Mega-trends

Introduction

Need to understand geopolitical and historical trends, and their impact on your markets, industry and organisation. There are no easy answers to deciphering the forces at play in global markets. Need to turn information and knowledge into insights. This requires imagination, curiosity and context plus understanding the transmission mechanism, eg in 2016/17 events like BREXIT, Trump's election in USA, terrorist attacks in western countries, North Korea dispute, mass shooting in Les Vegas, growing power of China, etc. For example, technology is a far bigger threat to jobs than trade. In the current situation with information overload there is a need to prioritise information

They are gradual yet powerful trajectories of change (social, economic, environmental and/or technological) that will at some point express themselves with explosive force. We need to read early signals before they become strong and take proactive action early. We ignore these forces at our peril.

"...there are trends - patterns of change over time - that signal this possibility, which morphed into likelihood which morphed into certainty which morphed into reality..."

Stefan Hajkowicz, 2015

We need to be careful of complacency, especially as many trends are positive, such as improvements in longevity, incomes, education levels, health facilities, governance, etc. But this does not guarantee a better future.

These megatrends are different from wildcard events like black swans, ie nobody saw them coming

It is often hard to distinguish the difference between signals and noise.  For example, fragments of seemingly unconnected data and information exist well before an event occurs. This is relevant whether the events are major, eg September 11 terrorist attacks (2001), collapse of the Berlin wall (1989), Cuban missile crisis (1962), 1970s oil shock, global financial crisis (2007), etc or small, eg somebody hurting themselves, a car accident, meeting someone by accident, etc. In hindsight it is relatively easy to identify what information mattered and what information was irrelevant. On the other hand, connecting the signals in advance of the event requires great analytical skills, pattern recognition and powers of deductive reasoning.

"...Part of the challenge is thinking outside the box. We need to make imaginative leaps into the future to envisage what might be possible. This takes us beyond the world as we know it today..."

Stefan Hajkowicz, 2015

Our ability to respond to events is based on our ability to accurately identify, interpret and act upon signals, and to separate the signals from the noise. By getting a picture of how the world is changing, it's possible to start separating signal from noise and to make wise choices, ie right choices at the right time, and develop strategies to best handle them.

For example, the rise in populism worldwide since GFC, eg BREXIT, the election of Donald Trump as President of United States, rise of populist leaders in Europe, etc, is posing a challenge how to handle popular prejudices against people of different racial/ethnic groups, immigration, globalisation, distribution of benefits, etc. There is a dire need for leaders to explain complex truths in a compelling and comprehensive way.

We need to understand how online things happen.

Foresight is the art and science of understanding change and exploring plausible futures so that you select the most suitable.

"...the future is slippery and hard to grasp. It's a fascinating place where emotions are mixed with logic and it becomes difficult to neatly separate imagination from evidence.
To think about the future we need a mental model to give structure to our thoughts......thinking about the future is about preparedness..."

Stefan Hajkowicz, 2015

Use the 4 Ps ( possible, plausible, probable & preferable) to look at the future, ie
i) probable (past events that are likely to recur, eg using long-term, historical rainfall patterns to forecast the likelihood of future rainfall (within set levels of confidence), financial booms and busts like tulip mania in 17th century , South Sea bubble in 18th century, Great Depression of 1930s, Asian currency crisis in the 1990s, NASDAQ technology crisis in 2000s, GFC in 2008, etc)

ii) plausible (events that may not have occurred and are not necessarily feasible to occur; evidence-based on logic and reason, eg the emergence of online retailing in the late 20th century was a plausible event with the development of the Internet and associated functions like websites, credit cards payments, electronic banking, encryption technology, transport and logistics systems to deliver goods, smart phones, etc)

iii) possible (anything that potentially could happen in the future, irrespective of probability and unknown consequences, eg aliens visiting earth, increasing human lifespan, etc; unknown unknowns)

iv) preferable (the desirable pathway of change; where foresight (what might happen) makes changes in your selected strategy (what should we do about it); making unknowns knowable)
Four stages of foresight study (systematically exploring the future)

"...To see the future we need inside to understand pattern change, ascertain their importance, deduce likely future scenarios and then make wise choices......history provides critical insights about the future..."

Stefan Hajkowicz, 2015

i) environmental scan (exhaustive search of the signal trends potentially relevant to decision-makers; cast a wide net seeking relevant information)

ii) validating and prioritising (identify trends and risks that are happening and are important)

iii) narrative of the future (evidence-based, coherent and compelling story)

iv) communicate the findings (telling the story that connects to the audience)

There are 8 megatrends

1. More from less (increasing demand of limited natural resources)

2. Going, going..... Gone? (harder to improve sustainability, ie protect biodiversity, habitats, environment, global climate, etc)

3. The Silk Highway (overland and maritime; changing economic focus to the developing world, eg Asia)

4. Forever young (uneven wealth/income distribution plus aging population with impact on changed retirement patterns, chronic illness and rising health-care expenditure).

