How did we do? A review of Competitive Futures predictions about 2009

We take this business of telling people what’s coming pretty seriously. Competitive Futures works with leaders of large, medium and small businesses to help them interpret weak signals in trends and forecasts to help them make wiser, more profitable decisions. There are no guarantees for outcome, only a rigorous methodology that can produce insights.

For these reasons, we pride ourselves on methodology, and constantly check ourselves. The bulk of our work is based on longer-term strategic trends in society, economics, and technology. We were challenged to think much more short-term in 2009 due to the fissures in so many critical institutions that seemed on the point of collapse. Back in 2008 we made some short-term predictions about the year to follow. In the spirit of intellectual rigor - let’s look back and see how we did.

#1: The future is now. No, seriously.

We thought there would be precious little concern for long-term futures in 2009, given the potential for the collapse of central banks, food riots and alien invasions that seemed possible during the hysteria of the meltdown in late 2008. While we saw few alien invasions or mass food riots, 2009 was perhaps even more short-term-focused than the average year. The vast majority of leaders with whom we interacted were more concerned, rightfully, to seeing which institutions were going to self-destruct before thinking too much about the long-term. After all, when you see General Motors and AIG go down within weeks of each other, it’s probably not crazy to get defensive. Cash flow management trumped weak signals intelligence until the latter half of the year. Given the signs of Western governments to preserve their institutions, many executives are permitting themselves to think about the long-term.

However, it is important to recognize that this was a particularly American view in 2009. Asia Pacific and Europe seemed to view the year as at least stable, allowing them to look beyond short-term catastrophes.

#2: Global problems. No global solutions. (Yet)

We predicted that this year would test the ability of nations to create solutions to complex problems. The financial system seems to have righted itself with most industrial nations working together to make sure the whole thing doesn’t collapse due to a lack of confidence in the system. Naturally, this has been only made possible by “quantitative easing,” just printing money to cover bad debts. The long-term implications of this will be serious- note that cases like Dubai show that just because large countries can cover themselves doesn't mean the system isn't fraying at the edges. For now the world proved a willingness to keep its institutions in tact.

We were in fact predicting a bit more chaos in the global system than really happened. Europe and America are keeping their alliance intact in the Soviet-style quagmire in Afghanistan. America’s radical fiscal decisions didn’t appear to rupture ties with its Chinese counterparts where its massive industrial partnership is concerned - though this tolerance may not last forever. The Copenhagen talks seem a bit unproductive from our point of view, but at the very least it doesn’t look like a session of Taiwanese Parliament.

Frankly, the deterioration of world institutions often predates wars, so we’re glad to be wrong here. This issue is broad and will require monitoring.

#3 Barack Obama will not fix the world in 2009, but will do really boring things to improve the function of the U.S. federal government.

Obama sure hasn’t saved the world. Instead, he has shown a willingness to prop up American institutions despite the inevitability of their demise. Where the American financial system has been collapsing under the weight of its own ephemeral value proposition, Obama has offered cash bailouts. Where urbanization is increasing demands public transit, Obama’s stimulus rebuilds interstates and bails out car companies straight from the treasury. Where the impending Boomer retirement requires a structural re-understanding of the healthcare system, the bill produced by the Administration and Congress changes a few procedures without addressing the fault lines that will cost the country trillions. In fact, these early decisions may hamstring any substantive changes Obama may intend to make in later years. Given the importance of the government in shaping markets - to put it lightly - it is essential to predict the direction of policy.

As far as improving the function of the Federal Government, the word in Washington is that there is certainly more of a meritocracy in place that during the hyper-political Bush years. These improvements pale in comparison to the Administration's more sweeping decisions regarding saving automobile manufacturers at taxpayer expense.

#3: Home prices will continue to fall, because they were never worth as much as we pretended.

The Case-Shiller is down 8.9% year over year, though prices have stabilized. The American government has spent considerable money shoring up mortgage-backed securities in an effort to stop the slide of asset prices. Were the market allow to function, the Case Shiller might have slid back to reflect the actual state of the U.S. economy, the one with double-digit unemployment, and drop back to 1999 levels, in line with our flat GDP growth.

#4: Out: Organized labor. In: Communities of labor that happen to organize

We said: “Labor unions the world over will come under suspicion, rightly or wrongly, for its association with the collapse of the American automotive industry. Labor unions will be weakened for being as inflexible as their managerial counterparts.”

