheless, crises of the magnitude gift it to somebody? Would I consume it?" Dimitrios Tsivrikos, consumer and busi- of Johnson & Johnson and the Tylenol case Puri lobbied for visible signs of ness psychologist at University College can provide valuable opportunities in the change to Cadbury's packaging. "I said: London, says that leadership is everything right hands. Within one year, Johnson & 'Listen, we could all argue that we sell a under crisis management situations and Johnson had restored its share price and million bars in India and six of these have that companies need to be seen to be its company Chairman James Burke was been found with a problem, but the fact is ­connecting with their consumers if they being hailed as a hero. that our sales are down 40% in affected are to reverse a negative perception. Johnson & Johnson has now risen to ­areas and 20% overall. We need to show "Recalling the product is the first step," count itself among the world's most ­powerful the consumer we're taking action.'" Tsivrikos says. "I think in crisis manage- pharmaceutical companies. Similarly, New factory floor machines were ment, the worst thing you can do is try to ­Cadbury's travails in India are now counted ­installed that sealed the chocolate bars be sketchy about what's happening or as one of the country's classic corporate case from both ends to prevent"The meal moth downplay the effect." studies and the company still reigns supreme ­infestation. "In a multinational, normally In the case of Samsung, he says that in one of the world's biggest markets. getting ­capital approved is a rather long its rival Apple would likely be watching the and painstaking process. In this case it company closely – not purely to profit was done before one evening was out," from its faltering position – but as a case win wisdom Puri says. "We realized that what we had study in what not to do. to tellworst the consumer was: 'You believe thing"The first thing is to assess what has As for the opportunities the crisis ­offered there's a problem, and we've acted.'" caused the problem, who has been him, Puri says the discomfort of the situ- The real game changer, however, came ­affected by it and then develop the best ation is still too fresh in his mind. "It after Cadbury took on Amitabh Bachchan possible vehicle to address it," Tsivrikos helped us become much stronger be- – India's famous Bollywood actor – as says. Consumers are not merely buying a cause it suddenly makes you realize as a brand ambassador. Puri says the star product. They are also buying into the life- food ­company how vulnerable you are," ­insisted on visitingy the oufactory, a grass- canstyle, the context and the dream the brand he says. "I remember Sir John Sunder- roots ­exercise that further served to build is built on. "We call it brand equity and land, my chairman, telling me at the time, back trust. sometimes it's worth more than the assets, 'Bharat, you know, you might not realize He says their best estimates had been the technology and the people in a com- ­­­­it now, but what you've actually been for the crisis to pass and for Cadbury to be pany combined," he says. through is a privilege.' My immediate do is be thought was: 'What has the man been drinking last night!'" There wasn't a business book for ­Cadbury to follow. Its crisis was unique and could have a left a nasty taste in the mouth. But good leadership turned a sketchy near ­catastrophe to its advantage by put- ting trust at the heart of the recovery and faith in the process to win back consum- er confidence. Thus, the company man- aged to transform near tragedy into sweet ­success. Or, as Aeschylus sums it up best or downplay in the O­ resteia: "There is a place where what is terrible is good … There is advan- the effect." tage in the wisdom won from pain." 22 Think:Act 22 TRUST ethical Business

a call for sustainability Bas van Abel founded Fairphone to bring a more globally conscious smartphone to the market. TRUST ethical Business Think:Act 22 23 IT PAYS TO BE GOOD Today’s consumers stand behind businesses that share their values. With environmental accountability rapidly becoming a mainstream demand, these companies prove that ethical practices can also make business sense.

b b Frederick Schulenburg

hen Craig Sams and his brother set up The story of Sams' businesses – Whole Europe's first macrobiotic restaurant, the Earth Foods is now part of organics multi- native Nebraskans were operating well national Wessanen – is symptomatic of a Fairphone outside the mainstream of 1960s London. broader shift that has seen ethical or "Seed" may have been a hit with the likes ­sustainable business move from the of John Lennon and the Rolling Stones, ­fringes to the mainstream. From blue chip The world’s first who flocked to the two-room venue in behemoths to artisanal market traders, modular smartphone W­Notting Hill with its cushions on the floor companies now almost fall over each designed to be easily repaired, Fairphone’s and basic dish of rice and vegetables, but ­other to brandish their ethical credentials, business concept is it was definitely an unusual enterprise. now aware that their customers demand built around product The name, however, was prophetic. ­nothing less. As Paul Polman, chief exec- longevity, recyclable Out of Seed grew a wholesale and retail utive officer at consumer goods giant Uni- components, fair ­organic food business, Whole Earth Foods. lever, memorably said in an interview with work conditions and This was followed by Green & Black's, a The Guardian, the importance of this to ethically sourced ­pioneering organic chocolate business set the viability of business may prove ­critical: materials – including up by Sams and his wife, Jo Fairley. Sams "Some companies that miss the standards precious metals. The remains involved as president and adviser of acceptable behavior to ­consumers will company announced to Green & Black's, which now has around be selected out." the realease of the £150 million ($185 million) in sales and is Polman has been one of the promi- Fairphone 2 in 2017. part of ­Mondelēz, the global confection- nent champions for changing the way ary giant. He and ­Fairley receive visiting companies do business. No one doubts ­Mondelēz executives to their home on the his commitment to taking a stance on English south coast, where they relay their ­issues such as the environment. He is as vision of how a business can be run along likely to kick off shareholder meetings photo: fairphone photo: ethical and environmentally aware lines. with data on global warming as on 24 Think:Act 22 TRUST ethical Business

Ioannou's research has found that firms " W e have moved beyond the with a high commitment to their ­sustainability purpose have different orga- nizational DNA, a longer-term horizon in ­trade-off between their external communications and are more attractive to long-term investors. sustainability and profitability." He identifies four key principles that make for successful ethical business: Ioannis Ioannou, strong governance, which ensures that the Professor at London Business School guiding principles are spread across the business; "purposeful stakeholder engage- ment" to ensure support from all those ­involved; credible transparency; and long- term decision-making. 1% Doing things differently group sales and operating margins. Unile- Some companies have been putting ethics of all sales of Patagonia clothing are donated to ver is by no means alone. Scores of com- front and center of their business model support the preservation panies now subscribe to the principle of for some time. Even to the extent that they and restoration of the doing ethical business. The ­question is are built in to how the business operates. environment on an how much of this is lip service and how At Patagonia, a commitment to a core set ongoing basis. much is actually part of the ethos of a of beliefs aimed at ­"using business to in- company and demands significant com- spire solutions to the environmental cri- mitment and energy. While a ­commitment sis" has been part of the corporate culture to an ethical approach might win you the Patagonia since the outdoor clothing company was $10 support of your customers, one nagging founded in 1973. It ­researches the envi- million question remains: Is it possible to make Founded in 1973 ronmental impact ­of its production and real money doing so? Niche businesses by Yvon Chouinard has developed ways of working with recy- (pictured), Patagonia­ was raised in November targeting affluent, high-minded custom- cled materials – for ­example turning plas- has built an outdoor 2016 alone when the ers can command higher prices or sacri- tic bottles into fleece – and recycling the clothing empire company donated 100% fice a bit of margin; companies in more garments themselves. based around ethical of its Black Friday retail cut-throat mass market sectors do not Patagonia also subscribes to fair trade practices including and online sales. have that luxury – or so, at least, runs the practices regarding work conditions. It recycled materials received wisdom. and fair treatment of ­offers paid internships and donates 1% of Ioannis Ioannou, associate professor workers. The compa- sales to grassroots activist projects. It runs of strategy and entrepreneurship ­at ny's "Buy Less, Buy programs to support environmental initia- ­London Business School, believes such Used" campaign had tives, shares its marketing platforms with thinking is well past its sell-by date. Con- the opposite effect: It advocacy groups and helps to finance proj- sumers can punish those who don't increased sales. ects, such as an initiative to save a Chilean ­subscribe to their world view, making it fishing community's land from develop- ­potentially costly to ignore changing ment. This fosters a sense of ­community ­attitudes. "We have moved beyond the that supports the business. trade-off between sustainability and For Bas van Abel, consumer attitudes ­profitability," he says. have been a central part of his business, Research he has done with George ­Fairphone, from the start. The maker and ­Serafeim at Harvard Business School and retailer of smartphones began out of the Robert G. Eccles at Saïd Business School belief that it should be possible to make found that companies judged high-­ such a ubiquitous product in a way that sustainability businesses "dramatically did not involve the exploitation often outperform" their low-sustainability peers ­associated with sourcing many of its com- in terms of stock market and accounting ponents. "People said I was crazy," recalls measures of financial performance. the ­Dutchman, who originally trained as Think:Act 22 25

ational experience and finance to be able to scale up the business. A commitment to sustainability is also increasingly important in attracting talent. "Millennials don't want to work for companies that don't share their values," says van Abel. Sven-Oliver Pink, one of the founders of Fond of Bags, a Cologne-based ­company that makes and sells fashionable back- packs and bags made out of recycled ­plastic bottles, agrees. Getting the right staff has been critical to the growth of the five-year-old business. The company – which took on 100 new people over the last year – will not employ anyone who does not share the core beliefs underpin- ning the business, Pink says. The result is a committed workforce – and in a "war for talent" environment, that is a positive ­contributor to the health of the business. Green & Black's says that only by building up long-term relationships with cocoa farmers could it guarantee the qual- planting a seed Craig Sams grew experience as a restaurateur ity of the base product and the consisten- into organic businesses including chocolate maker Green & Black's. cy of supply. But as Sams says, it is impor­ tant not to overpromise: "You need to make sure that you have got it right before you shout too much." Allowing the mar- keting department to rush out messages an artist and engineer. The market was of how ethical the business is before the dominated by big powerful ­players. His operational side is sorted invites disaster, hunch was that consumers would respond and accusations of "greenwashing." to an alternative – and be prepared to pay On a more positive note, growing for it, literally. After two rounds of crowd- commercial scale can be used to improve funding, he has raised €21.5 million ($23 practices in the ­supply chain. "We are now ­million) from future customers. acquiring an importance among our sup- Green & pliers," says Pink. "And that gives us the Making the commitment Black's possibility to have influence." That is critical to his mission in more "It was scary," he remembers. "In three ways than one. When the business started, weeks we had raised millions and did not The maker of the the founders each put in €60,000 ($64,000), know how to make a phone. I was crying first chocolate bar with Pink borrowing his share. The asso- in bed telling my wife that I wanted out. to get F­ airtrade ciated risk made him very "egotistical" in She told me it was too late and encouraged International's mark, his approach he says, ensuring that they Green & Black's has me to continue." He did and the company took care to choose good suppliers who remained committed has since sold 125,000 phones – tiny in conformed to the ethical outlook of the to ethical sourcing terms of the overall industry, but impres- since it was founded business. Failure to do so could have sive for a startup. The issue now is that in 1991. Co-founder ­presented a business risk – and left him while he feels they have realized some of Craig Sams (pictured) ­sitting on debts. Sustainability, after all, their original goal of changing attitudes, is also behind the applied as much to the economics of the Fairphone has reached a point where it organic company business as the environmental qualities of photos: gettyimages, jay l. clendenin; charles best; privat jay gettyimages, photos: needs help, partners who can bring oper- Whole Earth Foods. the products it made and sold. 26 Think:Act 22 TRUST Media and Fake News In News We Trust 27 In News We Trust Or do we? The rapid rise of 'fake news', spread by the most efficient network the world has ever seen, is undermining reporting and threatening democracy. When facts are called into question, who can set the record straight?

bb Carole Cadwalladr photo: getty images, dominick reuter images, getty photo: 28 Think:Act 22 TRUST Media and Fake News

what they are doing is quite different, but very clever. They are taking facts and then turning them into something entirely fictitious." He cites the example of a story that Breitbart ran that claimed a mob of 1,000 refugees had burned n the morning of January 11, the world woke down a church in Germany chanting "Allahu akbar" – up to an ­announcement from the President Elect of God is great. "That story consisted of facts that were the ­United States of America. Donald Trump had de- almost completely correct but which had been strung cided to ­respond to the accusation that a dossier had together to create a completely false narrative." Eva been passed to the FBI alleging he had been compro- Kühne-Hörmann, Justice Minister of Hesse, said at Omised by the Russians. Taking to Twitter he declared: the time that the danger is that these stories spread "FAKE NEWS – A TOTAL POLITICAL WITCH HUNT!" "at incredible speed and take on lives of their own." Three months earlier, that response would have But Beckett says it's unclear what, if any ­measures are been unimaginable. Not just because nobody antici- possible to combat it. "Facebook has ­announced that pated a President Elect tweeting in caps at 2 a.m., but it is taking certain measures to ­combat false news but because "fake news" didn't exist then. Or rather, it did, they'd be pilloried for bias if they start censoring we just didn't know about it. right-wing sites. It would be very difficult – and unde- Fake news had been virtually invisible until the sirable – for them to be drawing the line on what is biggest upset in US electoral history. It had been out and isn't political bias." there for months, it transpired, polluting the news and ­information ecosphere: entirely made-up stories Only the beginning flooding social networks – particularly Facebook – throughout the election campaign. But it was only in Removing the financial incentive for fake news is one its aftermath that "fake news" finally broke cover and response, he says, "decoupling it from advertising," as has become a defining phenomenon of our age: ­a some campaigns are trying to do: by pressuring ­propaganda tool, a hyper-aggressive competitor to ­c­ompanies to stop advertising on Breitbart. But it's mainstream news, and, as seen in the Trump tweet, ­a clear that the election is only the beginning of the fake newly legitimized defense against any accusation of news phenomenon. any sort. On President Trump's first day in office, his press In the months since the election, and long ­after secretary, Sean Spicer, took his first press conference BuzzFeed reported on teenagers in Macedonia ­making in the White House and it became clear that fake news up stories about Trump for financial gain, ­it appears had become an official government tool. The crowd, the problem is wider and deeper than anyone realized. said Spicer, was larger than it had been at any other inauguration – not just a lie, but a provable lie. The fake fake news

"That's the fake fake news – the Macedonian ­teenagers inventing stories about Trump," says Charlie ­Beckett, professor of media and communications at the LSE " T here's now a and director of the think tank, Polis. This was the ­discovery that a host of sites disseminating ­completely fictitious stories about Donald Trump and Hillary trend for calling Clinton had been created by young, tech-savvy men in one small town in Macedonia who had discovered that if they could make content go viral in the US they anything you could monetize it through Google AdSense. "But fake news is also the hyper-partisan stuff like Br­ eitbart." don't like fake Breitbart, edited by Steven Bannon – Trump's ­campaign chief and now head of strategy – is a new type of news organization: a populist, right-wing news." ­website mixing news and lies and propaganda seem- ingly indiscriminately. "It's now expanding into Charlie Beckett, professor of media ­Germany and Italy and France," says Beckett. "And and communications at the LSE Think:Act 22 29

free market ­reporting Open access to online publishing was once the democratizing strength of the internet. Now, we must reckon with the flipside of that freedom – liars and propagandists have a voice there, too.

