Paul Denlinger: China’s Strategic Future
by Eric Garland
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.
Russia is the new energy power player while America barbecues
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.
Retail on the verge of unprecedented strategic change
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.
Cisco’s futurist discusses “The Internet of Things”
by Eric Garland
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.
Exhumation and Maradona: Antics and rotten fruit of the Bolivarian Revolution
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.
Rebirth of the “made in America” brand
by Eric Garland
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?
China, Google, and two notions freedom
by Eric Garland
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.
Economic policy and politics need to meet in the middle
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.
Shadow inventory and other things you never read about
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.
Homo economicus mortus est? (Who needs economists?)
by Eric Garland
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?
About Eric Garland
Eric is one of the world's pre-eminent thoughtleaders in forecasting and strategy. He helps leaders of business and government make critical decisions about their futures.About Dan Vecchi
Dan Vecchi is the director of economic risk analysis for Competitive Futures. He helps leaders examine their investments in countries around the world, exploring future options and ensuring profitability in the years to come. He speaks natively fluent English, Spanish, Italian and works regularly in South America as well as Europe.New project: Manufacturing 2020!
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