Plate Tectonics!

Continents change as the tectonic plates on which they rest shift around. The results are earthquakes, volcanic eruptions, and the creation of mountian ranges. The global economy is a bit like this.

As the locus of economic and political power changes its centre of gravity, so there will be economic earthquakes, financial volcanoes will blow, and new political mountain ranges will form.

In practical terms, whilst there may be the occasional bout of turbulence in the financial markets, most of the effects will be slow, gradual, and prolonged. For example, it could be argued that the current value of the dollar contains a 'hyper-puissance' premium that is draining away from the US. The more that the ineffectiveness of US foreign policy is demonstrated in Iraq, the greater will be the reductions in that premium.

There is an interesting piece in The Economist this week (see article) that examines the effect of a constantly depreciating dollar. If our view is correct, then the US dollar is over-valued at the moment, and further depreciations ought to be expected in the near future.

Is It Bear Season Yet?

While the focus of the world is upon the woes of the credit crunch, other significant stories are slipping by under the radar. One of these reported in The Economist caught our attention – a discussion of the cooling of relations between Europe and Russia (see article). It would appear that the Russian tactic of asserting itself through bilateral disputes has now reached such a critical mass that Russia risks provoking a reaction from a concerted Europe. In response to this, there is evidence reported in The Times that Russia might be a little more conciliatory if the nations of the EU were to offer a conciliatory approach (see article).

For those with an interest in future geopolitics, these two stories have certain significance. On the part of the EU, it would be unusual for the nations of the EU to act together jointly on a single policy. We call the two views within the EU the Atlanticist (to follow the lead of the US, to act as a weak confederation in matters of foreign policy) and the Federalist (to act jointly in matters of foreign policy, not necessarily following the lead of the US).

If it is true that a new consensus is growing between France and Germany towards Russia that leans towards the Federalist view of the world, then that might imply the pendulum has started to swing away from the Atlanticist view of further enlargement of the EU. In practical terms, this would be a good piece of news for Turkey, which has significance in Europe as a Black Sea bulwark against a resurgent Russia, and which has a geopolitical significance in terms of the Federalist agenda, but not necessarily in terms of the Atlanticist agenda. It would also suggest that relations between Europe and the US, which have been thawing in recent months, might start to grow cooler again.

It also highlights an interesting conundrum for the Russian Government. If the EU does distance itself from Washington, as President Putin called for, then it is quite likely that a more assertive EU in Federalist colours will emerge. This may not be to the advantage of Russia, as The Economist article suggests. After all, the EU does have two vetoes on the UN Security Council in the hands of the UK and France, which may be used to counter Russian interests in the Balkans. If, on the other hand Russia wants a more compliant EU, then the result may be a more Atlanticist perspective on the world, where the US offers a lead in European affairs.

We shall continue to monitor the developments in this relationship because it could be quite significant in the near future. Much of US policy in the Middle East presumes a disengaged Russia. However, with a proximate border with Iran across the Caspian Sea, it is difficult to see how US policy towards Iran could escape comment from Moscow. So far, Russian diplomacy has not been a feature in the war in Iraq. We wonder if this might be a feature in the near future.

Flying Cars (Again)

The BBC recently carried a story that caught my attention (see story). It was about Dr Paul Moller, a Californian inventor, who claims to have a prototype flying car that will enter production in 2010. This captured my attention because I am cursed, like most futurists, by the vision of the flying car. The flying car is often touted as an example of ‘bad’ futures gone wrong. A predicted future event that didn’t happen. It would be ironic if Dr Moller was right, in which case the predictions would simply seem ahead of their time.

There are, however, grounds to suspect that we might not see Flying Cars by 2010. A Google search quickly unearthed the case against Flying Cars. An article on the Downside Web Site (see article) calls into question the veracity of the Flying Car story. Even if the Downside story is right, and we do not see Flying Cars by 2010, it would be interesting to consider what might happen if it were to be true. It would be interesting to think about a truly disruptive technology in the field of transportation.

I had hoped that this opportunity had come my way. I recently attended a half day conference on the future of transportation in Suffolk (see meeting notes). I was keen to get to grips with concepts such as the impact of Peak Oil on commuting by car, the possible impacts of disruptive technologies, and how work patterns might be reorganised in an effort to reduce carbon footprints. In doing so, I had made a key mistake.

My fellows at the conference were not futurists. They were professionals in other areas of endeavour who have an interest in the future. The conference served to remind me of two factors. First, unless we encourage people to think differently, they will continue to think in straight lines. Many at the conference thought in terms of a linear link between the past, present, and future. In which case, the key to understanding the future is to understand the past and present. The possibility that the future might be different from the past was a concept that didn’t readily settle with most participants.

Second, whilst most of the conference goers were experts in their areas, very few had managed to join the connections between the various disciplines. One of the key attributes of many futurists is their ability to piece together a connection across disciplines. We look for weak signals in a variety of areas to provide evidence for, or against, a given hypothesis about the future. Sometimes, I forget that not everyone does this, which closes the circle nicely.

When my fellow futurists rail against the Flying Cars, perhaps we ought to have a bit more patience and forbearance with others. Not all have embarked upon the journey into the future, and, if they have, they might not have travelled as far as us. After all, the future is a frightening place where anything can happen.

