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Over the last few days I have been blogging on what life might look like in 2019. The bottom line, of course, is that nobody knows. For sure, there will be wild-cards in the next ten years that nobody could have predicted. Even so, it’s interesting to speculate about how the events and trends of today will play out over the coming decade. Today it’s the turn of the dismal sciences. 

The Great Recession

unemploymentThe world has never seen anything quite like it. During the last six months of 2008, every country in the world caught an economic ‘flu precipitated by years of care-free lending across the globe. Stock markets crashed and some of the biggest names in banking were forced into government ownership. Unemployment soared. Breadlines and tent cities have began to appear. The USA was caught out very badly, and it’s likely that its standing in the world may never again be the same in the face of growing competition from China and India. As I write we are still unsure how deep this recession will cut or how long its effects will be. The Economist, in a recent article, declared that the recovery is going to be prolonged and painful, with double-digit unemployment rates and horrendous levels of public debt. Such crises have massive after-effects: history has shown us that revolutions and wars are common outcomes. Will this time be any different?

The European Union

eu-flagIn 2004, the European Union grew in size to 25 states: a new political entity at the heart of Europe based on the free movement of people and capital, the promotion of democratic values, and a pooling of resources when it comes to foreign relations, humanitarian aid, financial policies, agriculture and lots of other areas that impinge on everyday life. That said, the political structures required to govern such a large and diverse group of nations are not quite up to it. Two attempts have been made so far to resolve this problem, but the first foray failed outright and the second attempt – the Lisbon Treaty – has been driven into the mud primarily as a result of an unsuccessful referendum in Ireland. What is clear is that the EU is comparatively toothless if it doesn’t resolve these issues quickly. Its long term future is far from certain, despite evidence that it has lead to a greatly improved quality of life for many people within its borders. There are several groups within the EU who desire to see it fall under it’s own weight and while a legislative vacuum remains, these groups have been gaining in confidence. No-one knows what a post-EU Europe might look like, but my guess is that it would not be pretty. Nationalism, once you get beyond the flag waving and the late-night singing, is often an ugly spectacle to behold. So where will it be in ten years time? Dead? Broken? Stagnant? Or, perhaps, reinvigorated? Thriving? We can hope.

Last installment tomorrow: The 9/11 Wars.

Most people will agree that we are now going through a period of time that will be remembered for a long time, like World War II, 9/11 or The Great Depression. It’s probably the first time in world history when the entire globe has been caught in the grip of a sudden and calamitous economic crisis. No country has been untouched. Governments,  businesses and households worldwide are desperately fighting to shore up their reserves while avoiding financial meltdown. The problem is far from over and recovery will take many years.

Last month, Dominique Strauss Kahn of the IMF gave the current economic crisis the rather unimaginative appellation “The Great Recession“. Given that we still don’t know how long this crisis will last, or how deep it will be, events might yet consign this name to history.

Doing a quick trawl of the web, I have discovered a few potential alternatives.

  • The Great Deception (*)
  • The Bush Kaboom (*)
  • Depression 2.0 (*)
  • The Flump (*)
  • The Clump (*)
  • The Not So Great Depression (*)
  • The Repression (*)
  • The Econopocalypse (*)
  • World Crash I 
  • The De-Hummerization (*)
  • The Great Uh-Oh (*)
  • The Boomer Bust (*) 
  • Econorrhea (*)

And what would you call the young people who will be shaped by these events? Generation OMG.

800px-a_small_cup_of_coffee

In our main cafeteria, a sachet of instant coffee costs 10 cent. In the coffee docks the very same sachets are free. There are two coffee machines in our cafeteria. One machine brews a 30 cent mocha. The machine right beside it brews a mocha for 1 euro 20 cent. Not to be outdone, beside these two machines is a brand new coffee bar, where you can now buy a mocha for a whopping 2 euros 10 cent. Meanwhile, the best coffees come from an espresso maker right beside our general manager’s office. This coffee is free. The coffee in the smaller canteen is free, but if you want an extra large coffee, it costs a euro.

And if you can understand the economics of all that, you deserve a cup of coffee.

Now this book is quite amazing. I had heard about it some weeks ago, so I made a special point of attempting to find it when I went shopping in the US.

The Long Tail - Why the future of business is selling less of moreAnderson’s central thesis is this: with the introduction of the internet and new ways of working we now live in a time of abundance and practically infinite choice. And as a result, the rules completely change. No longer are we constrained to think in terms of “hits” or “blockbusters” or “top selling brands”. We can now buy anything we like, and it’s available for us to do so in just a few seconds of clicking or calling someone. And, what’s more, it’s happening all around us today.

What fascinates me most is how it seems to overturn one of the most powerful “laws” of doing business. A long-standing rule of business is the Pareto Principle, commonly known as the 80:20 Rule. Put simply, it means that, to make money, companies should only concentrate on their highest selling products or services. The slow movers and niche items are too expensive to store, and so they should be ruthlessly excised. The result, if you haven’t already seen it around you, is uniformity, blandness, lowest-common denominators and a staggering lack of choice.

These days are coming to an end.

