This is part two of our dialogue with Aurora WDC on how executives should be approaching scenarios, wargames and other sophisticated tools to decode the rapidly changing market.

An important facet covered here is the dynamic between using facilitators from within the organization versus working with trusted outsiders to provide intelligence and analysis.

This dialogue with Arik Johnson, Derek Johnson, and Dr. Craig Fleisher details how executives can improve their foresight through more sophisticated analytical techniques than have been demanded in recent years.

Yesterday, the barista at our local Starbucks said, “That Rapture prediction was wrong for everyone but those in Joplin, Missouri.” That seemed like a cryptic comment until we heard the news and saw the terrible photos. Then, later yesterday, one of the most ominous purple and green cloud formations we’ve ever seen crested over Busch Stadium and the Gateway Arch, in front of the large bank of plate glass windows of the new Competitive Futures offices in downtown Saint Louis.

They tell us that April was Missouri’s worst month ever for tornadoes, and that Joplin is the most destructive tornado in history. The mainstream media is tapping into this fear, as per usual, asking why the weather has gone “cuckoo.”

Has weather gone “insane?” Is something happening? Is something wrong? Is something different? These kinds of questions make us at Competitive Futures turn off the television and go searching for long-term trend data to give us, and our clients, some guidance.

Risk management firm Aon has a team of climatologists, meteorologists, engineers and mathematicians that try to answer these questions for the reinsurance industry. Their recent report on global insured-loss weather events tells us that while last year featured the highest average temperatures on record since 1880, the longer-term trends do not indicate a significant change in weather patterns overall.

The trend global temperature is undeniable (National Climactic Data Center)

Let’s check the trends in storm systems elsewhere in the world.

Global tropical systems with winds lower than 74 miles per hour remain around the 25-year average:

Eastern Pacific hurricanes hover around the 25-year average, tracking a bit low in the past few years:

Western typhoons are following similar trends:

Finally, let’s put American tornadoes into that same perspective:

There are clearly some years of sharp spikes in tornado activity in the past decade, but if you look back a quarter-century, a clear trend of more numerous tornadoes is not yet emerging. This year could simply be an outlier. It is far too soon to tell if climate has “gone cuckoo.” The overall trends remain close to the global averages for the past twenty-five years.

This isn’t to say that the scale of the “damage” isn’t on the rise. Look at this graph from Munich Re describing the increase in insured-loss events:

The damages are clearly increasing – but then so is population and urbanization around the world. So when these events come up, they seem to be increasing in impact, since the total number of humans and the gross amount of their assets affected by these events are indeed getting larger. Once again, this does not mean that the world is by definition a more “insane” place to live.

There are two points to add here. First, the total increase in temperature is undeniable, and its future impact is poorly understood. This is why insurance companies all around the world are vigilant about the trends in these very kinds of events. We will be revisiting these issues constantly in the decades to come.

The second point is the human element to these disasters. We should be in awe of the destructive power of nature. We should mourn the dead and tend to the homeless. It was ever thus with humanity, constantly in the hands of the Gods.

Yet as leaders, we must think clearly about the actual trends at play.

I’d like to underline the most important point from our podcast with World Future Society president Tim Mack yesterday. The study of the future is about fifty years old at this point, a fact that might escape you given the astonishment of major media every time they mention it. Futures is almost as old as most of the serious disciplines of modern management: market research, marketing/PR, some kinds of finance.

That said, the discipline is growing up rapidly. The point Tim Mack makes with such eloquence is that much of the interest in foresight during past decades came from technophilia and pure optimism. That is to say, people wanted to know about the future because of how much more awesome it would be, from a scientific and social point of view. This makes complete sense when you think of the number of people who died in childbirth, died from simple infections, suffered wildly during surgery, went hungry and then…didn’t. Every decade there were miracles that represented remarkable progress in the ability of the human race to control its environment and shape its own destiny. It would only stand to reason that one would expect the future to full of nothing but such success.

The past couple decades have been telling a different story. It is becoming increasingly clear that our modern technology and social outlook can produce failure and catastrophe right along side progress and miracles. Today, you must learn to study the future to appreciate its implications both good and bad. This is not as much fun as anticipating awesomeness. But so what – that’s life. Maturity is all about taking the good with the bad. If foresight is to be a serious discipline that provides real value, this must be its destiny.

