The year ahead is going to be a tumultuous one, challenging in political, economic, and financial terms. Despite this, there are opportunities for those prepared to take advantage of them, because uncertain times mean that market share is up for grabs. And no, it’s not a coincidence that there are 12 trends for 2012. I discarded a bunch more, but it’s such a catchy title I couldn’t resist.

I’m going to approach these 12 trends with three objectives: What is important? Why is it important? And what does it mean to you?

And I’m going to start with the bad news, and end with the silver linings.

1)    Declining American influence – America’s absolute and relative influence in geopolitics, economics, finance, and the military is declining for a host of reasons: the rise of competing powers like China, India, Brazil, and others; the very expensive military adventures in Iraq and Afghanistan, which have sapped America’s willingness to engage in aggressive political and/or military action; the Arab Spring, which eliminated Middle Eastern strongmen like Mubarak who followed America’s political lead, and the continued stalemate over the fate of the Palestinians, means that America’s influence over this critical and unstable region is at or near an all-time low; the Great Recession, which has sapped America’s economic and financial clout; and the dysfunctional stand-off between Republicans and Democrats that has frequently led to policy paralysis.

The implications of this are a less stable, more dangerous world. America may have gone back and forth on whether it wanted to be the world’s policeman, even though it truly was the global cop, and it’s inability to fill that role now means that the world is a more dangerous place.

This sets the stage for sticky situations to emerge, such as the twin nuclear threats from a suddenly even less-stable North Korea, and the only slightly more stable and geopolitically ambitious theocracy in Iran. It also leaves more elbow room for the ever-ambitious China to expand its power and influence, notably in south Asia and the South China Sea. It also leaves critical global issues, like what to do about climate change, without essential leadership.

The implications of this is a world where there are more likely to be more, and more serious, geopolitical, financial, and economic crises, and greater uncertainty in virtually every aspect of life. Others may not always have agreed with American policies, but they will miss America’s steadying influence as it ebbs from their lives.

2)    Ho-hum! Just another financial crisis (European edition) – The daily drumbeat of scary headlines dealing with the financial crises in Europe have gradually deadened everyone’s awareness for how dangerous the situation truly is. In particular, Angela Merkel is juggling hand-grenades, and hoping that she won’t drop any, and that none of them will go off unexpectedly. Germany is the only European country with the potential to stop the rolling crises that are affecting Europe, and then only if Merkel acts in a timely basis. To do this, she must let Greece go bankrupt instead of propping it up, shore up the banks, notably German banks, that have bought far too many dodgy EU bonds in the past, allow the European Central Bank (ECB) to become a lender of last resort, with the ability to stop a run on European bonds, and halt the bond market attacks on other European countries, starting with Portugal and Ireland, but extending to the much bigger countries like Spain, Italy, and even France. But Germany doesn’t want to do these things, and German voters are adamant that they won’t subsidize what they see as the lazy, profligate lifestyles of southern Europeans. But if Germany doesn’t act, and in a timely fashion, it may lose the ability to act at all, and come under attack from the bond markets as well. Indeed, German bonds are no longer being bought with as much enthusiasm as they were even two months ago. If Germany doesn’t act soon, it may lose the ability to do so at all.

Remember what happened in the American financial markets in 2008? If Germany doesn’t act in time, we could see the same kind of thing happen in 2012, this time starting with a run on European government bonds. From there a run could spread to those banks – American as well as European – that hold too many of these bonds. And once such a run started, the most dangerous question of all would emerge: “Who’s next?” Investors, frightened by the panic, would look to sell any and every questionable credit, and their attention might turn to the various U.S. state and local governments, like Illinois, California, and Harrisburg, Pennsylvania, among many others, that are struggling with their finances.

The U.S. Federal Reserve has become the de facto lender of last resort to the entire developed world, and would undoubtedly step in and support the banks and markets with everything they had. But this time, remembering the callous, greedy ingratitude of last rescue of the banking industry, American voters and the American Congress would likely tell the banks to drop dead. It was a hard enough last time to get Congress to bail out the banks; this time I suspect it would be impossible, even though failing banks would take the global economy down with them. Moreover, the Fed doesn’t have anywhere near as many bullets today as they did in 2008, and Fed Chairman Bernanke already has some Republicans, notably Ron Paul, baying for his blood over the quantitative easing from the last crisis.

The danger here is frighteningly real, and even greater than the risks we faced in the panic of 2008. Yet, the steady drip of crisis headlines and last-minute rescues has left many people convinced that nothing will happen. If it does, it will catch people flat-footed, not because they didn’t know there was a crisis, but because they have been hearing about it for over two years now, and have tuned it out. We could muddle through, and probably will – but the risks are far higher than most people realize. It will be important to have thought out a Plan B to deal with the unthinkable, if it happens, one that prepares you and your finances for a bigger repeat of the 2008 panic. Again, it probably won’t happen – but it’s better to have a plan and not need it, than need a plan and not have it.

3)    Yes, China’s influence will continue to rise, but…  Napoleon famously said, “China is a sleeping giant. Let it sleep.” Well, China’s very much awake now, and throwing her weight around – although cautiously. If I were (God forbid) Emperor of China, I would require my minions to tread cautiously, to smile a lot at our trading partners and neighbors, and to make our gains slowly, one salami slice at a time, never appearing too greedy or overreaching. I would practice soft diplomacy, offering aid and comfort where I could do so cheaply, loudly proclaiming our respect for other countries’ internal policies, taking leadership positions in things, like climate change, where I knew I was going to have to make changes anyway, and generally trying to look like a good global citizen. I would act, in short, as if time were on my side, and I was going to be the next Big Thing.

And generally speaking, that is precisely what China is doing – except that every once in a while the mask slips, and the avarice and aggression shows, as with the boundary disputes with other countries, especially as related to the South “China” Sea, which China (the nation) seems to be trying to interpret literally as being a Chinese lake.

But China has an Achilles’ heel – several of them, in fact – and does not have (much) time on its side. Its biggest weakness is that it is aging faster than any other significant country on Earth. Because of its One Child policy, China’s population is expected to peak, and begin declining, sometime around 2020 – within the next 10 years. And its labor force is already in decline, even as the demands for higher wages push its cost structures higher.

Meanwhile, although there is a great deal of pride in China’s new affluence among the Chinese, that affluence is not evenly spread, and there is unrest among those who remain poor. Add to this the widespread corruption of Chinese officials at all levels, which often provokes revolts, like the one in Wukan, which leads to simmering dissatisfaction among many Chinese.

This will further be exacerbated by the fact that China’s factories are automating almost as quickly as those of the developed world, which threatens to slow the rate of job creation, productivity, and affluence markedly over the next 10 years. Yet, China dare not automate; to do so would mean a loss of competitiveness, which would produce even worse results as industries would move elsewhere.
So, with that in mind, what would I, as self-appointed Emperor of China, do? Worry about a future I couldn’t control, and for which I could not see a clear path forward. The next 10 years will mark the beginning of the end of China’s ascension, and if I were Emperor, I’d think about retiring to some warm, cushy haven before the revolution came. Chinese Spring, anyone?

The implications are for China to step up its attempts to increase power and influence, and throw its weight around even more actively before that power starts to wane, but as quietly as possible. Look for China to try to make this the China Decade, especially in finance, trade, and geopolitics, as it attempts to pull in as much as it can while it can.

4)    American Spring? Meanwhile, closer to home, while those on the political right like to dismiss the Occupy movement (e.g., Occupy Wall Street), the fact that the movement happened at all is the most significant part of it. Indeed, Time magazine made protestors its “Person of the Year”, and that’s not restricted to just the Arab countries. The Occupy movement and protests against cut-backs in many developed countries had many of the earmarks of the Arab Spring: protestors saying that their governments serve an elite clique and not the people; lots of people, especially young men, who cannot find work despite months or years of trying; and a belief that the political system is neither representative nor responsive. Just because winter has fallen, and the Occupy settlements have been disbanded does not mean that the dissatisfaction has gone away. And with increasingly dysfunctional government in America, the potential is there for a much stronger protest movement against the System, however that is defined. American Spring, perhaps? It sounds unlikely, but not as unlikely now as it did before, and it won’t be restricted to America for discontent will grow in all developed countries.

This is especially true as the boomers move towards retirement, only to find that their either don’t have the resources to retire and that no one is going to donate them, or that the civil servant pensions that they were promised are unaffordable.

The protest movements have only just begun, and they are going to be acrimonious, disruptive, and at times hijack the political process.

5)    Mixed signals for both weaker – and stronger – economic growth.  Europe and its prospects are dragging the global economy down. The uncertainty in Europe, combined with the painful budget cuts in Greece, Ireland, Portugal, Italy, Spain, and the United Kingdom, mean that Europe is now in recession and a drag on the global economy.

