Once upon a time the world was flat, as Thomas Friedman said, and CEOs didn’t need to check their phones over dinner. Now, it’s one crisis after another: All bets are off when it comes to supply chains and trade routes, auditors allege “material uncertainty” over the accounts and boards note election dates in rich countries. “Government relations” is no longer a corporate backwater.

The war in Ukraine, Brexit, the protests provoked in France, the Trump presidency followed by Biden’s Inflation Reduction Act: they were all products of politics, of voters and leaders behaving in ways that did not fit the the globalization paradigm. Executives who weathered the 2008 financial crisis and the Covid-19 pandemic were already daunted by the challenges of the energy transition, diversity, and AI. Now they also have to worry about politics. It’s not just governments that need a foreign policy anymore: every big business needs it too.

If you are going to shift your supply chain away from China, where are you going? India, Vietnam, Morocco? What risks are insurable? What activities can survive political turmoil? This is a war game of the kind that generals used to do. Economic and political uncertainty led to more FTSE-listed companies issuing profit warnings in the third quarter of last year than in any comparable period since the global financial crisis.

Speaking to executives at corporate conferences in the US and UK, it seems to me that no leader can overcome every challenge. Instead, big business needs something like a political director. He is not an ex-politician selling a contact list that will expire when his party loses office. Instead, this would be a technocrat who understands that the government is a constant triangulation between parliament, party and press; that politicians rarely get ahead of public opinion on any issue; that, unlike business, there is no simple end result. And he should be someone who can forge a new era of cooperation between two sides that often downright despise each other.

In recent years, Western industry and governments have not had to worry much about each other. Aside from the financial crisis, they largely operated in silos, with little mutual understanding. But governments are becoming more interventionist. Biden’s chip and energy legislation is not just forcing other countries to respond; Technological advances will make regulation a hallmark of this decade. When even the creator of ChatGPT calls for security measures for the AI, it is a turning point.

Meanwhile, climate change is affecting the way nations think about farming, construction, and travel. Genetic testing is still largely unregulated; New gene editing techniques have the potential to permanently alter future generations. These issues are being discussed by eminent scientists, but politicians must also enter the fray to do battle with business experts and innovators. Are governments capable of meeting the challenges? They have been notoriously clumsy and slow to regulate fast-moving technologies.

Upping your game will mean working together with the business instead of getting caught up in lobbyists. The “revolving door” often gets a bad rap: when former German Chancellor Gerhard Schröder became president of Nord Stream 2, it was arguably the worst kind of cronyism. But it hasn’t hurt Kyriakos Mitsotakis, the quietly impressive Greek prime minister, to have spent a decade in finance. Experiencing what it’s like on the other side can foster more respect and less naivety that leads to regulatory capture.

Business leaders often find politics completely bewildering, like a whole new language. In the UK, I am not surprised that so many executives are horrified by politics and prefer to stay out of it. Five prime ministers in seven years have made wild political swings, despite wearing the same party tag. David Cameron accidentally created Brexit, Boris Johnson had no plan for it, and Liz Truss gave the nation the “idiot cousin” in the form of higher mortgages. Even before that, business people who entered government often went under.

For its part, the government must stop treating trade relations as mere theater and find ways to listen. At different stages of my career, I have sat on different sides of the table in meetings between CEOs and government ministers. I have seen CEOs fail to communicate clearly, not understanding what is and is not in the government gift, and I have seen ministers fail to realize that no one will say anything useful if their competitor is in the room.

Businesses will also be affected by trade-offs that governments make between the economy and national security. It is possible that this could change which institutions can really fail. Banks, insurers, energy companies, railways, universities: theoretically self-employed in many countries can end up being protected in practice. Was the Fed’s decision to bail out uninsured depositors at Silicon Valley Bank a sign of things to come?

A political director would have to tolerate ambiguity. The level of uncertainty is exhausting and may be why the average age of new CEOs is falling for the first time. Former US Lieutenant General and National Security Adviser HR McMaster once described the post-Cold War period as a “vacation from history”. But now, geopolitics is back with a bang. The bosses must organize their own generals, who can bear the dirt of politics.


Leave a Reply

Your email address will not be published. Required fields are marked *