Transport For the 21st Century

A Conference Organised By Suffolk County Council

Trinity Park, Ipswich, UK
7th September 2007

Participants:

CLLR GUY McGREGOR, Suffolk County Council (Chair)

DAVID FROST, British Chamber of Commerce

ROB MAIDMENT, Suffolk Development Agency

ANDY CAMERON, WSP Consultants

SAMIRA AHMED, B Sky B

ROGER TURKINGTON, Suffolk ACRE

COLIN IRLAM, Suffolk County Council

I was originally attracted to this meeting by a number of factors. To begin with, the focus of the conference was local to where I live, and the issue of transport is one that will affect me – personally - for some time to come. I was also interested in observing the state of play with regards to Foresight in the Public Sector. One could quite well argue that the UK is one of the leading exponents of Public Sector Foresight. However, there is a view that this is confined to the national level and has not really permeated down to the level of Local Government in the UK. I wanted to test this hypothesis. Finally, our research indicates that one of the major trends within society is the shift of allegiance away from the national and towards the community. I wanted to gain a feel for the community in which I happen to live and work.

The Conference was a first step in the engagement with the future. It was a good first step, and we ought not to expect too much from that first step. It will be interesting to see what comes from the Conference. If it is a stand alone event, then it would take on the characteristics of an opportunity missed. If, however, it was to represent the start of a process by which there is a discussion about what futures are possible and what futures are desired, then we shall all look back at the afternoon as quite a memorable event.

READ the full report.

Thinking About The Future

by Andy Hines & Peter Bishop (Eds.)

ISBN 0-9789317-0-X

The intention of the book is to be practical. It describes itself as setting out guidelines for strategic foresight. I rather see it as a navigators guide into the future. The book identifies 115 guidelines for undertaking strategic foresight activity, which are grouped into six sequential steps – Framing, Scanning, Forecasting, Visioning, Planning, and Acting. This framework has been derived from a wide collaboration between 36 leading foresight practitioners and academics, which was also cross-referenced and synthesised by the Association of Professional Futurists’ Professional Development team. The contributing team was global in its origins and cutting-edge in its approach.

On the whole, I enjoyed the book. I believe that it will provide an important landmark in the literature of strategic foresight. It may not become a business best seller because of the limited audience to which it will appeal. However, I would thoroughly recommend it to those engaged in the area of strategic foresight and strategic planning.

READ the full review

BUY from Amazon US

When The Music Stops .....

Following up our story "Crisis, What Crisis?" (see link), this story in The Times caught our attention (see article). It would seem that Barclays is one of the banks that have been left holding the paper when the music stopped.

The Oiks 1 HSBC 0

An interesting example of the exercise of people power has come to light over the past couple of weeks. It concerns a disagreement between the banking giant HSBC and a number of their student and graduate customers. For a number of years, as an inducement for students to open an account with the bank, it has offered a facility whereby overdrafts run up whilst at college – up to a limit of about £1,500 to £2,000 – are left as interest free loans for a short period after graduation – generally no longer than two years.

This is part of a tactic to attract the custom of graduates, who, over the course of a lifetime, are unlikely to change banks and who are likely to generate a stream of profitable business for the bank (checking accounts, mortgages, insurance, pensions, savings, investments, wills & trusts, and so on). It is a common marketing tactic amongst the UK retail banks.

In July, the HSBC announced that it was to withdraw the facility with immediate effect, even for existing customers who had opened accounts on the understanding that there would be a facility after graduation, and who had relied upon that inducement in placing their business with the HSBC to begin with. The story came to our attention through a report in the Guardian (read report).

The student body, galvanised by the National Union of Students, and using Facebook as an organising vehicle, planned a campaign to protest against this unilateral change in their banking arrangements. The idea was to use the smart mob to clog up the banking facilities of the HSBC in selected cities across the UK. The protest would be non-violent, and would consist of several hundred students all turning up at a selected branch, at the same time, and querying the notice of charges sent to them as customers. It would generate a fair deal of negative publicity – particularly as the HSBC brands itself in the UK as ‘the listening bank’.

In the face of this, according to the Guardian (read report) the HSBC has relented and has scrapped the plans. The NUS are claiming this as a major victory of the small guy against the corporate world (see link). This may be a bit of an exaggeration, but the tenor of the claim is in the right direction.

In the UK, for many years, the retail banks have treated their customers with complete contempt. They realise that, in modern society, not to have a bank account is to become a non-person, who cannot be paid a salary and who cannot receive state benefits. The banks are in an oligopolistic position, and it is often alleged that they abuse this market power to the detriment of their customers. Indeed, there are now so many cases before the courts where customers are suing their banks for alleged unfair and illegal bank charges, that the judiciary are complaining about how the volume of cases is starting to paralyse the Small Claims Courts.

We see this as part of a longer trend – one that large corporations need to heed. The communications revolution and the internet have delivered a vehicle to activists to organise a campaign against companies. Turning this around, as a futurist, we now ask companies what they would do if 80% of their customers turned up to their outlets at the same time, on the same day, to complain about poor service or to return allegedly faulty goods. Or to call the Chairman’s office, or the company’s auditors, or the company’s bankers, and so on. The new technologies have given the customer a new voice.

I wonder how many organisations plan for this Wild Card.

Crisis, What Crisis?

Few could have failed to miss the stories in the Press about the turbulence in the financial markets over the past few weeks. The Financial Times has uploaded an interesting interactive graphic that charts the progress of the recent ‘Credit Crunch’ (see graphic). It is interesting to see how a problem in one geographical market spreads into others. What has been even more interesting has been the policy response of the monetary authorities across the world.

The joint response has been a policy of monetary loosening, depending upon the ability of the central banks to act. In the US, the response was to inject a bit of liquidity into the market, coupled with a reduction in the Discount Rate (think of that as the wholesale price of money traded between banks). In Japan, where the scope for interest rate reduction is much less, the Bank of Japan injected liquidity into the financial sector. This was also the response of the European Central Bank, where conditions are different to Japan. In Europe, the real economy needs monetary tightening (through higher rates), while the monetary economy, right now, needs a monetary loosening. The worst of the turbulence now seems to be over, and the Central Bankers are likely to be pleased with the way in which a potentially major problem has been dealt with.

