Time to get out of The Box

Most people call it futurism.  I call it “futures analysis”, the plural indicating that there are many different possible futures.  Whatever you call it, we all do it in one form or another.  Do I get married?  Should we have children now?  Should I quit and look for a new job?  The list is endless for all of us.  And some of us do it professionally.

In analyzing and forecasting ahead, there is a need for focus or the analysis becomes so complex, it is impossible to judge.  But focus can unwittingly become tunnel vision and that is an even bigger problem.

Recently, the Boston Consulting Group published the first of a series of reports on a subject of real interest to me.  Well-written, thoughtful, and with statistics unavailable elsewhere, they discussed the simple fact that although money, goods, and services can move more quickly around the world than ever before, labor cannot.

As a result, there are “aging nations” that will face labor shortages in the next fifteen years, but there are also nations that will face growing numbers of unemployed workers.  BCG emphasizes the need to deal with this and soon or there will a high price to pay for both types of nation.  By their estimate, it may cost us as much as $10 trillion in lost GDP if not confronted.  I understand their point well and have seen this develop over the nearly five decades that I have worked in nations all over the world.

But when I was finished, I was unsatisfied. I also read many analyses that focus on something else – automation.  I am told that millions of jobs have already been lost to automation and tens of millions more will be lost during the same fifteen years.  How does this factor into the BCG analysis?

I expect BCG to tackle this question in their remaining reports in this series, but it helps make a point.  It is getting harder and harder to make recommendations for the future based on a trend that may be trumped by another trend gaining strength at the same time. And heaven help you if there is more than one.

Let me give you a much more modest example from the nation where I live as an American expatriate – Panama.  In recent months, there has been a lot of talk regarding a new canal proposed for Nicaragua, the so-called “Grand Canal”.  As someone who provides economic and investment analysis to those interested in investing in Panama, I am frequently asked if we are afraid that this canal will seriously damage the future of the Panama Canal.  The short answer is, “No.”

Given fifteen or twenty minutes, I can go through a list of serious potential problems with its execution.  The presence of some rather odd Chinese investors makes no difference at this point. There are sufficient problems in Nicaragua, regardless of who provides the money.  This is not the first time we have been through this.  In 2011, it was a Chinese proposal to build a “dry canal” (a railroad) across Colombia.  No one talks about that anymore.

However, if I am speaking with a client with patience and no time limitations, I explain the real “threat” to the Panama Canal.  A little over 40% of Panama Canal tonnage is to and from Asia and North America’s Atlantic coast, or to and from Europe and North America’s Pacific coast.  Here the Canal’s real competitor is not the route around the tip of South America.  It is the US itself.  Freight can be unloaded on either coast of the US and moved by truck to the other side of the country.  That sounds faster, so why isn’t that normal?  The problem for shippers is sometimes port congestion, but the primary problem is trucking.

There is a perennial shortage of truckers.  It costs a lot to recruit new drivers, keep them, pay costs resulting from accidents, pay for insurance and more.  The long-haul trucking system, as it is now, is hard-pressed to meet its obligations currently.  It therefore often pays to have your goods shipped through the Canal to the opposite side of the US or Canada and avoid transcontinental trucking completely.

But there is a new trend, one that has great potential impact on shipping of all kinds.

We all know about Google’s self-driving cars.  Well, rest assured that this is of great interest to trucking firms.  Removing the majority of truckers and their associated costs from the equation will dramatically reduce costs and increase the efficiency of the trucking system.  Having your truck on the road 24/7, other than maintenance, will dramatically impact both your bottom line and your pricing.

Mercedes-Benz already has proposed its first prototype of a self-driving semi. Mercedes assumes the truck will not be practical until 2025, ten years from now. Well, perhaps, but it’s impossible to predict this trend’s commercial fulfillment. In any case, 2005 was not that long ago and you know how much changed in just the next five years.

That isn’t the only line on the corporate cost spreadsheet, but it is an important one that the Panama Canal will have to deal with.

Is that all?  No, there is a second competitor coming along – 3D printing.  This new industry has amazing potential and that’s no secret. Just look what the Chinese have already done with it.

3D-printing a house is pretty impressive, but ships typically carry much smaller things. Toys for Christmas by the tens of millions is just one example of many. In the future, to be able to print your own goods, toys among them, rather than order and wait for them to be shipped to you is exciting, You will download designs from the Web and print them out at home. Until then, I expect stores to arrive in communities where we can go, make an order, and pick it up when it’s finished.

Each year, 3D printing will become more sophisticated and more useful to more people.  Like personal computers not so long ago, it may not be obvious how an individual or even a small business can profit from the technology as it is today, but tomorrow is another story and tomorrow will probably be here far sooner than many of us expect. And with it will come a challenge to every canal, every trucker, and a lot of other people who ignore it as “trivial” or “far in the future” today.

As for the folks in Nicaragua, even if the tens of billions of dollars are spent and a canal of some sort is in operation in a decade or so, it will open deeply in debt and just in time to run head on into the new competition.

Down here, I am not losing sleep worrying about the Panama Canal.  The Panama Canal Authority is one of the most impressive institutions I have ever seen in operation. They know how to compete with alternatives. And if, in the future, their contribution to the national economy begins to shrink, the nation can handle it.  Panama’s economy has been growing rapidly for more than a decade and is far more diversified than it was in 1995 or even 2005.  While the rest of the world focuses on the Canal’s expansion, the story of Panama’s diversification has been overlooked too frequently.  Panama will find its way through these changes.

But this essay is not about canals.  They just provided me with a familiar (to me) example.  I’m writing about futures analysis. Many of us grew up during the Cold War.  Those were very complex times too, but you could depend on most nations, if not all, looking to Washington and Moscow before making an important decision.  That certainly didn’t make those decades easy or simple to analyze, but at least it provided a structure and I think too many of us who remember that period have never completely recovered from its loss.  Its end was a true blessing, but it makes futures analysis much more difficult today.

So read predictions and forecasts for 2025, 2050, even 2100, and accept them as food for thought, but don’t believe them.  They are all wrong, we just don’t know how wrong yet or why.

Today, too many analysts are still warm and comfy thinking inside that simpler 20th century box. It’s so much easier than stepping outside the box, into the real world of the 21st century.

——-

This is a personal blog, more of a notebook, unadvertised and without promotion. It is where I jot down thoughts that are important to me and may potentially be used in other commentaries for general publication. I write when time and spirit allow. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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