This chart says some interesting things about the post-2008 business world in America. Specifically, it screams that if you are involved in business, the world probably looks very different than it does if you are a teacher, a carpenter, a senior depending on fixed income, or a new grad looking for work.

Over the past 30 years, there have been ups and downs, but if you are a publicly traded large company, you can definitely expect more than five percent return on your capital, and often you can expect much more than the average investor. But what really interests us is that in the post-2008 world of crazy gloom and doom and bailouts – the profit margins look like we’re in a golden age.

Ask the average American, the consumer on whom this success is supposedly based: Are we in a golden age? Does it feel like we’re in a golden age?

Most systems depend on there being a shared sense of meaning. Post-War American success was shared by a broad range of people on the socio-economic spectrum, many of them recent immigrants. The notion of free markets succeeding over a communist enemy provided a certain cohesion to the narrative of what was happening. Are we getting richer? Well, we have a better system and we’re all prospering.

What does this system say about us? Does it make sense? Does it speak to a variety of people?

One of the most important trends in corporate governance and business strategy in the last decade has been the feverish drive toward conglomeration. Banking, telecom, heavy industry, energy, pharmaceuticals, and funeral homes have been on the path of combining into ever large corporate entities. This has a broad reaching impact for everybody – workers, other companies, governments, and the investors who provide public capital.

There’s a fascinating piece from CNBC, which features some insight from Reformed Broker’s Josh Brown. It seems that for years, the business media has accepted that giantness is always a great strategic move. Here, there is some real discussion (!) about whether it makes sense to have a single corporate culture attempting to compete intelligently in a broad variety of businesses.

Brown’s point is cogent – sometimes conglomeration a good idea (Berkshire Hathaway) and sometimes…it’s just a whole lot of people with the same letterhead.

Back in the ancient days of, say, 1996 – back when we were erecting large stone monoliths in honor of the various tree gods in exchange for their mercy during the winter months – there was this strange superstition that one should pay authors and musicians and filmmakers for individual copies of their work. You got to “own” these copies and you were able to listen or read or watch anytime you wanted. Some people even got rich from this business of selling copies of artistic work.

Bizarre, isn’t it?

Now we have a host of digital music services that offer unlimited music for fractions of a penny per listen. But even stranger, we now even have things like Grooveshark which work like the original, gangster, Wild West, lawless version of filesharing circa 2000 – only prettier and easier to use. I’m listening to it now. It is positively baffling how well it works and how free it is.

We have entered into an age like no other, in which a human being born today will essentially have unlimited entertainment from the artistic output of a number of centuries available anywhere he/she goes, and for free.

Future generations will be able to spend a year watching situation comedies from the year 1985 – in real time – commercials and all – available for free in some far off Burbank computer server. Next year, do you want to do nothing but listen to Dixieland jazz and Glenn Miller-era swing? No reason not to. When you have finished, you can read every book published in Scotland in 1820 while listening to Creedence Clearwater Revival. Don’t forget to tune in for our free streaming marathon of Greek and Albanian soap operas! Followed by 2000 straight hours of the Manga Channel, a specially curated webzone for people who love extreme tentacle-centered Japanimation.

And not a dollar will change hands.

Let the implications of that development sink in. It means a lot for how future generations will act.

Forget what we have to say on the subject, take it from the CEO of financial giant HSBC: The world’s economy is shifting with terrible swiftness toward China and India. Now, you’ve heard that opinion expressed a million times – but what Michael Geoghegan is saying is that this is NOT an incremental transition, as many leaders still perceive it.

We still meet executives who believe that a global outlook is a luxury – nice if you have one, but you can live without it. It is hard to imagine understanding the message presented here and persisting in that worldview.

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

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

At the Tastee Diner this morning I had the pleasure of sitting next to a retired man who now makes his extra fun money driving a hearse. Little did I know I would be hearing about strategic trends and secondary implications of the economy’s transition.

Just two days ago, when lecturing at American University, I heard MBA students using the funeral industry as an example of the longer trend in industry consolidation, and simultaneously as an example of profitable opportunities resulting from the global megatrend of aging populations. The professor then spoke up to mention that formal funerals, which regular cost a five-digit sum in America, are sharply down in favor of cremations, around 25% year-over-year.

During breakfast, my new companion informed me that cremations are up, about 25% year over year – and that fewer funeral homes are able to afford their own hearses since their use is becoming comparatively more rare. The cause is assumed to be the lasting effects of the recession.

Twice with the same unusual trend in the same week? Clearly the futurism gods are telling me to look up this development further. And lo, on the Internet you can find voluminous and interesting trends and forecasts for the “celebratory services” industry.

Today, open up the yellow pages, find some unusual businesses and ask yourself what trends they must be experiencing. You will find interesting fodder for your own strategic thinking.

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.

If you have a certain nostalgia for 1980s Soviet advertising, or if you’re interested in the current state of the semi-nationalized automobile industry, you’ll get a chuckle out of this “scenario,” an ad for the 2012 Pelosi GTxi SS/RT Sport.

It’s funny, and yes, it contains some fairly partisan political jabs. That kind of material is something I would studiously avoid in a professional context – especially this blog. That said, we’re not in ordinary times. I would say that the current level of government involvement now means that political analysis of industry developments is more important than ever.

As I have said previously, the government is no longer simply regulating industry or financing it through monetary policy – it is now managing companies with the taxpayers as stockholders who have a right to see their investments protected. This will necessarily require an analysis of politicians and their goals. This may mean our competitive analyses will lay bare political feelings in our own organizations. That was the risk of the U.S. Government’s bailout policies, a dramatically-increased politicization of the American – and global – business environment. And here we are.