And we’re getting there.

It could be the most important time to be part of this discipline.

The political unrest in the Middle East brings up some geeky thoughts about the techniques of strategic analysis. This is not from the “Hey, you should dig megatrends!” book of the future, but direct from the canon of heavy geopolitics and game theory. E.H. Carr‘s realism versus Walt and Mearsheimer’s Neorealism versus Alexander Wendt‘s theory of constructivism. It happens to be about the current geopolitical situation, but the techniques referenced come to bear on all forms of competitive analysis. (In other words, business readers, don’t click out to espn.com just because this stuff is government-y, please. It involves you.)

One of the biggest implications of the past few weeks of major unrest in the Arab/Middle Eastern world is that the units of analysis are being scrambled. Remember: foreign policy experts use the nation-state as the key unit of analysis. Cold War realpolitik, for example, hinged entirely on big ol’ nation states as the way we analyzed the world. There were two big units, the United States and the U.S.S.R., both of who were distinct actors with stable central decision makers and defined borders. They units went out and affected other units, namely countries, to try to “win” geopolitics without killing people and breaking their stuff. When one of these units went and tried to influence a third, say, Vietnam, then the other came out to also influence it. Very clean, in terms of analysis, even if the reality was a complete misunderstood mess.

September 11th screwed things up by suggesting that non-state actors would no longer play bit parts, but could influence the whole geopolitical game. To wit, the 9/11 attacks allowed/motivated the United States to take over two nation-states, Afghanistan and Iraq. But notice – the analysis here was still about nation-states, their legitimate governments, and force-based realpolitik. The United States has attempted to use the newly-minted nation states to provide a counterbalance to its strategic competitors in the region, notably Iran (and probably Pakistan, if we are honest.) Not much has changed.

The revolution in the Middle East is different. Changing Mubarak, a long-time ally of the United States and a moderate actor on Israel’s western flank, for a popular revolution is a complete scramble for the strategic analyst. For example, Western nations give “Egypt” military aid in the billions. Well, actually, it’s not Egypt – it really has been Mubarak’s regime. They aren’t handing out AEGIS cruisers (or whatever) to random Arab taxi drivers in Cairo, they are handing power off to a group that they assume will act in a way similar to all the other regimes out there. It enables things to be nice and neat, or at least to keep some form of balance.

The huge weakness of this analysis is that it assumes complacency on the part of the huge percentage of the population that isn’t part of the government elite or the military. A nation-state is truly the result of a social contract, and when the millions of people who form that contract decide it’s no longer for them – it’s not the same thing anymore. It can’t be used as a unit of analysis in the same way. Let’s say the people of Egypt follow through on their popular revolt and elect a parliament of all taxi drivers. Can a foreign policy analyst in Paris seriously expect the same type of future behavior that it got from foreign-educated elites who understood what was expected of Cold War nation states?

Nope, it’s a whole new world.

Why is this useful for business? It’s no different than what the record companies went through when the MP3 came out and destroyed the value chain. Competitive analysis might never look the same. Why, customers were now fulfilling the roles of marketing AND distribution through the Internet. How could you possibly assume the same dynamic once the units were different?

When people say, “This is a game changer” this should be the level of dynamic shift to which they are referring.

Though many sources have been making this point, it is notable that the American Institute of Biological Sciences is taking a macroecological approach to the future of human economic activity. In a purely scientific fashion, they look at the relationship between energy consumption and economics, and conclude – not surprisingly – that you can’t have one without the other.

If, then, we are running into stalling production and skyrocketing demand – lots of places simply won’t grow economically, they conclude.

Makes sense. Now, if your government is projecting massive deficits into the future, and in the future economic growth will be constrained, what does that mean to the debt?

I always thought that debt which will never be paid back is either inflation or bankruptcy.

People are often surprised to discover that I have a significant interest in history, from pre-history to the ancient world, the dark ages to the Renaissance, and of course the modern scientific era. Often, people think that an interest in history is somehow incompatible with an interest in the future.

It’s the other way around – you can’t understand the future without understanding the complex dynamics of the past. Moreover – study of the future and the past are linked by the scarcity of reliable data. Analysis and interpretation tend to be more important than raw data collection.

