Notes From The Edge Of Tectonic Change…

What is it? A high impact change in culture, economics, politics and behavior from the micro to the macro. Multiple “power-shift” events occurring simultaneously.

Creative Destruction

Entire swaths sectors of the economy will disappear or will change so much they might as well disappear:

* America may well not be in the auto industry soon. “American car sales have dropped to an annual pace of nine million, from some 17 million in 2007. Even if sales increase considerably, that is likely to leave a lot of unneeded auto factories,” said The London Times.

* Financial services will have to be completely remade (by government?). Check "Eight Bubbles" mmap.

* Newspapers will start to vanish. Magazines are in worse shape. Books‘ channels of manufacturing, distribution, and sales are going though through upheaval. Check "Kindle" mmap.

* Broadcast media will become meaningless, replaced by digital delivery.

* Advertising will be next to feel the earthquake, after media.

* Large-scale retail will shrink and consolidate and then be transformed by a search-and-buy economy. 

* Business travel - including the convention and conference business - will take a huge hit in the financial crisis and much of it won’t come back, replaced by more efficient communications.

* Carbon polluting energy industries will shrivel, with or without govermant incetivized corruption.

* Residential and commercial real estate will have to restructure around a new capital structure. Homes will get cheaper but so much of homeowners’ equity has been wiped out in real estate and stock investments that apartments will be what’s built, when building returns. Commercial real estate had its own bubble and it will be hit with a double whammy as tenants shrink and disappear. Construction will, of course, decline.

* Health care was the one sector in this month’s employment report that showed growth. But we know that medicine, pharma, and insurance will undergo a forced restructuring.

* Computers are getting so small and cheap and open that that industry is under growing pressure. As every other device we have becomes smart and connected, the "computer" ( a physical box of switches) itself will begin to disappear.

* Universities are facing competition from each other and commercial newcomers online and have suffered huge blows to their endowments; they will have to change. We should be so lucky that elementary and secondary education will also face such pressure.

* Education is a growth opportunity but not in its current institutions. As industries are killed and turned upside-down, present and former employees will need to be retrained in technology, in the skills of starting and running a business, in entirely new skills. 

* Finally, consumer products of all sorts will have to change in the face of empowered customers and, in some cases, with competition from small competitors given the benefits of scale on platforms (see: eBay, Etsy, Amazon, et al). They will also face price pressure thanks to online comparison shopping. “prosumerism” and new retail structures.

* Government will grow but thanks to the empowered populace, it, too, will face fundamental change.

“Power-shift” - the process of transformation that accompanies radical innovation

The opening up of new markets and the organizational development from the craft shop and factory to such concerns as (“fill in the blank”) illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ... Current methods, processes, "things", must be destroyed to create the new. This always causes upheaval on ALL fronts. Microsoft, MTV, CNN, FedEx, Intel, Hewlett-Packard, Burger King all started up in this kind of "crisis"

Current Transformational Issues

The change in our society and how it is structured are both causing and necessitating change in the economy, society, politics  and industries. The crisis is bigger than it appears in the rear-view mirror. It’s more than jobs lost and companies folding. It’s a new socio-economic realty, built on a new society that we are only just beginning to recognize if not understand.

Because of these changes, it’s hard to build a business model anymore out of screwing people - since when you do, we, the screwed, can rise up and be heard and fight back and make evil too expensive much more effectively that in times past. Our interconnectedness is also what made the complex derivatives & MBS’, CDS’ etc. - the toxic assets - that triggered the financial crisis possible - but that is all the more reason why we will demand transparency, our best antidote to evil. That will change how business is run in fundamental ways.

Frameworks:

Socio-political

• Don’t be overly optimistic about the impact of technology on the future of society, although it has the most immediate effect.

• Transformation phases (pre-development, take-off, acceleration, stabilization) can provide essential insights 

• Essential change in international relations & constructs - NATO-like organizations in every corner of the world.

• Relationships will become more "bottom-up" oriented as inter-connectedness becomes pervasive.

