Archive for the ‘Centre for the Future’ Category

The Future of the Bitcoin

By Stephen Murgatroyd -

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The Bitcoin has been around for five years. Like any other currency, the idea is that you buy the currency and can then use it in the way you would any other currency – to buy goods, to trade, or to exchange for other currencies. Unregulated and not backed by any guarantees or supported by any insurance, Bitcoins are a virtual currency that use cryptography to control the creation and transfer of money.

People buy them because they think they will, over the long haul, save money on bank fees and transaction costs. However, they are also taking a risk with the currency, especially since there is no lower-level fixed value for the coin.

Governments do not like them because they are unregulated, put consumers and users at risk, and the coin will have an impact on the economy, if its use significantly increases. They also do not like them because they enable crime. Criminal activities involving Bitcoin have largely centered around theft of the currency, money laundering, the use of botnets for mining, and the illicit use of Bitcoins in exchange for illegal items or services.

Two recent Bitcoin Bank failures – Mt.Gox and Alberta’s Flexcoin – do point to the challenges of launching a new global currency. One of these was poorly managed and lost some $550 million  and the Alberta based business was attacked by hackers who stole 896 Bitcoins valued at $600,000 ($669 a coin). The apparent suicide of another Bitcoin executive – the CEO of First Meta Pte Ltd – also points to the vulnerability of virtual currency firms.

It will be interesting to see what happens to this currency over time. In the future, there will be increasing use of cyber-currencies and cyber transactions. Maybe a refined Bitcoin2 which is insured and regulated is what is needed. It is not a trivial matter –  he total market capitalization of all Bitcoin is estimated at $8.3 billion – its a big deal. What is really interesting, from a futurist perspective, is how a virtual community can adopt a virtual currency without concern for the regulation of this currency. What does this tell us about the new reality of globalized economics?

Bioprinting – The Next Wave of Health Care Disruption

By Stephen Murgatroyd -

Scientists and doctors are teaming up all around the world to print organs, layer by layer, with 3D printing technologies. These developments include  3D printed livers at San Diego-based bio-printing company Organovo to 3D printing skin cells at Wake Forest University, all from your own cells. Recently, so as to “prep” for surgery on an infant, a medical team arranged for a 2D printed heart  to explore surgical options. 3D printed valves, components required for head and neck reconstruction and other body parts have all been in play for some time.

As speed and quality improves, printing replacement body parts from stem-cells or from emerging nano constructions will become increasingly possible. This could have a major impact on the treatment of burn victims or in the restoration of damage after an accident.

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A History of the Future

By Stephen Murgatroyd -

In 2011, Max Singer, founding President of the Hudson Institute and a leading practitioner of strategic foresight, published a book called History of the Future.  The premise of the book is very simple – the shape of the world to come is visible today, though there are a few areas of uncertainty (demographics and the future of work being two) which may change the specifics. 

Singer focuses on these driving forces: (a) the emergence of modernity in terms of values and culture; (b) the soaring wealth of the few and the reduction of poverty overall; (c) the growth of freedom; (d) the decline and fall of the war system; and (e) the Jihadi challenge and the rise of Islam, not just in the Middle East but throughout the world. Singer suggests that these forces are shaping destiny and challenging the old values and suggesting new ways of working, new values and new cultural norms.

In an Epilogue chapter called The Desperate Problems of the Future, Singer suggests we should be concerned about:

  1. The emergence of formerly poor nations (Myanmar and Bangladesh, for example) into moderately wealthy modern nations.
  2. The unequal distribution of wealth and the fact that this unequalness is getting more unequal rather than less so – the rich are getting richer at the expense of the middle class.
  3. Changing social structures – especially family, marriage, work, community and sense of identity and meaning.
  4. The demographic deficit – people are not replacing themselves in their own communities and therefore societies rely more and more on immigration and labour mobility to stay the same economically (Canada is a good example of this).

My friend and colleague, David Oldroyd, would add a fifth issue to this list which is the scarcity of raw materials against demand for these materials. As the global population grows to 9 and 10 billion, demands for minerals, food, water and basic materials will increase and so must our ability to either extract these materials or produce them. Many think that demand will far outstrip supply, causing shortages. Water is an especially important area of vulnerability.

