Inbound marketing experts HubSpot put together a compelling list of statistics that show why the future customer will require new techniques and technologies, especially social media.

One of the reasons Competitive Futures is launching its multi-client research project on this is subject is that forecasts show that many executives are unclear about how to go about social media for CRM, and even intend to keep marketing through one-way, context-free media, despite the incredible growth in online social activity.

It is our forecast that this tension between social-savvy customers and social-hesitant businesses will mean that the first companies to evolve their practices will achieve competitive advantages in the years to come.

Check out our white paper, and download our prospectus to see how your company can sponsor this unique foresight project.

Competitive Futures is launching a new multi-client research project over the next six months on the future of social media and customer relationship management. This white paper details the insights that lead us to take on this important topic on behalf of our clients.

For a full project prospectus, call us at 877.431.6565 or contact us.

Competitive Futures White Paper: Social media and customer relationship management

This episode of the CompFutures Podcast features Australian futurist Paul Higgins, founder of Emergent Futures. Paul has a fascinating background, a veterinary surgeon who turned toward foresight after a simple ad for a futures studies grad program. In this episode, he describes when executives should think about the future versus tending to execution, how the future of trust will be key to our social institutions, and why Australia is a fascinating vantage point from which to think about global business.

More than ten years ago, we were involved with a study on the Future of the Kitchen 2010 – 2020, in which we forecast appliances using the Internet.

Crazy, am I right? It’ll “never happen.”

This is the fun part of having been in the business of trend analysis, forecasting and scenarios for over a decade. You are around long enough to see what works out and what doesn’t.

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.

Back once again with the fantastic Pam Atherton on A Closer Look Radio, Eric ties together the disparate topics of locavore restaurants, revolution in Egypt, and fake government shutdowns to what it all means for YOU and your business.

Zero Hedge has a copy of the latest newsletter from PIMCO’s CEO Bill Gross to his customers. The topic is the quasi-certainty of the U.S. Government continuing its deficit for decades. His tone is very unusual – especially for this member of Generation X – in that he talks about the ethical obligation to future generations in this piece called “Off with our heads!”

Perhaps you did or did not make it through the entire lecture and Q&A with Prof Niall Ferguson in yesterday’s post. Either way, you may have missed the key forecast that underlies all of his thinking about the future of the American economic system:

The U.S. is poised to run major budget deficits in addition to its current debt through 2080.

Take a second to think about that.

This morning’s papers, in advance of the Republican takeover of the House of Representatives, are reporting the upcoming “serious budget cuts” to be proposed by the new house members. It makes for good copy – after all, things might soon be different!

Let’s look at the actual projections from the Congressional Budget Office.

Ferguson points out that there is not currently the political will to reverse this trend since it involves the sweeping entitlements of Medicare and Medicaid. These two programs alone will, by 2080, equal the entire size of the United States government in 2010, never mind military and education and all the rest. Ferguson is not bullish on the notion that future generations of politicos will stare into the eyes of retiring Baby Boomers and say, “sorry, no pensions for you, and you can buy your own healthcare.”

So America, despite its headlines, will still engage in deficit spending unless something very drastic and unexpected comes to pass. That’s an important long view to have as the politicians take to the airways.

Is empire cyclical, doomed to birth, consummation, establishment, decline and desolation? Or are there other futures for large regimes? Can large complex systems create new kinds of future, or are the winds of fate far too strong? Can we predict decline, change it, improve things, create order out of chaos?

Nobody is better at exploring the large questions than Niall Ferguson. This lecture is long and well-considered, not a candidate for viral videohood. Given the subject, that is perfect.

There is a great post today on Mish’s blog about the future of job growth in the United States. He’s at odds with Calculated Risk blog on the forecasts for employment in America.

CR forecasts a growth in between two million and three million jobs in the United States in 2011 alone.

Calculated Risk takes the time to point out that this is not necessarily going to be seen as a tremendous recovery:

With over 15 million unemployed workers – and 6.3 million unemployed for more than 26 weeks – adding 2.4 million private sector jobs will not seem like much of job recovery for many Americans. Hopefully I’m too pessimistic.

Mish is skeptical, unable to see what exactly will drive this growth. This chart from the Bureau of Labor Statistics that he cites shows how manufacturing jobs have been declining steadily for a decade, in both recession and boom.

We have been discussing how America, as the world’s largest economy, is in a transition to a “Knowledge Economy.” Clearly we are seeing the decline in jobs that involve actually manufacturing things. Supposedly, we are supposed to move as a nation toward intellectual property law and management innovation consulting and branding. Yet those jobs are not filling the losses from other types of non-farm labor.

Is the Knowledge Economy still a good term for what is happening? What will America do for a living?

When you’ve been in the business of forecasting for more than a decade, it’s fascinating to see how your past scenarios become current events.

More than ten years ago, I remember discussing the conundrum of digital imaging with the executives of Kodak. It’s not that they didn’t see this coming, it’s that there was no elegant way to repurpose billions in chemical factory infrastructure for a world of integrated circuits and hard drives. Looking back at 1999, it was difficult to see a world where Kodak thrived using anything resembling their old model of competitive advantage.

Today, Kodak has now been delisted from the S&P 500, along with the New York Times and Office Depot. Added onto the list of bellweather stocks is Netflix, a company whose shared are trading near $200, a company whose business model seemed like a long-shot at the time.

The whole point of analyzing future is to understand upcoming competitive dynamics. There will be new winners and new losers.

Competitive…Futures…yeah, I like the ring of that.

