Dubai’s demise and some basic questions about debt
The endless oil-soaked financial Bacchanal known as Dubai, home to air-conditioned ski parks, seven-star hotels, the new headquarters of Halliburton, Roger Federer’s income, and a army of foreign servants supporting a few ultra-wealthy is now officially out of wine, the band gone home, the hangover beginning . It turns out that like so much, Dubai, or at least Dubai World, is leveraged to the edge of its financial capabilities and has ultimately defaulted on the interest payments.
In the streets of Washington and on the Internet, we hear murmurs about the crisis of confidence in sovereign debt, questions on whether Dubai is really a country, really a city-state, really real enough to matter. So many questions about future bond ratings, the effect on gold, a retreat to commodities-backed currencies, the impact on equities. Also, there is speculation on the cause: is it real estate, peak oil, an overestimation of the global ultra-wealthy, the instability of the financial services industry?
In addition to those questions, I have a few basic questions first :
- How is Dubai any different from the United States, France, or Japan, countries swimming in massive debt?
- Has debt as a concept somehow morphed? Is sovereign debt really expected to be repaid? If not, are the bonds issued from such debt legal financial instruments, or some form of fraud?
- How is it that countries basing their fiscal health on debt expect the future to be so much more fruitful, profitable and taxable? Which strategic trends are they seeing to value the future performance of their assets so highly?
Basically, how is it that all these banks, companies, pension funds, and nations can be so extended, engorged on debt? Does anybody run black ink anymore? Why is the future perceived to be of greater value than the present?
I think the answers may be simple. Painful but simple. Better to make money than to owe money.
Now, who is making money out there?
Auto-Tune, Internet memes, and future trend analysis
by Eric Garland
It’s Thanksgiving week here in the United States, and I am very grateful to have found a video clip that features three of my favorite things:
- Music technology
- Weird Al Yankovic
- Analytical tools to understand trends
You’ll admit, the Venn Diagram of such varying interests have a tiny intersection, so personally I’m going to enjoy it.
Here’s why the story of Auto-Tune is of interest to intelligence and decision making types. There’s nothing particularly universal about the software itself – it’s a “plugin” used for digital music production for the correction of vocals. If you sing out of tune, Auto-Tune drags you back into A440 pitch, using effects that range from imperceptible to robotic. As of 2009, the term “Auto-Tune” is a verb, and adjective and an Internet meme, for the reasons given in the video below. Unbeknown to the masses who know the effect through artists like T-Pain and The Gregory Brothers, the effect has been in use since 1997. Only now has it come to the cultural forefront. Why?
- Evolution of Auto-Tune from hardware to a software plugin usable with digital audio workstations
- Drop in price of Auto-Tune
- Increase in processing power and bandwidth of computing and the Internet in general
- Proliferation of free social media sites such as YouTube and MySpace
In short, the technology got cheaper, easier to use, and easier to distribute. This has led to the proliferation of an “Internet meme,” an idea that virally spawns a burst of creativity around the world on the same theme. What I love about this video from Rocketboom is their description of the four stages of an Internet meme, offering us a certain level of predictability for future memes. The stages are:
- Introduction
- Overexposure
- Parody and remix
- Equilibrium
You may not connect Lolcatz or dramatic chipmunk with economic forecasting or product management, but at Competitive Futures, we see significant similarities. Short-term fads and memes regularly invade the public consciousness, and as a decision maker you must understand their dynamics. Is green business a meme created by the media, or is it driven by structural factors? What about “ethical business,” is that just a popular reaction to the scandal in the financial world, or a development in the world of management? Is “collaboration” a marketing meme to describe the same old information technologies, or is it truly a driver of business value in the next decade? We recommend that you collect a variety of data-driven trends to help your analysis – preferably trends that are under-reported and thus immune to the dynamics of Internet- or media-driven memes.
While you consider such heady stuff on the way into a long weekend, think it over with the Gregory Brothers, the world’s most awesome political-remix-Auto-Tuners:
Communicating major trends with computer visualization
Whether you love history or a world beyond PowerPoint, check out this wonderful visualization of the world’s naval powers over time.
The revolution of algorithmic authority
by Eric Garland
Clay Shirky recently began exploring a significantly important idea in Intelligence 2.0, that of algorithmic authority, a new form of trust that befits the complex informational environment of the 21st century. For those of us who assemble large amounts of data for decision makers, authority is critical, and it is under major stress due to the Internet. Until recently, you could help leaders make the most informed decisions by assembling the most authoritative sources, interpret the implications of that data, and go forth understanding several potential courses of action. Today, we must also add a new dimension – evaluating the validity of the information as the barriers to entry fall in the world of printing and distribution. Shirky’s theory helps us in this regard:
Algorithmic authority is the decision to regard as authoritative an unmanaged process of extracting value from diverse, untrustworthy sources, without any human standing beside the result saying “Trust this because you trust me.” This model of authority differs from personal or institutional authority, and has, I think, three critical characteristics.