• Applies from the "bottom-up" socially

Global Restructuring

• A new economy built on a new society that we are only just beginning to recognize if not understand
• A great “compression,” as an economy built on perceived value reconciles with actual value (ex. - derivatives.).
• Emerging Markets - China/India/Latin America - financial expansion/contraction of these nations is accelerated.
• Globalization is not simply a trend or fad but is, rather, an international system. It is the system that has replaced the old Cold War system, which replaced the old empire-based Colonialist System, and, like that Cold War System, globalization has its own rules and logic that today directly or indirectly influence the politics, environment, geopolitics and economics of virtually every country.

"Great Power" dissolution - 

Instability

I don't forecast a 1776-style revolution to spontaneously erupt globally or locally. It will happen in stages, and it will spread among the classes (over, under, sideways, down…) and will be waged in many forms … over the Internet, in town halls, on the ballot as well as at the physical/literal "barricades". 

What will be the spark that ignites it? A final straw bailout? Another tax hike? Disappearing entitlements?  Or will it be the ultimate “let them eat cake” policy that pushes people past the breaking point? Who will break first? 

• The vast middle of transformative political-socio-economic change being wrought right now by globalization's spread/speed.
• Re-tooling military role - "war among the people" - get out of a big-war mentality and focus on the reasonable scenarios ahead
• Ditch the UN - NATO-like organizations in every corner of the world.
• The former middle class that lost their jobs, 401ks, IRAs, pensions … and even their homes?

• Jobless, blue-collar, and paycheck-to-paycheck workers, their credit maxed out and heading toward homelessness?
• The young and restless with dead-end jobs or no jobs, who believe their future has been stolen and want revenge?
• The artists and intellectuals on one hand, the hardcore conservatives and impassioned patriots on the other, united in outrage at Big Brotherhood’s control of the entire socioeconomic and political system?    

One of the above? Some of the above? All of the above

I hate to say it, but- 

• Jobless, broke and nowhere to go, “Self Storage” will soon live up to the meaning of its name. Down and out, thrown onto the streets … homeless Americans will empty out storage lockers of useless junk … to store themselves. When Panic strikes, it will only be a matter of time and a question of survival before they move in. Whether on their own or with family in tow, living in concrete and steel 4x8s will be a step up from sleeping in the streets or risking a night at a homeless shelter.

• The implications of a nation in decline are already in the making. As legitimate options to earn real money dwindle, the business climate for crooks and cons of every stripe and social order to invent new scams (and bring back old ones) to fleece easy marks, will expand across the social spectrum.  Pyramid sales – termed “multi-level marketing” by the people in the business – with promises of big bucks by hitting up friends, family and strangers to buy some of what the Pyramid boss is selling, will hook flocks of hungry suckers. The informercial business will also thrive as the newly out of work and the sunk in debt toss the dice on a get rich scheme that promises a money back guarantee. 

• Like other third world nations threatened by a heavily armed criminal class, a frightened public will be locking themselves in both day and night. Surveillance equipment, gates, bars, anti-theft devices, attack dogs, attack-proof products, security guards, identity theft and theft protection … any businesses and service promising “protection” will proliferate. 

• Anti-immigration movements will intensify as many of the problems ranging from increased crime, to loss of job will be blamed (rightly or wrongly) on the illegal population. Immigration will also remain a major Campaign 2008 hot button issue. A dark horse candidate with a populist bent and a strong anti-illegals position will find a wide voter base. 

• Wage riots and street protests will escalate in size and intensity as demands for better pay and income distribution become calls to action from out-of- work and the low-paid masses. As with other nations on the skids where the police are used to protect the powers, brute force will be inflicted upon the crowds and planted shills will turn peaceful protests ugly by inciting violence. 

• As major corporations fall and chain stores break apart, ample opportunities will be available for entrepreneurs to fill the gap the big guys left behind.

• European riots over austerity measures - measures brought about by financial carelessness, that was brought about by US “nuclear umbrella” of the Cold War era. Our defense budget is so high, so they can make theirs so low… and spend it on social welfare.

• Arab Spring - may be co-opted by Muslim Brotherhood, military orgs.

• Occupy Wall Street - has an element of “astroturf” to it, but many of the protesters are sincere.

What of it?

Now we talk about the emphasis on people, not technology ... though the interlinked digital infrastructure amplifies the issues considerably. 