Established opinion, says Beckett, has been that the what's clicked on most? "It's exactly that," says plurality of news media is a good thing. But now, he ­Beckett. And the 'clickiest' news, it turns out, is the says, it's out of control. "There's now a trend for call- news that we want to believe. The news that fits into ing anything you don't like fake news. As Trump is do- the belief system we already have. "But you can't ing. It's not quite as propagandist as Goebbels," he change human nature overnight. And the advantages says referring to Hitler's Nazi media chief, before he of the internet are still greater than the disadvanta­ges. trails off, "but..." I would rather Breitbart is out there in the open But? "It is worrying. It's destabilizing political ­engaging in the marketplace of ideas where it can be ­debate." Because in the new age of what has come to challenged and debated." be called "platform capitalism," news is just one ­commodity among other commodities. On Facebook, Tracking the impact news whether from Macedonian teenagers or The New York Times looks the same. And, in many ways, it's The idea that fake news played any part in the US ­reflecting the structure of the internet. Its great ­election was "pretty crazy," said Facebook founder ­democratizing strength was to give the marginalized Mark Zuckerberg after the election. As more and more a voice and access to a worldwide network. The fact stories came to light – stories such as the Pope had that it gives liars, propagandists, neo-Nazis and endorsed Trump, that Hillary Clinton sold weapons ­Macedonian teenagers a voice too, is something that to ISIS – and that they generated more views than is only now starting to be reckoned with. those from The New York Times or CNN, it was Is it that there's now a free market of news? That ­Zuckerberg's flat denial of the problem that seemed it's not what's most accurately reported, or truest, it's pretty crazy. 30 Think:Act 22 TRUST Media and Fake News

Fighting back But understanding how fake news travels and what impact it has is a science that is in its ­infancy. One of with critical the few people trying to understand what is happen- ing at a structural level is Jonathan ­Albright, assistant thinking professor of communications at Elon University, North Carolina. He took a list of known fake news and education sites – 303 of them – and then used a data tool to "crawl" them. This uncovered where and how they Information is the currency of our world. were hyperlinked into the web's architecture. He Business, politics, social discourse, internation- looked at about 23,000 pages, roughly 1.3 million hy- al relations and more all rest on the assumption perlinks and uncovered what he claims is the of shared, accurate information. But with "fake ­structure of the fake news ecosystem. news" corrupting news coverage, we are now learning how that currency is being debased. A network of untruths The problems are driven by as yet unad- dressed structural issues in media including Facebook, he observes, is often cited in the argument, digital accountability for the dominant market but it is in fact only working as an amplification power of big technology companies and the ­system. The premium social media site helps news failed business model and economic decline of spread faster, but the more startling fact is that a many news and information outlets. number of small sites are putting out a huge amount If we are to have confidence in what we of hyperlinks. The way they are linked together is a learn about the world and how it works, significant factor in this debate. these structural issues require our attention. His map of the information cyberworld has In addition, both Russia and China have turned into a huge system which he says is surround- invested significantly in international media ing and encroaching on the mainstream news system at a time when western newsrooms have faced in a "quite terrifying way." He explains that this net- significant cutbacks. With elections in France work is strengthened with every click, link or like. His and Germany this year, both countries have ­conclusion is that the network is choking the expressed concern at Russian propaganda ­mainstream news ecosystem like an organism that is seeking to undermine public confidence in their growing and getting stronger. political institutions. What Albright's research has made clear is that Richard What is to be done? We should be in no it's not just "news" that is at stake. It's facts, infor­ Sambrook doubt that without trusted sources of reliable mation, truth. information, and without the media pursuing And in this, Trump is just one powerful node in a The former public accountability, the democratic structures network of untruths. Even historical facts, document- ­director of global of western societies will fail. ed and incontrovertible, such as the Holocaust, have news at the BBC, The solution has to lie in our own hands. become sites of "controversy." Typing "the Holocaust where he worked People will have to think more critically about is" into Google's search bar, at the time of writing, as a journalist for the information they consume and share. brought back Google's first suggestion of "a hoax." 30 years, Richard Society needs to renew a commitment to media And, incredibly, nine out of 10 of the top sites Google Sambrook is education, critical thinking and literacy. Surveys suggested claimed that yes, it is a hoax. Anybody now a professor show the public is often unable to distinguish googling the Holocaust was being directed – by of journalism between well-researched news and information ­Google – to neo-Nazi content. and director of from reliable sources, PR, propaganda, advertis- the Centre for Google claims its search results are simply "a ing, activism or simply gossip or innuendo. And ­J­ournalism at ­reflection of content across the web" but Cathy O'Neil, the merging of news and opinion has left many Cardiff University. a data scientist and the author of Weapons of Math deeply confused between facts and assertion. ­Destruction, calls it a "co-conspirator" in league with If we all contribute to the environment the those disseminating hate speech. She points out that media reflects, then we all need to take greater no one knows how the Google or Facebook ­algorithms responsibility for the consequences. We should work. This is commercially protected information place greater emphasis on transparency and and, for that reason, there is no regulatory oversight accountability of media sources, on the use of in place. She notes with dismay that extreme websites evidence and data, and value rather than decry would have been locked out of the debate by the the diversity of views. TRUST Media and Fake News Think:Act 22 31

mainstream press just a few years ago; now the gate- and the news industry" but for many, including jour- keepers of information are ­algorithms which are able nalist and media commentator Frederic Filloux, it is to be ­manipulated. nothing more than a "PR stunt." Facebook needed to What can be done to combat the lies has precipi- be seen to be responding to the problem, to reassure tated a mixture of introspection and despair from users and its media "partners," but its approach is, he mainstream media, though a fightback, of sorts, has claims, a mixture of "cynicism and naiveté." now begun. On the day after the inauguration, The New York Times and the Washington Post took a ­robust Creating accountability stance. "Slamming Media, Trump Advances Two Falsehoods," said The New York Times' front page. What's really needed is a far wider-reaching "algorith- There's a new seriousness and intent to the way mic accountability," says Frank Pasquale, professor of that the mainstream US media has decided to cover law at Maryland University and author of The Black its president. But, it's only one tiny part of a much Box ­Society. Because in a few years, the entire news ­bigger picture. The role of the two greatest and ­information ecosystem has come down from be- ­information monopolies – Facebook and Google – is ing ­located across a handful of powerful, diverse me- key. In ­response to the fake news furor, Facebook dia players to just two main gatekeepers – Google and ­announced a Facebook Journalism Project in January Facebook. "I am terrified about the future of this that would "establish stronger ties between Facebook ­information duopoly. People say, 'Oh the mass media is terrible, so stop criticizing Google and Facebook.' You can criticize both, but their dominant position is making the situation incalculably worse." While news organizations are grappling with the issue, it is, arguably, time for the rest of us concerned Research has citizens to do our bit too. One of the first politicians to take up the call for greater transparency from ­Google and Facebook, Britain's Shadow Industrial made clear Minister Chi Onwurah, said at the end of 2016 ­that "algorithms aren't above law." It's a good phrase. What that it's not remains to be seen is whether it's true, or not. just "news" that is at stake. It's facts, information, truth. photos: getty images, drew angerer, jeff overs jeff angerer, drew images, getty photos: 32 Think:Act 22 TRUST Edward Snowden WOULD Think:Act 22 33 YOU TRUST THIS GUY?

When Laura Poitras, b b Ewen MacAskill Glenn Greenwald and only expected to be in Hong Kong lance were described by US and British Ewen MacAskill­ flew for two days so I traveled light, just ­intelligence agencies as the biggest leak in to Hong Kong to meet I the clothes I was wearing and a spare Western intelligence history. set, a laptop and notebook. Two Newspaper readers only ever see the Edward Snowden, they days: long enough to check out an ­unlikely finished product and are largely unaware tale that there was a US "spy" claiming to of the hours wasted by reporters checking came back with an have top secret documents and ready to out phone calls and emails, many of them unprecedented scoop. leak them to The Guardian. from cranks. So most reporters start with In the end, I spent 10 days in Hong a built-in skepticism. They also got to the heart Kong, an extraordinarily intense period of I was based in The Guardian's New reporting with only a pause to buy new York office in May 2013 when the then US of another story – what clothes. The source turned out to be gen- editor Janine Gibson called out across the it means to trust, for a uine, former CIA official and US National newsroom and asked if I would go to Hong Security Agency (NSA) contractor Edward Kong the next day. There was someone photo: getty images, barton gellman barton images, getty photo: whistleblower and a team. Snowden, whose revelations about surveil- claiming to be a spy and he or she 34 Think:Act 22 TRUST Edward Snowden

wanted to talk. "Sure," I replied instinc- tively, rarely turning down any assignment, Our initial exchange in especially one involving foreign travel. In Janine's office, I met The Guardian columnist Glenn Greenwald, who wrote Snowden's hotel room about US national security matters from his home in Rio de Janeiro, Brazil. Using a secure laptop Glenn showed us a few doc- uments sent by the source to demonstrate had a whiff of panic. he or she was genuine. Glenn kept saying: "Wow." I had no idea of the significance and just nodded. The diagrams looked suspiciously amateurish. Janine's plan was that Glenn, film- maker and journalist Laura Poitras and I would travel to Hong Kong and meet the source. Her fear was that the whole story immediately, explaining on my return that only way to disentangle this was to get might be a hoax. I was added to the team he regarded the iPhone as a microphone back to journalistic basics: who, when, of Glenn and Laura mainly ­because I was that could allow the intelligence agencies what, where and why? a veteran journalist with ­­The­ Guardian to listen in on the conversation. He took He ran through his life story. It sound- who had worked on many stories with other precautions too, such as placing ed improbable he could have done all he ­Janine and then editor Alan Rusbridger. ­pillows against gaps in the door to reduce said he had done. He was 29 and yet he the chances of someone in the corridor claimed he had made it into the higher Justifiable caution ­listening in. At the time I thought it ranks of the NSA, even though he had not smacked of paranoia, but I later came to been at university, the starting point for Laura did not want me on board. She had view this as entirely justified. In spite of ­almost any career in the upper reaches of valid reasons for that. More than anyone these precautions, one of the biggest the government. He had been employed else other than Snowden, she made this ­surprises was how calm he appeared and by the NSA in Maryland, by the CIA in story happen. She was the first person to how at ease he remained. ­Geneva, and had worked for the NSA in Ja- take Snowden seriously when he first got The initial conversation was very pan, Maryland and then finally Hawaii at in touch on the internet. She told him to ­specific, with Snowden talking about the NSA's huge listening and hacking post. expect only two people in Hong Kong: ­secret documents he was leaking showing ­herself and Glenn, and feared the appear- the scale of NSA surveillance. I found Going on instinct ance of a third might spook him. Plus, she ­myself lost in the detail and thought the did not know me. Bit by bit I came to trust him: the ­result of In the end, we compromised. We flew an accumulation of things. He knew he to Hong Kong together, but only Laura would have to convince us that he was who and Glenn went for the first meeting on he said he was and presented a pile of Monday. I would join on Tuesday. Glenn ­credentials, from his driving license to his reported back on Monday evening that he The Media's Role intelligence IDs, though these would have believed Snowden was genuine. been easy to fake. More reassuring was Heading over with Glenn in a taxi to Depending on the source, Snowden that he was not ­evasive about anything in meet Snowden on Tuesday morning, my has been cast as a hero and champion his personal life, no matter how intrusive fear was that he might no longer be there, of the freedom of information or as a the question. I told him that every aspect snatched by the CIA before I had had a traitor who has of his life would be scrutinized and if he chance to speak to him. He was staying at threatened the had done anything ­illegal or embarrassing structure of de- the Mira Hotel in the middle of one of in his life, it would be ­better if he told us mocracy itself. Kowloon's busiest and noisiest shopping now. He mentioned one personal incident, His 2014 Wired thoroughfares. Our initial exchange in which we have never disclosed, but it was cover has been Snowden's hotel room had a whiff of­panic called his most pretty innocuous. I thought: If this is the after I asked him if he minded if I record- provocative. most ­embarrassing thing he thinks he has ed the interview on my iPhone. He asked done, he's led a pretty clean life. His an-

me to remove the iPhone from the room swers did not sound rehearsed. Crucially, / good!movies citizenfour dvd photo: TRUST Edward Snowden Think:Act 22 35

