Global Megatrends: Seven Patterns of Change Shaping Our Future

Global

Megatrends

Dedicated to my grandparents, parents and family. Our future looked so uncertain at the outset of World War II as the world went into freefall. But we found a way to a better place. And we’ll always keep finding a way.

Global

Megatrends

SEVEN PATTERNS OF CHANGE SHAPING OUR FUTURE

Stefan Hajkowicz

© CSIRO 2015

All rights reserved. Except under the conditions described in the Australian Copyright Act 1968 and subsequent amendments, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, duplicating or otherwise, without the prior permission of the copyright owner. Contact CSIRO Publishing for all permission requests.

National Library of Australia Cataloguing-in-Publication entry

Hajkowicz, Stefan, author.

Global megatrends: seven patterns of change shaping our future/Stefan Hajkowicz.

9781486301409 (paperback)

9781486301416 (epdf)

9781486301423 (epub)

Includes bibliographical references and index.

Social prediction.

Twenty-first century – Forecasts.

Change.

Sustainable living.

Technological innovations.

Demographic transition.

303.49

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Contents

1     Introduction

2     Thinking about the future

3     A history of the future

4     A moment of serendipity (and seven megatrends)

5     More from less

6     Going, going … gone?

7     The Silk Highway

8     Forever young

9     Virtually here

10  Great expectations

11  The innovation imperative

12  Falling and landing

13  Conclusion

References

Index

1

Introduction

Imagination is more important than knowledge.

Albert Einstein.

Imagine a mountain climber atop a steep sloping icy peak. The summit is within his view. The freezing air affronts his skin. He can barely sense his nose or ears. He turns his gaze away from the rock face, pausing to contemplate his progress. The sunlit snow-capped mountains and grassy plains way down below are reflected in his goggles. On turning back to the rock face to resume climbing he inadvertently steps on slippery ice. He loses his footing and slips over. He starts to slide and roll uncontrollably down a rocky slope towards a cliff and certain death. The slope gets steeper and steeper and he slides faster and faster. Desperately he grabs a climber’s pick from his belt and jams it into the rocky slope to halt his motion. Again and again he tries. But he can’t get it to catch on anything. The pick slides and scrapes across the rocky surface. The secure foothold he previously had no longer applies. His existing toolkit isn’t working. He needs a new model to survive a radically new situation. He’s in a moment of freefall.

In the history of nations, in the history of corporations and in the lives of individuals there are moments when the foundations of existence are vaporised. In a moment of freefall the fundamentals which guided our choices and actions no longer apply. Our knowledge base fails to provide obvious anchor points for reasoning and decision-making. To prevail, we must construct and implement a new conceptual model. For this we need foresight – the ability to think ahead. We need at least some idea that the moment of freefall, or something like it, is on its way. Fortunately that’s always how these moments happen. Driving forces start slowly at first, then gradually build. They connect to other driving forces, leading to increased momentum. Then at some point in the future the gradual build-up of change expresses itself with explosive force. That’s freefall.

Our mountain climber’s situation didn’t begin when he slipped on the ice. There were trends – patterns of change over time – that signalled this possibility, which morphed into likelihood which morphed into certainty which morphed into reality. There was the observable trend of ice patches becoming increasingly frequent as he ascended to higher and colder altitudes. There was the palpable trend of his concentration failing from physical exhaustion. There were the thinning oxygen levels. These information signals existed before he even began his climb. There is an extensive databank of trends arising from the collective experiences of hundreds of climbers attempting to conquer similar mountains. Whether our climber prospers or perishes in this moment of freefall will depend on his foresight, preparedness and, when he’s in the moment, his ability to rapidly identify and select the right management options.