Altimeter’s Jeremiah Owyang recently presented this following forecast on how social media will be integrated into the heart of business starting next year. Up to 2010, some companies were just experimenting with social media, some bolted it on to their existing brand communications structure, while still fewer used it as an organizing principle to allow all members of the company to relate to the outside world of customers and stakeholders in new ways.

In 2011, Owyang says we can expect businesses to focus on measurements of ROI, integration with product roadmaps, more organized modeling, and increasingly mature policies for social media.

In the wake of the financial shock waves rocking the Western world, there is a group of thinkers who represent a new school of thought – that there will indeed be no “recovery” of economies in the traditional sense. Their forecasts for the future of practically everything are transformative in nature, and should be considered by all strategists. I call these thinkers the “survivalists” for the way they not only see an end to current financial regimes across the world (that ideology is increasingly common), but also see a return to a more disintegrated, localized 19th century version of economics.

Perhaps the most conventional of these thought leaders are those in the peak oil camp, energy analysts who often come from an investment background. Guys like Gregor MacDonald and Chris Nelder come to mind, analysts who are convinced that peak oil supply is upon us. They give a variety of hard data on the matter, and are talking about how the assumptions of our economy are about to be upended. Both have been guests of the Competitive Futures Podcast.

With a buzzsaw sense of dark humor, James Howard Kunstler has been pointing out the unsustainability of America’s economy for years. His 1997 book The Long Emergency is a classic for describing the policies needed to deal with a post-cheap-oil world, a work of great foresight in the way it predicted that financial calamity would accompany the peak in oil supply. His weekly missives are available on his blog, which are usually more bracing than six shots of espresso.

Another writer is Charles Hugh Smith of the blog Of Two Minds. His new book is called Survival Plus, a guide that takes the coming collapse as a virtual certainty and actually moves people toward steps they can take to rebuild their local economies, far beyond a simple call to stock up food and shotgun shells in the cellar. A sample chapter can be found here.

The idea that the old system may never regain its integrity is one that should be on the mind of every leader. This school of thought is only covered on the margins of today’s media, but its ideas will give you new perspective on potential future scenarios for your business.

The interesting thing about studying the future, is that trends are usually developing while we’re busy looking at other things. This is a very positive trend coming from Africa:

Currently a net food importer, Africa has the potential to become a food exporter through a combination of modern technology, improved infrastructure and better technical education, according to the study.

Calestous Juma, professor of the practice of international development at the Harvard Kennedy School in the United States, led the research, which was funded by the Bill and Melinda Gates Foundation.

“Seventy percent of employment in Africa comes from agriculture, so you can argue that in Africa agriculture and economy are synonymous,” he said. “In effect, you cannot modernize the economy in Africa without starting with agriculture.”

Pour nos lecteurs (et clients!) francophones, voilà un court film qui accompagne un livre important qui va sortir prochainement de nos collègues canadiens Michel Cartier et Jon Husband, La société émergente du XXIe siècle. Leurs perspectives deviennent de plus en plus trenchants chaque fois que nous regardons ces films.

Êtes-vous prêt pour le 21e siècle from Michel Cartier on Vimeo.

Chris Nelder is the author of Profit from the Peak, Investing in Alternative Energy, and the editor of www.getrealist.com. He is one of the world’s experts on the limits of the world’s oil supply, and here he has some major forecasts that all leaders should consider carefully.

• We already hit peak oil in 2004. The era of cheap oil is ending every day.
• Like corn flakes? Soon they won’t make economic sense.
• Air travel as we know it we be for the rich after 2015.
• Cities need to have a plan to transition back from suburbanization
• Investors need to forget fiat assets and get into hard goods for the transition.

We’re always excited to talk once every few months with the inimitable Pam Atherton on her fabulous radio show A Closer Look. She provides one of the few media forums where we can talk about future trends and their implications, in depth.

In this episode, we go into a question on the minds of everyone these days – what are the jobs of the future? We talk about agriculture, manufacturing, old time values, and why the future will be a struggle between savers and spenders.

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.

In this episode of the Competitive Futures Podcast, we interview Paul Denlinger of China Vortex, an author, investor, and executive advisor who specializes in U.S. – China commercial activity. He’s a rare bird indeed, completely fluent in Mandarin and English and totally familiar with the executive leadership mentality of both countries. In this episode, he gives the audience some forecasts about China that you (unfortunately) just won’t be hearing in other media:

• The crash of 2008 shook China’s faith in the U.S. and sent their strategy away from engagement to the creation of a massive Chinese middle class they hope to drive the world economy
• China will ramp their use of coal significantly on the way to dominating the world market for renewable energy
• The markets for many raw materials are being cornered by China today and may leave other countries in the lurch if they don’t act soon

All of this, plus invaluable insight about how the Chinese mentality on the future differs considerably from that in the West.

We hope you enjoy listening to this interview as much as we did making it.

Past returns are no indicator of future success. This one sentiment is the rationale for future-focused thinking, especially for countries and companies that have achieved prosperity and greatness. The cleverness of our forebears will not guarantee future returns, financial, cultural, social or otherwise.

Which brings me to a discuss of the stock market of the future. The Dow Jones just celebrated ten years hovering around 10,000. Some doomsday types are predicting a potential fall to 1,000, some are more sanguine, and the world’s pension funds appear to expecting a long boom.

Back in 2008, when everything was up for debate, I remember the violent reaction many Americans had to the notion that the stock market might not rebound. I recall floating this idea back when the banks fell over, and I people acted as if I had insulted their mother, slapped Santa Claus, and kicked a puppy. Of course the Dow will come back. Don’t you know that since the Great Depression it has always been a good investment? This means it will be a good investment in the future. To suggest otherwise is a mix of ignorance and intentional blasphemy.