In future terms, two questions dominate. Will the turbulence in the monetary economy bleed into the real economy? It is hard to assess this at the moment. If the turbulence has been contained, then there is an argument that the real economy is unlikely to be greatly affected. If, however, by October - when the true extent of the losses and the identities of the holders of the losses become known - further turbulence is encountered, then there is likely to be a greater chance of the real economy being affected by the turbulence in the financial markets. Further monetary loosening is likely to fuel, eventually, further asset bubbles – either in the stock markets or in the property markets.

One of the reasons why it is hard to see where the losses will fall is because of the opacity of the financial instruments being traded. We can all see the starting point – sub-prime lending to poor credit risks. These were then bundled into a further series of financial instruments. In doing so, it appears that the credit rating agencies rated the instruments according to the probity of the institution packaging the debt (usually good credit risks), and not according to the eventual borrowers (very bad credit risks). When the sub-prime market stuttered through rising defaults, nobody quite knew who was exposed to the market and by how much. This is where an element of panic set in. It is the modern corollary to the Victorian ‘run on a bank’.

This brings us on to the second question – can it happen again? It is reasonable to expect that it can, given the development of increasingly exotic financial instruments and the interconnected nature of modern financial markets. In this respect, financial turbulence is the consequence of globalisation – turbulence spreads much faster and much further afield nowadays. However, there is also a much deeper future issue buried in this question that is all to do with where the US stands in the world.

In an interesting article in The Business (see article), Bill Jamieson correctly points out that the lead agency in dealing with the recent turbulence has been the US Federal Reserve. However, one wonders how long that might continue. Financial turbulence is often the result of large scale changes in the world economy. An interesting example here is the Sterling Crisis of 1947-49, where the financial markets adjusted to Britain no longer being a world power. If we are in a period of relative US decline – possibly through the rise of China and India, then, at some point within the next five to ten years there may well be a significant run on the US Dollar analogous to that experienced by Britain in the 1940s, as the financial markets adjust from the one paradigm to another.

In this vision of the future, the market adjustment is likely to be substantially greater than the recent one. We need to remember that on 16th September 1992 (‘Black Wednesday’), the UK Treasury spent £27bn in reserves in three hours to fail to support the Pound in the ERM. It is possible to envisage a scenario where the Fed. simply does not have enough money – and the US enough friends in East Asia – to support the Dollar. In which case, recent events take on the nature of an inconvenience rather than a crisis.

I wonder how many global companies have priced that risk into their business models.

A Future Worth Building

I hadn’t intended to lead with this. I have now returned from the WFS Conference in Minneapolis. This was a great conference that managed to press many bells for me. The papers presented are starting to appear on-line (see Web Page), and are worth looking at if you have an interest in the future.

I gave three papers at the conference; all around the theme of US foreign policy to 2025 (the slides from the papers are on the WFS site). On this subject, it is very easy to become despondent and to flesh out some very dark futures in the years to 2025. Much of our work points to the relative decline of the US in the years to 2025, and many of the scenarios that we developed revolve around the question of how the US handles this relative decline.

As a corrective to the gloom and doom, we developed a scenario that starts with a happy ending for the US in 2025, and backcasts to now - to see what needs to happen in order to achieve this outcome. As with all of our scenarios, this is a story of the future. We used a fictional style because this is not a prediction; it is a possibility for the future. What are more important are the longer themes that are developed in the story.

For example, it is our belief that the force assessment for Iraq is woefully understated and that the US has a serious problem in service manpower, without reintroducing the draft. If so, then the only credible solution to this problem is to widen the responsibility for providing security to include a broader coalition of nations that include the nascent regional power of Iran. The fictional details hang around this theme – to engage Iran or not to engage Iran.

We offered this scenario (which is about 6,000 words long) for the Conference Volume, which would have acted as a nice complement to the papers that we gave. Sadly, the paper didn’t make the cut. However, in talking about it to those who attended the sessions, there were a good number of people who asked for a copy of the scenario and felt that it would be suitable for a broader audience. We have now posted a copy on our web site (link to paper).

The scenario tells the story of the winner of the 2008 US Presidential race – Eric Blair. Eric Blair is known to most as George Orwell, someone who I have admired for many years. The situation of Eric Blair is based upon that of Winston Churchill in the 1930s (he called them his ‘Wilderness Years’). There is an irony here in that George Bush has compared himself to Churchill – a comparison that many in the UK find deeply offensive, and to which we allude in the story.

We also cast Eric Blair taking over from George Bush in the same light as Churchill taking over from Chamberlain in 1940. The US in 2008 might not be facing its ‘darkest hour’, but we feel that the situation is not very encouraging and requires a great deal of adept handling – a skill that has eluded quite a number of previous Presidencies. If only another FDR would step forward …

I hope that you enjoy the scenario. Please feel free to comment on it. It is only by being told why we are wrong that we can move forward.

Fairtrade And The Future

Two strands of the future came together for me this week. On Monday, the BBC business programme ‘Working Lunch’ carried a feature on Divine Chocolate (see news clip). Divine Chocolate is an interesting company. It is a chocolate manufacturer, but with a strong corporate ethos of fairtrade. Not only does it purchase the cocoa from Ghana for a price above the market rate, it also has helped to develop the cocoa producers into a collective body, and gives 45% of its profits to social projects within the producing villages. On the company web site (see site), it states that just under half of the company has been given to the producers.

