Professor Karl Moore from McGill, who did that interview with Michael Porter the other day on the future of business’ role in society, is back with a TED talk he gave on the future of post-modern management. He notes that as the internet creates a system of “algorithmic authority” and tears down the rigidity of authority, “leadership” and “management” will have less impact on team-building than partnership, especially for those under age thirty-five.

Given the role of larger and larger bureaucracies in many key industries, this reality will be quite disruptive.

The most important implications of any strategic trend is usually not that your organization must do something drastic, it is that your organization is obsolete and can’t respond effectively at all.

Case in point: newspapers and the Internet. It’s not so much that newspapers could have done something to maintain their business model of classified advertising, it’s that they need a brand new business model and structure to survive. If that is the major implication of the trends we track as strategic analysts, then we almost must develop skills to help organizations change quickly and painlessly.

On that note, check out this talk from Aurora WDC’s Arik Johnson on the future of organizations, recorded at last month’s Intelligence Collaborative meeting in Washington.

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

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

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

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

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.

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.

I am glad to see Douglas Ruskoff weigh in on our current situation. He’s a fantastic thinker, humanistic and often contrarian, the author of many books including the recent Get Back in the Box: Innovation from the Inside Out, which is about the foolishness of senseless innovation. If I read Rushkoff correctly, he sees economics as a distinctly human, connected enterprise, and the absolute opposite of where our commercial leadership has taken us.

He presents some major, major ideas:

• The recent goal of business has been to make every company a holding company, one whose purpose is the acquisition and/or management of debt as opposed to a group of competent people who do things for other people
• People at all levels have become more interested in the perceived value of assets (homes, shares of companies, CDOs) than the actual value that they might ever produce
• Most of these ideas are supporting people who may not even be in the system – long-gone investors, maybe even dead guys
• The monetary system is not about encouraging trade, but often preventing trade
• The American Revolution came about because England forbid people from providing each other with services
• LOCAL CURRENCIES used to be very popular and could be again
• We were probably better off economically in the Late Middle Ages (the Black Death notwithstanding)

We need to revisit our total concept of value creation. It’s great that Rushkoff is lending a hand.

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.

I studiously avoid day-to-day politics into the discussion of strategic trends, but in this moment of critical government decision it is unavoidable.

Listening to President Obama’s speech before a joint session of Congress, I tried to imagine the impact of the trillions in deficit spending on the global economy. America’s recapitalization of banks, according to the President, is to stabilize the economic system but also to get banks lending again.

The concern is that if we do not re-start lending in this country, our recovery will be choked off before it even begins.

You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.

But credit has stopped flowing the way it should. Too many bad loans from the housing crisis have made their way onto the books of too many banks. With so much debt and so little confidence, these banks are now fearful of lending out any more money to households, to businesses, or to each other. When there is no lending, families can’t afford to buy homes or cars. So businesses are forced to make layoffs. Our economy suffers even more, and credit dries up even further.

That is why this administration is moving swiftly and aggressively to break this destructive cycle, restore confidence, and re-start lending.

I have placed several graphics on this blog about the trillions of dollars in debt that have been created through this culture of debt in the past twenty years. This crisis is due largely to that culture. Surely, rolling lines of credit are necessary to running most businesses. There are fluctuations in cash flow that require a certain percentage of your annual revenue to be offered to you in credit to keep things functioning.

That’s not what has been going on. We’ve financed trillions of dollars of GDP through rampant debt. Note the difference between real GDP and economic activity financed through leverage:

This culture has destroyed the Anglo-American banking system. Many corporate mergers have been made possible only through billions in available debt. Education prices shot well ahead of wages due to availability of private student loans. Housing is crushing the middle class now that the bubble has burst – a bubble that would have been impossible without a reckless culture of debt.

If we are to recover, the culture must change. According to Mish, who should be one of your favorite economic bloggers:

With all due respect Mr. President, you and Congress want to force banks to lend when banks (by not lending) are acting responsibly for the first time in a decade. Mr, President can you please tell us who banks are supposed to lend to? Do we need any more Home Depots? Pizza Huts? Strip malls? Nail salons? Auto dealerships? What Mr. President? What? And why should banks be lending when unemployment is rising and lending risks right along with it?

Note that he mentions retail, also at an all-time high bubble, and which also will come down.

I’m in a mood to make short-term predictions about management: The future is in growing your business from organic growth, recapitalizing cash from operations. It will not be from exuberant bank lending policies, or this malaise will last an extra five years.

I thoroughly enjoyed the NPR segment yesterday entitled “Obama tests Keynes” in which a couple of young guys dig into the often-bewildering rhetoric of the economic stimulus package. Funny, relevant, and worth a listen.

It’s important that in this case it’s young journalists taking a fresh approach to the economic arguments of Baby Boomers. I don’t think the Boomers at the head of our institutions often recognize that the political ideologies discussed were born long before we arrived on the scene, and often have no connection to reality for Gen X & Y. The snarkiness between taxcutters and economic stimulators often generates as much deep-seated passion as comments about “Hanoi Jane” Fonda – it’s a reference to a fight that started well before our births, and may need minutes of explanation to even make sense.

