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.

Libraries are cutting edge. Schools are not. Librarians move with the changes in technology. Teachers do not. And we need to ask ourselves why that is, because we spend a lot more on our schools than on our libraries.

Now let me make the obvious amendments: Not every library and librarian rides the cutting edge of technology, and not every school is stuck in the 19^th century. But if you had to make a generalization about each of these two pillars of our culture, that would be the one to make, because it’s largely true. And this is ironic, because these two institutions should, theoretically, complement and support each other as sources of knowledge, understanding, even wisdom in our society.

Why is this so? Why have they moved in such divergent fashions when they have so much in common? Well, first of all, libraries are affected by something very like market forces. In a world where a computer may cost a few hundred dollars, and where I or almost anyone else can perform the research that we need online, without ever venturing into a reference library, and where kids and younger adults live and play in cyberspace as easily as they breathe, then what is the role of a library? When people can buy and download books into an iPad or smartphone, and carry an entire library’s worth of books in a laptop in a backpack or briefcase, what is the role of a library? When cyberspace provides places for people with like interest to congregate, discuss, and network, no matter where they live, what is the role of a library? When you can consult experts, either live or through their video, audio, and published works, from wherever you are, what is the role of a library? When traditional print media are under siege by cybermedia, and you can read any newspaper or magazine from anywhere you want, what is the role of a library?

Nobody forces you to go to a library; you go because you want something and they have it, whether for pleasure or for serious intent. As a result, libraries have to operate at the cutting edge of technology, because otherwise they will loose their relevance, and patrons will stop coming through their doors. And librarians have long since not only realized this, but embraced it, seeing in technology new, and more powerful tools that can help them to help library users.

There is no such force acting on schools. Students are required by law to go to public school (or find an acceptable and sometimes expensive or labour-intensive equivalent), so schools have an effective monopoly – which they abuse by forcing students to endure years of agonizing boredom. It is well-intentioned boredom, and possibly useful-at-times boredom, but boredom notwithstanding.

Next, for the most part, except in major cities, libraries are lightly administrated and not terribly politicized. Most community libraries have a volunteer board that steers and assists them. There is usually a head librarian who acts as an executive, but there are not layers of administration heaped on top of the basic operations. There is no “ministry of libraries”, and about the most political aspect of libraries is their funding, and whether it’s too much or not enough.

Public schools, on the other hand, are top-heavy in administrators. They have principals and vice-principals, each of whom must adhere to ever-thickening books of rules about what they can and cannot do, plus the many things they absolutely must do. Teachers have forms to fill out to convince the education bureaucrats that they are complying with the prescribed teaching plans and teaching the prescribed material. Each district has a board that administers the buildings, the staffs, the budgets, and the pedagogy. And every state or province has a secretariat or ministry, usually a very big one, to make sure that everyone else is doing just the right things at just the right moments. (And an obvious comment: clearly the sheer size of our education system, and the importance of its task require that there be administration; but private schools seem to function perfectly well with a much, much lighter load.) All of this mass of people making sure that other people are doing just the right things, and only just the right things means that change is very difficult. It is a dead weight on the progressiveness of schools.

Next, libraries don’t usually attract a lot of political attention. Those who don’t like them typically just don’t go there. They don’t argue that what’s being done in libraries is undermining our rights or our government, or spreading unhealthy lifestyles or propaganda. Schools, unfortunately, have become highly politicized, and everybody disagrees about what should be done, and how, which tends to exacerbate the paralysis.

And whereas people who don’t like libraries probably never liked them, and probably never went to them, everyone had to go to school. And everyone who went to school as a kid thinks they know what’s going on in our schools, and that it’s really pretty simple stuff that anyone could do, if they weren’t occupied doing more important things. Couple this with the widely held misperception that teachers have a cushy number, knocking off work at 3, taking extended holidays at Christmas and in the Spring, and enjoying Summers off, and it’s clear to anyone that teachers don’t work very much or very hard. Nobody complains about “librarian’s hours,” because people mostly don’t care, even when libraries are publicly funded. Of course, that this perception of teachers and teaching is mostly wrong doesn’t get much attention.