On Tuesday, I attended a session in London on the ‘Future of Civil Society in the UK and Ireland’, co-hosted by the NCVO (see site) and Carnegie UK (see site), which provided the second strand of the future. It was interesting to meet and listen to a number of people - who are not based in mainstream corporate or governmental bodies – talk about their hopes and aspirations for the future of their work. I will put a fuller review of the day on our Blog later this year, but for now, it is enough to say that the day was quite stimulating in a number of areas. The two futures strands came together in the form of describing the Social Enterprise.

As we move away from Hierarchy World (the economics of scarcity) and towards Network World (the economics of abundance), an interesting paradox is emerging. If you are in the Network World, you create more value for your company by giving it away. Value is enhanced through sharing and co-operation. This is why I always feel uneasy about those Information Age companies who are reluctant to share and co-operate. A good part of the value in Divine Chocolate is because it has given away part of itself.

Why should that be? The chocolate sold by Divine is not a commodity. It is an experience. Not only do the customers buy the chocolate, they also buy the story behind the chocolate. It makes them feel good to eat chocolate and to know that they are contributing to global development in doing so. The experience of Divine Chocolate is an action firmly rooted in the Dream Society, where we no longer buy goods but the stories behind those goods. The act of philanthropy has created the added value within Divine. This is the upside to living in an age of spin.

Does the social enterprise need new forms of corporate ownership? According to the press release issued by Divine on the declaration of the first Divine Dividend (see release), the existing corporate structures work just fine. What is needed more is a willingness to share and co-operate. If, in the West, we do not share and co-operate more, what sort of future can we expect for ourselves?

Drawing Boundaries On Conservation

This week at the Time Bandits we looked at Drawing Boundaries on Conservation. Overall the article is a good idea. The Time Bandits think that some animals that we should be watching out for are cod, red squirrels, hedgehogs, stag beetles, eels and jelly fish. Mainly because there are so many of them being killed each year but not many people do much to help save them. The Time Bandits thought that the main ways to help cod is by not eating them and most of the other animals by leaving food out for them so they don't starve.

The article has a number of problems that the animals would face and the Time Bandits thought that the problem of paper parks is the worst because if parks are not marked down then people will keep going on and chopping down the trees, littering the areas and generally ruining the areas.

The Time Bandits were really mixed when I asked them if we should have more zoos because some thought that zoos preserve the animals, educates the people and gives people jobs. But on the other have some Time Bandits thought that the animals are in bad conditions, not given enough roaming space for it to be natural for the animals and the zoos are exploiting animals for money. The Time Bandits came to a decision that zoos are only OK when the animals have less than 100 in the wild but other than that the animals are being exploited.

I asked the Time Bandits, what animal if it became extinct would have the largest impact on the ecosystem? A Time Bandit made a really good answer by saying humans would have the largest impact as the world would change so dramatically. What do you think?

Living Without The Dudes In Suits.

An interesting news item caught my attention this week. I saw a piece on a lunch-time BBC news bulletin about a local group (Mesh 29 – see website) who have charted without a record company, a record deal, a distribution deal, or even producing anything more tangible than an internet link (see news feature). I found this to be an interesting example of disintermediation (cutting out the middle) that the internet has allowed. We might view it as the hollowed out organisation, or evidence of a flatter earth, or even an act in the long tail, but I see it just as an example of consumers getting much closer to producers.

Although the technology has allowed the spread of disintermediation, the growth of global markets has given the volume needed to cater for minority tastes. I often wonder if disintermediation – doing away with all of the middlemen (and women) – is an important corollary to globalisation. Could we have the one without the other?

Globalisation without disintermediation would represent the world of corporate hierarchies, where one mass unit would interact with another. This is the nightmare world of Orwell’s 1984, of Mussolini’s dream of a Fascist State. Equally, disintermediation without globalisation would be rather anarchic – a world of broken promises. In many respects the world was a bit like this during the dot-com boom of 2000 – orders made and taken, but with very serious problems in fulfilment. It is interesting to reflect on how far we have come in seven years.

This has some resonance for the future. There is nothing to suggest that the process of disintermediation has abated. Indeed, we speculate that part of the crisis in the retail end of the financial services industry is that people simply want to stay much closer to their savings. Additionally, despite the setbacks in the Middle East, the world is still adding connections rather than disconnecting them. If so, the future trend would be for a continuation of companies needing to be much closer to their customers.

Perhaps we all, eventually, will be represented by the switchboard business model where every consumer talks directly to every producer?

The Architecture Of Globalisation

Much has been written about Globalisation. It usually tends to focus on the really sexy aspects of the process – trade flows from exotic places, hot money sloshing around the world, gizmos and gadgets that will revolutionise the way in which we live, and so on. And yet, it is the really mundane things in life that are the more appropriate measure of the process of Globalisation.

A story this week brought it home to me. I dislike air travel very much. I don’t like airports – they are far too soulless for me. I don’t like the insincere veneer of customer care offered by airlines. I don’t like being herded around from one place to another. And I really dislike being interrogated by immigration officials who, if they had paid more attention at school, would be qualified to flip burgers. Wherever possible, I prefer an alternative form of transport.

My preferred method of travel is the train. It is relatively green, relatively relaxed, and a more enjoyable way of travelling long distances. The problem is that, in Europe, at least, the rail system is so fragmented. For example, in booking a ticket to the European Futurists Conference in Lucerne, the system will force me to buy a ticket from Ipswich to London, from London to Paris, and from Paris to Lucerne.

