Few people I know are in a better position to take a step back and analyze the big picture on the risks to the world—and to business—than Gen. Stanley McChrystal, the retired four-star general who ran U.S. operations in Afghanistan. Over decades, he’s built as widely varied a resume as can be imagined, from running Ranger operations to stints at The Council On Foreign Relations and, more recently, on public company boards. Through this he’s developed a military-geopolitical-commercial-historical perspective that’s really second to none.
His firm, McChrystal Group ,was built to advise corporate leaders on how to better navigate exactly the kind of high-speed, high-volatility environment we’re in right now. He laid out his framework for doing so in his 2021 book, Risk: A Users Guide, which centers on the idea of building a core “risk immune system” rather than try to build contingencies for every possible challenge and change that can confront a business. (He hosted a Chief Executive masterclass on the framework earlier this month, and we spoke at length with him about it for an article in the last issue of Chief Executive.)
I talked with him Thursday night to get his sense of what was going on, how he’s advising CEOs and boards, and how to think through what happens next. Here are excerpts of that conversation, edited for length and clarity:
Were you surprised when you woke up [Thursday] morning at what happened?
I guess disappointed, not shocked. About a week ago, if you’d asked me I’d have said I thought that the release of intelligence the West has done might have dissuaded him from doing anything this dramatic. The last few days you could see the run-up to it so this morning it wasn’t a shock, but it was disappointing. I actually thought they might have been able to dissuade him.
It’s quite a thing to see, tanks, military vehicles on the roads of Europe. What do you think happens from here? Any guesses on how the next couple of innings play out over the next week or two in the conflict here?
It’s a real wild card. It appears that what Putin is trying to do is get as much done as quickly as he can. Likely he’s trying to cause the government of Zelenskyy to collapse so he can put in a more sympathetic government, more malleable to Russia. And potentially, he may try to permanently carve off the Donbas region. I wouldn’t write that off.
He may recognize them as separate sovereign entities within a larger Ukraine. But he could carve them off because he’s trying to reset the board before people tell him to stop, before the pressure rises to the point where he can’t do more, and so, [he’s] trying to get as much done as possible, I think.
Is this really, you think, about rebuilding that historic sense of a barrier between him and the West or is this something more about grandeur and his place in history? I guess it’s pretty tough to unpack what his aims are here.
He probably couldn’t answer that question himself. I think it’s probably a combination. He has a debt to the history of Russia in his own mind to try to reestablish those things which are appropriately Russia. He also has a personal ego. We know that and that ego has evolved over time. He’s changed as an individual. He was that KGB guy in the early years, but now he’s been a leader of a state that got disrespected for about two decades. And so, I think he now thinks he’s in the position and has the responsibility to [change that].
But I also think there are other pressures on him. There are oligarchs, there are other things that force him to take in some of these actions. So, my sense is that he’s not like a man with a mission, like Adolph Hitler had, a very clear ideologically-driven thing, in my view, but I think he is a person that has a pretty clear sense of, “I have gotta accomplish these things while the opportunity is still here.”
You talk to a lot of CEOs and boards through your firm and your personal connections. What are they calling and asking you about right now? And how are you advising them? What are you telling them about how to think through what to do over the next period that we’re facing?
Usually, the question is two parts. They first want know what’s happening inside Ukraine. And of course, we all can see what we see and I can give them with military experience, some sort of an assessment of what my view of actually happening on the ground, but then they ask, “Okay, what’s the next move? What’s the long-term implications of this? Is Putin trying to reestablish greater Russia or is he trying to reestablish the Soviet Union? Is this the harbinger of a new cold war? Is China going to align?”
These are all things they’ve heard about in the news and they’re trying to connect dots to think, what does this mean three years from now, five years from now? What’s it going to mean for energy prices? Where will Russia fit into this?
What are you telling them?
I’m telling them that I’m watching the tactical things like they are, and I’ll give them sort of an assessment of what it seems, but we’ll wait and see. On the longer part, and I don’t have any better crystal ball than anybody else that you know, but I do sense that some of the big historical factors that are moving now is that Russia is trying to get back into a position, at least, as a major world power. They are in many ways a declining power, demographically declining, economically declining, but nobody wants to believe that about their own nation.
So they are trying to get themselves in that position, which is liable to cause them to continue to be pretty aggressive. We’re seeing right now that they’ve got support from China. I’m not sure that that’s solid. It’s not in President Xi Jinping’s long-term interest to align with Russia because Russia’s doing things which are antithetical to traditional Chinese foreign policy of non-intervention.