he did not ask for money, the usual give- seemed to upset him more than his own away for a hoax. Unusually too, he did not safety. But what tilted the balance towards request anonymity. belief that he was telling the truth was just a two-way street In the end, as with most ­reporters, the sheer volume of documents. I was 99% After going to meet an trust comes down to ­instinct. He just sure – based on the interviews, the identi- ­unknown American who sounded genuine, especially when talking fication proof he had brought and the claimed to have some in detail about various NSA documents as leaked documents – that he was genuine. interesting "stuff,"E wen he showed them to us on his laptop. It But final confirmation came when­J anine MacAskill discovered would have been hard but not impossible contacted the White House and the NSA that establishing trust to fake such documents, but it would have to say we were planning to publish the first would run both ways. been much harder to fake the en- of the leaked documents and asked for a thusiasm with which he tried to ex- response. It was only when she was plain the various surveillance pro- patched into a conference call later with grams to us. He was ­uncomfortable representatives from the White House, the and coy when talking about his NSA, the FBI and others and was asked not personal life but he ­became ani- to publish that we knew for sure. mated and voluble when talking about programs such as PRISM, Suspicion gives way to trust which disclosed the ­extent to which big US tech companies co- On the flight to Hong Kong, Laura and operated with the NSA. When I Glenn barely spoke to me. Glenn softened ­returned, my wife asked me what within hours of landing and Laura soon convinced me that he was real and after. I don't know for sure why she did. In that is the reason I gave her: the vol- a taxi into Hong Kong, Laura asked me ume of documents and the about stories I had done. That might have ­enthusiasm and knowledge he dis- helped, but I believe that what really began played in taking us through them. the thaw was just working together. We The right blend Before I left for Hong Kong, I agreed had different skills – I was a reporter, upon a codeword with Janine which I ­Laura a filmmaker and Glenn possessed of expertise would use on the phone if I thought the deep knowledge of the whole national source was genuine. Now was the time to ­security and surveillance issue – and we American journalist and ­documentary use it and so I phoned Janine. melded as a team. ­Initial suspicions gave filmmaker Laura Poitras was the first The next day I saw Snowden again and way to trust. The leak of US ­diplomatic person to take Snowden seriously. Her 2014 film Citizenfour offers an went back over his life story in preparation ­cables in 2010 ended with WikiLeaks in-depth look at the meetings with for a profile of him. He unexpectedly founder ­Julian Assange and the journal- Snowden in Hong Kong. threw a new story into the mix: that he had ists ­involved ­falling out badly. By contrast, wanted to go to Iraq and had trained with we have ­remained friends. An expert on national security issues the US Special Forces. That set off an Laura, speaking at a journalistic award and surveillance, Glenn Greenwald alarm. It was the kind of thing a fantasist ceremony in New York in 2014, said we had began contributing to The Guardian would come up with. He alarmed me been untested as a team before ­going to in 2012 and was asked to join Poitras as the second member of the team ­further when he went on to say that he had Hong Kong. "We each had our areas of The Guardian sent to investigate to abandon training when he jumped off ­expertise but we got on the plane never Snowden's claims. the top of a bunkbed and broke both legs. ­having worked together and did something I briefly panicked, thinking I would and worked together in a way that was Ewen MacAskill, a veteran journalist have to phone The Guardian and tell them ­really extraordinary, and I'll be forever with The Guardian, became the next, to kill all publication plans. In the end bound to them." She added an important unexpected addition to the team. though, after further questioning, strange rider, one that Glenn and I concurred with: Although MacAskill's presence was as his story seemed, I felt he was telling She dedicated the award to the person who met with initial skepticism, their mix the truth. It was partly that he was partic- made the sacrifice, who had never met jour- of expertise proved invaluable. They ularly emotional that day, having learned nalists before, but took a chance and came won Snowden's trust. that NSA security had visited his home in to trust first Laura, then Glenn and then Hawaii and spoken to his partner, Lindsay me, and who we, in turn, came to trust Mills. The well-being of his partner ­implicitly: Edward Snowden. 36 Think:Act 22 photo: getty images, heiko junge heiko images, getty photo: TRUST Defying doomsday Think:Act 22 37 Unusual Treasures, Unusual Banks

Unpredictable threats like climate change and global instability are leading to a rethink on how best to protect some of the world's most valuable resources. We take a­ look at a few of these modern-day Noah's arks redefining what we safeguard – and how we do it. 38 Think:Act 22 TRUST Defying doomsday

Seeds for the Future

Blasted deep inside a mountain halfway between mainland Norway and the North Pole, the Svalbard Global Seed Vault is protecting the world's agricultural heritage in fail-safe permafrost conditions far above potential flood levels. The 830,000 samples of diverse crops stored here are drawn from almost every country in the world.

1 " Cr op diversity is a fundamental foundation for the end of hunger." Marie Haga, Executive Director of the Crop Trust 2

1 Boxes containing diverse 2 the vault operates on a crop samples arrive at the black box system. Akin to Global Seed Vault from a safety deposit box, each photo: getty images, heiko junge; laif, christopher morris, vii redux morris, christopher junge; laif, heiko images, getty photo: all over the world. After country or institution that arrival, they are sealed in deposits seeds retains custom-made packages ownership of their samples and stored in the vault at and is the only one who can a temperature of -18 °C. withdraw or open their boxes. 40 Think:Act 22 TRUST Defying doomsday TRUST Defying doomsday Think:Act 22 41

Art Treasures

Priceless art, ranging from antiquities to paintings by modern masters are stored in various facilities, like the one pictured below, around the world. One, the Geneva Free Port, is reported to hold over a million works of art. Officially a facility for goods in transit, it offers climate-controlled premises, security and confidentiality.

Collecting Genome Material

Launched by the Smithsonian National Museum of Natural History, the mission of the Global Genome Initiative is to gather and preserve the Earth's genomic diversity. The initiative also organizes the Global Genome Biodiversity Network to foster active collaboration across member organizations worldwide. With less than 1% of the planet's known genomes sequenced to date, potentially priceless information will be retained for future innovations in medicine, agri- photos: bird collection, national museum of natural history, smithsonian institution, chip clark; ralf meyer, visum kunstfonds dresden/vg bild-kunst dresden/vg visum kunstfonds meyer, clark; ralf smithsonian institution, chip history, natural museum of national bird collection, photos: culture and environmental sustainability. 42 Think:Act 22 TRUST Defying doomsday

­­Ice for the Ages

The atmospheric data frozen into the world's glacial ice is invaluable in the study of global warming. That is, if it doesn't melt before scientists perfect a way ­of reading it. To safeguard this knowledge, the Protecting Ice Memory project has set out to create an archive of ice core samples taken from glaciers around the world. The project's first samples, extracted from Mont Blanc, are being held in Grenoble before being transported to the Concordia ­Research Station on ­Antarctica, where ­temperatures average -54 °C.

DNA Data Storage

History has taught us that human knowledge is anything but stable. Even digital storage, assumed by many ­to be infallible, is fragile and will someday be rendered unreadable. But now a research team led by Robert Grass at ­­­­­ETH Zurich has discovered how to save data as ­DNA. With error-correcting

algorithms and unprecedented information density, DNA ben/wildtouch del sarah uga, fondation grey; howard images, getty photos: may be used to protect the world's collective knowledge for a million years. Think:Act 22 43 44 Think:Act 22 TRUST useem TRUST useem Think:Act 22 45 More than a Sounding Board b b Bennett Voyles It's time to bring the relationship between the CEO and the board out of the stone age: Wharton professor Michael Useem on the new leadership model that's steering companies to make smarter decisions.

illustrations by Frank Flöthmann TRUST useem

raditionally, corporate boards hired and fired the company's " I think the logic is inescapable leaders, but otherwise stood back and let the CEO pilot the ship. In their book that companies that are well led TBoards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the by executives who partner with Way, Dennis Carey, Ram Charan and Mi- chael Useem observed that, these days, their directors are going to make more and more boards are choosing to stay on the bridge for the whole voyage. smarter decisions." But is steering by committee a good idea? Useem, the William and Jacalyn Egan professor of management at the Wharton School of Business in Philadelphia, In the past, board membership was often That's a potential Achilles' heel of this ­new ­explained to Think:Act why, despite the an almost honorific position. Does being a model. As non-executive directors downside risks that board leadership cre- board member demand a bigger commit- devote ­ more time in helping to shape ates, he believes it's a chance worth taking. ment today than a few lost rounds of golf? the company's strategy, they may be Yes, it definitely takes more time. In the less able to monitor performance Think:Act In Boards That Lead, you argued US, if you're the lead director or the ­objectively. that the role of the board has undergone a non-executive chair, you can be putting Will we see term limits? quiet revolution over the last 10 years. in well more than 200 hours a year. It's coming, as a way of keeping the board What's different about today's boards? In the US, both of those roles have ­become fresh, to give it new ideas and to ­ensure Michael Useem: Over the past decade, much more important, much more director independence. I think that many boards have added a second time-consuming, and much more a governance is going to move in this function to the traditional function of matter of actually knowing the ­direction as appreciation grows of the keeping an eye on management. ­substance of what the business is downside of having very long-term For a host of reasons, many boards are ­doing and what the market looks like ­directors who may lose some of their moving towards adding a leadership than used to be the case. edge as independent voices. function as well. Are there any downside risks to this ­ Could you give us an example of the kind If you ask directors what question is new­ model? For instance, could board of value this new style of board can add? ­uppermost on their minds, historical- ­members' personal investment in the I'll reference one that's in our book: The ly their answer was: Is top manage- strategy make them less objective about CEO of Gillette, the biggest player in ment doing the right thing for its management's performance? the men's shaving market, called the ­owners? In addition, directors now CEO of Procter & Gamble and said ­really want to work as a partner with ­Gillette would like to consider being top management, to think about how acquired by Procter & Gamble. to create value. This was going to be one of the biggest Board members are also getting more ­decisions that the CEO of P&G at the ­involved in leadership development. time, A.G. Lafley, and his top team Many firms now ask non-executive would be making during their tenure. ­directors to serve as mentors to top They had a bunch of critical questions managers, and even as instructors ­­in to answer: What was the right price? company leadership development pro- Would it make sense to bring this grams, adding substance and not just ­consumer product into the P&G ­family oversight to their role. ­given the history of it not being there? photo: gettyimages/priyanka parashar otntl, rce & abe a six had Gamble & Procter Fortunately, Nominations and governance committees Choosing board members must also be a be also must members board Choosing Are theypersuasive, and directthe work and chair aperson who is the leaddirector top management? collaboration with can lead,organize Is the person who the Is Is the current chief executive of Gillette large acquisitions of their own before own theiracquisitionslargeof important important procedures board the that certain ing governance and inations traditions? wn its board who had been through very very through been had who board ­better n a huge new division that has that division new huge a n bring more serious business now. The nom- now.business serious more The will it take to retain him for at least at for him retain to take it will which is responsible for the obtain informed guidance from than from guidance informed obtain ture members of the board and mak and board the of members ture Whom board. P&G the joined they ­s ­current are strong, has strong, are acquisitions themselves? executives who've been through major what so, if and succeed, acquisition and what he knows vital to making or non-executive are theydecisive everal years? And, what will it do to do it will what And, years? everal of the board in and are theyand ­o strategic? ­cu ­i tr o Potr Gml to Gamble & Procter of lture for the P&G chief executive to executive chief P&G the for 1 ­ or former executives on the on executives former or ­pl ayer at many companies. The key questions to askyourboard to questions The key ­become ­ but not solarge that it can't function as a decision-making Is the board large diverse expertise a critical massof and experiences, enough to haveenough to ­identif a much more much a team? ­c ommittee, 2 ying fu- ­the -

What shouldahealthy working relation In British firms, the relationship between ship between a board andaCEO look like? board and the firm? the and board to the strategy and function, butalso leadership ofleadership the value not only to Is everybody in the monitoring the boardroom In American firms, the relationship the firms, American In has become critical as well. In both In well. as critical become has instance, instance, who is knowledgeable about receive guidance and advice? In the In advice? and guidance receive between between the lead director and the CEO we that need we do member board whether the two of them are capable are them of two the whether ­other's thinking exquisitely well? Can closely.collaborating of able they Are understands really who board the on they call each other with no notice to notice no with other each call they on work they what up divide to crucial.is CEO the chairmanand the global supply chains? don't have? Do we have somebody, for a of kind What days: questionsthese cases, the question comes down to down comes question the cases, effectively? Do they understand each understand they ­effectively? Do somebodyhave we Do cybersecurity? tougher muchthemselves asking are contributing believes that boards can play amuch more constructive rolemore constructive than they the newboard 3 TRUST currently do. u changes wouldchanges you see the board andits leadership ofleadership the activist investor want to make in company, what

looking at yourlooking Michael If youan were m firm? 4 U seem - You've mentioned the differences What impactdoesdiversity have on Historically, very few firms have had two had have firms few Historically, very blee ht rnig oe onto women bringing that believe I onr taiin i gvrac are governance in traditions Country Many countries now require boards to But isn't itunstable to have two leaders? different. Do model willyou think this go global? board performance? board configurations are even more ­betw include acertainpercentage of women. It's akin to certain atomic configura atomic certain to akin It's have in the US or UK. Over time, I think able state. It's good to view view to good It's state. able an in fact that they're so few and far between form better in all countries. their with partner probably more varied for large means it's an unstable configuration. configuration. unstable an it's means relation these era, ­monitoring-only now that more diversity in terms in diversity more that now nies that are well led by revolutions that is happening in front inhappening is that revolutions Germany ­Germany is still different than what we ­G a bad oeae n owy for Norway, in operate boards way of us. Overall, there is good evidence evidence good is Overall,there us. of the strong collaboration between the between collaboration strong the they're because soon decay that tions to make smarter decisions and per and decisions smarter make to compa that inescapable is logic the any almost than companies traded ­governing boards is one of those quiet ships were less significant. ­director not as a co-relationship, but as ­demographic variety makes for a more consequential board. chief executive and board chair or lead The time. of length any for co-CEOs ­aspect of corporate management. The relationship.a complementary ­exper ­e xample, is different from that in that from different is xample, ray ad hi oeain in operation their and ermany, een the USand the UK,but other ­unst ie geographic tise, T hink:Act ­di rectors are going are rectors ­ex

