The Outlook for Industries in 2014: An EIU Webinar Series


The Economist Intelligence Unit is putting on a series of webinars on the outlook for various industries in 2014.

1.  Consumer Goods in 2014

Wednesday, January 15, 2014

2.  Automotive in 2014

Thursday, January 16, 2014

3.  Financial Services in 2014

Friday, January 17, 2014

4.  Energy in 2014

Wednesday, January 22, 2014

5.  Telecoms in 2014

Thursday, January 23, 2014

6.  Healthcare in 2014

Thursday, January 30, 2014

For those interested in registering for these webinars, contact laurenbrayshaw@economist.com!

I am looking forward to this series because I have attended previous webinars from the Economist Intelligence Unit, usually about economic and geopolitical forecasts for various regions of the world.   This will be the first time I’ve attended their industry-specific webinars, but I have an interest in all of them, so I plan to attend all six webinars.   Of course, I plan to summarize these webinars here on the blog, so if you can’t attend, then you can still get a thumbnail sketch of what’s going on in 2014 by visiting here on Saturdays in the months of January and February, when I plan to post them!

Here’s to a prosperous New Year in 2014!

 

Project Planning, Scheduling & Control–Chapter 10: Managing Project Communications


This blog post is part of a series that summarizes the 5th edition of the classic project manager’s handbook Project Planning, Scheduling & Control by James L. Lewis, Ph.D., the founder of the Lewis Institute, Inc.    I wanted to go through the book and take notes for my own use, but also in the hope that my summary would be of interest to both those already in the project management field or those who want to enter that field.

Section One of the book covers Introduction to Project Management, and contains Chapters 1 through 5.

Section Two of the book covers Project Definition, and contains Chapter 6.

Section Three of the book covers Project Planning, and contains 7 through 11.   This post covers chapter 10.

TO BE CONTINUED

Project Planning, Scheduling & Control–Chapter 9: Project Scheduling


This blog post is part of a series that summarizes the 5th edition of the classic project manager’s handbook Project Planning, Scheduling & Control by James L. Lewis, Ph.D., the founder of the Lewis Institute, Inc.    I wanted to go through the book and take notes for my own use, but also in the hope that my summary would be of interest to both those already in the project management field or those who want to enter that field.

Section One of the book covers Introduction to Project Management, and contains Chapters 1 through 5.

Section Two of the book covers Project Definition, and contains Chapter 6.

Section Three of the book covers Project Planning, and contains 7 through 11.   This post covers chapter 9.

TO BE CONTINUED

Project Planning, Scheduling & Control–Chapter 8: Implementation Planning


This blog post is part of a series that summarizes the 5th edition of the classic project manager’s handbook Project Planning, Scheduling & Control by James L. Lewis, Ph.D., the founder of the Lewis Institute, Inc.    I wanted to go through the book and take notes for my own use, but also in the hope that my summary would be of interest to both those already in the project management field or those who want to enter that field.

Section One of the book covers Introduction to Project Management, and contains Chapters 1 through 5.

Section Two of the book covers Project Definition, and contains Chapter 6.

Section Three of the book covers Project Planning, and contains 7 through 11.   This post covers chapter 8.

TO BE CONTINUED

Project Planning, Scheduling & Control–Chapter 7: Developing Project Strategy


This blog post is part of a series that summarizes the 5th edition of the classic project manager’s handbook Project Planning, Scheduling & Control by James L. Lewis, Ph.D., the founder of the Lewis Institute, Inc.    I wanted to go through the book and take notes for my own use, but also in the hope that my summary would be of interest to both those already in the project management field or those who want to enter that field.

Section One of the book covers Introduction to Project Management, and contains Chapters 1 through 5.

Section Two of the book covers Project Definition, and contains Chapter 6.

Section Three of the book covers Project Planning, and contains 7 through 11.   This post covers chapter 7.

TO BE CONTINUED

Project Planning, Schedule & Control–Chapter 6: Headless-Chicken Projects and How to Prevent Them


This blog post is part of a series that summarizes the 5th edition of the classic project manager’s handbook Project Planning, Scheduling & Control by James L. Lewis, Ph.D., the founder of the Lewis Institute, Inc.    I wanted to go through the book and take notes for my own use, but also in the hope that my summary would be of interest to both those already in the project management field or those who want to enter that field.

Section One of the book covers Introduction to Project Management, and contains Chapters 1 through 5.

Section Two of the book covers Project Definition, and contains Chapter 6.  This post covers this one chapter that covers the Initiating Process Group.

1.  HEADLESS-CHICKEN PROJECTS

Dr. Lewis begins with a description of the behavior of a headless chicken which he encountered in his boyhood while living in the country.   After a chicken’s head is cut off, the body runs around spewing blood for a few seconds, and then it falls over and quivers a bit, at which point the chicken is officially dead.    In reality the chicken died when you cut off its head, but it takes some time for the message to reach the body.   His analogy with project management is that many projects actually die during the initiation process, but their death only becomes apparent in later stages.

A study done by the Standish Group in 1994 showed that 83% of all projects suffer serious problems, and only 17% of them succeed.    Of those projects that suffered serious problems, 50% ended up being revised, and 33% failed outright.

