The Journal of 2020 Foresight

Reports from the Knowledge Labs about our recent findings, research topics, and interviews with lifestyle leaders who are creating their own futures.

How to stimulate your own powers of foresight. Consider the following thought provokers. Ask yourself, in these categories what are the brand new trends and forces? Which are the ones growing in importance? Which current forces are loosing their steam? Which have peaked or are reversing themselves? Which are the "wildcards" about to disrupt us in the future? POLITICAL AND TECHNICAL thought for food: Electronics, Materials, Energy, Fossil, Nuclear, Alternative, Other, Manufacturing (techniques), Agriculture, Machinery and Equipment, Distribution, Transportation (Urban, Mass, Personal, Surface, Sea, Subsurface, Space), Communication (Printed, Spoken, Interactive, Media), Computers (Information, Knowledge, Storage & Retrieval, Design, Network Resources), Post-Cold War, Third World, Conflict (Local, Regional, Global), Arms Limitation, Undeclared Wars, Terrorism, Nuclear Proliferation, Weapons of Mass Destruction, Governments (More/Less Power and Larger or Smaller Scale), Taxes, Isms: Nationalism, Regionalism, Protectionism, Populism, Cartels, Multinational Corporations, Balance of Trade, Third Party Payments, Regulations (OSHA, etc.) Environmental Impact, U.S. Prestige Abroad. SOCIAL AND ECONOMIC Food for thought: Labor Movements, Unemployment / Employment Cycles, Recession, Employment Patterns, Work Hours / Schedules, Fringe Benefits, Management Approaches, Accounting Policies, Productivity, Energy Costs, Balance of Payments, Inflation, Taxes, Rates of Real Growth, Distribution of Wealth, Capital Availability and Costs, Reliability of Forecasts, Raw Materials, Availability and Costs, Global versus National Economy, Market versus Planned Economies, Generations: Y, X, Boomers, Elderly, Urban vs. Rural Lifestyles, Affluent vs. Poor, Neighborhoods and Communities, Planned or Organic Growth. Got Knowledge?

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Thursday, February 27, 2003

Over-Specialized, Obsolete and Temporary -- But Not By Choice

Chapter Two: The Ridge

By Steve Howard, CKO
The Knowledge Labs

Table of Contents
Chapter One: Basecamp
Chapter Two: The Ridge
Chapter Three: The Outpost
Chapter Four: The Tribal Territories

The Polls are open. We’re asking people like you to rate trends and predictions that have the greatest direct impact on your livelihood and future plans.

Today’s top five:

37 – From 1998 to 2008: small and large growth stocks will do well. Also emerging countries in the international sector (Dent)

36 – During this timeframe (1998 to 2008) real estate and REIT funds look attractive (Dent)

35 – Dow will reach 21,500 around 2008 -- the time to harvest stock and most real-estate investments (Dent)

34 – Shift into long-term treasuries and very high quality corporate bonds between 2006 to 2008. (Dent)

33 – In 2009 or 2010 expect the first serious U.S. and global stock correction and shift bond portfolios into Japanese and some European stocks. (Dent)

Register your vote

Journal of 2020 Foresight: You told us in 1997 Lone Eagle and Lost Explorer teamed up to lead an expedition focused on the doing-what-you-love story lines: “Staying Put, Doing What You Love;” “It’s Wired, Doing What You Want – Anywhere, Anytime;” “Struggling Lone Eagle, Overpriced for Local Market;” and “Trapped & Permanently Temporary.”

Trailblazer: That’s right. And, we briefly mentioned another learning expedition of HR executives. In addition to the economic picture repeating itself a decade later, “two of the talent scenarios” – “Me Go-Go Fast” and “Absent Minded Professor …” informed the “Trapped & Permanently Temporary” and Struggling Lone Eagle, Overpriced for Local Market” scenarios.

J2020F: We’ll come back to the HR executives a little later. Tell us the story line for “Trapped & Permanently Temporary.”

