Tag: futures

Developing Intelligence for a Complex World

THE ORACLE’S SECRETS TO PRODUCING BETTER FORESIGHT

We’ve always assumed oracles of the future got their answers from breathing mountain air or from the gods looking down. The reality is the good oracles were canny oracles that did their homework first before delivering their fateful responses. They had access to great intelligence networks to help them, and most importantly before they gave a foresight response to a tough question they purposely disturbed the dynamics of the situation using quick probes to see what information would be revealed. We can’t look at a used car and expect to know how it will run; we have to kick the tires, turn on the engine, and give the car a test ride to have any sense of the future. Good oracles understood they weren’t passive participants in how the future played out; they were active, engaged ones. Whatever they said or did could influence the final outcome. Before delivering their foresight response, which was irreversible, they probed or stimulated the complex environment to see what possible behaviors could develop.

In modern day organizations, oracles have been replaced by effective intelligence practices that focus on getting “intelligence from the trenches,” conducting as much experimentation and testing in the market as possible, and learning quickly from emergent behaviors in the market. Google and Amazon have created amazing probing or active-intelligence capabilities that should enable them to remain very competitive for the foreseeable future.

INTELLIGENCE NEEDS FOR COMPLEX ENVIRONMENTS

Real-world environments are very messy. They evolve in nonlinear ways and are largely unpredictable. Even with a computer, we barely understand how the many forces interact and behave. We can have voluminous information about a situation, but it’s always very incomplete, often inaccurate, and very hard to integrate and analyze quickly. We generally have limited insight about the individual forces shaping the situation and the situation as a whole, and only understand in retrospect why things happened. We need intelligence practices that will help us better understand the situations we’re facing, that will coax out better foresights about future threats and opportunities, and that will enable us to act effectively in response to the changing environments.

Our intelligence needs start with understanding better the dynamics of complex environments. Real-world environments are complex because many interrelated forces interact unpredictably. Change in one type of force, social or economic or physical, inevitably affects the others, but the unfolding behavior of the system cannot be predicted by understanding the individual forces or any set of force interactions. Importantly, every stakeholder in a situation is a force, playing a role and acting on the other forces.

A complex environment is simultaneously dynamic and resilient. Resilience is the capacity of the environment to absorb disturbance, to undergo change, without crossing some threshold to chaos and a different dynamic. This capacity to undergo some change without a radical change in general dynamic is defined as the resilience of the system. The more resilient the system, the more anti-fragile (a term from Nassim Nicholas Taleb, the author of The Black Swan and Antifragile: Things That Gain from Disorder) it is.

The complex social-physical system becomes unstable and chaotic when changes in the interlinked forces result in thresholds being crossed. Shocks and disturbances to a system, such as from a natural disaster, technological disruption, etc., can push a system across thresholds into a different state or dynamic, often with unwelcome surprises. An accumulation of nonlinear changes can also push a situation over thresholds. Eventually the system reconfigures into the new dynamic and state with new thresholds.

Complex environments can be defined at many levels or scales. The highest level is the Earth system, but any real world issue, like the copper commodity market, the urbanization of Southern California, the development of renewable-energy sources in Europe, or migrations in Europe, can be defined as a complex situation.

Facing complex situations creates a number of strategy and intelligence challenges for organizations.