Meanwhile, China, which had been concerned about inflation, and hence was hiking interest rates in a bid to slow it, has now reversed itself, which I can only interpret as concern that growth will slow more than they want. That’s a potential positive, as it will add stimulus to the global economy.

Canada, which has to date seemed to skate above most of the problems of the rest of the developed world, now seems to be experiencing slower growth, with an unexpected jump in the unemployment rate, while its housing market is looking pricey, frothy, dangerous, and much like America’s prior to the collapse in 2008, especially in condo development in its major cities like Toronto, Vancouver, and Calgary. Moreover, its consumer debt levels are exceeding the levels of American consumers in 2007, and no less a figure than Mark Carney, the highly respected Governor of the Bank of Canada, has warned consumers and banks alike to cut back on consumer borrowing. Canada could be arriving late for the financial meltdown of 2008 – but if its consumers don’t mend their ways, they will get there.

And yet, America, which until 2008 was seen as the world’s engine of growth, seems to be picking up for no specific reason. Actually, this was almost inevitable because of the natural dynamism and entrepreneurship of the American economy. What has prevented America from rebounding earlier, or more strongly, has been the housing market, which is still in horrendous shape – but slowly improving.

So how will this balance out through 2012? Assuming that Europe doesn’t crash and burn, and drag everyone else down with it, and that Iran doesn’t precipitate a significant war in the Middle East, then America will continue to recover, its jobless rate will continue to decline (slowly), the world will lick its (economic) wounds, and things will slowly get better.

Accordingly, while I continue to counsel my clients to have a Plan B in their back pocket if things do go bad, my primary advice is the prepare now for better times ahead. There are problems – big problems – ahead, and the American election in 2012 is not going to help, but for 2012 we are likely to see an improving environment, and opportunities re-emerging for those with the courage to grasp them, as I outline in Trend #7 below.

6)    Climate change accelerates – and the consequences will multiply. The most significant and portentous climate news of 2011 was the discovery of methane gas bubbling up in the Arctic Ocean off the north coasts of both Siberia and Alaska. Methane is a far more potent greenhouse gas than carbon dioxide, and the melting of the Arctic ice cap, combined with the rise in the temperature of the Arctic Ocean, has started to release methane from the ocean floor. As well, as temperatures rise in the northern polar regions of Siberia, Alaska, and Canada, the permafrost melts, releasing even more methane into the atmosphere. The amounts of methane that could be released by both sea floor methyl hydrates and permafrost are staggeringly huge, and could dramatically accelerate the rate of climate change. If this trend continues, not only will the debate over climate change be over, but humanity will be forced to race to keep up with the potential changes.

As it happens, the vast majority of climate scientists – something approaching 95% – now agree that climate change is happening, and that humanity is at the very least a significant contributor to it. Since I speak to lots of different kinds of audiences, I can tell you that most groups now accept that climate change is happening, even those that have been among the most vocal doubters. The doubts they now raise are more along the lines of whether humanity is to blame. But from my point of view, it no longer matters: if your house is on fire, you don’t throw gasoline on the fire, regardless of how it started. That’s roughly the position we’re in now.

In 2012, we will get more information about the release of methane, and can only pray for good news. Meanwhile, brace yourself for more strange, and increasingly extreme weather. And because climate is a chaotic system (where chaos theory is a branch of mathematics), it is literally unpredictable. This means we can’t tell whether we will get floods or drought, hurricanes or tornados, or something else unforeseen. But it won’t be business as usual, either.

7)    Innovation as Steve Jobs’ legacy.  Jobs didn’t invent innovation, but he sure popularized it! Innovation has become a corporate religion in recent years, and with good reason: innovation can allow you to disrupt the marketplace, scoop up market share, increase profits, and win friends and influence people, just as Jobs and Apple have done. Yet, innovation is hard, especially because there’s a natural resistance to change and to the real risk-taking that innovation requires.

But if there is a theme for the corporate world in 2012, it is that now is the time to get serious about innovation. As an innovation specialist who runs seminars and workshops for corporate clients, I’m seeing this on a daily basis in genetic and medical research, agriculture, the automotive industry, the insurance industry and finance generally, plus just about every other sector of the economy. And technology itself embodies innovation. Indeed, the idea of a technological company not working hard at innovation seems like recipe for extinction. The world is changing rapidly, and there are lots of new opportunities – and disasters – out there. It’s raining soup, but if you just stand there, looking up in surprise, you’ll drown!

8)    Who dares, wins. Such is the motto of Britain’s fabled SAS – one of the world’s premier commando groups. But their motto applies equally to unsettled times. During such times, it’s easy and very, very tempting to hunker down, conserving cash, and wait for lazy, easy times to return. But study after study shows that companies that continue to market aggressively, and pursue research into new ideas, new products, and better results for their customers make far more inroads with modest expenditures during bad times than spending far more during good times, when everyone else is competing hard. Moreover, loyalty is won when times are bad, both among consumers, and among employees. And best of all, you can often accomplish a great deal with careful planning and foresight rather than lavish expenditures. This is where strategic planning comes to the fore. The time to be thoughtfully aggressive is when your competitors are playing turtle.

9)    The Red Invaders. The emergence of a Chinese middle class not only means upward pressure on food and fuel prices, it also means a vast invasion of Chinese tourists bearing money. For those countries and regions able to attract such tourists, it means a new source of revenue, and a big shot in the arm. And, as with all ethnic groups, it also means serving them the way they want to be served in terms of language, food, and customs. To the winner go the mega-spoils.

10) Haggling returns to North American retailing. Smart retailers are recognizing that it’s no longer enough to post a sign saying “10% off” to attract consumers, but that consumers are more demanding now, and are moving away from the traditional “no haggle” approach to buying. Moreover, haggling offers two additional benefits to consumers: it’s become somewhat of a game where they can enjoy the thrill of the hunt; and it offers bragging rights when talking with their friends. As a result, haggling has been emerging in two different ways, one passive, and the other active.

The passive form of haggling is to wait for sales. You can witness this almost anywhere when consumers see an item they like in a store, and ask if it’s on sale. When they’re told that it’s not, they turn up their noses, and say they’ll wait until it is. This might be described as “temporal haggling”, where the consumer is saying, “I’ll wait until you lower the price before I buy it. And if you don’t lower it enough, I won’t buy it.” Smart stores are responding in creative ways. Some salespeople say, “No, that’s not on sale, but it will be starting next week,” which amounts to a counter-offer. A smart consumer will reply by saying, “Can you put it aside for me until then?”, implicitly offering to buy it if they do. Some salespeople say no, others say “Sure.” The net result is that store and consumer have haggled over the price to agree on a sale/purchase. Yet the smart retailer actually has an advantage in this exchange: they get to name the sale price in temporal haggling.

By comparison, in active, more traditional haggling the consumer takes the initiative, saying something like “What’s your best price on this widget?” If the salesperson replies with the sticker price, the haggle is over and the consumer leaves. If the salesperson names a price, the consumer responds dismissively, and says, “I wouldn’t pay a nickel over $X for that”, and the salesperson can choose to respond or not. This is, as I say, traditional marketplace haggling.

If a retailer wants to capitalize on the re-emergence of haggling into the North American marketplace, they need to anticipate it, and come up with a range of responses. One might be to say, “We can’t discount this item today, but it is going on sale next week. Would you like to put a deposit on it to hold it until then?” The retailer regains the initiative this way, and moves towards a close. Or better still, the retailer should look for a way to add value rather than cut price by making a counter-offer like, “No, I’m sorry, we can’t discount that item. But we can offer you a 50% discount on a matching accessory if you buy it.”

Regardless of approach, though, retailers should be prepared to return to marketplace haggling, and have a range of responses ready to deal with it. Consumers, as always, should decide what they want, and what their bottom line is in getting it.