In that spirit, I propose this, a chart of world “GDP” from 1 A.D. to the current moment:

Simply note that throughout history, India and China have had the majority of economic activity on Earth. Note how Britain, despite its colonial force and powerful navy, never really dominated the world in terms of total economy. And see the miracle that is the United States – where did those guys come from?

When you consider data in long, broad strokes, you can ask more interesting questions, such as “Where do we go from here?”

And also, what the heck is GDP, anyway?

If you don’t at least appreciate history, you’re its prisoner.

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

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?

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.

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.

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.

We finally have video and audio of last week’s Intelligence Collaborative event at which I discussed the impact of social media on what passes for authoritative information, and thus on decision making.

ZeroHedge points out that JP Morgan has now taken out a $3 billion reserve to hedge against the potentially faulty judgments of their quantitative analysts.

For those of us in the world of largely qualitative analysis, this is a fairly unprecedented move, one that cuts across the grain of most schools of modern managerial thought. As my colleagues in intelligence often say, fake numbers will trump real insight almost every time. For example, consider that 87% of all statistics are made up on the spot to support faulty arguments. (Ahem.)

We’re not against hard numbers; collect as many of them as possible in every analysis. Still, you should be able to analyze the assumptions behind those numbers. Speaking of which, the ZeroHedge article pulls a shocking statistic out of the history of the subprime debacle. Check out what the quantitative model predicted subprime losses to be, as opposed to the actual losses, factors of 100 greater. Holy cats…

I might add, if you prefer real forecasting to fake numbers, we’re teaching a course on the subject around lunch time, March 4. Why not join the class?

People often ask us what kinds of information they should be collecting if they want to see what’s coming next. This short video explains what kinds of intelligence you should be gathering and why if you want to maintain profitability and growth in the years to come.

For those of you who know Gregor MacDonald, you know you’re in for a treat with this podcast- a full hour of some of Gregor’s latest forecasts on energy, economics and society, insights you simply won’t get anywhere else.

For those of you who haven’t discovered Gregor yet, he is one of the top energy analysts in the world, and in our minds, one of the top analysts of anything, period.

This podcast covers sweeping ground:

• Why we’re at peak automobiles
• The end of cheap oil
• Coal’s role in the development of the world economy
• The return to human capital and small towns
• Why waterways are the future
• Our current period of “late phase economic decadence
• Why PAKISTAN holds the key to the Copenhagen Protocol

Crazier still, we could have spend ANOTHER hour talking to him and still not exhausted him of insight.

Enjoy.

Keynes and Hayek cutting heads, playing the dozens on their economic philosophies. Entertaining, and a fairly accurate breakdown of the Austrian school versus the resurgent Keynesianism which we are all experiencing.

That said, what if both these economic theories are dead and something new is on the horizon? Then this “battle” framework is distracting us from the hard work of original thinking.

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.

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.

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:

1. Music technology
2. Weird Al Yankovic
3. 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:

1. Introduction
2. Overexposure
3. Parody and remix
4. 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:

Whether you love history or a world beyond PowerPoint, check out this wonderful visualization of the world’s naval powers over time.

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.

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.

A great interview with Arik Johnson of Aurora WDC on the future of intelligence and next-generation organizations.

Arik presents some really key ideas about how decisions need to come from the outside in, putting intelligence first and listening carefully to the external environment that is so important in understanding our future.

Some of my comments from last week’s IntelCollab meeting in Washington DC.

Bloomberg won’t allow embeds, but check out this clip with Robert Shiller of Case-Shiller Index fame as he discusses the housing market.

This guy likely understands housing better than anyone else in America, and he seems absolutely perplexed as to the banks, the stimulus, the whole thing. It defies rational analysis, in response to no structural trend in particular.

Bloomberg, as in most of the business media, has a classic position: Up is GOOD! But Bob Shiller seems more interested in talking about how quantitative forecasting no longer works as a predictive model. He just seems confused as to what just happened. As well he should be.

