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Generational Dynamics Web Log for 29-Dec-06
McKinsey's Predictions: Ten Trends of 2006

Web Log - December, 2006

McKinsey's Predictions: Ten Trends of 2006

How accurate were their predictions for the past year?

A year ago, McKinsey Quarterly Magazine published an article on the "Ten Trends for 2006." The article is authored by Ian Davis, managing director of McKinsey & Company and Elizabeth Stephenson is a McKinsey consultant.

Now, they've re-published the same article, adding in links to other relevant articles in 2006.

Apparently they would like people to evaluate their predictions, and I'll be happy to do that. As readers know, I've claimed that, for the last three years, this web site is the best predictive web site in the world, and I've challenged everyone to find one with a better record. None exists.

So let's take a look at McKinsey's predictions, and comment on them:

"Macroeconomic Trends: Centers of economic activity will shift profoundly, not just globally, but also regionally. As a consequence of economic liberalization, technological advances, capital market developments, and demographic shifts, the world has embarked on a massive realignment of economic activity. ... The story is not simply the march to Asia. Shifts within regions are as significant as those occurring across regions. The United States will still account for the largest share of absolute economic growth in the next two decades."
This is a fine prediction because it doesn't say anything except that things will change. Here's what they don't mention: That public debt and the balance of trade deficit continue to increase exponentially at unsustainable levels, that the stock market bubble continues to grow dangerously, and that the housing bubble is bursting. You don't have to be a rocket science to see that any financial shock could launch the entire world into a major financial crisis.
Generational Dynamics has predicted since 2002 that we're entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range, probably by the 2006-2007 time frame. What we're waiting for is a major generational panic. I estimated that the probably was 50% that it would occur in 2006, and obviously that didn't happen. Thus, I would estimate that the probability is higher than 60-70% that it will occur in 2007.

"Public-sector activities will balloon, making productivity gains essential. The unprecedented aging of populations across the developed world will call for new levels of efficiency and creativity from the public sector. Without clear productivity gains, the pension and health care burden will drive taxes to stifling proportions."
This one is bizarre. They understand that local and state governments are going bankrupt because of pension plans for aging populations, but they incorrectly predict that something will be done to fix the problem, and that the fix will involve productivity gains in the public sector. I don't think the public sector labor unions would like that idea, even if it were feasible.
At any rate, nothing has gotten done, and nothing will get done. The McKinsey people are probably Boomers, and, like all Boomers, they don't have any idea how to do anything except argue, and wait for someone else to solve their problems. What they don't understand is that the generations of people who actually DO know how to get things done (the G.I. and Silent generations that survived World War II) are gone now. Boomers will do nothing until a financial crisis forces them to unite and actually get things done.

"The consumer landscape will change and expand significantly. Almost a billion new consumers will enter the global marketplace in the next decade as economic growth in emerging markets pushes them beyond the threshold level of $5,000 in annual household income..."
Once again, we have a "prediction" that says nothing except that population is growing and kids grow older.

"Social and environmental trends: Technological connectivity will transform the way people live and interact. The technology revolution has been just that. Yet we are at the early, not mature, stage of this revolution. Individuals, public sectors, and businesses are learning how to make the best use of IT in designing processes and in developing and accessing knowledge."
Whew, that's hard-hitting. Umm, except that I've been hearing that prediction, or a variation, for decades. There's nothing particularly special about this recent technology developments, except that they're trend extensions of computer technologies that were developed long ago.

"The battlefield for talent will shift. Ongoing shifts in labor and talent will be far more profound than the widely observed migration of jobs to low-wage countries. The shift to knowledge-intensive industries highlights the importance and scarcity of well-trained talent."
The reminds of the Y2K problem, which was caused by 1970s COBOL computer programs that used only two digits (e.g., 78 for 1978) to represent years. A failure was going to occur in computer software around the world as soon as it was necessary to represent the date 2000. Information Technology departments became acutely aware of this problem in the mid-1990s, and started spending hundreds of millions of dollars to remediate their software.
At that time India became major international consultants. An American corporation would hire Indian consultants to help them with the remediation effort. Since everyone had to work on the same mainframe computer, the Americans would use the computer during the day, and the Indians would use the same computer via satellite link during the night (which of course was daytime in India). This was one of the most amazing projects in history. By the time January 1, 2000, almost every single computer program in the world was properly remediated. This project was so successful that some idiots actually believe that there was never a problem to begin with; believe me, there was.
At any rate, that would have been the time to predict that "ongoing shifts in labor in talent will be far more profound than the widely observed migration of jobs to low-wage countries." Today, that's not a prediction; it's ten year old news.

"The role and behavior of big business will come under increasingly sharp scrutiny. As businesses expand their global reach, and as the economic demands on the environment intensify, the level of societal suspicion about big business is likely to increase."
Now, this is an interesting prediction. Nothing like this prediction has happened or is likely to happen as things stand. But once the stock market panic occurs, there will be an enormous effort to identify scapegoats, and many corporate executives will go to jail.

"Demand for natural resources will grow, as will the strain on the environment. As economic growth accelerates—particularly in emerging markets—we are using natural resources at unprecedented rates. ... In China, for example, demand for copper, steel, and aluminum has nearly tripled in the past decade."
This is true, of course, but it was old news when the prediction was made.

Finally, we have identified a third set of trends: business and industry trends, which are driving change at the company level.

"Business and industry trends: New global industry structures are emerging. In response to changing market regulation and the advent of new technologies, nontraditional business models are flourishing, often coexisting in the same market and sector space."
This was big news in the 1980s when personal computers flattened the corporate management tree from 8 levels to 3 levels. Or it was big news in the 1990s when ERP (Enterprise Resource Management) system revolutionized relations between manufacturing, marketing, vendors and distributons. Today it's not so new.

"Management will go from art to science. Bigger, more complex companies demand new tools to run and manage them. Indeed, improved technology and statistical-control tools have given rise to new management approaches that make even mega-institutions viable. Long gone is the day of the "gut instinct" management style. Today's business leaders are adopting algorithmic decision-making techniques and using highly sophisticated software to run their organizations. Scientific management is moving from a skill that creates competitive advantage to an ante that gives companies the right to play the game."
This is science fiction. There's no such thing.

"Ubiquitous access to information is changing the economics of knowledge. Knowledge is increasingly available and, at the same time, increasingly specialized. The most obvious manifestation of this trend is the rise of search engines (such as Google), which make an almost infinite amount of information available instantaneously. Access to knowledge has become almost universal. Yet the transformation is much more profound than simply broad access."
Once again, there's nothing new here. Google's been around for almost ten years now.

So these are fun predictions, but they don't really say much, and they miss the world war and financial crisis that are coming.

As I've said before, this is the only web site in the world that tells you what's going on in the world, and what's coming. (29-Dec-06) Permanent Link
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Generational Dynamics Web Log for 29-Dec-06 McKinsey's Predictions: Ten Trends of 2006

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Generational Dynamics Web Log for 29-Dec-06
McKinsey's Predictions: Ten Trends of 2006