11) Health care magic blossoms. Putting aside the issue of cost, which concerns everyone, the ability of health care to solve problems is beginning to move at computer speeds, in part because IT is increasingly being used by doctors, nurses, hospitals – and patients – to manage health care, and in part because research is increasingly being done using smart, powerful computer tools to perform research and execute treatments. Among the changes in the immediate future of health care are:

• The rapidly rising ability to repair failing hearts and minds (or at least brains) and other organs with stem cells. Stem cell treatments are starting to move out of the laboratory and into the operating room, and 2012 will see hundreds of people receiving this kind of therapy.
• Similarly, 3D printers, which have been in development for roughly 20 years, are now good enough that they are starting to be used to create replacement organs from a patient’s own tissue. This will gradually move into mainstream medicine, with replacement hearts, livers, and kidneys being at the top of the list.
• Quadriplegics will increasingly be able to interact with the world through prosthetics controlled by thought alone, either through electrodes that interpret brain wave patterns, or implanted chips which interpret specific thought-impulses.
• Retinal implants are starting to emerge that can help blind people discern light, shapes, and some objects. The implication is that we may be able to help aging boomers improve their failing eyesight as they age – one of the biggest complaints of old age!
• Health care is increasingly falling into the hands of the patient – literally. Smartphones, which are fundamentally wearable computers with all the capabilities of what used to be called “supercomputers”, can now work with Bluetooth-enabled sensors to monitor various aspects of health, from the vigor of your workout, to the health of your heart, to the level of your blood sugar. This will lead to a revolution in health management, with consumers sometimes way out in front of practitioner.
• Likewise, as patients become more and more comfortable with researching medical conditions and treatments online; they are demanding an increasing role in their own diagnosis and treatment; becoming active, important advocates for fund-raising and acceptance of treatments; and blunt critics of health care practitioners through social media and word of mouth. Smart practitioners are accepting this trend and rolling with it. Old school practitioners are resisting, but may wind up steamrolled by it.
• Crowdsourcing of tough diagnoses, and novel solutions to the medical and financial problems of health care promise to open yet another front in the health care revolution. This follows on with the success of crowdsourcing in helping leading-edge research scientists in astronomy (galaxyzoo.org) and protein research (Foldit game softwear).
• Sequencing your genome gets cheap. Sequencing the first genome cost billions of dollars and took decades to perform (culminating in the Human Genome Project). Today it costs about $1,000 (although analysis costs significantly more). Within 10 years, it will cost $100, and analysis will cost about $500 more, and will provide you a complete run-down of where your vulnerabilities lie, and what you can do to forestall future health problems. For 2012, we will see incremental advances towards that goal, with major diseases identified, and a short list of things you do – and don’t – want to do or eat prescribed. This is the true beginning of personalized medicine, and it will revolutionize health care.

12) Technology accelerates in 2012. It’s hard to know what to leave out: electronic mind-reading? Glasses that emit sounds and smells to allow you to enhance social media? The proliferating tablets and smartphones with ever-more wondrous abilities? Here’s a partial list of things I think demonstrate trends that will become increasingly important:

• 3D printers – As well as making replacement organs, 3D printers are coming into the price range of consumers, and may mean that you can buy your own desktop factory. Need a replacement screw for a door? Make it yourself. Need to duplicate a key? Ditto. See a nifty device on TV? Download the plans and make it yourself. Of course, who knows what the ink cartridges will cost.
• Near-eye monitors – These look like glasses, but are computer monitors. They’re the lineal descendents of jet fighter heads-up displays, and will revolutionize the way we use computers, particularly smartphones, but have been hampered by high costs. Prices are starting to approach luxury consumer levels, so applications will start to appear in things like immersive gaming, personal entertainment theaters, medical imaging, and augmented reality.
• Augmented reality through your smartphone – Augmented reality is overlaying information on top of the view from your Mark 1 eyeball, much as Google Street View overlays the names of shops on a photo. You’ll be able to hold up your smartphone’s camera and have your phone overlay directions, stores, infrastructure views, or whatever else might be useful to you. This gets better when you can view the results in your near-eye monitors.
• Cloud computing explodes – Owning a computer is so 2010. Cloud computing is rapidly placing the resources of today’s supercomputers in your hands for pennies a minute. One researcher used one of the commercial clouds to try to break his password to a social media website by brute force, just to see if he could do it. Using the cloud and standard code-breaking techniques he did it in minutes, and it cost him 39¢. As the tools to harness this power get more powerful and easier to use, the potential of the cloud will be adapted by more and more users.
• Siri & copycats + babbling to your smartphone – Siri is an application of the iPhone 4S that allows you to speak to your iPhone and get it to do things for you. This might be setting a count-down timer, converting milliliters to fluid ounces, finding an address and directions from your present location, or looking up a phone number (all of which I’ve done). Apple is offering this technology as a beta version now, but every Siri request goes through Apple’s servers. This means the potential exists to assess what people want to do, and come up with solutions, improving the results really quickly, making personal avatars (also called PDAs, butlers, or assistants) much more valuable in short order. And that means everyone will rush into the field. This will lead to lots of really bad copycat applications, but ultimately a revolution in how we use technology.
• Biometric passwords – Our world is becoming so full of passwords that need to be foolproof (meaning our tendency to forget them) that biometric passwords are almost inevitable, and they are beginning to appear. They will be expensive at first, but gradually retina, fingerprint, voiceprint, and other means of making sure you are you will become cheap and commonplace, and then you will become your own password, no memory required.
• Robots – Everyday robots are here, but they are clunky, expensive, or just plain cute. That’s changing very quickly, and 2012 will see more and more of them appearing in more and more places. Typically these will be commercial settings, but health care is one place where robots make sense and will be used. Rosie the Robot won’t be washing your dishes this year, but she’s coming – if you’re willing to pony up the equivalent of the price of a luxury car.

The Occupy movement is most significant not for what the protestors say, but rather that the movement is happening at all. It demonstrates significant unrest, and the greatest dissatisfaction with the capitalist system that we’ve witnessed since the fall of the Soviet Union. But where is it headed? That’s a much more worrisome question.

The fuel that powered the Vietnam war protests was the draft. There were many other issues – objections to the military-industrial complex, objections to American foreign policy, objections to the money misspent on the war, dislike and disagreement with McNamara and Johnson, even objections to war per se – but without the draft, the protests could not have been as sustained or as widespread as they were.

In the same way, the fuel that powers the Occupy movement is jobs – or rather, lack of jobs. In America, and most other developed countries, the official unemployment rate is high, but the true unemployment rate is obscenely so. In the U.S., for instance, the official rate is 9%. But if you include those who have stopped looking for work, and therefore are no longer counted in the official unemployment statistics, then add those who are underemployed, the true rate approaches 20%. And if you look at the rate for young men, particularly among minorities, it approaches 40%. There is immense frustration with the lack of opportunity, and the smug, self-righteous people who look at the protestors and sneer, “Get a job!” only reveal the vast depths of their ignorance.

It’s true there are many issues embraced by the Occupiers, but without the lack of jobs, the movement would never have developed into much of anything. Americans are not generally a jealous people. If people were prospering, the middle class was expanding, and young people were able to find jobs and start their careers, they wouldn’t really have cared what percentage of total wealth is held by the top 1% of income earners. What rankles is that the rich continue to get richer through a perceived manipulation of “the system”, while the vast majority of other people suffer economically. It leads to the belief that the game is fixed in favor of those who can afford to buy the politicians. Whether this is right or not may not matter – it’s the perception that’s important here. And that perception may be explosive.

But where is this movement going? What’s next?

The Future of Work

If the future holds more jobs, and greater prosperity for most workers, then the Occupy movement will collapse from lack of fuel, and be remembered as a strange fad that came and went, like pet rocks or hula hoops. That’s not the case, because the future of work is much bleaker than people, even most top economists realize.

There are two forces that are squeezing workers in all developed countries: foreign competition, and domestic automation. One is going to get much worse, and the other is going to get slightly better.

The one that will get slightly better, at least in manufacturing, is foreign competition. There have been headlines for decades about the offshoring of jobs. There was even a management cliché for it in the 1990s: “Emigrate, automate, or evaporate,” which meant move your factories offshore in order to take advantage of dramatically lower wages in developing countries; decrease the labor content of your products in order to reduce the advantage of cheap labor in developing countries, or go out of business. (As an aside, there’s actually a fourth option: innovate, but that’s another story.)

This happened because of the emergence of the global economy. A global marketplace implies a global labor pool. If workers in developing countries can do similar work, but at much lower wages, then the work will naturally gravitate to them, and away from workers in developed countries. This has been going on since the 1970s, and is a familiar tale. It makes headlines, and becomes the subject of learned papers by economists, and protests by industries and unions that want protection. And the offshoring of jobs will continue until there is a rough parity between those producing things offshore, using cheaper labor, and the cost of producing things at home, using more expensive labor.

One way this could happen is through wages falling in developed countries, and rising in developing countries. But wages tend to be sticky; not many people are willing to take a cut in pay. As a result, what has tended to happen instead is that workers here are let go, and their jobs disappear, even as the wages in places like China and India are, indeed, rising.

The mild good news here is that much of this adjustment has already happened. Indeed, there are a few reports of manufacturers moving production back to America as the cost of labor in China, for instance, has risen, and as governments, particularly in the southern American states, have reduced legal protections for workers, effectively lowering their cost. (Whether you view this as a good thing or not is a separate issue. Indeed, it’s a difficult issue: do we want good worker protection, but no jobs, or bad worker protection and some jobs?)

The other way for workers in developed countries to compete is through higher productivity, and many companies have survived and kept their production in America that way. Yet, even when they succeed, the number of jobs required goes down. Businesses survive, but only by shedding jobs, leaving a trail of unemployment in the wake.

This is the past and present. The future will be different.

Increased productivity comes most notably through increased automation, and we’ve all experienced that, as when we go to the gas pump, swipe our credit card, and pump our own gas, all without an attendant. But automation is about to become supercharged.

