2016 Uncertainties

In April of 2015, the McKinsey Global Institute published a report titled: ‘The four global forces breaking all the trends.’ I would argue that what McKinsey defined were not forces or disruptions, but new trends — which simultaneously, with related causation or not, the other “long-established patterns” ceased to remain as important or relevant has they had in the past. In other words, as these four items trended, other things stopped trending.

2016 Uncertainties: Why Uncertainties and Not Trends?

Rather than see the world in trends, I like to see the world in uncertainties that, like an atom in quantum mechanics, can have a range of probable outcomes. Uncertainties tell people what they should pay attention to, unfortunately, unlike predictions or even forecasts, they don’t suggest some future state. What they do well, however, is teach people, and empower them, to think with agility as they consider what actions they would take depending on how a particular uncertainty turns out.

Once an uncertainty collapses, it generates new uncertainties. Let’s take the Affordable Care Act, affectionately known as ObamaCare, as an example. While the Obama administration was negotiating with Congress on the bill, there was much uncertainty about what would be in it. Many parties had positions, and they attempted to influence the shape of the bill, but until it was actually voted on and signed, its features and provisions remained uncertain. The passage of the bill and the President’s signature on it, collapsed the uncertainty about details, and created a new wave of uncertainty focused on two areas, one more immediate, one more longer term. Implementation was the immediate uncertainty, and it has had a long tail: from how exchanges would work, to which states would sign on, to how the technology would work and finally to how many people would adopt the plan. All of those uncertainties unfolded within the first several months of the Act’s implementation, but the lack of data over time kept their ultimate values uncertain.

Over the long term, challenges to the Affordable Care Act threaten disruption. The millions of dollars spent on implementing the bill would be potentially lost, and millions more would need to be spent to recreate the old system, or to develop yet another new one. There is uncertainty about what a fully Republican controlled government would or could actually do to repeal the law, and a great deal of uncertainty around what would replace it should it be repealed. Should the bill remain in force, its efficacy, including cost containment and access (read affordability), remain uncertain.

The Orange Country Register has heralded 2016 as the “Year of Uncertainty.” Lloyd Omdahl, in the Grand Forks Herald says ‘The only certainty in 2016 will be uncertainty.’ In reality, this is true not just of 2016, but of any twelve month period counting twelve months from any arbitrary date. Other early year uncertainty headlines include:

• Clouds Of Uncertainty Hang Over Pak-India Talks After Pathankot Attack – Reuters
• Swift Energy bankruptcy casts uncertainty on Louisiana oilfields, NOLA.com
• 2016 election uncertainty clouds health care business climate, Crain’s Detroit Business

Businesses, governments and individuals need to be diligent in watching how the future unfolds. We all need to systematically assess, personally and professionally, what we actually know about the future, and what is uncertain. By doing so we can better develop plans that are not just robust in the face of change, as that suggests only survival — but plans that are resilient — plans that thrive and evolve positively because their struggle to align with the new conditions enhances them, makes them better. Uncertainty also forces agile thinking — rather than charging toward a goal with blinders to all but those things one is sure of, many of which may really be uncertain — planning, decision making and action informed by uncertainty spurs creativity, helps identify potential risks and may presage opportunity.

The 2016 Serious Insights Uncertainties should be seen as characters from the future to pay attention to, characters for whom the action and the dialog remains to be established. The future is a playwright that does not harken to human need for timeliness. Many of the uncertainties won’t be resolved by the time you or your organization needs to make a decision. If that is the case, make the best decision knowing what may be, and then remain vigilant and rigorous to assumptions underlying the decision. If the future unfolds differently don’t be compelled to stay the course, but embrace the empowerment to adapt to the new conditions.

2016 Uncertainties 

Serious Insights has created the following list of uncertainties, organized by STEEP categories — Social, Technological, Economic, Environmental and Political — as a starting place for monitoring the key areas that will influence the future for years, if not decades to come.

A PDF list of the uncertainty topics is available for download so it can be posted on an office wall, or door, as a reminder of the areas where we must remind ourselves each day that our decisions and our plans are subject to uncertainty. We must continuously look for the collapse of uncertainty into certainty, and the new uncertainties that inevitably arise from such a collapse.