2.  THE CAUSES

Consider the launching of a project.    What is the problem with this series of steps?

  • Project sponsor conceives the need for the project
  • Project manager is recruited
  • Project manager assembles team, tells team members about the project
  • Team members say nothing
  • Project manager assumes all team members are in agreement, and all understand the mission

What is the problem?   The project manager had a failure of leadership.   It is not a failure to manage agreement, but a failure to manage disagreement that is the cause of future problems on this project.   Why?   The team members weren’t in agreement, and did not understand the mission.   However, they were afraid to do so in front of others for fear or appearing stupid.    Remember, silence does not equal consent.    This is referred to by Dr. Lewis as the Abilene Paradox, that everyone appears to agree to an outcome, mainly because no one is willing to disagree.

3.  OVERCOMING THE ABILENE PARADOX

The project manager did nothing to make the team members feel like they are a team.   The team members need to get actively involved in defining the project, which includes examining the problem to be solved and then developing a mission statement by the following process:

  • Each person prepares a statement of the team’s mission
  • These are compared, and differences are resolved
  • The group then combines individual views into a team statement reached by consensus
  • The group reviews and critiques the meeting, in order to improve future meetings
  • The mission statement is published and all members receive copies

Okay, what happens if there are discrepancies between the team members in terms of where the team is going?   For the sake of illustration, let’s say that one person is going in a different direction than the others on the team who are all going in the same direction.   There are three ways to resolve this:

a.  Convince the person to go in the same direction as the others

This is done through discussions in which the individual’s misunderstandings are corrected.   If the person understood the direction but disagreed with it, then he may need to be convinced of the proper direction.

b.  Change the direction of the entire team (paradigm shift)

It could be the “errant” person understood or thought of the mission in a way that everyone else missed.  In this case, the team agrees to change to the direction advocated by the individual in what is called a paradigm shift.

c.  Remove the person from the team

If a core team member disagrees with the mission as it is seen by the other members and that person refuses to change his direction, then the best decision is to remove the person from the team.   As it difficult as this decision may sound, the first objective for a project manager is to achieve a shared understanding of the team’s mission.   If that person does not agree with the direction of the team, then that person will resist throughout the entire project.    And that outcome is worse than having to remove the person from the team at the very beginning.

4.  MISSION VS. VISION

Here is the difference between a problem, mission and vision statement.

a.   Problem

The starting point is the problem.   It can be stated as a need or a lack that the project must fulfill.   For example, for a person looking for work, the problem is:   I need a new job.

b.  Vision statement

What are the features that the solution to the problem will have?   These must be prioritized in terms of i) must-have features, ii) features that you want, and iii) features that would be nice to have.     The vision is a definition of the characteristics of the final outcome.

c.   Mission statement (can also be called a goal, objective, or target)

The mission is to achieve a solution to the problem with all of the must-have features and as many of the others (want and nice features) as possible.  

5.   PROBLEM DEFINITION

Defining a problem is important, because the way a problem is defined determines how we attempt to solve it.   If you don’t spend enough time working out the actual definition of the problem, you might end up developing the right solution to the wrong problem.   Or to give it another metaphor, you can finally get to the top of the ladder, and realize that the ladder was up against the wrong wall.

A problem is defined as a gap between where you are and where you want to be, confronted with obstacles that make closing the gap difficult.

There are two kinds of problems, open- and closed-ended problems, which have the following differences.

Closed-Ended Problems Open-Ended Problems
Solutions Single Multiple
Best Solved Using … Left-brain analytical approach Right-brain synthesis approach
Oriented towards … The Past The Future

6.   DEFINING CLOSED-ENDED PROBLEMS

a.   Problem Statement

The steps for creating a solid problem statement are as follows:

i.  The problem statement should reflect shared values and a clear purpose.

ii.  The problem statement should not mention either causes or remedies.

iii.  The problem statement should define problems and processes of manageable size.

iv.  The problem statement should, if possible, mention measurable characteristics.

v.  The problem statement should be refined (if appropriate) as knowledge is gained.

b.   Problem Analysis

Since closed-ended problems have single solutions, you need to find out what is broken, and determine a remedy in order to repair it using problem analysis.   Here are the steps:

i.   Identification of the deviation

A system that previously performed properly suddenly ceases to do so, and you have a symptom of a problem.  The problem is a gap between a desired state and a present state, confronted by obstacles that prevent easy closure of the gap.    This gap is deviation from standard performance.   (In the case of a project, if the critical ratio or CR = SPI x CPI is outside of the range between 0.8 and 1.1, it is a signal that a potential problem exists with the task in question.)

A problem is recognized because of the effects produced are different from the normal outcomes expected from the system or process.

ii.  Description of what the problem IS and IS NOT

There are two ways to localize a problem by exposing underlying patterns:   stratification and is/is-not analysis.

Stratification

Examine the process to see what characteristics could lead to biases in the data.   Using brainstorming to make a list of the characteristics that could cause differences in results.  Make data collection forms that incorporate those factors, and collect the data.  Look for patterns related to time or sequence.   Then check for systematic differences between other factors, such as days of the week, shifts, operators, and so on.

