Will Vermont secede from the United States?
There is an interesting development at the intersection of political trends and economic trends. We have been recently covering the economic fissures in some of our largest states. California, Arizona, Illinois and Michigan teeter on the brink of financial crisis, and this in turn menaces the integrity of the United States Constitution. Letting California’s bonds go to junk will have long-reaching impacts – but if the Federal government begins distributing bailouts selectively, there are bigger legal problems at stake. Other states will have recourse to ask for money from the Federal government, making the relationships of the 50 states complicated indeed.
What’s another option for states? Leaving altogether. Now that’s a new trend in these parts.
The state of Vermont has had a secessionist movement dating back over 200 years, back to the time when it was an independent republic. It’s mostly been a topic of discussion over an excess of beer in pubs – until recently. Now, Time magazine reports that seven separate candidates are running for the state senate on a secessionist platform – plus a candidate for Lieutenant Governor. One of the points they raise is that the state is a net positive to the federal government, only receiving 75 cents in services for each dollar collected in taxes. Thus, a way to balance the books for Vermont is to cease paying US Federal taxes, and to move out on its own. And they are forecasting:
By 2020, they foresee Vermont producing at least 75% of its own electricity and heat, using wind-, solar-, biomass- and hydro-power. They want to establish a Bank of Vermont owned by the people of Vermont — freed from the arbitrary controls of central bankers — as well as a local alternative currency, with Vermont pension and operating funds invested not in Wall Street but in locally owned financial institutions.
Volcker: Keep banks small
Quite interesting development: Paul Volcker is recommending that we break banks up into smaller, more secure pieces to reform the financial sector.
Very reasonable analysis, but it’s pretty rare in these days when the media praises every merger and acquisition as a way to improve customer reach, innovation, fresh breath, and more.
The crisis of American states
Obama’s State of the Union speech mentioned many classic problems facing the United States – unemployment, healthcare, security. Sure, there was some mention of the more recent banking fiascos – but how much of what was mentioned showed a nation facing unprecedented challenges requiring untested solutions?
For example, where was the mention of the fiscal crisis of the largest, most productive American states, like California, New York, and Illinois?
Investing and planning for the future? Look beyond the headlines toward the trendlines.
Small companies adding value: the rise of microbrewing
When I wrote Future Inc: How Businesses Can Anticipate and Profit from What’s Next, I chose the future of beer as a case study to illustrate forecasting methodology. The reasons were many. Beer is a 5,000 year-old product, and not as tech-driven as information technology – so you can’t fall back on techno-optimism when thinking about its future. Still, beer is wildly interconnected: it encompasses agriculture, biotechnology, transportation, retailing, government regulation, cuisine, social impacts, and much more. Despite being simple, the changes in the beer industry are rich and interesting. Plus, beer is delicious.
One of the key forecasts I uncovered while researching the book was the rise of microbrewing. The major beer brands around the world were stalling while small, local and national operations were profitably targeting a small and growing segment of beer drinkers and nascent foodies.
Here we are four years later, and the trend has continued apace. This article in the St. Louis Post-Dispatch shows how even in the shadows of the now-Belgian owned Anheuser-Busch, microbrewing is taking off at mid-double digit rates while sales of the majors now dip.
One of the reasons behind this trend actually transcends the beverage market. In our research in the field of economic development, Competitive Futures has learned that the rise in local beers often coincide with resurgences of economic vitality. Local beers become a flag around which communities rally. It often becomes associated with “local success stories” of businesses started in someone’s garage, soon requiring real capital investment in manufacturing infrastructure and jobs with good wages. Local ingredients and traditions are incorporated; cultures are revered. In short, microbrews are successful because they create value on multiple levels – for shareholders, employees, municipalities, and of course, beer lovers.
Now, can large companies create value on this level? Perhaps only if they begin thinking in this superconnected way.
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More trends and analysis to follow in 2010.
Short-term and long-term business planning – what timeframe?
We spied a very interesting interesting graph from Rick Telberg, who may possibly be the only competitive intelligence professional I know focused on strategic trends for tax, finance and accounting professionals. His company surveyed a very interesting question – what do you consider short-term planning?
The answer, after a billion articles about futurism, The Art of the Long View, scenario planning, technology foresight, and all the rest, is still a bit shocking.
Half of people interviewed actually considered short-term to be within three months. One out of five thought of their short-term as one week.
What could they possibly think of as super long-term? A year? Eighteen months?
How can you discuss peak oil, Boomer retirement, housing trends, the rise of Asia Pacific?
Bear this in mind as you try to discuss strategic trends.
Simple mental calisthenics for innovation
No fancy charts. No ultra-complex matrices of trends, implications and scenarios, backed by authority figures. Today, a question:
What if every obstacle to your future is actually a strength, a challenge that will drive you toward an elegant solution?
What if, for today, you thought of everything impossible in the world as the key to your ultimate success.
Will difficulty make you shut down your creative faculties when you need them most? Or will you mentally rise to the occasion?