What is left undiscussed: the notion that a group of our institutions have banded together to defy most of the logic that underpinned capitalism: that there is a free market, and that the winners are not picked by the government. That’s why the trends don’t matter in this case. The Treasury, Federal Reserve, White House and Congress banded together to make banks the winners, to allow them to suspend marking their assets to market, and to artificially keep housing prices inflated. In an economy made by fiat, structural trends lose their predictive ability. Who cares what “the numbers” say if a small group of people can renegotiate what those numbers mean at any given time?

Ah, but this is not without cost. Unemployment, inflation, and consumer spending will still likely follow the laws of gravity. That will make the recent acts of our government a temporary solution at best. So keep your seat belt buckled.

Mark Johnson gave me the idea for this allegory for “decisions without strategic intelligence.”

It seems strangely a propos.

A sneak preview of August Jackson’s presentation at the inaugural Intelligence Collaboration meeting coming up this Thursday.

I’m very excited for our upcoming inaugural meeting, this Thursday of our new, increasingly global, professional society, The Intelligence Collaborative.

The following video explains what intelligence is, why we need to collaborate, and why now is the perfect moment.

Have a look at the video, and if you’re anywhere in the MidAtlantic region, consider a trip to our nation’s capital this Thursday. Tickets are free – just bring your interest in how social media will change the practice of intelligence.

Courtesy of intelligence thoughtleader August Jackson, here are slides from his recent guest lecture at Johns Hopkins about all the various kinds of analysis you can and should be using.

This is a great jumping off point for anybody getting started in intelligence, planning, or just plain thinking.

And as we say here at Competitive Futures, KEEP THINKING.

It is more than enough work thinking about how the world is changing. Exceedingly few people think about how people think about the changing world. I’m proud to say I know some great folks who are on the cutting edge of understanding intelligence and decision making. Here, we’ve got a copy of the latest Competitive Intelligence Podcast, the brainchild of August Jackson. This time, he’s interviewing our friend and colleague Arik Johnson of the intelligence consulting firm Aurora WDC, on his view of the present and future of intelligence and its effect on leadership. The interview is broad ranging

• A new paradigm of intelligence: scarcity of analysis instead of scarcity of information
• The “perpetual beta” mindset, one of rapidly-changing technology and reduced barriers to entry
• The next decade of competitive intelligence: CI 2020
• CI’s evolving role as a mechanism and process to correct for cognitive bias
• The importance of a customer-centric model in delivering intelligence

It’s a great year to revisit our assumptions on how decisions are made. This is a great discussion to get you kicked off.

• “It’s impossible to tell the future.”
• “Nobody could have seen this coming.”
• “ These days, things are so unpredictable, we just focus on the short-term.”
• “We have entered into a period of history of high instability – forecasting is practically impossible.”

The above are classic canards used by the media and some authority figures to argue against the intellectual exercise of thinking critically about the future. They have been used with alarming frequency since the bank meltdown of last year. The collective shrugging of the shoulders of our banks and Treasury officials was often accompanied by sighs of “How could we have know what was coming? It was all TOTALLY random. That’s just the way of the world now.” Ergo, we needn’t think hard about the possibilities of converging trends, we should just check in to be told what’s going on.

This is wrong, and it is counter to how smart leaders act. None of that has changed, bank catastrophe or not.  Think about the future and you will improve it. Ignore it, and other people will create your future for you.

This week marks my tenth anniversary as a forecasting professional. I can now look back on forecasts we made a decade ago with today as the target date. Thinking about a decade of predictions, scenarios, visions and forecasts, I can say I am more excited than ever about this intellectual discipline. In short, it works, it helps, and I still recommend it to every executive on Earth.

This week, I’ll be sharing some of my favorite stories of forecasts we made in the heady days of the Dot Com Boom. If ever there was a period of irrational exuberance, that was it. And we still saw into 2010 with some clarity – enough so that I’m proud to discuss our successes and amusing failures.

If you watch the TeeVee Box, the world and its institutions seem inherently irrational. It’s a world of crazy risk, cataclysmic downfalls, nonsensical solutions from people who ought to know better.

One of America’s high priests, Ben Bernanke, has just been taken on for a second term at the head of the powerful and enigmatic Federal Reserve bank. See my post from yesterday to understand why this surprised me. For a moment I had the all-too-common though:

In a world this nuts, why even forecast? I mean, why study housing prices, water tables, healthcare expenditures, and all the rest if the world comes down to the actions of a select, semi-rational few.