Then there’s the union issue. Librarians in big cities tend to be unionized, but with smaller community centers, this isn’t usually the case. And while there is clearly a valid and legitimate reason for teachers’ unions, they have, in the main, tended to block and fight changes in the way schools operate. They must feel threatened by such changes, although I’m not sure why. But the result is that they act like lead boots, further adding to the difficulties that prevent schools from changing.

The end result of all this is that we have one of the critically important foundations of our society and economy – our school systems – mostly stuck in the 19^th century, whereas our libraries are racing forward into the second decade of the 21^st century, and stretching towards the third.

It’s not good enough, and it needs to change. But who has the courage, the will, and the authority to change it? That may turn out to be the critical question for the 21^st century.

© Copyright, IF Research, September 2011.

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.

There’s an unusual amount of dissension among economists and other commentators about whether we’re heading towards higher inflation or devastating deflation, and whether the economy will continue to grow, or slip into a double-dip recession. This is happening because we are in uncharted waters, with few, if any, precedents to guide us.

My own view is that the American economy will continue its anemic growth in a mostly jobless recovery; that the prices of necessities, particularly food and energy, will continue to tick upwards, gnawing away at workers’ real take-home pay; and that the economy’s precarious growth could be tipped over into a renewed recession by one of several different crises. I believe, in short, that all of the scenarios described above are possible. So, how do you plan for the future, whether it’s your investment portfolio or your company’s marketing plans?

Let’s start by looking at the various different forces at work on the economy today.

Inflation

Those concerned about inflation are connecting dots and concluding that inflation or even hyperinflation are ahead of us. They see the U.S. Federal Reserve Bank (the “Fed”) pour newly-printed money into the economy via so-called quantitative easing, and they watch oil and food prices rise, and decide that one is causing the other. And since monetary inflation, caused by printing too much money, affects all prices, oil and food prices are merely harbingers of a much broader, more rampant inflation. This is not the case because these two dots aren’t, in fact, connected.

The Fed is, indeed, printing money, but it’s a kind of money with a relatively low inflation potential. Normally, the Fed, or any central bank, creates money by encouraging the banking system to create it. They do this by lowering reserve requirements, or by lower interest rates. Reserve requirements are the amount of cash that banks must hold for every dollar of money they loan out. Since this requirement is a small fraction of the loans on their books, every dollar in increased cash reserves creates many dollars loaned out and placed into the economy. Likewise, lowering interest rates makes it more attractive for corporations and individuals to borrow money, increasing the loans outstanding, which again multiplies the amount of money in the economy. This is high-impact money.

What the Fed is doing is almost literally printing money, then using it to pay the government’s bills. (There’s a bookkeeping entry where the U.S. Treasury issues bonds, then the Fed buys the bonds for cash, which the Treasury then uses to pay bills. Hence, the U.S. government borrows from itself, and prints money as a result.) But while this money winds up in the economy, the effect is only of the amount of money printed, not some multiple of that amount. This is a technical issue, but the effect is that while, yes, there is some inflationary effect from the Fed’s quantitative easing, it is nowhere near as important as the inflation hawks fear, especially in an economy where demand is weak, and there is virtually no leverage for workers to increase their wage demands.

Meanwhile, the prices of food and oil are going up because of the supply and demand for food and oil, without reference to the amount of money being created in the United States. Hence, the prices of food and oil are going up even in Japan, which is experiencing persistent deflation, not inflation. Both are global commodities, and the demand for both is being driven by the rapid expansion of the Rapidly Developing Countries (“RDCs”), like China, India, Brazil, and Indonesia. Hence, in an example I’ve used before (because it’s so compelling), China’s middle class expanded dramatically during the 40 years from 1960 to 2000, with the result that China’s food consumption tripled in forty years. As the developed world economies emerged from recession (albeit slowly), and added their demand to that of the RDCs, the demand for both rose faster than the supply, pushing prices up.

