The thrilling conclusion, in which we talk about social network analysis from a real-life perspective and why it represents a powerful holistic world view.

August Jackson shares how studying the link between people, companies, and technologies makes social network analysis a very powerful strategic tool.

August keeps on a roll, telling you how to run a network analysis yourself, how to pick good sources (not necessarily LinkedIn!) and how this type of thinking represents a more holistic way to see your markets.

Sure, your teenager may hear the word “social networks” and think of a great way to coordinate a social life. August Jackson, Competitive Intelligence and Strategy Professional, Tech Pundit and Social Software Evangelist working for Verizon, knows that social networks are the key to advanced competitive intelligence analysis and extremely relevant, accurate business forecasts.

In part one of this four part interview, August gives us the nearly fifty year background of this analytical discipline, how we can better understand competitors, partners and customers alike, and why you should NOT start with software but make your first attempts at this work just with your brains and pen and paper.

Because, sometimes, you need a more advanced form of information to make good decisions about the future.

TIME Announces New Version Of Magazine Aimed At Adults

Competitive Futures is currently partnering with a wonderful organization that deserves your support, Haiti Futur, a group that is working tirelessly on the revitalization of Haiti from a foresight point-of-view. Since the country has essentially been leveled, there is a magnificent opportunity to build a new, future-focused infrastructure using the broadest vision and most modern techniques for sustainability. Its chief mission is revitalizing the intellectual capital of the country through education, a great place to start when you think of building a foundation for a brighter future.

Talking with the group’s director, Josette Bruffaerts-Thomas, some fascinating points about economic development, and its future, arise. For example, Mme Bruffaerts dismantles the phrase “poor country.” To hear her tell it, economic development is not about increasing riches, but reducing suffering. This makes sense as soon as she brings out examples – Nigeria is a hundred times richer than Denmark or the Netherlands in any material sense. There are more natural riches of all kinds, but most everyone would say that between education, illness, and joblessness, Nigerians suffer more on average than the Dutch. But this is not to say that Nigeria is poor – just that its people are suffering, and that policies can be undertaken to improve things. To say that a country is poor is to subconsciously condemn it to one definition of economic wealth.

When you think about it, this is a completely different frame for economic development, which is usually focused on bringing in industries or creating tax base. In this frame, the central focus of all activity is improving social and intellectual capital, which may indeed be aided by the invitation of foreign direct investment, the establishment of new industries, or the building of new infrastructure such as bridges and hospitals. Yet the true measurement remains the well-being of the people.

When you consider how the numerically-based monetary system may soon be collapsing under its too-numerous contradictions, this frame of reference for economic development may be useful to us all.

In this episode of the Competitive Futures Podcast, we interview Paul Denlinger of China Vortex, an author, investor, and executive advisor who specializes in U.S. – China commercial activity. He’s a rare bird indeed, completely fluent in Mandarin and English and totally familiar with the executive leadership mentality of both countries. In this episode, he gives the audience some forecasts about China that you (unfortunately) just won’t be hearing in other media:

• The crash of 2008 shook China’s faith in the U.S. and sent their strategy away from engagement to the creation of a massive Chinese middle class they hope to drive the world economy
• China will ramp their use of coal significantly on the way to dominating the world market for renewable energy
• The markets for many raw materials are being cornered by China today and may leave other countries in the lurch if they don’t act soon

All of this, plus invaluable insight about how the Chinese mentality on the future differs considerably from that in the West.

We hope you enjoy listening to this interview as much as we did making it.

While the media was arguing about whether Ben Bernanke knows what he’s talking about, while America was discussing the meaning of “double dip” recession, or hockey stick recession, or V-neck, or crew cut, or whatever, while Sarah Palin’s daughter got back with Levi or didn’t because he’s maybe got another girl pregnant or maybe she set it up to sell books or not -  something real and important was happening. As usual, Gregor MacDonald was on top of it:

“Russia has now surpassed Saudi Arabia to become the number one oil producer in the world. This is not an event that happened last month, either. The leap forward emerged as far back as 18 months ago, in October of 2008.”

It is usually a source of alarm when the Russians start taking the upper hand in things, but you would never know it by listening to American media, which is still in a tizzy over whether any major secrets were spilled by the Wikileaks documents showing us that Afghanistan is a tricky place to govern.

Incidentally, I hear that Wikileaks may come out next week with a chilling set of leak documents showing that fire is hot, puppies are cute, and that the trend for the sun setting in the west may continue.

Meanwhile, back in the rest of the evolving world:

It’s clear that Saudi Arabia has been a very different kind of oil producer than Russia, in the past ten years. I would encourage readers to think about, in particular, the period starting in late 2005 through late 2007 when against a backdrop of steadily increasing prices Saudi Arabia production fell by nearly a million barrels per day.

Obviously a major power shift will be going on as a result of this development. The priorities of the Middle East could change rapidly if the sheiks perceive a permanent contraction, and you can read history if you want to see what the Russians tend to do with significant power over their neighbors.

When people think of “radical futures” the words “nanotechnology” or “genomics” are usually not too far behind. Throw in a few comments about “transhumanism” and “the end of biology” and you’ve got a classic futurist-y look at the next twenty years. One concept people rarely think about when they hear of radical future transformation:

Retail.

That’s why Doug Stephens from Canada’s Retail Prophet is such a refreshing speaker on the future of business. He is to our knowledge the only speaker who talks about the upcoming changes in the world and what they mean for the business of retail. It’s counterintuitive when you think about how important that sector is to our economy and how little we discuss its future.

Below are clips from one of Doug’s recent speaking engagements. Look for more interviews from him when Competitive Futures re-launches its Podcast with a new iPhone/iPad application in a couple of weeks.