2010 marks an important anniversary – the Dow Jones Industrial Average has remained at 10,000 for ten full years. If you only take the last ten years, your savings account was a better investment than stocks. You could make money trading stocks, but it is increasingly clear that the only people doing this effectively have football field-sized computers for high-frequency trading and a phalanx of astrophysicists providing the mathematical formulas.

What will stocks do in the future? That’s not really the issue here. Start by accepting the notion that past returns are no guarantee of future performance. And then, keep thinking.

Welcome to my first of many dispatches as director of economic risk analysis at Competitive Futures, Inc. I look forward to sharing with you some the insights we provide clients on current economic trends from around the world. Jumping right in: Is Brazil’s economy too hot?

These days, the orthodox view is that economic growth is GOOD, inflation is BAD. Most countries around the world have too little of the former and risk far too much from the latter, mostly from profligate spending and “quantitative easing.” Which is why it’s easy to see Brazil as a bright spot in the global economy. Brazil’s GDP growth is at a scorching 9%- which would normally be so hot as to cause worry of inflation. But wait – Brazil’s inflation won’t cause the same problems that the world will see in all the other countries at risk of inflation due to monster deficits. The land of futbol, caipirinhas and Copacabana is more dynamic and innovative than ever before, and will overcome inflation through investment.

Inflation in hot economies is often caused by a lack of sufficient infrastructure to meet growing demand. In Brazil, this won’t be a problem going forward, to listen to the country’s forward-looking economic policy makers. The country’s economic future appears to be poised to grow past any inflation concerns. The consumer market has grown exponentially for the past 15 years; massive investment opportunities such as the 2014 World Cup across Brazil and the 2016 Rio Olympics will see inflows from across the globe; and mass infrastructure projects in energy, transportation, and extraction (Franco fields and Tupí finds) are increasing. In a world where North America and Europe look backward to find their Golden Age, Brazil is looking at the next decades.

Imagine businesses looking for growing seeing Sao Paolo as a better bet for stability than the ailing eurozone or deficit prone North America. Brazil won’t be “one of the BRIC countries” it might be “where we have our headquarters.”

One of our more accurate predictions at the end of 2008 was the soon-to-be-discovered catastrophe of unfunded pensions. As 2010 develops, we see that many of the current hotspots in the ill-defined “financial crisis” are tied to this one issue of having overvalued the future at the expense of the present.

California is sitting on around $500 billion (!) in liability. The state of Illinois is short $78 billion for it’s pensions. Now, here comes The New General Motors, still losing billions after a taxpayer bailout. The Government Accountability Office has recently released a report about how pensions will likely drag the ailing manufacturer down starting in 2012 or so. (h/t to Megan McArdle at The Atlantic for quality analysis here – also, the comments section is a stitch)

What happens in 2012? The bulk of the Boomers start cashing in those defined-benefit pension plans, heading to the doctor’s more often, and generally turning 65 at the rate of 7000 per day. Aren’t forecasts useful? This is why we call it a megatrend – it will impact car companies, state governments, universities, national governments, baseball teams, travel agencies – everybody.

Nothing is more dangerous than a business decision based entirely on, “sunny, bright scenarios of fantastic success at 8% returns for all of our investors, forever!”

Forecasting isn’t perfect, but sometimes it gets really close.

Check out this video from 1969 about what information technology would look like “in the future.” Online shopping and online banking – hey, that looks pretty close.

From a technique point of view, this is more conjecture than trend extrapolation, since nobody but a few DARPA engineers really knew about the Internet. Still, hey, good guess, right?

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.

With a hat tip to August Jackson, Lloyd’s of London schools us further in the outlandish corporate risk due to the telephone.

Had I not seen this, we might have started using such dangerous technology recklessly.

If you are professional strategic analyst – or want to be one – you must use forecasts. If you want to improve your chances of success, make sure you and your analysts are using Real Forecasting.

Having trained thousands of executives in the art of foresight, we know that now, more than ever, we need a clear view of the events coming in weeks, months and year, or we risk making decisions on faulty assumptions. What passes for business media is scarcely a help in this area. If you listen uncritically to the forecasts offered up in most channels, you have to base your view of the future on:

• Sunny economic forecasts based on stock speculation instead of shrinking incomes and unemployment
• Chairmen of the Federal Reserve forecasting the rise housing prices just before the detonation of the entire economy under the weight of fake mortage-backed securities
• The US Government predicting world oil supply as stable or steadily growing while key oil fields go extinct and China and India put millions of cars on the road
• Healthcare debates that appear to ignore the impact of the Boomer retirement, shifts in employment contracts

If you are a professional analyst, we want you to be able to:

• Know good forecasts from bad
• Identify who can you trust in a world without defined authority figures
• Make critical decisions based on the best information

Our short course entitled Real Forecasting for Professional Analysts is perfect for busy analysts and managers who want a professional-level refresher course in the evaluation of forecasts. Our course, featuring 60 minutes of content and 30 minutes of Q&A, will show you how to:

* Find the right sources
* Identify what type of forecast is on offer
* Explore the assumptions of the author
* Pick out the trends used to make the forecast
* Identify implications of the forecast
* Assess the probability of the future described
* Communicate this infomation to other people

At the end of the day, we want our clients to be ready to evaluate forecasts, understand who is writing them, ascertain their assumptions and know what it all means so they can better plan for the future.

This course will be delivered electronically, and will allow for group interaction.

Click here to reserve your seat now.

Usually, it’s the job of tin-pot dictators like Chavez and Ahmedinejad to trot out their intelligence services and declare that the world is out to get them.