I welcomed with joy the news this week that a number of European train companies are to pool their ticketing arrangements (see story). Apparently, this is an attempt for the train companies to compete directly with the airlines. It is certainly the case that Ipswich to Amsterdam, via the ferry crossing, is quicker by train than by plane, if we add into the mix the travel to the airport and the hanging around in the airport terminals. At £50 return, it is also cheaper to travel by train.

This news is of great significance to our model of globalisation, as it provides an example of how the architecture of globalisation is being built. In our view, globalisation is all about the integration and the harmonisation of the world economy, global society, and the global political sphere. There is still some way to go, but the vision of the end state of globalisation is starting to take shape. Companies such as the rail companies (an interesting mix of public sector, private sector, and a hybrid group) are finding that the benefits of collaboration far outweigh the benefits of competition. This is the force of globalisation that is turning the world upside down.

The authorities in China and India are presently engaged in building a rail link across the Himalayas so that Beijing will link, by rail, to Mumbai. There is a great amount of geopolitical significance to that project – it cuts out the maritime choke point in the Straights of Malacca – but it will have quite some commercial significance as well. From my perspective, it means that I will be able to travel by train from Ipswich to Cologne, from Cologne to Warsaw, from Warsaw to Moscow, from Moscow to Vladivostok, from Vladivostok to Beijing, and from Beijing to Mumbai. And back again.

How about that for a connected world? I guess that you all now know what to buy me for Christmas!

The Wellbeing Of Nations

After every Time Bandit had finished reading the article I asked them are you surprised that Britain is so low down on the worlds happiness scale, 41 out of 178?

All of the Time Bandits replied by saying no. I asked them why and they answered by saying that there are so many depressed people in Britain and very few of them are getting help. When it comes to children and being at school many Time Bandits thought it was no surprise that people are depressed. To do well in life you need to be poplar, do well in school and be prepared to ruin your life i.e smoking, drugs and sex. If a child doesn’t fit into any of those categories then the chances are that person will be unhappy.

Unfortunately one would hope that you could forget about it in class but it seems not as teachers turn a blind eye on bullying, pile you with homework and scare you about “important” exams.

The Time Bandits came up with some ways of trying to make Britain happier. Some of which were taking away crime, poverty and the majority of depression. Stop doing pointless things like wars and mainly stop having rulers who are just in it for themselves.

Timeline Technology

This week at the Time Bandits we looked at Timeline Technology.

Overall there were very mixed views as some thought that it was a great idea but unlikely to happen whereas others thought it was wrong in many ways. The most changed subject, the Time Bandits thought, were Artificial Intelligence, Robotics and Computing and Communicating. On the other side the Time Bandits thought that the least changed were Security, Biotechnology and Environment and Resources. The overall view I was getting from the Time Bandits was that we don’t need any of this and will simply end up more screwed up.

The Time Bandits thought that the hardest thing to make would have to be the robots outnumbering all the armies, also that could be quite dangerous. But the easiest thing to make is new forms of animals simply because if you breed different animals you will get new forms of animals anyway.

Going into more detail on certain subjects, the Time Bandits kept coming back to the idea of a full direct link which can seem good but will probably end up very bad. It could easily end up helping child perverts as they could lead a child into an alleyway without their parents knowing. On a better note, electronic pets would be quite good as they can be a lot easier to look after than normal pets.

Something that should never happen, the Time Bandits thought, was thought recognition as if you think of anything and it happens then teenage pregnancies could go up, death rates could go up and many other bad things could start happening. If all this does happen, a Time Bandits pointed out, would we not end up living in a virtual world. And people may give anything to make and have these things but why would you want to give up your humanity to become just another animated person?

Here Comes the Rain Again!

It has rained this week. You might feel that there is nothing unusual in that – Britain is known for its rain. It has, however, rained this week. We have been experiencing unduly heavy rain storms that have quite disrupted the northern parts of England (see story). With the rain came flooding and destruction (see story). And then it rained again (see story). There is much of the future wrapped up in this sequence of events.

First and foremost, there is the question of dramatic climate change. We believe that opinion on climate change has shifted slightly over recent months. In our view, it now seems to be taken as a given that climate change will occur, and the discussion has moved on to what we need to do about it. Much of the discussion has been around what to do in the long term – ways of adjusting our carbon footprint. Despite this, there is also the much nearer term to think about.

The tale of Ulley Reservoir may be a portent of things to come. This reservoir became so full of water that the fabric of the dam that retained the water started to give way. There was so much water in the reservoir that the engineering tolerance built into the dam was being exceeded. (See story). As we saw this story unfold, we wondered just how much reconstruction of the infrastructure would be needed to cope with dramatic climate change. In the last week, roads and bridges were washed away because their engineering tolerance had been exceeded.

If we, in the UK, are to preserve our infrastructure, then it seems to us that we are on the verge of a fairly major construction boom, as much of our infrastructure needs to be reinforced, if not replaced. This begs the question of how such a construction programme would be financed. It also begs the question of the supply of the building resources (the global market in building materials is still very tight), the supply of the human resource to do the work (we don’t have enough engineers in the UK, can we import them or train them ourselves?), and the supply of the management know-how for such a reconstruction.

We suspect that, very slowly and immeasurably, climate change is changing the nature of the insurance industry. Those poor souls flooded out in South Yorkshire will now be unable to obtain household insurance, if they were able to in the first instance. The question of how to compensate those who are victims of natural disasters – particularly if their plight is the result of public policy – is a political issue that may well climb the agenda in the next few years.