Then I thought it over. The last year has unfolded in a strictly rational way. The trick to understanding the future (and the method I teach) is to analyze a combination of three things:

• structural trends
• actor decisions
• wildcards

Understand what’s happening, the options available to actors in a system, and the crazy stuff that can happen when you’re not looking.

Look at the economics of 2008 – 2009 through that lens and it all makes sense.

This is the subject of today’s podcast, so KEEP THINKING.

Paul Krugman is reflecting what I saw weeks ago when discovering a chart that compared GDP growth with total U.S. debt. The story tells itself:

Obviously, the GDP growth of the past 10 years has been illusory, juiced up by debt. This was par for the course, really; Anytime you drive the housing sector from pure imagination instead of job growth, you’re in Fantasyland economics. Says Krugman:

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Why did we keep up the charade? I submit that Boomers getting ready to retire wanted so badly to see their assets increasing in value, they were willing to let assumptions go unchecked, up to and including believing in frauds like Bernard Madoff delivering ahead of the market over and over again.

Which brings us to futures studies and statistically-driven management: anytime we rely on numbers for management, we must rigorously check the qualititative basis for our beliefs. That means incredulity, inquiry, skepticism and the conversion of sacred cows into delicious dialectical cheeseburgers.

While we are all arguing about credit-swap-derivatives and Keynesian economics, science and technology moves on.

This is a holographic image of Ray Kurzweil, techno-utopian, singulatarian, author, and inventor of incredibly awesome musical instruments. Announced today was the joint venture of Google, NASA and Kurzweil on a project called “Singularity University.” For $25,000, you will be able to study artificial intelligence, nanotechnology, and biotechnology in depth over a nine week period, ostensibly to explore the concept of “singularity,” the intersection of these technologies that could theoretically mean a radical leap for humanity.

I am conflicted about this.

Let me say that I love Kurzweil as a polemicist. His book Age of Spiritual Machines posed insightful questions about the development of neural nets and advanced computing, making us consider just what our interactions with non-carbon life could look like. He asks pertinent questions with imagination and daring.

My conflict is over his more recent book The Singularity is Near, which is techno-utopianism claptrap taken to its most absurb level, a book that says mortality can be conquered and conquered soon by the magical intersection of IT, nanotech, and biotech. Specifics on this intersection are not offered, nor supported by peer-reviewed scientific literature.  The methodology for his forecasts is non-existant, a textbook example of how simple extrapolation of current trends can lead you to conclusions without validity. For example, I don’t believe that nanotech and biotech will allow us to live forever as holograms in our iPods just because we’re spending a lot on genomics and nanotech research. We don’t even know why we sleep, nor understand how proteins are coded from the genome, nor a million other basic facts about humanity. Can we learn? Sure! Are their leaps in understanding? Absolutely! Can we count on them? Not so fast – Mother Nature gives up her secrets on her schedule, not ours. And every answer obtained usually means 1,000 more questions.

Most of the healthcare community is terrified of the real future of taking care of Baby Boomers with diabetes, heart failure and Alzheimer’s, while the “transhumanist” community is going on about we can defeat death in 2023 and live forever as Second Life characters. I find the worldview frivolous at best.

But that doesn’t mean they aren’t right.

Mind you, I’m not betting on uploading my brain into an iPod anytime soon, but I don’t want to dismiss these people or these thoughts at this moment in time. I think we’re getting very distracted by the turmoil caused by globalized finance and industry. This is understandable, but anytime people are this involved in a crisis, we take our minds off the vast majority of other things going on. And while we’re fixing our monetary system – which will take years – scientific research and development is going to keep progressing. Somebody ought to be watching it and considering a broad range of scenarios. In this case, I’d rather have a guy like Kurzweil pushing the envelope. We need to consider best- and worst-case outcomes and discuss it well in advance.

Why my change of heart? Look up current progress in surveillance technology. It has come so far, and is moving so fast toward a society of constant observation- with totalitarian implications – that it is clear that science and technology is not waiting for us to clean up our 401(k)s. It’s moving along, with or without us. And all of us, Ray Kurzweil included, need to keep thinking about it.