Unless the developed world slips back into recession, or the growth of the RDCs slow significantly, the prices of both food and oil will continue to move up.

Deflation

Deflation is a widespread, persistent decline in prices, and is actually more dangerous than inflation (although neither are desirable). To see this, consider what happens if you’re considering buying a new car, but believe that the price will go down if you wait a month. Chances are you and others like you will postpone your purchase. A month later, if you are proven correct, but believe that the price of the car  you want will fall further in the next month, you’re likely, again, to wait to buy the car. Hence, deflation creates a vicious, downward spiral: people postpone purchases, which lowers demand, which causes prices to fall, which cause people to postpone purchases. When entrenched, deflation can wreak havoc on an economy – as has happened with Japan. Japan has experienced almost 20 years of recession-like non-growth in part because of deflation. (The Japanese government has also made persistent policy mistakes that have prevented the economy from breaking out of this cycle.)

So, are we likely to experience the same kind of persistent, widespread declines in prices? Based on what I’ve said above, not in oil and food, but what about beyond that?  In many ways that depends on what happens to the economy. If the U.S. economy continues to grow, even weakly, then the prospect of serious deflation is remote. I could see the possibility of weakness in discretionary consumer purchases, such as TVs and consumer electronics, if employment growth remains weak. When people are hurtin’ financially, they’re less likely to splurge on a large luxury item. So let’s turn to the prospects of a renewed recession, which is the scenario where I can see widespread deflation.

Recession

There are several reasons why this recovery is weak. First, it was provoked by a severe financial debacle, and such recessions typically take longer to recover from as people feel poorer. It will take time – years – for people to rebuild their balance sheets, and meanwhile, demand will remain weak.

Next, there is no group within the economy to really stimulate demand. Most recoveries are lead by the consumer, but as I’ve just said, that’s not happening this time. Governments, notably the U.S. federal government, have largely shot their bolts, and are now more worried about repairing their balance sheets. And businesses, which are actually in pretty good financial shape as a group, see no reason to overextend themselves. In particular, businesses are not eager to take on more staff. Instead, they are either asking their current employees to work longer hours or take on additional shifts as demand slowly rises, or they are investing in increasingly sophisticated automation. The knock-on effect of this is that employment is likely to stay weak. In total, then, this is a recovery without leadership.

A longer-term problem is that all countries are going to experience a squeeze in employment growth, but it will be particularly noticeable in the developed countries. First, a global economy implies a global labor force, which means that workers in Canada or America, for instance, are competing with workers everywhere. It used to be most noticeable in low-skilled industries, but as RDCs increase the number of highly educated people they have, and as they build up more sophisticated commercial bases, they are competing in broader swaths of the global workplace, including very highly skilled areas that used to be the exclusive preserve of rich countries. Meanwhile, in an attempt to minimize the differential in labor costs, companies in developed countries are automating as quickly as they can. This is helping in that companies that might otherwise go out of business are surviving, but even when they do, it means that they do so with fewer employees. Hence the economy will grow faster than the number of jobs.

Automation is also affecting RDC economies and workers as well, but their faster rate of GDP growth is masking the effects. Still, the Chinese government worries about not creating enough jobs to maintain social stability.

But beyond economic growth and employment growth, there’s another factor that’s in play: the fragility of governments, notably because of their heavy debt loads, means that the recovery is not as robust. It also means that the recovery would be easier to derail, much as an overloaded boat is easier to sink.

