Going Global

Key Questions For The 21st Century

Michael Moynagh and Richard Worsley

ISBN 978-0-7136-8866-5

There are very few of us – if any – who have not been touched by globalisation. In common with most phenomena, globalisation has its advocates and its detractors. For example, on the plus side, it is seen as the root cause of the rise of nations such as India and China, which, jointly, account for 100 million fewer people living in poverty each year. On the other hand, it has been responsible for the migration of jobs to the newly industrialising nations, causing great economic and social dislocation in Europe and North America. Globalisation is one of the key issues of our times. Michael Moynagh and Richard Worsley jointly run the Tomorrow Project. This is an organisation based in the UK that collates thinking about the future. The prospect of a futures perspective on the issue of globalisation is something that commended itself to me.

This is a great book. As a futures text, it is a bit narrow in scope and a bit too close to the present. But is it a futures text? If we turn the question around, the book does have a number of uses to which it could be well put. I see this as a good introductory text for ‘A’ Level and first year undergraduate students of economics and geopolitics. It would give them the language and basic concepts of globalisation. It could also provide a contemporary briefing for those engaged in the foundation level of their professional exams and for those is business who have a responsibility for strategy but who are not futurists. It could help them to understand some of the complexities of the world in which we live. As a text, the book is well written, the arguments flow naturally in a logical order and the book moves along at a good pace. This commends it as a good read. So, if you are looking for a good introduction to globalisation, then look no further than this book.

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Perfectly Unpredictable

A Meeting Organised By Gresham College

Gresham College, London, UK

28th January 2008

Speaker:

MICHAEL MAINELLI, Mercers’ Professor of Commerce, Gresham College

One of the hazards of being a Futurist is that we can too easily fall into the trap of prediction. We are frequently called upon to provide a view on how the future may take shape. In doing so, we ought to stress that the future is inherently unknowable. Claims to have a special knowledge of the future run the risk of being proved wrong. It is usually better for the Futurist to alert others of possible futures - the various directions which the future might take - or even probable futures that guess at the potential likelihood of different possible futures. This is very different to forecasting a single unique future that will occur. Most often, forecasts are just plain wrong. However, the process of forecasting is such that the conversation, if not the result, can be quite instructive. It was in this light that I was attracted to the lecture.

I quite liked the lecture. It was both stimulating and provocative. The argument was well constructed and the delivery kept things moving at a decent pace. Professor Mainelli appeared to have mastered his brief and presented it with great confidence. As entertainment it was extremely enjoyable. I would recommend the lecture series as both informative and enjoyable.

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Serious Games

My NLP contacts tell me that modelling desirable behaviours is an important part of our learning process. What does that mean in practice? When we have a target that we wish to achieve, we can look at those who have achieved the target in the past, determine the critical aspects of their winning performance, hone our performance to replicate those critical aspects, and then practice to replicate the technique. We may not be successful in achieving our quest, but we will certainly manage to raise our game. This is, after all, the basic business model of the tennis coach (football coach, cricket coach, etc., etc.).

We can also apply this technique to our work in the future. The basic aim of the scenario is to examine how, under a differing set of circumstances, various futures may evolve for us. If the scenarios are deductive (i.e. we focus on the end point), we have little opportunity to influence the final result. If, on the contrary, our scenarios are inductive (i.e. the focus on the pathways into the future), then we have the opportunity to explore the consequences of different decision sets upon a variety of future outcomes. This is the key to the serious game (also known as ‘corporate wargames’).

I had the pleasure of playing the Warm Game last year. This is a serious game produced by Z-Yen for the London Accord on Climate Change (more details). The game takes a simple model of climate change over the 21st Century and considers the implications of a number of possible policy stances of each of the six players. The base model examines the ‘free rider’ problem - if I reduce my Carbon emissions, you will benefit as much as me, but without any of the attendant cost - as it applies to the subject of climate change. As a simulation, the game does induce the same range of responses that we have seen so far on the subject of climate change, which implies that, although only a representation of reality, the game does produce some valid futures.