But when the Spanish intelligence service says the country is under attack from speculators in a clear conspiracy, it’s a sign of something deeply interesting. First, it’s a telltale sign that people high in the Spanish government are concerned that greater instability is on the way from the sovereign debt crisis, and they are attempting to control the narrative.

For those of us practicing future intelligence, this is a call for us to examine the broader political trends at play. Most views of the future take the Euroland to be a stable economic entity for all scenarios. Generally, a meltdown of the single currency and a brushfire war between Belgium and Portugal are considered far out.  At the very least, most people consider the continued operation of the EU to be a given – after all, it has resulted in one of the most successful, peaceful, prosperous times in the history of the continent, especially after the tumult of the early 20th century.

Still, it may be that the success of Euroland has required all countries to play a part for which they are ill-suited. Spain still has 20% unemployment. Greece’s debt is out of control. In the days before the single currency, each country would have been free to fail, unsupported by the largesse of France and Germany. Today, they have been supported through their use of a stable, global reserve currency. Like so much, this may be borrowed equity, and borrowed time.

Imagine a future for your business, and indeed your nation, in a world where Europe re-fragments. It may be less far-out than previously thought.

Tim Geithner says the United States will never lose it’s AAA bond rating.

Sure it will: if it does those things that cause countries and corporations to degrade their credit ratings. Those things specifically include printing lots of money – which the United States is doing, and has been doing for decades. And all this before the Boomers start to really tap Social Security and Medicare and cease flipping homes and buying new cars and receiving taxable income. And last time I checked, the United States is still engaged in two sprawling wars in Central Asia, noted to be a bad idea. Those cost money, too.

In the world of professional futurists, the words “never” and “always” indicate a rich vein of assumptions which leaders refuse to examine. They almost always beg us to examine the potential implications of the scenario which is never to occur. For example, “What if the United States loses its AAA bond rating.”

That said, there is a way Geithner’s forecast could be true. If bonds are rated according to the assumption that the United States is the gold standard, as the governor of the Bank of Israel indicates, then perhaps bond ratings might disappear or become quite un-indicative of reality rather than ever betray that standard.

But by that point, what would all this analysis of central banking really matter? We would be well on our way to new systems of investment and public financing, however painful the transition might be.

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.

Obama’s State of the Union speech mentioned many classic problems facing the United States – unemployment, healthcare, security. Sure, there was some mention of the more recent banking fiascos – but how much of what was mentioned showed a nation facing unprecedented challenges requiring untested solutions?

For example, where was the mention of the fiscal crisis of the largest, most productive American states, like California, New York, and Illinois?

Investing and planning for the future? Look beyond the headlines toward the trendlines.

When I wrote Future Inc: How Businesses Can Anticipate and Profit from What’s Next, I chose the future of beer as a case study to illustrate forecasting methodology. The reasons were many. Beer is a 5,000 year-old product, and not as tech-driven as information technology – so you can’t fall back on techno-optimism when thinking about its future. Still, beer is wildly interconnected: it encompasses agriculture, biotechnology, transportation, retailing, government regulation, cuisine, social impacts, and much more. Despite being simple, the changes in the beer industry are rich and interesting. Plus, beer is delicious.

One of the key forecasts I uncovered while researching the book was the rise of microbrewing. The major beer brands around the world were stalling while small, local and national operations were profitably targeting a small and growing segment of beer drinkers and nascent foodies.

Here we are four years later, and the trend has continued apace. This article in the St. Louis Post-Dispatch shows how even in the shadows of the now-Belgian owned Anheuser-Busch, microbrewing is taking off at mid-double digit rates while sales of the majors now dip.

One of the reasons behind this trend actually transcends the beverage market. In our research in the field of economic development, Competitive Futures has learned that the rise in local beers often coincide with resurgences of economic vitality. Local beers become a flag around which communities rally. It often becomes associated with “local success stories” of businesses started in someone’s garage, soon requiring real capital investment in manufacturing infrastructure and jobs with good wages. Local ingredients and traditions are incorporated; cultures are revered. In short, microbrews are successful because they create value on multiple levels – for shareholders, employees, municipalities, and of course, beer lovers.

Now, can large companies create value on this level? Perhaps only if they begin thinking in this superconnected way.

Competitive Futures has a theme for all of our products and services in 2010: real forecasting.

When we look back at the good and bad decisions of the past twenty years, we ask, “Were you looking at real forecasts or fake forecasts?” Did you listen to forecasts that told you, comfortingly that the positive scenario was 5% growth, the negative scenario 1% growth, or the “middle” scenario dead on at 3% growth? Or did you ask which assumptions were behind that view of the future? Did you ask complex questions and get mature answers?

More on this – much more – in the month of January.

In the meantime, to illustrate the difference, check out Chris Nelder at GetREAList in his blistering takedown of the EIA energy forecasts, entitled What if the Annual Energy Outlook Were Written by an Honest Person: Why the EIA Should be Statutorially Barred from Making Predictions:

Suppose you worked at the Energy Information Administration (EIA), the agency within the U.S. Department of Energy charged with keeping data and making projections on energy, and you had to produce an annual report with a scenario for the next 25 years.

Being an intelligent and informed investor, you might grapple with the $147 to $33 range in oil prices over the last year and try to imagine how such volatility might happen in the future.

You might be tempted to model a few economic factors such as GDP growth rates and credit availability, and how they affect investment in energy supply.

You might consider the price at which producing a barrel of oil or a thousand cubic feet of natural gas becomes profitable, and the price at which it becomes too expensive and destroys demand.

You might take peak oil, peak gas, and peak coal into account, since the best available models on those subjects all suggest peaks within the time frame of your scenario.

Wow, great analysis from Mr. Nelder, and an appropriately systemic approach to energy forecasting. That’s what the EIA forecasts look like, right?