­location 22 ecutives who ­pu blicly 47 47 and

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TRUST hAckers Think:Act 22 49

b b Jessica Twentyman

ctober 2015. Executives at UK- based phone and internet service O provider TalkTalk made a shocking revelation: One of the company's ­databases, containing customers' personal ­information, had been breached by hackers. The cyber criminals had accessed names, phone numbers and details of bank accounts and credit cards relating to around 157,000 ­individuals. When it comes to IT security, the penalties for complacency can be steep, as TalkTalk's management team discovered ­following their disclosure. During the finan- cial quarter in which the attack took place, the company experienced a £15 million ($19 mil- lion) impact on trading and lost some 95,000 customers. On top of that, it had to spend a whopping £42 million ($53 million) in "excep- tional costs" relating to the attack: restoring online capabilities, upgrading IT security, ­hiring consultants and offering free upgrades to disgruntled customers. And then in October 2016, TalkTalk was slapped with a £400,000 ($500,000) fine by the Information Commissioner's Office, a record penalty from the UK body charged with ­enforcing the Data Protection Act. Others have also been hit by similar ­attacks. When customer information was ­stolen from Sony's PlayStation video games network in 2011, the company spent around $15 million in the US settling lawsuits arising from the incident and was hit with a £250,000 ($300,000) fine in the UK. To avoid such minefields, companies are increasingly looking to hire so-called "white hat" hackers – skilled IT security experts who probe systems for weak spots. These white hats, also called "ethical hackers," provide an opportunity to preemptively fix­v ulnerabilities before they are exploited by criminals – or "black hat" hackers. The terms "white hat" and "black hat" have their roots in the symbolism of old ­Western movies, where the good guys wore illustration: twotype deisgn, christian hruschka twotype illustration: white hats and the villains wore black 50 Think:Act 22 TRUST Hackers

ones. These terms describe an approach of lines of code and, in some cases, inten- to IT security rooted in the idea that, in tional "backdoors" designed to let ­order to beat criminals at their own game, ­authorized parties gain access are still a company needs people on its side who open to abuse. are able to think and act like them. Whatever the task, though, Rad has a They must be able to use the same first step in her game plan: talking to ­tactics: find vulnerabilities in IT systems ­employees. "They're often the weakest and then test them to see how they might link, because it's easy for them to respond be exploited in order to gain access to to a 'phishing' email or share a password ­underlying databases – a process known with an unauthorized party, with no bad as "penetration testing" and an important intentions. Sometimes, we find vulnerabil- element in the ethical hacker's playbook. ities this way, without even looking at the company's IT systems," she says. A matter of intent Another challenge for her to crack could be that the software patches issued It boils down to intent, says US-based­securit y by developers intended to plug any analyst and white hat, Tiffany Rad: "It's how ­vulnerable IT gaps may be incorrectly you use a tool or a skill that turns them into ­applied – or never applied at all. Network- something bad or something good." ing hardware such as routers, switches This is a lesson she learned from her and firewalls may have ports left open, father, who taught her how to pick locks. ­allowing unauthorized parties to spy on Far from preparing his daughter for a the traffic they're directing or even reroute ­career as a criminal, John Strauchs, a for- it. Default administrator passwords on mer operations officer with the CIA, had "Picking equipment and programs, provided by only good intentions. "He was teaching me manufacturers, may never be changed to the importance of problem-solving … In a lock could more secure alternatives by the end-user order to solve a problem, you need to un- companies that install them. derstand how something works," says Rad. make you a "When we do move on to the IT sys- "If you know how something works, you tems," says Rad, "we often start with can often find ways around it – or ways to ­networking, looking in particular at Wi-Fi make it work even better." With the abili- burglar. ­access and at those points where the ty to pick a lock, you could become a bur- ­public internet and private corporate glar, certainly, but also a skilled locksmith. Or a skilled ­networks touch," she says. "I'm also Rad chose the latter path, becoming a ­interested in the ­permissions that are "locksmith" in IT security. In the course of locksmith." ­applied to different corporate systems – her career, she has been a white hat ­hacker does everybody who has permission to at IT security company Kaspersky Lab and ­access this database of customer contacts, at networking giant Cisco. She has used for example, really need to be accessing her skills to identify security flaws in the that database in the first place?" computerized gates and doors of prisons, In some cases, more sophisticated in the sensors and meters of connected "social engineering" hack approaches may cars and in a wide range of government be at work. User passwords are a particu- and corporate IT systems. lar target, with holders persuaded to Today she works at her own startup ­divulge their details to people posing as company, Anatrope, which focuses on the authorized parties, or by simply leaving security of smart, connected vehicles. them out in plain sight on a sticky note For some projects, Rad works on a ­attached to a desktop PC, for example. ­micro level, investigating the firmware on "This isn't a static environment – a microchip for vulnerabilities. In others, threats are always changing and it's a she works on a macro level, probing a ­challenge for white hats to keep up with large corporate network for weak spots. that. Every day is different." Tiffany Rad, Most software programs contain Which is why white hats have to stay US-based security analyst ­unintentional bugs or defects in millions one step ahead of the criminals by keeping and white hat hacker TRUST Hackers Think:Act 22 51

up to date on emerging threats by reading providing accreditation and certification to or by networking with other white hats. the information security industry. It's these kind of challenges that make the The term ­"lemon market" coined by job compelling: "Beating hackers is a puz- Nobel Prize-winning economist George zle," says Rad. "And people like me love to Akerlof describes a situation where sellers solve a puzzle." know more than buyers. He uses the used- Despite the temptation to go rogue, car market as a comparison, where there white hat hackers adhere to a strict code are good cars for sale and dodgy ones ­(or of conduct. "The tools we use are powerful "lemons"). The seller knows which is ones. Once you have that gift, you wouldn't which, but most buyers can't differentiate want to give it back, but you have to be between the two. wise in how you use it," says Rad. The same applies to the market for Bounty ethical hacking, Johnson says, which is Thinking like a hacker why CREST doesn't just focus on the certi- hackers fication of individual testers, requiring Certain industries are further along in them to undergo extensive training and to Computer-savvy individuals ­accepting white hats than others, says Vince re-sit exams every three years, but also the with time and skills to spare may find that bug bounty ­Warrington, an IT security advisor who has accreditation of the organizations for programs offer a chance worked on projects for ­organizations such which they work. That involves them to make some money on as Diageo and GlaxoSmithKline. demonstrating appropriate policies, the side – and sometimes The financial services sector has a ­processes and procedures for protecting big money – by scouting pretty good understanding of how hackers client information. out flaws and glitches in think, he says, as do the public sector According to Johnson: "This is highly corporate IT ­systems and ­bodies that guard state secrets. "[Other sensitive work, so companies need to be flagging them up in return for ­industries] are still in the mindset that 'We very clear exactly who they are dealing a reward. Even the P­ entagon have to defend the castle,'" he says, adding with and ­confidentthat they meet a set of is now involved. In April and that they need to come at it from the ­extremely high standards when it comes May 2016, the US Depart- ­attacker mindset. to data protection." ment of Defense ­ran Hack the Pentagon, thought to be the For those that have made the switch first bug bounty program run in thinking, however, maintaining an Red versus blue – and widely publicized – by ­internal white hat team comes at a cost. the US federal government. That's not just the ­salaries that skilled Some organizations take a novel ­approach This ­initiative was hosted ­personnel expect, says Warrington, but to tackling IT security problems. This and run on its behalf by also the constant ­pressure to keep white ­involves organizing white hats into a "red" HackerOne, a specialist bug hat skills up to speed in the face of team that works separately from the bounty platform where ­increasingly sophisticated attacks. With ­"regular forces" who manage day-to-day hackers and companies meet that in mind, some organizations turn to operations, monitor attacks and remedi- and communicate. third-party specialists. ate security flaws – the "blue" team. The Hack the Pentagon ran for For those that go down this route, red team poses as the enemy, exploring 24 days, resulted in a total there will be no shortage of offers of help – ways to carry out attacks. of 138 vulnerabilities being at a price. This is a crowded market, in part For penetration tester Gemma Moore, tackled and over $70,000 ­because many white hats have recognized a founder of UK-based IT security firm ­being awarded to hackers. that they can make more money on the ­Cyberis, staging this kind of ­exercise is the The highest reward was open ­market. most thrilling part of the job. $3,500, with the average There are also serious questions about It's very useful because developers of worth $588. It was consid- trust. "There's a certain nervousness around systems don't tend to think in the same ered such a ­success that the fact that you're giving outsiders privi- way that penetration testers do, she says. the Department of Defense collaborated again with leged access to key systems, no matter how "Our first thought, always, is 'How are we HackerOne to launch Hack stringent the non-disclosure agreements going to break this?' and that can be a real the Army in November 2016, you ask them to sign," says Warrington. education for a client." And the sooner a challenge to findsecurity ­ That makes the market for ethical hack- companies reap the benefits of those flaws in the US­Arm y's ing skills a "lemon market," says Rowland ­lessons, the better: The best defense, after photo: getty images, bloomberg images, getty photo: ­public-facing systems. Johnson, an executive at CREST, a ­nonprofit all, is to hack the hackers themselves. 52 Think:Act 22 TRUST Digital Footprint A Day in Data

7:00 AM 7:20 AM 8:30 AM 9:15 AM 12:30 PM Big D wakes up He takes his dog He drives to work. Despite The jam eases. Big D is Big D walks down a busy earlier than usual. for a walk. ­ leaving early, he gets already late for work and street and looks for a place Due to a traffic jam, his smart- He is wearing his stuck in a jam any­way. starts driving fast. to have lunch. phone ­automatically reset his fitness wristband To kill time, Big D searches A minor accident occurs. As he passes a McDonald's, alarm by 30 minutes. to track his steps for cheap last-minute His in-car black box he gets a notification in the and heartbeat. vacation deals. ­records his driving form of a coupon delivered and sees that he was to his smartphone. ­speeding.

74% 49% of people book their of consumers plan their holidays online. shopping trips around 51 % NO. 1 circulars and coupons. of people surveyed reason for accidents: cited privacy as their speeding biggest concern with 53 wearable tech. 82% DAYS of customers make purchase before the flight is 60% decisions in-aisle. 25 when prices are lowest. of drivers would change their habits to get an MILLION insurance discount. new users begin using 3.5 wearables each year. $85,000 average iPhone MILLION user income iBeacons will be Bonus for installed by retailers driving safely A healthy by end of 2018. $61,000 Usage-based insurance average Android lifestyle = allows clients to install user income discounts a black box which The data collected from records and reports Targeting wearables is used by their driving style. consumers insurance providers. Your iPhone iBeacon allows participating raised your stores to send travel cost coupons to users Booking platforms close by. adjust their prices based on the user's mobile device. Think:Act 22 53

Your digital footprint may be deeper than you realize. What does your average day tell companies about you? illustration by Supertotto

1:20 PM 3:45 PM 8:00 PM 11:10 PM While sitting at McDonald's, Big D goes back to Big D uses Uber to Big D and Li'l P he gets a notification saying his office and works get a ride to dinner. hit it off. that a woman with similar on some figures. It asks if he will be ready They go to Li'l P's interests is right behind him. He is still thinking in 5 minutes. apartment for a Big D takes his chance and about Li'l P, so he The driver already knows coffee. Big D sees speaks to Li'l P. They visits her Facebook the destination and Big D flyers with ads for arrange a date for tonight. profile several times. already knows the price. baby products.

5% 5 of Americans report finding MINUTES real love online. after your ride ends, Uber will continue to 24% track your movement. of people say they 25 would ask a person products are analyzed 77 for the first date via together by US retailer MINUTES Facebook. Moving Target to predict customer is how long a typical profiles pregnancy. Tinder user spends tindering every day. Based on locations Social media you've visited in the predicts love past, calendar notes Not a secret anymore and interests, apps can Based on your clicking predict where you are Based on your purchases, stores Fancy seeing behavior, social media headed next. send you physical flyers with you again can tell who makes your specific, targeted ads. heart flutter. Happn app tells you what other users are in your area and how many times you've crossed paths.