With the bankruptcy of General Motors, our economy has finally hopped over the plane’s wing into the Twilight Zone. Not that this event was surprising to anybody with a cursory interest in money or cars – GM bet its future on the world’s endless thirst for bloated Hummers and Yukons and left quality and disruptive innovation to Asian rivals, all while locked into being America’s largest private provider of healthcare and pensions. You can get six Jack Welches, ten Peter Druckers and those guys who started Google on board and even they aren’t going to figure a way out of that hole. Like any death of a long-sick relative it is still a shock without truly being a surprise. You’ll feel the same way when American healthcare self-destructs and when Social Security cracks in half.

The reason to stockpile peyote and brown acid is not the demise of a for-profit company, which should be a prosaic activity in a capitalist system. You’ll need some strong hallucinogens to deal with how this bankruptcy was done, and what it means. The failure of GM I was expecting; a failure accompanied by an additional thirty to fifty billion of my tax dollars was the pimp slap. Not only is the original “Fortune One” company declaring the death of its business model, now my children and I get to be 60% owners of the company for the foreseeable future. It almost makes me long for the good old days of 2008 when we simply handed bankers hundreds of billions to pay off their bad investments without the need to get seats on the board to protect collective shareholder investments.

The walls began vibrating songs and the chairs began dancing a frentic rumba when a psyche-shaking question occurred to me – How many freaking companies do I own as a taxpayer now? I am a proud owner of Fannie Mae and Freddie Mac, a lovely deal for the 50/50 partnership in which government covers the “loss” part of the equation and private investors cover the “profits.” I get 80% of AIG, those masters of risk management who set the planet on fire by insuring every transaction on Earth from credit default swaps to Mexican cock fights. I have shored up most of the gargantuan banks on the planet through easy loans so big that our inevitable inflation will soon give Argentina, Brazil and Ukraine a hearty, nostalgic laugh. Now, my government has made me a majority shareholder in a automotive company that will need to atomize the oldest and most-established industrial infrastructure in the world before it could ever hope to compete with the supply chains of Korea, China, Japan and India – though not a word has been written to describe the difficulty of this transition.

As a taxpayer, behold the fantastic portfolio of my future prosperity! I will take this group of investments over any crap that Warren Buffet might cobble together! And that guy Soros will soon be proven to be no match for the investment genius of Obama, Geithner and Bernanke!

The drug trip has barely begun, my friends, and the buzz of bailout is now set to become a thrumming, pulsating multisensory experience as this new market moves ahead into the new physics of crony socialism.  There’s no longer any need to believe in gravity, density, or inertia since this new universe is created by executive fiat and is subject to change at any moment. Just consider one question about the moral hazard created in this hallucinatory plane of existence: who is responsible for competitive intelligence for all of these companies that I own?

In order to compete effectively, every company must have a system of intelligence to understand market developments and competitors behavior. This practice varies in sophistication from sending guys to trade shows once in a while to learn stuff, on up to formal intelligence bureaus working in the service of products managers, strategists, and the CEO him/herself. In a modern economy evolving as quickly – and if recent events are any indication, chaotically – making decisions without the benefit of up-to-the-minute data and analysis about the business environment is a sure way to catastrophe. In the world we used to call reality, organizations had a discrete, impermeable layer that separates “us” from “them” and “internal” from “external,” allowing us to look critically at the external world. Intelligence thus permits leaders to understand the future marketplace and take action to insure profitability.

The U.S. Government not only is providing capital to a variety of American industries, it has invested me as an American taxpayer with a majority position in several cases. Moreover, the layer between “us” and “them” is now more permeable than wet Kleenex – since corporations are taxpayers too, Ford’s taxes will make them part owner in GM. Consumers too have multiple interests at stake – buy a new Ford Fusion, and you may watch your investment in GM decline. Buy insurance from a smaller carrier and you may deny AIG, of which you own 80%, of one of the only sources of profit they have to offset their days at the craps table of global finance.

Let’s not forget the government agencies themselves – they are now shaping the market through legislation and regulation, financing the industry through the Treasury’s policy of monitarization, AND acting in the market – ostensibly – to assure the return on the billions of dollars of taxpayer capital they just promised for the coming decades. This is where some peyote may help you squeegee your third eye clean and see into the kaleidoscopic mask of the Bizarro Future. Some major questions loom:

• For America’s neo-mercantile companies, who collects the data in their search for competitive intelligence?
• Who does the analysis? The company that led itself off the cliff, or the federal government bureaucrats who have zero understanding of individual market dynamics?
• To whom do they report first? Cabinet secretaries or CEOs?
• What kind of information is the most important? Rational, measurable data about the objective business environment, or subjective data about political personalities and their connections to top companies? After all, the new shape of the market seems to have more to do with who had Hank Paulson’s cell number in October of 2008 and who had dinner with Geithner while he was at the New York Fed than it does any macroeconomic trends or intellectual property analysis.

I take it back, leave the hard drugs alone. The coming reality will rival anything that distorted neuronal activity might bring. Remember, this is about the moral hazard of the future. It is with the addition of an automotive company to the national portfolio that we finally complicate American capitalism to an unimaginable degree, like trying solve calculus regressions with ten variables. In a business world created through executive order and maintained through fake federal money, all other players in the market – if they are paying attention – should view future market dynamics with the confusion reserved for a fever dream. It makes competitive intelligence extraordinarily necessary, and partially impossible.

An American auto manufacturer just stated that its plan to get out of bankruptcy is to tap into the awesome organization, logistical, and managerial brilliance of the Italians.

From the insightful analysts at CNBC:

At 10:14am:”Stocks Slide on Swine-Flu Fears”

At: 11:21am: “Stocks Rebound as Traders Find Flu Trade”

No further comment is required.

This article from USA TODAY should be on its front page in all red letters.

A small but growing number of cash-strapped communities are printing their own money.

Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.

The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.

Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.

It is not possible to overestimate this disruptive nature of this trend.

This has nothing to do with a drycleaner exchanging his services for some computer repair. This is about the nation-state shifting in importance back to the city-state, or at most the regional economy. The economic vitality that normally comes from nations is being choked by the decadence of bankrupt financiers and the inaction of feckless bureaucrats. In response, the people who actually provide the wealth of nations are walking away.