McKinsey states in their report that “ Our intuition has been formed by a set of experiences and ideas about how things worked during a time when changes were incremental and somewhat predictable. Globalization benefited the well established and well connected, opening up new markets with relative ease. Labor markets functioned quite reliably. Resource prices fell.” But that isn’t really true. All of the changes that disrupted this fanciful State of Status Quo didn’t happen over night. The forces that would disrupt the illusion of stability were grinding away in the shadows where the data mongers feared to tread (or didn’t think they needed to). By being broadly accepting of uncertainty and learning to pay attention, we can, at minimum, not be surprised, and in the best of cases, we can anticipate sooner than others, and therefore leverage the changes to benefit of society, business, and of ourselves.

Emerging Uncertainties

Emerging uncertainties since publication (these will be incorporated into the appropriate STEEP category at a later date).

• Zika Virus and its impact on the Americas (follow this NPR page for the latest updates)
• The Constitution of the U.S. Supreme Court with the death of justice Justice Antonin Scalia the future of Supreme Court will become a major political battle regardless of how clear cut the Constitutional process. (See this NPR analysis, 5 Ways Scalia’s Death Complicates The 2016 Election, for more details).

Social Uncertainties

The vibrancy of the Sharing Economy While this topic could fall into the economic category, the sharing economy is primarily a social phenomenon because it is based on trust before financial transactions occur. Failures of trust, generated by stories of poorly executed social contracts, or eroded by efforts to align the sharing economy with more traditional economic ideas, like labor organizations, could curtail the vibrancy of this emerging phenomenon that counts Uber, Lyft and Airbnb among its winners [see Organized labor, the Gig Economy for additional perspectives].

The fate of Middle Eastern refugees How Turkey and the EU treat, adopt and assimilate Syrian and other Middle Eastern Refugees could have a big impact not just on the state of social justice in those countries, but in their ability to grow economically.

The source of entertainment Coming through, and in the trail of the Star Wars blockbuster, it appears that traditional movies can still attract an audience willing to pay again and again to see a beloved or engaging film — but the rampant piracy of Game of Thrones, and the ability to dive into the web to retrieve almost any content for free threatens entertainment industry economic models. But perhaps the most interesting aspect of entertainment uncertainty is what people will find entertaining as new distractions, most notably virtual reality gaming and streaming begins to find its way into consumer markets — the increasing propensity to consume content on mobile devices continues to make television and movies the second screen (listen to Bob Mondello’s excellent analysis of how Star Wars: The Force Awakens is far from the biggest movie of all time when it comes to the actually number of people it touches — NPR: Superlatives Notwithstanding, Even ‘The Force’ Has Its Limits).

The state of personal safety, and security at the Olympics and Euro 2016 The 2016 Olympics and Euro 2016 will be litmus tests for global safety. That is said, of course, of every Olympics since Munich, but holding the Summer games in Brasil, which is challenged by economic and political issues, will define safety for millions of attendees. France will be challenged by the echoes of recent terror attacks during Euro 2016.  If nothing happens, there will be  congratulatory sighs of relief. If, however, attacks erupt during the games, the perceived ability of any country to protect a gathering of global scale will be very deeply challenged. Continued attacks elsewhere (including shootings and other foreign and domestic terror in the U.S.) will create general uncertainty about personal safety while an intensification of attacks would impact uncertainties around economic growth, and bring into question where businesses should be located and how much travel is required. This might precipitate an increased investment in technologies like collaboration and Virtual Reality that will allow immersive, collaborative business experiences without the risks associated with travel.

The effects of populist and nationalistic movements From Donald Trumps call to build a wall between the U.S. and Mexico, along with his suggestion that the U.S. hold off on Muslim immigration, are nationalistic and populist positions that offers several uncertainties, not just about what happens should he be elected [see Questions of who will run the United States], but how those positions end up in party platforms, and ultimately as policy should any Republican candidate get elected. Bernie Sanders is also towing populist positions on the Left, such as universal health care and education for all. The Refugee crisis in Europe may also be fueling the the rise of Neo-Nazi movements and other nationalistic phenomenon. The recent re-release of Hitler’s Mein Kampf generated over three times as many orders as the print run (see Reuters ‘Demand for reprint of Hitler’s ‘Mein Kampf’ overwhelms German publisher’ and NBC New York: Adolf Hitler’s ‘Mein Kampf’ Sells Out After Week on German Bookshelves), and electronic copies have been high on download lists for years (see ABC news ‘Hitler’s ‘Mein Kampf’ Surges in E-Book Sales’).