But then, you’re not working for the EIA.

If you were, you’d do something like this…

You’d get out your crayons and your graph paper, and starting with your most recent data, you’d plot a nice, steady 1.5% global growth rate for energy demand over the next 25 years.

You’d do something similar for supply so that it matches demand at prices that also climb at a nice steady rate. For oil prices, call it, oh, how about 0.4% per year? That sounds pretty good.

You’d draw basically flat lines into the future for all the fuels dominant today, since you know they have serious challenges ahead, and then draw sharply rising lines for the latest and greatest technology, projecting enormous growth rates for things like shale gas and enhanced oil recovery.

You’d be sure to count all possible supply from new sources — like a new gas pipeline from Alaska — even if those projects don’t yet exist. Hey, it could happen!

You would not, however, factor in any CO2 reduction, because policies to control it don’t exist.

Naturally, you’d assume that the next 25 years would show gradual economic growth, so there wouldn’t be any troublesome issues like credit availability or depressed consumer demand to worry about.

Ouch.

If you are making forecasts about where to build a factory, planning to ship your finished goods to the markets of the world, and you are calculating energy costs per unit, whose forecasts are you going to use? The EIA is more of an authority, but then again – who’s got the more authoritative forecasts?

Courtesy of Forrester Research, a great graphic describing the innovation of the music industry, from 25 billion euros in 2000 down to 10 billion euros today.

Competitive Futures has been using the music industry as the poster child for strategic disruption since the beginning of the decade. I remember discussions with music executives around the turn of the millennium. Mostly, they were caught in the “moral” indignation of “kids” “stealing” music when they should be paying $18 (closer to $30 in Europe!) for static music media.

My favorite discussion was with an industry exec who attempted to sell me on the notion that “Compared with going to the movies, which is $8, a CD is a great investment because you can play it again and again. It probably should be $100 or something.” Nice. Try.

The conclusion: just because you don’t want to face reality doesn’t make it have less impact.

Last year we did a series of forecasts for the short-term future, mostly as a reaction to the crisis in world financial institutions. Normally we try to avoid reactions to the 24-hour news cycle, but since a new bank was bursting into flames every 24 hours, it was appropriate.

For 2010, we’d like to follow on last year’s short-term forecast with…

REAL forecasts. Longer-term analysis. A marriage, once again of the strategic with the tactical. For 2010, the future is back.

We’re gratified to say that most of the collapse of 2008 and 2009 was easily predictable through the analysis of basic strategic trends that play out over five and ten year periods. It took nearly a decade for the central banks to help blow a real estate bubble. It took a decade of unregulated derivative financial products to bring Wall Street to the brink of collapse. It will take five to ten years for the Boom generation to rip our social security programs to shreds. Peak oil will have increasing effect on the economy in the next decade. On it goes.

Understand the real future now. Invest early. Mind your short-term management of your organization with a sense of what’s next. This is what we’ve always believed in, and now that panic is subsiding in favor of a stable decline of many 20th century institutions, people will be more apt to take the time to listen.

And Competitive Futures will be there.

Happy New Year!

We take this business of telling people what’s coming pretty seriously. Competitive Futures works with leaders of large, medium and small businesses to help them interpret weak signals in trends and forecasts to help them make wiser, more profitable decisions. There are no guarantees for outcome, only a rigorous methodology that can produce insights.

For these reasons, we pride ourselves on methodology, and constantly check ourselves. The bulk of our work is based on longer-term strategic trends in society, economics, and technology. We were challenged to think much more short-term in 2009 due to the fissures in so many critical institutions that seemed on the point of collapse. Back in 2008 we made some short-term predictions about the year to follow. In the spirit of intellectual rigor – let’s look back and see how we did.

#1: The future is now. No, seriously.

We thought there would be precious little concern for long-term futures in 2009, given the potential for the collapse of central banks, food riots and alien invasions that seemed possible during the hysteria of the meltdown in late 2008. While we saw few alien invasions or mass food riots, 2009 was perhaps even more short-term-focused than the average year. The vast majority of leaders with whom we interacted were more concerned, rightfully, to seeing which institutions were going to self-destruct before thinking too much about the long-term. After all, when you see General Motors and AIG go down within weeks of each other, it’s probably not crazy to get defensive. Cash flow management trumped weak signals intelligence until the latter half of the year. Given the signs of Western governments to preserve their institutions, many executives are permitting themselves to think about the long-term.

However, it is important to recognize that this was a particularly American view in 2009. Asia Pacific and Europe seemed to view the year as at least stable, allowing them to look beyond short-term catastrophes.

#2: Global problems. No global solutions. (Yet)

We predicted that this year would test the ability of nations to create solutions to complex problems. The financial system seems to have righted itself with most industrial nations working together to make sure the whole thing doesn’t collapse due to a lack of confidence in the system. Naturally, this has been only made possible by “quantitative easing,” just printing money to cover bad debts. The long-term implications of this will be serious- note that cases like Dubai show that just because large countries can cover themselves doesn’t mean the system isn’t fraying at the edges. For now the world proved a willingness to keep its institutions in tact.

We were in fact predicting a bit more chaos in the global system than really happened. Europe and America are keeping their alliance intact in the Soviet-style quagmire in Afghanistan. America’s radical fiscal decisions didn’t appear to rupture ties with its Chinese counterparts where its massive industrial partnership is concerned – though this tolerance may not last forever. The Copenhagen talks seem a bit unproductive from our point of view, but at the very least it doesn’t look like a session of Taiwanese Parliament.

Frankly, the deterioration of world institutions often predates wars, so we’re glad to be wrong here. This issue is broad and will require monitoring.