I remember forecasts back as far as 1999 that by 2015 or 2020, the biggest user of the Internet by far would be other machines. Medical diagnostics, vending machines, cars – they numbered in the billions and all would have great reasons to share information – to say “I’m broken,” “I’m out of soda” or “Hey, you have early signs of cancer – go to the doctor.”

Now that we have WiFi throughout the industrialized world and emergent adoption of IPv6 (offering unlimited discrete IP addresses) this future Internet of Things could be right on schedule. Cisco’s chief futurist discusses this in a recent live broadcast, in addition to some basic ideas for how innovative companies use futurists to drive growth and profit.

Venezuela has become something between a Kundera power struggle with subjective jurisprudence and lack of freedom of speech and a Garcia novel where everything is unbelievable anywhere except for in the state of magical realism. As food shortages in Venezuela are aggravated by rotten food on the Colombian-Venezuelan border—a major blemish on Chavez’s ability to provide rations to the poor even if he had the oil money of the 2005 era—his saber-rattling begins once again. Chavez, with Argentine futbol superstar Diego Maradona at his side, has now severed relations with Colombia after Colombian President Uribe asked the OAS to look into Chavez’s relationship with the infamous left-wing narco-terrorists FARC and ELN. Although out-going President Uribe’s demands overstep his sovereignty, Chavez is not as innocent as he wants to be. He claims that the FARC and ELN should not be defined as terrorist organizations while there are links between Miraflores and FARC rebels. This is all happening as the Venezuelan economy is crumbling on top of the weak foundation on which it is based. In the midst of this, Chavez has exhumed the body of national independence leader, Simon Bolivar (who was more akin to Napolean than to Chavez), due to a Chavez-created conspiracy of a capitalist assassination of the Venezuelan idol 180 years ago.

The absurdity of farce and fiction in Caracas brings way too many questions as to the future stability of Venezuela. Reality has become subjective to the caprice of an authoritarian who has lost his ability to buy his political power. While Chavez’s friends (Morales in Bolivia, Correa in Ecuador, Ortega in Nicaragua, and to an extent the Kirchners in Argentina) may empower some of the poor, Chavez is leading Venezuela—and its poor and its rich—to the slaughter. For this egotistical bullishness, he will become a hero in the quixotic stylings of Ernesto Guevara, who is better remembered for an amorphous philosophy, a motorcycle bildungsroman, and mythical tattoos on Hollywood starlets, rather than the reality of suppression and corruption that appears to have been forgotten by history.

Most consumer purchases in the United States, large and small, involve reading the tag “Made in China.” Everywhere. Everything. Baby toys, shower curtains, plastics of any sort, iPods, furniture – it seems lately that the only thing in America that isn’t made in China is AMERICANS. Maybe we’ll even figure out how to outsource that…

A tip for trend analysis – every major trend has a counter trend. The megatrend of Asian manufacturing is now leading to a powerful counter trend of repatriating operations to America, or at least to make it look like it’s a key component of your brand.

You can see this movement in the “manifesto” commercial for the new Jeep.

Will others competitors follow along?

Paul Denlinger, a very astute observer of U.S.-China business relations has a fascinating piece up at China Vortex discussing two very different notions of freedom of information that are colliding soon.

One view, ostensibly “American,” is being espoused by Google, Facebook, and their respective CEOs. In short, this view is the early Internet mantra of “Information Wants to Be Free.” Opposing them is the Chinese government, which obviously believes that government should play a role deciding which information goes where in a society.

Read Denlinger’s analysis and decide whether the issue of “information sovereignty” and “individual rights” are as clear as you might think. It just goes to show the incredible role culture needs to play in all of our analyses of the market.

While economic policy and national politics have always been a couple, sometimes the relationship can be strained by the injection of partisanship. The current crisis requires insight into the actual issues to make policy suggestions. The United States is running a risk by having its economics so colored by bitter partisan divisions, as this is one area where there needs to be solidarity.

In a thought provoking GPS episode, Fareed Zakaria interviews two very different schools of thought on the actions necessary. His conclusions are that we must meet in the middle of the political agendas and look at the economic possibilities. Essentially, his view is that the U.S. government needs to spend more now while also reviewing entitlement programs to make sure each dollar is spent in the most efficient manner – a classic centrist approach.

It is always a risk for a country when political in-fighting colors international economic policy. That is true for Greece, Spain, China, Iceland, and, of course, the United States.

We don’t believe in conspiracies, nor do we believe the future is impossible to see. Rather, the information is there, hiding, waiting to be researched and analyzed.

Many executives fall into a cognitive trap – that if something is important enough to affect their business, then the business media will call it to their attention. Our experience says that this is not so. You need to do your own research and reach your own conclusions.

Take this graphic showing how long it would take to sell both existing and “shadow” real estate inventory. “Shadow inventory” is that which sits on a balance sheet, but yet is never offered to the market, and there’s tons of it out there now that neighborhoods and commercial developments are succumbing to foreclosure. This graphic says that we’ve got nearly ten YEARS worth of inventory, assuming we keep things the way they are for a decade.

How many of your colleagues know about this? Do you know how this fact might affect the much vaunted “recovery?” If it’s not your industry, would you come across this information by accident?

Likely, you need customized research. If you’re interested, we can help.

Does anybody need economists?

This is the subject of a fascinating polemic raised by our colleague Gregor MacDonald. He notes, in an incredible understatement, “economists don’t ‘do’ energy.” They are content to set Keynes and Hayek in a never-ending cage match over monetarism versus free markets, while petroleum dwindles, Boomers retire, technology flattens work hierarchies – while real things are actually happening.

Some of the debate is set off by the paper embedded below by a Federal Reserve Bank economist. As the title indicates, he doesn’t think much of the input of non-specialists. We then have a similar question for his profession – how is it that we all participate in economic activity, and only you feel qualified to comment on it? And while we’re on the subject, why didn’t you predict an absurdly obvious bubble and subsequent crash?