The nature of trust in technology Between anti-drone technology [see The impact of drone technology] and the fear of job displacement by robots and artificial intelligence [see The intrusion of artificial intelligence], along with the more existential threats of AI, the trust that is so easily given over to technology could be facing retrenchment. Software bugs will also degrade trust depending on their frequency and degree of economic disruption, social impact or threat to human safety [see The efficacy of an Internet of Things]. A shift away from trust in technology would create uncertainty in the future growth of technology as an economic driver, but it could also generate new, more human-based approaches, creating perhaps, social innovations that leverage population growth to solve issues technology doesn’t address well like violence, human trafficking, drug and alcohol abuse, education deficiencies and global relationship building.

The impact of civil dialog and civil unrest Technology has changed the visibility of the circumstances behind police actions, often reinforcing negative perceptions with actual evidence. The “black lives matter” movement will face a strategic point where it must answer how to transform protest into change — and what form that transformative action will take. The increasing inequity of pay, displacement of workers with technological solutions and outsourced labor, and the need to redefine value in the emerging 21st Century economy will put continued strain on society as it weighs the balance between civil dialog and civil unrest.

Technological Uncertainties

The impact of drone technology is being met by anti-drone technology. But it is an extreme case of uncertainty to worry about the safety of a device that so few own. That it is a worry at all, makes it a significant uncertainty for those in the drone market. The more mundane uncertainty is found in the drone economy itself, and if there will be enough demand to transform drones into devices of economic transformation, or if it will remain within the purview of hobbyists (see Popular Mechanics: The Anti-Drone Business Is About to Take Off).

The significance of Virtual Reality to life and work As The Oculus division of Facebook announced availability of its Rift headset, HTC and Samsung, along with dozens of other hopeful VR vendors descended on Las Vegas for CES 2016, which was hyped as the show that would start the VR onslaught. While VR was easy to find at the show, it isn’t yet easy to buy beyond some basic headsets that deliver mobile phone VR experiences. The technology world waits with rapt attention to see if VR will turn into just a new way to run games and deliver consumer content, or if it will be a social and business phenomenon that disrupts consumer social apps like Twitter and Snapchat in favor of streaming VR — in business a new uncertainty has arisen about the fate of traditional computing as VR offers a richer, more immersive capability than even the most screen-intensive personal workspace. VR could challenge incumbent computing powers by offering another way into computing that doesn’t require Microsoft Windows, Apple OS X, Android or even a browser.

The privatization of space With improving fortunes and technological achievements for Space X, Orbital Sciences, RSC Energia and Blue Origin, and continued investment by firms like Virgin Galactic and Starchaser Industries, the privatization of space is well underway, but many uncertainties remain, including safety, mission and economic viability. Then of course, there is the bigger question, “if we successfully commercialize space, what economic opportunities will be created, what new social phenomenon will emerge — will new solutions to Earth-bound issues be discovered — if so, in what areas?”

The unleashing of self-driving cars Safety, insurance and legislation all play into uncertainties about the future of self-driving cars, not to mention the propensity of drivers who want to not only enjoy the experience, but to control it.

The master of the Internet platform Facebook and Google have become the backbone of the Internet, along with apps like Twitter, Snapchat and Pinterest — but with emerging technology like Virtual Reality, do they remain the right metaphors for interaction. Both are investing in VR, but transitions create risk, opportunities, and most of all, uncertainty. We simply don’t know enough about VR’s impact to imagine an immersive net. And even if VR doesn’t become the short-term disruptor, there is no guarantee that the platforms of today will be the platforms of tomorrow (remember AOL, MySpace and FourSquare) creating uncertainty about long-term advertising and marketing investments.