  • First, because real world situations are interactively complex and non-linear, they are difficult to explain, let alone predict some cause and effect. A relatively minor action like publicizing a foresight of the future can create disproportionately large effects. When Elon Musk makes a market prediction, he can have a large impact. However, the same prediction for the same issue at a later time may produce a different effect.
  • Second, each situation is unique and novel. Historical analogies can provide useful insights on individual aspects of the larger issue, but the differences among even similar situations can be profound and significant. The political goals at stake, the stakeholders involved, the cultural milieu, the histories, and other dynamics are unique.
  • Third, a complex situation can’t be known, only surrounded. The organization’s understanding of the issue depends on who’s involved, and each individual will see the relationships between the forces driving the situation and their importance differently.
  • Fourth, every description of the issue points in the direction of a set of foresights. The description puts blinders on what we see as foresight. For example, if one describes bankrupt commodity producers as the result of falling demand and lower commodity prices from a weak economy, the foresight of the future will be different than if we describe bankrupt commodity producers as the result of building too much supply capacity.
  • Fifth, any stakeholder’s action, including its intelligence activities, can disturb a situation with non-linear effects.
  • Six, real-world situations have unlimited possible outcomes; there’s no fixed set of possibilities. Also, there’s no way of knowing if many of the foresight possibilities have been identified and considered.
  • Seventh, foresight ideas for an issue are better or worse, not right or wrong. The suitability of a foresight and its perceived quality will depend upon how individual stakeholders have understood the situation and what constitutes success for them. The perceived quality of a foresight can change over time; yesterday’s foresight might appear good today, but disastrous tomorrow.
  • Eighth, every foresight for a real-world situation is a ‘one-shot operation.’ The interactive dynamics of a situation are continuously creating a new situation and cannot be undone. The consequences of change are effectively irreversible.
  • Ninth, real-world situations have no ‘stopping rule’. It is impossible to say conclusively that a situation has been resolved. Work will continue on an issue until strategic leaders judge the situation is “good enough,” or until stakeholder motivations, will, or resources have been diverted or exhausted.

ORACLE SECRETS FOR COMPLEX ENVIRONMENTS

Based on these challenges, we can surmise what were the secrets of the good oracles. How did they come up with good foresight for the tough questions of the day? There were seven things.

First, good oracles did their homework before coming up with a foresight response to a tough question posed to them.

Second, good oracles had intelligence teams to assist them. An oracle must develop a superior ability to identify signals of change from the external environment and see the new possibilities for all the players. The oracle needs a team to accomplish this and the team must specialize in watching complex situations—watching non-linear dynamics, emergent behaviors, etc., identifying the key uncertainties and the ranges of possible outcomes, spotting signals of change, gathering new data, managing probes in intense environments, and developing new insights on threats and opportunities. Oracle team persons need to have an entrepreneurial mindset to operate in those fluid situations, work with the open network, and communicate their insights upward. They must be able to recognize new patterns in a changing environment, know which types of relationships within the network are crucial at specific times, and mobilize relationships in order to accomplish objectives.

Third, good oracles developed a wide network of sources in the field, a network of players well beyond traditional players and boundaries.

Fourth, good oracles recognized they’re not outside observers in unfolding dramas, but active players in those dramas. Like every other player, an oracle action—particularly its foresight response—can shape the situation’s dynamics and possible outcomes.

Fifth, before settling on a foresight response, oracles first stretched their teams to identify the full range of possible dynamics in a situation and outcomes. The teams did this by focusing their intelligence activities on the big uncertainties, developing an understanding of the conditions from which opportunities or threats could emerge, and identifying the threshold boundaries—the tipping points—beyond which the possible outcomes and dynamics would change in chaotic ways. Very often the big uncertainties would be about the various players, who could emerge, how anyone might behave, etc. But there were many other possible big uncertainties—technology innovations, the success of new products and services, and local government rules.

Sixth, oracles extensively used probes. Instructive patterns can emerge from complex dynamics, if one can disturb or probe the situation and watch the effects. Probes can be a field test of a new product, an external-stakeholder interview, a publication of a blog, the posting of something to sell on eBay, etc. The objective was to coax out information about a major uncertainty, particularly about how key players might behave, so the oracle team could develop a better foresight response. Most probes will fail to produce anything, so oracles need a portfolio of them to create the opportunities for informative patterns to emerge.

 

Finally, good oracles made most of their money from retainer services because real-world situations rarely got resolved and clients wanted timely foresight updates. In fact, clients needed the oracles’ coherence in the midst of all the change, for seeing how the situational players were learning and adjusting to the changing dynamics. So good oracles developed processes for ongoing development of their network, watching of the dynamics of a situation, and probing the situation to stimulate new intelligence, if necessary.

