People often congratulate him on navigating Pimco through the financial crisis so successfully and ask, “How did you know what would happen?” His answer: We didn’t know. On the Friday before the weekend when Lehman Brothers failed, Pimco’s top managers went home leaving three scenarios on the whiteboard:

• Lehman gets rescued. They considered this by far the likeliest outcome.
• Lehman fails in an orderly manner, with thorough plans for unwinding its positions.
• Lehman fails in a disorderly manner. They believed the chance of this was less than 5%.

Pimco developed detailed plans for what to do in each scenario. So when the least likely scenario happened, the company responded confidently and quickly, including sending a lawyer to Lehman’s offices in person Monday morning to deliver critical instructions and documents.

Pimco didn’t try to predict the future; had it done so, it would have been wrong. Instead it imagined different futures and prepared for each one. People often object that this is wasteful, since most of the plans will never be used. But, says el-Erian, “it’s a lot less expensive to prepare plans for events that never happen than to have no plans for events that do happen.”

His larger point is that today’s environment is in many ways as crazy and unpredictable as the environment of September 2008, and we must prepare in the same way. “Secular stagnation” isn’t secular, he argues – it can’t last. Looking across the developed world, he believes the financial system is broken; “negative rates don’t work forever.” Politics are broken; fringe parties and movements can influence but can’t govern. And social systems are broken, as the widespread revolt against immigration shows. Today’s stagnation will end in the next two to three years, he says. But how?

Economists agree on the broad outline of what should be done. The prescription includes comprehensive reform of taxation, immigration, and social insurance across developed economies plus specific steps in particular countries, which together should spark a return to strong growth and more normal interest rates. But maybe none of that will happen, in which case “low growth becomes recession and artificial financial stability [maintained by aggressively easy monetary policy] becomes financial instability.”

If el-Erian is right, we’re headed for one of two starkly different futures, and soon. Which will it be? He has learned not to guess. “Our only hope,” he says, is to “think in scenarios, get cognitive diversity” into our discussions, and plan now for multiple futures – even the ones we think are highly unlikely.

#

We’re switching to a new email provider soon. To make sure you keep getting Power Sheet, please whitelist or add fortune@email.fortune.com to your address book.

You can share Power Sheet with friends and followers here.

What We're Reading Today

Viacom interim CEO steps down
CEO Tom Dooley took the helm of the company four weeks ago, after former CEO Philippe Dauman agreed to step down, ending his battle with Sumner Redstone. But Dooley's tenure will come to a close November 15; Viacom does not have a replacement ready and will begin a search. Los Angeles Times

Fortune's 40 Under 40 
Coming in as the top disruptor among the younger generation is CEO of the Bechtel Group Brendan Bechtel. He helms his family's engineering and construction company as it battles weak commodity prices and competition from China. Also making the list, Cruise Automation founders Daniel Kan and Kyle Vogt and Stitch Fix's Katrina Lake. Fortune

Ahmad Rahami flagged twice 
The FBI and other agencies are having to respond to the fact suspected New York City bomber Rahami was flagged multiple times over concerns of terrorist ties. First incident came in March 2014, when Rahami returned from Pakistan after traveling for nearly a year. The second, five months later, Rahami's father warned officials that he was concerned his son had terrorist sympathies.  NYT

North Carolina governor declares state of emergency for Charlotte
Gov. Pat McCrory made the declaration yesterday, after a new wave of protests erupted at a prayer vigil for Keith Lamont Scott, who was killed from shots fired by a police officer. The National Guard has moved in to help end the protests. One person was in critical condition after being shot by another civilian, according to authorities. ABC News

Building a Better Leader

In order to measure leadership potential...
...look for high levels of integrity, which builds trust among employees. The potential is difficult to determine, though, based on one's leadership style. Harvard Business Review

In order for companies to want to tackle a social problem...
...there must be a business incentive as well. If they recognize new market opportunities, then they will provide resources to improve the situation. Fortune

To prevent overworking...
...make a plan to discourage you from tackling email on weekends or forgetting lunch. Using your staff or company resources can help you stick to the plan. Inc.

Facing Scrutiny

Chipotle makes push to woo back customers
In a marketing campaign focused on print and digital ads, Chipotle is outlining what it will do to protect its food, including highlighting eight food safety changes. It's an attempt by the fast food chain to encourage customers to return since the E. Coli scares late last year kept many away. Co-CEO Steve Ells says, "in 2015 we failed to live up to our own food safety standards, and in so doing we let our customers down." Yahoo

Leon Cooperman responds to insider trading allegations
The SEC charged Cooperman and his hedge fund, Omega Advisors, with insider trading yesterday morning. Shortly after, Cooperman told investors that he will fight the charges. He said the energy company in which the case centers around was one that the fund had already invested over $100 million in prior to receiving the information. And he continued to buy the company after the information became public, according to a letter to investors. Fortune

Mylan CEO faces a heated House
CEO Heather Bresch took questions from members of the House Oversight and Government Reform committee, trying to explain why the EpiPen's price increased so much over the past decade. She said that the company only makes about $100 on an EpiPen two pack priced at $609. But the committee mostly chastised Bresch for the practice; little was discussed in ways of fixing the price hikes. WSJ

Up or Out

David Hoffmann, a former McDonald's executive, has become Dunkin' Donuts' president of U.S. and Canada.  WSJ

Rolls-Royce has hired Stephen Daintith as CFO.  Reuters

Fortune Reads and Videos

The amount Donald Trump might pay the IRS...
...over concerns that he used his non-profit, the Trump Foundation, to solve personal issues could be surprisingly little. Just $700,000 according to Fortune's calculations.  Fortune

A power plant fire in Puerto Rico...
...led to an entire-island blackout. The initial fire set off other fires at other plants as generators malfunctioned. The cause of the original fire is unknown. Fortune

Twitter receives 2% more requests...
...for user information from government agencies in the first six months of 2016, compared to the last six months of 2015. Fortune

Can 'clean bacon' become a thing?
Panera hopes so as it introduces bacon that's free of artificial additives and from pigs that aren't given antibiotics. Fortune

Quote of the Day