The many leaders in business and government worldwide whose scenarios for 2017 did not include this scenario will now confront reality and adapt. Where to begin? Think of the job in three categories:
Adapting to massive policy uncertainty: Did Trump mean it when he said he might “renegotiate” – that is, default on – U.S. Treasury debt? That he would deploy a huge deportation force? That he would renege on America’s obligations under the NATO treaty and that he would encourage South Korea and Japan to develop nuclear weapons? It’s hard to say because he was apparently making up policy positions as he spoke. He has been consistent on only two points and is clearly on the hook to his supporters to deliver on them: imposing severe restrictions on immigration, especially by Mexicans and Muslims, including building a southern border wall; and reducing imports while also punishing U.S. companies that move operations abroad. Whether either initiative could win congressional approval is far from certain.
Which raises a larger uncertainty. Republicans will control the White House and both houses of Congress, but they aren’t even remotely united. Almost no senators endorsed Trump, and few representatives did; House Speaker Paul Ryan obviously detests Trump and opposes his positions on immigration, trade, taxes, and other issues. Or maybe Ryan won’t be speaker in the new Congress – another uncertainty. Federal policy, which would have been highly predictable (though unpopular among business leaders) under Clinton, has just become a giant mystery. Pay close attention to Trump’s early announcements of appointees, a leading indicator of where he may be going.
Adapting to second- and third-order effects: For many leaders, the ways in which others respond to a Trump presidency may be more significant than Trump’s own actions. What is Xi Jinping thinking as he contemplates a U.S. president who has virtually promised a trade war with China, and how will he respond preemptively? How about Vladimir Putin, quite possibly the happiest man in the world today? Stock markets plunged on the election news almost everywhere, except Russia. Will illegal immigrants, on whom U.S. agriculture and some other industries rely, flee the country? Leaders need to anticipate how others will behave and then go another level deeper and anticipate third-order effects. It’s time for 3-D chess.
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Adapting to the broader phenomenon: We always knew there were plenty of Americans who felt victimized by the globalizing economy, threatened by a more diverse, less white populace, affronted by a changing culture, especially with regard to sexual orientation, gender, and race.
What we didn’t know until now was how many such people there are and how powerfully angry they are. Very likely they didn’t realize it themselves. Now they know and the world knows, and the national conversation on nearly everything will change. Angry rejection of established authority is the new zeitgeist. Anyone who communicates with the American public needs a new strategy.
Many leaders have now learned the hard way that just because something is unthinkable doesn’t mean they needn’t think about it. Let’s hope they remember that lesson. For all we know, more unthinkable news could be on the way.