The rate of change in computing speed and cost-effectiveness is not only accelerating, but the rate of acceleration is increasing. Some technology forecasters believe that computers will increase in power by 1,000 times over the next 10 years. With this growth in computing power available at steadily cheaper prices, automation is going to accelerate dramatically, eating its way up the workplace food chain. Only this time, it’s not going to be primarily blue-collar jobs that disappear – that’s pretty well already happened – but white-collar jobs that are hard hit. Indeed, anyone who uses a contemporary computer can experience this for themselves.

With the Macintosh laptop that I’m using to write this blog, I could (if I had the talent) write a new piece of music, score it, perform it with dozens of (computerized) instruments, record it and release it for sale. I could take videos with my iPhone, download them to my laptop, edit them, add titles and special effects, add in the music that I had created, and then publish the end result on YouTube. In effect, with these two tools, a laptop computer and a smartphone, I can replace composers, performers, and an entire movie making team – and that’s using today’s technology. Very shortly, I could make an entire movie, using technology to create photo-realistic virtual actors and background scenes, dub the voices myself, then change the sound of my voice using technology, and produce an entire movie without anyone else. True, it would be a terrible movie as I know nothing about directing, editing, or acting, and not much about composing or playing musical instruments – but that’s not the point. The point is that the tools we use are becoming so powerful that high-end jobs that used to require skilled people can now be done by ordinary folk.

Likewise, computers will move into medicine, performing research using Genetic Programming, and assisting doctors to do complex diagnoses using smart computers like IBM’s Watson; performing clerical work in almost every conceivable industry, and displacing millions of white collars workers along the way; drive cars, trucks, and trains unassisted; and almost any other kind of routine work. Indeed, computer intelligences and everyday robots will move towards replacing workers in any and every kind of repetitive work, leaving only creative, innovative, entrepreneurial work – and leaving millions, or even tens of millions of people unemployed.

What Happens When Too Many People Are Unemployed?

If you look at the Arab Spring from earlier this year, it wasn’t so much a yearning for the freedom to read newspapers not approved by dictators, or the desire to vote that was the driving force that caused people to revolt, but unemployment, especially among young men – leading the inability to create a life, to feed your children, or even to be able to afford to get married and start a family – that drove the revolutions, and inspired young men to face bullets and tanks. If you look at the protests in Europe, it’s not just the anger that a lazy, luxurious way of life is being taken away from Greek citizens, but a very real fear that they won’t be able to live that drives citizens to the barricades.

Unemployment, the specter of want, and the inability to make a decent living, to have a decent life, is historically a very potent, very scary force in geopolitics, and it’s with us now. The Occupy movement is not just about fairness, but driven by the fear and anger that there is no opportunity unless you are one of the privileged class that has a job. As the number of jobs lost to automation rises, so too will the number of people who will respond to the goad of fear and anger about their future.

Worse, it’s not just about finding a job – it’s also about keeping one. Jobs appear and disappear faster than at any time in history, and someone who is a valued employee and a rising star one day can be redundant and valueless the next. A person in that position can try to retrain and find new work, but they find themselves among the multitudes of people desperately seeking work. Without the in-demand skill that got them a job in the first place, they are reduced to the same pavement-pounding, resuming-producing, faith-sapping odyssey that afflicts so many out of work people today.

I’ve seen this coming for some time. In 1993, I wrote a book called Facing the Future. In that book I wrote the following passage:

It’s an overall decline in the need for work that concerns me, brought about by the increasing capabilities and sophistication of computers.

I seem to be very much in the minority on this view, and I may be dead wrong. The conventional view is that as jobs disappear from manufacturing and clerical work, for instance, the steadily rising productivity of workers using increasingly sophisticated automation will create a new prosperity that will increase demand and create new jobs. This is certainly reasonable, because it is precisely what has happened throughout history. But where, I wonder, will the new jobs appear? The conventional view is that new services will spring up, and that higher living standards will allow people to spend money on things they could never afford before, and that much of this will be for personal and personalized services.

I can see logic in this. New services do appear. There were no aerobic instructors, for example, in my grandfather’s day. But how much personal service can we use? Moreover, generally speaking, service jobs pay less than manufacturing jobs. As for being able to buy things that we couldn’t afford before, since manufacturing will increasingly be automated the higher demand for manufactured goods won’t necessarily generate more jobs.

This is not a problem that will burst on the scene in the next five to ten years. Humans are still capable of offering a flexibility, initiative, and creativity that machines cannot duplicate. But at some point, whether it’s twenty years away or one hundred, I’m afraid that the time will come when there will be very few jobs that computers can’t do better, faster, cheaper, and more reliably than humans. As that day approaches, we will be confronted with several problems.

In the first place, we will need a new economic system. Much as it grieves me to say so, free market capitalism may be dying, for it only pays those who are part of the production process. If virtually no one is part of this process, all the fruits of production will belong to those who own the machines – a recipe for the peon-and-aristocracy patterns of Third World economies. But where will the machine-owners find their customers? People can’t be consumers unless they have money to spend. …[1]

In the intervening 18 years, I’ve seen nothing to change my mind. We are, indeed, heading towards a world of aristocrats and peons. Indeed, that is precisely what the Occupy forces are demonstrating against, only they use a slightly different terminology: the 1% and the 99%. Same thing.

So where is this leading us? If I’m right, then even if the economy and employment picks up, and mollifies the Occupy protestors and their spiritual kin, the concerns will return again and again as the long-term rates of unemployment, especially among the young, continue to rise. And that way lies revolution.

What Should We Do About This?

If we lived in Naples in 79 A.D., and saw steam pouring out of the top of Mount Vesuvius, we would try to warn the residents to flee. We are in an analogous situation. This volcano won’t erupt in the next month or next year – but as things are trending, we need to take action, and soon, or we risk precisely the kind of revolution we witnessed in the Arab Spring earlier this year.

It’s no good trying to stem the tide of automation. That smacks of the 19^th century luddites smashing mechanized looms that they felt were stealing their jobs. Moreover, it would be like trying to hold back the tide, and about as successful. It is possible that politicians, under voter pressure, will seek to ban automation and the productivity increases that automation produces in order to preserve jobs. (This is also called “featherbedding”.) All that means is that countries that do not ban automation will see their relative productivity increase, their cost structure decrease, so that the jobs will migrate from here to there rather than being lost to automation.

Instead, politicians, economists, and anyone else interested in our future prosperity and stability should be taking a serious look at how to create new, better jobs that people can do best. These will largely be entrepreneurial, I suspect, and will all be creative, and focus on innovation. This also implies a complete revamp of our education system, away from rote learning and memorization, and towards creativity and individually customized education, to enable each person to emphasize the things they are best at.

None of this will happen quickly or easily. It requires a very different view of “job creation” and a very different understanding of the future of work. The “magic of the markets” won’t solve this problem. Capitalism, left to itself, will emphasize greater productivity through automation, leading to greater profits for the owners of the machines – until profits collapse because there aren’t enough consumers to by the goods and services industry produces. Capitalism will lead to a dead end.

This is not the conventional view, and many will decry my message as “socialist”, although I’ve said nothing at all about redistributing wealth. Some will pillory me for being alarmist, but without attempting to refute my reasoning. And some will just hide their heads in the sand and say “it can’t happen here.”

To this last group, I would suggest that they tell that to Moammar Gadhafi and Hosni Mubarak. They were sure it couldn’t happen there, either.

The stock markets have fallen out of bed since President Obama signed the ludicrous debt ceiling deal. I don’t wonder about that; what I wonder is why they took so long. I was expecting stocks to fall two weeks earlier than they did. But now the question becomes: What happens next? This is actually a much deeper question than it seems, because it goes far beyond just the behavior of stock prices and markets. But let’s start with stocks.

When I started work on this blog, the S&P 500 index was at 1,119 which put it almost exactly half way between the October 4th, 2008 high of 1,565 and the March 6th, 2009 low of 667. Specifically, it was 452 points below the high, and 446 above the low, so almost exactly half way. (And if you want to look at that in percentage change terms, it’s 40.4% down from the high and 39.9% up from the low.) That would seem to imply that while there may be more risks yet in holding stocks, we may be getting through the worst, and should start compiling lists of stocks we want to buy. Indeed, since I went to virtually all cash in my personal and corporate investment accounts more than two weeks ago, I am waiting for buying opportunities, and creating just such lists.

But there’s an old stock market cliché for times like this: Never try to catch a falling knife. Don’t buy when markets are in free fall, because you’ll only wish you waited longer. Barton Biggs, a well-respected market analyst and money manager, was interviewed on Bloomberg TV, and said he had a list of great stocks that were now bargains, but that he wished he’d waited longer to buy them – and that was 150 points higher. So, that being said, what are the risks, and how will we know when the worst is over?