The issue of strategic foresight is currently towards to the top of the business news agenda. The impact of the ‘credit crunch’ can be interpreted as a monumental failure of strategic foresight by the monetary authorities in the UK. The first run on a bank in 150 years, the resultant nationalisation of that bank (dubbed as ‘the biggest bank robbery in history’ by its shareholders) and the loss of reputation that is being suffered by the City of London are the direct result of a corporate failure to join the dots to form a coherent strategy.

A key role within top management of an organisation is to assess the risks faced by that organisation. Future studies have a tool that can help to identify and weigh those risks – the process of scenario building. By using inductive scenarios, executives can use a behavioural model to explore how to react to a future state as it emerges. Not only can possible future states be identified, but how individuals (or teams) may react to those situations can be modelled.

In this way, teams of managers can learn how to deal with anticipatory crises. One wonders why so few managers do.

Obama Taps The Long Tail

Why is the fundraising effort of Senator Obama going so well, when that of Senator Clinton isn’t? There are a number of reasons why this might be the case, but one that caught my attention was reported in the New York Times (see article). It would appear that Senator Clinton has adopted a strategy of wooing a small number of large donors, whilst Senator Obama has adopted a strategy of wooing a huge number of tiny donors. It is a testament to the success of the Obama campaign that the Clinton campaign is, belatedly, adopting the technology of the internet in fundraising.

As I was reading the article, I couldn’t help but think about Chris Anderson’s book ‘The Long Tail’. The main thesis of the book – long known to economists – is that there is a huge consumer surplus waiting to be tapped from those priced out of the market. What has changed in the economics of business is that the traditional bricks and mortar method of delivery is more exclusive than the new clicks and mouse distribution model.

If we had to point to an exemplar in this field, then Amazon gives a fine example. If we limit ourselves to just the distribution of books, Amazon has a huge inventory when compared to traditional book stores. It has overcome the teething difficulties of distribution that plagued its early days – although Christmas can remain a problem – and now offers a service offering far better than our local book store.

Senator Obama has now moved that paradigm to campaign fundraising. Instead of wooing the great and the good (small numbers of very rich individuals – the Clintonistas), he has developed an internet based following that allows a huge number of individuals who make very modest campaign donations. The article mentions millions of contributors, 90% of whom contribute less than $100 and 40% of whom contribute $25 or less. In total, according to the New York Times, Senator Obama has collected $28 million in total in January.

This has had two important side effects. First, there is a bond with a far greater support base than the Clintionistas can deliver. Second, the automation of the fundraising has allowed Senator Obama greater amounts of time for campaigning, as opposed to fundraising. It is no wonder that he leads the race for the Democratic Nomination.

A more interesting question will be whether, if he does secure the nomination, he can then bring this performance to a Presidential race. If he does become President, then Senator Obama, by using the internet as a key communications tool, will have changed the face of American politics.

The Writing On The Wall

China And the West In The 21st Century

Will Hutton

ISBN 978-0-316-73018-1

It is a widely held view that the rise of China will dominate the economic and political landscape during the first half of the twenty-first century. Already we have felt the influence of the Chinese economy in holding down inflation rates (and interest rates) in the OECD nations and we are on the verge of witnessing the impact of Chinese diplomacy in Africa. Whichever way you look at it, the development of China is having an impact on our world. Will Hutton has a long pedigree of writing incisive commentaries on the major issues of the day that will have an impact on the near future. The combination of an important topic such as the rise of China and the lucidity of Will Hutton means that this is a work that ought not to be ignored.

I feel that the book can be well recommended. It is well researched, well written, and well argued. More importantly, it is an easy book to follow and has an appeal to a more general readership. If your life has been touched by the rise of China – and whose hasn’t? – then this book will help you to look at some of the possible futures that you might face.

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The Olderpreneurs

Is an ageing society a problem? When we see this issue discussed, it is normally in terms of dependency ratios (the number of people of working age supporting the number of people not of working age), potential burdens on healthcare systems, and, of course, the looming pensions crisis. It would seem that the future for us all could be quite bleak.

We cannot deny that possibility of this scenario as a future, but the case against it is starting to mount up. The BBC Money Programme carried a feature last week on ‘Olderpreneurs’ (see feature). This was a very interesting programme for a number of reasons. In the UK, if we can believe the official statistics, there are now more people aged over 60 than there are aged under 16. The section of society with the fastest growing amount of business formation is the over 50s. It is unclear why the statistics cut off at 50. There is potentially a lot of interesting facts that are buried in this aggregation.