There was some upside to the week. When we compare the floods of South Yorkshire with the flooding of New Orleans a number of key differences are striking. It is interesting how easily the public services have been able to retain control of the situation. There has not been a repeat in South Yorkshire of the mayhem that was associated with the flooding of New Orleans. If anything, according to our correspondents in the area, the recent flooding has kindled what, in the UK, we call the ‘Dunkirk Spirit’ – where personal differences are laid aside in order to resolve the emergency facing a community, where everyone accepts the authority of the rescue services, and where all agencies pull together for the public good. This has assisted recovery efforts greatly.

It is important in future terms, as both New Orleans and South Yorkshire provide different, but empirical, models of how a community can react within a disaster scenario. South Yorkshire has demonstrated that public disorder is not inevitable after a disaster, that emergency services can co-ordinate to deliver effective relief, and that engaging the local community aids rather than hinders the recovery operations. Thomas Barnett was not entirely right – the guns don’t always come out after the third day.

Are We Ready For Open Sourcing?

None of us likes to be held to account. I recall from my accounting days in organisations that the annual audit was seen as, at best, a major inconvenience, and, at worst, a holy terror that blighted and destroyed careers. When we are the provider of a service, we do not like to have our actions scrutinised. However, when we are the consumer of a service, we want our voice to count.

In recent years, politicians have scrambled to become closer to the people, whilst also taking steps to keep the people as far away as possible. For example, Tony Blair has tried to interact with ‘the people’ through the Downing Street web site, whilst his spin doctors try to ensure that media contact does not give rise to any negative footage. Occasionally, the policy scores an own goal as the on-line petition over road pricing demonstrates.

In an interesting article in the RSA Journal (see article) George Osborne and Will Davies considered what some might see as a trend towards open source government. Both authors are questioning how politics may be changed in the age of the Internet. The internet enables mass participation in government, but only if there is not too great an asymmetry of information. And therein lies the rub.

Traditionally, the government will have most of the information, which denies people the ability to make an informed choice about issues. This monopoly on information is starting to be eroded. For example, patients can now rate their hospitals (see web site) and my children can now rate their teachers (see web site). However, it is still the case that most information is still in the hands of government – the provider of public services – who are naturally suspicious in matters of accountability. The Rate My Teacher web site lists those schools that have blocked access to the site because the teachers object to it.

The issue of accountability and transparency has spilled into the world of commerce. There is always a complicated relationship between the Directors, Shareholders, and Auditors of listed companies. In a recent survey, the Institute of Chartered Secretaries suggested that the Company Secretaries of three out of four listed companies thought that the AGM was a waste of time and money. And yet, the AGM is the only place in the corporate calendar where the Directors of a company, through the Auditors, are held accountable to the owners of the company (the Shareholders).

Eventually, we will either realise that accountability is an essential part of the democratic process, or we will give up on the democratic process as a means of arranging our affairs. Later this week, the UK will be governed by a Prime Minister who has been elected to that position by nobody – not even his own party. Does that provide us with a glimpse of the future?

The Globalisation Of Crime

An article in The Economist caught my attention this week. It was about how cocaine from Latin America is now being routed through Africa prior to arriving in Europe (see article). It speculates over whether or not Guinea-Bissau is the first narcocracy in Africa. The article resonated with a talk given at the RSA by Misha Glenny in March (see lecture details and access podcast of lecture), where it was argued that global organised crime is an inevitable corollary to the process of globalisation. If we were to have a theory of globalisation, then it would also have to explain the development of global organised crime.

Strangely enough, our path to this conclusion originated in a different direction. We were giving some thought to the ‘War on Terror’, and were contemplating the differences between the European approach (‘terror’ is an extended form of violent criminality that requires a policing solution) and the Atlanticist approach (‘terror’ is an act of war waged by a group upon a national entity that requires a military solution). Although these differences appear profound, in practice the policing solution requires the police to adopt a para-military stance and the military solution requires rules of engagement similar to armed policing operations.

An interesting feature of the current manifestation ‘War on Terror’ is how it operates internationally, using a network of groups. Previous manifestations have been essentially national and hierarchical. All of the benefits of globalisation that have assisted the development of the global economy (the internet, global communications, cheap air travel) have also assisted global terrorism (or, if you like, global organised crime). This is exactly the conclusion of Misha Glenny.

If this hypothesis is correct, then it helps to explain where we should look for the situation to develop. Although the violent organised criminality may manifest itself in the developed (interconnected and globalised) societies, much of it originates and develops in the fractured and failed states – the pre-moderns, if you wish. These ‘failed’ states are located in an arc that sweeps from Central Asia, the Middle East, through Africa, and into parts of Latin America – those areas that have been bypassed by the process of globalisation.

The analysis also gives a clue to the answer to the problem. If the absence of globalisation has assisted the development of global organised crime, then the inclusion of these states in the process of globalisation will also help to reduce the development of global organised crime. To date, the assistance given by the globalised world to Africa has been miserable. A vacuum has been created that is being filled by the drugs gangs of Latin America, the people smugglers of the Near East, and the Jihadists of South Asia.

This is why Africa matters to us. This is why poverty relief and debt reduction are such pressing priorities. It is vital to our own interests that Africa is absorbed into the global economy if we are ever to win the ‘War on Terror’. Beefing up policing operations will help to relieve the effects of the problem, but an effective solution to the cause of the problem requires much more effort on our part.

The little guy strikes back- Futurist Club

After reading The little guy strikes back I just I just had to show it to my futurist friends at last weeks meeting of the Time Bandits. Here were are overall views on it.

The whole thing with us idolising famous people is never really going to change as people are not selfless, so some feel the need to be the centre of attention and some just want money. When I say things are not going to change I mean in future generations as none of the Time Bandits thought Paris Hilton getting special treatment was not that bad. Also as many Time Bandits pointed out things won't change as long as the media keeps going on about how wonderful famous people are.