This is a statement to Messieurs Obama, Sarkozy, Brown, Hu et al. that if you can’t make a functioning international currency system, we will not take part. The printing of local currency is the sign of a revolution brewing – a bloodless revolution that is far more radical.

Watch this trend very closely. If it continues, it will change the logic of globalization for the next decade or more.

This is perhaps the top entry in the Guinness Record Book of Complete Philosophical Reversals.

Jack Welch, “Neutron Jack,” the great father of steroid-pumped management, “Flourish Elsewhere” human resources, cutting the bottom 10%, and evangelist of shareholder value as a singular strategy, has now declared the whole “money for Wall Street” thing is the “dumbest idea in the world.”

For those of you who have heard the term “shareholder value” abused in every possible context, a phrase used as a placeholder for an actual strategic thought, this reversal is akin to hearing the Surgeon General come out and say, “You know Marlboros and tequila get a bad rep – I think they are part of a healthy breakfast.”

This too is an overcorrection. People who bet their money on the performance of a for-profit enterprise will expect a certain level of return compared to stockpiling gold or letting money sit in a savings bank (assuming you can find a solvent bank these days.) Jack is right, shareholder value is a result and not a strategy – but it’s still a fine goal.

The difference in the next economy will be that half the world won’t be investing through Wall Street for the basic societal functions of assuring a dignified retirement for aging citizens. Once the pensions set to grow at 8% fail (coming soon to an economy near you!) people will get even more hesitant to invest in nameless, shapeless glass and steel buildings. Investing in for-profit companies will return to where it ought to – a risk undertaken by the very professional and very observant.

Will corporations really see employees as their number one constituency, as Jack suggests? He obviously saw value in firing over 110,000 employees in his tenure at General Electric – but it sounds like a nice idea.

The future may look like more of a balance between durable human relationships and the need to keep the doors open by making money.

At a luncheon meeting for the International Association of Corporate and Professional Recruiters, we had a stimulating dialogue about future trends and their implications on the next generation of leaders. We discussed the bursting of the current bubble in some depth, leading to one participant asking, “Will we ever see growth again?”

It’s not whether we’ll see growth – it’s whether you’ll recognize it as growth. For more, tune in to today’s episode of the Competitive Futures Podcast:

There are a whole lot of talented people in the United States and elsewhere. Perhaps one of the most frustrating things about this current crisis is that most people were getting up every day, designing bridges, learning cardiology, teaching kids, and generally being productive. All of the sudden, we get an email from the banks that everything is completely ruined and there will be no more civilization. It’s time to head back to the hunter-gatherer days. The average lifespan will turn to age 36, most people will die from mammoth stampedes, etc.

In reality, people are pretty resourceful. Just because global finance capitalism is caught in a seizure, doesn’t mean people will stop being resourceful. This is why we’re interested in the establishment of community-based barter networks. That energy and talent has to go somewhere.

Farnoosh Torabi is finding all kinds of examples of barter online, from orthodontists trading braces for server maintenance to laser treatment specialists looking for dog grooming.

If our centralized financial system screws up the concept of money, people will go without it. There will likely be all sorts of grey-market activity as a result.

Longtime reader JM remarks the following:

Think about how much influence this current situation may have on the future definition for anti-trust suits brought on by mergers and acquisitions. What will be the maximum threshold for total market share that will be allowed? We keep hearing how these companies are “too big to fail.”

Will the government put in measures and procedures to keep this growth from occurring? Which industries will be affected? Will this make smaller companies more or less competitive knowing they will not or can not be absorbed by larger players?

Insofar as government will not want to keep pumping trillions into bad business decisions, a likely future is that anti-trust departments will be put on steroids.

Then again, Merck and Schering-Plough think that mergers are the way of the future. Their reasoning? Efficiencies and combined product pipelines.

Hasn’t that always been the rationale behind mergers in pharmaceuticals? And is it working?

Is it working in banks? Healthcare? Automobiles?

I don’t think the government will show us the future of the economy, and maybe that’s just fine:

Mr. Bernanke defended the latest government injections into AIG — putting the total commitment at more than $170 billion — and said the actions would help stabilize the firm and carry out spinoffs and sales of noncore units.

“We don’t know for sure what the future will bring. We don’t know how the financial system will evolve or how the economy will evolve. But I do think that this does give us the best chance both to achieve financial stability and as well to ultimately recover most or all of the investments that the public has made in AIG,” he said.

It is not clear to me how nation-states will be able to justify allowing banks to merge to the size of AIG in the future. Companies of that size are so big, the government appears powerless to stop them, and yet that same government ends up responsible for keeping them solvent in the face of disastrous business decisions:

“AIG exploited a huge gap in the regulatory system. There was no oversight of the financial-products division. This was a hedge fund, basically, that was attached to a large and stable insurance company, made huge numbers of irresponsible bets, took huge losses. There was no regulatory oversight because there was a gap in the system.”

This isn’t a moralistic forecast, but a practical one – what smart country would allow this situation to be repeated in the next 50 years? What investor would risk his capital in the same manner? We won’t have to wait for some government to outlaw this behavior; capitalists will take the lead by being more skeptical about investments.

More importantly: Bernanke claims he has no idea what the future will bring. That’s OK – it’s our job anyhow.

The United States Government is taking great pains to prop up gigantic financial companies that made catastrophic decisions. One Harvard Business School professor thinks that small, local businesses will be the economic engine of the future.

That is how innovation works: small companies competing like crazy and trying out new things. Across cities, there is a strong connection between an abundance of small firms and local growth. The last thing that the government should be doing is propping up big declining firms. Real innovations are far more likely to come from someone’s garage, which is where Chester Carlson came up with the Xerox machine during the Great Depression.