Well, first of all, you need to consult a properly licensed investment advisor for specific information, someone who knows your financial position, tax status, age, risk tolerance, cash flow, and all the other pieces of information that go into making a proper assessment of your investment needs. I am not that person, and this is not intended as investment advice. Here endeth the small print.

Risk management

Let’s take a step back and see if we can find some benchmarks. To do so, I want to go back to a concept that I’ve written about repeatedly in this blog, and use regularly with my consulting clients: the ratio of risk managment. What are the possible risks? And what are the potential returns? Once you’re assessed those, you’re in a better position to make decisions, rather than just guessing whether the markets will go up or down.

By my definition, risk is the cost of being wrong. So, if we invest in stocks now, or don’t invest in stocks now, what are the risks either way? Let’s start with the potential positive risks, because, unfortunately, this is a much shorter list.

Could the markets surprise us on the upside? There are three factors that drive stock prices: interest rates, corporate earnings, and investor psychology. I don’t foresee any upward pressure on interest rates unless there’s a true financial panic. Even if there were a panic, there are so many trillions of dollars invested in U.S. Treasury securities that there is nowhere else for them to go. Accordingly, absent an end-of-the-world type scenario, I believe interest rates are a neutral influence at worst, and probably slightly positive.

Next are corporate earnings, which have been surprisingly good of late. Yet, I believe the outlook for the U.S. economy – and all others that are at least partly reliant on it, which is everyone – is worse now than it was before the manufactured debt ceiling crisis. That political stunt by Tea Party fanatics shook people’s faith in the American political system, and raised doubts about the American economy that weren’t there before. As a result, more people are talking about a double-dip recession now than before, and such talk tends to become self-fulfilling. Moreover, falling stock markets tend to make people feel poorer, which makes them spend less, which slows demand, which slows the economy. All told, then, I would have to assess corporate earnings as being neutral at best from here, and possibly negative.

Finally we come to investor sentiment, which is always the hardest to get a handle on. Moreover, if the markets have a couple of high-flying up days, then psychology can change from being deeply fearful to being deeply greedy overnight. But one solid indicator of market sentiment which has been consistently good is market volatility. High volatility times, even when markets are rising, are times when there’s lots of uncertainty, which is why values seem to change overnight. The best environment for bulls is one where markets make a slow, steady advance, not ones where markets zip up, then down, then up again. And a handy index for this is the Chicago Board Options Exchange SPX Volatility Index, or VIX index (VIX:IND). This index recently reached levels unseen since April of 2009. All told, then, I would suggest that market sentiment is unsettled and nervous, which is definitely bad.

So could markets surprise us on by running away from us on the upside? There’s always that possibility, but I think the odds are pretty small that we will lose a lot by staying on the sidelines. If the market recovered to where it was in May, the S&P 500 could go back to 1360, which would mean we might miss a gain of about 22%. And that’s if the market took off so fast we couldn’t respond. So the risk of being left behind by the market is, in my view, relatively limited.

Possible Positives

Another positive development is that falling stock prices have also brought down commodity prices, notably oil. Since high oil prices act like a tax on the economy, lower oil prices clearly benefit economic growth.

And banks are generally in much better financial condition now than they were in 2007 – except those that have loaned too much to weak European sovereign credits.

Beyond these points, what might is likely to happen to the economy? Well before the phony debt crisis, the outlook for the U.S. economy was disappointing at best, with feeble growth, weak employment, and nothing on the horizon promising to change that. Now the outlook is worse, as I said, so at best we could see the economy return to that slightly depressing, feeble outlook. So, again, the potential to be surprised on the upside, or the return half of the equation, seems limited. Now let’s turn to the potential risks. Alas, here the list is much longer and more compelling.

Potential Negatives

I’m going to list the risks, and merely touch on most of them rather than go into exhaustive detail. The prospects are dreary enough without dwelling on them. I’m going to save the worst ones for last. Here are the major risks that I see now:

• Stocks go down because they go down. Markets develop a mind and momentum of their own, and while I don’t believe you should ever rely on momentum investing, it’s also clear that when investors become fearful, and especially when they panic, it’s dangerous to get in their way. In particular, investors, particularly boomers hoping to retire, were deeply shaken by what happened to their investment portfolios in 2008, and are likely to be faster to bail out on markets rather than try to ride them out. This increases volatility, which, as I’ve said, is a bad thing.

• A possible double-dip recession. There is no real reason why the U.S. economy should go back into recession. I had been expecting it to dribble along in a slow growth, jobless recovery that was disappointing. Now, though, the talk about a double-dip is, as I said, likely to become self-fulfilling. There’s no fundamental reason for it, but the phony debt ceiling crisis shook confidence, and ultimately the economy. And the markets run on confidence.

• America’s downgrade from AAA. This doesn’t help, but it is currently a split rating, with only Standard & Poor’s lowering America’s credit rating, and only on long-term debt. If the two other major agencies, being Moody’s and Fitch’s, were to follow suit, that would be an enormous negative, but that doesn’t seem to be in immediate prospect. Neither, though, is America likely to get its AAA rating back anytime soon. Canada was downgraded from AAA in 1992, and then got it back ten years later. But that was during a period of strong economic and productivity growth, and the Government of Canada, under Prime Minister Jean Chrétien and Finance Minister Paul Martin ran 10 years of budget surpluses, paying off big chunks of government indebtedness. The odds of America doing that are vanishingly small. The only reason American debt has performed as well as it has so far is because, in the words of one commentator, “It’s the best looking horse in the glue factory.”

• Weak economic growth compounding American government indebtedness. The Tea Partiers have overlooked the primary fundamental of government finance: that government revenues and expenditures are inexorably tied to economic performance. A weak economy will sap government revenues and force up expenditures, compounding deficits, and piling up debts. Slashing spending in such an environment cuts jobs, lowers economic growth, and increases deficits. This is precisely what happened in the 1930s under President Herbert Hoover. He and his counterparts in Congress kept slashing spending to try to bring the deficit under control, only to find that economic growth fell further, increasing the deficit. In response, they slashed spending even more. It became a vicious cycle, and this is still the textbook example on how a government can turn a recession into a depression. Unfortunately, right-wing politicians in America seems to be embarking on precisely the same policies now.

• Another negative that has ramifications that go far beyond stock prices is the high rates of unemployment for men and young people. We can see the results in the riots in Greece and Portugal, but now in London as well. In America, the official unemployment rate is 9.1%, but the percentage of working age (16 to 64) American men who are employed has fallen from about 85 percent in the early 1950s to under 65 percent now. Some put the actual unemployment rate of men in America at 25%, and that for young people at 45%. These numbers are hard to confirm, because unemployment surveys don’t include people who are so discouraged that they’ve given up even looking for work. Whatever the true numbers are, this is bad news economically, bad news socially, and bad for America’s future.

• The political deadlock in the American Congress. America has become steadily more polarized over the past 20 years. There have been many analyses of why this is, but I think there are two primary reasons. First, the media have discovered that it is more profitable to be biased and outraged than it is to be balanced and thoughtful. Fox News in America, and News of the World in England are or were the exemplars of this trend. And with the splintering of media caused by the Internet, people can now choose to consume only those viewpoints with which they agree. This creates the echo chamber effect, where like-minded people reinforce their own prejudices. The result is rather like being surrounded by yes-men: you become convinced that your point of view is the only valid one. This pushes people with different viewpoints farther apart, and causes them to summarily dismiss any views that don’t coincide with theirs as being obviously, even maliciously wrong.

The other reason is jerrymandering. As I’ve discussed this at length in another blog (found here), I won’t go through the arguments again. But the result is that the extremes in American politics are being over-represented, and the center is being ignored. According to The Economist newsmagazine (14 April 2011), the results are pretty stark: “On average, House Republicans have voted with their party’s majority 91% of the time and Democrats 90% of the time. The picture is very similar in the Senate.” This is making American ungovernable, as was clearly on display during the unnecessary debt crisis, and an America that cannot govern itself becomes a danger to itself and others, geopolitically as well as economically.

• Finally, the greatest immediate risks out there right now relate to the financial crisis in Europe. Greece is functionally bankrupt, and all that is left is to decide how to cope with the financial mess. The other weak members of the EU are being shunned by the credit markets with more or less justification, but the net result is a potential run on European sovereign credits. The results of this could be very much like the run on Bear Sterns or Lehman Brothers in 2008, with the same kind of knock-on consequences. Worse, this financial crisis could lead to the possible collapse of the Euro as a currency, which would endanger the survival of the EU. And that would be a very big economic (and financial) shock indeed, especially as the world’s central banks don’t have as many resources left to battle a global financial crisis.

