2009: The Status Quo versus The Long Emergency
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?
The high-resolution society: the future is in small companies
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.
“Nobody could see it coming,” schadenfreude edition
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.
Future Leaders Now! Slides from the ASTD meeting
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!
The end of giant corporations?
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.
In praise of accounting- decoding the market collapse
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.
The financial crisis and what it means for leaders
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.
The future of business: more business, less finance
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 Critical Moment for Next Generation Leadership
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.
Future brightspots will result from this mess
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.
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