TB: Well, essentially this is a story of a generation, just under 80 million, in their 40s and 50s who fall victim to cost cutting measures at large companies. Unprepared for what is to follow they find themselves living more frugally. With higher than expected living costs for their elderly parents, their inheritance that they had counted on vaporizes. Forced to work, without much of a pension or retirement savings, they find themselves over qualified, over specialized, and discriminated against.

J2020F: So in other words, these middle-aged Boomers are thrust unprepared into local, cutthroat, and competitive labor market? And, since they populated the middle management, executive management, and senior professional positions they’re priced out of the market due to their salary demands?

TB: Sure. In an employer's market like in this scenario, they’re forced to take on temporary contracts that fail to lead to permanent work equal to or better than their former positions.

J2020F: So, having played by the old rules they had fully expected to last through the magic combination of years of service and age to qualify for a fully funded pension?

TB: Right. Instead, they’ve been cut lose prior to meeting the test. And, because of global competitive pressures and their own selective filtering of the industry trends they should have paid attention to (which led to layoffs and restructuring in the first place) local comparable positions in the same industry are virtually non-existent for them.

J2020F: So, they’re over specialized in arcane, and now commercially obsolete jobs. I bet that makes it even more difficult to consult and command high fees. When push comes to shove, the hunt for other opportunities takes too long and their forced to take whatever becomes available.

TB: That’s right. The more they followed their former organization’s way of doing things, and the longer they repeated the process, the more out of touch they’ve become with current market and industry demands.

J2020F: So they’re shocked to discover that what worked so well in one organization – the way customers are satisfied, problems are solved, opportunities are cultivated, etc. -- doesn’t transfer easily to another work setting.

TB: Imagine the emotional devastation when they realize the safety and security of working for one large company not only doesn’t pay off for them; it makes for a more uncertain future golden years.

J2020F: Since the event occurs near the twilight years of their career and at peak earning years, they may have early retirement, but they will still need to work to make ends meet for a couple of decades.

TB: Absolutely. They will not want to cut back on expenses, but they will be forced to live more frugally. They’ll find themselves competing in the marketplace with part-timers, temporaries, and younger people with less experience who will gladly work for less.

J2020F: Organizations favor this strategy because it allows them the flexibility to expand and contract their labor force without creating negative public relations.

TB: The peak earning, middle managers, become a permanent loser in a winners and losers conflict.

J2020F: In this sort of business and economic cycle, large companies and even smaller ones continue incessant cost cutting moves to increase productivity.

TB: Which is why we see some overlap with the HR Talent Scenarios.

J2020F: They’re under pressure to target high salaried boomers.

TB: Information Technology (IT) groups only purchase the new technologies if it can cut transaction costs and give better and tighter controls on current worker’s expenses.

J2020F: What happens to the Trapped and Permanently Temporary, then?

TB: They first turn to their home equity as a source for capital to stay afloat, or to fund a business. But, that source eventually dries up. Even if they manage to own their equipment in a home office, they find it difficult to fund growth.

J2020F: Why?

TB: Because, those who bought homes at the peak of the housing market find themselves in the unenviable position of paying high house payments for a home whose value has declined to the point that they lose all their equity if they place it on the market.

J2020F: What do they do, then?

TB: They resort to loans from families, cash advances on credit cards, and savings. Hoping that business will pick up and pay down the loans.

J2020F: I imagine, though, for those starting out, if they can't find alternative sources for capital, the barrier to the entrepreneurial option is too high and too risky.

TB: Yes. We also see a rippling effect, as well. Because housing is the biggest investment we typically make, how that investment retains or doesn't retain value directly influences consumer confidence about the future. If boomers don't feel good about the future they don't buy as much.

J2020F: So, a lag occurs in the economy sooner than could be projected as a result of a generation moving past its peak spending patterns.