First, it takes in material from multiple sources, which sources themselves are not universally vetted for their trustworthiness, and it combines those sources in a way that doesn’t rely on any human manager to sign off on the results before they are published. This is how Google’s PageRank algorithm works, it’s how Twitscoop’s zeitgeist measurement works, it’s how Wikipedia’s post hoc peer review works. At this point, its just an information tool.
Second, it produces good results, and as a consequence people come to trust it. At this point, it’s become a valuable information tool, but not yet anything more.
The third characteristic is when people become aware not just of their own trust but of the trust of others: “I use Wikipedia all the time, and other members of my group do as well.” Once everyone in the group has this realization, checking Wikipedia is tantamount to answering the kinds of questions Wikipedia purports to answer, for that group. This is the transition to algorithmic authority.
Arik Johnson on the organizations of the future
by Eric Garland
The most important implications of any strategic trend is usually not that your organization must do something drastic, it is that your organization is obsolete and can’t respond effectively at all.
Case in point: newspapers and the Internet. It’s not so much that newspapers could have done something to maintain their business model of classified advertising, it’s that they need a brand new business model and structure to survive. If that is the major implication of the trends we track as strategic analysts, then we almost must develop skills to help organizations change quickly and painlessly.
On that note, check out this talk from Aurora WDC’s Arik Johnson on the future of organizations, recorded at last month’s Intelligence Collaborative meeting in Washington.
Evaluating forecasts in the 2010 – 2020 economy
by Eric Garland
Round numbered years are boom times for forecasters. There is something intellectually symmetrical about round numbers that makes people hungry for the future. Back in 2000, it was really easy to get people excited about forecasts for 2005, 2010, 2020, 2050 – all divisible by ten, mathematically elegant! There is something more confusing about analyzing trends from 2007 – 2016 than there is from looking at 2000 – 2020. The brain is a funny thing.
As we begin a new decade, you will see quite a bit of retrospective about the last ten years, and copious forecasts around the year 2020. Now is a good time for executives to brush up on their skills in evaluating forecasts, so they can critically assess what is really coming down the road. Given the high level of complexity facing our economies, this is really quite important.
Assessing forecasts is more important than the act of collecting the data itself. When you see numbers about the future in particular, we are instantly attracted to their comforting certainty. Rarely do we ask, “which assumption are packed into this trend line?” For example, take a look at this projection of potential unemployment in the United States from Q4 2009 through Q4 2020. I got this forecast from the indispensable Mike Shedlock, and he got these projections from a mix of Bureau of Labor Statistics reports and assumptions.
There is also a spreadsheet on offer “detailing” the assumptions, getting into the specifics of how many jobs might be created and when they might enter the economy.
Here’s how my analyst’s brain immediately sees this in terms of the future: I want to know what will really be HAPPENING in order to create this abstract curve. Curves like this are pure PowerPoint candy, giving us beautiful visual aids to support our discussions of the future, but the lack of explicit discussion of the future leaves us an intellectual vacuum. To really evaluate the validity of such a scenario about unemployment in the United States, we can’t leave this trend line alone – we must complicate it with all the factors that will actually go into economics in the next ten years
- Aren’t the Baby Boomers retiring during this time, or at least leaving active work?
- The Boomer “retirement” will leave a talent crisis in its wake. Will unemployment mean the same thing?
- Is there a tipping point of high employment at which American society will change and become less stable? 12%? 15%? 20%?
- What about peak oil? What if economic activity is squeezed from high energy costs?
- Which industries are assumed to create the jobs? Why will they provide more value in the next ten years?
- Does this curve assume any backlash from the Ponzi scheme meltdown of the banks? What if we crash again in 2010 or 2011?
- Will US unemployment rates roughly follow the world economy, or is this trend indicative of a shift in economic power to Asia Pacific, Europe, or Latin America?
These questions are not meant to knock down the validity of such forecasts – I’d rather have an unexamined forecast that gets us talking rather than fixate on more blather from the day’s stock market trades. More forecasts lead to more discussions and better decisions.
Hopefully 2010 will be a banner year for forecasting and strategy. If you want to more, we can recommend the book Future Inc, which dives deeper into this methodology. If you want to know even more, get in touch with us to schedule training to make your analysis more valuable to your organization.
Classic futurist bait: digital androids
by Eric Garland
The future of video conferencing: having a physical representation of you in a room, a mannequin with your face digitally projected onto it.
Creepy? Uh, yes, that’s a word that comes to mind. But people in a few years may look for all kinds of ways to enhance long-distance communications, and this may not be as disturbing.
In the meantime, it’s an interesting technology in a phase of rapid growth.
Nokia on our digital lives in 2015
by Eric Garland
Nokia is the poster child for futures thinking at the corporate level. They pulled off the amazing feat of transitioning their company from logging supplies, rubber boots and toilet paper over to cell phones, spurred by the transformative event of the bankruptcy of the Soviet Union. (How did they pull this off? I detail it in my book “Future Inc.”)
Finland in general, due to their somewhat obscure position in Europe and the humility of being regularly invaded by Swedes and Russians alike for centuries, has become REALLY good at foresight. Thus, it’s no surprise to see Nokia’s vision for our digital lives in 2015 laid out in beautiful graphical scenarios as in the video below.
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.Connect with us
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