Some things are too difficult for the laity to understand. Most of the hard sciences are really impossible to comprehend to outsiders, and news reports on their breakthroughs are often comically misunderstood. But is economics a hard science? Isn’t it a social science based around people trading things? Can we discuss our economy without the need for technocrats of this sort?

Economics is Hard

Go to your newsstand and pick up a copy of Foreign Policy magazine’s July/August 201o issue entitled “The Committee to Destroy the World.” It’s a fascinating, broad analysis of all those countries who don’t play by the rules set out by industrial powerhouses – and why they don’t. If you sweat about the failure of American pension funds, Icelandic treasury bills, or German austerity, then cast also an eye toward North Korea, Zimbabwe and Iran for contrast.

One particular item of interest – failed states aren’t all bad, according to the magazine. They make for cheap and pliable partners for China when it comes to natural resources. We reported on this trend back in 2007 with our STEEP Report series, how China’s massive investment in infrastructure requires a broad range of partners, most of whom then become warmer to the rest of the Middle Kingdom’s strategic goals.

Click on the image for a map of China’s investments in natural resources.

Past returns are no indicator of future success. This one sentiment is the rationale for future-focused thinking, especially for countries and companies that have achieved prosperity and greatness. The cleverness of our forebears will not guarantee future returns, financial, cultural, social or otherwise.

Which brings me to a discuss of the stock market of the future. The Dow Jones just celebrated ten years hovering around 10,000. Some doomsday types are predicting a potential fall to 1,000, some are more sanguine, and the world’s pension funds appear to expecting a long boom.

Back in 2008, when everything was up for debate, I remember the violent reaction many Americans had to the notion that the stock market might not rebound. I recall floating this idea back when the banks fell over, and I people acted as if I had insulted their mother, slapped Santa Claus, and kicked a puppy. Of course the Dow will come back. Don’t you know that since the Great Depression it has always been a good investment? This means it will be a good investment in the future. To suggest otherwise is a mix of ignorance and intentional blasphemy.

2010 marks an important anniversary – the Dow Jones Industrial Average has remained at 10,000 for ten full years. If you only take the last ten years, your savings account was a better investment than stocks. You could make money trading stocks, but it is increasingly clear that the only people doing this effectively have football field-sized computers for high-frequency trading and a phalanx of astrophysicists providing the mathematical formulas.

What will stocks do in the future? That’s not really the issue here. Start by accepting the notion that past returns are no guarantee of future performance. And then, keep thinking.

First, a headline from the Motley Fool: Cisco Taps Google for an Office Assault. Sounds serious. We think it is, too, and for a variety of reasons.

You may notice that the tech sector has been experiencing a wave of mergers and acquisitions, all angling to find a future of profitability in a world where our information needs all converge into multi-use devices and mobile infrastructure. Whether it’s smart phones, search, or telepresence, it seems that when one megacompany is involved, they are ALL involved.

Just consider the short- and long-term implications of the Cisco Cius – a Google Android-run tablet computer that will allow entreprise-grade video, video and data collaboration.

Business-wise, does your company just specialize in one form of telecommunication? You had better have a serious commitment to a special niche – finance, healthcare, defense, or other – because the mass market will be eaten by some very, very large players.

In terms of business communications, email, phone, and video will finally come together into one smooth package. Meetings will be infused with all kinds of rich content. Quick email messages (so easy to misconstrue!) will likely be replace by short video bursts in which your facial expression will be transmitted along with your words! Collaboration between colleagues around the globe will finally become easy enough to make telecommuting more of a reality than ever.

In this is just one device – think of what lies ahead in the next ten years, both for the companies involved and for those who will use these products and services.

The US has come close to labeling China as a manipulator of exchange rates. The undervalued renminbi allows for cheap exports, especially into their largest market: the EU. The last G-20 talks were a concerted effort to pressure China to allow the renminbi to rise, and last week the US got some, but not nearly enough. China has opened up to a crawling peg: a feckless economic move but a highly deft political move.

Since the last G-20 talks, the EU was emasculated by the Greek and Spanish crises, to which the US had to divert efforts away from nudging the Chinese into a more buoyant exchange rate. Even before loosening the exchange rate the renminbi had strengthened to the euro. Why would China allow their exports to become more expensive to their largest markets? China now has left the US flat on its heels with only a week to prepare complaints about the actual topic at hand—doing business in and with China—before the G-20 talks in Toronto, June 26-27. Brilliant timing.

Now, what is China’s end game in this? Obviously, the value of its currency is merely a tool in its larger political and economic strategy. So what does this mean and where is China going?

Jon Stewart slays the past eight presidents for platitudes about moving past foreign oil. Lest you think the current president is serious, ask yourself how his administration reconciles his multi-billion dollar national investment in car companies and highways while also pushing the urgency of getting away from oil.

Also, make sure you stay with this video until the end which details the great number of fantastical technologies that will somehow replace the most dense, transportable, efficient form of energy we have ever discovered. And note how these futurist presidents keep kicking the can of energy independence up the road from 1980 to 1985, 2000, 2010, 2025, 2300, the year 5000.

Understanding the future is about not being glib about the difficulty of the challenges that face us, and yet still moving forward.

Retirement will be impossible, but maybe that will be OK in a world of knowledge workers, says Harvard Business review.

Actually, when you read in medical literature that retirement is the surest highway to alcoholism, depression, and death, this may not be that alarming a forecast.

You know what they say, aging is terrible, but it sure beats the alternative.

Welcome to my first of many dispatches as director of economic risk analysis at Competitive Futures, Inc. I look forward to sharing with you some the insights we provide clients on current economic trends from around the world. Jumping right in: Is Brazil’s economy too hot?