But also China depends on markets in the world. And so, if we go into a cold war, like stasis with them on the wrong side, they’ll be in a disastrous position. So, my sense is China is apt to be doing some recalculation here. They may have done a very near-term thing supporting them in the UN, but I don’t think that that’s durable.
And so, my sense is several things happen. The China-Russia link doesn’t stay as strong as it appears this morning. Western Europe is likely to unite more than we have seen in a very long time. Now, how long that will last is always problematic. But at least as long as they feel that Russia and Putin himself are real potential threat, they are likely to unite and they can look at a map. They can see Poland, Lithuania, Latvia, Estonia are so incredibly vulnerable and I’m sure Finland and Sweden feel pretty vulnerable being outside of NATO right now.
So, my sense is we get this ramping up of NATO and greater European Alliance and stability. I think that’s all good. That really puts Russia in a pretty difficult position. So, in the near-term, they may make some real progress in Ukraine, but I think they have a worse position on the chessboard, six months from now than they did two days ago. I think that’s going to be a big factor.
You in your book and in the masterclass you did with us you talked about how 80% of all your preparedness for all kinds of crisis is the same, regardless of what it is. This kind of crisis can come at a business in a lot of knock-on, unpredictable ways—through energy prices, supply chain disruption, banking disruption—all kinds of things. What do CEOs need to do about what you call “the risk control factors” and the core? Because we really don’t know what vectors this is going to come at you from in the next few months, right?
You just nailed it because if they say, “I’ve got to try to predict what Vladimir Putin is going to do and exactly how that will play out,” that’s impossible. If you try to figure out certain scenarios and prepare for that particular one, then you’re preparing for something that’s almost assuredly not [inaudible].
As you said, what are the things that affect us? First, you could have supply chain disruptions, financial disruptions, certainly a huge spike in energy prices. You might start to have a call-up. I mean, we might have to go to some kind of shooting war and the United States might have to deploy a large number of forces. Now, you’ve got reservists going.
You’ve got all of the things that, that kind of a muscle movement by the nation would impact on a business. There are probably a thousand that you and I can’t think of, but I guess the first and foremost I’d say, if they can get their business in a boxer stance so that they are not cash poor, they are not in an ability where they’ve got this just in time supply chain that one hiccup, and their production stops.
Any of the things that they are dependent upon, that they don’t control, they better be looking at and say, “What resilience can I create into that?” And sometimes, it’s not as directly efficient in the long term, it doesn’t tighten everything down so you’re getting the maximum amount of profit, but it’s far more survivable when you get an upset.
Even if this Ukrainian event doesn’t turn out to be the big one, we’ve got all these other factors that are happening right now. There’s the likelihood they will shut down Nord Stream 2, that pipeline. So, energy prices are likely to be affected anyway. There’s of course all the pressures of inflation. So, even if Putin were to go home with these forces tomorrow, there’s enough out there that argues that for the next few years business ought to be really setting themselves up to be flexible.
A lot of people talking about the parallels of history, the Sudetenland and Hitler in 1938, about the way that inertia took us into World War I. Are these the right parallels? You’re a student of military history, like few other people I know. Talk a little bit about the pros and the cons, the pitfalls and the parallels of thinking about this in terms of these historical precedents that we have of out there.
It’s a very important way to think about it. Here’s how I approach it. I like to study history. And when you see things, you try to find a match. You say, “This is the Sudetenland. This is just like this.” The reality is I think that’s dangerous, because you’re looking for things to fit too closely. And if it doesn’t fit too closely, you’ve prepared for the wrong thing. Because Putin is not Hitler. On the other hand, Putin’s not a good guy, neither was Adolf Hitler, and there were a bunch of not-good people that arise.
So what I would tell people is understand that the idea, the reality that we have lived for the last 30 or 40 years where almost no national borders have changed. You know, you think about it. The post-World War II map looks an awful lot like now, and yet that traditionally borders change a lot.
So, the reality is borders do change. Autocrats do rise. People do start major wars. There are major upsets that happen in society. And those are the things that we ought to be understanding are absolutely possible. And when they happen, they start to get a momentum of their own.
The thing about something like Ukraine is you start small and then it’s like a fire. It’s got a certain geopolitical logic to it when it starts, but a year into it, it’s got a visceral, emotional side that is burning far hotter than the geopolitical logic of it. That is still our society. So, that’s what I would tell people. Just because something doesn’t make sense doesn’t mean it doesn’t happen. Prepare that way.