This brings me to my major point: we are vulnerable to nasty surprises or shocks. If, for example, Greece defaults on it’s debts (or perhaps I should say “when” as it seems pretty inevitable to me), this could trigger a re-evaluation of all sovereign and sub-sovereign (i.e., state and local) debts. This might throw a jurisdiction like California or Illinois into the spotlight, or trigger a run on Portuguese bonds. It could, in short, trigger a panic that could produce another financial catastrophe. Only this time, governments have fewer bullets available to stop a financial stampede, and we could well see the financial collapse that we so very, very narrowly avoided in 2009.

Is this likely? Probably not, but the odds of it happening are higher than I would like. And if a scenario like that does happen, then deflation is a real threat, and you can forget about inflation because even the RDC economies will slow or go into reverse.

So what do we do now?

The highest probability is still for continued economic growth in the developed world, albeit slower than we would like, and that’s how I’m placing my bets right now. I believe that the cost of necessities will continue to rise, but that it won’t degenerate into high, widespread inflation. This is consistent with a slow growth scenario coupled with rising demand from RDCs.

But I’m also watching developments very carefully, and have an exit strategy in mind in case I don’t like the way things develop in Europe, with the foolish, almost-suicidal discussions over the U.S. federal debt ceiling, and with credit watches on shaky governments (both national and American states). I’ve been saying this for some time, and it may be that readers are getting bored with the message, but this is a time to plan for the worst, and hope for the best. I’m not sure, in the current situation, what else you can do.

© Copyright, IF Research, June 2011.

The following article was first published in Teach magazine.

A recent government publication highlighted all the marvelous things that individual teachers and school boards were doing with technology in my region. It was both uplifting, and disquieting. It was uplifting because I could see that there were entrepreneurial, creative people working in education to drag the education system into the 21st century. It was disquieting because these innovations were disjointed, unrelated to each other, and were not doing much to change the average outcomes for the vast majority of students. Indeed, the process of highlighting the projects merely underscored what could be done – but what, largely, wasn’t being done.

There has, recently, been a steadily rising chorus of voices, especially outside of the pedagogical community, commenting on how much better we could be doing with today’s education. These range from Sir Ken Robinson, a U.K. consultant, author, and iconoclast, to Why Don’t Students Like School?, a book psychologist Daniel T. Willingham, to a series in The Toronto Star by science journalist Alanna Mitchell that surveys what’s happening in education around the world. My favourite quote from The Star series is from the first article. In it, French neuroscientist Bruno della Chiesa was cited as having asked the French education minister about an international movement to link research into how the brain functions (and therefore, how people, especially children, learn best) with the field of education. The minister’s reply? “The brain? What does the brain have to do with education?”

Our education system, as I’ve said before, is based on the 19th century mass production model. This was natural. Universal education came about because the Industrial Revolution was creating factories that needed workers who were literate. Therefore, business pushed governments into creating and funding universal education to produce such workers, and it was done pretty much in the style of the factories that future workers were being trained to fill: You take 25 students (more or less) and put them in the 1st grade workstation and process them through the 1st grade curriculum. Then you move them through the 2nd grade workstation, process them through the 2nd grade curriculum, and so on. Moreover, you have them sit still and listen for six hours a day, five days a week, 180 days a year. The process is, itself, completely contrary to the natural inclination of children, with the result that we bore them to tears before they get much past grade 2 or 3.

This is changing, but very slowly, and changing primarily in superficial ways. Moreover, we are not, as a rule, using the things we know now about how the mind works, how different people learn with different strategies, how different people need different emotional and psychological needs to support optimal learning, and much more. We are, fundamentally, following an outdated model of the most effective ways to teach children.

Yet, our understanding of humans is growing with remarkable speed. We can look at brains as they function, tell whether someone is engaged or bored, identify strategies that are likely to produce superior results, and even begin to understand the relationships between genetics and environment that shape personalities, intellects, and brain function. But what we know now will pale in comparison to what we know by the time today’s grade 1 students finish their formal schooling. Moreover, not using this research would make about as much sense as medical researchers unlocking the secrets of, say, cancer, but society refusing to make use of such findings. Clearly, we want to take advantage the things we learn about how the human brain functions – and how learners can be helped to learn better, and develop better intellectual gifts.

