5 Ways Leaders Can Adapt to Shifting Geopolitics | Nikolaus S. Lang | TED

7,333 views ・ 2024-11-06

TED


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Have you been sleeping for the last 30 years?
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Well, if we believe former Polish Prime Minister Mateusz Morawiecki,
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we all have been napping since the early 1990s.
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At least geopolitically speaking.
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Why?
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Well, join me at the Munich Security Conference,
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one of the world's foremost conferences on national security and defense,
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on the 19 of February, 2022.
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Five days before the Russian full-scale invasion of Ukraine.
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With 190,000 soldiers waiting at the border.
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Leaders such as Kamala Harris, Ursula von der Leyen,
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Antony Blinken and Volodymyr Zelensky
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are discussing the future of war and peace in Munich.
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In this unique, historic and tense situation
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Prime Minister Morawiecki urges the world
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to wake up from years and decades of geopolitical napping.
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So you'll get a wake-up call.
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In fact, when we look at our realities -- personal, business, political --
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we see the outsized impact of geopolitics on all our lives.
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Now, what is interesting is that while companies are struggling
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with the challenges of AI revolution,
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of high interest rates, of labor shortages, of climate change,
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they tend to overlook geopolitics.
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Luckily, I think that we have a window of opportunity
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to really up our game.
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To develop what I call the geopolitical muscle.
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No worries, I have no shares in any gym chain.
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But I think that developing a geopolitical muscle,
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meaning having the possibility to understand the challenges
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and the navigation of the new realities, is key.
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Now, talking about new realities.
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I lead the BCG Henderson Institute
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and BCG's Center for Geopolitics.
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And in this role,
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I have spoken, over the last two years,
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with 500 CEOs,
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executive committees and boards around the world,
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literally from southern Chile to northern Japan.
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In these discussions,
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my counterparts asked me, "Nikolaus,
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how will the world in the 2030s be?
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How is our future?"
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Well, I'm not an oracle.
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But I like to work with scenarios.
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What are scenarios?
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Scenarios are images of the future.
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And you know what's really beautiful about scenarios?
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They are precisely wrong,
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but generally right.
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So what's the most favorite scenario all over the world,
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from southern Chile to northern Japan?
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It's a scenario which we call "back to the future."
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It's actually the world of the 1990s, the early 2000s,
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a time where democracy was prevailing,
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free trade was flowing,
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international organizations like the UN, WTO, World Bank were functioning.
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And of course, many of us grew up in this period.
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So no wonder that we want to be in a scenario like this one.
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But I have bad news for you.
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This scenario is very unlikely.
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Then there are other extremes.
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People saying we will end up in a global escalation of conflicts.
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We have seen huge conflicts with huge humanitarian toll
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and macroeconomic impact
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in Ukraine, in the Middle East, in Sudan.
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And we see here, obviously the worry of these people to say,
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well, will we see a proliferation of conflicts,
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notably in the Indo-Pacific,
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which will lead to an economic Armageddon?
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Well, here I tend to be slightly more optimistic,
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and I believe that this scenario of global escalation,
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notably because of the deep interlinkages in the Indo-Pacific,
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political and economic,
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is not likely to happen,
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at least in the short to medium term.
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So now you will ask me and say, "Nikolaus,
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OK, so no "back to the future,"
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no global escalation,
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so what's happening?"
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Well, I think the most likely scenarios for the 2030 is the multipolar world.
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What does it mean?
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Well, since 1945,
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we had a world that was dominated by one or two superpowers.
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I believe that the 2030s will see many powers,
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many spheres of influence.
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And let me go through a few of them.
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First, there is what I call the Western bloc,
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the United States, Europe,
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allies in North America, allies in Asia Pacific.
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This bloc is characterized by democracy and market economy.
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This bloc is collaborating technologically in topics such as AI,
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renewables, medtech and so on.
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Even militarily, this bloc has evolved.
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We have seen the reawakening of NATO as a response to the war in Ukraine
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and the US has developed a very interesting network of alliances
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in the Asia Pacific,
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including countries such as Japan, Korea, India,
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Australia and others,
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under interesting acronyms such as AUKUS or Quad.
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Then there is a second bloc,
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which I describe as the new Eastern Bloc.
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And that's actually China and Russia growing together