These days, the orthodox view is that economic growth is GOOD, inflation is BAD. Most countries around the world have too little of the former and risk far too much from the latter, mostly from profligate spending and “quantitative easing.” Which is why it’s easy to see Brazil as a bright spot in the global economy. Brazil’s GDP growth is at a scorching 9%- which would normally be so hot as to cause worry of inflation. But wait – Brazil’s inflation won’t cause the same problems that the world will see in all the other countries at risk of inflation due to monster deficits. The land of futbol, caipirinhas and Copacabana is more dynamic and innovative than ever before, and will overcome inflation through investment.

Inflation in hot economies is often caused by a lack of sufficient infrastructure to meet growing demand. In Brazil, this won’t be a problem going forward, to listen to the country’s forward-looking economic policy makers. The country’s economic future appears to be poised to grow past any inflation concerns. The consumer market has grown exponentially for the past 15 years; massive investment opportunities such as the 2014 World Cup across Brazil and the 2016 Rio Olympics will see inflows from across the globe; and mass infrastructure projects in energy, transportation, and extraction (Franco fields and Tupí finds) are increasing. In a world where North America and Europe look backward to find their Golden Age, Brazil is looking at the next decades.

Imagine businesses looking for growing seeing Sao Paolo as a better bet for stability than the ailing eurozone or deficit prone North America. Brazil won’t be “one of the BRIC countries” it might be “where we have our headquarters.”

We couldn’t love  Nassim Nicholas Taleb’s work any more here at CompFutures. His book The Black Swan has become an instant classic for its application of scenario planning to financial markets, showing us that humility and constant skepticism are our constant allies when thinking about future. His work shows us that past performance is not necessarily future reality, and that we probably aren’t as smart as we think we are when making predictions about an ultra-complex, superconnected world.

Plus, he called the financial crisis well before 2008. It’s a small group of contrarians who got that one right. (Ahem.)

For a while, Taleb was in a self-imposed media blackout, terribly weary of having expressed the same ideas time and time again about how “eternal growth” isn’t the only scenario nations and companies should expect. Black swans, he contended in endless interviews, were still on the horizon, circling with plans to challenge the orthodoxies of Keynesianism, Hayekian free markets, or any other old fashioned 20th century notions.

With the new round of economic stimulus, bailouts, and other such faith-based superstitious economic rituals, Taleb is back on the scene to discuss why, contra Krugman, debt-based stimulus packages are making us less safe, giving us growth wrapped in a dangerous package of fragility.

A wonderful, weary, frank interview.

Tell me that when every kid has one of these that education won’t change forever.

Also, let me know how colleges will keep charging $1000 per semester for books when no printing is required.

This is the stuff that makes you say, “Awesome, I think the future just arrived.”

Kno Movie from Kno, Inc. on Vimeo.

In studies of the future, we typically define for leaders a number of potential outcomes. Obviously, nobody can be certain of the exact future, but through rigorous study of strategic trends, we can at least understand many of the major uncertainties, and plan ahead accordingly. These uncertainties are often boiled down into “scenarios,” a tool with which many people are familiar.

Scenarios must be defined and presented in a certain way if they are to inspire leaders to consider all the possibilities. There are risks if scenarios are done wrong. Present only one scenario, and the rest is considered blasphemy. Present two, and people are forced to take “sides,” both of which may be misleading. Present three scenarios, and people will usually fixate on the “moderate” scenario, even though it is no more reasonable or reliable than one with more impacts. For these reasons, we recommend no fewer than four scenarios, a broader set of uncertainties that stimulate discussion as to our course of action.

The image at right gives only one way of presenting a variety of scenarios, though probably my favorite way. The impact of these potential futures vary from mild, to wild. Note particularly the “wildcard scenario” – low probability, high impact. It probably won’t come to pass- but if it does, all bets are off. In our experience, wildcards are often discarded as too improbable to be worth the potential lost time discussing some doomsday scenario. Many executives avoid a serious consideration of wildcards, preferring to focus on scenarios with brighter upsides.

The BP spill, now in its 43rd day, is the definition of the wildcard, and the best possible argument for why they should be considered in advance.

True, planning for low-probability, high-impact events is not the quickest way to juice up revenue and profit. But it could mean the survival of the company.

My latest interview with Pam Atherton of A Closer Look Radio, covering the superconnection between peak oil, European fiscal crises, local economics, and even the iPad. It’s all about institutions in transition and what you will do to assure your future success.

Facebook will be worse than an abandoned shopping mall, and Twitter is doomed – or so sayeth my favorite comic, Patton Oswalt. (While it may seem to strange to cite standup comics for business insight, I submit that there’s nothing more comical than most of mainstream business television right now.) As such, I thought that his announcement that he is joining Twitter contained some cutting analysis on the future of social networks and the stability of their business models in an era of ultra-easy product substitution:

So, I’m joining Twitter this Saturday.

And, eventually, whatever replaces it.

I was on Friendster. It collapsed. I jumped on MySpace, and now it’s pretty much an abandoned shopping mall. I still get about 30 Friend Requests and 15 messages in my Inbox every day, but they’re all mailing list bullshit for bands I’ll never listen to, or porno-bots promoting some young Eurasian hottie. Even the comments are clearly all bot-generated. An abandoned mall still had trash, heating and cleaning services drop by, I guess.

I’ll still update my calendar and galleries here, but that’ll be about it.

Don’t feel bad, MySpace. Facebook is also, clearly, on the way out. Constant spam ads, weird privacy wormholes — yuck. Any social networking site, like a great punk band or TV show, has entropy and collapse built into its biography.

Remember how fun Friendster was for those three or four months?

His scenarios, however, are my favorite:

And Twitter will collapse, too. What will replace it? Here are my 3 predictions:

BlipBlap: Basically Twitter, but only 17 characters allowed, and no vowels. Xclnt!

Wh1ff: The first-ever “scent site” — you update your status from an “odor board” of 170 different scents. “(Snnnnnnfff) Patton had chili for lunch and he’s somewhere humid.”