War, crime, disaster, poverty, etc still exist today. They are more likely to be the exception than the rule

"... Despite what we hear on the news and from many authorities, the great story of the year is that we are witnessing the greatest improvement in global living standards ever to take place. Poverty, malnutrition, illiteracy, child labour and infant mortality are all falling faster than at any other time in human history. Life expectancy at birth has increased more than twice as much in the last century as it did in the previous 200,000 years. The risk that any individual will be exposed to war, dying in a natural disaster, will be subject to dictatorships has been smaller than in any other epoch. A child born today is more likely to reach retirement age than his forbears were to live to their 5th birthday..."

Johan Norberg 2016

"...in the past 25 years, the number of democratic countries in the world has almost doubled......people living in extreme poverty in the world has plunged from almost 40% to less than 10%..."

Barack Obama as quoted by Der Spiegel 2016

This progress started with the intellectual enlightenment of the 17th and 18th century where people adopt a more scientific/objective approach rather than being content with authorities, traditions and superstitions. Its political equivalent was classical liberalism which delivered people from the shackles of heredity, authoritarianism and serfdom. Industrially, the Industrial Revolution of the 19th-century further helped to conquer poverty and hungry. Then in the late 20th-century with globalisation, Internet, digitalisation, etc the progress continued at a faster pace and larger scale.

"...humans are not always rational or benevolent, but in general they want to improve their lives and the lives of their families, and with a tolerable degree of freedom they'll work hard to make this happen. Step-by-step, this adds to humanity's store of knowledge and wealth...... more people are allowed to experiment with different perspectives and solutions to problems than before. So we constantly accumulate more scientific and other knowledge..."

Johna Norberg 2016

5. Virtually here (digital/Internet/social media, etc technology is reshaping everything we do, ie greater connectivity)

6. Great expectations (changing consumer expectations for products/services, experiences and social interaction)

7. An imperative to innovate (accelerating technological change creating new markets and disrupting existing ones)

Recent technological breakthroughs around communications are important. On the other hand, some of the past technological breakthroughs have been pivotal and include

i) artificial fertiliser, especially nitrogen, has been the most powerful weapon against hunger and poverty. Nitrogen helps plants to grow. German chemist Fritz Haber demonstrated how to produce ammonia from hydrogen and atmospheric nitrogen. Another German, Carl Bosch carried out around 20,000 experiments to come up with the right process to synthesise ammonia commercially.

"...world population - its expansion from 1.6 billion people in 1900 to today's 6 billion - would not have been possible without the synthesis of ammonia..."

Vaclav Smil as quoted by Johan Norberg 2016

NB Nitrogen has some negative impacts, ie it makes everything grow (including weeds) and causes toxic algae blooms in waterways and coastal areas

ii) agricultural technology, ie automation

"...150 years ago it took 25 men all day to harvest and thrashed a tonne of grain. The modern combine harvester, a single person can do it in 6 minutes. In other words, contributed to a 2,500-fold productivity increase. It used to take half an hour to milk 10 litres. With modern milking machine it takes less than 1 minute. Expanded trade, better infrastructure, cheap electricity and fuel, food packaging and refrigeration have all made it possible to move food from surplus areas and places of shortfalls. In the USA it took around 1,700 hours to the purchase the annual food supply for a family in the late 19th century. Today, it takes no more than 260 hours...."

Johan Norberg 2016

iii) diet

"...In the mid-19th century, the every daily calorific intake in western Europe was between 2,000 and 2,500 - below what it is in Africa today. In 1950 it was already around 3,000. One indicator of health is average height, since the human body reduces its growth if the necessary amount of nutrition is not available. The historical records show that the difference in height between Western Europe and the rest the world was marginal until 1870. After that, the average Western European grew in stature by around 1 cm per decade......this was incredibly important to health......generally live longer......children who receive better nutrition can resist disease...... stood a better chance of surviving..."

Johan Norberg 2016

At the same time fertility was falling, ie

"... As people become richer and better educated, they have fewer children......US fertility rates plummeted from seven children per woman in 1800 to 3.8 children in 1900 to 1.9 children in 2012 - below the replacement rate. This trend is the same all over the Western world..."

Johan Norberg 2016

8. Safety (personal security, eg privacy thru to global safety, eg terrorism)

More details on each mega-trend

 

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