The Costs of Being Wrong

So the cost of being too pessimistic is the potential to lose a market gain of perhaps 20-25%. The market cost of being too optimistic would be a repeat of the kind of bear market we saw following the 2008 market panic, which could be a further 40% drop. But the greatest risk is that the problems in Europe and America are compounded by policy mistakes, such as those followed by Herbert Hoover in the 1930s, or a market collapse brought about by forces that overwhelm the world’s central banks, such as the collapse of the European Union with the subsequent economic catastrophe. Either of these could produce a market drop similar to that of the 1929 to 1932 period, which was a fall of 89% would take the S&P 500 down to the vicinity of 170 points – an 85% drop from where it was when I started writing this blog. That, and the very dangerous economic fallout that would come with it, are the real risks.

So if you’re only mildly pessimistic, weigh the potential for a 25% gain against a 40% drop. If you’re really scared, weight that 25% upside against an 85% downside. Add in your assessment of the probabilities of each, and place your bets accordingly. As for me, at the moment, I’m staying on the sidelines and watching the carnage, biting my fingernails all the while.

This article was originally published in Teach magazine.

For most of the 18 years I’ve written this column, I’ve focused on how education will change. This time, I’m going to focus on why it must change, and it relates to the purposes of education.

There are two major schools of thought about the purpose of education, and for some strange reason, most people believe they are mutually exclusive. One school believes that education should primarily be devoted to the enlightenment of the individual, to equip them with the mental tools to enable them to appreciate the fine and important things of life, and to enable them to contribute to their society and the world. The other school believes that education should provide the individual with the skills they need to  get a good job and a vocation, so that they can support themselves, contribute to the economy, and enjoy the material things of life. Both are right, and they are actually mutually supportive, not mutually exclusive – but that’s a topic for another day.

For both purposes, education must change. Let’s look first at the enlightenment of the individual. The world around us is being driven largely by commercial interests. This has become such a normal part of our lives that we hardly even notice the daily bombardment of advertising, and the pervasive, subtle pressures to own something, or behave in a particular way. And there is nothing especially wrong with society because these pressures exist – this pressure has largely been responsible for the richness and luxury of our daily lives. Yet, there is more to life than just commercial offerings, and most commercial offerings are shallow, and lack deeper purpose. Moreover, commerce and society generally tends to emphasize novelty, and while, again, there’s nothing wrong with new things per se, there is much more to life than just the novel.

On their own, few people would delve deeper than today’s satisfactions – which is where education enters the picture. Education provides context, history, art, depth of understanding, and perspective that most people would not otherwise be exposed to. This is part of the traditional role of education as it fulfills part of the purpose of culture, which is the transmission of our society’s values.

But the world is changing, and at ever accelerating rates. And the shiny baubles that novelty and commerce provide are increasingly being designed to be “sticky” or addictive. If education is to capture the attention of children, and persuade them of the value of what we know, what we have, where we’ve come from, and who we are, then it must compete with the increasingly effective seductions of commercial offerings. Assuming that just because we can hold students captive for six hours a day, 180 days a year, for 12 years is enough to allow us to brainwash them into appreciating the riches or our society is, in my view, a short-sighted and foolish view. Instead, I believe that education must compete for attention, not just for enforced time, and the only way we can do that is to seduce students into a state of fascination with what the wider world has to offer. As I say when I’m invited to speak to groups of students, we adults have perpetrated a cruel hoax on you: we’ve convinced you that learning is an intolerably boring process that you have no choice but to endure, when the reality is that learning is the most fun you can have with your clothes on.

We need to change that. Today’s students are, in my view, smarter, hipper, more skeptical, and less likely to believe propaganda than any other generation in history. They know that no matter what the school system tells them, the odds of them needing, wanting, or using most of the crap we teach them is vanishingly small once they leave their formal education. And yet, there are things that they will need to know that we’re not teaching them, and there are things they would love to know if we could present them in a way that doesn’t bore than pants off them. And as far as I can see, the only way we can seduce students into loving education is if we approach that education by appealing to those things that the individual students themselves are passionate about. We have to stop teaching the curriculum, and start teaching the individual – each individual, every single individual, and teach them as individuals, with unique interests and abilities. We have to stop teaching Mr. Smith’s grade 11 English class, Ms. Phansalkar’s grade 9 geometry class, or most of the groupings that assume that 25 kids are all the same simply because that makes education simple for us (and excruciatingly boring for them). And I don’t see any way that our current education system can achieve the level of interest or seduction necessary to compete with the enthralling, but shallow, offerings of commerce and society.

Now let me turn to the vocational aspects of education. And if anything, the need for change is even more compelling here.

We are all aware that countries like China and India, plus fast gaining countries like Brazil, Mexico, Indonesia, and Malaysia, are providing enormous competition for low-level and low-skilled jobs. What is not as well known is that these same countries are aiming for the best jobs that require the highest levels of education. They will not be satisfied with low-skilled jobs that don’t pay well and offer little opportunity. This means that our students will be competing with the best in the world in almost any field. Worse, they are starting at a big disadvantage: our school days are shorter, our school years are shorter, and our society no longer has the devotion to higher education that parents in developing countries have.

Some commentators and politicians contend that the way to deal with this issue is to lengthen school years and school days, pile on the homework, and really get “back to basics.” I think this is precisely the wrong answer, because it means making our education system even more boring than it already is. Moreover, we are headed into a world where creativity and innovative thinking will be more valuable than rote learning of any depth. Indeed, what’s the point of memorizing facts if you can command them with a wave of your search engine? Understanding and context, on the other hand, are critically important. Accordingly, if our kids are to compete with smart kids from around the world, our children will be better equipped if we focus on helping them identify their peculiar talents and abilities, and then develop them.

But there’s another threat that is, perhaps, even more worrying than rising competition from smart kids abroad, and that is automation. Most people are familiar with Moore’s Law, coined (and repeatedly reframed) by Gordon Moore, one of the founders of Intel. In economic terms, Moore’s Law states that computers will double in speed, and halve in price, every 18 months. Yet, it turns out that Moore’s Law is wrong because it’s too conservative. Moore’s Law posits an exponential growth rate – which means a constant rate of change (i.e., doubling every 18 months). But computers are evolving faster than that, and not only is the rate of change accelerating, but the rate of acceleration is increasing. As a result, a rough estimate indicates that computers will become about 1,000 times faster and more cost-effective over the next 10 years. And, as we develop new, more effective tools and techniques to harness this power, it means that automation will become dramatically more powerful in the next decade.

Automation has been increasing in power for millennia, since the invention of fire and the wheel. It really started to accelerate with the advent of the Industrial Revolution in the 18th century. Now it is moving at a rate that may be beyond our comprehension.

In the past, automation has led to a steadily rising standard of living, as well as new, better paying jobs that offer more opportunity. And so it still does. However, the major difference now is that automation is changing things so fast that the skills we develop at the beginning of our careers may not be enough to allow us to make a living for more than a few years – and eventually a few months – before they become obsolete. We are being thrown out of work at ever-faster rates, and if we are to hope to continue to work, we will need to constantly upgrade our abilities.

To some extent, the effects of both of these developments – foreign competition and domestic automation – are already evident. Whereas when I and my peers left our formal educations, we had a choice of jobs available to us, today students finish a university education, and spend years looking for anything more than menial labour. Worse, the next 10 years are going to make this seem like a happy outcome. Within the next 10 years, we will face an employment crisis that will shake the foundations of our society, our political system, and our economy. And the only answer is education, and education for adults as well as young people.

But it can’t be the same old education. It has to be education that emphasizes our human talents and abilities, our creativity and our ability to improvise and innovate. Skills training in most fields, with a few exceptions, will become obsolete at faster and faster rates. We will, instead, need to fall back on those things that are uniquely human, like art, teamwork, leadership, empathy, understanding, creativity, ingenuity, and all of the deeper aspects of human life and society. Computers, robots, and cheaper competition from abroad will take everything else.

And for those who say that the way to combat these things is by protecting domestic jobs, and halting the use of automation, let me say that like King Canute, you might as well try to stop the tide from coming in. Such efforts are not only doomed to fail, they will also make it even harder for us to succeed by diverting our attention and efforts away from the real task for tomorrow’s education: helping us to blossom into self-actualization, to become the best people we can be.

Do we have the wit to see the problems that are racing towards us? And do we have the will do to something about them? Those are the questions that will determine why we need to change education.

© Copyright, IF Research, September 2010.

The next 10 years will dramatically change your life and almost everything in it. And while there are lots of things likely to change, I’d like to focus on 10 that will be of particular importance to you personally, to our society, and to the meeting planners generally.

Someone always benefits from change – and those who will benefit most will be those who prepare most successfully for what’s to come. Since I’m necessarily going to have to be brief, I would encourage you to contact me if you’d like to discuss any or all of these 10 points.

