Events & Surprises of 2016

by futurists Richard Worzel and Kit Worzel

There are many things that we already know about 2016:

The leading edge of the Boomers will turn 70 – and complain about it.

The Millennials are taking over in government, business, and society. Leading edge Millennials are turning 35 this year, and are (finally) moving into the household formation stage of their lives, which will produce ripples through many industries, from baby clothes to mortgages, furniture to insurance, and much more.

One significant omission from the Millennials’ buy lists is likely to be cars, as they will increasingly rely on organizations like Uber and ZipCar for transportation. Cars are no longer status symbols – except possibly the Tesla.

There will be a presidential election in the US that will be incredibly tedious, irritating – and frightening.

The Rio Olympics will take place, with the expected crises and scandals, both by the athletes, and by the organizers.

Weather will be predictably unpredictable – and global temperatures will continue to rise. 2016, like 2015 and the decade before, will probably be the hottest year on record.

Terrorists will continue to try to disrupt the Western world.

So far, it’s all predictable.

But what are some of the less predictable things, and the things that might even surprise us in 2016?

Technology

Computer genies, such as Apple’s Siri or Microsoft’s Cortana, will actually become useful, reducing the demand for smartphone apps by doing things directly. For instance, Apple TV’s interface is going to devolve to “ask Siri” as the means of doing things, and this is a sign of things to come.

We also suspect that IBM may make their smart computer system, Watson, which is resident in the Cloud, available to the general public to answer questions, for problem solving, and general information, effectively competing with search engines like Google. Watson is already available for a variety of online purposes, both for free and for pay, but this range is clearly going to expand. However it happens, the point & tap computer interface may get competition by allowing people to ask their computer genie to do things for them.

Meanwhile, Watson is moving into more general medical diagnostics, after being used primarily by specialists in areas like oncology. This will open the door to having health care professionals other than doctors act as gatekeepers to the health care system.

Three tech trends very much in evidence in 2015 will converge in 2016. Virtual Reality (VR), Augmented Reality (AR), and the growing demand for, and supply of, bandwidth, particularly wireless bandwidth, will bring about the emergence of telepresence, which substitutes a virtual experience for actually being someplace, or with someone. Hence, you may be able to virtually attend a concert in San Francisco or London and feel like you’re there, or visit with your great-aunt Millie at her bedside, all without leaving home. This will take years to unfold, but it will begin in earnest in 2016.

Wireless Internet traffic will exceed wired Internet traffic in 2016. We are in an increasingly wireless world.

With 750,000 drones expected to be bought this holiday season in the US alone, drones are among the most anticipated gifts of 2015. However, new FAA regulations, combined with lawsuits and police reports, may ground the gifts before they are even opened. Drones bought before December 21st have until February 19th to register them with the FAA (at a cost of $5). So, while 2015 may have been the year of the drone, 2016 is shaping to be the year of drone regulation, with fights between governments over who has jurisdiction and arguments about how drones affect privacy.

Meanwhile, 3D printing is about to cross the chasm from the early-adopter phase into the mainstream[1]. As printers come down in price, and more and more people get experience with them, they will think up more and more things they can do with them – which will further accelerate 3D adoption, at home and at work. The ripple effects will be significant: 3D printing won’t replace mass production, but it will reshape it, along with related businesses, including stores, plus delivery and distribution companies.

3D printing is also set to start printing out human organs, beginning with skin. While the printing of more complex organs is still a few years off, bio-printing skin will happen in 2016, as will FDA testing on its safe use. The testing will take time as a single error in printing could produce cancerous cells, but if it is possible to increase fidelity enough, then this will be a boon to burn victims, some cancer survivors, and of course, the beauty industry, which will start doing skin transplants to get rid of wrinkles. While some may consider this last frivolous, beauty companies such as L’Oréal and Procter and Gamble are the ones leading the research and development on bio-printing, and they will undoubtedly offer it as a cosmetic treatment once it is proven safe. Meanwhile, what they learn will be beneficial for 3D printing of other organs – at a price.

And finally, 2016 is the year that Tesla’s battery factory comes onstream. The first year’s production is already sold out, and the Paris conference on climate change will only boost the demand for both electric cars (where Tesla holds the image lead), and Tesla’s PowerWall, for storing alternative energy, notably from solar power panels. Everything renewable is going to explode in 2016 – and much of it will be at best expensive, and at times, counterproductive, actually increasing GHG emissions. Mistakes are almost inevitable in a rapidly developing industry.