The Big Three automakers pose real policy problems. The government is already on the hook for their huge pension liabilities. Vast layoffs will make the recession worse. I am not arguing for complete laissez-faire, but an open-ended commitment to this industry, or any other, is pure folly. Growth requires change, not binding our country to declining industries.

I’m not certain that the current knowledge economy, often depending on broad partnerships, will be just about one guy in his garage, but this would be a radically different approach to economic development policy.

The national pastime is now watching financial indicators reach the lows of the decade. It’s getting boring.

FAR BETTER is to see what IS going to create the next economy – entrepreneurialism. The next economy won’t be stimulated into existence, it will be built by entrepreneurs. Yes, that intrepid spirit of putting your money and time into businesses that do little but eat money and time, in the hopes that one day you will change the world – or at least turn a profit.

My colleague, the intelligence thoughtleader and Enterprise 2.0 guru August Jackson dragged me out to a mixer for group I didn’t know – Tech Cocktail. You might think that an event dedicated to technology startups would be morose in this supposedly capital-scarce, depressed economy. Surprisingly, the mood was gleeful, far more reminiscent of Monica-Lewinsky-era Washington, when cell phones were novel, Napster brought you the world’s music guilt-and-compensation free, and people were just SURE that www.e-spatulas.com was going to set the world on fire.

Wait, haven’t we learned ANYTHING since 1998? Shouldn’t we have figured out to not trust the flowing drinks, the meeting of new people, the launching of strange sounding, internet-based services, since this irrational exuberance brought us Enron and Global Crossing? Isn’t getting excited about tech companies better suited to an era of high profits, financial trickery, cheap illusions?

No, this is still where the future’s at. Sure, nobody was trying to deal with clean water, climate change or healthcare, the likely shapers of our destiny, but it’s the attitude here that is so important. Check out a few of the players:

• The Social Collective, a group the builds online communities to improve the value of conferences
• Localist, a one-stop shop to advertise local cultural events
• DeGeeked, a website dedicated to answering the simplest, most inane questions for tech n00bs
• GeniusRocket, a service to link brand builders and artists

What struck me was that this time around, all of the entrepreneurs were prepared to discuss viable business models. They knew where the money would come from, and were even realistic about their projections. Today, it’s OK to base a business off traffic and revenue from ads, even if it means you won’t be ultimately buying a Gulfstream 5 from your income. The rest generally knew who their target markets would be. These details seem to be all the difference between this round of innovation and 1999, when sites like www.goatclick.com went for $127.50 a share, and the CEO said “We’re still looking for a business model.”

I don’t care whether any of these specific businesses rescues the economy. What strikes me as important is that America is still hosting these types of events, where people come together excited to talk about building new services, manufacturing new goods, solving real problems and hopefully creating jobs. This is the only spirit that EVER builds economies.

We’re spending so much time examining the collapse, it’s time we get excited about the recovery. I know I am.

Gerd Leonhard is one of the hardest working guys in the world right now, criss-crossing the globe and trying to figure out the future of making money off music, books, movies, and other content. (Guys like me really appreciate that!)

He has noticed that the “sue the customer” trick didn’t work (ahem) and that a new business model for content is badly needed.

Here, his mantra is “compensation, not control.” Watch the whole thing:

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.

If we are on the brink of a Great Depression, the run up to it looks a little unusual:

AT&T said Wednesday that it activated 1.9 million iPhone 3Gs in the fourth quarter with 40 percent of those activations representing new customers.

In the back half of 2008, AT&T activated more than 4.3 million iPhones (statement). AT&T also noted that it iPhone customers deliver higher revenue per user and have lower churn rates.

via » AT&T: 1.9 million iPhones activated | Between the Lines | ZDNet.com.

I’ve been a big fan of Jeff Jarvis’ media criticism, especially his analysis of the end of media conglomeration.

Evidently, he’s not been bored whatsoever. His new book is called “What Would Google Do?” and dives deep into the thoughts and behaviors of the leaders of the fastest-growing company in history.

I have not yet read the book, but the tone is spot on for 2009. We’re clearly in a period of upheaval, but the winners of tomorrow will be those who look constantly for lessons, for new ways to relate to customers, and for hidden business opportunities. This is a good approach in that vein.

As Pfizer prepares to buy Wyeth for $68 billion.

The details state that Pfizer helped finance the deal by raising $22 billion dollars in debt from “a consortium of banks.” Who had $22 billion laying around in this credit crisis? Just curious.

Somewhere around the time that Americans were forced to write checks to bail out companies “too big to fail,” it occured that maybe “big” was the problem all along. For these reasons, the small, nimble, intelligent organization maybe the star of the next decade.

Let’s look at some applicable statistics (especially given the post on Dvorak.) Here’s what a decade’s worth of mergers and acquisitions in the pharmaceutical industry has wrought in terms of new drug applications, according to the FDA: From 1998 – 2008, flat. There is no noticeable benefit in the number of saleable pharmaceutical therapies, despite the total growth of the industry, and its concentration in a few hands.

Pfizer put together, as the result of mergers with Upjohn, Searle, Warner-Lambert, Pharmacia, Parke-Davis, Kazakhstan, Australia, and the planet Saturn, the largest private R&D organization in the world. Their 2008 R&D expenditure was $7.5 billion. That’s right, they had an organization bigger than most corporations dedicated to working on things not yet proven to make money. This by itself looks pretty cool, but it seems that the real revenue – Lipitor, Viagra, etc – comes from acquisitions, not research. Smart is nice, but big is the real strategy.

And big may be deleterious to research organizations. According to Derek Lowe’s blog In the Pipeline – which is likely the best industry blog on the whole Internet:

First, of course, is sheer size. As I’ve said numerous times, I think that many things scale as a drug company gets larger, but research productivity isn’t one of them. If anything, it may go in the other direction. Pfizer is an excellent example of just what I’m talking about. If there were any reliable correlation of size to internal research success, this is where you’d expect to see it. But Pfizer has been notoriously unproductive in its own labs. Some of that has been sheer bad luck, but you can’t use that explanation to cover the whole problem.