The false steps and triumphs of Big Data Security breaches are not the only uncertainty driver for Big Data [also see ‘The legacy of cyber terror’]. At some point, people are going to start asking how the algorithms using data come up with their insights, recommendations and actions, and that’s going to expose the lack of understanding behind many services, not to mention, force governments and for-profits to perhaps disclose just how much they know about people, and how they use that data. The more the actual data behind Big Data gets revealed, the more people may ask  just what businesses and governments know, how they know it, how they use it and how they protect it. If 2016 exposes errors in logic that may well precipitate legal investigations that but Big Data in the spotlight. The increasing amount of information gathered via the Internet of Things may also add to consumer concerns about how intimate the data is that exists about them, and how much control, or not, they have over that data. This could result in social or political movements related to privacy and data control.

The efficacy of an Internet of Things  IoT is a good marketing term, but it isn’t a reality, and its biggest uncertainty is if it will become one or not. Things connected to the Internet, sure (Gartner estimates 6.4B of them by end of 2016), but the protocols and user interfaces remain a mess. Another uncertainty is the security of these systems, as well as the insurance implications for both the efficacy of self-monitored security solutions, but also the liability for home hacking. IoT also plays a huge roll in technologies like driverless cars (see Computerworld:Google’s driverless cars still need a human driver), and the recent spat of software bugs that have taken down service providers (see NY Times: Nest Thermostat Glitch Leaves Users in the Cold).

The legacy of cyber terror Will Cyberterrorist take down the Internet, or just continue to erode trust? Is there so much momentum that people will continue to use the Internet regardless of increasing risks? The combination of data breaches and the exposure of personal information such as the one in the Ashely Madison breach (see CIO: Ashley Madison breach shows hackers may be getting personal) and even hacks against firms whose job it is to protect information (see thehackernews: Hacking Team: We’re Victim of a Criminal Cyber Attack) raise the question if there some tipping point that makes e-commerce too risky, and what that will mean for retail.

The intrusion of artificial intelligence 2015 was a year that big names took a big bite out of AI hype, but it didn’t seem to slow development. Facebook’s Marc Zuckerberg has announced he is writing his own AI assistant. The AI of current systems is pretty minor compared to visions of real cognitively competitive machines, but AI is getting very good within limited domains threatening some job markets which already increasingly rely on software automation. The uncertainty isn’t if a computer will become an overlord of humanity, but if in 2016 some algorithms will get smart enough to do the job you apply but a small part of your brain to perform.

The ultimate roll-out of robots Robots remain a branch of AI in the academic world because they will need reasoning and sensing to move from remote controlled and human assisted, to be fully autonomous. Many robots in limited domains, such as welding on a production line, do run without human intervention until they fail or require reprogramming — but the future isn’t stationary industrial robots, it is, perhaps, autonomous robots that are self-deterministic.  As robots gain in intelligence, trust and capability, how does economy absorb workers displaced by the continued injection of robots?

How deep the dip into the Deep Web and the Darknet With all that is being written about the deep web and the Darknet neither are so dark anymore as they are murky. The role these parallel webs and nets place in social movements, economic shifts and terrorist activities will  impinge on perceptions about data collection and the safety of using Internet connected technology. This will create uncertainty about the source of trust. Perhaps these places less trusted by government and business will prove to be where citizens should look for emergent models of personal information protection.

Economic Uncertainties

The rate of interest rate rise Will interest rates remain low, leading to the continuation of the Zero-rate liquidity trap, or will some other factor force central banks to rapidly increase rates. This isn’t an isolated uncertainty, but a general symptom of other economic maladies. Slow-downs in China and other emerging economies, along with potential issues with Europe, may restrain banks from executing even modest rate increases. How far and how fast remain the issue (see CNBC: Uncertain liftoff as short-term interest rates start to rise).

The rise of alternative currencies Although Bitcoin has suffered some setbacks, it, along with dozens of other alternative currencies, offer the increasingly digital economy new ways to exchange value for goods and services. These currencies have generated other new technologies, that offer greater security than the opaque world of private banks and finance. A good example is the distributed and tamper proof transaction database technology known as a blockchain, which holds the public ledger for bitcoin, which might well offer new transaction models beyond alternative currencies. The adoption of this technology creates uncertainties about how organizations compete on transparency.

