Vacuum State: Inevitable Surprises

Date: 6th August 2009

Time: 5.30pm

Place: National University of Singapore, Bukit Timah Campus, Singapore.

Introduction from the host:

(From Wikipedia):Schwartz was born in 1946 to Klara and Benjamin Schwartz, Hungarian Jews who had been in concentration camps and were living in a displaced persons camp in Stuttgart, Germany.[1] The family soon moved to Norway, where they lived until he was five. At this point, they emigrated to America, and found a new home in Camden, New Jersey. Schwartz grew up there, attending school with such future stars as Steven Spielberg. He won a National Merit scholarship, and was able to attend Rensselaer Polytechnic Institute (RPI) on full scholarship. He will serve as RPI's May commencement speaker for the class of 2009.

For more, read http://en.wikipedia.org/wiki/Peter_Schwartz_(futurist)

Note: This is written as first person for ease of reading. It is not an ad-verbatim recording of his speech. Any errors and omissions are mine and most likely accidental.

Thanks for the great introduction. I have done many talks all over the world and this is by far the best introduction of myself that I have received. :)

Singapore is a special place to me. My first time in Singapore was back in 1967. Today I would like to view the world from the perspectives of different cultures, sub-cultures and age groups, to see if we can catch some signals and early warnings and see if we can paddle faster than water.

Let me first of all make clear that I do not know what is ahead or around the next bend. What I do is to present you some of my findings and then later come up with some (surprise surprise) scenarios. We have only one hour for the presentation followed by 30 minutes of Q & A, but there is more than one-hour worth of information I would like to relay, so there will be parts of the slides that I'll just fly through and some parts we spend a bit more time on.

It is said that "He who predicts the future lies even if he knows the truth" or another Chinese saying that goes, "He who lives by the crystal ball, die from broken glass".

Let's start with the Short Term Shocks.

The current financial crisis has some structural problems.

We moved from Hedging to Speculation to Ponzi - that's what is described as the Minsky Movement from 2003 to 2007.

From Wikipedia: A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.

We have seen a global economy over-leveraged. For a while it worked well. The US borrows and loves consuming more and more, while on the other hand China saves and lend and produces the goods to be consumed by the US. It seems to be a symbiotic relationship and it all works well, but this is beginning to stop with the US unable to consume as they used to. And even if we believe this relationship works, we still have the task to bring it back to work the same way as they used to.

So question is, "How quickly can it unwind?"

The US debt is 4 times its income. Can we de-leverage?

The Greenspan fallacy is that bankers have incentive to make the banking system work. But these are perverse incentives and there was also a lack of transparency leading to the securitization of debt that led to the final collapse.

The Indian and Chinese economies, despite their large populations, have relatively small consumption. So, there'll be modest economic growth for sometime to come. There may be another financial crisis come autumn and then there will be a need for another financial stimulus package.

Now the world has learned that trade, development and finance must work together.

In this crisis, we also see the practice of globalisation under challenge, as we see the crisis from some over-valued local assets in America spread across the world rapidly.

Food shocks:

There will be large price perturbation and huge price movements for food. A prime example would be the price of rice. Prices will be hedged and we may see the same thing as what has happened to oil.

Demographics:

There has been some moderation over the projections of the world population. It will continue to grow and peak at 8.5 billion people by the year 2050. Many countries are having lesser and lesser babies, even in countries where the Pope has sway, like Italy and Spain, the birth rates have fallen drastically well below natural replacement rates.

More and more people will move to cities. Half the world population already live in cities in 2009, which incidentally is a good thing for the environment, leaving the countryside and environment less disturbed. This will happened for the industrialised world as well as (surprisingly) for the developing countries, except for the Middle East and the US (due to immigration).

The future will also see the end to retirement. That isn't surprising if you consider that the concept of retirement is a relatively new idea. Up till the 1930s, there wasn't retirement, pensions...etc. In the near future, people will have longer lives. People of my generation in developed countries may live up to at least 120 years, and this is no exaggeration. Also note that I said, "at least 120 years", which means it is possible to live 150 years, as anti-ageing pills get perfected and more commonly available.

For those of you who are below 30 years old now, if you do take care of yourself well, your lifespans will be measured in centuries and not decades. *Roaring Laughters* I am not kidding here. You may live till 200 or 300 years old. So choose your spouse carefully, you may end up living that long with them.