#3 Barack Obama will not fix the world in 2009, but will do really boring things to improve the function of the U.S. federal government.

Obama sure hasn’t saved the world. Instead, he has shown a willingness to prop up American institutions despite the inevitability of their demise. Where the American financial system has been collapsing under the weight of its own ephemeral value proposition, Obama has offered cash bailouts. Where urbanization is increasing demands public transit, Obama’s stimulus rebuilds interstates and bails out car companies straight from the treasury. Where the impending Boomer retirement requires a structural re-understanding of the healthcare system, the bill produced by the Administration and Congress changes a few procedures without addressing the fault lines that will cost the country trillions. In fact, these early decisions may hamstring any substantive changes Obama may intend to make in later years. Given the importance of the government in shaping markets – to put it lightly – it is essential to predict the direction of policy.

As far as improving the function of the Federal Government, the word in Washington is that there is certainly more of  a meritocracy in place that during the hyper-political Bush years. These improvements pale in comparison to the Administration’s more sweeping decisions regarding saving automobile manufacturers at taxpayer expense.

#3: Home prices will continue to fall, because they were never worth as much as we pretended.

The Case-Shiller is down 8.9% year over year, though prices have stabilized. The American government has spent considerable money shoring up mortgage-backed securities in an effort to stop the slide of asset prices. Were the market allow to function, the Case Shiller might have slid back to reflect the actual state of the U.S. economy, the one with double-digit unemployment, and drop back to 1999 levels, in line with our flat GDP growth.

#4: Out: Organized labor. In: Communities of labor that happen to organize

We said: “Labor unions the world over will come under suspicion, rightly or wrongly, for its association with the collapse of the American automotive industry. Labor unions will be weakened for being as inflexible as their managerial counterparts.”

The General Motors bailout certainly did not make heroes of the organized labor movement. Instead, for many, unions came off as just one more institution using politicians to lock in guaranteed results in a changing economy.

None of this will preclude the formation of guilds or collective bargaining, especially groups that use transparency and social media to its fullest. This practice may be quite the opposite of today’s unions that are more similar to their corporate counterparts, lacking the agility to handle the speed of current strategic trends.

#5 In 2009, it will occur to many Americans how underfunded the pension system really is.

This didn’t make big news in 2009 except in one place – California. Their pension system could be underfunded by as much as $48 billion, a number that even makes their Governator tremble. This could be why Gregor MacDonald has been doing so much groundbreaking strategic work on state’s future.

Hat tip to Tim Powell of the The Knowledge Agency who has been following this potential black swan for years – that many pension funds are calculated for 8% returns (!) in order to stay solvent.  Given the disruptive potential of the trend, this will be a major story in 2010 and beyond.

#6: America’s private healthcare system will not ask for a bailout – that’ll be 2011.

This one sure seems on track. Unfortunately.

#7: Small entrepreneurial businesses will attract more attention, good will and capital in 2009 than giant world corporations.

2009 was actually quite a year for the large, the important, the too-big-to-fail. Bonus checks for bankers came straight out of the federal treasury. General Motors got a new majority equity partner – the U.S. federal government. The tech sector began another round of mergers and acquisitions. Banks further combined and became even more unlikely to behave according to market forces.

Still, in the background, smaller companies are getting even more nimble. The barriers to entry in a variety of businesses are falling. Unemployment is rising. Talent is becoming available. Real estate in de-industrializing places is becoming cheaper. The environment is becoming fertile for startups to flourish, and not in the cash-up-front, $1000 Aeron chair, debt-soaked manner of the late 90s tech boom, but small and smart.

An aha moment came for me walking in the streets of Paris near the Paris Chamber of Commerce (CCIP) and seeing a giant banner draped across the building  that read, “That’s it, I’m starting my own company! But how do I get started? CCIP can help.” This in a country that used to use the English phrase “one-man-show” as a semi-epithet, where the elite aspire to work in government agencies. Clearly, the need for fresh creation of business value is at a critical point.

This video from Chris Anderson explains this perfect moment for entrepreneurs with great eloquence.

You can see the wages of small, smart startups. We could be dreaming here, but Twitter actually posted a profit this year, in addition to fueling a popular revolt in the Islamic Republic of Iran. Not bad for a company that started as a few guys and some venture capital money.

#8 American cars will continue to suck.

We were being a bit snarky here. Then again, General Motors cars literally suck cash out of the federal treasury for every one you drive. Chrysler cars are awaiting the managerial brilliance of the Italians to save the company. Hmm. Not the triumphal image that the American automotive industry has projected in the past.

Ford, by contrast, refused help from the Federal Government, continued to innovate, and has been leading one of the more innovative corporate social media campaigns in the world. Their financials are at the very least stable, which in comparison to its rivals, is like winning the World Cup, the World Series and the Super Bowl simultaneously.

American cars won’t “suck” so much as the undeniable forces of competition will continue to exert pressure. If the U.S. federal government ceases its historic interventions, you may see some competitors actually cease operations, which happens from time to time in a free market.

#9 The media business will continue its inexorable charge toward chaos.

It sure did. Hundreds of newpapers disappeared, with others on the ropes. Major radio players such as Citadel are in bankruptcy. Book publishers laid off staff in mass. Businessweek went on sale for $1. (Not an issue, the whole publication.) This will likely only accelerate in the years to come as we discover the degree to which EBay and Craigslist replace critical revenue from the classifieds and online media offers content for free.

#10 Ideas, creativity, humanity, and community will trump authority, power, and control in 2009.