02:12 AM Big D is asleep in bed. His fitness wristband now records his sleep patterns. Every moment of his day offers an opportunity to collect even more data. 54 Think:Act 22

Building a Robot With a Heart

b b Henrik Bork

Will the machines rise in the battle against loneliness? Kaname Hayashi offers a new solution to the epidemic of the modern age. Groove X Think:Act 22 55

Loneliness warrior Hayashi is a dreamer who delivers results. His photo: laif, jérémie souteyrat laif, photo: collaboration on the Pepper robot has made him famous in Japan. 56 Think:Act 22 Groove X 40%

of Japanese people are projected to be living alone by the year 2035. $14 million okyo, Japan. Outside Shibuya Station, 2,500-odd people spill on to the the amount of startup capital Kaname Hayashi road as the light turns green, making this has already secured ­ the ­world's busiest pedestrian crossing. for Groove X. TThe Shibuya Scramble, as it's come to ­be known, is the result of five roads ­converging in one ­place. It's a busy sight. ­Vehicles. Neon lights. People. They are all 2018 in one place, but they are all caught in their own bubbles. Some are ­immersed in the year Groove X robots their smartphones. Others lost in thought. are set to be introduced That's Tokyo for you. Like others of its to the public. ilk, the world's most populous metropoli- tan area is also somewhat ironically in the middle of what can be called a loneliness epidemic. Fewer Japanese are marrying. They have fewer children. The divorce rate is on the rise. Old parents are left alone in empty nests. Some estimate that 40% of the Japanese will be living alone by 2035. It's not a happy picture. ­humanity has been waiting for these ­buildings and neon advertisements in the Just a few kilometers away from the ­anti-loneliness machines. He speaks so Akihabara quarter. Far below, scores of Shibuya crossing, sitting on his perch in softly, lisps endearingly and peppers the people are scurrying back and forth. the Fujisoft Building in the Akihabara ­discussion with quotes from so many ­Loneliness? Aren't we living in the age of quarter of Tokyo, Kaname Hayashi thinks books that one could easily mistake him social media? Don't we spend our days he has a solution to loneliness: a robot. for a dreamy-eyed university professor. chatting with more people than ever "What we would like to solve is the gap Hayashi is a dreamer, no doubt. But ­before, whether we actually know them or between the survival strategy of our he is out to turn his dream into reality. His not? Could our era be the least ­lonely ­human genes, which want us to live as a startup, Groove X, has already completed ­moment in evolutionary history? group, and our modern lifestyle, which prototypes for these robots, although no No, it's all an illusion. Today, we tend makes us lonely," says Kaname Hayashi, one has been allowed to see them yet. to live alone or in small groups, says CEO and founder of Groove X, a startup "Sometimes, you feel lonely. It hap- ­Hayashi. However, we continue to carry determined to develop the world's first pens to us all. Anyone who claims that it the prehistoric "loneliness gene" with us, ­robot that appeals to the heart. doesn't is probably lying," says Hayashi. creating a void. "Facebook, other social A machine to combat loneliness, to He then suddenly launches into a tale media or video games are such a big fight against sadness. A therapeutic robot. about the origin of our species to explain ­industry precisely because they fill this One that doesn't captivate with its intelli- his creation. In prehistoric times, sharing void," he says. As will Hayashi's robots. gence or strength, but with its ability to the meat of a slain mammoth was not so sense emotions and respond to them. A much the evidence of a selfless act around Paving the way with Pepper robot that can charm you: just like R2D2 the campfire, but more about the prospect or BB-8, those two cute characters from of gratitude and companionship in return. Hayashi started as an engineer. He the Star Wars epic. As long as we contributed to the group, we ­specialized in aerodynamics and was Hayashi, 43, fashionably dressed and were not alone. ­involved in the design of both the Lexus sporting a neatly trimmed beard, has a Hayashi glances out of the window of LFA model and Toyota's Formula 1 racing very matter-of-fact style and applies it to the conference room in the Fujisoft car. He later ­attended the SoftBank the advance of the robots, as if all of ­Building and takes in the canyons of ­Academia, established by millionaire Groove X Think:Act 22 57

The press has been racking its brains ever since to work out where the Groove X ro- bot's charm will lie. But the details are un- der wraps. What has leaked out is the fact that Hayashi's creation will not speak. As Antoine de Saint-Exupéry, the author of The Little Prince, once wrote: "Words are the source of misunderstandings." And as Hayashi admits, he was also inspired by the aesthetics of the great Japanese tea master, Sen no Rikyu. His tea houses have very narrow windows, their interiors are minimalist to the extreme, but they give free rein to the imagination. Less is more.

The subconscious side of frankenstein complex 'Robotophobia' is typical communication in Western films. Japan has a different attitude. Hayashi had his eureka moment when he visited a retirement home in Tokyo with ­Masayoshi Son, who enjoys something of SoftBank's Pepper robot in 2014. He asked a cult status in Japan. SoftBank Academia an elderly lady what else she would like to is Son's unorthodox training institute for see in the robot. "It would be nice if it had executives. He ­recognized Hayashi's talent warmer hands," she replied. "That was a and ­appointed him to head the robotics shock for me," remembers Hayashi. Like arm of SoftBank, which then went on to all his colleagues, he had been fixated on ­develop and market Pepper the robot. the nuts and bolts: the language, artificial Pepper, a babbling humanoid, or "Sometimes, you intelligence (AI) and the like. "But then I ­robot that looks like a person, now stands realized that we were too focused on the in Tokyo's cellphone shops. The robot was conscious side of communication." hugely popular and made Hayashi famous. feel lonely. Groove X's robots are likely to propel "If anyone can develop a robot like this to the robotics industry in a new direction, combat loneliness, then I ­certainly can," It happens to with emotional robots, or, as Hayashi he announces confidently. He has already ­prefers to describe them, "subconscious secured $14 million in startup capital. In us all. Anyone robots." The aim is to build robots that a neighboring room, 20 engineers are can communicate with us on a very ele- ­tinkering with the robots, which are set to who claims mentary, unspoken level. Instead of trying be introduced to the public in 2018. to imitate people, which is still too much In 2015, Hayashi moved his firm onto of a challenge for AI, Hayashi's robots are the "incubator floor" of the ­Fujisoft that it doesn't is to be more like a kind of artificial pet. ­Building, where the Groove X team shares Robots have appealed to people's ­space with other startups. With its hissing probably lying." emotions before. Sony's Aibo, one of the espresso machines, a motorbike parked first of this kind, could wag its tail and between the long wooden benches and its blink some lights when petted by a hu- youthful energy, this space gives a little man, which made the little robot dog pop- photo: picture alliance photo: nod to the culture of Silicon Valley. ular in homes for the elderly in 58 Think:Act 22 Groove X

silicon valley attitude in tokyo Groove X is using revolutionary technology to solve a common problem. Groove X Think:Act 22 59

"Our robots are not intended to replace human warmth. We One reason for the relative willingness of the Japanese to accept technology may be Shintoism. According to this ­religion, don't want to there can be a soul inside every being, in every tree, every waterfall. Even in a life- replace anything less stone. Perhaps, suggests Hayashi, that's why the Japanese are less hesitant at all." when it comes to building robots. Although today loneliness is a global problem, the types of ­robots created by different cultures vary wildly. In ­Hollywood movies, for instance, the ­lovable, whistling Star Wars robots R2D2 and BB-8 are exceptions to the rule. ­Instead, films tend to be dominated by ­Japan ­starting in 1999. Toyota is selling a ­militant battle ­robots. In contrast, ­Hayashi little baby robot, called Kirobi Mini, which grew up with the cute ­Studio Ghibli char- is marketed as being "always on hand for acters in the animated films of ­Hayao Mi- ­heart-touching communications." But so yazaki. "They can't ­speak. People don't far interactions between these robots and benefit from them, but they do live with humans have been limited. Hayashi prom- them," says Hayashi. Maybe it's not such ises his creation will be become a real a bad model for a robotics ­business with "companion robot" for lonely people. big ­ambitions, a kind of ­robot charm OK. But isn't it tremendously sad to ­offensive. The force awakens. send a lifeless robot into a retirement After a number of critical questions, home? Isn't the best company for a lonely all of which he parried calmly and polite- person fundamentally another person? "If ly, Hayashi breathes a deep sigh and asks they have enough human company, they if he can offer a question in return. "What may not need my robots," counters about when parents give their child a ­Hayashi drily. But, the reality in most ­teddy bear, not just their own warm skin?" ­major cities looks rather different. "Our His simple question arrests the conversa- robots are not intended to replace human tion. Hayashi's new robots, he reiterates, warmth," says ­Hayashi. "We don't want to don't want to replace anyone, but they do replace anything at all." have big ambitions. They are far from be- That aside, Japan isn't a bad place to ing an automated "tool," and even further extend the field of robotics with a new from a functional being from the realm of ­archetype, explains Hayashi. Christianity cognitive sciences. Their world is that of and Islam both hold the belief that man the emotions. ­"Ultimately, it's our goal to should not presume to create new beings. increase human potential with our robots." That is God's work, and people believe By raising the self-esteem of its human that if we create something similar to our- owner. "In ­dispelling your loneliness, it selves, it would almost certainly turn makes you a better person. I believe that , jérémie souteyrat against its creator before long. "Some machines can heal humanity. We ­ ­people call it the 'Frankenstein Complex'," believe that robots can make this ­world a photo: laif photo: says ­Hayashi. It's different in Japan. better place." with due respect Leicester supporters kiss a mural of manager Claudio Ranieri before the May 7, 2016 Premier League match. Leicester city Think:Act 22 61

Confidence Does the Trick

In 2016 Leicester City, underdog of English football, snatched victory from the jaws of defeat to become Premier League champions. What can business learn from their transformation?

b b Alistair Magowan

ay 2, 2016. It was a tense ­scene, from one of the most unlikely victories in but Christian Fuchs kept his sport – and he was ready to capture it. On M head. The Leicester City foot- the final whistle, he pressed record on his ball player and his teamma- phone to catch star players Vardy and tes were poised to seal one of the biggest Riyad Mahrez bounce into view. At one shocks in football, but rather than attemp- point it looks like he's set to crash into a ting to win the Premier League on the wall. The footage went viral and instantly pitch, they were gathered in striker ­Jamie became a symbol for one of English foot- Vardy's kitchen watching their ­closest ri- ball's greatest triumphs. It was a champi- vals, Tottenham, on TV. Due to ­an unlikely onship victory that owed as much to team turn of events, Leicester's fate ­depended cohesion as it did to talent. on how Tottenham fared in this vital Leicester's story seems almost impos- match against Chelsea. If ­Tottenham were sible in a cash-rich era in sport, where to lose or draw, Leicester would win a pri- ­ranking is often determined by the size of ze beyond their wildest dreams. the wage bill. This was a team which flirt- After taking a 2-0 lead, Tottenham ed with relegation the previous year, who were now drawing 2-2 with Chelsea. Fuchs had a playing squad which cost £57 photo: getty images, michael regan michael images, getty photo: and his teammates were a breath away ­million – seven times less than 62 Think:Act 22 Leicester city

2015 EST. 1884

some rivals. Football pundit Gary Lineker School, whose book Confidence addresses game on! An Everton fan was so sure they wouldn't win the League how winning and ­losing streaks begin and awaits a match against that he vowed to present the BBC's iconic end, Pearson's tactics were perfect for ar- L eicester City. football program Match of the Day in his resting any ­declining business. ­underpants if he was wrong. "Leadership that builds the underpin- Five days after Fuchs and his friends ning of confidence starts with accountabili- May celebrated, they lifted the cup. As­L eicester ty where everybody knows what they're re- fans tried to make sense of it all, Ranieri sponsible for with a great deal of Under previous manager Nigel had a simple message for them: "Don't ­discipline," she says. "Collaboration is the Pearson, Leicester perform "the wake up, keep dreaming." ­second underpinning of confidence; that great escape" by winning seven of their last nine games to avoid So how did they do it? And what people understand the need to support Premier League relegation. ­lessons can businesses learn from such one another and to build on the strengths a ­victory? of their teammates. Thirdly, it's about ­taking initiative; that people are given Culture of accountability ­permission to step in and take leadership roles themselves. When leaders build Ranieri had no doubts about how his team ­those three factors in, then there can be won. "Focus, determination and spirit ­tremendous team spirit, discipline and made this possible," he told reporters. ­desire to win." "They deserve to be champions." Despite keeping Leicester in the But to understand how that was ­Premier League, Pearson was sacked. ­fostered, you have to go back to the previ- ­Ranieri, 64, took over and his experience ous season under former manager Nigel proved a critical factor. ­Pearson. Having won only four of their first 29 League games, they looked Evolution not revolution ­doomed. Yet they managed to win seven of their last nine games. When Ranieri joined Leicester, supporters Pearson's trick was to build a culture were underwhelmed. His nickname "the of accountability in which each player was Tinkerman" was based on his time at personally invested in how the team fared. ­Chelsea, where his taste for chopping Players were given responsibility for their teams failed to deliver despite the resour- own fitness programs in consultation with ces at his disposal. This time, though, he a highly skilled team of backroom staff seemed a changed man. He recognized that included recruitment specialists, the culture that already existed at ­Leicester sports scientists and psychologists. And and kept changes to a minimum. by getting everyone to take ownership of "In football and in business, there is a their own role in the team, it created a tendency for managers to radically ­change ­furious work ethic towards a clear goal: everything," says Simon Chadwick, avoiding relegation. ­professor of sports enterprise at Salford According to Rosabeth Moss Kanter, University. "[Ranieri] understood that the Ernest L. Arbuckle professor of business backroom staff were highly skilled and he

administration at Harvard Business didn't need to change too much." batiche farouk regan, michael images, plumb ltd, chris brunskill images, getty photos: Leicester city Think:Act 22 63

show your colors A local shop August "They deserve in Leicester. Riyad Mahrez and to be Jamie Vardy begin champions." the season in fine form as Leicester Claudio Ranieri, go unbeaten in their Former Leicester City manager first six games. 2

June : fans afar Pearson is sacked after his A Leicester r­ ­elationship with the board is supporter wears deemed "no longer viable." Ranieri 4 Algerian winger is appointed two weeks later to The first 2015–16 Mahrez' shirt an underwhelming reaction. match ­is a win. in Algiers.

November December Leicester bounce back from their Many experts think the first defeat of the season to win Leicester bubble has burst five of their next six games and as they slip behind Arsenal hit the top of the Premier League. after three games without a Vardy sets a new Premier goal, but they carve out League record for scoring in a 1-0 win over eventual title 11 consecutive games. rivals Tottenham.

"It's about taking initiative; that people are given permission to step in and take leadership roles themselves." Rosabeth Moss Kante r, Professor of business administration at Harvard Business School mutual appreciation Leicester City captain Wes Morgan leaves a message of thanks to fans. 64 Think:Act 22

2016

February Defining wins over Liverpool and Manchester City give Leicester staff a feeling that they are witnessing a special season.