HIGH TECH’S RELIANCE ON PROBES

In modern day organizations, oracles have been replaced by effective intelligence practices. Twenty years ago, Richard Pascale, former McKinsey consultant and Stanford Business School professor, described in a Sloan Management Review article, “Surfing the Edge of Chaos,” a set of strategic principles for organizations operating and competing in complex ecosystems and how Royal Dutch/Shell was attempting to apply those principles. One key principle was that in a world constantly evolving in ways one can’t predict, where one has a limited ability to understand the world and shape events and outcomes, organizations succeed best not by trying to control an unpredictable environment but by constantly disturbing it. Another principle was that decentralized organizational units were best positioned to develop the intelligence and insight for responding to the changing environment that was changing often in non-linear ways. At the time of the article, Royal Dutch/Shell was implementing a new management system that would rely on “intelligence from the trenches,” involve as much experimentation and testing in the market as possible, concentrate on rapid learning, and implement continuously adapting action plans. That new management system of Royal Dutch/Shell characterizes the approach many fast-growing corporations use today.

Probes are the techniques for generating intelligence from the trenches—by making small disturbances—and conducting market experiments and tests. They are the product tests, product announcements, market experiments, and interviews designed to get stakeholder responses. Probes are the means for resolving the uncertainties about what the stakeholders might do in the future. Will customers buy this new product idea? How might regulators respond to the new product or service? How might suppliers and competitors respond? Probes can be used to reveal emergent strategies of new entrants.

Online environments have totally changed how companies conduct probes. For example, the use of online surveys and tools like Survey Monkey has transformed how consumer research is done around the world. Corporations that compete in online industries and have access to millions of online users or customers are creating significant competitive advantages for themselves through their probes. They can run many probes, quickly, for little cost and are leveraging that capability to build their new products or services. Probes are a key for leveraging big data.

A major strategy of online companies is “ship and iterate.” This is essentially a strategy that leverages probing skills to commercialize a new product or service. The company doesn’t focus on getting a perfect first product introduced online but instead they initially make available online a close-enough product and then focus on iterating quickly to get improved versions into the hands of users. That first product shipment is in effect a big probe and generates a lot of useful information even if the product fails.

Google finds some of the most important data from the product-shipment probe is the negative feedback because it’s so motivating to the product development team. Google also believes in soft launching new products—i.e., only providing minimal marketing and public relations support with the initial launch, forcing the new product to gain momentum and succeed on its own.

Amazon believes speed matters with new products or services and, when there’s uncertainty about what might happen, it just tries something and takes advantage of the opportunities stimulated by doing something first in the marketplace. Being first also attracts to your product or service the critical segment of users and customers that is strategic and risk-taking—the innovators and generates for you the first feedback information from the marketplace that no one else will have. This bias for action is a characteristic of Amazon’s culture that is focused on continually trying to improve customer experiences.

For online and software companies, it’s easy to ship a new product or version. For hardware companies, it’s a little more difficult, but cost-effective probes can still be created. Online environments have enabled for hardware companies an array of new approaches and technologies for generating and testing product and market ideas fast, at low cost, and with not-much risk. For example, one can ship the design of the hardware, or one can create a virtual model that users can play with.

Who Will Do Well After the Global Commodities Glut?

FORESIGHT

Global commodity markets are beginning to turn around, but the industry leaders could be changing. For the last three years, the global economy has been severely impacted by the oversupply of commodities and dramatic price drops. The large multinational producers have been desperately trying to survive, and if they’re fortunate position themselves strategically for the long, slow recoveries. For commodity producers with money now is the best time to negotiate future commodity-extraction agreements. Countries with low-cost reserves to license will likely have to change their terms to attract new foreign investment. Chinese producers will likely become the new global leaders in many key commodity markets. Anti-trade/anti-foreigner sentiments have been increasing around the world, and these will influence where multinationals go. With the growth of developing-country multinational producers, the trend toward increased transparency of large government commodity agreements could reverse, and corruption levels could worsen. Multinationals from developed countries will be somewhat less active and this will reduce the influence of their countries’ foreign offices around the world.