This is not to say it’s easy to see it coming. The signal heralding a moment of freefall might comprise tiny fragments of seemingly unconnected information. Often it’s hard to discern the signal from the noise. For example, fragments of perhaps seemingly unconnected information existed in the months and years leading up to the tragic September 11 terrorist attacks, the collapse of the Berlin Wall, the Cuban missile crisis, the Pearl Harbor bombings, the 1970s oil price shocks, the emergence of free market economies in the former Soviet-controlled eastern bloc countries and recent severe weather events linked to climate change. Our ability to proactively respond to events of this nature partly comes down to our ability to identify, interpret and act upon signals. The signals we receive typically start off weakly and are barely discernible among the background noise. But the signal strengthens and becomes clearer over time. Our ability to read signals, detect patterns and make choices is critical to how we perform during a moment of freefall.

This book tells a story about how the world is changing. The book is more focused on the trajectory of change leading up to moments of freefall than on the moments themselves. Understanding change allows us to conceptualise a possible moment of freefall that lies before governments, companies, communities and individuals. This book talks about global change but with local implications. It captures the thinking of many dedicated scientists and researchers who have devoted their careers to exploring and understanding change. These are people who wake up most mornings wondering what the world will look like in 10, 20, 50 or 100 years’ time. It tells of the journey we went on at CSIRO – Australia’s national science agency – to see into the future and it tells of what we saw. By getting a picture of how the world is changing it’s possible to start separating signal from noise and to make wiser choices. It’s possible to emerge from a moment of freefall in better shape.

Our narrative of the future is built upon the concept of ‘megatrends’ – gradual yet powerful trajectories of change that will at some point express themselves with explosive force and throw companies, individuals and societies into freefall. The change heralded by megatrends lies beyond our direct control but not beyond our influence. If we can read megatrends we can alter our destiny. Being ‘caught’ in a megatrend is analogous to being caught in a rip at a surf beach. A rip is a dangerously strong underwater current which forms at an ocean beach and can be hard to identify – even for experienced surf lifesavers. A rip can drag an unsuspecting swimmer far offshore into deeper waters where they’re at risk of drowning. Accepted wisdom says that when you get caught in a rip it’s futile to attempt to swim against the flow of water. The current is too strong and you’ll soon be overwhelmed and exhausted. But neither do you want to just float entirely at the mercy of the currents. You need to keep your head above water. You need to manoeuvre yourself into a position that will allow you to make your way back to shore, preferably with the waves to help you along.

Just like ocean currents, the social, economic, political, technological and environmental drivers of global change – the megatrends – are powerful forces. They are continually at play reshaping our world. We ignore these forces at our own peril and typically fail if we try to swim directly against them. But we also fail if we let these forces take us where they will. To find a better place we need to read the currents and anticipate likely destinations. Then we need to design and implement a strategy. A strategy embodies those actions that give our company, community, society or ourselves the best possible chance of achieving our objectives and reaching our desired destination. That means making the right choices at the right times. It also means accurately reading and understanding the megatrends heralding profound change. That’s how we prosper, rather than perish, when in freefall.

Foresight is the art and science of understanding change and exploring plausible futures to help people make wiser choices. It’s an ancient field of inquiry. Since the beginnings of our existence human beings have been devising ways to see into the future. It’s an innately human desire. It’s also a survival necessity. The rise and fall of civilisations through history largely comes down to their ability to both foresee and adapt to change. Would Rome have fallen if the last emperor, Romulus Augustus, and his forebears had acted upon rising disease risks, agricultural land degradation, lead poisoning from aqueducts, moral decay, complacency, political infighting and corruption? Would the civilisation of Easter Island still exist if the people foresaw and acted upon unsustainable deforestation, environmental destruction, habitat loss and a growing rat plague?

Getting enough food was one of the early imperatives for human foresight. In our hunter–gatherer days we observed and learned the migratory patterns of grazing animals so we could predict where and when they might concentrate in numbers. At those locations we could hunt with a higher likelihood of success. As we developed agriculture, our attention turned to the skies. We became increasingly interested in forecasting weather patterns so we could predict rainfall, storms and crop yields. Sometime around 650 BCE the ancient Babylonians attempted to predict rainfall and weather seasons based on the appearance of clouds and halos of light surrounding the moon and the sun. By 340 BCE the Greek philosopher Aristotle published a book called Meteorologica which presented theories on the formation of wind, thunder, lightning and rainclouds.¹ Some of these theories were flawed but many were highly accurate.