The Long Tail hypothesis says that the action in the future will be in the lower selling categories. People are increasingly seeking out those things that they want to buy – the niche music tracks or clothes, the arty Spanish films, the British comics from the 1980’s. Whatever you are in to, you can find it quickly and buy it for a cheap price, thanks to Ebay, Google, Amazon and a host of smaller sites and blogs. The Long Tail idea says that hits will decline in importance as interest in niches grows and grows and grows.

So much choice…This is nothing short of a crisis for traditional big media organisations, whose job it has been for a century to sell a consistent message to as many people as possible. Now, with the explosion of new channels of communication, people are turning off their radios and TV sets, reading blogs instead of newspapers, downloading indie music instead of going to the record store, ordering customised T-shirts, footwear and jewelery over the web instead of accepting the limited offerings in the local shop. The message, loud and clear, is “Blandness and Hobson’s choices? No thanks”.

Mega celebrities, big-name TV shows, best-selling newspapers, hit pop bands, blockbuster movies: all are beginning to show significant drops in their market-worth and the trend is getting more pronounced with each year. The world of mass communications is splintering into a million pieces, and no-body seems to be able to put this Humpty Dumpty together again.

Does this mean that the age of the hit is well and truly over? Of course not. Just look at the recent global racism furore on Celebrity Big Brother for instance. However hits will possibly be more random in the future – arising from anywhere, and disappearing back into obscurity once their time in the spotlight has passed. It’s likely that hits will be much harder to achieve, and more limited in their impact. Marketing’s problem will be in getting their message out to a truly fractionalised audience, with no-one consumer quite using the same channels of communication.

Over the past week I was away in Chicago. I had a fairly quiet time there, so during that period I was able to catch up on some reading.

The Tipping PointFirst of all, I finished reading “The Tipping Point” by Malcolm Gladwell. This is a great read – very interesting stuff. His central thesis is that social changes (business trends, fads, crime rates and other memes) tend to behave in a manner somewhat similar to epidemics – often there is little progress followed by a sudden exponential jump – the idea catches fire, as it were.

According to Gladwell, three factors are needed – the right people, the right messages and the right environment. What makes the book exceptionally interesting are the case studies used: everything from crimes on the New York subway to Sesame Street to the sales of footwear. It’s packed full of interesting tales: the bit on the 150 rule was fascinating. Essentially the idea behind this is that no social or business unit should be bigger than 150 people. Go beyond this number and you lose control. The manufacturers of GoreTex are cited as a good example of this. They build a new factory and restructure once the population of any of their units goes beyond the 150 mark. Radical stuff indeed.

If I had any reservations it is with the first area – finding those elusive “right people” who will seed the epidemic, as it were. These right people, known as Connectors, Mavens and Salespeople, are required to guarantee success. While I accept that there are people around with such exceptional skills, I wonder how common they are in practice. There is something super-human about it which doesn’t quite ring true. It all seems a little too simple – too packaged. A well working team would seem to me to work just as well, if not better.

The book Freakonomics challenges his assertion that small changes, on the margin, resulted in a sudden drop in the New York crime rate. It’s a debate that will go on for a while, I imagine.

So, I now know a bit more about “stickiness”,the dynamics of cigarette smoking, Paul Revere’s ride and the influence of peers. It’s an enjoyable read and highly “sticky” in itself, but nevertheless I have a few misgivings.

My next review is coming up soon.

The Wisdom of Crowds is an enlightening book, particularly at the beginning where he spells out his thesis: that, under certain defined conditions, the views of many can often trump the views of one single person, no matter how influential or how much of an expert that person may be.

The Wisdom of Crowds

The book justifies the opinion that forecasting and estimating are better performed by many people from different backgrounds instead of just a single elite. These types of problems, referred to as “cognition” problems, are commonplace – who is going to win the 3.40 at Newmarket, what will our sales be for the next quarter, when will the project be completed, etc.

He then tackles more complex problems, called “coordination” problems and “cooperation” problems, and arrives at a similar conclusion that, left unhindered, crowds of diverse people, acting independently, can arrive at an elegant solution to very complex problems.

In some ways, the book is nothing new. Adam Smith promoted the basic idea over 200 years ago when he talked about the “invisible hand” guiding the market and economists and politicians have been discussing this ever since. Surowiecki asserts that some of the rules of the free market have applications way beyond finance – the inner workings of the Google search engine and the Hollywood Stock Exchange (HSX) are examples that are mentioned.

But, you might be saying, what about stock-market bubbles, group-think, decision by committee, mass-hysteria, riots and all the things that one would attribute negatively to crowds? His view is that crowds work best when a highly diverse group of individuals are able to make independent choices with levels of influence minimised as much as possible. In this way the maximum amount of information can be gleaned from the environment and an aggregation process can then happen which may yield a good answer to the problem at hand. Influence and persuasion are seen as disrupting factors in this process.

If you are looking for a “how to” manual, then the book will be somewhat disappointing. For instance, many business managers face challenges in getting groups to come together to make good decisions. This book provides some tantalising evidence that group decision making is indeed superior, but the reader is left to figure out for themselves how to apply it to their own particular situation.

The book is very readible. It contains a large body of fascinating research material and conveys the conclusions elegantly.

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