So my question is: What needs to happen for us to adopt superior methods of education students? And who can help us as we seek to take advantage of our rapidly gathering understanding of brains, and how they learn? The answer, if you think about it, is that there are lots of things that can be done, and lots of people to do them. Let’s start at the top.

• Teachers – Teachers are the front line in education. You are the ones that have to make fine theories work in real world classrooms. Therefore, you must lead this revolution, much as doctors would have to lead a revolution in cancer treatment, not researchers. But to do this well, you need to know about the work that’s being done. Accordingly, we need two things. First, you must seek out such knowledge, particularly case studies of real students in real classrooms, and push to have it presented at conferences and PD days. And second, we, as a society, must make sure you have both the time and the resources to study new developments before asking you to implement it.

• Principals and administrators – You need to be the fomenters of change, pushing ministries and school boards to source and present such information, and making sure teachers have straightforward, effective access to it. You are the facilitators of this process, and, with the teachers, must become the champions of the things that can realistically work in the classroom. This is a tough balancing act between fine theory and real practice, but there’s no one in a better position to do it than you.

• School boards and ministries of education – It’s your job to sift through the research, find the approaches that look most promising, and make it available to schools. This means appointing people to seek out the wide varieties of research that are emerging, consult with researchers to find out which ones have been tried in real world environments, and which show the most promise. Perhaps most important, it’s vitally important that approaches be realistic, and have been tried in ordinary schools, not showcase schools with massive resources. And even new approaches that have worked elsewhere need to be introduced slowly, on a small scale, and proven before they are rolled out, willy-nilly.

• Teachers’ Colleges – The world is changing, and your job is to prepare those who want to be teachers with the latest research, an understanding of what works best in pedagogy, and how to apply it in a real world classroom. What’s even more important, you are going to have to keep changing your curriculum as new research appears. Many teachers’ colleges are doing this now, but it’s crucial that they stay abreast of what’s happening.

• Secretaries and Ministers of Education – Your job is two-fold. First, you need to take the political flak that always accompanies change, to defuse it, and to harness it into constructive dialog so that schools don’t become war zones between opposing views on high-minded pedagogical theories. And second, you need to push the system to change. Every social system resists change; stasis is easier, and people – all people – are inherently lazy. Therefore, for the good of your jurisdiction, and to secure its future, you have to make sure that change happens. Push your bureaucracy. Support their initiatives. And make everyone in the system accountable for converting new ideas into practical classroom realities. Oh, and one more thing; don’t interfere when people are doing their jobs right, no matter how politically attractive it may be to do so.

• Parents – You are not the experts on this, but you represent the users of the education system. It’s up to you to push for better education for your kids, and to work with teachers to make it happen. This means being supportive when new things are tried, but also unwilling to accept 19th century answers in a 21st century world. And here’s a clue: if you’re kids are bored, and hate school, then there’s something radically wrong with their school. Find out what the alternatives are, and start a conversation about how schools can improve.

• Voters – Change takes time, but has to start somewhere. Don’t just block change with knee-jerk reactions of “Schools were tougher in my day.” In our day, we didn’t understand 10% of how the brain works, or how students learn, that we do now. You’re paying a hefty tax bill to educate students. Make sure the education system is giving you value for money.

Our education system needs to be changed, but cautiously, and in the right directions. This is going to take sustained, careful effort, and what some might think is hopeless cooperation between the different participants in the education system. I believe we have no choice; the old models won’t work with today’s hipper, sharper, Internet-saavy kids. If we don’t change the system, today’s students will increasingly tune out the system as irrelevant, and we will lose an enormous opportunity that will benefit all of us.

© Copyright, IF Research, September 2010.