One of the great missing pieces in futures research is an adequate understanding of the human psychology of foresight. We have been talking to leaders about a rapidly moving future for around 70 years, and yet most people would agree that we haven’t quite arrived at a “foresight culture.”

The Long Now Foundation just pointed out a new article in the venerable journal Science which is finally seeking to understand The Psychology of Transcending the Here and Now.

People directly experience only themselves here and now but often consider, evaluate, and plan situations that are removed in time or space, that pertain to others’ experiences, and that are hypothetical rather than real. People thus transcend the present and mentally traverse temporal distance, spatial distance, social distance, and hypotheticality. We argue that this is made possible by the human capacity for abstract processing of information. We review research showing that there is considerable similarity in the way people mentally traverse different distances, that the process of abstraction underlies traversing different distances, and that this process guides the way people predict, evaluate, and plan near and distant situations.

From my own experience, the future is certainly abstract to people – something they consider – whereas the present is visceral – something they feel in their guts.

If I tell you the 2007 Case-Schiller price index indicates a once-in-a-lifetime bubble for housing, one that will soon pop, you file this under “interesting ideas to consider.”

When I show you a picture of the 4000 sqaure foot house that you are inexplicably allowed to purchase under lax banking regulations and unverified income, you file this under, “very awesome things.” The abstraction of the banking system is no match for the visceral awesomeness of being able to purchase a suburban castle with six bathrooms.

I think most people in a global economy will not take the time to consider the roots of confirmation bias is such depth. But I sincerely hope that every leader of business and government will.

MUST READ, from intelligence thought leader August Jackson:

Social Networking More Popular than Porn: What it Means for Competitive Advantage « augustjackson dot net:

Policies in information security, public relations, human relations, marketing, sales… the list goes on all have to take this reality into consideration. Old “sledgehammer” strategies are not going to work going forward. The best and the brightest are going to go where they can maintain and grow their self actualization through social tools both inside the company, with partners/customers and their social lives. Many boundaries are going to collapse as a consequence. It’s not going to be all flowers and happiness because everybody involved is going to have to be a lot smarter.

August is on to something big. The drive for social connection is incredibly powerful, more powerful than all other forces including the sex drive. As he points out, the companies may change in social media, but the social trend is here to stay for the rest of our lives.

This will change all organizations, all strategies.

I normally enjoy PC Magazine’s John C. Dvorak, but this article is off the charts. I can’t think of anyone else willing to attack management-by-numbers as vigorously, concisely, or as well.

By letting a program designed for accountants tell you what to do and what to think, you end up with an economic meltdown. The mechanism itself is flawed. Nobody ever wants to talk about the flaw with spreadsheets, do they? Most spreadsheets are, in fact, fiction, or even fantasy.

The Enron scam and the more recent oil price scam were both developed with spreadsheet modeling. “What if we could fix prices?” they asked. Click, click, click. Wow!

So this is the 30th anniversary of the spreadsheet and the subsequent rise of the accountant—the guy calling the shots and doing the deals. This class of people, once known for their meekness and wonkery, has become so powerful that they have managed to protect their common incompetence (see Enron, MCI, and Madoff, among other screw-up examples) by instituting Sarbanes-Oxley, essentially a law that protects them in any situation that involves them.

I appreciate the use of “hard data” in analysis. This was the single practice of the Enlightenment that took apart the superstitious autocracy of monarchies that shielded themselves with the divine right of kings. But the simple fact is, numbers can lie with a facility that would impress used car salesmen. The worship of the spreadsheet has certainly contributed.

We’re so excited about this upcoming SCIP meeting, I need to repost the entire meeting description:

It’s January 28th in Washington DC. You should come and be part of this discussion!

New Ways of Knowing 2.0: Social Media and the Future of Intelligence and Decision-Making

Intelligence is at a watershed moment. After decades of developing a profession to collect information and provide early warning, we find ourselves in a broad-reaching financial catastrophe that was unknown or ignored by decision makers. Despite a collection and analysis of economic information, most businesses walked unknowingly into a ruined banking sector, retail distribution on the brink of bankruptcy, housing grotesquely overvalued, American automobiles at the point of extinction – all while most leaders continued to view change as incremental.