The price of oil over a barrel? The low price of oil suggests uncertainties about growth, as well as economic models. If sustainable energy is the goal, is the price of oil still a good gauge of the kind of growth, or sustainability, the worlds is looking for out of meetings like 2015 United Nations Climate Change Conference held in Paris? If the price of oil remains depressed, what does it mean for environmental targets and new energy technologies [see ‘State of sustainable energy investments in the face of cheap oil’ in Environmental uncertainties]. The lifting of sanctions against Iran is likely to exacerbate the global oil glut in the near term. How the global oil powers deal with cheap oil, from stockpiling to curtailing production, is itself highly uncertain. The other uncertainty is the potential for a return to recession amid insolvencies in the energy sector (see WSJ: Oil Plunge Sparks Bankruptcy Concerns).

Growth of the pot economy Will the continued liberalization of marijuana growth, sales and consumption move into more states, and will cross-state trade become a reality? How will criminality be handled in an increasingly uneven system of laws and enforcement profiles across states and countries.

Organized labor and the Gig Economy The “Gig Economy” threatens to make work a continuous activity and deprive workers of long-held rights because they never land long enough to be classified as employees. For some, this proves ideal, for others, it is just a way to survive. What will happen to incomes, long-term industrial and high-technology knowledge, and labor organization in the Gig Economy? The Gig Economy, and its component business models like outsourcing, outtasking and continent staffing will continued reshape the relationship between workers and employers. Will attempts, like those with Uber-drivers, to organize, curtail innovation and stagnate the growth potential for ambitious members of the Gig Economy? The U.S. Supreme Court is scheduled to hear Friedrichs v. the California Teachers Association in 2016, which raises uncertainties about the continued power of unions to compel members to pay dues which could significantly weaken public-employee unions (see Huffington Post: This Supreme Court Case Could Significantly Weaken Teachers Unions).

The state of the Chinese economy Growth has slowed, which has created a number of uncertainties, including how China will react to urbanization, how it will drive productivity, manage the need for labor mobility and deal with wage reductions. Will these factors lead to a negative spiral in confidence? And if growth continues to slow, how will China’s economic doldrums effect other economies. How will the shift be distributed among China’s population? Will the early 2016 stock market sell offs continue to drive down markets, or will positive developments outside of China distract from China’s restructuring?

The health of the European economy The emerging market is landing on Europe’s doorstep, but it is uncertain if Europe will embrace it or hold it at arms length. The influx of refugees can be taxing, but if economic and social integration is handled well, it can also mean a huge economic windfall for aging Europe. The influx of younger people can help revitalize innovation simply by presenting new, more global perspectives. Following several terror attacks, rising nationalism and xenophobia could negatively impact the benefits of accepting and integrating refugees as well as threaten the principals of the European Union. The British referendum on its continued participation in the European Union also casts doubt on the future. Uncertainty also exists about Germany’s continued ability to lead.

The wealth of the middle class What will come of the U.S. middle class? Will it continue to suffer from wage erosion and therefore, loose its economic and political power, or will it, as promised by many U.S. presidential candidates, find a new way to thrive in the 21st Century? And what of China and its growing middle class. What social movements will arise from newfound wealth, what political realities will they face? Will the Chinese middle class be pressured to “redistribute” their newfound wealth as Chinese growth slows? Will the Indian middle class continue to grow, and will it influence the politics of inclusion, growth and organization within the Indian political structure. Other middle class growth areas include Mexico and Brasil. The “middle class” in China and Mexico and India, however, are very different the traditional U.S. middle class. Is it time to define new terms, new social structures — and if so, what will those terms mean for policy and perception?

The long-term viability of any business model Services that transport people from one place to another have been around, seemingly, since the invention of the wheel, but they are documented to 1605 with the early hackney carriage. How one calls for transportation has also evolved, and in the age of Uber, the immediacy of mobile devices, combined with the Gig Economy, created powerful forces that are reshaping transportation for hire. While the Gig Economy and various technologies offer many uncertainties, the general worry that some unforeseen idea will emerge to disrupt business model has become a regular concern for managers in most businesses, examples include car sales with Carvana, ListingDoor for real estate sales and StudySoup for education.

Environmental Uncertainties

State of sustainable energy investments in the face of cheap oil Will the continued depression of crude oil prices keep the reigns on cleaner energy solutions, the elimination of gas guzzling vehicles and the perception of a need to conserve energy? Cheap oil also creates deep uncertainties across sustainable organizations, and energy-related sustainability efforts within organizations.