The General Motors bailout certainly did not make heroes of the organized labor movement. Instead, for many, unions came off as just one more institution using politicians to lock in guaranteed results in a changing economy.

None of this will preclude the formation of guilds or collective bargaining, especially groups that use transparency and social media to its fullest. This practice may be quite the opposite of today’s unions that are more similar to their corporate counterparts, lacking the agility to handle the speed of current strategic trends.

#5 In 2009, it will occur to many Americans how underfunded the pension system really is.

This didn’t make big news in 2009 except in one place - California. Their pension system could be underfunded by as much as $48 billion, a number that even makes their Governator tremble. This could be why Gregor MacDonald has been doing so much groundbreaking strategic work on state’s future.

Hat tip to Tim Powell of the The Knowledge Agency who has been following this potential black swan for years - that many pension funds are calculated for 8% returns (!) in order to stay solvent. Given the disruptive potential of the trend, this will be a major story in 2010 and beyond.

#6: America’s private healthcare system will not ask for a bailout - that’ll be 2011.

This one sure seems on track. Unfortunately.

#7: Small entrepreneurial businesses will attract more attention, good will and capital in 2009 than giant world corporations.

2009 was actually quite a year for the large, the important, the too-big-to-fail. Bonus checks for bankers came straight out of the federal treasury. General Motors got a new majority equity partner - the U.S. federal government. The tech sector began another round of mergers and acquisitions. Banks further combined and became even more unlikely to behave according to market forces.

Still, in the background, smaller companies are getting even more nimble. The barriers to entry in a variety of businesses are falling. Unemployment is rising. Talent is becoming available. Real estate in de-industrializing places is becoming cheaper. The environment is becoming fertile for startups to flourish, and not in the cash-up-front, $1000 Aeron chair, debt-soaked manner of the late 90s tech boom, but small and smart.

An aha moment came for me walking in the streets of Paris near the Paris Chamber of Commerce (CCIP) and seeing a giant banner draped across the building that read, "That's it, I'm starting my own company! But how do I get started? CCIP can help." This in a country that used to use the English phrase "one-man-show" as a semi-epithet, where the elite aspire to work in government agencies. Clearly, the need for fresh creation of business value is at a critical point.

This video from Chris Anderson explains this perfect moment for entrepreneurs with great eloquence.

You can see the wages of small, smart startups. We could be dreaming here, but Twitter actually posted a profit this year, in addition to fueling a popular revolt in the Islamic Republic of Iran. Not bad for a company that started as a few guys and some venture capital money.

#8 American cars will continue to suck.

We were being a bit snarky here. Then again, General Motors cars literally suck cash out of the federal treasury for every one you drive. Chrysler cars are awaiting the managerial brilliance of the Italians to save the company. Hmm. Not the triumphal image that the American automotive industry has projected in the past.

Ford, by contrast, refused help from the Federal Government, continued to innovate, and has been leading one of the more innovative corporate social media campaigns in the world. Their financials are at the very least stable, which in comparison to its rivals, is like winning the World Cup, the World Series and the Super Bowl simultaneously.

American cars won’t “suck” so much as the undeniable forces of competition will continue to exert pressure. If the U.S. federal government ceases its historic interventions, you may see some competitors actually cease operations, which happens from time to time in a free market.

#9 The media business will continue its inexorable charge toward chaos.

It sure did. Hundreds of newpapers disappeared, with others on the ropes. Major radio players such as Citadel are in bankruptcy. Book publishers laid off staff in mass. Businessweek went on sale for $1. (Not an issue, the whole publication.) This will likely only accelerate in the years to come as we discover the degree to which EBay and Craigslist replace critical revenue from the classifieds and online media offers content for free.

#10 Ideas, creativity, humanity, and community will trump authority, power, and control in 2009.

Overall, the leaders of large institutions did an admirable job prolonging that which will ultimately be susceptible to forces of nature. But it’s more clear that there’s no fixing these institutions - banking, real estate, media, healthcare. Neither might they collapse spectacularly in the short-term, something that wasn't clear last year at this time.

This puts people in an interesting position and a stable footing for 2010 and beyond - there will be ample opportunities for entrepreneurial, creative activities, either in small companies or large companies who think like small companies.

What do you think of these forecasts, and what they mean for 2010 - 2015?

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