Put simply, I think that really huge drug companies are a bad thing. A collection of smaller ones carved out of the same resources would probably explore more therapeutic avenues, and in a more nimble and focused manner. I also like competition in this business, because it keeps us moving, and because it leads to a wider variety of approaches being tried out for each problem. Mergers and buyouts have, I feel sure, not been good for the ecology of the industry, and Pfizer is the absolute champion of that style. Large and productive research organizations have disappeared beneath the waves because they had the misfortune of discovering something that Pfizer wanted to buy.

Strong words. And perhaps the trend for large R&D organizations may be coming to an end – even Pfizer is making noises that it will be cutting research expenditure due to the financial slowdown.

But that’s not the end of the culture of big. Pfizer’s looking at generic competition to Lipitor in 2011 and a thin pipeline despite the billions spent. What does that mean? Well, naturally, CEO Jeffrey Kindler is looking to do major acquisitions to grow revenues.

Big is a culture. It won’t change overnight, except in response to sharp financial pain.

A few weeks ago we speculated that local barter economies might pop up in response to the implosion of super-fancy global capital markets.

According to a very cool article in the London Times, barter is making a comeback.

In the UK, a village pub, the Pigs, at Edgefield, in Norfolk, offered pints in exchange for locally sourced food to be cooked in its kitchens. Thousands of others trade more formally through exchanges such as Bartercard: last year the Fashion TV network used Bartercard to save £110,000 in cash on alcohol and other goods for its launch party – which FTV is repaying by providing advertising.

Incidentally, here’s that video of our thoughts of barter.

With the release of Future, Inc. in Korean and Chinese, I’ve had the great opportunity to do interviews with Asian business magazines. I find that they ask more interesting, more insightful questions than many of their Western counterparts, so they are often fun interviews. The only problem is, once they are translated, I have NO IDEA what they said.

I just finished an interview with Korea’s KRX Magazine, which covers the Korean stock market and business in general, and I decided to post the whole text in English, so someone can appreciate it.

The questions:

Companies have hard time in business due to the global financial crisis. What new trends can we look for?

The most important trend is away from the philosophy of growth at all costs. For years, particularly in the United States, management has followed a typical playbook – get big, quickly, through borrowing money from private venture capital or public offerings. Then, you can go national or international, reaching bigger markets and gaining leverage over vendors and distributors. Once you have leverage over vendors and distributors, you cut costs by firing excess employees and force downward price pressure on the market. With the extra cash from operating expenses, you buy more national or international companies. For around forty years companies have repeated this formula.

The theme here was BIG BIG BIG. The problem with “big” is that it sometimes comes at the expense of “smart.”

The financial crisis in the United States illustrates this theme perfectly. Financial institutions were merging at an unprecedented rate, devouring already huge national banks until only a few savings banks, investment banks, and insurance companies remained. The international approach leaves managers little room to be creative or to make exceptional strategies. Once you are at a global size, you are less able than ever to adapt to a changing world. All these companies had the same goals and the same risk models. To obtain profits for their international stock holders, they felt obligated to balloon the size of the housing market – even though this ultimately destabilized the world economy. Presumably, smaller companies would have had the agility to choose different strategies in response to these unprecedented changes.

As a result, I believe the counter-trend of the next couple of decades will be SMALL, ENTREPRENEURIAL, and LOCAL. This is the opposite of many of the trends we have seen in the past decades, which is why I believe we are in such a critical moment in history. This point should be of particular interest to Koreans, since this change will have important implications for the chaebol system.

The pharmaceutical industry illustrates why small and smart companies may likely beat large organizations in the future. The past decade has seen unprecedented mergers and acquisitions in the pharmaceutical sector, making enormous global corporations like  Pfizer, GlaxoSmithKlein, and Novartis. The thought was that large corporations could combine their research and development budgets and make new, maybe even revolutionary drugs faster and more profitably. That simply hasn’t happened. New drug applications at the Food and Drug Administration appear to be unchanged since 1999. The strategy today, as a result, is to find small, innovative companies and to buy their intellectual property while it’s cheap. The implication is interesting -  it says that size is not the benefit it has been assumed to be.

What efforts should countries make home and abroad, respectively, in order to be a leading power.

The future of economic prosperity will be dependant on a number of social, economic, and political factors, but there are some characteristics that will make the winners of tomorrow.

INFRASTRUCTURE: A country’s infrastructure – railways, airports, roads, hospitals, electrical grids, telecommunications, etc. – leads the way for entrepreneurial companies to create new business. Look at Asia versus Latin America. The Western countries have moved significant portions of their manufacturing sector to Asia in the past twenty years.  The theory behind this is that companies wanted to take advantage of lower labor costs – after all, China is a long way from France and the United States!

But wait, if all America needed was cheap labor, Latin American countries featured low-cost labor forces, all of whom speak a language closer to English than Mandarin, and much, much closer. The difference was infrastructure – the port of Shanghai can process container ships in a few hours, while the ports of San Salvador can require WEEKS of wait time. Interconnected rail, roads, airports, and seaports made the difference in the economic fate of nations.

You can thus see the potential winners of the future today. China is investing 9% of its GDP in infrastructure. The Korean government’s “Vision 2030” program focuses heavily on infrastructure investment, which you can see in that it has the best Internet connectedness in the world (I believe.) Meanwhile, the United States is investing less than 2% of its GDP in infrastructure – and our levies are bursting (Hurricane Katrina) and bridges are collapsing for no reason (Interstate 35 in Minneapolis.) Europe is fixing bridges and building more high-speed rail.

Another part of infrastructure is EDUCATION. This will be particularly interesting in light of the trend in online education, which could bring all sorts of training to the developing world. We’re evolving into a knowledge economy, moving to higher value-added products. Education and job skill training will determine who will win and lose in the coming decades. Once again, I am particularly worried for the United States, which has been increasing the cost of education at a rapid pace without increasing the quality. As a result millions of our young people enter the job market with thousands of dollars in debt.