DanzaQuip: Every single status update on this site is first sent to Tony Danza’s personal e-mail. He then decides which ones to post, and is the only one who can respond or comment. (*This site will replace the U.S. Post Office in 2027)

Really, is it any stranger than a prediction that 400 million people would voluntarily post embarrassing photos online in an ultra-complex social web of their coworkers and former elementary school classmates?

Everybody wants a profitable, just, humane, creative, interesting, healthy future – it’s just that while we are working in groups to achieve it, a bunch of other stuff happens along the way. Such is life in a world defined by bureaucracy, and instead of complaining about it, we need to realize why we’re having so much trouble actually thinking about the future. Until we recognize our collective problems, all the trends and scenarios in the world won’t help us create organizations with a strong sense of foresight.

The above statement is the central thesis for my next book, which will be a detailed, rich manual on exactly how NOT to study the future. I have identified twenty-five common traps into which leaders fall when attempting to think about the future. Before you get flogged with any more reports about nanogenetics or the rise of the Ghanaian automobile industry or reports on cell phones implanted in your molars, we need to look back at the past fifty years of futurism and see why it didn’t necessarily result in a world full of visionary futurists.

Given my new mission, I was excited to find this beautifully-presented look at cognitive bias in groups.  The authors outline for us all the ways our group dynamics can result in dangerously inaccurate thoughts about the future:

• The 19 social biases
• The 8 memory biases
• The 42 decision-making biases
• The 36 probability/belief biases

I love this presentation in the way in does not invite to blame or ridicule – these are natural phenomena that occur within groups of people. I may have committed 75 of these mistakes before breakfast myself – it’s that easy. When we come around to such self-analysis with a touch of humor and understanding, we may finally be in a position to move on to organizations that are more sophisticated and more effective.

Cognitive Biases – A Visual Study Guide by the Royal Society of Account Planning

I spoke recently with an American diplomat who outlined the larger importance of having the European currency succeed. Her concern is for the geopolitical balance that will be affected if the eurozone is not stabilized.

“Think of the Euro currency as the first baby in a marriage. Sure, there’s a difference between marriage and dating, but a baby is a real, concrete, serious output from that union, a tangible expression of your interaction. Think of the countries of Europe as participants in a somewhat new marriage. Right now, if the euro turns out to be a failure, if it is no longer considered as a reserve currency, it will be significant embarrassment on the parents – sort of like if their first kid ends up in prison.

Before, the European nations were just dating, nothing serious. They allowed passport-free travel between countries; they liberalized trade policies and labor pools; they didn’t go to war for the first time in a while. This currency has been their first major project as a group. Even their military assistance in Afghanistan isn’t truly an expression of Europe as a force – it is a NATO action. The currency, on the other hand, is designed to show Europe as a major economic counterbalance to China, Japan, and the United States. If that currency fails on the first try, essentially the rest of the world may – rightfully – see Europe as a collection of diverse states that are not able to coordinate even simple policies.

The world may be left with a more bipolar world between China and the U.S., with Europe left as nothing more than a tourist destination full of aging populations and delicious cheeses.”

Time to put your scenario-planning hats on, especially if Europe figures prominently as a market or as a supplier for your organization.

Often, I think the 21st century may look increasingly like the 19th. Sure, there’s the dominance of coal in the developing world. There’s unprecedented globalization. European disintegration. Resurgence of local agriculture. All this, plus world health is considerably better. Not a bad future, necessarily.

In the musical world, there is a recent event that hearkens back to the 19th century days of the player piano, but will 21st century elegance and complexity. Pat Metheny, one of the top guitarists and composers in the world, has experimented for years with MIDI (Musical Instrument Digital Interface), the technology that allows musicians to connect directly to synthesizers, samplers, and recording devices. This year, his vision has gone steampunk – the Orchestrion project, a centrally-coordinated digital orchestra that triggers actual instruments instead of their synthesized counterparts.

Watch the video – this is an incredibly beautiful sounding vision by a mad professor bent on calling back a more elegant age.

Beats talking about housing and finance for a moment.

Egads, Reuters has a really great set of scenarios for how the Greek crisis could play out.

Good stuff, very positive to see in major media.

We’ve been sitting back, examining the situation of sovereign debt in Europe and watching its impact on global markets.

Today, Greek debt is reduced to junk bond status, and a two-year bond’s yield has reached 26%. It was 18% yesterday.

As much as European officials say that this won’t have any systemic impact, that is often what people say when they don’t want it to have impact.

Think of multiple scenarios for this outcome. Use game theory, scenario planning, or old-fashioned guessing – but think it through.

Collectively, we have desperately wanted to ignore the larger implications of what people falsely call the “Crisis of 2008” or the “Banking Crisis” or even less correctly, the “Subprime Crisis.” The implications are too big, so it’s better not to pay attention, soothing ourselves with discussions of “green shoots” and chipper news reports that “the American consumer is BACK, baby!” The last thing our news media wants to do is continue the study of what happened, what it really means, and what’s next. This is a shame, as we are guessing that there is much in the way of “crisis” to come.

Here at Competitive Futures, we absolutely recommend studying disruptive events with the goal of creating strategies for the survival of YOUR company. Over and over again, we say a crisis for some is not necessarily a crisis for you, if you plan ahead. So when we predict major disruption, it’s not that we want to gather up a few bottles of tequila, some old records, good friends, and just wait for “the end.” Quite on the contrary, we think that it’s time for action, no matter how disruptive the news may be.

So then, just some of the news:

• Japan, the world’s second largest economy, may begin missing payments on its bonds, rendering it functionally bankrupt.

• Los Angeles, the second largest city in the United States, the tax base of which includes media, defense contracting, and major shipping, is nearly out of cash. It’s bond rating has been reduced by Moody’s to Aa3, a medium-grade risk investment.