RECENT SIGNALS OF CHANGE

While commodity cycles and their effects on multinational producers and developing countries are normal, the scale of changes in the down cycles and the reversal of so many large fortunes are catching much of the world by surprise. It appears most commodity markets have passed their worst moments and are now recovering, albeit very slowly: the new cycles are beginning.

  • Many commodity supply leaders—companies with the best-paid management talent—are in serious financial trouble. Why did they get the timing of so many large capital investments wrong? Why were they expanding supply capacity after many years of demand growth, right before the crash?
    • Severe commodity downswings can occur almost overnight. Exports of copper to China in 2015 were half of what they were in 2012, when copper demand was at its peak. In 2015 the equity shares of the large Anglo-Swiss miner and trader Glencore, who has been very active in copper, fell to a sixth of what their value was in 2011.
    • The Spanish renewable energy firm Abengoa SA is struggling to avoid what could be Spain’s largest-ever corporate bankruptcy. It announced in August 2016 that its latest action was to sell five of its US ethanol plants for $357 million.
    • Petrobras is implementing a divestment plan to sell $15 billion in assets to help pay off the company’s very high debt load of $126 billion. In the spring and summer of 2016, Petrobras sold stakes in Argentina and Chile subsidiaries, a large offshore oil field to Norway’s Statoil, and petrochemical unites to Mexico’s Alpek.
  • The global economic slowdown and global commodities slump is also severely impacting an array of large services and equipment supply companies.
    • The mega ocean shippers like the Danish Maersk Line, Dutch Hapag-Lloyd, and China Bulk Shipping have 30% more capacity in the water than cargo. UK marine data provider Vessels Value says that in the five years through 2015, ship owners ordered an average of 1,450 ships annually. This year through July orders fell to 292 vessels. It will take several years before the surplus capacity is scrapped and demand for shipping increases enough. Maersk recently announced it was replacing its chief executive and was looking at splitting the company up.
    • The Union Pacific railroad in the United States suffered an 11% decline in total freight volume in the first half of 2016. Coal volume was down 21%.
    • Samsung C& T, Samsung’s construction arm, has lost at least $700 million in the Roy Hill iron-ore mine in Australia in the last two years. Unfortunately in 2013 before commodity prices began falling, Samsung C& T agreed to take the risk for cost overruns, while committing to an aggressive timeline for when the iron-ore exports would begin.
    • In July 2016, oilfield services companies Hallliburton and Schlumberger announced another round of layoffs of 5,000 employees and 8,000 employees, respectively.
    • Both GE and Honeywell reported in July 2016 disappointing overall financial results because of weak sales of equipment into the energy sector.
  • Emerging-market economies are suffering. Many African countries are in serious turmoil because of the fall in commodity prices and some lessening of support by China, Africa’s biggest trading partner.
    • As of July 2016, 97.1% of Angola’s exports and 92.2% of Nigeria’s were petroleum; about 45% of Angola’s gross domestic product and 35% of Nigeria’s have come from the petroleum sector.
    • An interesting rivalry is developing among China, India, and Japan for relationships with African countries. India and Japan are suspicious of China’s presence and leverage on the continent and they are taking steps to improve their individual positions.
  • Social unrest is increasing in many countries because of the poor economic conditions brought on by the depressed commodity markets.
    • Since the Peruvian president Mr. Humala took office in 2011, 53 people have been killed and close to 1,500 injured in social conflicts in the country, mostly related to commodity-extraction industries.
    • In Nigeria, rebels and unhappy habitants in the Niger Delta are physically attacking oil facilities and crippling the Nigerian government that desperately needs the revenue of oil exports. Their attacks have cut production by 700,000 barrels per day since 2015.