1. Everyday robots

The first thing you need to know is that we are about to experience the emergence of what might be called “everyday robots” and computer intelligences. We’ve been raised on the idea of robots, and they’ve always been just beyond the horizon, like flying cars, vacations on the moon, and the three-day workweek. We grew up with pulp fiction fantasies about what robots would be like, such as Rosie the Robot from The Jetsons, the Terminator from the governor’s mansion in California, or the classic Isaac Asimov I, Robot series of stories. But over the next 10 years, we are going to experience an increase in computing power of roughly 1000 times, and that means that that the hesitant, clumsy robots that are now appearing in laboratories will get dramatically better over the next decade, improving about as quickly as an 18 month-old toddler improves at walking. Robots will first be used with applications in the military, police, health care, and be created by hobbyists for fun. Much of the non-military development is in Japan, because they have, by many measures, the oldest population in the world, and need arms and legs to do things.

Aside from the sex trade, which seems to soak up new technologies and harness them for sexploitation, the development of robots for civilian use will start primarily in the workplace, especially in fields like health care. (I’ll deal with sex robots at a later date, because they are a real prospect.) It will take time for robots to come to households, because they will cost about as much as a car. But the business potential of another household possession in a field that may become as important as the automotive industry is going to drive development. And along with everyday robots, we will also get computer intelligences that rival human intelligence in certain, tightly defined areas. This leads to my second point.

2. Dramatic increases in productivity

Related to the rise of robots will be automation and dramatic increases in productivity, which has several implications. The first is that increased productivity will lead to cheaper goods and services, which will produce a substantial increase in your standard of living and a much higher level of wealth – if you have a job or occupation. But greater productivity also implies that companies won’t need to employ as many people, which will mean that many jobs will disappear, replaced by automation.

Traditionally, automation has led to new jobs with better wages and prospects appearing, and that will happen – but these new jobs will also require more education, more intellect, and more creativity. This means that people who don’t have appropriate skill sets will become chronically unemployed or underemployed. This could make it even harder for young people, just finishing their formal educations, to get their feet on the bottom rungs of the employment ladder.

In the meeting industry, it also means smart tools for planning your conferences and running your business. Think of having an automated assistant that can do a lot of the routine work in organizing a conference, including the routine interactions with hotels, travel agencies, printers, communicating with conferees, and so on, leaving you to do the tougher creative work, and to focus on the human, interpersonal aspects of your job

3. The ascent of women

Next is the ascent of women and different ways of doing business. The first part of this is the decline of men, as men seem to be harmed more by environmental degradation than women. Based on research that is only just starting to emerge, two to four times more boys than girls are afflicted by attention-deficit disorders and hyperactivity disorders in America. Sperm counts are dropping in many parts of the world, and testosterone levels are lower. Testicular cancer is higher in many places. And the birth rate of boys in many countries, including America and Japan, is far lower than statistical variance should allow. We don’t really know why this is happening, but researchers are theorizing that males are more vulnerable to new chemicals, such as synthetic hormones, that are making their way into the biosphere.

Meanwhile, girls have better roles models now than ever before in our society, up to, but not quite including president of the United States. More businesses are being started by women than men, and the businesses started by women are more likely to survive, so that over time, more and more businesses will be headed by women. But the clincher is that almost 60% of college and university students are women, and the ratio is even higher in most graduate fields. As a result, a steadily rising share of tomorrow’s leaders will be women, which will lead to a cultural shift. Without being too glib, I think it’s safe to say that women have a different way of thinking and acting in the world than men, and this power shift to women is going to change the way our society – and this industry – behaves.

4. The health care revolution

Point four is the health care revolution, starting with customized drugs and treatments. Herceptin is a drug used to treat breast cancer – but it is only used with patients that have two particular genetic markers. If you don’t have these two specific genetic characteristics, there’s no point in giving you Herceptin, because it won’t help you. And it’s the precursor of customized drugs. They will be dramatically more effective – and, at least initially, dramatically more expensive as well because the research costs will have to be spread over a much smaller population.

Meanwhile, decoding your personal DNA is rapidly becoming affordable. You can already get genetic tests that show whether you are susceptible to certain kinds of diseases, such as Alzheimers, ALS ( Lou Gherig’s disease), or Huntington’s. But whereas it took decades, and billions of dollars to decode the first human genome, within 10 years, having your personal genome fully decoded will cost about $1000 or less, and take a few hours, bringing it into the realm of the possible. And this cascade of data about you will, gradually, allow us not only to ascertain what diseases you need to guard against, but also which lifestyle choices, including foods, will work best for you.

And a third leg of the future of health care is the wearable computer companion to monitor your health and guard against threats. There are already smartphone applications to monitor heart rate, blood sugar, calories burned, and so on. These are going to become increasingly sophisticated, and will, over time, become dedicated to monitoring your health, heartbeat-by-heartbeat, and intervening as necessary to reduce the risks of health crises, such as heart attacks or strokes, as well as to advise you on optimal health management.

These three things, combined with electronic health records, will, over time, produce the greatest tool for health treatment and research humanity has ever had: a global system to identify health risks, and find cures or treatments for them in something approaching real time. And I fully expect that they will eventually lead to life expectancies of 120 years and more, although this development will take much more than just 10 years. Which leads me to my next point.

5. Transhumanism

Like my previous point, this is going to start over the next 10 years, but will carry on into the indefinite future as we learn more, and figure out what to do with what we know. Transhumanism is the school of thought that science and technology are going to allow us to first cope with disabilities, and then to augment and exceed our natural abilities. Some of this, such as stem cell therapies, will mean using biological mechanisms to repair our own bodies. Beyond that, transhumanism also projects that we will use artificial means to augment our abilities. It has already started with devices that help us survive. Some, like heart pacemakers, have been around for decades. Others, like brain pacemakers to prevent seizures, are relatively new. Next are prosthetics. Of course, the oldest prosthetics, like peg legs and hook hands, have been around since Disney invented pirates, but I’m talking about arms and legs controlled by thoughts and nerves. Prosthetic arms & legs will act and seem natural.

As we move towards computers that can read your intentions and interpret your thoughts, we get into interesting man-machine combinations. Eventually we will be able to choose, by an act of will, to control distant machines and mechanisms by thought. We’ll be able to use the power of computers to augment the speed with which we think, and the depth of things we can “remember.” Imagine, for instance, being able to Google something on the Internet just by thinking a query, and getting the answer either whispered into your ear, or displayed on contact lenses on your eyes that act as a computer monitor. There are already prototypes of precursors of these things, from thought-controlled wheelchairs for paraplegics, to memory glasses that can remind the forgetful who the person in front of them is. As I said, this is a brand new field, so I doubt if you’ll need to worry about the Borg just yet.

6. Critical economic uncertainties

The headlines this spring have centered on whether we’re likely to have a double-dip recession, and the financial and fiscal crises of the PIIGS of Europe (Portugal, Ireland, Italy, Greece, and Spain). These uncertainties are caused by too much debt borrowed by consumers and governments alike.

Having too much debt is like having a rowboat that’s heavily loaded – it doesn’t take much to swamp it completely, and it doesn’t have much resilience. Moreover, it takes a long time to bail out of debt, so these problems are not going to go away overnight. Accordingly, in your plans and planning, I would strongly recommend that you be prepared for repeated, periodic shocks and crises that lead to financial upheaval, and economic slowdowns or outright recessions over the next decade. Believe me, I don’t like this prospect, but I think it’s better to be prepared for shocks than to be caught by surprise by them. You need to have plans in place for dealing with such upheavals and slowdowns, or else you’ll be flattened by them.

7. Growing political and social turmoil

In addition to the potential for new crises and turmoil in the global economy and global markets, there is also the potential for increased financial and political turmoil in the developed countries. Not only is the U.S. federal government, among other nations, running up unprecedented amounts of debt, increasing its financial vulnerability, but many of America’s individual states are in a squeeze. This is happening not just because of the Great Recession, but also because they’ve been too generous with pensions and benefits to their retirees over the years. For example, by 2018, the state of Illinois will have to pay $14 billion a year for benefits for retired state employees, which is more than a third of the state’s total revenues, and could bankrupt it, much as happened to General Motors.

And in a larger sense, there are going to be growing conflicts between public sector retirees, who mostly have decent pensions, and private sector retirees, who mostly don’t yet will be paying taxes to support their civil servant neighbors. As well, there will be conflict between aging boomers, who will vote for generous Social Security payments and unlimited health care, and their children who will be paying taxes for benefits they don’t believe they will ever receive. Accordingly, the political situation in most developed countries will likely get worse – hard as that is to believe!

8. Climate change accelerates

Within 10 years, the debate on climate change will be effectively over except for those who are willfully choosing to ignore evidence. It’s already clear from changes happening in the polar regions that climate change is happening, and climatologists are astonished by how fast they are occurring. Change may come not only more rapidly than we expect, but faster than we can adapt. I suspect we’re in for a wild ride, and that will almost certainly force changes on us that we will find difficult. We will also find some changes that are helpful, such as longer growing seasons in parts of North America – particularly the northern tier of Midwestern American states and the Prairies of Canada – IF we get the right rainfall patterns, which may also change. But it’s also clear that many of the changes will be harmful to us and the way we live.