• Greece has been saved by preferential loans of thirty billion Euros from fifteen of the EU member states. Nobody, however, is discussing what happened, why it happened, or how to keep it from happening again.

The pattern emerging here is that we have major early warning signals that the current “crisis” is part of a much larger reorganization of society and economics. Whereas last time we focused on the debt shenanigans of private companies (AIG, Wells Fargo, Bear Stearns, Lehman, et al.) this time the focus is on nation-states themselves. This isn’t about stocks, from which people expect some risks, but government bonds, which are supposed to be the dullest part of anybody’s portfolio next to shoelace futures or large stockpiles of sugar packets.

Nobody is talking about how much of a rupture this could be, which is no surprise given how little people wanted to discuss the last “crisis.” Before, this was presented as a crisis of economy – “The economy has taken a bad turn; we will bail out the private actors and things will return to normal. Oh yeah, and regulate some stuff…maybe, so that this doesn’t happen again. Not that we knew what happened.”

Now, with the bankruptcy of major cities and states and entire countries, we have a crisis of the global system. Nation-states are attempting the regulate financial actors that are orders of magnitude larger than the agencies that purport to have legal control over them. It doesn’t really work, but when push comes to shove, the people accept the sovereignty of their elected governments to print currency, engage a stimulus, or create new regulatory regimes. The inverse is not true for nation-states.  Once nations have failed, our final unit of geopolitical analysis is finally gone. If Japan defaults, they can’t really send out Mizuho Financial to negotiate on their behalf or print a stimulus. The Yomiuri Shimbun isn’t really the official spokesperson for the nation – their foreign ministry is. And after all, it’s the government that backs the currency the businesses use, not the other way around.

You might imagine, after being caught flat-footed in 2008, that our managerial culture would be more sensitive to these emerging patterns and their potential implications.

Some will pay attention, and those people can position themselves for success. Will that be you?

The reason we study trends, forecasts, and scenarios is that our actions have consequences. Our decisions or lackthereof will impact the fate of nations, of men, of our ecosystem, of life itself. Small or large, immediate or delayed, our in actions in a complex system have real effect.

Take Iceland. This financial calamity is causing the first net migration of Icelanders from their island since 1887.

Anna Margret Bjoernsdottir never thought she would be forced to leave her once wealthy homeland, but after 18 months of economic upheaval she has decided to join the biggest emigration wave from Iceland in more than a century.

“I just don’t see any future here. There isn’t going to be any future in this country for the next 20 years, everything is going backwards,” lamented the 46-year-old single mother, who plans to move to Norway in June.

The cause of the upheaval is the country’s integration into a global financial structure that even New York, London and Zurich scarcely understood.

Like many other Icelanders who have seen their worlds collapse since the financial turmoil began, Bjoernsdottir’s predicament stems from the decision, on advice from her banker, to take up a loan in foreign currency.

Repayments on her loan, in yens and Swiss francs, became insurmountable after the Icelandic krona nose-dived following the banking sector implosion.

“My loans are twice as high as they were,” she said, shaking her head in disgust. “The payments keep going higher and higher, so I have to leave, I’m forced to!”

We have lived in a period of relative peace and prosperity in the West, and if we read about emigrants fleeing their home country, it’s usually from some place like Cambodia or Guatemala, a place that that has never succeeded in our First World economics. Turning the page back a few years, we see immigration from Ireland and Italy due to extreme hardship. It is hard to imagine the new home of software development companies and luxury goods returning to a state of hardship.

Then again, it’s difficult to imagine recalcitrant Icelanders leaving for the shores of Norway.

That is why we look at scenarios – because these things are possible within a lifetime.

One of our more accurate predictions at the end of 2008 was the soon-to-be-discovered catastrophe of unfunded pensions. As 2010 develops, we see that many of the current hotspots in the ill-defined “financial crisis” are tied to this one issue of having overvalued the future at the expense of the present.

California is sitting on around $500 billion (!) in liability. The state of Illinois is short $78 billion for it’s pensions. Now, here comes The New General Motors, still losing billions after a taxpayer bailout. The Government Accountability Office has recently released a report about how pensions will likely drag the ailing manufacturer down starting in 2012 or so. (h/t to Megan McArdle at The Atlantic for quality analysis here – also, the comments section is a stitch)

What happens in 2012? The bulk of the Boomers start cashing in those defined-benefit pension plans, heading to the doctor’s more often, and generally turning 65 at the rate of 7000 per day. Aren’t forecasts useful? This is why we call it a megatrend – it will impact car companies, state governments, universities, national governments, baseball teams, travel agencies – everybody.

Nothing is more dangerous than a business decision based entirely on, “sunny, bright scenarios of fantastic success at 8% returns for all of our investors, forever!”

Two events in Europe point to a significant industrial trend: Using lots of energy simply isn’t hip.

First, an experimental plane just launched from Switzerland without any fuel on board – the Solar Impulse.

Second, Daimler (having lost weight and colored its hair and bought a new wardrobe following its breakup with Chrysler) and Renault-Nissan signed an alliance in Brussels to make small, energy-efficient engines destined for a variety of innovative, small vehicles destined for city living.

Meanwhile, General Motors failed to find a buyer for Hummer, the symbol of energy-guzzling American military triumphalism.

None of this is “green” business – it’s purely in line with the emerging reality of energy scarcity.

One of the great economic tensions right now in the Great Transition is between national organizations and smaller bureaucracies at the edge. For example: the economy melts down from an incredibly predictable housing bubble crash after a decade of equity destruction and flat GDP growth. Banks should fall, currencies should be scrambled. At the last minute, national governments step in, flood new printed money into the market, force stronger megabanks to buy weaker ones and – WHEW – everything can go back to normal.

The problem is, not everybody is a national government or a megabank with cellphone access to the Secretary of the Treasury. That’s when we see the smaller organizations at the edge begin to suffer the long term effects of this Transition.

