Drawing future scenarios: what will the world be like in 2030?
“Hope for the best, but prepare for the worst” *
*The Tragedy of Gorbuduc, by Thomas Norton and Thomas Sackville (1561)
When studying corporate strategy, an extensively used tool is the SWAT matrix, an exercise in which two families of elements are identified:
· Internal: Strengths and Weaknesses
· External: Opportunities and Threats
A second step is to make that reflection actionable through a CAME exercise: Correcting weaknesses, Addressing threats, Maintaining strengths and Exploiting opportunities.
Today I want to focus on identifying threats, so if you feel deeply optimistic about the near future, perhaps you’d better stop reading here and go out to have a nice walk with your family, or some beers with friends.
Anyway, this is no formal exercise but an entertainment from someone who always has been interested in prospective.
Let’s begin by breaking down the components of main factors: global macrotrends -geopolitical, economical, environmental- that combined with technological trends will define different local scenarios by the year 2030.
Global macro trends:
A) Geopolitical and economical scenarios:
- A.1 Multipolar collaborative world. China has overtaken USA as global superpower, and becomes a liberal democracy as a result of its citizens claims of freedom. China fully integrates in multilateral post WWII institutions (UN, WTO, IMF) and becomes its main player, exercising soft influence. Western liberal values and legal framework become global without exceptions and converge, taking the European citizenship guarantees as a paradigm. Europe and LATAM thrive as a result of falling trade barriers and homogeneous rules, finding in China new free markets to expand. Chinese tech companies expand worldwide as China becomes the new innovation hub, levering in top universities. Its economy evolves towards services, relocating industry in Africa, India and perhaps LATAM. Probability: low
- A.2 Multipolar confronting world. China has overtaken USA as global superpower, but remains being a dictatorship. Multilateral post WWII institutions (UN, WTO, IMF), western liberal values and legal framework are weakened as China builds a parallel system to exercise a growing hard influence worldwide, but specially in LATAM and Africa; USA and Europe react increasing protectionism while populism expands. Probability: high
- A.3 USA as the lonely superpower. China hits a growth glass ceiling and stagnates as a result of the trade war with USA, that extends its economical and political hegemony in time, but suffers middle-term competitivity decline as a result of protectionism. Though, silicon Valley remains being the main disruption tech hub, and American universities are still in top of worldwide classification, attracting best talent and brain draining Europe and Asia. 2030 looks alike last Pax Americana period. Probability: medium
- B.1 Green New Deal (2020–2050) is fully successful. Temperature increase is limited to ∆1,5ºC by 2100. We want and we can change: intensive short-term efforts are made and huge resources are mobilized to achieve this aim, not only energy production systems migrate to renewable sources, but global energy consumption decreases. Prosperity and wellbeing are redefined in the frame of circular economy. Fossil fuels are highly taxed, what affects global trade and consumption. Some economic sectors suffer in this transition (tourism, car production) but others thrive (infrastructures, building refurbishment, local production). Probability: medium
- B.2 Green New Deal (2020–2050) is partially successful. Temperature increase is between ∆1,5ºC and ∆4ºC by 2100. We want, but we can’t change: though some efforts are made, the goal of limiting global warming in not achieved due to technological feasibility barriers (insufficient energy storage systems, lower EROEI of renewables) and/or societal reluctance to change business as usual behaviors. Agriculture, water management and tourism are highly affected by global warming, and extensive parts of Southern Europe and LATAM are desertified, global crisis becomes permanent. Probability: high
- B.3 Green New Deal (2020–2050) completely fails. We don’t want to change: lack of awareness among citizens and corporations, and lack of coordination among governments extend the past BAU economic system. Temperature increase reaches ∆4ºC by 2100, and this global warming make extent areas unlivable: global instability results in warfare, famine, and thus migrations at an unprecedented scale. This scenario, as well as A.2, result in national protectionism and weakened multilateral institutions. Probability: low
C) Technological trends:
- C.1: artificial intelligence is able to exceed expectations and widespreads, creating a new economic environment of low marginal cost where automation enables to free people from many current tasks and jobs, fostering productivity to unprecedented levels and allowing humans to focus on creative and relational missions after some socioeconomic changes to guarantee income transfer from corporations to citizens, it is the scenario described by Bertrand Russell in his essay In Praise of Idleness. Probability: medium
- C.2: artificial intelligence is able to reach some of our current expectations, and improves many business processes, but most companies and citizens do not benefit from those opportunities, as they remain in the hands of just a few tech players that are part of an oligopoly. Besides, income transfer does not occur, and employment destruction is not mitigated. occurrProbability: high
- C.3: artificial intelligence fails to reach expectations and cutbacks in investments generates a new AI winter: digitalization is frozen. Probability: low
D) Local scenarios: as a result of global trends combinations, socio-economical local scenarios can be described (though not all possible combinations have been considered)
Best case scenario:
D.1=A.1 Probability: low +B.1 Probability: medium + C.1 Probability: medium
In a globalized and cooperative world, middle classes are consolidated in developing countries, and prosperity is maintained in current developed countries, where migration is able to achieve cultural and labour integration, and contribute to compensate demographic decline and social welfare. Climate change mitigation efforts do not come without sacrifice with respect to previous living standards, but they begin to be successful. In that context companies are able to achieve their purpose without main external barriers, just internal and usual competitive issues have to be solved. Thanks to AI based services, corporations are able to extend their activity to new geographies in a new wave of globalization, contributing to the zero marginal cost society.
D.2=A.3 Probability: medium+B.2 Probability: high + C.1 Probability: medium
A confronting world stressed by commercial tensions do not reach an agreement to limit global warming, and local solutions face technical impediments. Climate change affects with special harshness USA Sunbelt, LATAM, Mediterranean countries, Africa and the Pacific area. Some areas are winners of global warming effects: Canada, Russia, Scandinavia. Economical, social and political challenges affect companies in all sectors, and create major external issues that are headwinds against. Internal corporate performance must be excellent to face that context, but at least technical AI advantages are evenly distributed and foster innovation regardless the scale of corporations.
D.3=A.2 Probability: high +B.2 Probability: high + C.2 Probability: high
A multipolar collaborative world faces environmental challenges in a coordinated way, however, technical constraints impede to limit global warming to ∆1,5ºC, what affects affects multiple geographies and societies. Economical, social and political challenges affect the activity of every company, and create some external issues that are headwinds against normal activity. Internal performance lags behind of those <20 tech giants that own AI knowledge, patents and talent, and that extend their activity to every sector beyond their original boundaries. Incumbent companies are not able to face new incomers, that drain their customers base in a global degrowth scenario.
Worst case scenario:
D.4=A.2 Probability: high +B.3 Probability: low + C.3 Probability: low
A confronting world not willing to make changes in the current fossil fuel-based economic system will trigger conflicts for those dirty energy last resources, while exacerbating global warming effects that will affect all societies. Whatever internal performance is, it will be extremely difficult for any company to survive in a world in permanent crisis, where a few players fight for the remains of past prosperity.
I close with a disclaimer: there are formal probabilistic approaches to make forecasting that I have not used, as they require time, huge amounts of data and modelling efforts, none of them at my reach. Instead, what I have shared here is a product of my intuition and subjectivity in just a couple of hours, so don’t worry too much and take that walk and beer anyway.