Can You See The Future?

"The use of Vegetable oils (Bio Diesel) for engines may seem insignificant today. But such oils may become in course of time as important as Petroleum and Coal tar products of the present time " - Rudolf Diesel, 1912

What does Diesel’s statement have to do with the price of fish? Well, corn (like fish) is a commodity. The price of corn is determined daily on global commodity markets and in turn those markets are driven by fundamental data such as growing conditions, global trade and among others the price of petroleum determined in the same way but subject to differing influences.

Was Diesel a soothsayer capable of predicting the future?  His statement displays prescience but given that it was nearly 100 years ago and the trend that he was talking about has only begun recently, it is not very helpful. Is it possible to predict the future?  Traders in financial markets believe that their speculation will pay off; their preferred choice of analysis is hefty mathematical models running on supercomputers rather than crystal balls.  Their timescales however are very short, from a few minutes in and out of a trade to make a few points from very large positions to a few months. Up until the credit crunch this approach paid off handsomely for hedge funds and investment banks.  For some who did not see it early enough disaster lay ahead. Yet others heeded the warning signs and they made adjustments and continued to enjoy positive returns.

For the practical futurist the timescale is longer than the traders but shorter than Diesel’s. The fundamental forces of economy, politics and environment and others that drive the markets for commodities shape our lives and the trading circumstances of our organizations. In the early 1970s a series of major shocks related to oil supplies saw the real price of oil quadruple in twelve months.  In turn, this disruption led to long lasting changes in oil use amongst western economies.  Some commentators assert that it helped to accelerate de-industrialisation in the west.  It also spurred innovation the results of which have led to the use of bio diesel.

The recent rise in oil prices has only just reached double in real terms and the disruption has been far less than in the seventies as the West’s dependence on oil has reduced. The rises have caused real hardship and will continue to do so until global dependence on the carbon economy is reduced. The medium term driver is the point at which oil supplies become critical. Without diversification of energy sources the economic and political challenges will overwhelm.

Before the current recession hit, commodity prices including foodstuffs, were way above their long term averages. The recession has returned them to more normal levels but every sign that presages an upturn leads to more bullish commodity markets. It may have been forgotten already but those rises in prices before the recession led to food shortages and food riots. That has not yet gone away and a strong upturn in economic activity which leads developing nations to eat more animal  proteins, that in turn raise cereal prices coupled with increased demand for corn for biodiesel may well see food  riots reemerge as a global political issue.

I only say this here to assert the possibility not to make the prediction. Practical futurism is about projecting forward drivers of change such as commodity prices and considering alternative extreme outcomes to gauge the range of possibilities. By combining together the results of such an analysis for a number of relevant drivers of change it is possible to identify critical uncertainties that can derail the best laid strategies.

What then are the practical benefits of this analysis? One of the places to start thinking about the future is what has happened in the past. History does repeat itself but in unpredictable ways. The global economy has seen eight recessions since 1952 and they all exhibit some features in common but differ from each other in critical ways. We know that this recession will come to an end and there has been much speculation about what shape it will take, i.e. will we come out as steeply as we went in?

At Futurist we have been taking a look at the performance of different industries at different points in the recession. We are not speculating when it will be over or how bad it will have been, we are saying that there are strategies based on the analysis of previous recessions that can position your organization to benefit from the upswing when it comes and to keep you informed of where the dangers lie. This is practical strategizing for difficult times. 
 
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