We’ve spoken quite a bit about states, provinces, and smaller countries. Now, cities, municipal corporations, are on the chopping block. Harrisburg, capitol of Pennsylvania, is considering Chapter 9 bankruptcy as it considers its inability to meet the debt payments on critical infrastructure investments.

Today, it seems that a little backwoods village out west called Los Angeles is out of cash, may miss payments to vendors, and is in bad need of emergency financing.

Nation-states have rights that smaller units do not. Nations – provinces – cities – neighborhoods – individuals. If systems don’t work from the individuals on up, we predict an increase in bureaucratic peccadillos that nobody can solve through talent and hard work alone.

Corporate espionage. Security. Keeping your precious trade secrets from The Bad Guys, whether they be competitors or government agents looking to destabilize your economy.

This. Is. Serious. Stuff! Just ask Washington’s Eamon Javers, who just published Broker, Trader, Lawyer, Spy, about the use of former MI5, CIA, and KGB agents in the corporate wars over market share in the chocolate toy segment. Spies are involved!

He’s even on the Daily Show, the highwater mark of all important information.

So again, This Is Serious Stuff. Kids, break out your Cold War Mindsets!

This past weekend  I spoke at the George Washington University’s graduate program for high-tech security to discuss the future of intelligence. As the professors expect, I take this from a much more broad perspective, bringing competitive intelligence, futures studies, scenario planning, stochastic thinking, and general irreverence into a bouillabaise we call Intelligence 2.0.

The real news piece here is that I am excited for the next generation of leaders. The dialogue that ensued among these future security professionals was broad-ranging, insightful, and fun. We’ll need plenty of all three in order to meet the needs of organizations that exist in a world of pervasive media, and these young people seem up to the challenge.

Some major points that came out of our dialogue:

• A command-and-control mindset about information will not fit with a world of social media – the goal will be to limit risk for a certain number of activities, not to funnel all information through one conduit.
• Asymmetry of analysis will be more important than asymmetry of information – it’s not who collects the most data, but who is the best at deriving insights who will be most effective.
• A corporate culture of constantly hiring and downsizing employees with decreasing levels of engagement is no recipe for data security – many corporations are begging for their data to hit the wild Internet through shoddy HR practices.
• The shift to Gen X management will be huge – while Boomers came up on strictly hierarchical, militaristic command structures, Gen X and Y believe much more in sharing information, decisionmaking power, even credit. This will change what “secure” means in the future.
• Increasingly multinational corporations are turning to nation-state legal apparatuses to enforce their own security needs – even though the economic benefit will not necessary transfer to the nation-state in question. Over time, tension will increase about this issue.

Not bad for a grad school class on a Saturday before lunch, am I right? If these are our future leaders, I couldn’t feel any more secure.

I am very excited to have discovered a new group of future-focused intellects in Quebec. I was recently invited by Michel Dumais, a venerable media figure in Montreal who deals with technological trends from a social perspective, eschewing gadgetry in favor of a wise, humanistic view of where the world is going. We’re going to have many more dialogues where this one came from.

The following excerpt is from our discussion this past week in which I explain the basics of “la prospective” how it’s used in organizations, and how it differs from classical, 20th century, technophilic futurism.

Have a listen, though I warn you in advance that this is the genuine article, 200 proof Canadian French accents, right from my homeland of northern Vermont and southern Quebec.

Enjoy.

There is a broad trend, from real estate to finance to education, in overvaluing the future at the expense of the present. Even though you couldn’t possibly pay for your house on your current wages, the banks financed that property assuming that it would one day be worth more. Pensions offer defined benefits based on the assumption that the future looks much brighter than the present – often assuming sunny-yet-risky 8% returns even in the face of global recession. And nowhere is this more evident than education – with U.S. wages stagnant at around 1.3% growth per annum, university tuition has been growing in the double-digits for years. This means that we once again assume that the future will be a priori more prosperous than the present, otherwise educational institutions would simply have to admit to offering less education, less opportunity per dollar.

Along with our overvalued formal education market, the United States has also been overvaluing early job opportunities. According to the New York Times, more and more U.S. companies have been turning to unpaid internships for actual labor, enough to cause some state attorneys general to pursue them for violating minimum wage laws.

Internships, in principle, are opportunities for students to be exposed to professional situations, while forgoing both compensation and any real work responsibilities. The benefit is supposed to be in the direction of the student, primarily, largely an altruistic gesture on behalf of companies. In practice, though, many companies are taking advantage of the weak job market to get free labor in exchange for padding a candidate’s CV. These companies are failing to provide the educational side of the bargain, and often putting the young people to work in cold-calling, clerical work, and other jobs that are normally compensated in full.

“We’ve had cases where unpaid interns really were displacing workers and where they weren’t being supervised in an educational capacity,” said Bob Estabrook, spokesman for Oregon’s labor department. His department recently handled complaints involving two individuals at a solar panel company who received $3,350 in back pay after claiming that they were wrongly treated as unpaid interns.

Many students said they had held internships that involved noneducational menial work. To be sure, many internships involve some unskilled work, but when the jobs are mostly drudgery, regulators say, it is clearly illegal not to pay interns.

Washington DC especially works like this, but often the exchange is an entree into a highly specialized world – foreign policy, humanitarian work, affinity associations (“Federal Bass Players Association”) – that don’t just hire anywhere. The system is still often abused.

Companies may find this an easy way to get labor for the present, but since these workers are often overburdened with debt, the risk is in talent simply walking away to other endeavors, perhaps even other countries.

There’s a talent crunch coming, in case you haven’t heard.

Forecasting isn’t perfect, but sometimes it gets really close.

Check out this video from 1969 about what information technology would look like “in the future.” Online shopping and online banking – hey, that looks pretty close.

From a technique point of view, this is more conjecture than trend extrapolation, since nobody but a few DARPA engineers really knew about the Internet. Still, hey, good guess, right?

