General Stanley McChrystal’s risk management lessons

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Good afternoon, and welcome to today's FT Future Forum and Board Director event. I'm Andrew Hill, senior business writer at the Financial Times. And I'm delighted to be able to interview and introduce to you this afternoon four-star General Stanley McChrystal, who I was embarrassed to see has a shorter bio than I do.

But since he was once described as one of America's greatest warriors by the US secretary of defense, there isn't much more to add to that. So the general has authorised me to address him as Stan. I mention that because I was once admonished by an audience member for not addressing an officer on a panel I was chairing by her rank.

But more relevant to today's discussion on risk is his latest book, Risk: A User's Guide, a highly readable primer on how to handle risk. And in it he writes: "While there's little we can do to avoid or eliminate many of the threats we encounter in daily life, our ability to effectively defend against external risks is something we can control." But now we've got actual war in Europe. So Stan, welcome. How would you advise our audience to go about tackling or defending themselves against today's many risks?

So what I'd say is we need to start with the recognition that we are going to face a series of crises or risks. And so there are a couple of options. You can get in the foetal position, get in the corner, and sob quietly until it all goes away. Or you can get yourself ready for what's coming.

I've joked with a lot of people, and it's only partially a joke. If I was ever put in command of Afghanistan again, what would I suggest as the preparation for the strategy? And I'd say I would take the president, the vice-president, director of the CIA, myself, secretary of defence and go whitewater rafting. And I would take several cases of beer, and I'd go out for five or six days. And I wouldn't talk about war or politics. I would just take that team and go through something that bonds them as individuals, build some trust, build some empathy between them.

Does a plan serve any purpose for risk preparation?

Dwight David Eisenhower, general, then president of the United States said something that I think is absolutely true. He says: "The value is not in the plan. The value is in the planning." Because, in my experience, you put together a plan, and it seems like a great one, but it never executes as you expected it to. But when you go through the planning process you learn about the situation. You learn about what your capabilities are. You essentially develop a range of things that you can do.

And therefore, the plan is really just a start-off point. As we joke, everybody's got a plan until you get punched in the face, and you always get punched in the face. But if you're in good physical condition, if you know how to box, if you know all those other things, that's not fatal. That's expected.

We sometimes talk about moral licencing and whatnot. If we make one person responsible for something, it basically absolves the rest of us from responsibility. In the book we describe the case in Lehman Brothers where they created a chief risk officer. But then that chief risk officer, for all her expertise and responsibilities, wasn't brought into the investment committee.

Another audience member asks - and this is a version of what we were discussing right at the beginning - how do you judge the risk-reward ratio in complex, real-time environments? And what are the key criteria to decide if the risk is worth taking? I mean you talk in the book about 10 dimensions.

By what measure do we make ourselves weak? First off, when we understand - and we'll take Covid - what failed first on Covid? I would argue the first thing that failed was communication, starting with China, then across different governments, then communication between public health agencies and publics, particularly in my country. That communication became problematic because it lost its credibility with the people.

Now in some cases it was unintentional mistakes. Some cases, it was politics. But the reality was we didn't communicate what the situation was, what we needed to do about it, and then establish a narrative around which essential leaders could mobilise the population to mobilise activities effectively.

And there was a critical moment, probably and I'll call it two months or so, when they could have gotten that right - maybe late December to February. And by the end of February of 2020 that trust was broken. And so now people had different narratives about what the threat was and what we should do about it.

I'm just wondering how you would suggest dealing with... and I'm talking about the Ukraine-Russia situation here... dealing with an unpredictable leader, an unpredictable opponent, Vladimir Putin in this case. Are there ways in which the same techniques of preparation for unpredictable risks work against an unpredictable individual?

There's no single world leader who is going to determine what happens at the end of the day in Ukraine. Putin is the single most powerful leader because he's disproportionately powerful inside Russia. And therefore, at least in the near term, he can deliver what Russia is going to do.

Look at any of the other international leaders, whether it's President Biden or Macron or Johnson, none of them has the ability to deliver their nation's foreign policy without doing a lot of co-ordination and deals and whatnot. They are constrained because they operate in pluralistic situations. And then nobody can deliver Nato because that's also a set of agreements.

Now there's strength in that. But the reality is there's exceptional limitations to that as well. But to personalise this, at the same time, I would turn around and say people do matter a lot because individual egos, individual slights, even in meetings will affect how a person responds to a situation.

But there's a question from the audience that just points to the potential dark side of this asking, do you have any practical advice on avoiding groupthink?

The leader has got to create an environment where they've got people around them who not only feel that they can speak up but feel an absolute responsibility to point out the things that haven't been raised, to point out the things that are maybe counterarguments or dangers in a situation. And you can't rely on getting lucky to bring an outsider in who will do that. You've got to create a dynamic within your own team that ferrets that out, that ensures that perspective is always put on the table.