For guys like me in the 60s, the body has taken so much abuse, it wouldn't be able to extend its life like you younger ones can. We can only make it to 120-150 years old.

[My note: In that case, a 70 year old of the near future will be considered a 'youngster', and his mates may call him out for a game of football or skydive. Just like what many youngters of today do.]

[Chart shown of violence vs age group composition]

The chart shows that countries with a younger population have more violent crime. That's how it is, where you have younger men (oh, by the way, it is only the men, women are alright in this respect), you get more violence. This is irrespective of economies.

Society:

Religion will become an increasingly profound influence in society. Women will become more dominant. There will be more and more women in universities, holding high positions in businesses and governments. Look at the hall today, there are already more women here in law school sitting right here. This will happen everywhere, except the Middle East. They will face a decline in their competitive edge without the participation of their womenfolk, and this might force them to change.

Climate Change:

There will be more and more extreme weather. If there is a global warming in the weather, that will melt the ice on the Himalayas, that is the source of all major rivers in Asia. Bangladesh - forget it! It'll be gone. 160 million people there will be looking for a new place to live, probably China and India, which they will not be much welcome.

I just came back from Cambodia, the lake Tonle Sap, will have severe effects on their ecosystem. The Three-Gorge dams in China will have significant effects on the lower reaches of the Mekong river, affecting Cambodia, Vietnam and Thailand.

Singapore may find itself building dikes like the Dutch has very soon, as the sea level rises.

The problem is that despite the availability of alternative energy sources, the efficient energies are still from coal and therefore they are the bulk of the world energy source. The US and China are now stuck with coal. Which makes the return of nuclear energy as a popular energy source. There could be a shift in the concept of having small nuclear power stations on barges and anchored in the sea. This could well happen in Singapore where land is scarce.

So we will see the additional energy demands satisfied by nuclear and renewable energies. By the year 2020, all cars in Singapore could be electric.

Science and Technology:

There will be an increase in new scientific tools and computing power, and the use of artificial intelligence. There will be increase in the discovery of scientific anomalies, there will be an increase in the number of scientists and increase in funding for the sciences.

Regenerative Medicine:

We will see the shift to the new paradigm of regenerative medicine. We will clone our own kidneys, hearts and other body parts while we are healthy and use them when our original ones stop working properly. There will no longer be the need to buy transplants from others.

There will also be the trigger to use the natural healing process of the body.

There will be human enhancements: mechanical, biological and chemical.

There will be synthesized biology - taking cells and modify them into something else useful for us. Algae will be used to generate electricity. (Already happening now.)

Geo-economics:

There will be a triumph of knowledge over natural resources. In knowledge, there is no limit to growth. In the digital economy, more and more things will be FREE. New business models will be invented to gather revenue. It'll be more akin to giving you the razor free, but selling you the razor blades.

Private NGOs and foundations will be increasingly influential over government and national foreign policies. Look at the Gates Foundation, Soros Foundation, Larry Page, Sergy Brin, Pierre Omidyar...etc. The Gates foundation alone wield about USD50billion!!!

There will be a re-balancing of the power of global finance, as China owns more and more of the US treasury bonds. It'll not be from London or New York, but more of Singapore, Hong Kong, Shanghai and Tokyo. It's very simple, the one who pay the bills calls the shots.

Scenarios:

It will be a knowledge driven world. There will be an increase in interconnectivity and therefore more shock prone. There will be a challenge between "Interests and alliances" (more China) vs "Laws and Institutions" (more American). It will be likely to be in Singapore's interests to ally with the US than China, as it is more structured by laws and institutions. Besides China has a history of dominance in the region and expecting tributes to be paid to them and this is not what you would like to do.

There will be a continuous need to attract talent. Just like what Singapore is doing.

Strong authoritarian society will not be sustainable. The penetration of information will undermine them.

Question time:

Question: Over the risks of Nuclear Power generation.

Reply: We can manage the risks of nuclear power generation but it is more difficult to manage global climate change.

Question: You mention about the dominance of women in the future and the violence of young men. Putting the two together, will you see the world becoming gentler and kinder with less wars and violence?

Reply: The likes of Golda Meir and Margaret Thatchers of this world are not your gentle sweethearts. *drawing a thunderous laughter from the audience* They are one of the most ferocious warriors the world has ever seen. With more woman leaders, the world will certainly be different, but I don't think that just because of that, there'll be less wars and violence.