“First, we shape our structures .. then, they shape us.” - Me

“The goddamn internets just let any idiot find out things without having to go through an approved corporate filter of 'What Happened' “ --  Tom McHenry, circa 1998.

Frameworks: Restructuring of Society: Back in the Roosevelt Days you had at most 10 groups who could influence policy making; today there are hundreds. In this new mosaic society, we need to rethink the fundamental systems of laws. Bureaucratism: most prevalent form of power in a system. Not capitalism or socialism. The flow of information and the flow of money; both are important. Power will flow to those sectors which regulate information in a super symbolic corporation. Bureaucratic power-shifts will occur.

Dynamic Equilibria? Don't ask me to “prove” any of this - just think about it.

Power is inherent in all social systems and in all human relationships.  It is not a thing but an aspect of any and all relationships among people. Hence it is inescapable and neutral, intrinsically neither good nor bad.The 'power system' includes everyone - no one is free of it.  But one person's power loss is not always another's gain. The power system in any society is subdivided into smaller and smaller power subsystems nested within one another (my note .. some call this 'holarchy').  Feedback links these subsystems to one another, and to the larger systems of which they are part.  Individuals are embedded in many different, though related, power subsystems. The same person may be power-rich at home and power-poor at work, and so forth.

Because human relationships are constantly changing, power relationships are also in constant process. Violence, which is chiefly used to punish, is the least versatile source of power.  Wealth, which can be used to both reward and punish, and which can be converted into many other resources, is a far more flexible tool of power. Knowledge, however, is the most versatile and basic since it can help one avert challenges that might require the use of violence and wealth, and can often be used too persuade others to perform in desired ways out of perceived self-interest.  Knowledge yields the highest “quality” power. due to its inherent utility.

The relationship of classes, races, genders, professions, nations, and other social groupings are incessantly altered by shifts in population, ecology, technology, culture, and other factors.  These changes lead to conflict and translate into redistribution of power resources. Conflict is an inescapable social fact. Power struggles are not necessarily bad. Fluctuations caused by simultaneous shifts of power in different subsystems may converge to produce radical shifts of power at the level of the larger system of which they are a part.  This principle operates at all levels,. Intra-necine conflict within an individual  can tear a whole family apart, power conflict among departments can tear a company apart, power struggles among regions can tear a nation apart.

At any given moment some of the many power subsystems that comprise the larger system are in relative equilibrium, unilke others are in a far-from equilibrial condition.  Equilibrium is not necessarily a virtue. When power systems are far-from-equilibrial, sudden, seemingly bizarre shifts may occur.  This is because when a system or subsystem is highly unstable, nonlinear effects multiply.  Big power inputs may yield small results.  Small events can trigger the downfall of a regime.  A slice of burnt toast can lead to a divorce. Chance matters.  The more unstable the system, the more chance matters. Equality of power is an improbably condition.  even if it is achieved, chance will immediately produce new inequalities.  So will attempts to rectify old inequalities.

Perfect equality implies changelessness, and is not only impossible but undesirable.  In a world in which millions starve, the idea of stopping change is not only futile but immoral.  The existence of some degree of inequality is not, therefore, inherently immoral; what is immoral is a system that freezes the maldistribution of those resources that give power.  It is doubly immoral when that maldistribution is based on race, gender or other inborn traits. Knowledge is even more maldistributed than arms and wealth.  Hence a redistribution of knowledge (and especially knowledge about knowledge) is even more important than, and can lead to, a redistribution of the other main power resources. Over-concentration of power resources is dangerous.  (examples: Stalin, Hitler, and so on.  Other examples too numerous to itemize). Under-concentration of power resources is equally dangerous. The absence of strong governments in Lebanon has turned that poor nation into a synonym for anarchic violence.  scores of groups vie for power without reference to any agreed conception of law or justice or any enforceable constitutional or other restrictions.

If both over-concentration and under-concentration of power result in social horror, how much concentrated power is too much?  Is there a moral/ethical basis for judging?  The moral basis for judging whether power is over - or under-concentrated is directly related to the difference between 'socially necessary order' and 'surplus order'.