The Time Bandits thought that the next people to revolt will be high school teachers as many of them get a lot of abuse and have very little power to stop it. Also caretakers may revolt soon as many are being paid badly.

When it comes to prisons I asked the Time Bandits "Should mothers with babies in prison have their own prison, when famous people have one? The Time Bandits thought mothers should have longer with their babies but not a special prison. What most Time Bandits thought was that mothers in jail are not fit to look after a baby full time. Also what if a mother threatened to kill the baby? But when I asked about famous people having their own prisons the Time Bandits couldn't understand it because it is obvious that they will get special treatment, so why can't the famous people go in a main prison. As long as there is no bullying from other prisoners then why should they get special prisons.

When I asked the Time Bandits who they thought is the most overpaid famous types of people, the majority thought that footballers as getting paid over a million pound for kicking a ball around for ninety minutes is ridiculous. If footballers really love football they should do it for enjoyment instead of money.

The Little Guy Strikes Back.

The tale of Paris Hilton has captivated us this week. First she was going to jail (see story). However, she was not going to an ordinary jail. She was incarcerated in a special VIP and Celebrity Unit that has little connection with a more general prison population. After a couple of days inside, it seems that a ‘medical condition’ developed, and she was let out under house arrest to serve the remainder of her sentence (see story). The LA Sheriff’s Department has not released details of the medical condition, which does nothing to contradict the allegation made on the BBC that the medical condition was caused by the bed being too hard and room service not quite being up to scratch. The saga continues in uproar, with a re-incarceration (see story).

This story interests me, as it contradicts Harts Law of Jurisprudence – if there is one law that could be seen as a principle of natural justice, it is that all should be treated equally before the law. Such a blatant contradiction of natural law has given rise to quite a great deal of comment. However, we need to stand back and look at what is happening. The implication of events in LA is that we now live in a world where celebrity and wealth are above the law. We live in a naturally unjust society.

This has some important implications for the future. It means that we are comfortable with the paradox that, whilst needing the services of public servants (teachers, police, nurses, firefighters, and so on), we are prepared to deny them the ability to live comfortably – in what we might see as ‘the good life’. A story caught our attention, where public servants in the UK cannot afford housing in 70% of the UK (see story). It seems to me that this is not sustainable.

If the rich and celebrated can act is a selfish and self-absorbed way, without even obeying the law, then why can’t the little guy? A couple of stories caught our attention along this theme. First, parking wardens in Edinburgh are set to go on strike because, they claim, their salaries do not allow them to live ‘the good life’ (see story). Whilst admitting that parking wardens are not the most appreciated of public servants, if traffic chaos and gridlock ensues in Edinburgh, then they will have made their point. Second, postal workers in the UK have voted to strike (see story). Once again, the key issue is pay. A national postal strike will have a significant impact on the economy, if it goes ahead.

Does this represent the start of a much longer trend? Has the pendulum moved away from fame and celebrity and towards contribution and service?

Wind Energy: Power from the Prairie

This week at the Northgate High School Futurist Club we looked at Wind Energy: Power from the Prairie. The overall view was that it is a very good idea; but no one really has done enough acting, just a lot of talking on the subject. Wind turbines are a very good way of collecting energy because as long as we have wind we have an infinite supply of energy. The Time Bandits thought that we should also raise taxes on certain doodads like boats to help fund buying new turbines. But the Time Bandits didn’t think that prioritising on this was very smart as there are so many other things that we should be concered about.

On the other hand there have been some very bad stories about the effects of wind turbines like pigeons get stuck in it, whales signals get messed up and they start doing very abnormal things, they are loud and are ugly. But compared to oil stations some Time Bandits thought wind turbines were very pretty.

When the Time Bandits got on to thinking about where the turbines could actually be placed some Time Bandits were a little stuck so I asked them to think of a place where there is lots of space, at first many thought of Australia and Ireland but when I asked them about Great Britain the Time Bandits thought Wales is a good option.

Once the problems have been sorted out with wind turbines then I think that wind turbines will be a very smart way to go forward. So maybe in the future when you go on holiday to Wales you will see lots of wind turbines out and about.

Has the Long Slow Fuse Been Lit?

How long can China maintain its recent growth rate?

I was sitting on a passenger train next to a freight train that was full of containers going to and from China musing on just that question. A quick calculation revealed that, if current growth in port and shipping capacities continue, and if Chinese exports of manufactured goods continue to grow at their present rates, then by 2012 to 2014, every ship in the world will be involved in the China trade and, sadly, there will be insufficient port capacity to land the goods.

If this ridiculous scenario is to be avoided, then more carrying capacity needs to be developed (a possibility), or the Law Of Large Numbers will apply to the Chinese economy (far more likely). The Law Of Large Numbers is easy to comprehend. If we want to increase our income by 10% each year, then it is easier to move from £10 to £11 than it is to move from £100,000 to £110,000. As China weighs heavier in world trade, we would expect the rate of growth in China’s trade to diminish. This is the Long Slow Fuse.

We have seen something similar in the recent past in relation to Japan. In the 1960s, the growth rate of Japanese exports was quite considerable when compared to European and US growth rates. However, the Long Slow Fuse had been lit. It detonated in the 1980s, and consigned the Japanese economy to an unwinding that has taken the best part of a generation to work out. We are of the view that a similar process will occur to the Chinese economy.