Acknowledgement of climate change in the U.S. election As the U.S. election moves toward the center after candidates are nominated at the margins during primaries, climate-change deniers running for President or Senate may have to finally step up and acknowledge climate change in order to be elected, even if they remain personally ambivalent about causation (due to gerrymandered precincts the alignment of candidate and constituency is less of an issue for congressional candidates).

Political Uncertainties

Questions of who will run the United States The presidential election won’t be decided until late in 2016. Key policies, like the future of health care, immigration, the use of the military in the Middle East, and the political leaning of the legislative bodies, will all churn uncertainty. Issues will be open to debate, not resolution — and then the election results will create a cascade of new uncertainties prior to the transition of administrations and after.

The role of the U.S. in global leadership With the threat of a European Union confidence vote in the U.K., the high economic and social impact of Middle Eastern refugees, along with economic and political changes in China, will the U.S. need to step up to fill global leadership gaps as other nations turn inward to solve their problems? Or will the U.S. do the same, leaving the world with out a firm leader, which creates many uncertainties about what might arise, or demise, during the distraction?

Can U.S. health care heal itself?  As mentioned in the opening of this post, health care remains a major uncertainty going into the general election. For insurers and the businesses who provide health care, as well as providers, they will be looking for answers to questions like: If the Affordable Care Act is repealed, what will replace it, and how will the transition be funded? If it remains, will it remain under threat — or will it be amended to reflect the lessons of implementation? If it is amended, how political versus functional, will the amendments be?

The definition of U.S. immigration policy boundaries For those living in the U.S. illegally, 2016 is going to be a year of relative certainty, followed by a year of major uncertainty, depending on the outcome of the election. If the anti-immigration proponents win, it could mean massive deportations and a great militarization of U.S. borders. The fate of families, some long-time residents of the U.S., will become uncertain. The process for becoming a citizen, and what categories make that easier or harder, will also be in flux. For other global citizens wishing to immigrate to the U.S., that process and its requirements will also remain uncertain beyond 2016.

ISIS, the Middle East and everything The Middle East remains a major source of uncertainty. Rapid depletion of oil wealth in the likes of Saudi Arabia and Dubai, Sunni and Shite in-fighting, reactions by Western powers to domestic terror attacks, civil war in Syria, Kurdish strength growing along the Iraq-Turkey border, the windfall or fallout from the Iran Nuclear deal and many other issues threaten to make the Middle East a continued venue of violence and distraction that can drain resources that would be better applied to European and American domestic agendas. The reach of Middle Eastern-based terrorists into the U.S. and Europe creates its own wave of political, economic and social uncertainties. The impact of leadership changes in “stable” parts of the Middle East, like Saudi Arabia, are already being telegraphed through the the behavior and expectations of their Millennials. The fragmentation of the Middle East will generate many localized uncertainties that will coalesce into global impacts in areas like energy prices, terrorism and global trade.

The architecture of physical globalization There has been a move to enshrine globalization in physical projects of late, including a China-Russia-America (Alaska) tunnel, an ambitious canal in Nicaragua and the expansion of the Panama canal. These projects are as much nationalistic endeavors as they are attempts to physically instantiate global ties. If these projects go forward, how they are funded, the duration of construction, or the fall-out of their demise in local economies all create uncertainties that reflect upon the very leading edge of globalization at its most ambitious.

The shape of regulatory frameworks Economic doldrums and immigration issues suggest the need for progressive reforms, but populist reactions may keep much from being passed.  Temporary countermeasures and rejoinders may act as policy, trumping structural reforms, which will keep everybody guessing about what happens next, and how long any decision will last. Coming out of the U.S. election, along with lessons out of Europe’s current multi-pronged crises, it will be pertinent to ask if global political bodies will begin to look to longer-term solutions or if the quagmire of the present will keep them focused on near-term, politically motivated outcomes. A regulatory shift away from solving near-term issues would force changes in how large organizations interact with legislators, which would create a number of uncertainties related to election finance and lobbying, perhaps even the process of elections.

 

Note: these uncertainties will be updated throughout 2016.