This unprecedented current economic crisis seems to represent a failure of intelligence. After all, if intelligence cannot motivate leaders to action, then as professionals we must ask – what good is it? Many analyst voices in the desert warned about the risks in real estate, derivate markets and reliance on leverage, but it’s not clear that this led to action. Are we in our current mess because the leaders in business and government simply didn’t listen? If so, how can intelligence professionals deliver analysis that drives appropriate action?

The next generation of intelligence might solve the inherent weaknesses of Intelligence 1.0 by relying on a broad range of information, focusing on relationships over hierarchy and replacing official dogma with a continuous dialogue. Technology will be a major driver in this evolution: Web 2.0 and social media tools are moving into the mainstream– not just in the consumer space but also in business. 2008 has seen the year of “Enterprise 2.0.” Web 2.0 has gone to work to enable collaboration, smash silos and change business processes. Intelligence analysts have new tools and methods at their disposal for primary research, secondary discovery, collaborative analysis and communicating actionable insight.

“New Ways of Knowing 2.0″ will be an interactive educational event in which we will examine the potential of social media to improve the intelligent organization of the future. Participants can expect to teach as much as they learn and see connections among diverse concepts, tools, intelligence practices and business processes. Our panelists will include:

• Suki Fuller, social media maven and CI consultant
• Eric Garland, strategic forecaster, intelligence thought leader, author of Future Inc: How Businesses Can Anticipate and Profit from What’s NEXT, and principal of Competitive Futures, Inc.
• August Jackson, market and competitor intelligence analyst and Enterprise 2.0 evangelist at Verizon Business.

You will come away with this program with immediate and actionable advice about how you can incorporate Enterprise 2.0 tools into your intelligence processes to improve your ability to adapt to our ever-changing world. Discussions and highlights from the program will be posted to the new SCIP DC chapter blog at http://scipdc.wordpress.com.

Again, stop whatever elese you were doing, like reading things I wrote about 2009, and read Jim Kunstler’s forecasts about 2009. The author of The Long Emergency is experiencing the unenviable task of seeing dire structural change ahead, change that won’t be mollified by new gadgets, and being right about its consequences.

Some highlights:

He’s not a fan of techno-solutions. (not unlike yours truly)

The various tech industries are full of MIT-certified, high-achiever Status Quo techno-triumphalists who are convinced that electric cars or diesel-flavored algae excreta will save suburbia, the three thousand mile Caesar salad, and the theme park vacation. The environmental movement, especially at the elite levels found in places like Aspen, is full of Harvard graduates who believe that all the drive-in espresso stations in America can be run on a combination of solar and wind power. I quarrel with these people incessantly. It seems especially tragic to me that some of the brightest people I meet are bent on mounting the tragic campaign to sustain the unsustainable in one way or another.

He sees Dow 4000:

A consensus in the blogoshpere says that the stock markets will rebound strongly during the first Obama months. This is possible just on the basis of pure “animal spirits,” but the Obama Bounce will occur against a background of continued dismal business and financial news. It will appear to defy that news. By May of 2009, the stock markets will resume crashing with the ultimate destination of a Dow 4000 before the end of the year.

He believes that you’ll actually need positive cash flow to make a business run (old-fashioned, but radical!):

We’ll turn around early in 2009 and discover that we are a much poorer nation than we thought because from now on credit will be extremely hard to get for anyone for anything. The businesses that survive will have to keep going on the basis of accounts receivable…Giant enterprises requiring giant loans to get from quarter to quarter will tend to not make it. Borrowing from the future will become a practical impossibility as past bad debts from previous borrowings continue to unwind, cease performing, and get written off.

Real change. Not new technologies for old philosophies. Nobody will save the day. We’ll need to make workable solutions for many different types of people.

And still – people will need things. Goods and services will be required, perhaps just different types.

Business development will need to be on its toes! Are you ready?

One of the most outrageous things I heard about this current financial crisis was that “Nobody could see it coming.” Early warning was written all over this systemic collapse – and people actively made fun of this view.

Watch this video of economist Peter Schiff and the ridicule he must endure for accurately predicting the systemic weaknesses in the economy.

Think about this kind of dynamic the next time you need to spread news of a systemic disruption in your organization.