Also part of national infrastructure is HEALTHCARE. Since the population of the developed world is aging at such a rapid pace, success will come to those countries who can provide their citizens with good quality healthcare without overly taxing businesses and citizens.

What strategies and blue prints for the future should business leaders have?

ANY plan for the future would be nice. I think that a professional approach to foresight must be standard skills for every leader of business and government. I travel the world talking to executives, and it shocks me how few leaders are able to answer the following question: “What are three major trends in the world, and how will they affect your organization in the long-term.”

So I don’t have specific recommendations for future blueprints – I simply recommend that leaders learn how to make them.

What would happen in the global economic landscape when all the dust in the financial markets settles down?

My prediction is for an increase in trade barriers, slowing of globalization, and increase in national regulations.

Globalization is positive in the way it has increased prosperity and alleviated poverty – but the downside is that it is very hard to manage. We can trade together, but it quite difficult to manage multi-national problems such as global warming and the credit crisis because all leaders must answer to their own citizens, each with a special set of values and goals. The credit crisis has been particularly toxic, since so much of it began in the United States and its decisions about regulations in finance and housing. What do you do if you are affected by one set of decisions, but you can’t really influence them? I think the answer will be to insulate nations from the decisions of other countries, at least in the short-term.

What are the challenges for the new president of the United States regarding the financial debacle?

The challenge is to regulate while allowing innovation. It’s not fair to any one president -  an incredible task in the face of decades of policy that lacked foresight – but I believe the Obama Administration can set the stage for decades of success or failure in its reaction to this crisis.

Many American policymakers, unlike their Asian and European colleagues, have been operating under the assumption that private industry can act in its own interest with minimal guidance from national policy and regulation and that the result will be positive for both individuals and nations as a whole. The financial crisis shows that actually, companies can act in their individual interest and lead both individuals and the nation off a cliff.

The answer is NOT the establishment of giant national regulatory bureaucracies that remind us of Soviet-era politburos – it was a disaster then, it would be a disaster now. So this government has to strike a very delicate balance – it must set up a strong national economic and industrial policy, accompanied by regulators who can exact penalties on companies that commit transgressions. But it must allow those companies to be started quickly and easily and to choose innovative strategies, to keep the spirit of American entrepreneurialism alive and well.

I think the Obama Administration has a lot of work ahead of it.

Let’s say the America used to be the center of the world in the past and China would take over the U.S. in the future. What changes would the ordinary people on the globe experience in a world where China is the most powerful country?

First, it will be difficult to directly compare China directly to the United States in the post-Cold War era. The United States had an economic, industrial, political, and culture advantage in a way that might not ever be duplicated. The rest of the world has been developing economically in the meantime, and the United States is unlikely to disappear from the world.

Also, language will change how China can extend its power in the 21st century. English is currently the international language, and that is unlikely to change no matter what China does. There are already billions of people who use English as a first or second language.

What is your outlook on the Asian economies, including Korea?

One of the biggest issues is AGING POPULATIONS. Japan, China, and Korea all have unprecedented proportions of their populations reaching old age in the coming decades and an insufficient number of young people of working age to support social programs. This is no different than Europe and the United States, but both of those regions will benefit from more liberal immigration policies to attract talent workers. The future of Asian economies will depend significantly on the responses to this issue.

Otherwise, I’m interested to see how China will balance its rural populations and its newly urbanized industrial population on its east coast. The difference in the values and needs between both populations will cause much difficulty for the Chinese government, and there is already the spectre of unrest that threatens growth in the country.

Could you tell me ‘keyword of future’ that people need to know.

Entrepreneur. The future belongs to those who can create new businesses quickly in respond to rapid change. Nations need to create a culture and an infrastructure to encourage entrepreneurial activity, or these changes will appear very unwelcome.

The last question. Could you give some advice to Koreans as to what they must do to prepare for the future?

Maintain your national identity! The age of undifferentiated global brands and mass manufacturing seems to be coming to an end, and those who are thriving (nations and companies) have a competitive advantage because they do something very well that nobody else does. France still does luxury very well, as does Italy. Japan and Switzerland excel at ultra-complex manufacturing because as a people, they love details.

Besides if you give up kim chi, bulgoki, and tae kwon do, I’ll be very upset.

Which is a good thing, since U.S. unemployment is at its highest since 1945.

Remember, we’re headed into an unprecedented global talent crisis as well. It sounds like a paradox, and it is. But it still means that lots of well-educated and skilled people will be available to start new lives, think new thoughts, and explore new directions.

Chaos mean opportunities.

Can’t believe I missed this last November, but Global Entrepreneur Week must have been a blast.

The word ENTREPRENEUR will be very important in 2009 as we build small ideas into new institutions.

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?

Stop everything you are doing, click here, and read this fantastically thought-out article from Paul Graham on why the future of economies will no longer depend on giant, hulking organizations, but small, nimble startups – and why this is socially disruptive.

Large organizations will start to do worse now, though, because for the first time in history they’re no longer getting the best people. An ambitious kid graduating from college now doesn’t want to work for a big company. They want to work for the hot startup that’s rapidly growing into one. If they’re really ambitious, they want to start it.

This doesn’t mean big companies will disappear. To say that startups will succeed implies that big companies will exist, because startups that succeed either become big companies or are acquired by them. But large organizations will probably never again play the leading role they did up till the last quarter of the twentieth century.

The most important part of thinking about the future is systems thinking. In our Future Intelligence method, the first part of every project or exercise is to map out the system of any business, activity, or market. Thinking about the beer market? Don’t just stop at consumer tastes, think about packaging, trasnportation, distribution, leisure, sports, etc. That way, you think not just about one kind of change, but the relationships.

This financial crisis is one long lesson on the interconnected nature of all industry, governance, finance, and geopolitics. This is going to surprise you all, but now, since they are part of the whole system, the commercial developers are now asking for bailouts from the federal government.