I also suspect it is going to force us to make significant changes to our lifestyles, imposing Green Economy ideals on even disbelievers. This doesn’t have to be a bad thing, because another name for “pollution” is “waste,” and by decreasing waste, we can actually increase profits. Specifically for the meeting industry, I would suggest that we need to develop a “green index” to indicate the environmental cost per participant of conferences as a means of first measuring, then pushing for improved efficiencies.

9. The energy revolution

We’ve already seen with natural gas that new technologies can revolutionize even well-established industries – but that’s not going to be enough. If you look at the long-term cost of oil over the past 150 years, you can see that, with the added demand from rapidly developing countries like China and India, coupled with the sheer volume of energy we need to add each year just to maintain our lifestyles, we will push up the price of oil at a remarkable rate – at least for the next several years, until we come up with good energy substittues.

Now, let me reassure you – we are not running out of oil, because almost ¾ of the Earth’s surface is covered in water. We haven’t discovered or exploited the vast majority of the oil under that water. But we are running out of cheap oil. The BP oil spill in the Gulf of Mexico is an example of the problems ahead. More expensive petroleum will provoke us to develop new ways of using energy more efficiently – so called “negawatts” – as well as developing new sources of energy. It’s astonishing what demand for a critical resource can do, but it’s going to take time to displace oil from the center of our energy equation.

For this industry, though, it’s also going to mean that travel is going to become more expensive. We will see more moves towards virtual meetings, more local meetings, and regional satellite meetings that combine through telecommunications into national conventions. Start thinking about, and looking for ways of stretching travel dollars, because it’s going to be a fact of life.

10. The purpose of life

When people ask the question, “What is the purpose of life?”, they are starting off in the wrong direction with an improperly formed question. This is not a question at all, but a statement: Life is purpose. Without purpose, there is no life.

But this raises a different question: What’s my purpose? And this is a question that can’t be answered by looking out there, but in here, inside yourself. I got this from a wise man, Viktor Frankl, in a book called Man’s Search for Meaning. And here’s the question he posed that you should ask yourself: “It’s not a matter of what you can expect of life, but what can life expect of you?” It may be that you think your purpose is to bring home a paycheck, and that’s certainly important. But I would urge you to stop and think about what life can expect of you, what you feel is your calling, and then be guided by this sense of purpose.

The decade ahead is going to be radically, remarkably, dangerously different than any period you’ve lived through or have experience with. And it’s going to offer opportunities that you cannot now anticipate. If you don’t have a clear sense of where you are going and why, and are not prepared for the challenges we face and the opportunities ahead, you will be devastated by what’s to come.

Someone always benefits from change. Let it be you.

Good luck, and God speed. Thank you.

by futurist Richard Worzel, C.F.A.

I’ve been a free trader all my adult life. I studied international trade in university, watched it develop with the collapse of the Bretton Woods Agreement in the early 1970s, and have seen the amazing consequences of globalization, which has lifted hundreds of millions of people out of desolate poverty. Moreover, it makes sense: free trade is merely an extension of occupational specialization, so that just as it makes sense for the cobbler to make shoes and sell them to the farmer in exchange for food, it makes sense for countries to do what they do best, and trade with each other.

Of course, freer trade (because we don’t really have free trade) has a downside. It creates winners and losers. Some folks do very well out of free trade, including consumers who get cheaper goods, plus those who are capable of competing and finding new markets. Some folks lose their jobs, as those jobs migrate to other places where the wages are lower, or there’s a natural advantage. I remember hearing one labor leader, who represented workers at GM when those workers were on strike, saying in a radio interview that “We’re not going to let workers in other countries take our jobs just because they’re willing to work for lower wages.” I thought to myself: here’s somebody who’s really out of touch with reality: why should you be able to keep a job if there’s someone else who can do it as well, but for less money? Of course, if you have the job and are losing it, you will naturally object that it’s unfair. But I can’t see as you can make a reasonable case to anyone not related to you that you are entitled to that job.

But my purpose here is not to defend free trade, but, perversely, to warn about one of its unintended consequences. The fundamental (and correct) premise of free trade is that it destroys older jobs, and creates new jobs that offer better pay and working conditions. But it does that only if workers have the ability to fill more demanding jobs that require more thought and higher levels of education. Otherwise, workers wind up competing by cutting their wages or taking poorer, less rewarding service jobs.Generally speaking, this means that free trade benefits developed countries because they usually have better levels of education than developing countries. It also benefits developing countries because less remunerative jobs migrate to countries where those jobs are not only welcome, but a distinct improvement on what those people had available before. Hence, both sides are better off.

But what happens when the students in developing countries are better educated than those in developed countries? In the past, this would have sounded nonsensical; education is expensive, and so is more likely to be available in rich countries. Yet, this pattern is changing, partly because of our own laziness, and partly because of our conviction that we are naturally superior, and hence naturally deserve higher paying jobs.

A recent column in The Economist newsmagazine, published on June 11th, 2009, and entitled “The Underworked American,” described the development of just this kind of situation. American children, the Lexington columnist said, do substantially less work – and presumably learn less – than their counterparts in Europe and Asia. Our children go to school fewer days a year – about 180 days compared to up to 220 days. Over a 12-year primary and secondary school career, this means that American children “lose out on 180 days of school, equivalent to an entire year” compared to their future competitors abroad. They also have school days that are two or more hours shorter, and far less homework. And the same is true in Canada as well, which tends to mirror the patterns of its largest trading partner.

It has been known for many years that post-secondary education in North America is the finest in the world, but that secondary and primary school education lag behind other countries, including most of the emerging Asian countries. And there are other indications that things are going wrong as well.

Indicators of trouble

The first indicator is that graduate schools largely could not function without foreign students filling their classes. In many graduate schools, including most of the best, foreign students fill the majority of spaces. Interestingly, when I recount that to American audiences, their almost knee-jerk reaction is that we should get those foreigners out of there, and make room for American students. I gently point out to them that the reason there are so many foreign grad students is that there often aren’t enough Americans to fill the classes – there aren’t enough Americans who go to the trouble to work through grad school, and those that do apply, may not be as well prepared as their foreign counterparts.

The other, and in some ways more worrying, indicator is the steady rise of cheating at the undergraduate level. I was at a party the other night, and met a very bright young women. She has a graduate degree, and has started her own business, but is finding it tough to make ends meet. This isn’t unusual: the early days of any new enterprise can be tough. What caught my attention is that she said that she could make a very good living off the Internet by writing essays for undergraduate students who are too lazy or too ignorant to write their own. And this is only one example. Anyone who wants to look can find lots of descriptions of how colleges and universities are struggling to cope with widespread cheating. In other words, while education is clearly the currency of the future, we are systematically cheating ourselves, first with inferior primary and secondary education, and then by looking for ways of ducking the hard work of post-secondary education.

“Yellow Peril”?

I was recently a panelist in a discussion about the problems of North American education on a public-affairs program called “The Agenda.” One of the panelists had written a book about the short-comings of the American education system, and his thesis was that while we are the best at the world in holding football rallies, our education is going to relegate us to second-class status (this is my summation of his work, not his). We also had panelists who had grown up in other countries, one in India, and one in China, and they both agreed that school children worked much harder there than they do here. And there was a representative from a teachers’ union, who was brought in from another city by a remote hook-up. I was there as a futurist who writes about education (I’m a columnist for Teach magazine).

After the moderator introduced the topic, and spent some time talking with the author, the gentleman from China, the woman from India, and me, asking us all what we thought, he turned to the woman from the teachers’ union. That was when things became decidedly sticky. She was most insistent that there was nothing wrong with our education system, it was the finest in the world, and that we were all preaching a racist doctrine that amounted to scaring people about the coming “Yellow Peril,” meaning a metaphoric invasion of Asians. The author and I just looked at each other in disbelief, then he commented that we weren’t talking about a yellow peril, but an intellectual peril, where we were rendering ourselves uncompetitive in a world where education standards were rising. She wasn’t having any part of it; it was all lies, foul lies, and we should be ashamed of ourselves.

At that point we ran out of time, which ended the discussion, but off-camera, the host apologized to us for the unreasonable attitude of the union representative. I took it as yet another sign confirming my concerns about education and our future.

So the bottom line is this: Free trade is good for a country and a people if they are prepared to step up to more challenging, and more rewarding, work that requires better education and deeper thought and insight. Instead, we are trying to see how little work we can do. We idolize Homer Simpson instead of the author of the Iliad, and look for short-cuts instead of digging in to see much we can learn. In the short run we can get away with this. Eventually, it will mean a long slide into (relative) poverty, with our children and grandchildren having more and more difficulty finding meaningful work.

Free trade doesn’t work for the ignorant.

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© Copyright, IF Research, June 2009.