    • In today’s environment, fair elections in Africa’s democracies are difficult to hold as presidents try to cling to power. In Uganda, Congo-Brazzaville, and Burundi the presidents all won flawed elections with the opposition being violently confronted. In Zambia, the loser of the recent election is disputing the result, after a contentious election run up.
  • In a severe downturn, the lowest-cost producers take advantage of their positions as much as possible. They want to keep their operations as busy as they can, not require any worker layoffs or reduced wages, drive competitors out of business or get them to close high-cost plants, and if the opportunities are right, purchase high-quality businesses from companies desperate to sell.
    • In the world steel industry with global oversupply, China, the world’s number one steel producer, has been producing steel at a record pace. China’s first-half exports are up 9% year to year. At the same time, US Steel Corp is unprofitable, cutting thousands of jobs, and idling plants. Germany’s Thyssen-Krupp AG has held talks with Tata Steel of India and others to merge various operations to strengthen themselves. Caparo Industries out of London declared bankruptcy in 2015 for 16 of its 20 businesses.
    • Saudi Arabian Oil (Aramco) is planning an initial public offering to sell as much as 5% of the company for an estimated $100 billion in the next three years.
    • Norway’s Statoil is cutting back its planned capital spending on the giant Johan Sverdrup offshore field to approximately $30 billion from approximately $38 billion so the field remains profitable even when oil prices are low. Statoil continued to push ahead with the project two years ago even after prices had fallen because the field will contribute approximately 40% of the country’s total crude output in the 2020s.
  • In this period of industry restructuring, the international investments of Chinese companies are very important, for the first time in 200 years.
    • Chinese firms have executed about $160 billion foreign takeover deals in the first seven months of 2016, more than any full year on record.
    • In August 2016 a US panel approved state-owned ChemChina’s planned purchase of Syngenta, which supplies about one-fifth of the world’s pesticides and about 10% of soybean seeds to US farmers. If the purchase is ultimately approved by the US and EU governments, it will be China’s biggest-ever overseas deal.
    • State-run State Grid Corp. of China, the world’s largest electricity provider by revenue with $312 billion, is pursuing a takeover of CPFL Energia SA, the Brazilian electric company, for $13 billion. This might be China’s biggest investment in Brazil.
    • On August 30, 2016, Zhongwang, one of China’s biggest aluminum producers, agreed to buy US-based Aleris Corp. for $1.1 billion. Aleris makes rolled aluminum for the aerospace, automotive, and construction industries. The US military is a client for its armored vehicles. There is a glut of steel, aluminum, and other metals in the world largely caused by an oversupply by Chinese producers. Metal exports from China are facing new tariffs and other barriers around the world.
  • As of the summer of 2016, it appears energy and materials commodity prices hit bottom in 2015 and are slowly recovering. The commodity fuel (energy) index of indexmundi.com is up approximately 45% since the beginning of 2016, although it’s still 23% down from the highs of a year earlier. Noticeably, private equity firms are beginning again to invest in oil opportunities. The metals price index of indexmundi.com is up 10% for the year, but still down 15% from a year ago.
  • For the last twenty-five years, the international activities of multinational corporations have been growing rapidly and transforming the global economy. Multinational affiliate sales as a share of world GDP more than doubled from close to 25 percent in 1990 to more than 50 percent in 2014, according to the UNCTAD, World Investment Report (2015).
  • Many commodity producers are reluctant to start new ventures today, even to secure low-cost reserves. Governments facing years of economic difficulties are struggling with how much effort should they apply to save existing ventures (and the jobs), mitigate the impacts of the closed or canceled ventures, and change the incentives to attract new multinational and local investments.