Let us not consider the merits of such a proposal, but just marvel at how much all of these industries are interconnected. Every actor in the system requires certain behavior from the others in order to survive. When one actor changes (e.g. suddenly ballooning the amount of credit) all the others respond.

Subprime mortgages are now changing the dynamics of the construction of mini-malls around the world.

It’s a mess, but at the very least it’s interesting.

If retail and commercial development are melting down, what comes next?

Amazing news that General Electric will no longer provide quarterly earnings guidance.

This is not just a decision by a public company to change its relationship to Wall Street, but a sign of a much bigger change in industry itself. It’s not just that people are going to take the longer view out of some appreciation of foresight or sudden development of wisdom, but out of respect for the massive changes currently facing global commerce.

The new Tom Friedman article is essential for its analysis of the coming shift in business models. Like every other human with a functioning brain stem, the Detroit Bailout stinks to Friedman:

…America’s bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.

And I did not know this about gas mileage 100 years ago:

Do not expect this innovation to come out of Detroit. Remember, in 1908, the Ford Model-T got better mileage – 25 miles per gallon – than many Ford, GM and Chrysler models made in 2008. But don’t be surprised when it comes out of somewhere else. It can be done. It will be done.

And it will happen to more than just this industry.

More insightful stuff from Gerd Leonhard on the future of media, which is useful the day after the Tribune Company melts down.

Great point: water is technically “free” in the developed world, but the global water industry is worth $100 billion, four times the size of the music industry.

Just because a business model blows up doesn’t mean the service no longer has billions of dollars in value

Click To Play

As a creator of content, you wonder how you are going to get paid if you can’t control the rights to your output.

Gerd Leonhard is likely the world’s top “music futurist,” a job title that appeals to me in many, many ways. He says that control is overrated.

That, my friends, as the banks melt and industries scatter about as if you dropped a box of ball bearings from ten feet up, is the theme of the year.

Check out Gerd’s keynote for more thought provoking insight:

Hat tip to Jon Lowder, who just suggested this interesting SlideDeck about the future of the university.

Is it too late?

And who will fill the void?

CHAOS MEANS BETTER BUSINESS DEVELOPMENT OPPORTUNITIES

If you look through the last several posts on this blog, you may ask yourself, “Is this guy a total drag at parties, or what?” Most of the blogposts these past several weeks indicate a world in traumatic transition, and I guess I can’t apologize for that. The world is evolving quickly and is shaking off old, useless institutions like a golden retriever getting rid of fleas. It’s quite scary and often painful.

Please put on a Bob Marley record now to feel the positive vibes

I’d just like to say that we here at Competitive Futures are actually more positive than we’ve been in some time. People are just as smart and savvy as they ever have been, the world is in fact more peaceful, and we have a new global system of information exchange that is probably the coolest thing humanity has ever built. The institutions will fall if they don’t match reality, but the future of people, communities, and business is as strong as ever.

Positive cash flow will require a new mindset

That’s not to say that all of this new business and effective government will come easily. In fact, people are going to have a difficult time adjusting from old ways of thinking to new (dare we use the word) paradigms.

We believe that that name of the game in 2009 will be business development in a complex, changing world. There are infinite new ways to profitably serve customers – especially while your competition is at least as confused as you are.

So, banks blowing up? Great. Housing market in disarray. Fantastic. Global warming still progressing? Wonderful. This chaos will be useful to those who are paying attention and starting new businesses – lean, mean, high-speed, low-drag businesses.

I hope that’s a more fun, positive message at parties this Christmas season. It’s what we will be discussing all through 2009.

This clip of Monty Python’s official YouTube site seems to me to be the ideal way to communicate when you’re faced with a game-changing industry trend.

Humor: imagine the power.

Fantastic article from Seth Godin about the future of the publishing industry. According to one of the business world’s most consistently interesting thinkers, there is a great future for ideas and inspiring people, but a terrible future for the book industry itself.

Speaking as someone who loves writing and thinking, but can’t understand why it takes an extra six months for a publishing date due to printing books in China, this is a refreshing look.

Since our banks and automotive companies are dying at such a quick pace, it seems like a nice time to visit the question of how to engineer industries before they collapse.

My intelligence buddy August Jackson just made an interesting point: given the fantastic new AUTOMOTIVE BAILOUT that’s flirting with us, will the world lose its taste for giant, conglomerated corporate entities?

Seriously, what’s the upside of having businesses so large that governments believe they shouldn’t fail? We’re spending ludicrous amounts of tax dollars to keep banks alive. The U.S. federal government is running a debt that would cause any individual to choose bankruptcy. Now, the car companies feel that they need more of (my) tax dollars to keep afloat, because letting them fail would be far too painful for all concerned.

What is the benefit of companies so big, we can’t let them fail?

And if consolidation is so bad, why is the pharmaceutical industry considering even more of it?

Questions for this new age.

Don’t get me wrong, I’m not complaining about finally paying less that $3 a gallon for gasoline. Something seems out of balance about the preciptous drop in the crude oil futures, down to $64.

It’s called futures, right? Well, even in the case of a total meltdown in the global economy, the Chinese, Indians, and South Americans will still expand their GDP, putting long-term pressure on global production of refined petroleum and petrochemicals. I understand the recession taking off a few bucks per barrel, but this rapid fluctuation may tell another story.

Perhaps it’s that speculators are leaving various markets in droves. After all, mortgage commodity speculation isn’t looking all that healthy, now is it?

Many people received a weird email from the CEOs of various airlines not long ago about how 60% of oil was bought by speculators who never intended to take delivery, artificially driving up prices. If they are leaving that game, it could be that prices are returning to the actual supply-demand curve.

Perhaps it’s unregulated speculation that has the weaker future.