But there are two major drawbacks of in-person lecturing: it imposes a de facto geographic monopoly on education, and a one-size-fits-all mentality on teachers and students alike. Let’s look at the geographic monopoly first, and then segue into differentiated instruction for each student.

If Socrates were available to lecture (or dialog) on philosophy at a public school, but not in your area, you might have to settle for Joe Schmoe just because he happened to teach at your school. Indeed, with a few exceptions, virtually all teaching and lecturing is determined by a geographic monopoly: you’re stuck with the teachers who happen to be available. Until very recently, there have only been two ways to change that: lure the best teacher to your area, or go elsewhere to be with the teacher you want.

Having students taught by whoever is available locally may be a good thing, or it may be a bad thing, but mostly it’s a mixture. Like many people, I had a few dud teachers, a large number of good teachers, a goodly number of excellent teachers, and one life-changing teacher in my public school education. But does it have to be that way any more? Do students need to settle for the teachers available in their local schools?

15th Century technology

Of course, teachers don’t do teach based only on their own knowledge any more: they use teaching materials to supplement their talents. The classic example is the textbook, which is written by experts, and contains examples, problems, exercises, illustrations, and charts that would be well beyond most teachers’ abilities to prepare on behalf of their students in the prep time available. In this way, we are already using technology (albeit based on movable type, a 15th century technology) to buttress the capabilities of local teachers. And this has worked extremely well: the education delivered by teachers today averages out to be the best in history. I say that it “averages out” as the best in history because there have been select individuals, such as the children of royalty or the aristocracy, who have been tutored intensively by brilliant teachers that may have obtained better results. Today’s result is different: we deliver consistently high quality education to virtually everybody. It’s just that not everybody profits from it fully or equally.

But this brings me to my central point: Why should we stop with the technology of the 15th century to supplement and support the abilities of teachers? And why shouldn’t every student have available the intensive, one-on-one experience with the best possible teachers to enable their learning? We now have the ability to do just that, and the cost is declining to the point where it is competitive with traditional lecturing.

In an earlier column I wrote that the best way to teach a given subject to a specific student depended on who was doing the teaching, who was doing the learning, and the material being taught. Let’s work with that concept and do what Einstein called a gedanken (thought) experiment about what we could do if we so chose.

A thought experiment in education

We know that every individual represents a unique mix of emotional and intellectual intelligence. As well, different people learn best with different learning strategies, notably visual, auditory, or kinesthetic. In our experiment, therefore, let’s assume we can customize an approach for every student that optimizes their ability to understand and absorb a given subject matter. I’m a visual learner, for example, and have to see something before I can really absorb it. Listening doesn’t work anywhere near as well for me, which explains why I always took copious notes in any class I attended: it allowed me to see what the lecturer was saying. And I enjoy a high level of abstraction that starts with the familiar and concrete, but then draws inferences that takes me beyond the everyday into wider generalizations and hypotheses. There’s something about glimpsing distant vistas of knowledge that grabs and motivates me (which also explains why the work I do as a futurist so fascinates me). So, if I were the student, we would clearly focus on visual instruction, and lead the subject matter into abstraction, generalization, and inference.

Next, we also know, whether we acknowledge it or not, that different teachers reach different students with greater or lesser success. My daughter, for example, is a real down-to-earth person, very different from me (which made it very difficult for me to help her with her homework). She had a teacher in primary school who was known as an excellent teacher, but, like me, loved intellectual abstractions. My daughter and her teacher also had very different emotional strategies for socialization as she tends towards the intimate and personal, and he prefers to be aloof and detached. The result was that the two of them struggled to communicate, and at times had difficulty even being polite to each other. Each one felt the other was being deliberately obtuse or obstructive whereas it was clearly a case of the wrong teacher with the wrong student.