Hope and glory April Chao Khun Thongchai, the Leicester show official Leicester incredible resilience City monk, prays to earn a 2-2 draw next to club pen- with West Ham dants on ­­May 1, after Vardy is sent 2016 (above). off and they concede two late goals, only The next day, for Leonardo Ulloa fans ­celebrate the to equalize in injury team's shocking time. triumph (right).

May "With added social cohesion, teams After failing to can achieve even greater performances." beat Manchester Ken Way, Performance psychologist United, closest rivals ­Tottenham can only draw at Chelsea, sparking wild cele- brations in Vardy's house as Leicester win the title without kicking a ball.

May 16 Over 240,000 peo- ple turn out to greet the Leicester team on the streets of the city as they salute one of the biggest shocks in

sports history. ian francis photo, stock alamy images; plumb bloomberg, images, getty photos: the sweet taste of success Leicester City lifts the Premier League trophy on May 7, 2016. Leicester city Think:Act 22 65

"Leicester's lesson for business

One of the best examples of this came when is about how club: "What we had last season was an Ranieri listened to the wisdom of Leicester's ­incredible social cohesion, and that's head of recruitment Steve Walsh – credit- you adapt ­always seen as a 'nice to have' element ed with discovering star players Vardy and whereas task cohesion is seen as more im- Mahrez, who were both plucked from the your goals portant. What last season's ­success shows lower leagues. is that with ­added social ­cohesion, teams Walsh had his eye on another depending can achieve even greater performances." ­diamond in the rough: N'Golo Kante. The midfielder was attracting little interest on your The dangers of over-performing while playing in France, but after Walsh whispered "Kante, Kante, Kante" into environment." Where do you go once you've achieved the ­Ranieri's ear ad nauseam, the manager Mike Forde, Football consultant impossible? In Kante's case, the ­answer eventually buckled and bought him for was another team. Other star players have £5.6 million. The player was a key part in been rewarded with ­bigger contracts. Leicester's success, and the following Comolli believes there is a "strong summer was sold to Chelsea for a £26.4 one man remained focused on the next ­correlation between rewarding players and million profit. game: Ranieri. He kept the pressure off his a decline in performance". Kanter adds: players by taking them out for pizza and "Money is not the major motivator of per- Exploiting an underperforming caused laughter in press conferences by formance and if you start paying people market describing the sound of an imaginary bell too much, they start ­competing for the mo- should the players need motivation in ney and themselves rather than the team." Having avoided relegation the previous ­training. "I tell them 'dilly-ding dilly-dong' Kanter's advice is that Leicester focus season, Leicester's sole aim would be to if they are sleeping," he said. on what she calls the three Ms: mastery, stay in the division. Ranieri decided to It is worth noting that often when a membership and meaning. "Teams and play a weakened side in the FA Cup, so his manager talks to the media, he is, in fact, athletes that win consistently stress team lost at the first round and would play indirectly talking to his own players. The ­improving their own performance rather up to 10 games fewer than their rivals. press might repeat his words for the pub- than beating the opposition," she says. "Leicester's lesson for business is lic, but for the manager it is another way "Secondly, teams need to remember that about how you adapt your goals depen- of getting his message to his team. the whole is greater than the individual ding on your environment," says Mike Ranieri showed an ability to marry the ­reward and thirdly, remember that you're ­Forde, a former director of football at cognitive and emotional culture of the doing something meaningful with a ­sense Chelsea who now works as a consultant ­organization. "Often you have companies of purpose, so the [team] values are with NBA and NFL teams in the United who have a sound set of values, but if ­incredibly important." States. "Leicester continued to evolve their ­someone who delivers them is nervous or Ultimately, Leicester’s success was un- objectives as the season evolved based on shouts and says something wrong at the expected and as a result they have had to an underperforming market and the rea- wrong time, it can have a huge impact on deal with a number of issues they hadn’t lization of the talent at their disposal. staff and their performance," says former previously considered. Not least the loss "Everyone is looking at market share Tottenham and Liverpool director of foot- of Ranieri. After Leicester suffered a string in business and how their products or ball Damien Comolli, who acts as a consul- of defeats in the season following the ­services can allow them to make gains and tant to Premier League clubs. "Ranieri was team’s historic win, the club’s board held climb up the scale. In Leicester's case, emotionally intelligent in interviews and him responsible and fired him. A cruel they recognized the opportunity and re­ on the touchline when the pressure was at outcome after the huge achievement in calibrated their goals to exploit it fully." its highest." which he was instrumental, but an As the last quarter of the season Without the pressure of relegation, ­indication of the challenges that come ­approached and fans became excitable the players were ­enjoying the ride. with ­winning, maintaining confidence about Leicester qualifying for European ­According to Leicester's performance psy- from all parties and sustaining success in football and holding on to win the title, chologist Ken Way, who has since left the the longer term. photo: agustin munoz Endurance Explorers Think:Act 22 67 Motivation in the Deep End Psychology can play a key part in surviving extreme situations – and it can be applied to the business environment, too. Survival specialists Cody Lundin, EJ Snyder and William Trubridge show how.

bb Ben Knight

t was monsoon season in arizona, and Cody Of course, it is exactly this kind of physical Lundin was out at night by a river with one of misery that Lundin's students, variously deter- his more "aggressive" classes. That means the mined challenge seekers from all walks of life, "tribe" couldn't bring any gear along: The only are here for. "As freaky as they are, those are tools ­allowed were those they could make in the experiences that people like the most. the wilderness. That's what they joke about afterward," he "Of course there are no lights, because I laughs. "And that's because they've become don't allow flashlights," he reminisces. "And more confident, because they've pushed be- the river starts to roar. Flash flooding." yond their ­perceived limits." Throughout that night, the tribe was Lundin has run the ­Aboriginal Living stranded as the river rose between them and Skills School in Arizona for the past 26 years their primitive base camp, unable to even sit and has co-hosted two of the ­Discovery Chan- or lie down because of the half-inch of water nel's ­perennially fashionable ­survival pro- streaming around their feet. It would all have grams – Dual­ Survival a n d ­­­Lost ­in the Wild. been another day at the office for Lundin, ex- Businesspeople are grist to the survival acad- I cept that one participant grew scared, and said emy mill: Companies like to send their em- she wanted to cross the river to the camp. ployees into the ­wilderness on "team-building" "She was really scared. So we had to stand and ­"leadership" ­exercises. But what do there all night and try to talk this person they ­actually learn? What does exposure to Diving in down," Lundin remembers. "We told really ­nature's tough indifference have to offer ­Freediver William bad jokes to try to keep ­morale up, did squats ­businesspeople? Trubridge pushes to keep body core temperature up. But there Lundin's teaching methods are a little his body to take was a point where if she would've tried to run startling. "When you light that fire with that him where no one away,­ ­I would've had to hold her down and half a paper match, I'm gonna bring up the has been before. tackle her." person you love the most," he says. 68 Think:Act 22

"And I make you know if you don't get this fire lit – when the snow's lightly falling, and all you have is that ­paper match – you and the person you love the most are dead." The point, as he puts it in his typical- ly blunt manner, is to "prey on people's emotions and train them hard, because that's exactly what nature's gonna do."

Living the extreme

US army veteran and celebrity survivalist EJ Snyder knows a lot about self-reliance. While out filming Naked­ and Afraid in the Tanzanian bush, Snyder got a thorn in his foot. "It festered and got so infected it was about to make me fall down because I almost couldn't walk," he says. "After about 15 days, I had my knife heating up, getting ready to cauterize the wound and clean it out. And the executive producer stepped in, this British guy, and said, 'Hey EJ, what are you ­planning to do with that knife, mate?'" Snyder's answer was a careful balance of patient explanation and pain-fueled irritation: "'Well, Steve, I'm gonna take this knife and I'm gonna shove it in this foot, and I'm gonna burn this thorn out with all taking aim EJ Snyder sets his this infection, and then I'm gonna take that hot, sights on incorporating stressors ­boiling water right there, and I'm gonna clean it, close into teamwork exercises. it up, and I'm done.' And he's like, 'Hold that thought, EJ Snyder mate.' And so he called time out and got a doctor in to take care of it." A former infantry- In some places, though, there won't be anyone man and paratrooper there to help. William Trubridge has not only forced in the US Army with his body ­beyond its own limits, but has put it in pla­ a SERE (Survival without ­oxygen through the Blue Hole, off ­Dahab, ces that no other human body has ever faced – diving Evasion Resistance Egypt – a 98-foot tunnel 180 feet underwater that Escape) survival leads into the Red Sea. The soft-spoken 36-year-old­is school background, possibly the world's most renowned diver. Born in the EJ Snyder taught UK, raised in New Zealand and trained in his teenage future Green Berets years by the legendary Umberto Pelizzari in Italy, ­he "They've become at Fort Bragg before has broken virtually all the freediving world records becoming a technical that there are. advisor, commenta- Swimming straight down beyond the reach of more confident, tor and host for TV sunlight involves a Zen-like depth of concentration. and film. because they've Freediving is almost unique among sports in that, physiologically, it demands an extreme mental ­detachment because the brain uses 20% of the body's pushed beyond their precious oxygen even at rest – and an active brain even more. That's why learning to deal with anxiety, partic- perceived limits." ularly ahead of a world record attempt, is vital.

c ody lundin Endurance Explorers Think:Act 22 69

" We have to manage acute stress… You know it's coming and He describes the stress he puts himself through in training and performance: "Even if I've done that dive before," he says, "the concept of 'in five or 10 minutes you can prepare for it." you're going to stop breathing and swim for four min- William Trubridge utes down and up, and if anything goes wrong, if you overstretch yourself just a little bit, you may black out below the surface,'" is still a challenge. Freediving is an intense form of physical exercise and Trubridge has to try to shut down blood flow to the extremities of his body so that his muscles work anaerobically (meaning they use as little oxygen as bounce back to where you were – you come out of it a possible). That leaves most of the oxygen concentrat- different person." In fact, many people find it difficult ed in his heart, lungs and brain. William to relate to normal ­society, never mind start a busi- Trubridge ness. "The bits of your brain that have been trained to Putting mind over matter be on high alert in the hostile place have not been ­de-trained when you come back," as he puts it. Trubridge effectively wants to shut down conscious A 15-time world Nevertheless, Leach can see why parallels might thought while diving. "The best way to do that is not record holder in be drawn. A key element of military survival training to fight the thoughts or push them out of your mind, freediving, William subjects soldiers to "stress inoculation" – being ­taken but rather to let them slide through and focus on the Trubridge is also the hostage or being trapped in a helicopter that has empty spaces between thoughts." current freediving ditched upside-down in water. They do this not just champion and holds To enhance this concentration, Trubridge closes to learn what to do, but also to experience what it's the title of 2010 and his eyes during his dives so that he can feel more like, so that the initial shock doesn't suspend the 2011 World Absolute acutely what's going on inside his body and his mind: Freediver. brain's cognitive skills. "Possibly more than most sports, freediving is ­dependent on being calm and composed and able to His diving school, Getting back to business control your thoughts and your stress, and staying Vertical Blue, is ­detached from what's going on around you." ­located in the Leach has found that the temporary lack of these Bahamas and offers It's a long way from EJ Snyder's life, which, when ­cognitive skills is why some people die in extreme annual courses at it's not about hacking through Amazonian marshes, ­situations and others survive. In other words, extreme all levels. It also follows a more sedate routine of teaching survival hosts the annual situations don't directly teach you skills that you can courses to civilians, often incorporating stressors into Suunto Vertical Blue learn in normal life. "But the principles of survival – teamwork exercises: "I'll say, 'Alright, we're building competition.­ protection, location, water, food – apply to all environ- a shelter, you're in charge, and you're the worker bees.' ments, and I don't see why those principles should And halfway through the project – 'You three are out not apply to the survival of a business." of the picture!' – then the others have got to finish and Trubridge reckons that it "probably hinges on the figure out who's in charge. When you have a bunch of idea of stress." He adds: "In business there's contin- workers who are self-motivated, it just makes a better uous background stress as well as a more acute stress team. What CEO doesn't want to strengthen their in particular moments. With freediving, we have to team so they work better for them?" manage that more acute stress in what I would say are But does surviving real disasters equip you for almost laboratory conditions. You know it's coming normal life? John Leach, psychologist, former mili- and you can prepare for it and train yourself." tary survival instructor and author of the seminal Maybe that is the key: You might not yet be able book Survival Psychology is skeptical that survival to dive through an underwater cave or cauterize an skills can easily be adapted to business skills. ­infected foot with a heated knife, but there is also no "I'm always a little bit wary of these things," he stressor – either acute or background, in wilderness davide west davide photo: says. "If you get into a survival situation, you don't or in life – that you can't train yourself to manage. 70 Think:Act 22 THOUGHT LEADER Presuade Me! robert cialdini says we shouldn't resist being "pre-suaded". He shares his thoughts on influence, decision-making and how he ended up buying a TV he did not particularly need.

b b Bennett Voyles illustrations by Mario Wagner

hether you're selling a product Now there's a sequel: In Pre-suasion: ­A or leading a team, few skills are as useful ­Revolutionary Way to Influence and Wto an executive as a talent for ­persuasion. ­Persuade ,­ Cialdini introduces a whole new But how does this process ­actually work? way to persuade. He argues that even In his groundbreaking book Influence: The ­before you get to his six factors, a process Psychology of ­Persuasion, social scientist he calls "pre-suasion" may nudge you a Robert B. ­Cialdini presented his theory ­little closer to yes. He coined the term to that all ­ethical persuasion depended on describe ­factors that predispose a person six ­factors, an idea he supported with to feel ­favorably about a proposition reams of peer-reviewed research. When it ­before it is even made. Taking time out was published in 1984, sales were slow, from his busy schedule, he met Bennett but over time, the influence of Influence Voyles on Skype from his office in Tempe, began to build. Thirty-three years later, the Arizona, and talked about how you can book has sold over 3 million copies and best use – and perhaps most importantly, Fortune ­regards it as one of the 75 smart- how not to find yourself being used by – est ­business books ever written. the power ­of pre-suasion. Think:Act 22 71 72 Think:Act 22 "You need to think not only about what a communicator