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with countries such as North Korea and Iran joining this bloc.
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The economic reality is that Russia is pumping gas into China
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via pipelines with the name Power of Siberia 1.
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And China is sending cars to flood Russian roads.
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But also, technologically, this bloc is trying to become independent,
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be it space exploration, semiconductors or and so on.
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The most interesting part of it is that technologically and militarily,
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this bloc is going to a completely different level.
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If you see the Iranian kamikaze drones in the skies over Kiev
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or the joint naval drills of the Iranian,
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the Russian and the Chinese navies
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in the Gulf of Oman, March of this year,
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military cooperation is becoming reality.
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And then there’s a third bloc.
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And I don’t call it bloc.
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I don’t want to call it bloc,
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because I think it's more of a grouping of countries,
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where we have a series of middle powers,
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regional powers such as India, Indonesia,
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the GCC countries,
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that are playing a role of staying in balance between those two blocs.
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These countries have huge assets,
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be it natural resources, abundant talent,
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interesting geographical position.
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And they leverage these assets to develop a non-aligned path
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between the two other blocs.
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And they develop spheres of influence across Asia, Africa,
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the Middle East and Latin America.
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So we are in this multipolar world.
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What does this mean for companies and corporate leaders?
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Companies and corporate leaders need to navigate
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and they need to develop a geopolitical muscle.
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Remember, corporate workout.
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So let me go through five exercises that companies need to do.
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First, build resilient supply chains.
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The operating model where you used to have a large factory
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at the lowest possible cost location on Earth, is dead.
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We have seen how pandemic,
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war and tariffs are destroying supply chains overnight.
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The new reality is you need to have a network of small factories
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all over the world.
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You need to have flexible supply chains
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that are able to respond to external shocks.
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Exercise two.
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Prepare for continued inflation and price volatility.
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I know no one wants to hear it,
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but I think the current discussion of price cuts is interesting.
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But the reality is that the cheap money of the 2010s is gone.
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Much more real is a continuous inflationary pressure
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we will see through geopolitical shifts,
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increased military spending and the cost of energy transition.
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So companies need to prepare in their investment
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and pricing decisions
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how to handle this continued inflationary pressure
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and pricing volatility.
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Third, design your organization for a fragmented world.
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The time where you were handling a company
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and a multinational company from one headquarter, is gone.
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In a world, in a multipolar world,
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where you have different economic systems,
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political ideologies and technical stacks,
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you will need to set up your company
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as a collection of regional command centers
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that are agile and independent
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and can perfectly adapt to the new realities.
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Fourth, prepare for cybersecurity.
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In a multipolar world
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where AI and asymmetric warfare are likely to become the new normal,
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companies need to prepare for cyber attacks,
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both on a system level,
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but also on an employee level and a culture level.
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Fifth, and this is the core of it,
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develop the geopolitical muscle.
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So what is it?
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It's about talent.
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It's about decision making.
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And it's about leadership.
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Talent.
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Companies need to hire
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and develop talent that is able to sense geopolitical shifts,
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that is able to think in scenarios,
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that is able to redesign supply chains,
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that is able to define new strategies.
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Second, decision making.
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While investment decisions and project decisions
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and strategies need, of course, to consider dimensions in finance,
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in legal and HR,
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it is critical to inject a geopolitical perspective
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in the way how you make decisions.
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And last on leadership,
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let me dream a little bit.
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I still think that managers continue to be good managers.
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But I would hope
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that their decision is also influenced by the way how historians,
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economists and politicians decide and think,
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in order to pivot their strategies to the new realities.
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So let me conclude this wake up call with a simple alternative.
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Either you continue with your geopolitical napping,
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(Laughter)
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or you build your geopolitical muscle.
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Thank you very much.
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(Applause)
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