During the Renaissance years of the 14th to 17th centuries several famous philosophers devoted their time to thinking about the future. Just like all fields of scientific inquiry in the Renaissance, foresight and futures thinking were in their infancy. Nostradamus (1503–1566) was perhaps one of the better-known philosophers concerned with long-range futures thinking. His works, known as The Prophecies, have attracted vast attention since they were published in 1555; over 200 editions have subsequently been published. Much of the controversy relates not to Nostradamus’ original works but to interpretations placed upon them by modern commentators. They’ve been used by filmmakers, authors and doomsayers to fascinate audiences and catch attention.

Nostradamus himself flatly rejected the notion of being a ‘prophet’ and, like many philosophers of his time, attempted to use methods of scientific inquiry to understand the world. He was much more humble and circumspect than the novelists, movie directors and social commentators who interpreted his works hundreds of years later. Two of Nostradamus’ lesser-known works are about medical science. After Catherine de Médici, Queen Consort of France, read Nostradamus’ main works – the prophecies – she summoned him to the royal court. Nostradamus feared being beheaded because some of his writings identified threats to the royal family. However, Catherine de Médici appointed him as a chief counsellor. And he kept his head both figuratively and literally. From a historical perspective the predictions about the future captured in Nostradamus’ prophecies are not what matter most. Two other things matter more. First is the fact he spent his life doing it and over time people would learn to do it better. Second is the fact that his prophecies captured such huge and sustained interest over the centuries that followed. Nostradamus showed us just how much interest human beings have in the future.

Leonardo da Vinci (1452–1519) was another Renaissance philosopher concerned with the future, whose works today might fall under the discipline of technology foresight. He sketched ideas for technologies that would (or could) be invented in the future. A recent display at the Museum of Science in Boston shows that much of what he imagined was later invented. In 1485 Leonardo sketched a parachute design that would allow a person to fall safely from a great height. Modern helicopters have turned into reality many of Leonardo’s sketches of flying machines with whirling and rotating blades. Some of his sketches depict underwater breathing apparatus with long hoses which allow a person to stay underwater for long periods of time. Modern scuba diving gear has turned this vision into a reality. Leonardo da Vinci’s illustrations have proven to be remarkably accurate predictions of technologies that would later come into reality.

As we moved into the 20th century strategic foresight emerged as a field of scientific inquiry. This is because it held value to military and civilian decision-makers. Herbert George (H.G.) Wells (1866–1946) was a famous English writer known for his works on science fiction; these included The War of the Worlds which described an alien invasion. He is also famous for his writings on politics and military strategy, particularly relating to World Wars I and II. In the early 1900s he was writing about the importance of using structured techniques to see into the future. In a BBC radio program aired on 19 November 1932 H.G. Wells was quoted as saying:

though we have thousands and thousands of professors and hundreds of thousands of students of history working upon the records of the past, there is not a single person anywhere who makes a whole-time job of estimating the future consequences of new inventions and new devices. There is not a single Professor of Foresight in the world.

H.G. Wells (1932) originally broadcast by BBC Radio, later cited by Ian Miles from the University of Manchester and published in the journal Technological Forecasting and Social Change.²

During and after World War II the Allied forces invested in strategic foresight to understand and counteract emerging technological and geopolitical threats. A key development occurred in the US on 1 October 1945 when the commander of the Army Air Force, General H.H. (Hap) Arnold and his colleagues launched project RAND (Research ANd Development) under special contract to the Douglas Aircraft Co. This project was motivated by the pivotal role of technology in armed conflict during the war, and the need to better anticipate future technologies. The first report issued by RAND was titled Preliminary Design of an Experimental World-circling Spaceship. The report foresaw satellites and the impact they would have in military and social affairs. By 1948 project RAND had grown to 200 staff. Today the RAND Corporation has headquarters in Santa Monica, California and employs 1700 people from over 50 countries. The RAND Corporation has moved beyond military matters into issues such as healthcare, environmental management, population, demographics, international business, children and families.³

