The term used by the major media and the U.S. government regarding the economy is “recovery.”

Here is our one major question: Recovery to what, and when?

Consider the latest Case-Shiller Price Index for home prices:

U.S. Home prices have dipped to pre-bubble levels, and appear to be on track for pre-Dot Com era levels.

Are we headed back for 1996? Hasn’t the United States become a different nation since then?

Is the “recovery” a trip back to 2007, 2002, or 1992?

Do those all count as recovery?

When people think of “radical futures” the words “nanotechnology” or “genomics” are usually not too far behind. Throw in a few comments about “transhumanism” and “the end of biology” and you’ve got a classic futurist-y look at the next twenty years. One concept people rarely think about when they hear of radical future transformation:

Retail.

That’s why Doug Stephens from Canada’s Retail Prophet is such a refreshing speaker on the future of business. He is to our knowledge the only speaker who talks about the upcoming changes in the world and what they mean for the business of retail. It’s counterintuitive when you think about how important that sector is to our economy and how little we discuss its future.

Below are clips from one of Doug’s recent speaking engagements. Look for more interviews from him when Competitive Futures re-launches its Podcast with a new iPhone/iPad application in a couple of weeks.

We don’t believe in conspiracies, nor do we believe the future is impossible to see. Rather, the information is there, hiding, waiting to be researched and analyzed.

Many executives fall into a cognitive trap – that if something is important enough to affect their business, then the business media will call it to their attention. Our experience says that this is not so. You need to do your own research and reach your own conclusions.

Take this graphic showing how long it would take to sell both existing and “shadow” real estate inventory. “Shadow inventory” is that which sits on a balance sheet, but yet is never offered to the market, and there’s tons of it out there now that neighborhoods and commercial developments are succumbing to foreclosure. This graphic says that we’ve got nearly ten YEARS worth of inventory, assuming we keep things the way they are for a decade.

How many of your colleagues know about this? Do you know how this fact might affect the much vaunted “recovery?” If it’s not your industry, would you come across this information by accident?

Likely, you need customized research. If you’re interested, we can help.

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.

In forecasting, it is often useful to show trend lines in a graphical fashion. This way, you may see a pattern forming, and get the jump on a profitable strategy. I outline this method in greater detail in a book called Future Inc.

That’s why I love this gem, one in a long line of gems from Mish. For those who think our housing assets will hold value, he sees the value curve, and the associated thinking, as following the same pattern as the Japanese housing bubble, from which the country has scant recovered.

What do you think?

Last night, California said it was going out of business. I don’t know if this means it’s going to be sold back to the Aztecs or what. I suspect it will mean that the health care industry will be transformed since the states will not be able to foot the bill for their obligations.

Also last night, somebody sent me this link to Forbes top ten worst real estate markets. EIGHT of them are in California. The average projected drop in value is around 25%. A connection?

Of course, the tenth most overvalued market is mine in Washington DC. But then again if you read this blog, you knew that. I think some of that overvalue might be from people selling their apartments for $10,000 for the coming inauguration. We’ll see.