I answered that question in the negative out of pure instinct, but when you hear that Lulu is already signed on for a publishing distribution deal for iPad, you think – oh yeah, once again Apple doesn’t make devices, they make new business models. And exceedingly few companies are comfortable in that game.

Andy Ihnatko at the Chicago Sun-Times is just flat -out ebullient, in way that transcends fanboy excitement:

In fact, after a week with the iPad, I’m suddenly wondering if any other company is as committed to invention as Apple. Has any other company ever demonstrated a restlessness to stray from the safe and proven, and actually invent things?

Good question: Is your company restlessly invented new things?

I have no idea how I managed to miss this incredible video for so long:

Are You Ready for the 21st Century ? from Michel Cartier on Vimeo.

There’s a forum discussion over at the Competitive Intelligence Ning community about the simple question:

How does the term “competitive intelligence” work in your country and in your language?

For our many readers from around the world, we’d love to hear your views and approaches!

I love this video, not just for being funny, but because it defines in literal terms what it’s like to formulate some coherent story about the world and how it’s changing through American media.

Adult language; it’s The Onion after all.

Breaking News: Some Bullshit Happening Somewhere

A couple years after the world financial system quite predictably melted down, it seems some of the more mainstream journalists are becoming interested in what we call “wildcard scenarios.” Kevin Drum sat down with Reuters’ Felix Salmon and learned:

We should all be more worried about the potential of a mass casualty event — an epidemic, a gigantic earthquake, a massive hurricane, etc. — to annihilate the insurance industry and take out the rest of the financial system as a side effect. The AIDS epidemic nearly did it, Felix says, and missed only because most of its victims weren’t insured. A really big hurricane hitting Long Island could do it, though.

Yes indeed, why don’t we think more about low-probability, high-impact scenarios? It’s not because these are new concepts, oh no. Herman Kahn from RAND Corporation introduced scenario analysis in a modern context to deal with the possibility of nuclear war. He made his entire reputation by bringing leaders unwanted outcomes (notably, destroying the planet) and walking them backward (“backcasting“) toward ways to avoid negative consequences (such as everybody dying). We’ve had fifty years to absorb Kahn’s messages.

Why don’t we think more about wildcard scenarios? It’s not that they haven’t become popular in the business world. Shell’s scenario group supposedly got on the right side of the oil crisis of the 1970s and built the next forty years of success on their understanding of probable outcomes. Those responsible published heavily and built wonderful speaking careers telling others about how to think in terms of scenarios.

Heck, I even wrote a book about how anyone, from a high school kid up to a CEO, can use trend analysis, scenarios and implications for anything. Why didn’t I end up on Oprah’s couch, telling everybody how to save the world with scenario analysis? Now available to the masses in non-jargony language and using the future of beer as a case study! Fun for the whole family!

Let me ask you the reader – how prevalent is scenario thinking in your organization? How many of your senior leaders are willing to entertain the possibility – however slight and “wildcard-y” – that the world may turn out in a way that could make their decisions the wrong thing to do?

And, a better question, what percentage of executives would take such intellectual exploration – hypothetical, mind you! – as a direct challenge to their authority?

How many public relations and communications staffers would find conjecture about potential futures, turning up unfiltered on social media ,as a direct challenge to the message they are trying to craft?

These are the cultural questions of bureaucracy we in the intelligence and strategy world need to deal with before turning out anymore 1500-page analyses of potential world events. We should save the toner cartridges until we deal with how organizations actually work.

Watch this all the way through. This was apparently an internal report for Penguin Publishing, a group I now figure might survive if they are thinking this way instead of lamenting the complexities of the iPad.

Brilliance.

With a hat tip to August Jackson, Lloyd’s of London schools us further in the outlandish corporate risk due to the telephone.

Had I not seen this, we might have started using such dangerous technology recklessly.

I loved this graphic, picked up on Twitter. (Click to enlarge) Not sure who Bozarth is, but it’s a clever comparison of social media to the original electric social medium, the telephone.

A few observations, picked up from our years of discussing innovative technologies and new social trends with leaders:

• When people say “It can’t be done,” they usually mean, “We can’t control what will be done with it.” Control, or more accurately the perception of control, is considered FAR more important than creating the forward motion of innovation. Control is almost always the most important value in a large bureaucracy,  more important than revenue generation and even profit.

• Most new communication technologies are tested out informally before they become official way of doing “work,” and thus are usually classified as “fooling around, wasting time.” Consider that back in 1996, in the days before Competitive Futures, while using the Internet to research competitors for my then-CEO, I was taken aside by a junior manager who accused me of “playing video games at work.” The video game in question, incidentally, was the EDGAR database of the Securities and Exchange Commission.

• Most every generation underestimates the tech savvy of the generation succeeding it, while simultaneously overestimating the complexity of the next generation of technology. Back in 2000, we did a landmark study of the future of information technology for the construction industry in which we predicted the increased use of cell phones, laptops, GPS, and electronic building plans. Many of the older executives rejected the notion that “construction guys” would be using “the Internet and computers” by 2010. Two assumptions here were faulty: that computer skills were the dominion of the educated, and that “computer” meant “giant, clunky desktop” instead of a smart phone or Toughbook. Today, even the poor kids have Playstation and cell phones, and intrinsically understand electronic menus and text messaging. The generation is more tech savvy, and the tech is simpler.

• The argument of late technology adopters is usually predicated on the idea that they have a CHOICE as to whether the new technology impacts their business. If history is any guide, you can either adopt major technology shifts or wait to see what your competitors will do with the technology. If this is still a question in your mind, why don’t you ask the music industry what it’s like to deny the inevitable.

As such, Competitive Futures is bullish on the long-term impact of social media. It seems inevitable for a host of technological and sociological reasons.  Pause for a moment to consider its impact on your customers and your internal management.