Think:Act You published the first edition has put into the of Influence in 1984. It didn't take off right away, but grew increasingly popular message you have over time. Robert Cialdini: That's right. When it was received, but what he first published, it didn't do well at all. In fact, my publisher at the time ­withdrew the promotion and publicity or she has put into the funds saying it "would be like throwing money down a pit." But about three or moment before delivering four years later, the book started to gain popularity and rise to bestseller that message." status, where it's stayed ever since. Had anything happened that made­ people­­­ more receptive to the book at ­ that point? I think it had to do with two things ­ that were happening simultaneously. ­First, the idea of evidence-based ­decision-making had begun to sweep the major institutions of our society: business, education, government and even sports. Influence provided a ­concise, collected set of evidence 77.3% about the persuasion process and which factors lend themselves to 29% ­success within that process. In a lot of the earlier books on persuasion, the authors would ­describe a successful campaign but not isolate the factors of mall shoppers agreed agreed when ­asked first if to participate in an they ­considered ­themselves that caused it. Influence did isolate uncompensated survey. to be a helpful person. those factors. The other thing that helped make Influenc­ e so popular was that, even though the book wasn't selling very well initially in the trade market, it was doing quite Was there a particular insight that question, "Do you consider yourself ­a well in university classrooms, especial- "pre-suaded" you? helpful person?" then suddenly 77.3% ly in MBA courses. Three to four years Two things happened. The first was a set ­volunteered. later, those MBA students became of studies on persuasion that didn't I started to see a lot of studies like that: ­ managers and they started ordering r ­eally have to do with what you did or For instance, an online furniture store the book in bulk for their teams. said inside your message, but what you ­divided its customers into two groups. It's been 33 years since the first edition did or said immediately before deliver- They sent half their visitors to a of Influence. Why did Pre-suasion take ing it. For instance, I read one study ­landing page with fluffy clouds in so long? where researchers walked up to mall the background, and the visitors who I never really had an idea big enough to shoppers and started asking them ­ saw that initial image of softness then compete with Influence, and I didn't to ­participate in a marketing survey ­became much more interested in want to plant a set of bushes around for no compensation. Under those ­comfortable furniture. The other half the tree that Influence had become – ­circumstances, only 29% of the people were sent to a landing page that had with Influence 2, Influence 3 and agreed to participate. But when the ­pennies in the background, and these Influence­ 4 type of books. I wanted to ­researchers approached a second ­individuals then ended up making wait until I had a seed for another tree ­sample of mall shoppers and ­preceded ­decisions that were more based on a … another big idea. that request with a simple pre-suasive low price. Robert Cialdini Think:Act 22 73

Cialdini's six principles of Before they had encountered any persuasion ­person delivered the message? All of ­information on the site about the those things can pre-suade you. You come to some fairly frightening ­various sofas and chairs that were 1 available, they were already thinking conclusions about how easily people can about comfort or cost and behaved in Reciprocation: People be manipulated, noting for instance that a way consistent with that initial ­image. want to reciprocate for a psychologists have found that it's hard These studies just wouldn't leave me gift or other kindness. for people to think logically when they alone. They didn't fit the model I had hear music playing. Yet you suggest that 2 been using so far to understand social pre-suaders with good motivations will ­influence. Commitment and be more successful in the long run. Why Then a personal experience finally tripped ­consistency: People are you so confident? the switch: I answered a knock on my try to live up to their The last time I bought a television set, I door to find a man who was asking me commitments.­ was actually in an appliance store to to contribute to a charitable cause, to buy something else. I was not interest- 3 develop after-school programs for ed in buying a new big-screen TV, but ­children whose parents couldn't be Social proof: We look as I was walking down one of the aisles, with them for a time after school. This to our peers to reassure I saw one model that was on sale and I man didn't present any credentials to ourselves we've made started looking at it. A salesman came show me that he was associated with the right choice. up to me and he said, "I see you're this particular program and I hadn't ­interested in this TV. Let me tell you heard anything about this program, so 4 about it and why it's such a good deal.

it was a risky thing to give him money. But before I do, I want to tell you that Liking: It's easier to say But I gave him more than I normally it's our last one. And, I just got a call yes to people we know give to a legitimate organization. and like. from a woman who's on her way to buy Afterwards, I felt very good about it, but it. I just wanted to let you know." wondered what had gone on there. 5 Fifteen minutes later I was wheeling that And as I thought about it, I realized I set out of the store. Now, I write books gave him that much money because he Authority: People want on pre-suasion and social influence brought his 7-year-old daughter with to follow the lead of and I was still susceptible to this! people they believe to him. She was hiding behind him, But here's the point of the story that has be experts. hanging onto his pants leg, peeking to do with the ethics of it all: If the out at me. He established a state of salesman was telling me the truth, I 6 mind in which I had elevated the consider him an ally. I wanted that ­importance of young children in my Scarcity: The more ­information to make a decision that ­decision-making process, the same rare and uncommon would be best for me. If he was deceiv- way those furniture store operators ­something is, the more ing me, to scare me into this purchase, ­elevated comfort or cost before people will want it. then I would consider him an enemy. ­providing information. And that's So I went back to the store the next day, to when I thought to myself: "This is an see if another TV had been brought in idea that's worth writing a book about." from the storeroom. But, no, there was What's the best way to resist still an empty spot on the shelf. After pre-suasion? that, I went online and I wrote a It's the mirror image of what I would say His new ­positive review of that store and the to a communicator: You need to think principle of salesperson. If there had been another not only about what a communicator pre-suasion: of the same set on the shelf, I would has put into the message you have have written a very negative review.

­received, but what he or she has put That's the way I think we have to deal with Often, it's not necessary into the moment before delivering that to change somebody's this process. We shouldn't be resistant message. What was depicted on the mind. To win agreement, to pre-suasive techniques if they steer landing page of that website you are you just need to change us correctly. We should only resist visiting? What did this person say to what's uppermost in the them if they are used in deceptive ways. you first before delivering a message? person's thoughts at the And, we should reward and punish What was the setting in which this moment of decision. ­accordingly. 74 Think:Act 22 Blockchain

Diamonds, Tuna and Pop Songs How creative blockchain pioneers are adapting the new technology to work way beyond the world of finance.

b b Janet Anderson

ust imagine that your electric car needs A key technology behind this vision is blockchain, a ­charging. Today, armed with your smart-­ form of data storage that records blocks of data in J phone, you can find the nearest charging sta- chains across a decentralized database. Since its first tion. But suppose your car simply charged its- appearance in 2008 as the technology behind the elf from inductive charge poles under the road, as it ­digital cryptocurrency, the Bitcoin, other blockchain stands at a traffic light, the cost automatically debited platforms have emerged. According to a report by from your account at the end of the day, without you IBM, 15% of global banks are ready to roll out having to think about it? By making charging easier ­commercial blockchain products in 2017. Beyond the and ­removing the anxiety of running out, it would ­world of fintech, governments are investigating po- help boost the uptake of sustainable transport. tential applications such as reducing tax fraud photo: getty images, wragg the mine. leaves diamond A rough Process. Kimberley under the as conflict-free It iscertified being revealed. and true its resold without be cannot ­diamond The stolen 1 provenance ­ ­ identity

2 9 and polished. where itiscut the gemmarket distributed to The diamondis insurers. to the policeand theft isreported stolen, the is Ifdiamond the blockchain helps technology fight diamonds conflict from zones. fraud and prevents the saleof andprevents fraud By providing proof ofcustody, The B and D marketplace. international on the a permanent identity The diamondnow has 3

lockchain lockchain iamonds 8 the diamond. house grades A certification ­retrospectively. cannot bealtered data recorded, the blocks, so that once into achainof ledger islinked Data in the digital and time-stamped. event isrecorded marketplace, the resold on the open diamond issoldand Each timethe

4 7 metadata points. as well as40other the girdle of the stone, laser inscription on clarity, cutand the ing itscarat, color, the diamond,describ- ofdigital thumbprint Everledger paper Alongside the finished jewelry. consumers as retailed to then metals, and set into precious The diamondis 5 6 ­ certification, ­ cr eates a digital ledger. decentralized is heldona because it tamper-proof is secure and data base. The tributed data- blockchain dis- entered onto a This datais 76 Think:Act 22 Blockchain "We track diamonds from mine to market,

and running elections. What ­makes blockchain so providing peace ­revolutionary is its potential to remove the middle- man. Described as the technology that adds a layer of trust to the internet, it makes possible secure online of mind for transactions through a distributed database that ­records events in time-stamped blocks. With each block in the decentralized digital ledger linked to a buyers previous block, blockchain creates an immutable ­record of events – once recorded, the data cannot be and saving altered ­retrospectively. Value can be exchanged more quickly, safely and cheaply. "Distributed ledger technologies have the poten- insurers a lot tial to disrupt large sectors of our socio-economic ­systems," says Paolo Tasca, executive director of the Centre for Blockchain Technologies at ­University of money." College London in the UK. In addition to the ­financial sector, Tasca believes all kinds of industries could be Leanne Kemp, Founder of Everledger transformed, from healthcare, pharma and energy to logistics, media and telecommunication. In particular, he believes industries where copy- right infringement is a problem could benefit from this new technology. "As a registry of ownership, ­it could raise transparency and solve the copyright In the luxury goods sector, provenance is of the ­problem," says Tasca. ­essence. Fraud costs the insurance industry millions No wonder, then, that pioneers in the creative of dollars every year. To tackle this issue for the ­industries, where copyright infringement causes ­diamond trade, London-based company Everledger ­economic damage amounting to $100 billion a year, has built a verification system on the blockchain are ­exploring the possibilities offered by blockchain. which will serve insurance companies, banks, mining companies, certification houses and retailers. The Protecting music and luxury goods technology enables them to record diamonds within hours of them leaving the mine and track their flow Grammy Award-winning musician Imogen Heap was through the supply chain. Fraudulent claims are so grabbed by the potential of blockchain technology quickly detected by cross-referencing data sources. to tackle the complex issue of music copyright in the Leanne Kemp, Everledger's founder, came to this online world, that she founded an organization, ­Mycelia, idea after 25 years of experience with emerging tech- to bring people together to work on these ideas. nologies in supply chain, jewelry and the insurance With blockchain technology, Heap sees the foun- ­sector. "Diamonds gain a recorded identity through dation of a sustainable ecosystem for music – one in the certification process, where arguably their value which payments are sent directly and automatically is attributed. Traditionally, provenance is recorded in to the artist. She has already experimented with its a documentation process which has been proven to ­potential by releasing a song, Tiny Human, with block- show vulnerability and is open to tampering. chain. When the song is bought, a smart contract ­Fraudulent practices are therefore widespread," she sends the payment almost instantly to the digital wal- ­explains. "We track diamonds from mine to market, lets of all the creators. Better still, fans can not only capture the DNA of each one and inscribe it into the see all the credits and lyrics, they can also purchase blockchain, providing peace of mind for buyers and the stems (the audio files that split a track into its saving insurers a lot of money." ­consitutent parts) separately or together, decide what Everledger has over 1,000,000 certified diamonds kind of license to buy and see in detail how each ­artist on its distributed database, with thousands more

that contributed to the work will be recompensed. ­added daily. Key to its success is the ability of diff­erent lefranc, polaris david laif, photo: Think:Act 22 77

­products to inform purchasing decisions at any stage of a material's life. Provenance has already shown how sustainably caught tuna fish can be tracked from the initial catch to transport, market, export and eventually a supermarket shelf. It has begun working with a UK supermarket chain to see how the idea can be applied more widely.