This rather struck a chord personally. I turned 50 this year, which meant that I went from the relatively unemployable to the completely unemployable. I know a number of very competent people who are practising well into their 60s and beyond. This signifies an important change in society that we ought to note. As more and more Boomers enter into their 60s, the definition of what it means to age is likely to change quite significantly.

To start with, people in their advancing years are unlikely to want to give up work. They need it for the income. From the perspective of the economist, people are likely to draw down their human capital for a monetary income. The tale of the looming pensions crisis relies entirely on the accumulation of monetary capital as its basis. The use of human capital as a pension fund rather cuts through the argument. It also rather undermines the argument about dependency ratios. If the nature of work is changing so that people are working for longer in their lives, then, by definition, the dependency ratio is not likely to change in quite an adverse way as previously feared.

People also like to continue to work for the social contact that it brings. Once again, economists are now starting to highlight the monetary value of social networks. The argument of those who fear a looming pensions crisis completely discount the value of social capital as a generator of monetary income. The Olderpreneurs are likely to become an important B2B segment as well as being a B2C segment of increasing importance. The Olderpreneurs are more likely to respect experience over youth, creating a ‘Grey Economy’ of friends doing business with friends. It may be that the looming pensions crisis is not as bad as it has been made out to be.

If so, then one might wonder about the prospect of the burdens upon healthcare systems. What does this mean in practice? It means that we – as a society – do not have sufficient monetary resources to pay for the eldercare demanded within the system. However, over the past twenty years, there has been a trend towards shifting the financial cost of aftercare from the Health Service to the patient. In fact, UK hospitals contain so much latent infection that it is safer not to have aftercare in hospital but to have it at home. The social networks of patients – family and friends – have been picking up the cost of this healthcare, and there is no reason to suggest that they will not continue to do so in the future.

When we look at it like this, perhaps an ageing population will not be so problematical?

The Future of Work and Management is a topic that is being covered at the London Futures Symposium on April 18th 2008. Click here for more details of the event.

The Age Of Empires

I was filing away some of my notes the other day when I came across this graphic. It is a chart presented by Niall Ferguson at the Global Leadership Summit, held at the London Business School in July 2007 (see link for details). It struck me as relevant to a recent discussion that has occurred about whether or not America has an Empire and in the context of a new piece that is emerging (‘The World Without US’, once again, courtesy of Niall Ferguson) on what the world would be like if the US were to choose an isolationist path again.

It is interesting to see that Professor Ferguson sees two global empires in play at the moment – the Chinese and the American. Much debate has raged over the American Empire, but the pundits have been relatively quiet about Chinese expansionism. Perhaps this is because the Chinese Government are projecting their influence by using the techniques of ‘soft power’ (trade, diplomatic persuasion, and aid), whilst the world has as its focus the big bangs of American ‘hard power’ (military intervention and diplomatic coercion). Whilst we look at US interventions in the Middle East and Central Asia, we also need to be mindful of China securing key resources in South America and Africa. One of the great uncertainties of the next two decades is whether or not China will assert itself through the use of hard power in addition to the soft power already deployed.

This is a theme developed in The World Without US (see link). This work considers what the world would be like if the US were to adopt an isolationist stance again. It originates in a 2004 article in Foreign Policy entitled ‘A World Without Power’ by Niall Ferguson (see article). Whilst there are some who would say that this would be a positive development, we might seriously question the degree to which the world would become safer and more peaceful. For example, at the moment, the US is attempting to broaden the war fighting capability in Afghanistan through NATO. This initiative is not meeting with a great deal of success, despite it being in the interest of all of the international community to ensure that 90% of the world opium capacity does not revert back to the Taliban. If the US were to withdraw from Afghanistan, it is feared that the streets of North America, Europe, Russia, China, and elsewhere would be flooded with cheap heroin and other opiate derivatives. A central uncertainty around US foreign policy over the next two decades is exactly whether or not it will adopt a more isolationist stance.

However, given the advance of globalisation, a more interesting question, perhaps, is whether or not the US has the ability to disengage from the rest of the world.

The Foresight Fishing Boat

The Foresight Fishing Boat, originally uploaded by EUFO Views.

