Iceland shows the hard reality of today’s economics
Clearly, the last few weeks have been complete turmoil for the world economic system. Practically everyone is revisiting their assumptions about economies, markets, even their own family’s budget. Still, in talking with executives, business owners, young people, and others, I get the sense that Americans haven’t quite yet comprehended the potential impact of these economic shocks.
Iceland, no longer has that luxury.
Today, the interest rate has been raised to 18% as a condition of an IMF cash infusion.
Polish guest workers, who for years have emigrated to Iceland for economic opportunities, are cashing out their remaining krona and heading home. I have heard that they fear the krona’s worthlessness to the point that many are running on the banks, taking cash, and attempting to buy automobiles that will at least hold their worth. (still looking for the link) To me, that’s a real wake up call, when your medium exchange is no longer trusted and people return to basic barter economies.
The economy, for many people, is this abstract interaction, a whirling dervish of numbers than only the mathematically-inclined financiers of London, Hong Kong, and New York can truly fathom.
Economics is actually a social contract between workers, companies, governments, and consumers. In the end, everything is a barter. I’ll work for twenty years, if you let me live in that house. I’ll work for two hours, if you let me buy that DVD. As a farmer, I’ll grow lots of corn, if you’ll give me bread, cars, housing, and education for my kids in return.
That’s the real system. And when you despoil it, you end up with 18% interest, 20% unemployment, etc.
I may be a futurist, but I was a Vermonter first. And there, the world starts with corn, cows, maple syrup and wood. Everything else is an abstraction that fits on top of that Bronze-Age infrastructure. When we forget that, we get real disruption in return.
It doesn’t have to be gloom and doom. But it doesn’t have to turn out OK, with our 401(k)s returning to “normal,” and our economies chugging along as we’ve become accustomed.
Just ask Iceland.
U.S. children developing more kidney stones
Another case of adult health problems in young children. Blamed on obesity, poor diet, and insufficient 
hydration, evidently American children are developing kidney stones. Hospitals are even developing pediatric kidney stone units.
Little Tessa here, age 11, has “cut back on salt and is drinking more water.”
What’s next? Are we going to hear about fourth-graders trying to scale back on the whisky and poker nights?
Also, kindergartens may outlaw the “kegstand.”
Now you understand why this generation of children in America will be the first to have a life expectancy shorter than their parents.
A bleak future for authority figures
At a conference in Charlotte, North Carolina, working with executives on future trends and their relationship 
to risk management. It’s an exciting time to be discussing global change and potential scenarios, especially in the wake of the financial debacle where real things are changing at a breakneck pace.
One woman put a fine point on our predicament. “The worst part of this is that our leaders are being revealed as the emperors who have no clothes. We require a certain degree of strength and trustworthiness in our authority figures. But a lot of these guys are looking ignorant, fraudulent, or worse.”
I think the answer here is not anarchy. Our economic system is far too complex to ever revert to operating our countries and industries without some degree of hierarchical leadership.
Trust in leadership is already shaken by the terrifying sudden meltdown of the world credit market. Thinking in terms of scenarios, if we have one or two or crises to follow up the financial catastrophe, how much less power will our institutions carry? Why listen to the news? Why pay attention to cabinet ministers? What does the boss know? He might be out of a job tomorrow too.
The fact remains, we will need leadership to guide institutions through the many challenges on the horizon. Reputation will be an important part of maintaining influence.
Technolust
Look, I am not a techno-utopian. I don’t look to gadgets to save humanity - not biotech, not nanotech, not
IT.
But I’m just a man. I can’t help the technolust that besets you when you witness the curved iMac prototype.
KidTechBlog from Singapore details 70 sexy gadgets you haven’t heard of (yet).
Why Greenspan’s admission of error matters
We live in a rapidly changing world, yet it often seems that our leaders are more terrified than ever in 
admitting mistakes. Think of the standard Washington political non-denial-denial, the expert blame deflection, the passive-voice “mistakes were made” begrudging semi-admission of responsibility.
Imagine how rarely we hear the words, “I got it wrong. I thought the world was one way, but it turned out to be more complex than that. Now I know better.” It’s as if authority figures are afraid that anybody who admits error will never be trusted again.
Yesterday, I expressed shock that Greenspan did not see the broader picture of the United States financial system, new kinds of risk, and the complex interaction with world markets. For somebody with so many advisors and access to information at any price, I am still a bit surprised.