    • Exxon Mobil is not continuing its involvement in a venture to build a new LNG export terminal in Alaska. The project is not forecast to be very competitive in the world. Just a year ago, the Alaska state government paid $65 million for TransCanada Corp.’s 25% share in the overall project that was expected to cost between $45 billion and $65 billion. BP and ConocoPhillips, other shareholders in the venture, are also expressing concerns about the project.
    • An article in the Wall Street Journal on August 31, 2016 about commodity mining in Indonesia highlighted the recent mining asset sales by Newmont Mining Corp. and BHP to local companies and the significant decrease in total mining exploration spending in the country since 2012. In 2012, spending on mining exploration in Indonesia was approximately $450 million and in 2015 it was about $100 million. These changes stem from the heavier government regulations of mining operations and restrictions to foreign investment that Indonesia implemented several years ago when the commodity markets were strong.
  • At a time of a global oversupply of hydrocarbon products, China is reshaping its energy supply and demand mix.
    • China Petroleum & Chemical, or Sinopec, is attempting to double domestic natural gas production in the next five years in order to reduce coal usage in the country and reduce China’s need for imported liquefied natural gas—that many investors around the world were counting on. Sinopec is counting on rapidly expanding natural gas production from shale reserves.
    • US coal exports to China have recently shrunk to almost nothing. They were almost 6 million short tons in 2011, 10 million tons in 2013, and about 300 thousand todate in 2016. Out of seven West Coast export terminals proposed in the past five years, none has opened.
  • In developed countries, wind and solar renewables are really changing the energy supply mix. Will this momentum change with lower hydrocarbon prices?
    • A key signal is that wind and solar renewables are becoming a significant energy source in Texas, the center of the US oil and gas industry. In 2001, renewables (wind, solar, and hydro) accounted for 2% of Texas energy; in 2016 they will account for 16%. One night this past Winter, nearly 50% of the power flowing into the state grid came from wind turbines in the state. Federal subsidies for renewables have been a big factor, but equally big have been the falling costs of solar and wind technology. Besides plentiful hydrocarbon resources, Texas also is rich in wind and sun.
  • While closing or selling high-cost operations, some producers are looking toward technology to help them dramatically reduce their costs. But they need a relatively strong financial balance sheet to do.
    • Shale 2.0. The technology of shale oil production is rapidly advancing despite current cost constraints. Over the last five years, production well productivity has risen more than 400%, 40% in the last year. BP PLC is pushing hard into fracking in the United States to increase its oil and gas, attempting to leverage its capabilities to apply new technologies at large scale.
    • Risk-averse large mining conglomerates, like Rio Tinto and BHP Billiton, are investing heavily in automation technologies to help them go to more remote places, dig deeper, and move minerals and metals to the market faster, including very large motorized conveyor-belt systems; supercomputers, drones with fancy remote sensors, and software for building three-dimensional maps of a mine in real time; driverless trucks and trains; and autonomous drilling systems.
    • Mining companies are investing in technology to reduce the costs of producing titanium dioxide and to make this material suitable for 3-D printing. Powdered forms of materials like titanium dioxide are melted layer by layer with a laser to create 3-D objects. The value of the global 3-D printing market is expected to grow to about $6 billion in 2016, up from about $1 billion in 2010.
  • New environmental risks from commodity operations are coming to light.
    • Recent figures indicate that around a third of the annual methane emissions in the United States can be traced to the natural gas industry. While methane doesn’t remain in the atmosphere as long as carbon dioxide (12 years compared to 500 years), it is about 25 times more potent as a cause of global warming. The Environmental Defense Fund, an American NGO that often works with industry, estimates 2-2.5% of the gas flowing trough the supply chain leaks out.