In my own book Rethinking the Future – Six Patterns Shaping a New Renaissance I looked at different issues. In particular, I focused on demography, economics, power and authority, sustainability, technology and identity. While end points are not dissimilar – we are both basically optimistic – the route to the end points are different.

What are the drivers you think will shape the future and how will these change the future (positive or negative) in the developed and developing world? These kinds of issues will be explored in the Centre for the Future – part of the International Institute for Innovation (3i) when we launch later this year.

Changing the Way We Think About the Future

By Stephen Murgatroyd -

The future is not a straight line from the past. It has bends, turns and may even involve a “sink hole”. What we thought was going to be shifts – the average global surface temperature is not what it was predicted to be, the sun is not behaving as we thought it might, the economic recovery around the world is not producing the return to employment we anticipated, the banking system remains vulnerable despite significant reforms intended to reduce this risk. The future rarely pans out exactly as anticipated.

 

This is why futurists use scenario planning as a tool. Rather than making predictions – e.g. “prosperity and GDP growth will last for ever” or “four male singers with guitars have no future in show business” (a year before the Beatles) – those engaged in foresight seek to understand the dynamics which will affect the future and then build 4- 6 scenarios which capture different futures we may experience. The “trick” with such work is to ensure that there is strong evidence to support all of the scenarios presented and that the indicators which show which scenario is in play are explicit.

 

If we take climate change as an example, three scenarios are becoming clear and a fourth is emerging. The first is that the planet is warming and that humans, through their use of fossil fuels for heating, transport and other purposes are contributing to this warming. A second scenario is that we are approaching a period of planetary cooling, due to a combination of factors with the actions of the sun being a critical component of this development. The third scenario is that the current climate is part of a “normal range” of climate change and that  any suggestion of warming or cooling misses the point – its climate change as per normal.  Some are suggesting a fourth scenario which is that of sudden and catastrophic change in climate, such that it may make the earth. Evidence is being referred to by scientist who support one (or more) of these scenarios. While some suggest that the dominant scenario is that of warming, evidence from direct observation questions the veracity of this view, which remains a dominant view of those who study climate change.

Given the failure of experts to make predictions – see an earlier post here – we should look at each of these scenarios and seek to understand them. The questions we should ask  are:

  • What evidence exists which suggests that the scenario has merit?
  • What indicators should we track to see whether or not the scenario is “in play”?
  • What are the implications of the scenario?

Blindly accepting a prediction without fully looking at alternatives is what gets policy makers, planners and others into trouble.

Beware of Predictions

By Stephen Murgatroyd -
In climate research and modeling, we should recognize that we are dealing with a coupled, non-linear, chaotic system, and, therefore, that long-term prediction of future climate states is not possible.” IPCC Third Assessment Report, 2001.
Despite this admission, the International Panel on Climate Change (IPCC) continues to have confidence in a scenario for the future which is so disturbing that nations are being asked to take drastic action to mitigate the climate “catastrophe” that awaits us. While actual evidence suggests that the climate is undergoing a natural cyclical change and that the “man-made” impacts are small, policy makers are determined to act on models and scenarios from “experts” which remain unsupported by compelling “real world” evidence.
Indeed, the expert “consensus” position is based on selective use of evidence, some of it from peer reviewed journals and some not, and expert group-think. Psychologists understand this phenomenon and have developed a thorough understanding of just how wrong experts can be.
Phillip Tetlock, author of Expert Political Judgement[1] and a Professor of Psychology at Penn State University, provides strong empirical evidence for just how bad we are at predicting. He conducted a long-running experiment that asked nearly 300 political experts to make a variety of forecasts about dozens of countries around the world. After tracking the accuracy of about 80,000 predictions over the course of 20 years, Tetlock found:
That experts thought they knew more than they knew. That there was a systematic gap between subjective probabilities that experts were assigning to possible futures and the objective likelihoods of those futures materializing … With respect to how they did relative to, say, a baseline group of Berkeley undergraduates making predictions, they did somewhat better than that. How did they do relative to purely random guessing strategy? Well, they did a little bit better than that, but not as much as you might hope ….
 