Case in point: the radio program deals primarily with the multi-decade conflict between Keynesians, who believe that well-timed government spending can save flagging economies, and market fundamentalists who belief that the entire economy can be managed through tax cuts and manipulation of the interest rate. The Keynesians protest, “government spending led to winning World War II and got us out of the Depression!” Market fundamentalists tend to argue that the slump of the 1970s proved that it’s not a cure-all – and that only deregulation, tax cuts, and Greenspan’s masterful operation of the interest rates saved us from big government stagnation.

The radio program concludes by saying that after all the discussion about this once-in-a-lifetime event, the Obama plan is basically pure Keynesian economics. After this, we’ll be able to see once and for all if it works or if we were imagining it the 1940s. The exciting bit is, this may be the first verifiable test of classical economics!

This kind of thing makes me insane.

Here we are, heading straight into the meaty part of the 21st century, experiencing an economic emergency that could only be created by a combination of today’s special mix of globalization, Internet, post-hegemonic power vacuum, unchecked assumptions, and 6.8 billion people at an unprecedented moment in history. And the only topics our elites can discuss is:

“So should we spend a lot of money on credit or fool around with the interest rate?”

Every day, people wake up and turn on the television or radio or Web site of their choice and begin worrying about a select group of numbers that are forced at them daily. We hear these measures so often, people are mistaking them for important or relevant.

• The Dow Jones Industrial Average – a collective of large-cap equities, and the prices that Wall Street gamblers are willing to pay that day to take part in their eventual earnings
• Housing starts – the number of new suburban homes under construction, with the assumption that all human housing should eventually stretch to the planet Mars
• Consumer spending – The amount people spend on Guitar Hero and couches and other goods for their new suburban homes
• Interest rates – The rate at which money can be borrowed from banks to the Federal Reserve, to other banks, to people, through credit, through…oh cripes I have a master’s degree and still don’t really get it. Suffice it to say that the interest rate policy appears as logical as Aztec shamanism, and about as transparent as the election of the Pope
• Stimulus packages – The amount of fake money spent on real things, supposedly to be paid – with interest! – by future generations, who will repay this through all the fantastic, super-paying jobs that are right around the corner…so…uh…just let us retire in peace, um, and keep paying your taxes…

We follow these things excessively, and to the untrained eye, they don’t seem to be leading to better management of the world economy. In fact, the world has been managed exclusively through these kinds of measures, and our policymakers are stuck arguing on the radio about whether KEYNES got us out of the GREAT DEPRESSION using these numbers.

GUYS – CAN WE TALK ABOUT THE NEW STUFF HAPPENING?

U.S. manufacturing now resides in China. Our kids are in debt. The Internet is making new companies possible and other companies obsolete. Science and technology is rolling onward. This is probably just another phase of Kondratieff cycles or Schumpeterian creative destruction. We’re looking at a huge change of management between the Boomers and Gen X. The Boomers are going to start going to the doctor a LOT and will crush the private healthcare system. Mass media is about to go extinct. Europe is out of kids, while the average age of Iran in 24.

Now, how is it that the argument can still be down to deficit spending versus interest rate policy?

Here’s some new measure to try out on the TeeVee, just to inject a bit of new debate into the public sphere:

• The Gig Rate: Measure the percentage of people who just graduated with expensive student loans and got a job that pays for rent, food, and debt repayment
• The Grandma/Doctor Ratio: Percentage of grandmothers able to get to their doctors appointments as scheduled, not left at home, letting their prescriptions go out of date, because they can’t get transportation
• The Ebay Entrepreneur Stat: Number of cash flow-positive home-based jobs created through Internet technologies, allowing people to make money and still raise their kids
• The Youth Diabetes Drop: Number of young people diagnosed with Type II diabetes mellitus able to reverse their disease through diet and exercise, thus saving society billions in the long-run
• The Volunteer Volume: Number of people financially secure enough in their lives to donate time to a local charity, improving their communities at no cost to taxpayers
• The Revitalization Rate: Dollars generated through the repair of our natural and built environments, from wetland and waterways to city centers and school districts, creating economic prosperity while giving future generations even more opportunity

I don’t care if you use these – invent your own. Find a way of discussing economic prosperity in a way that doesn’t use these same, tired, busted statistics.

It’s time to leave John Maynard Keynes where he was: a Cambridge elitist who bounced around the London dinner party circuit, hating the working class and delivering all kinds of new, interesting ideas just for shock value. I think he’d be sorely disappointed in us if he thought that in 2009 we hadn’t moved past him, despite having gone to the moon, defeating communism, and inventing about 1000 new world changing technologies.

KEEP THINKING.

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

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

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

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

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

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

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

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.

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.

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

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

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

It was a fine time last night with the Washington chapter of the American Society for Training and Development. I enjoyed the opportunity to interact with the people who will be finding and training the next generation of leaders.