Tim Powell, a colleague and expert in competitive intelligence, sees the financial crisis as a complete failure of scientific management. We use numbers all the time because measurement is better than superstition. Numbers aren’t perfect. but if we don’t restore confidence in these techniques, the whole economy will suffer.

When people—and I include institutions here, they’re run by people—can’t trust the numbers, they can’t trust the capital markets.  When they can’t trust the markets, they will not invest in those markets.  If they don’t invest in the markets, the markets will freeze up.  When the markets freeze, business can’t operate and will itself freeze—and that is exactly what is happening.

Without honest, quantifiable management techniques, our economy will look like the Soviet block – based on raw power, cult-of-personality warlord leadership.

Metrics can get onerous, but without them, we’re in the Stone Age.

We speak often about the need for early warning when it comes to business intelligence. Usually, after something really bad has happened, leaders say “Oh, if only we had known sooner. Let’s get more interested in early warning.” This is also accompanied by observations like, “This was a failure of imagination” and “we’ve got to think out of the box.”

I submit that most times, people don’t want to see the most important changes. Such tectonic shifts mean that precious institutions (and assumptions) might be shaken to their foundations.

For example, have you ever seen this chart of American credit card debt?

It matches housing prices perfectly, matching real economic growth for twenty years, then skyrocketing after 2001.

But these together, and you can clearly see the fundamentals of the American economy changing in a radical fashion. Something about the largest economy in human history changed dramatically, and nobody really stopped to make a comment.

If we want a prosperous sane economy and functioning government institutions, leaders have got to get serious about the deep philosophical and analytical dialogues that need to accompany these kinds of changes.

The last thing we want is to watch an even bigger catastrophe than the past month, followed by the all-too-typical chorus of “we should be interested in early warning,” and “nobody could have seen it coming.”

You can see it coming as long as you are willing to watch what’s really happening.

It’s time.

With everything that has happened in recent days, we here at Competitive Futures are really examining what we do as trend analysts.

Trends are the result of decisions human beings have made. Track them all you want – it’s the leaders that count.

What kind of leader are you? Are you thinking about the future?

Yes, it’s a marketing message for our firm, but more than ever we realize that the answer to those questions impact us all.

It’s amazing how shaving a few trillion off the global economy can change things. It can even completely flip your view of the world. Just ask Mark Penn.

Penn was brought to most people’s attention as Hillary Clinton’s chief strategist, for better or for worse. This probably isn’t a fair introduction to the man, since tenure as a campaign consultant was more due to his work as CEO for public relations giant Burston-Marsteller. There, he specializes in extremely granular market research, defining people by tiny variances in beliefs and purchasing habits. He refers to this as microtrends, saying that tiny movements within a demographic add up to real change. He points to professionals with tattoos, “pet parents,” and protestant Latinos as burgeoning interest groups who will one day cause larger changes.

Pretty reasonable stuff. The only problem has been his tendancy to declare “the era of the megatrend is over.” Penn’s last several years have been dedicated to pushing the notion that these microtrends have primacy over the megatrends, that megatrends were so 1980s.

This made me discount most of what Penn had to say, because to assert that macrotrends in society and technology wouldn’t change the future is horrible, horrible analysis. Water shortage, healthcare expense, immigration, surveillance technology, global warming, skyrocketing national debts, the list of 20 – 50 year macrotrends goes on, and all of them trump the fact that 30 year-old analysts in Mark’s office were getting back tattoos.

It’s been a long couple of weeks, of course, and the effects are readily seen. For example, now Mark Penn is trumpeting the effects of megatrends in today’s Politico. It seems the impact of a collapsing world economic system does reach as far as political campaigns. (That is, if you think that Obama’s lead in NORTH DAKOTA has any significance.) Yes, but Penn unfortunately covers his most recent view of the world with a Monty Python quote, “Nobody expects the Spanish Inquisition!” meaning that nobody could have expected the world economic system to collapse.

Normally, a Python reference would warm my heart, but this is just a cover for the fact that some people would rather study what kind of Starbucks coffee people prefer instead of  examining the underpinnings of our economic system.

Mark, since you’re now into megatrends ,check this out. There’s lots more where this came from:

And welcome to the club. We need a hand figuring this stuff out.