Overall, the leaders of large institutions did an admirable job prolonging that which will ultimately be susceptible to forces of nature. But it’s more clear that there’s no fixing these institutions – banking, real estate, media, healthcare. Neither might they collapse spectacularly in the short-term, something that wasn’t clear last year at this time.

This puts people in an interesting position and a stable footing for 2010 and beyond – there will be ample opportunities for entrepreneurial, creative activities, either in small companies or large companies who think like small companies.

What do you think of these forecasts, and what they mean for 2010 – 2015?

Please, sign in and leave your thoughts.

At a recent meeting with business students, Warren Buffett has proclaimed that all cars on the road will be electric in 20 years:

Goetgeluk asked what Buffett thought of the peak oil theory — that oil production has peaked and will only decline in the future — and what he believed would replace carbon fuel.

Buffett told him that in 20 years, he believes all the cars on the road will be electric. He’s already invested in a Chinese company working on the technology to make it happen.

Buffett is really famous and really rich, mostly from his defiance of conventional wisdom and some excellent timing, so people are naturally attracted to what he thinks about the future. He hasn’t given us much context to this forecast, but it’s still important to consider. Even though Buffett is an authority of strategic-level business issues, let’s pick apart this forecast. I’ll use a rigorous method of forecast assessment I learned working with the great Joe Coates:

Forecast:

• “All cars on the road everywhere electric in 2029″

Author:

• Warren Buffett, chairman Berkshire Hathaway, Omaha, NE

Type of forecast:

• Expert opinion/conjecture

Assumptions:

• All cars means all continents will have electric motors – Africa, Asia, Latin America included
• Electrical “fuel” will be more competitive than petroleum as fuel for transport
• All new electrical refueling infrastructure implemented in the next 20 years across the globe
• Sufficient increase in electrical power supply across the globe to meet new energy requirements currently fulfilled by liquid fuels

Implications:

• Massive recycling of existing cars and engines
• More liquid fuel available for long-haul trucking (assuming “cars” only means passenger cars and not electric trucks)
• Retooling of all auto factories starting in 2010
• Trillion dollar business opportunities everywhere from rebuilding local electric grids, recycling old batteries
• Increase in demand for coal and wind generated electricity to make up gap in supply of electricity
• Increased demand in solar

Probability:

• Extremely unlikely

Assessment:

This forecast is pretty glib coming from Mr. Buffett. All cars running on electricity in 20 years? Fifteen percent electric cars I could easily see, 50/50 I might buy as an extreme scenario – but 100% electric cars by 2029? It’s nigh on ludicrous. The system effect of a TOTAL shift on all cars everywhere would be practically an act of a minor deity. Perhaps Mr. Buffett is “talking up his book” and this new Chinese company in which he has invested.

Not all forecasts are created equal.

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:

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.

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

It seems strangely a propos.

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.

Further to our series of “Forecasting Works” blog posts, dig these ads for AT&T from 16 years ago, 1993. They forecast, based on their own knowledge of technology and some educated guesses:

• E-books
• Telepresence
• EZ-Pass digital toll collection
• Online concert ticket sales
• In-car GPS navigation

Were they completely accurate in these visions? Not entirely, but you’ll have to admit that it is all frighteningly close.

They engaged in a rational process of thinking about the impact of current trends, and it helped light the way.

You can do likewise.

“To run a pricing market for a non-renewable resource off rationing short-term supply and demand makes no sense.” – Gregor MacDonald

One of the worst traps in thinking about the future is assuming that your images of 20, 30, or 50 years ago are still likely, or even possible, in the future. Gregor illustrates this beautifully in his post “Jett Rink’s Speedboat,” about how today’s major oil finds will never lead back to some cheap oil pseudo-paradise of the 1950s and 60s. They cannot. Because this world is so very different.

Notice also his comments on how hyperbolic oil companies are becoming from oil field “discoveries” that sound dauntingly difficult – and how the market responds anyway.

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.

Today, the airwaves are filled with advertisements for consumer foods that aren’t simply nourishing but portrayed as practically medicine. A slew of softdrinks are marketed as hangover cures, energy, memory enhancers, cognitive enhancers, help with clairvoyance, and fuel for flight. Fish isn’t just fish, it’s OMEGA-3 FATTY ACIDS. And somewhere along the way, trans-fats replaced “Ebola virus” as the world’s deadliest substance. Is this random or could you see it coming?

Food as medicine was a theme we predicted for 2010 way back in 1999 when studying the future of food and health for a group of global consumer product manufacturers. The world seemed to be at a turning point at that moment, with a number of trends appearing to collide in the decade to come:

• Super-size and family value packs had reached their apex, due to increasing penetration of fast food and big-box retail throughout the world
• Obesity epidemic reaching a pitch, not only in America but also in unexpected places like France, Greece, China
• Litigious American culture had finally apexed with its war on cigarette liability, and a new target was likely to be next
• Biotechnology was promising new technological abilities for all plant life (this was the era of the Human Genome Project and techno-positive rhetoric was off the chart)
• Boomers were aging, and increasingly interested in immortality on the cheap
• Sustainability was increasing as a concern, and farming would be one of the most effected industries
• The “Slow Food Movement” was beginning to point back to heirloom breeds of livestock and produce and encourage local diversity in favor of industrial solutions

Basically, it was clear that the strategic trend of increasing portion sizes was about at an end. Food packaging technology had a bit more life in it, especially smart packaging to assure safety and freshness for delivery to developing nations. Genetically-modified organisms were causing a firestorm, and the promise of efficiency in factory farms simply wasn’t attractive enough to overcome the concerns over safety, particularly in Europe and Asia. Something else had to come next other than size and convenience.

Food itself hasn’t changed in the last ten years; a salad is still a salad. Food still grows in the ground. The major cause of starvation remains war, not lack of productivity.

