Shifts. Shocks. Fragility.

Most Annual Operating Plans happens in the horizons of one or two years. However, this doesn’t take into account the larger shifts happening in our environment and how vulnerable you are to it. Thus, by the time you get to it, the larger environment has already changed and you are still playing catch up. This is not only applicable to business/work but also to one’s career, one’s health and personal finance or even parenting.

Martin Wolf of the FT has a neat framework to help think through how the larger environment is changing. He argues that one should list the shifts, shocks, and fragility in your system and include them as factors in your planning.

• Shifts: Long-term structural changes that are occurring and are likely to continue. These changes are something you cannot control and have to adapt to.
• Shocks: Absolutely conceivable Black Swan events that could happen but we cannot forecast when and then they do happen — Covid-19, Israel-Palestine War, Russia-Ukraine War, etc.
• Underlying Fragility: Characteristics of the system that make these shocks so destructive.