The UK also developed foresight capabilities during the war years and beyond. Today the UK government has a dedicated foresight team which has recently written on topics such as the future of brain science, the future of crime prevention and the future of food production. Other governments with formal foresight groups include Canada, Malaysia and Singapore. These teams are working to understand change in the decades, even centuries, that lie ahead to help their governments and citizens make wiser choices. They use structured analytic techniques to identify, describe and analyse the impact of future trends and risks. It is likely that such groups will become more common in the future. In a world of accelerating change, an ability to identify and proactively plan for plausible futures is of ever greater importance.

The use of foresight also took hold in the private sector during the 20th century. Probably the standout experience comes from the pioneering work on scenario planning by the energy company Royal Dutch Shell. Angela Wilkinson and Roland Kupers from Oxford University’s Smith School wrote about scenario planning at Shell in the Harvard Business Review. It began in 1965 when the head of Shell’s economics division asked a long-standing employee, Ted Newland, to start an activity called ‘Long Term Studies’. Ted Newland recalled how it began:

I was placed in a little cubicle on the 18th floor and told to think about the future, with no real indications of what was required of me.

Ted Newland, Shell, cited by Wilkinson and Kupers in the Harvard Business Review.

In the 1970s Newland was joined by a Frenchman, Pierre Wack, who was inspired by a US-born mystic and spiritual leader and who reportedly burned incense sticks in his London office. Wack went on to become a world famous management consultant. During his time as Head of Shell’s group planning division he helped the company negotiate the oil price shocks of the early 1970s which had devastating consequences on many other companies and whole societies. The Arab–Israeli War fought between Egypt, Syria and Israel during October 1973 led to oil trade embargos from oil-rich Arab nations. The fuel shortages led to price spikes, queues at petrol stations, a stock market crash and worldwide economic recession. According to company records⁴ Shell was warned of these shocks by Wack and his team and was able to take precautions and cushion itself from the worst impacts. Shell emerged in far better shape than many other energy corporations. Wack challenged the dominant paradigms within the organisation and succeeded in convincing company executives that oil resources had finite supply and would one day become exhausted. The oil embargo and subsequent shocks to the world’s financial, social and political stability created a moment of freefall with both huge challenge and huge opportunity. For Shell, what happened during the moment held equal importance with the lead-up period when the early signals were emerging.

So foresight has proven itself as a vital capability through human history. As we enter the 21st century and humanity becomes smarter in so many ways, foresight will become only more important. This book is about foresight and megatrends that will change our world. It’s written to help you imagine moments of freefall that could reshape your company, your nation or your life. The story begins with some brief philosophical and conceptual thinking about the future. Before diving into the complexity of megatrends we need a mental model which we can use to think about, and plan for, change in an uncertain world. We then contemplate the history of the future. Here we explore the information environment leading up to moments of freefall in our past. Next, seven megatrends of global change impacting us over the coming years are introduced and described. Following this we move from megatrends to technology disruptors that can put us on a different trajectory. In the final chapter we reflect on a somewhat Panglossian scenario for the future. Here we let creativity take hold. We imagine what the world might look like if humanity succeeds in reading the signals and manages to grasp the opportunity, and sidestep the threat, in the many moments of freefall which lie ahead.

2

Thinking about the future

Difficult to see. Always in motion is the future.

Yoda, Star Wars Episode V: The Empire Strikes Back.

In Charles Dickens’ famous novel A Christmas Carol three ghosts come to visit the miserly and cold-hearted Ebenezer Scrooge. They include the ghost of Christmas past, the ghost of Christmas present and the ghost of Christmas future. The ghost which held the most salience for Scrooge, heralding both hope and fear, was the ghost of Christmas future. That’s because the story told by the ghost of Christmas future to Scrooge has not yet come to pass. There is still something Scrooge can do to change the story and