Great teachers usually find a way to reach even those students that are very different from them, yet even great teachers occasionally get students they can’t reach. Accordingly, we would want to match the student with the teacher, so that social styles, learning strategies, and the other intangible things that happen in the head and heart match up, making it easier for teachers to teach, and students to learn. Imagine, for example, having a classroom of students who just got it when you were teaching, or imagine having only teachers that really spoke to you in all of your studies. That’s the experience we would aim for with all students and all teachers in our thought experiment.

Teaching strategies should change according to the material

Next, teaching strategies should change according to the material being taught. To a certain extent, we already do this. We use photographs, illustrations, charts, aural demonstrations (e.g., singing & language pronunciation), class trips, hands-on experiments, physical examples, recordings, videos, and so forth, to convey different ideas and subjects. Some things, like woodworking, dance, drama, or tennis, can best be learned kinesthetically, by actually doing them, and that’s how we teach them. So using different teaching methods and media are the areas where we have ventured farthest in today’s education – but we can now go much farther. Today’s electronic media can offer means of conveying knowledge and, more importantly, understanding far more broadly and more potently than printed texts or class trips ever could. They are capable of being dynamic, immersive, multi-sensory, and hyper-extensible. All you need do is look dispassionately at what’s happening in computer and online gaming to see the potential for Game Based Learning in education. You don’t have to like or approve of Grand Theft Auto to see the potential for this medium.

Which brings me to actualization: How could we change what we do have into what we could have? That’s where I’ll start next time.

I’ve written about robots on several occasions before, but want to revisit the subject because the arrival of robots is imminent, and portends more than just science fiction characters come to life. First, let’s review where we are.

Robots have been around for decades, but mostly in very rudimentary forms, such as machines bolted to the floor of a car factory, or toys that roll over to you, carrying a tray. More recently, there have been what might be considered demonstration robots, such as Hitachi’s EMIEW, and Toyota’s Mobiro. As well, there are now commercial household robots, like Roomba and Scooba that, respectively, vacuum or scrub ceramic floors, as well as robots that pick up golf balls at driving ranges, and that mow lawns, both for individuals, and for industrial users. None of these have been terribly impressive -– but they weren’t really intended to be. Instead, they were stretching the possible, and testing out new techniques. The idea of a robot being able to look at the world, analyze its surroundings, and move on wheels, or walk on legs, evading obstacles, is actually a remarkably difficult problem. It’s one that computer scientists have been working on for decades – at least since I studied computer science in university in the early 1970s, but now have just about solved. Today’s robots walk on legs. The HRP-4C robot, built by Japan’s National Institute of Advanced Industrial Science and Technology, walks on two legs and has a human form. Big Dog, walks on four legs and looks like a headless mule. And the best way to view the development of robots – in all respects, not just in walking – is much as you would think of a human toddler: they are clumsy, and just learning how to walk, but they will develop quickly, now that they’ve taken their first steps.

Remember that the computers that direct robots will continue to follow Moore’s Law (“Computers will double in speed and halve in price every 18 months”), thereby becoming more powerful at exponential rates (or faster). Within a small number of years (somewhere between 2 and 5), we will see robots that can walk competently, and in a seemingly adult-human fashion and speed. And it’s not just the skill of walking that will develop: it’s robot’s overall abilities to perceive, analyze, consider, and respond. They will become progressively more and more life-like. Indeed, those who have seen the Big Dog video on YouTube have proclaimed it “creepy,” by which I infer they meant that it acts like a living thing.

There’s more, though: not only is the raw power of computing going to increase, some say by 1,000 times over the next 10 years, but there are many kinds of software that are being developed that allow computers to learn how to solve problems, and teach themselves new skills. The website shapingtomorrow.com cites an example of a Japanese robot that can create its own lab experiments, coming up with results unknown by its human creators. The combination of dramatically more powerful computers, and increasingly sophisticated software means that we are at the cusp of the emergence of robots.