TB: As their parents reach their final years less wealth transfers from the elderly generation to the boomer generation. While financial planners predicted the wealth transfer would offset years of low savings rates among boomers, it doesn't materialize for two reasons. Much of the elder generation's wealth is in the form of annuities and those income streams dry up upon death.

J2020F: While they lucked out with the run up in real estate values and life-long jobs with pensions and high savings rates, much of their current well being is derived from government programs?

TB: That’s right, like Social Security, Medicare and private pensions -- which had been included in calculations of that generation's wealth. None of these will be transferred.

J2020F: And doesn’t the Bob Hope generation consumes more today, than they in the past and at a rate higher than younger generations? Much goes to medical care that prolongs their life, I presume.

TB: True, they spend more and transfer less than their parents did. Taken together, the total amount of bequests in the United States in 1990, $208 billion, was 2/3s less than what it could have been, $344 billion, if more of their wealth was in assets that would have been passed on, as was the portion in 1960.

J2020F: So bottom line, for those boomers who expected to use a larger bequest for their entrepreneurial options or for their own long-term retirement, the amount available will be an unwelcome surprise.

TB: And for their children, in the short-term, a much larger shock. The negative impact on consumer spending, especially for retail chains in the region during the make-or-break holiday season falls off.

J2020F: Sounds like a game of dominoes. More and more the retail business falls off driving them out of business. With fewer entry-level positions.

TB: Right. Wages remain flat while the real estate prices remain under what had been market value at its peak.

J2020F: Boomers feel the pinch with less discretionary income.

TB: Which means credit cards and installment debt piles up at an alarming rate, making it virtually impossible for them to get out from under. As economic realities become direr, those hard charging consumers will suddenly scale back, prompting sale after sale to move retail goods early.

J2020F: So, holiday spending, while lower, will go towards the purchase of clothing, toys, and home electronics, followed by jewelry and sporting goods.

TB: At the federal level, we experience the impact of a default on the Treasury debt due to the Republican and Democrat battles over the federal debt ceiling and the budget. Civil-service trust funds holding billions of dollars for future civil service retirees become drained first.

J2020F: What happens with the Treasury debt?

TB: That borrowing power for the Treasury is short lived, after it hits the $4.9 trillion debt ceiling. But manipulating the trust funds, taking back government securities and replacing them with IOUs only works for so long before interest payments, maturing bond payments, and T-bills add up quickly.

J2020F: Sounds like an elaborate shell game.

TB: And it gets worse. While thought unthinkable by Wall Street, because of global ramifications, the default occurs just the same. First the stock market hits record highs, but then investors grow nervous prompting a small rise in bond yields and a jump in gold's price.

J2020F: That doesn’t sound too bad.

TB: Then the huge amount of debt es its toll since the Treasury has to sell over tens of billions in securities with short maturities in a short period of time.

J2020F: Then?

TB: Foreign investors, who owned more than 20% of Treasury debt, begin liquidating their holdings on a wholesale scale, even though securities had been the base of world bond and currency markets.

J2020F: Hadn’t it been the global market that was deep and liquid? Foreign central banks had been heavy investors. That bolstered the dollar and weaken the other currencies.

TB: The bulls were caught off guard. They sensed a buying opportunity since the U.S. bond yields could have rebounded when the major source of demand, those foreign buyers dried up.

J2020F: Why? Did the bulls expect foreign investors to stay out for only a short term.

TB: Yup. Politics did them in. The Republican and Democrat wars should have been concluded and the crisis resolved. If reason had prevailed, the bulls had expected a return to an environment of falling interest rates.

J2020F: But instead, the expected balanced budget failed to materialize, keeping short-term interest rates high, instead, and triggered the negative reactionary spiral?

TB: That’s right. These “trapped and temporarily permanent boomers”, forced to work without much of a pension or retirement savings, find themselves over qualified, over specialized, and discriminated against in a vicious economic spiral.

J2020F: So the second location-specific scenario, Staying Put, Doing What You Love plays out in a more positive way, right?

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