The Global Economy

The US economy will lead global growth. It won’t have the highest growth rate in the world, but the expansion of its economy will be the most important factor in 2016’s global economy. And the US dollar will continue to be the strongest major currency. Over time, of course, this means that foreign countries will export more goods to the US at lower prices (in US dollars), which will eventually hurt US producers, but for now the US leads the way.

The price of oil will continue to fall, possibly as far as $20, and, absent some geopolitical catastrophe, will stay below $50 for at least the next two years. We first wrote about the coming fall of the price of oil in January of 2013 in a research report produced for the Conference Board, and it’s pretty much played out as we thought it would.

And, of course, as the price of oil falls, so will the Canadian dollar, perhaps as low as 60¢. This will help Canadian exports and manufacturing over time, and provide some relief to the Canadian oil sector (since its products are sold in US$), but will sorely test the tourism industries in Florida & Arizona.

Meanwhile, global economic surprises could emerge from several possible sources.

First, a number of hedge funds are in trouble, and this could trigger a financial panic. We learned from the Lehman Brothers fiasco that a run on the financial system doesn’t necessarily have to start with a commercial bank.

This time, the trigger might be the reversal of the almost decade-long stretch of historically low interest rates. Many of hedge funds have loaded up on junk bonds, which offered higher-than-market yields. The problem is that with interest rates finally rising, the already illiquid market for many such bonds has vanished, making them impossible to sell. From a market point of view, this means they are effectively worthless, which may destroy the hedge funds that bought them.

That would produce ripple effects around Wall Street – and, as we’ve seen, that can spread quickly to Main Street as well, triggering a financial market crash, and possibly knocking back economic growth. Do we think this is the most probable outcome? No; but we do believe it’s much more likely than people realize, and should be watched.

And, as we said earlier, the US economy is leading the global economy. If everyone else is in bad shape, it could eventually drag the US down with it. That hasn’t happened before, but then the Chinese economy hasn’t been as important before, either, and there are signs that it might be in recession right now.

Meanwhile, real estate prices in Australia, Canada, and the United Kingdom are overheated, and will, someday, fall. The question is not whether they fall, but when. There’s no way to know whether this year ahead could be the time, but house prices in Newfoundland and Alberta, Canada, both related to the oil industry, are already backing off.

And finally, as we’ve said before, the EU crisis (involving Greece, Ireland, Portugal, Spain, and more) has not gone away, it’s just been papered over. The fundamental problems are not financial or economic (although there are financial and economic problems) but demographic. Europe has too many old people, and has made them too many promises to them that it can’t afford to keep. This will eventually end in tears – but for now, they will continue to paper over the cracks and hope that the tooth fairy will solve their problems some day.

Climate Change & Related Issues

As The Economist newsmagazine succinctly put it, “That climate change is happening, that it is very largely man-made and that it is exceedingly dangerous are all now hard to deny (although America’s leading Republican presidential candidates routinely try).”

Because of climate change, we can look forward to a succession of ever-warmer years (although not every year will set a new record – real world changes don’t happen in straight lines). We can also look forward to more extreme weather events around the world, including, but not limited to, blizzards, hurricanes, floods, violent thunderstorms, and droughts.

The Paris climate agreement was a surprise in that 195 countries came together to agree on a resolution on climate change. We won’t see much action in 2016, as the terms of the agreement don’t come into effect until 2020.

Meanwhile, there will be the expected negative reactions, especially in the traditional energy sectors. To cut greenhouse gas emissions significantly means severely curtailing the burning of oil, gas, and coal, which has been estimated to strand as much as $2 trillion of investment capital. Does anyone believe the fossil fuel industries will just walk away from that much money without a fight? Expect stronger lobbying and arguments for “clean” coal and “green” oil, as well as attempts to find carbon offsets and a push to fund carbon capture research.

But where might we be surprised in all this?

As the politicians and their civil servants return from the Paris conference and start to get down to the difficult work of turning promises into reality, there are going to be some hard truths that may catch people off-guard in 2016 if real action is actually taken:
(a) Fossil fuels are more heavily subsidized than renewables, with the result that we’re discussing limiting carbon emissions at the same time as we are subsidizing them.
(b) Much, but not all, of the money invested in renewable energy has been wasted, and some investments, including many wind farms, have indirectly increased GHG emissions. (Germany’s experience is a prime example.)
(c) Until very recently (2014) carbon emissions were not only continuing to grow, but the rate of emission was actually accelerating. The 2014 slowdown may be due to the slowing of the Chinese economy, coupled with their efforts to cut back on coal use in order to reduce air pollution. What is clear is that hitting the Paris target of keeping global temperature increases to near 1.5o C is going to be incredibly difficult and expensive, even without the inevitable photo-op boondoggles.
(d) Solar panels are dropping rapidly in price, to the point where they are going to cause real financial problems for electric power utilities.
(e) And finally, we will eventually need net carbon emissions to drop, first to zero, and then to actually decline. That last step – reducing the carbon in the atmosphere – will be the most difficult, and is why carbon capture research is actually a good, long-run idea.