The psychologist Daniel Kahneman, who won the Nobel Prize in Economics for his work on decision-making, has looked at the issue of “experts” and why they often get things wrong. In his book, Thinking Fast and Slow[2] he points to several aspects of their psychology as factors, but highlights two in particular: the illusion of understanding and the illusion of validity. These are primary causes of experts getting it wrong.
The illusion of understanding refers to the idea that the world is more knowable than it actually is. In particular, experts believe that they have an in-depth and insightful understanding of the past and this enables them to better understand the future. They use what Kahneman refers to as the WYSIATI rule – “what you see is all that there is” and this provides the basis for their confidence.
For example, it must be the case that high levels of government indebtedness (levels of debt to GDP ratio above 90% is the most recent version of this[3]) stifle the economy and reduce investor and entrepreneurial confidence according to some notable economists. Or it is obvious that human generated C02 is the major cause of climate change according to some climatologists. Both of these understandings are based on a particular view of historical data and “facts” and an extrapolation of these views into the future.
The views exist independently of the evidence to support them. Just as financial advisers are confident that they are successful in predicting the future behaviour of stocks, so macro-economists are confident that their views of austerity have the weight of history behind them. Those committed to the view that human produced CO2 is the primary cause of climate change are not deterred by evidence that it may not be or that climate change has stalled for the last seventeen years.
Experts are sustained in their beliefs by a professional culture that supports them. Austerians  (those who believe that austerity is the only way) have their own network of support, as do the Keynesians who oppose them. Anthroprocene climatologists who believe that man is the primary cause of global warming have their own network of support among climate change researchers and politicians while the skeptical climate scientists also have their support networks. All remain ignorant of their ignorance and are sustained in their belief systems by selected use of evidence and by the support of stalwarts. These supportive networks and environments help sustain the illusion of validity. It is an illusion because evidence which demonstrates contrary views to those of the “experts” are dismissed and denied – the expert position, whatever it may be, is valid simply because they are expert.
Indeed, using Isaiah Berlin’s 1953 work on Tolstoy (The Hedgehog and the Fox), Austerians and anthropocenes are “hedgehogs” – they know one big thing, they know what they know within a coherent framework, they bristle with impatience towards those who do not see things their way and they are exceptionally focused on their forecasts. For these experts, a “failed prediction” is an issue of timing, the kind of evidence being adduced and so on – it is never due to the fact that their prediction is wrong. Austerians who look at the failure of their policies in Europe, for example, suggest that the austerity did not go far enough; anthroprocene climatologists see the lack of warming over the last seventeen years as proof that they are right, it is just that the timing is a little out. Even the climatologist trapped in thick ice in the Antarctic, in December 2013, who set out to study the thinning ice-cap claims he just went to the wrong place – “climate change is happening and the ice is melting” he says, as he is lifted off the thick ice by helicopter.
Tetlock’s work, cited above, is a powerful testimony to these two illusions – understanding and validity. His results are devastating for the notion of “the expert”.  According to Kahneman, “people who spend their time, and earn their living, studying a particular topic produce poorer predictions than dart-throwing monkeys”.
Tetlock observes that “experts in demand were more overconfident than those who eked our existences far from the limelight”. We can see this in spades in both economics and climate change. James Hanson, recently retired from NASA and seen to be one of the world’s leading anthroprocene climatologists, makes predictions and claims that cannot be supported by the evidence he himself collected and was responsible for. For example, he suggested that “in the last decade, it has warmed only about a tenth of a degree as compared to about two tenths of a degree in the preceding decade” – a claim not supported by the data set which he was responsible for. This overconfidence and arrogance comes from being regarded as one of the leading climate scientists in the world – evidence is not as important as the claim or the person making it. Hanson suffers from the illusion of skill. Kahneman recognizes people like Hansen. He suggests:
“…overconfident professionals sincerely believe they have expertise, act as experts, and look like experts. You will have to struggle to remind yourself that they may be in the grip of an illusion”.  