Music – fix your business model!
by Eric Garland
This presentation from Alexander Osterwalder is a terrific, brief analysis of what is broken in the business model of music, and more importantly, how it can be fixed.
Note the systemic tear down of the different parts of the industry, looking at the value chain in great detail.
This analysis can and should be used by any company in any industry.
What real forecasting looks like
Competitive Futures has a theme for all of our products and services in 2010: real forecasting.
When we look back at the good and bad decisions of the past twenty years, we ask, “Were you looking at real forecasts or fake forecasts?” Did you listen to forecasts that told you, comfortingly that the positive scenario was 5% growth, the negative scenario 1% growth, or the “middle” scenario dead on at 3% growth? Or did you ask which assumptions were behind that view of the future? Did you ask complex questions and get mature answers?
More on this – much more – in the month of January.
In the meantime, to illustrate the difference, check out Chris Nelder at GetREAList in his blistering takedown of the EIA energy forecasts, entitled What if the Annual Energy Outlook Were Written by an Honest Person: Why the EIA Should be Statutorially Barred from Making Predictions:
Suppose you worked at the Energy Information Administration (EIA), the agency within the U.S. Department of Energy charged with keeping data and making projections on energy, and you had to produce an annual report with a scenario for the next 25 years.
Being an intelligent and informed investor, you might grapple with the $147 to $33 range in oil prices over the last year and try to imagine how such volatility might happen in the future.
You might be tempted to model a few economic factors such as GDP growth rates and credit availability, and how they affect investment in energy supply.
You might consider the price at which producing a barrel of oil or a thousand cubic feet of natural gas becomes profitable, and the price at which it becomes too expensive and destroys demand.
You might take peak oil, peak gas, and peak coal into account, since the best available models on those subjects all suggest peaks within the time frame of your scenario.
Wow, great analysis from Mr. Nelder, and an appropriately systemic approach to energy forecasting. That’s what the EIA forecasts look like, right?
But then, you’re not working for the EIA.
If you were, you’d do something like this…
You’d get out your crayons and your graph paper, and starting with your most recent data, you’d plot a nice, steady 1.5% global growth rate for energy demand over the next 25 years.
You’d do something similar for supply so that it matches demand at prices that also climb at a nice steady rate. For oil prices, call it, oh, how about 0.4% per year? That sounds pretty good.
You’d draw basically flat lines into the future for all the fuels dominant today, since you know they have serious challenges ahead, and then draw sharply rising lines for the latest and greatest technology, projecting enormous growth rates for things like shale gas and enhanced oil recovery.
You’d be sure to count all possible supply from new sources — like a new gas pipeline from Alaska — even if those projects don’t yet exist. Hey, it could happen!
You would not, however, factor in any CO2 reduction, because policies to control it don’t exist.
Naturally, you’d assume that the next 25 years would show gradual economic growth, so there wouldn’t be any troublesome issues like credit availability or depressed consumer demand to worry about.
Ouch.
If you are making forecasts about where to build a factory, planning to ship your finished goods to the markets of the world, and you are calculating energy costs per unit, whose forecasts are you going to use? The EIA is more of an authority, but then again – who’s got the more authoritative forecasts?
Apple’s true killer app: disruptive business models
Great analysis from Paul Denlinger at The China Vortex about the upcoming Apple Tablet, and what its real impact will be on the market.
As Denlinger points out, most people assume that the secret of Apple’s success is their reliably sexy user interface. Sure, that’s a critical factor in its dominance of the premium computing market – the stuff works and is beautiful. What makes Apple so influential as a company is its ability to change business models, making everyone else a follower.
Sure, iPod was a great little device, but others had portable MP3 devices, however ugly. It was iTunes that got people thinking of MP3s as legitimate purchases instead of illicit stolen files. The music publishing world is still reeling, and Apple is the number one music retailer in the world. The iPhone is not only cool, it introduced the App Store that allows each phone to be user-customized, with prices set by the free market. They don’t yet own the market, but the word “app” is now an accepted concept in the business lexicon. Sexy brings you to the dance, and wonky, quantifiable, innovatively-engineered business models take you home.
And so what awaits the Tablet?
Now, in order to make the Apple Tablet a real success, it has to have certain functionality which will not cannibalize iPhone and Mac notebook sales. This is why it’s point of attack will have to be on books, magazines and the publishing industry. It will offer developer tools for Apple’s digital publishing solution. Already there is talk about Apple’s new SDK for this new platform.
My prediction is that this new SDK will make it apparent why Apple has not been friendly about offering Adobe’s Flash access to the iPhone, since Apple’s solution will offer much of the same feature set as Adobe Flash, but will be more tightly bundled in on the front and back ends to the device and to the store. (Steve Jobs likes closed ecosystems where he controls the whole experience.) Tough times for Adobe’s Flash and Microsoft’s Silverlight: all dressed up and nowhere to go.
Speaking as an author, the industry is ripe – no, begging – for disruption. And as usual, it’s the Googles and Apples who notice first.
This will be fun to watch.
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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