What has changed most has been the industry of food. Most players in the food industry have changed significantly since 1999, and their actions have been in response to trends clearly visible at that time. Most all manufacturers are concerned with portion size, putting out “100 calorie snack paks” and “smart size” formats. McDonald’s stopped “supersizing” and began offering more salads and healthier food for kids. (Other players, like Hardee’s turned headlong into the storm and began to offer even more life-threatening beef-tastic products.) Kellogg’s cereal has reduced-sugar versions. Coca-Cola has diversified into all forms of beverages, and their new offerings are calorie-reduced, often featuring nutrients that are marketed as cures. Whole Foods has gone from a niche player to a major alternative grocery store in almost every urban area in the United States. Lawsuits are being filed for obesity.

In short, the future of food was plainly visible ten years ago if you look at the trends. Are their inaccuracies? Of course. Given the hyperactive coverage of the Human Genome Project and the height of the Dot Com Bubble, many people dreamed that genetic engineering of plants would be letting us grow most materials and chemicals and pharmaceuticals in the field as opposed to the factory. Instead, it looks like farmers’ markets are back.

Do we have food-as-medicine? Yes, but most of it is fake. Your doctor still recommends lots of veggies, a little less cheese and time in the gym as opposed to some beverage full of vitamin B12 and açai. However, the overall understanding of food as a major component of health has gotten more press, despite still-climbing rates of heart disease and diabetes.

Some of this stuff took ten years to fully blossom. I remember when my colleague John Mahaffie started talking about trans-fatty acids in 2000 as the next ticking time bomb, and I had no idea what “fat tech” could have to do with the future food. And yet New York City banned cigarettes and trans-fats around the same time.

Does forecasting give you an understanding of the strategic direction of the future of food? It did to our clients who were first on the market with new products.

• “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.

There are certain classic responses you will hear from people when they resist strategic ideas about the future. Let’s say that you recognize a threat to your current business and suggest a course of action. One of my all-time favorite reactions you are likely to hear is:

“We tried that once in 1980s…it didn’t work! So, you know, it can’t work now, either.”

Everything on earth, including perpetual motion machines, dividing by zero, and drinking red wine with fish was tried, to no avail during the 1980s by now-depressed executives. As a result, these jaded, weary bureaucratic warriors will attempt to shoot down anything that even smacks of an earlier attempt at greatness. Their tool of choice will be to compare the current strategic situation to the decade of neon and shoulder pads.

The way around this roadblock is a rigorous comparison of both strategic situations, today and yesterday. A non-aggressive way to handle this is to say, “Alright, it sounds like you learned a lot back then. Perhaps we could discuss how both situations compare?” Then you can go through all the things that have changed and see if you can unpack this person’s assumptions about their view of the future.

*Note of caution!* Some classic strategic blunders will always apply, and should be taken mostly at face value. Pay attention when you hear, “Don’t invade Afghanistan. We got the Soviets to do it in the 1980s, and it’s really nasty.” This one is true! They learned it in the 1980s, 1950s, 1920s, 1890s, 1120s, and so forth back to Alexander the Great. It’s a good bet.

*Additional note of caution!* Getting a puppy for a studio apartment, betting on stock tips from inlaws, tattooing the name of recently-met paramours on easily-visible parts of your body – you might want to avoid these mistakes as well, with or without rigorous analysis.

Now, let’s explore this technique in an economic situation rapidly unfolding before us. Many of my regular readers may be aware of the somewhat significant difficulties in the banking industry due to developments in the housing sector. (Ahem.) Everything – how do you say? – caught on fire and burned to the ground after people around the world decided that their three-bedroom ranch with a 1950s kitchen was worth EIGHTEEN MILLION DOLLARS, and then the banks developed ingenious financial instruments around this unusual state of affairs.

This you probably know. Now, if you’re a consumer of national television networks and some major print publications, then you may be hearing lots of protestations about how there’s never been a better time to buy! After all, we’ve seen it all before, especially in the boom-and-bust Eighties. (See “Scandals: Savings and Loan.”) This is a perfect time to ask whether this cycle is like the 1980s, or perhaps something new that requires new analysis and several scenarios.

My hero Mish is pumping out excellent analysis of the global economy, inexplicably free, and he came up with the following list of strategic conditions that are sharply different from just a few years ago:

Tougher lending standards: no more liar loans, bigger down payments, closer look at incomes, etc.

Tougher appraisal standards

The difficulty of finding jobs

Wage and benefit cuts shrinks affordability for those who do have a job

Huge bank-owned shadow inventories

Huge developer shadow inventories, especially in condos

Consumer willingness to “walk away”

Rising delinquencies and foreclosures due to rising unemployment

Rising taxes

Overleveraged consumers

Pent-up demand to sell in a “please get me out mentality” if prices rise just a bit

The upcoming boomer retirement downsizing event

A change in consumer attitudes regarding housing as an investment

A new frugality in consumer attitudes towards debt in general

This is a textbook perfect example of how to argue for a new approach to the strategic future. Seen this real estate market before, and you know for certain it’s going up? Then how do you think the overleveraging of consumers will impact the situation? What about all those empty condo towers in Florida with one family each? What about all those Boomers who were going to sell their houses anyway to move to more exciting or warmer or less busy places? What about the banks now waterlogged with houses nobody wants to buy?

You don’t want to discount people’s experience – it can sometimes be useful to hear of how the past can inform today’s decisions. It’s also acceptable to logically deconstruct the future into systems and trends (See: Future, Inc.) and to ask people if their assumptions about the future meet such demonstrably different trends at play. You may still get resistance, but at least people will be clear about where they are coming from.