The reasons why investments in renewables haven’t been more fruitful are pretty clear: governments (1) are lousy at picking winners, especially when technology is involved, and (2) political processes involving the handing out of money are quickly perverted to fill the pockets of those who are politically nimble.

A much better approach would be to let the markets sort things out, and the most direct way of doing that is through a steadily rising carbon tax, preferably designed to be either revenue-neutral (i.e., the revenues from a carbon tax are matched, dollar-for-dollar, by decreases in other taxes), or, failing that, be invested exclusively in research on new renewable energy technology.

The real climate surprise of 2016, then, will be if we see governments and consumers take sincere, effective action on climate change. We would welcome this, but don’t expect it.

Scarcity of drinking water will make headlines in 2016[2], and may bring some breakthroughs as well. Using local materials, Egyptian scientists have developed a desalination technique based on pervaporation, or evaporating water through a series of membranes and using the membranes to remove the salt. Egypt’s technique is much less energy intensive than other desalinization techniques, and if they can successfully scale it up, it could revolutionize access to potable water in hot, sunny climates.

Meanwhile, Bill Gates, through the Gates Foundation, is a big name in the water game these days. His foundation has been developing a method to purify sewage and wastewater to make it potable. It’s actually easier and cheaper to purify sewage than sea water, not to mention safer, but the hard part is overcoming the “yuck!” factor. Expect a PR campaign in the coming year on this topic, if not in the US, then in Africa and the Middle East.

Geopolitics

China’s obvious intention to dominate the South China Sea and the sea lanes that run through it could precipitate a military & political crisis. China considers itself a superpower, and is intent on expanding its economic, political, and military reach. The problem is that it is ignoring the legitimate claims of its neighbors, and, at times, trying to steamroll them. There have been some conflicts that could have escalated militarily, but didn’t, but that could change at any time. All it takes is a political miscalculation on one side or the other, or a hot-headed pilot or ship’s captain to make a mistake and precipitate a full-blown crisis. Where it could get particularly scary is if the mistake or standoff involves the United States, directly or indirectly, which has lately been flexing its military muscles in response to China’s illegal construction of military bases on disputed reefs.

Russia’s Vladimir Putin is the head of a country in decline, but one that (a) has delusions of recreating the Soviet empire, which is beyond Russia’s present capabilities, and (b) nuclear weapons. This is not a good combination, and could explode during 2016.

In 2015, Putin continued the slow motion invasion of the Ukraine, and provided weapons to Russian insurgents there, one of which was used to shoot down a civilian aircraft, killing everybody onboard. The sanctions that were applied in retaliation by the West caused further damage to a Russian economy already reeling from crashing oil prices and a declining population base. Perhaps as a result, Putin seems to be making common cause with the West over DAIISH (called ISIS in the media), while simultaneously trying to prop up his ally, Bashir al-Assad, the Syrian dictator. All told, it’s hard to figure what Putin will do next – except it’s certain to be for the glorification of Vladimir Putin. A surprise, then, would be if Putin actually cooperated with the West in the Middle East.

Social Trends

We’ve been talking about the emergence of women for well over a decade (with more recent, higher profile examples here or here), but 2016 is probably the year when everyone else wakes up and starts talking – some positively, others negatively – about the Power of Women. Women have been growing more powerful in virtually every aspect of Western life for quite some time, but things are about ready for recognition that women are now very much in the ascendant. If Hillary Clinton wins the US presidency, that will be the icing on the cake, for it will also throw the entire issue in high relief.

And finally, beer cocktails will emerge as a trend in 2016. We first encountered a beer sommelier in 2015 – someone who had undergone extensive training in order to help a customer select just the right beer – and micro-breweries are well established as trendy and significant. Now take that a step further, and look at how beer could become an ingredient in something more intriguing, and you get beer cocktails. Cheers!

© Copyright, IF Research, December 2015.


[1] http://www.zdnet.com/article/3d-printing-is-going-to-be-huge-in-the-most-boring-and-fascinating-ways-imaginable-ever-expect/

[2] See also the three FutureSearch blog posts from June, 2015, starting with: http://www.futuresearch.com/futureblog/2015/06/30/water-is-not-the-new-oil-the-future-of-water-part-i/

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