Last night we focused on the major challenges that lie ahead. Below are the slides we used as a conversation starter.

Want to discuss more? Have us out for a workshop or panel!

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.

The Washington Post has a worthy piece about the deeper roots of the current financial calamity. Dating back to the 1990s, it seems that the uses of derivatives created an investment zone without accountability.

Unlike the commodity futures regulated by Born’s agency, many newer derivatives weren’t traded on an exchange, constituting what some traders call the “dark markets.” There were now millions of such private contracts, involving many of Wall Street’s top firms. But there was no clearinghouse holding collateral to settle a deal gone bad, no transparent records of who was trading what.

With the establishment of these derivatives, there were places that financial transactions could disappear into and quietly slip out of, changing form, donning disguises, padding away quietly into the night. It was the Mos Eisley cantina of the financial world.

Shortly following the establishments of the derivatives markets, the world was entranced by the disastrous excesses of Enron, Worldcom, and Global Crossing. There, accounting was found ripped to tatters, covered in filth, abused in every way. The result was the establishment of the cantankerous jalopy known as Sarbanes-Oxley, a set of accounting standards so complex they would give a Jesuit an aneurysm. In addition to millions of hours of accounting time required, CEOs now had to sign tax returns in multiple places. Life was different.

Yet the new market for derivatives remained, and despite the hullabaloo in the calls for transparency, the financial world had well enough space to hide gains and losses when necessary.

We don’t just need intangible things like leadership, foresight, ethics, and a sense of social justice to get our economic system back on track. We need ACCOUNTANTS and FLASH LIGHTS. The real issue here is that we have ample trap doors for trillions of dollars to fall into. Sarbanes-Oxley was clearly not enough.

We will need accountants, endless phalanxes of methodical, numbers-minded paladins who are willing to prevent fraud in the financial industry. We don’t need more laws. We need more people enforcing them.

The “dark markets” seem like the source of our woes if they are able to remove trillions of dollars from accountability.

I’d say you can plan on a strong future for forensic accounting.

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

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

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

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

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.

A phrase continues to run through my head: “The future called. It’s waiting to see what you do before it happens.”

It’s an interesting moment to be involved with the long-term future – a moment when most people are too traumatized to see past the next few days. My next book is about the psychology of the future – not just how to study the future, but why most leaders do not. A concept I am exploring is the two levels of fear in organizational thinking.

The first level of fear occurs when the status quo is threatened. This might be exemplified by the events of mid- to late September, when the first banks started to buckle due to the subprime mortgage fiasco. Then, people started to worry about their stocks, their retirements, their home values – they were worried, in general, that if we changed too far from the current system, it would do them harm. People become more likely to rally around current institutions, defend them from fundamental change, because there is potential, undetermined harm on the other side of that shift.

If things get worse, we encounter a deeper, more interesting second level of fear. This occurs when people sense their institutions themselves are the problem, and there is much greater probability of harm from doing nothing. Now, people are much more likely to seek new structures, new intellectual frameworks, new rules. This is when leaders can take action and improve – or dramatically worsen – a situation.

This brings me to a lovely moment this past Tuesday, where I had the pleasure of speaking before the International Association of Corporate and Professional Recruiters. These are the people who seek out the leaders of tomorrow’s organizations, often interviewing and selecting potential CEO candidates for their clients. Their international meeting was in Manhattan, on 48th and Park Ave. Next to Wachovia, JP Morgan Chase, Merrill Lynch, etc. The mood is grim, shocked, calm, worried, and in many cases, angry.

This emotionally and intellectually charged atmosphere led to one of my favorite speaking events of the year. It was a great opportunity to speak before people who were interested in hearing about the challenges of the future, AND about what they could do to pick leaders with the appropriate mentality for those challenges. I could tell these executive recruiters, not to mention most of New York City, was open and willing to see how our institutions could realign with the future, to create a more just, prosperous humane world.

All this, followed up by world-class restaurants and guitar shops. Despite the crisis, I STILL love New York.

Think about the leaders we need for these challenges. Then, be those leaders. Or at least think like them.

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.

Managers love spreadsheets. Quantifiable trends. Robust columns of numbers, properly formatted, balanced checkbooks. This is business! We’re not guessing, we’re not estimating, we’re taking a scientific approach to management!

Verifiable numbers are supposed to guaranteed better results, fewer scandals, more rational behavior.

In the wake of Enron, Global Crossing, and other book-cookers, the government hastily brought forth the Public Company Accounting Reform and Investor Protection Act of 2002, better known as Sarbanes-Oxley. These new, stringent requirements would supposedly protect investors from capitalizing companies that were, in reality, bleeding money while their executives took bonuses from Liberian hedge fund partnerships and the like. I come to understand from financial colleagues that Sarb-Ox is so complex it would make a Jesuit’s head explode.

This complexity was supposed to better results, fewer scandals, more rational behavior.

What’s the future of numbers if the numbers are wrong by hundreds of billions of dollars?

If we can’t manage scientifically, how will we manage when all this is said and done?