Three recent stories support our view. First, there was a story in the Wall Street Journal about the triangulation of Chinese exports to avoid quota restrictions (see article). Second, there was an article in The Business about how the Chinese sovereign wealth fund ($300 billion this year) is being steered away from US T-Bonds, where the weight of Chinese money (currently $1.2 trillion and rising) is forcing down rates for investors, and into Private Equity in a search for higher returns (see article). Finally, there was a report on the BBC about how the Nanjing Automobile Corporation had re-opened a car plant in the UK (see story). This is part of a trend where Chinese companies assemble within the EU as a means of avoiding export quotas to the EU.

What all three of these stories have in common is that they represent actions taken by Chinese companies to avoid the Law Of Large Numbers, and represent, to our view, evidence that the Long Slow Fuse has been lit. If so, we might ask, will it end with a bang or with a whimper? That is, possibly, a more important question.

Youth Irrational Exuberance

This week at the Time Bandits we looked at Youth Irrational Exuberance. It talked about how children all over the world are aiming for goals that are too hard for most of them to achieve. So I asked the Time Bandits what their goals are, a few answers were: move away from England, be a blacksmith, have children that love you, get a good job. But there were some that were quite impossible like take over the world.

The Time Bandits really thought that what the article was saying is all true as none of the Time Bandits had much idea of how to accomplish that goal. But when the Time Bandits started talking about blaming people most of their faces were blank, so who is really to blame?

One subject that we have in school is a lesson called “careers”, which talks to you about your future and your job. The Time Bandits didn’t think this was a good lesson to have as it gives you information about jobs like being a fruit picker on a farm which not many people want to become, also when you ask about a job that you are interested in like being a futurist they can’t come up with an answer. Overall it was unanimous that “careers” were not helping us very much. A Time Bandit told me, also, that when she was in class and was constantly good she is very rarely praised but when someone who is usually bad is good for a lesson they get a ridiculous amount of praise. This could help to pollute young people’s minds to aim for goals that are out of their reach. I think the main way to stop this is for young people to be realistic in what they think about.

23rd May 07

The Revenge Of The Bean Counters

It is hard to get excited about accounting standards. And yet, these small, seemingly inconsequential, things have a great impact on our lives. This was brought to the forefront of my mind this week through an article in The Economist about accounting standards (see article). Apparently, there are two key approaches to accounting standards – the Rules Based Approach and the Principles Based Approach.

The Rules Based Approach is just that – accounts have to be produced to conform to a set of rules that govern the construction of a set of accounts. The problem is, as Enron quite ably showed, that a set of accounts may conform to a set of accounting rules, but paint a misleading picture of the state and performance of a company. This is where the Principles Based Approach has the advantage. Not only must a set of accounts conform to the letter of law, it must also conform to the spirit of the law as well. In this case, the role of the independent auditor becomes far more important, particularly if they have a statutory duty of care to a widely based community.

It would appear that the Principles Based Approach (mainly adopted in Europe and Asia) is driving out the Rules Based Approach (mainly adopted in the US), as the users of accounts (primarily the investment community) demand ‘true and fair’ accounts from companies. This has two important futures points – one trite and the other profound. The trite point is that it gives an example of how ‘Europe’, as argued by Mark Leonard (see our review), will run the Twenty First Century by dominating the cultural infrastructure of globalisation.

This leads to the more profound point. If we accept, as Thomas Barnett argues in ‘The Blueprint For Action’, that globalisation consists of the harmonisation of national rule sets into a single global rule set observed by all of the ‘insiders’ to globalisation, then the harmonisation of accounting rules is central to that process. As it happens, I have recently encountered the XBRL programme (see link) which aims to harmonise the electronic infrastructure of international financial reporting. To conform to an EU Directive, all UK company accounts will have to report in XBRL from 2011.

This will have the effect of binding the process of globalisation even tighter than it is now. The Chinese companies listed on London’s AIM market will have to report in XBRL, as will the Russian energy companies that have sought listings in London. The impact of this change will be to make national differences even less significant than they are now.

I wonder how long it will be before this commercial transparency and accountability feeds into the political arena in both China and Russia?

The Dragon And The Tiger

It is often suggested that, in the longer term (say to 2050), India will have a developmental advantage over China because India is a functioning democracy and China is not. Leaving aside the question of what would constitute a functioning democracy, why India would be included in this category, and why China would be excluded; we are left with an empirical question as to whether or not democracies favour long term development. However, before looking at the facts, it is worth examining an explanatory model.

The causality of the linkage between democracy and development is rarely explained. There has been as association between the two in the past, but we do not know whether this is simply coincidental. When models are propounded, it is along the lines of platitudes rather than reason. For example, in an article in The Futurist, it was stated that ‘the incremental efficiencies of India’s democratic government are likely to overcome the greater short-term efficiencies of China’s command system’ (see abstract of article). We are not told why this should be the case.

The Economist surveyed this question a couple of years ago (see article). It would seem that the evidence suggests that autocracies have an edge over democracies when it comes to development. The causality model is quite simple. As prosperity increases, the democratic process is called into action to share the increase in prosperity more widely. In turn, this slows the process of development as funds that otherwise would have been earmarked for investment are instead used for wealth redistribution.

The Business this week carried an interesting example of this process in action (see article). The article describes how the Indian government, emulating the Chinese government, have attempted to establish special economic zones. This process has been inhibited greatly by protests – both legal and extra-legal challenges – to the detriment of the policy. In India, as the actions of government are subject to democratic review, policy-makers do not have the same freedom for action as the policy-makers in China. Local interests are not so easily swept aside for developmental projects as they are in China.

In the long term, this could develop into a situation where China is the richer country, but India is the nicer place in which to live. Perhaps this is the Asian version of the Atlantic dilemma?