I quite like this as a metaphor - Foresight as an activity that involves fishing for insights into the future. Well, it amused me anyway!

Del Boy Goes East

There is, in the British tradition of comedy heroes, a character called Del Boy Trotter. Del Boy is something of a folk legend in the UK. He earns his living from ‘wheeler dealering’, usually on the other side of the law. His speciality is what, in the UK, we call ‘knock off’ – stolen and counterfeit goods – as well as goods smuggled into the country to evade customs duties (there is a brisk trade in smuggled cigarettes and alcohol). These are usually sold in unlicensed street pitches and pub car parks. The sad thing is that most of us in the UK actually know someone who makes a living in this way.

A recent issue of McKinsey Quarterly (see article) examined the rise of China’s middle class. Of particular interest to me was the projected rise (and then decline) of the lower middle class. The lower middle class is estimated to be 12.6% of the population in 2005, 49.7% of the population in 2015, falling to 19.8% of the population in 2025. The purchasing power of this segment is projected to rise from $93.9bn in 2005, to $542.7bn in 2015; to $288.0bn in 2025 (all figures in billions of constant 2000 US Dollars). These figures ought to alarm those who monitor the trade in counterfeit goods and the custodians of brand integrity.

The lower middle class in China is what, elsewhere, McKinsey describes as ‘aspirational’. They aspire to high levels of material consumption, but can’t afford to purchase primary brands (the average income per household is $3,900 a year in 2000 constant US Dollars). What happens is that, in order to buy ‘face’, members of this group buy fake and replica brands, as well as originals that may have been stolen in transit from the point of production to the point of sale. ‘Face’ is an important purchase for this group, as it enables the members of the group to purchase social status and standing. Members of the group are what they wear.

Del Boy, visiting China in 2015, will feel as if he has died and gone to heaven. The size of the ‘knock off’ market is likely to be huge. It will be interesting to see how the law enforcement agencies and the brand owners respond to this potential threat. One avenue of approach might be to attempt to bind the Chinese government even further into the rule base of global trade. However, an edict from the centre does not mean that it will be enforced locally. One can question the ability of the Chinese government to effectively disrupt the trade in fakes and counterfeits if local officials have a stake in it flourishing.

It is possible, however, that the brand owners may have a more effective response. If the sale of branded items moves away from the sale of ‘things’ and towards the sale of ‘experience’ using the branded items, then more control can be retained by the brand owners. It is easier to copy and counterfeit a ‘thing’ – whether that ‘thing’ is a watch, an accessory, a piece of software, or a piece of apparel – than it is to counterfeit an ‘experience’. If the future of branding moves in this direction, then the owners of brands are likely to be able to retain their role as the gatekeepers to the brands. In this world, the business model of the brand owner would change so that the ‘thing’ is given away at cost, but the customer is charged for the ‘experience’ of using the ‘thing’.

Failing that, an investment in a brand would need to have a very short payback period. The brand premium would only last as long as it takes for copies to go on sale. In some cases involving software, that period is currently negative (the copies are sold before the originals are launched). It is difficult to see how many brands would make money in that environment.

Perhaps we are coming to the point where Trotters Independent Traders (Del Boy’s company) is going global?

The Future Of Citizenship

A Meeting Organised By The NCVO

The NCVO, London, UK
17th January 2008

Speakers:

MICHELLE HARRISON, Henley Centre Headlight Vision

MICHAEL EVANS, Changemakers

Citizenship is one of those areas which we take as a given. In my mind, the question of citizenship hinges around the relationship between a person and the wider community. Much of the conversation at the meeting was according to an agenda dominated by the UK government. One can see why they might be interested in such a conversation. The diminution of the nation state into smaller communities, such as Wales or Scotland, and the aggregation of national sovereignty into supra-national entities, such as the EU, calls into question the relevance of the continued focus on the nation state as the basic building block of government.

On the whole I enjoyed the session. I didn’t agree with a lot of the content and I had questions over the futures methodology, but the material was presented in a clear and logical way. Michelle and Michael were great speakers and they really engaged the audience. I don’t normally come out of my bubble to rub shoulders with people in the real world, but I am very glad that I did so on this occasion.

READ the full report.