And it’s not just robots: automation will get progressively more powerful and sophisticated, and, again, at exponential rates or better. This is both an opportunity and a threat. The opportunity is that increased automation means increased productivity – companies will be able to produce more, or do more, with the same number of people, or produce the same amount with fewer people. (This is, after all, what increased productivity means.) And increasing productivity, for an economy, generally means increasing wealth and affluence.

The threat is that automation is eating its way up the employment food chain, replacing workers with machines. This has been happening for centuries, starting with the Industrial Revolution, but the pace of change is now advancing at computer speeds, and the increasing sophistication of automated devices means that it’s not just grunt work jobs that are being eliminated, ringing up gas purchases, but jobs that require more, and higher, skills. Coming back to the Japanese lab robot mentioned earlier, suppose that within several years a robot can do the work of a skilled lab technician, one that trained for, say, three years, and holds a post-secondary diploma. What kind of work would such a highly trained individual look for then? She already has an undergraduate degree, plus a post-graduate diploma, and the automation replacing her will get smarter much faster than she can. What kind of future lies in store for her?

Which points to a broader question. Automation will continue to get better and smarter as far as we can foresee into the future, whereas humans are limited by the capacity of our brains and senses. When automation can do almost everything, what will there be left for humans to do? And what share of the higher standard of living will we be entitled to when we have done no work to contribute to it? Or will we become a society of owners and peasants, with the owners of the machines vastly rich, and the peasants, who do not own them, living off the crumbs of the aristocracy?

Ned Ludd, the leader of the luddite movement, had an answer: the luddites smashed the knitting machines that were producing better cloth, and faster, than a human, thereby displacing workers. Will there be a movement to smash robots and computers? That would be dangerous, because we’ve become so dependent on them, and will become more so in future.

And if we find a way to distribute the goodies that automation delivers, even to those who do not work, what then will we do with our lives? Is there life after work, or life without work?

But how soon is this likely to happen? Is 10 years wildly optimistic, or wildly pessimistic, or somewhere in between? No one knows, because there’s a lot of art involved as well as a lot of science. It’s not just enough that computer scientists can come up with the software and hardware to make these things happen. You also need the venture capital to back it, management to create a workable business plan to deliver it to market, and an education period for people to get used to the idea of robots and smart computers and get comfortable with them. If Big Dog, for example, looks “creepy” today, how long until “creepy” becomes “commonplace,” and acceptable?

Well, one of the best ways of gauging the progress of robots will be by watching the American military. The Predator unmanned (but human controlled) flying drones are now being widely used by the military, and to great (military) effect. Big Dog was developed specifically to help soldiers carry gear in terrain where wheels won’t work, pioneering a quadruped walking robot. DARPA, the Pentagon’s research arm, sponsored a prize that led to the development of the first self-driving car, a Chevy Tahoe, in a simulated urban environment, complete with traffic signals, other vehicles, and pedestrians. And you just know that DARPA has to be working on a robot soldier, to go to places too dangerous for humans. To the extent that they succeed (and it’s publicized), that will be the leading edge of the utilization of robots.

My own sense (and this is, at best, an educated guess) is that within 10 years time we will have robots in public and private places doing menial tasks, such as cleaning, washing, and general maintenance. (We already have robots like Roomba, a computer-run vacuum cleaner, so this isn’t much of a stretch.) Within 20 years, computers, robots, and automation will be seen as a serious threat to workers in many low-, medium-, and even some fairly high level jobs, and the use of computer-driven devices (whether robots or some other form of automation) will be a hotly debated political issue.

Yet, it may be that this happens just in time. In the developed world, the aging of the population is going to mean that, within 20 years’ time, there will be a lot of retired people who need help, and nowhere near as many who can give it. There are already villages in Japan that have no inhabitants under the age of 60, which is one of the reasons why Japan leads the world in robot research. It may be that the robots be the ones to do the work the boomers need done.

In other words, the robots may arrive just in time.

© Copyright, IF Research, June 2009.