PLAUSIBLE DEVELOPMENTS IN THE NEXT FIVE YEARS

From my recent blog, Predicting Future Commodity Developments, I noted commodity markets act like complex social-physical environment systems: Most of the time the markets are relatively stable with modest increases and decreases in prices, demand changes, and supply changes around the world. But severe shocks or disturbances to the systems, such as from natural disasters and severe market disruptions can push the systems across their thresholds into different dynamics, often with unwelcome surprises. The recent large downward swings in commodity prices and demand may have pushed many commodity markets over their “stability” thresholds. We can expect in the upcoming few years more disruption and chaos, and new market dynamics to develop. Then a new “stable” market will be the norm. We should look for the signs of new market dynamics and understand them.

Chinese Companies

  • China companies will be the industrial leaders around the world in commodities. They will be the biggest, invest the most money, and generally be aggressive to capture the most market share.
  • The Chinese government will likely support Chinese companies moving abroad with various means of support to help them penetrate foreign markets and avoid trade and tariff costs.
  • In general, transparency of commercial transactions between governments and commodity producers will go down worldwide; corruption levels will increas

Producer and Country Restructurings and Bankruptcies

  • Restructuring of most of the commodity supply chains is not done, not by a long shot. Many operations/countries have just used up their cash and will have to borrow extensively to pay their bills.
  • Sovereign-wealth funds will continue to sell assets to cover national-government expenditures.
  • State-owned companies will continue to add large amounts of debt to pay for large projects that were already underway and to continue selling their high-priced reserves at a loss because prices haven’t recovered enough.
  • Some countries will stop paying on their international loans and require bailouts and restructuring plans from international monetary agencies like the International Monetary Fund
  • International loans for large commodity projects and developing countries will become more expensive.
  • US courts of law will be involved more often in the settlement of large disputes among governments, international companies operating in their countries, and NGOs representing local community interests.
  • EU authorities will attempt to impose a strong rule of law on multinational producers. A number of EU member countries will undermine EU actions to attract foreign investment to their countries and support local interests.

Developed Countries

  • Since many materials are strategic resources for a developed country, dealing with the changes in foreign ownership of commodity producers is a constant challenge because of the political firestorms that accompany them. In the future many cases will involve producers from China and Russia.
  • As the influence of the developed countries’ multinationals wanes, the influence of the developed-countries’ foreign offices/state departments will also wane. The connection points into the developing countries will be fewer.

Developing Countries

  • Many developing countries will reverse many of the foreign-ownership restrictions and contract, royalty, and tax limitations they imposed at the height of the commodity markets and offer new terms to attract foreign and domestic investment.
  • Some countries will try to maintain the tougher conditions on multinationals because of nationalist political pressures and local interests in controlling the country’s resources and spoils.

First Blog Post: Global Futures Framework

My name is Bill Ralston. This is a blog of hypotheses about the future based on emerging trends and signals of change. After many assignments developing scenarios of the future for businesses and government agencies, I get to present my views on key forces shaping the globe. I will often focus on commodities—ranging from agricultural products, to minerals and metals, to oil and gas, to fresh water—that drive economic development of emerging economies and are a major factor in the politics, economics, changing physical environment, and social priorities of developed economies. Few appreciate how dynamic Mother Earth is and how extreme the shifts in supply capacity, commodities demand, and resultant money flows can be. Economists, government leaders, and business interests continually overlook commodities’ importance and are often surprised by the wrenching turns of the markets. They simply don’t have good mental models for how commodities markets operate in our complex world and can’t appreciate the range of plausible outcomes they could be facing in both the near- and long-term futures.

In my business life I worked at Brown & Root, SRI International, and Strategic Business Insights. I started off as an engineer, helping design and build oil and gas facilities around the world. I then consulted to energy companies and civil infrastructure operators on strategy, technology, and business issues; I moved into consulting on what businesses and government agencies should do about environmental, health, and safety issues; and eventually found a role where I could integrate all my experiences: I became a corporate futurist, helping management teams develop scenarios of the future for the major issues they were facing. Throughout all of this, I was learning about decision-making under uncertainty, risk management, models of complex environments, and making projections about the future.

In this blog, I want to develop a global futures framework that will enable better insights about challenges the world faces. I want to apply this framework to a host of emerging issues and identify future plausible outcomes that businesses, governments, and societies could face. My analysis template will be (i) hypothesis about future threat or opportunity, (ii) recent signals of change, (iii) plausible outcomes in the future, (iv) implications, and (v) what to watch for in the future.

Emerging issues that are on my agenda to address include ocean-development opportunities and risks; Latin America economic-growth prospects; opening up of the Arctic; commodities dependency of emerging economies; civil infrastructure needs; global agricultural supply; petroleum in the future; climate change policies; Africa and China; Russia and the United States: the world’s largest commodity suppliers; the importance of technology innovation in commodity industries; European-nation energy strategies, etc.

Thank you for reading.