There are other psychological features of the expert that are worthy of reflection. For example, how “group think” starts to permeate a discipline such that those outside the group cannot be heard as rational or meaningful – they are referred to as “deniers” or “outsiders”, reflecting the power of group think. The power of a group (they will claim consensus as if this ends scientific debate) to close ranks and limit the scope of conversation or act as gatekeepers for the conversation. Irving Janis documented the characteristics of group think in his 1982 study of policy disasters and fiascoes[4]. He suggests these features:
  1. Illusion of invulnerability –Creates excessive optimism that encourages taking extreme risks. We can see this in the relentless pursuit of austerity throughout Europe.
  2. Collective rationalization – Members discount warnings and do not reconsider their assumptions. We see this in relation to both climate change and austerity economics.
  3. Belief in inherent morality – Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions. Austerians appear to willfully ignore the level of unemployment and the idea of a lost generation of youth workers, especially in Greece and Spain. Anthropecene climate researchers generally present themselves as morally superior.
  4. Stereotyped views of out-groups – Negative views of the “enemy” make effective responses to conflict seem unnecessary. Climate “deniers” commonly face suggestions that they be prosecuted or punished in some way[5].
  5. Direct pressure on dissenters – Members are under pressure not to express arguments against any of the group’s views. This has occurred in the climate change research community, since grants appear to favour those who adopt the view that man- made CO2 is the primary cause of climate change.
  6. Self-censorship – Doubts and deviations from the perceived group consensus are not expressed.
  7. Illusion of unanimity – The majority view and judgments are assumed to be unanimous. This is especially the case in “consensus” (sic) climate change science and amongst austerians.
  8. Self-appointed ‘mindguards’ – Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions.
– all of these characteristics can be seen to be in play in the two examples used throughout this chapter – economics of austerity and man-made global warming.
There is also the issue of the focusing illusion. Kahneman sums this up in a single statement: “Nothing in life is as important as you think it is when you are thinking about it”. “Government debt is the most important economic challenge facing society today”, says a well known economist, or “climate change is a life and death issue”, says US Secretary of State, John Kerry.  Neither of these statements are true for anyone unless they are obsessive.
Society faces a great many challenges. Much will depend on our own preoccupations and what focus one takes for the concerns you have. Some are more concerned about the future of Manchester United or Chelsea football clubs than they are about debt, deficits, or climate change. The illusion is that one person’s focus is, by definition, better than another’s simply because they are expert in this field.
Nassim Taleb makes a very compelling argument against forecasting in several of his books, most notably in The Black Swan[6]. He explains that we can make use of very short-term guesses or predictions, but long-term forecasts are nothing more than pure guesswork. We are guilty of ascribing far too much predictability to the truly unpredictable. It is very common for our human brains to believe we are recognizing patterns that are only a random sequence of events. Experts have tried to overcome our human fallacies with tools such as quantitative modeling. However, even these models play only on our biases. We believe that models that have accurately predicted the future in the past are likely to predict the future going forward. But that is no more true than believing me when I tell you that a coin will land heads up just because I accurately predicted it would do so the last ten times.
So beware of predictions, especially those made by experts. New Year’s Eve and Day are the prime season for prediction. You have been warned.

 

 


[1] Tetlock, P. E. (2006) Expert Political Judgment – How Good is It? How Can we Know? New Jersey: Princeton University Press.
[2] Kahneman, D. (2011) Thinking Fast and Slow. Toronto: Doubleday Canada.
[3] Reinhart, C. and Rogoff, K. (2013) This Time It’s Different – Eight Centuries of Financial Folly. New Jersey: Princeton University Press.
[4] See Janis, Irving L.  (1982).  Groupthink: Psychological Studies of Policy Decisions and Fiascoes.  Second Edition.  New York: Houghton Mifflin.
6 It has been suggested that those who deny that climate change is caused by human activity should be put to death. See http://joannenova.com.au/2012/12/death-threats-anyone-austrian-prof-global-warming-deniers-should-be-sentenced-to-death
[6] Taleb, N. ( 2010) The Black Swan – The Impact of the Highly Improbable.  New York: Random House.