Unlocking the sharing economy

Perhaps the ultimate test for the blockchain is ­its connection to the sharing economy and the physical world, explains Stephan Tual, co-founder of Slock.it. For example, if you can send money to a lock to ­unlock it, you can rent the locked property directly to others. Slock.it has worked on that very idea and also applied it to the area of mobility developing a blockchain-­ backed system that enables users to access the best mobility option available, public transport or car ­sharing, without having to register or buy tickets. Next, the team looked at sharing other assets, like utilities. With Share&Charge, owners of charging ­stations can sell electricity to electric car owners ­directly, enabling the charging station owners to ­recoup the cost of installation and providing electric car owners the convenience of more charging stations. from SEA to shelf Blockchain technology is even being Now they are working on the idea described at the extended to track sustainably caught tuna fish. beginning of this article – a car that charges itself while standing at the lights. "Without blockchain this would not be possible," says Tual. "A credit card payment takes several seconds to be approved. You can't wait that long at the lights – the transaction has to be instant." stakeholders from across the industry to work Tasca explains the benefits. "Uber, Airbnb and ­together. The diamond industry was ready for such other intermediary platforms create value exclusively collaboration, says Kemp, having worked together Everledger for their shareholders. I believe that distributed ledger ­since 2000 under the United Nations Kimberley technology can open the way to an authentic sharing ­Process, established to prevent the illegal trade in Founded by Leanne economy where end users are the only beneficiaries of ­diamonds. Everledger binds the industry closer to Kemp, Everledger the market value generated by the platforms," he says. ­tackle these problems. "It's a data relay race as dia- is using blockchain He predicts a bright future for blockchain: "It will monds pass from hand to hand," says Kemp. to document and bring us to the point where all social, business and Kemp believes that with consumers wanting to track diamonds, political connection will be disintermediated on a know more about the source of products, there is­ offering both peace vast scale," he predicts. Looking ahead 20 years or ­potential to apply the technology more widely across of mind to buyers more, Tasca already wonders what a blockchain-based­ and huge savings to the retail industry. society would look like: "If institutions become insurers. She intends Provenance, also based in London, aims to do just to ­expand the self-sustainable – run by algorithms where everything that. Their blockchain-based platform allows busines- company's service to is recorded, tamper-proof, self-enforceable and, ses to share information about the origins of their include other luxury ­although anonymous, open and accessible to all – will products and track the journey across the supply goods, from fine art this change their traditional role as ­structures and chain. Their goal is to build an open registry for to jewelry and wine. mechanisms of markets and social order?" Thinking

Gut feelings Gerd Gigerenzer believes in trusting Fast and in yourself to make the right decisions. Frugal Psychologist Gerd Gigerenzer has some radical views on risk, error culture and getting back to the basics of decision-making. Here he offers a simple way to tackle complexity: trust your instincts.

by Gerd Gigerenzer in conversation with Bennett Voyles

fter decades of studying how the carpet; and if they can’t be hidden, people think about risk, I’ve someone must be blamed. A learned a lot about why people This leads to defensive decision- make good and bad decisions. making. You might believe that Option A But unlike Daniel Kahneman, Richard would be the best for the company, but Thaler and the behavioral economists who ­instead you’ll look for a ­safer option – not have covered some of this same ground the one that’s the best for the company, and concluded that human beings are but the one that protects you from being doomed to keep repeating their mistakes, blamed or fired. This seems to be very I’ve reached a more positive conclusion. common: I have analyzed several large The truth is that left to our own devic- ­international companies and found that es, we actually make a lot of good choices. about every second to third decision is Where we go wrong is typically either ­defensive – and that’s by self-report, so ­because of social pressure or simple risk probably the figures are higher. illiteracy – and both those conditions can Companies with positive error cul- be cured. tures tend to make fewer mistakes in the Most sub-optimal decisions begin end because they have a system where the with the error culture of our institutions. many can learn from the few. Thanks to In business, for instance, most corpora- their positive error culture, airlines, for tions I know have a negative error culture: ­instance, now have next to no crashes. You They believe errors should never occur; if only need to drive 12 miles to equal the they occur, they should be hidden under risk of 1,000 miles on a commercial jet. Gerd Gigerenzer Think:Act 22 79

Contrast that to the negative error culture But organizations can be very resistant to that still prevails in the medical ­profession, such deep-seated cultural change. Even where mistakes are never permissible and when lives are on the line, people may not generally dangerous to ­acknowledge. In budge: US hospital executives have known "Intuition is Germany alone, an estimated 19,000 pa- for more than 10 years now that two thirds tients are killed by ­preventable errors ev- of the estimated 29,000 people a year who a form of ery year; in the US, the number reported die of catheter infections could be saved exceeds 100,000. by following a simple five-point hygiene It’s a shocking statistic. A student of checklist, yet today, 10 years later, only a unconscious mine, a captain of Lufthansa, recently few hospitals have adopted checklists. wrote a dissertation that compared error intelligence." cultures in commercial aviation and in Cut out the noise hospitals. When we had our first meeting with the head of a clinic and the head of Another key to better decision-making – every 50 grams of sausage or processed Lufthansa safety, the Lufthansa safety either at the organizational or the individ- meat we eat on a daily basis, our risk of ­officer told the clinic head: “If we had an ual level – is to focus on heuristics. Much getting colon cancer increases by 18%. So error culture like yours, we would crash a of the information we get is noise, and you might think, no sausage, because out plane every day.” noise can be disorienting. Often, a simple of 100 people, 18% get colon cancer. No – rule of thumb can reduce the complexity WHO’s number is a relative risk: Eating Say goodbye to guilt of the choice and lead to a better decision. sausage raises the chance of getting colon In the last financial crisis, for instance, the cancer – not dying from it, but getting it – How do you build a positive error culture? complex calculations of the rating agen- from 5% to a little less than 6%. Taking away the sense of shame is the key. cies were not the solution, but rather part But attitudes are changing. People in In a positive error culture, the key ques- of the problem. many fields are now looking for clearer tion is not who is guilty, but how we can Understanding the numbers you read ­information and simple heuristics that change the system that it’s less likely to can also lead to better decisions. Risk illit- make it easier to act on that information. happen again. eracy is endemic in our society, and not For instance, my team is working with The airlines do it by working with just among the general public: In our stud- Andy Haldane, the chief economist of the checklists to reduce the chances of miss- ies, we find that 70-80% of doctors do not Bank of England, to test ­simple heuristics ing a step. They also have a critical inci- understand health statistics. It’s not that – fast and frugal three-question decision dent reporting system that enables a pilot they are stupid, they just have no training. trees to estimate bank volatility and other to write down near misses so they can add Most medical schools don’t teach think- solvency factors, because we find that just measures that further reduce the risk. ing: They mainly teach learning by heart. a few measures can often do a better job Good role models at the top also help As a result, many doctors don’t know the assessing risk than a 50-factor algorithm. a lot. If you’re a top executive who was in- scientific evidence in their field and can Finally, we encourage people to trust volved in a decision that didn’t work out, be steered – or nudged – in any direction. their gut instincts more. Pursuing heuris- the way to begin to change your culture is The World Health Organization has tics and intuition at once might sound to discuss it with your team and say: “Look, recently warned us, for example, that for contradictory, but studies show that peo- I was part of that decision. We know it was ple who have many years of experience a bad decision. Let’s think about how we with a certain type of problem can trust got there.” their gut more than people new to the There are a lot of other things you can field. Intuition is a form of unconscious do as well to reassure people. At one com- intelligence that lets them feel something pany we worked with, managers issued faster than they can explain it. Monopoly-style “Get Out of Jail Free” The 17th century gave us a probabilis- cards with the explicit instruction that if Gerd Gigerenzer tic revolution. But more of the same can’t you take risks for your company and help us now, not in the many uncertain you’ve failed, just turn the card in and ­situations we face. We need a heuristics Director at the Max Planck there will be no questions asked. That Institute for Human revolution – in health, in wealth and in changed the entire culture, because now, ­Development and at the risk literacy, or else we will not be able to if you haven’t turned in your card for three Harding ­Center for Risk sustain an informed citizenship in a years, there is a big question mark over ­Literacy in Berlin, Gerd ­functional democracy. We want to use photo: jens passoth photo: you. Playing safe is no longer safe. Gigerenzer is also the author ­algorithms, not be used by algorithms. of Simply Rational: ­Decision Making in the Real World and Risk Savvy: How to Make Good Decisions. 80 Think:Act 22 food for thought

Take a deep dive and find out more in related articles, studies and Food for Thought magazines.

SMART CITIES Out of a maximum score of 100, the BLOCKCHAIN Get ready for change average city achieved 37 and only 19

Blockchain is set to change the way the of the 87 cities scored over 50 on the world does business. And it will transform the financial services industry. But block- Smart City Strategy Index. chain applications are not only a challenge to the traditional business models – they are also an opportunity for creating new ones and streamlining internal processes. Here are four use cases for blockchain in financial services, outline the major chal- lenges for quick blockchain adoption and propose a five-step approach for successful blockchain implementation.

→→ take the blockchain challenge Read about the five-step approach to jumpstarting blockchain opportunities ahead: http://rb.digital/2n8VejX

CENTRAL BANKS Cryptocurrency ahead

Central banks are standing on the precipice of change and the need to face up to new realities: Stricter financial market and bank regulation, increasing globalization, stiffer competition, complex organizations and digital innovations. In a two-part study, Roland Berger’s experts trace these developments from the central banks' pre-financial crisis position as a stabilizing institution through to the topic that should be topping the agenda of every digital bank today: Digital currency.

→→ envisioning an emerging Today’s central banks must 3 digital future 87 Top cities Cities face up to new realities and the time has come to embrace digital currency: http://rb.digital/2lRA9up Vienna is in first The number of global cities the http://rb.digital/2kwqFrr place with Chicago new study puts under the and Singapore close spotlight. behind. Think:Act 22 81

Representation of women in the houses of parliament [%]

10 %

SMART SENSORS E-MOBILITY INDEX Smart 1995 Rise and Clean machines cities are getting fall Stricter city emissions regula- 22% tions are setting the stage for connected In the smart sensors an electric vehicle breakthrough. industry, unit sales Roland Berger’s E-mobility With 87 smart cities around the globe are on a continual 2015 Index, conducted in collabo- there are almost as many different rise – 17% per ration with the Forschungs- approaches to smart strategies. In annum. But so is gesellschaft Kraftfahrwesen this first systematic study of its competition, and mbH Aachen (fka) explores the price per unit is fall- kind, Roland Berger examines new road ahead. With fresh ing at an annual rate +119% figures from the first quarter of currently implemented measures as of 8%. It’s time for 2017, we compare the positions well as those scheduled for future smart sensor players of the seven auto producing WOMEN IN AFRICA deployment in urban centers around to adopt smart nations – China, France, the world, scoring them on a scale strategies. Roland Germany, Italy, Japan, South Berger examines the Business boom of 0-100 to reflect a utopian ideal of Korea and the USA – relative strategic options seamless digital integration. The Sub-Saharan Africa lays claim to one another based on three that exist in the field. to the largest number of female indicators: technology, industry good news? More and more cities entrepreneurs in the world. In and market. A look at supply, are taking the necessary steps to →→ securing a this, the third “opus” of six in demand, and what’s to come. become smart cities. The less than piece of the pie the Women in Africa (WIA) se- Players in the smart sen- good news? Often they’re lacking ries leading up to the May 2017 →→ sizing up e-mobility’s sor market need strat- WIA Inaugural Summit, Roland players Our study looks at who’s connected end-to-end thinking. egies as demand and Berger addresses the key taking the lead in electric vehicles: competition soar: http:// Looking at strategic possibilities http://rb.digital/2i8VVLU rb.digital/2mfWv90 challenges preventing women across six interrelated action fields, from contributing more to the we take an in-depth look at where development of Africa despite there’s room for improvement – and their improved position over the just as importantly, who’s leading the last few decades. pack and why. We follow the success stories across three continents and →→ unlocking entrepre- neurial potential reveal that when it comes to being See what lies ahead at the upcoming smart, it doesn’t matter how big you Women in Africa Inaugural Summit: are or how much money you have. http://rb.digital/2fIHXPr There are 10 key pointers to follow along the way including: involving citizens, avoiding isolated solutions and ensuring data security. "It is clear that strengthening women's →→ urban progress and planning What makes a smart city? It has nothing to leadership leads to female empowerment." do with size or money, and everything to do illustrationen: gettyimages, comomolas; commons.wikipedia.org comomolas; gettyimages, illustrationen: with strategy: http://rb.digital/2m4BphD Cina Lawson, Minister of post and digital economy, Togo 82 Think:Act 22 Why trust matters

Transparency Can transparency replace trust? Transparency can replace part of trust. Real trust is about long-term aligned incentives, whereas Isn't Enough transparency is about espionage, it's about mak- ing sure that the other person can't violate what you want. It doesn't replace real trust. Often it's a good first step when trust is being broken – transparency can help create the next level to kind of start building it, but it is not real trust and it shouldn't be confused with real trust. Is personal sacrifice a necessary requirement for trust to grow? It is not necessary, but personal sacrifices are a­really good way to demonstrate a blind incentive. Here's an example: A waiter in a restaurant comes to the table and a person orders some- Dan Ariely thing. Let's say the person says they want to The best-selling ­order the fish and the waiter says, "Oh, don't author of ­order the fish, order the chicken, it's cheaper and Predictably better," and what happens afterwards is that Irrational, Dan ­everybody on the table listens to the advice of the Ariely wants you waiter, because the waiter has initially demon- to ask if you are strated that he's willing to sacrifice some of his really as rational own profits – the restaurant's and his tip – to give as you think. better advice. Now what would happen if the ­person ordered the fish and the waiter said, "Oh, don't order it, order the lobster. It's much more expensive but better." Would people trust him then? Absolutely not, because he hasn't ­uniquely demonstrated that he cares about the preferenc- es of the individuals. The point is that personal sacrifice is not necessary, but it's a good signal for aligned preferences. Can companies interact with individuals to promote trust?

Absolutely. If trust is about long-term aligned incen- klein maria design, christina twotype ustration: ill

tives, then companies can tell individuals that | they want their feedback. They can tell people that they want to understand what features they want in the future. They can basically create a pricing that is not just about the previous ­product but which extends into the future. You can say, for example, "If you give us feedback about the product, we will give you a discount for the next version," which basically kind of says, "We care about your input and we are willing to do something for it." So there are lots of ways, I think, that the companies can interact with Psychology professor and behavioral economist ­people to show that they care, that they're inter- dan ariely has spent decades researching subjects such ested in someone.

as the psychology of money, cheating and social justice. collection the forbes voss, stephen images, getty photo: Here he answers three questions on trust. IMPRINT

Publisher Executive Editor Design Copyright notice Charles-Edouard Bouée Regina Koerner Blasius Thätter The articles in this magazine are protected Roland Berger GmbH (Head of Global Marketing (Art Director) by copyright. All rights reserved. Sederanger 1 & Communications) Constantin Eberle, Disclaimer 80538 Munich Editor in Chief Axel Springer SE The articles in this magazine do not +49 89 9230-0 Neelima Mahajan Corporate Solutions necessarily reflect the opinion of the www.rolandberger.com publisher. Do you have any questions for Managing Editor Christian Hruschka, the editorial team? Please email us at: Katherine Noelling Christina Maria Klein, [email protected] Editor twotype design Are you interested in studies conducted by Mark Espiner Printing Roland Berger? Then please email us at: Axel Springer SE [email protected] Corporate Solutions Firmengruppe APPL, aprinta druck GmbH Published in May 2017 Uncertainty has reached a new pinnacle in politics, society and business. Visit www.rolandberger.com/nc and find out how to deal with it.