Still, I don’t want to let the moment pass without simply expressing gratitude to a man big enough to admit his assumptions did not match the moment. More than ever I believe that we are on the verge of a new paradigm in leadership, in management, in economics, and in society. Paradigm has been overused and badly used, but I think it’s finally appropriate. If there is change this significant on the horizon, many people will make mistakes.
For our institutions to survive and thrive we must possess the ability to admit mistakes, take responsibility, seek new perspectives, and move forward. I read people who are surprised that Greenspan was willing to “take abuse” and “take part of the blame” in his testimony to Congress. Yes, it’s that rare. But far more important is the example of a man of the highest position in society willing to admit that his assumptions were invalid.
I remain critical, but I am impressed and grateful.
Drop in oil prices don’t match the long-term future…or do they?
Don’t get me wrong, I’m not complaining about finally paying less that $3 a gallon for gasoline. Something seems out of balance about the preciptous drop in the crude oil futures, down to $64.
It’s called futures, right? Well, even in the case of a total meltdown in the global economy, the Chinese, Indians, and South Americans will still expand their GDP, putting long-term pressure on global production of refined petroleum and petrochemicals. I understand the recession taking off a few bucks per barrel, but this rapid fluctuation may tell another story.
Perhaps it’s that speculators are leaving various markets in droves. After all, mortgage commodity speculation isn’t looking all that healthy, now is it?
Many people received a weird email from the CEOs of various airlines not long ago about how 60% of oil was bought by speculators who never intended to take delivery, artificially driving up prices. If they are leaving that game, it could be that prices are returning to the actual supply-demand curve.
Perhaps it’s unregulated speculation that has the weaker future.
Common sense, key to clairvoyance
Alan Greenspan is apparently shocked that the financial crisis was so broad reaching.
Greenspan also blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.
A quick question: did nobody in the banking industry stop to ask whether doubled home prices might cause a problem for future homebuyers?
Did they really think that Generation X and Y would start their lives with massive student loans and a $500,000 starter home?
Nobody even pondered whether doubling home prices would have a impact on other systems. All it would have taken is to talk with a young person and ask them if they can imagine purchasing such a home.
Not everyone is so blind to the broader implications:
“It wasn’t deregulation that allowed this crisis,” Rep. Tom Davis, a Virginia Republican said. “It was the mish-mash of regulations and regulators, each with too narrow a view of increasingly integrated national and global markets.”
Broad thinking is the answer. Short-term, parochial thinking locked in the current business model leads to missing even the biggest trends.
Considering the future of immigration (version française)
We just finished a long and satisfying film project for a French-speaking audience. Here, we consider some of the inevitability of immigration, and explore the meaning of adding three billion people to developing nations.
Warning: French language used unabashedly.
Executives must re-establish their strategic radar
Tim Powell, a colleague and expert in competitive intelligence, sees the financial crisis as a complete failure of scientific management. We use numbers all the time because measurement is better than superstition. Numbers aren’t perfect. but if we don’t restore confidence in these techniques, the whole economy will suffer.
When people—and I include institutions here, they’re run by people—can’t trust the numbers, they can’t trust the capital markets. When they can’t trust the markets, they will not invest in those markets. If they don’t invest in the markets, the markets will freeze up. When the markets freeze, business can’t operate and will itself freeze—and that is exactly what is happening.
Without honest, quantifiable management techniques, our economy will look like the Soviet block - based on raw power, cult-of-personality warlord leadership.
Metrics can get onerous, but without them, we’re in the Stone Age.
Early warning: credit card debt shows fundamentals of the economy changing
We speak often about the need for early warning when it comes to business intelligence. Usually, after something really bad has happened, leaders say “Oh, if only we had known sooner. Let’s get more interested in early warning.” This is also accompanied by observations like, “This was a failure of imagination” and “we’ve got to think out of the box.”
I submit that most times, people don’t want to see the most important changes. Such tectonic shifts mean that precious institutions (and assumptions) might be shaken to their foundations.
For example, have you ever seen this chart of American credit card debt?
It matches housing prices perfectly, matching real economic growth for twenty years, then skyrocketing after 2001.
But these together, and you can clearly see the fundamentals of the American economy changing in a radical fashion. Something about the largest economy in human history changed dramatically, and nobody really stopped to make a comment.
If we want a prosperous sane economy and functioning government institutions, leaders have got to get serious about the deep philosophical and analytical dialogues that need to accompany these kinds of changes.
The last thing we want is to watch an even bigger catastrophe than the past month, followed by the all-too-typical chorus of “we should be interested in early warning,” and “nobody could have seen it coming.”
You can see it coming as long as you are willing to watch what’s really happening.
It’s time.
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