Fareed Zakaria already commented on the fact that over-reliance on equities markets spurred expansion of retail space that should never have been built. My view is that inherent weaknesses in the growth-at-all-costs model will one day cause many of America’s Big Box chains to go bankrupt.

First up: Circuit City. 

Who’s next? All I know is that if your business model is built on endlessly cheap goods from China and regular infusions of cash from Wall Street, don’t plan on twenty years of smooth sailing. Maybe not even twenty months.

You know you live in interesting times when the business press reports the BIGGEST gain ever in the Dow based on the happy news that the United States is nationalizing nine of its banks!

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.

Fareed Zakaria is taking the long view with our current financial crisis, which naturally impresses me. I am quite glad to read his take on the potential upside of the current financial crisis. His view is that we will finally correct some of our fatally bad habits and return to a more disciplined approach to management.

“The financial industry itself is likely to shrink, and that’s not a bad thing, either. It has ballooned dramatically in size. Curry points out that “30 percent of S&P 500 profits last year were earned by financial firms, and U.S. consumers were spending $800 billion more than they earned every year.”

The notion of 30% of profits coming from people who essentially charge fees to borrow money should have been worrisome. Then again, the idea of running your economy on consumers who were borrowing short of a TRILLION dollars per year should have sent us screaming into the hills.

As a result, most of our top math Ph.D.s were being pulled into nonproductive financial engineering instead of biotech research and fuel technology.

I love this point! It seemed for years that simply “being the best” meant a one-way ticket to Wall Street, not a genuine love or talent for finance. It was no wonder why – that’s where the best salaries and bonuses were, no matter what you did. Yes indeed, those brains would be a real help on all the rest of our challenges!

Capital expenditures went into retail construction instead of critical infrastructure.”

This would explain why my hometown of Rutland, Vermont shrank in population over the past decade (from 20,000 to 17,000,) while it received more than one million square feet of new retail space. The average age of the place is 57, most of our manufacturing and farming jobs are gone, but they put in a dozen new giant retailers. Only fundamental problems with the financial sector could have incentivized this.

I agree with Fareed Zakaria – we’re going to have the opportunity to kick some very bad habits! It sounds like instead of shuffling money through the financial sector, we’ll be more motivated to invest in bridges, solar panels, wind farms, factories, roads and things that will actually improve our future.

A silver lining indeed.

Here at Competitive Futures we regularly tell clients, “Just because something is a disaster doesn’t mean it will be a disaster for everyone.” History is filled with stories of leaders who perceived danger early, acted appropriately, and profited.

I’m a bit fatigued of straining about this financial mess, and naturally began to ask, “OK, what’s going to be positive out of this?” Despite the ugliness here, there will likely be many positive developments resulting from this crisis of business and governance. One example is quite close to home for me.

My father is in his 28th year running the Rutland Agway, a store dedicated to farm, home, and garden in Central Vermont. Recent economic trends have sent both farming and manufacturing to far-flung states or countries. Giant retailers like Home Depot came to take a piece of the diminishing supply of disposable income in the state. For local stores, things got pretty tight for a moment.

Fleeing jobs and rocketing fuel oil prices are putting a massive financial strain on rural households. How are they responding? By going local – planting gardens like never before. Staying at home, avoiding pricey vacations – and sprucing up the backyard with fertilizer and lawn mowers. And suddenly, times are better in the home and garden business. (On top of it, Vermonters are back to eating their own delicious local foods!)

What else could be positive about this? Think it through – there will plenty of time to think about disaster soon enough.

James Pethokoukis at U.S. News and World Report believes that this $700 billion (come on, at least a trillion) bailout is much cheaper than the $30 trillion cost of not bailing out Wall Street and allowing the free market to function.

$30 trillion.

Let me ask – are we saying that our economy could possibly be upside down by multiple trillion dollars without us knowing it?

If that’s so, is this illusory wealth? What is real? What is a social construct? How can managers know anything? Why then do we have leadership, management, and regulation of any sort?

Man, I feel like these questions are necessary, but they sound like Albert Camus after nine glasses of Bordeaux.

Is our economy really that much of a post-modern construction?

It’s times like these that you really miss Peter Drucker.

It seems that the fundamentals of the banking industry were unsound, and that ultimately this led to a collapse. It’s a question of structural assumptions – what is underpinning our industry? What might change? When could a tipping point come? These heady questions are often left to us futurist-types, but it seems like this week it would be a good idea for everybody.

For example, I would like to propose a betting pool on when the healthcare industry in America will need/receive its bailout. Between the demographics of the Boom generation’s retirement and the massive wasteful spending of our current system, the now $2 trillion industry has been forecast to increase to $4 trillion by around 2020.

My assumption – which I state here – is that this is structurally unsound. The economy as a whole will crack long before we get to $4 trillion. If we don’t change the structure of the industry, it will require one of those bailouts. What year do you figure it might be? 2015? 2023? 2025?

What about your industry? What assumptions are you using to justify the long-term profitability of your company? This isn’t gloom and doom, things might be great for you. But what’s the structural long-term?

This is a good week to ask those questions. The implications of failing to do so seem quite clear.

This financial meltdown was foreseeable. Still, it seems that the concept of “early warning” is really called into question. In the intelligence business, we pride ourselves on scanning the horizon, nominally to look out for bad things and potential good things on behalf of leaders.

If early warning and business intelligence is truly taken seriously, how could this have happened?

Surely, somebody among the myriad of financial giants and government agencies has a system of intelligence, futures analysis, early warning, whatever you want to call it. Why was so little action taken? Everybody involved in management must take note of the post-mortem of this situation and the lessons we can learn – lessons we must learn.

Often, we are called upon to deliver bad news to leaders, that a real threat is on the horizon that does not match their current strategy. There is a powerful psychological force that makes people reject bad news, or to accept it very slowly. I wonder if recent events won’t make leaders more psychologically flexible, more prepared to accept early warning.

The 21st Century requires leaders with these skills. When major institutions are lead without these skills, the consequences are evident to us all.