Is/Is-Not Analysis

This is a structured form of stratification.   You identify the problem to be analyzed.   You use the matrix below to organize your knowledge and information.  The answers will assist you in pinpointing the occurrence of the problem and in verifying conclusions or suspicions.

IS/IS-NOT MATRIX

ISWhere, when, to what extent, or regarding whom does this situation occur? IS NOTWhere does this situation NOT occur, though it reasonable might have? THEREFOREWhat might explain the pattern of occurrence and nonoccurrence?
WHEREThe physical or geographical location of the event or situation.  Where it occurs or is noticed.
WHENThe hour/time of day/day of week, month/time of year of the event or situation. Its relationship (before, during, after) to other events.
WHAT KIND or HOW MUCHThe type or category of event or situation.  The extent, degree, dimensions, or duration of occurrence.
WHOWhat relationships do various individuals or groups have to the situation/event?  To whom, by whom, near whom, etc., does this occur?

iii.  Analysis of data

Here are the questions you should ask to help identify differences in the data (found in part ii) in order to formulate hypotheses concerning causes of the problem (to be done in part iv).

  • What is different, distinctive, or unique between what the problem is and what it is not?
  • What is different, distinctive, or unique between where the problem is and where it is not?
  • What is different, distinctive, or unique between when the problem is and when it is not?

To find out what has changed about the process that is causing the problem, you need to find out what has changed about each of the differences listed above.

iv.  Hypotheses must be formulated about possible causes

One of the most commonly used tools for formulating hypotheses is the Ishikawa or cause-effect diagram, also called the fishbone diagram because it resembles the skeleton of a fish.

The four general categories of causes are:

  • Manpower
  • Machines
  • Methods
  • Materials

v.  Testing of hypotheses to determine root causes

Once the hypotheses for the causes have been identified, they have to be tested with the following question:

Can the cause explain both the is and the is-not effects?

If more than one cause is identified, the most likely cause will be the one that best explains the description of the problem or the one with the fewest assumptions.     To prove that the cause is the true root cause of the problem, you manipulate the factor that is supposedly causing the deviation.    If you can make the effects come and go by manipulating that factor, then you have probably found the true root cause.

If there are multiple causes that need to be tested, then your design of experiments must be able to determine which cause is primary.

vi.  Action which is corrective and (hopefully) solves the problem

There are three possible types of action that you can take to solve the problem once you have identified the root cause.

  • Interim action–you buy time while the root cause of the problem is sought
  • Adaptive action–you decide to live with the problem or adapt to it
  • Corrective action–aimed at the actual cause of a problem

The only action that will truly solve the problem is the corrective action.

7.   DEFINING OPEN-ENDED PROBLEMS

As mentioned above, solving an open-ended problem requires right-brain thinking and creative techniques.   Here are some suggestions for these techniques.

a.   Procedure

i.  Describe an open-ended problem that is important to you and for which you need answers that could lead to action.  Take as long as you wish for this.

ii.  Again taking your time, complete the following statements about the problem you have chosen.  If you cannot think of anything to write for a particular statement, move on to the next one.

PROBLEM DEFINITION

  1. There is usually more than one way of looking at problems.  You could also define this one as …
  2. …but the main point of the problem is …
  3. What I would really like to do is …
  4. If I could break all laws of reality (physical, social, etc.), I would try to solve it by …
  5. The problem, put another way, could be likened to …
  6. Another, even stranger, way of looking at it might be …

iii.  Now return to your original definition (step i).  Write down whether any of the redefinitions have helped you see the problem in a different way.

b.  Goal-Orientation Technique

Create a problem statement.   Try to recognize the desired end stage (“what I want”) and the obstacles to achieving it (“what’s stopping me from getting the result I want”).    For example, if you want to increase adult literacy, you can redefine this problem in the following ways:

  • Efficiently and effectively teach adults to read.
  • Keep kids from getting through school without being able to read.
  • Get parents to take an interest in their kids so that they will learn to read in school.
  • Eliminate the influences that cause kids to take no interest in school.

This technique is akin to step 3 in the Problem Definition procedure outlined above (“What I would really like to do is…”).

c.  Successive Abstractions Technique

A company that makes lawn mowers could take the problem of “develop new lawn mower” and create successive abstractions as follows:

  • Lower level–develop new lawn mower
  • Intermediate level–develop new grass-cutting machines
  • Highest level–get rid of unwanted grass

This technique might generate new business ideas for the company.    It is akin to step 5 in the Problem Definition procedure outlined above (“The problem, put another way, could be likened to …”).

d.  Analogy and Metaphor Procedures

Rather than defining a problem as a literal statement, try redefining it in terms of an analogy or a metaphor.   This is

  • “Improve the efficiency of a factory” is a literal statement.
  • “Make a factory run as smoothly as a well-oiled machine” is an analogical redefinition.
  • “Reduce organizational friction or viscosity” is a metaphoric definition.

This technique is akin to step 4 in the Problem Definition procedure outlined above (“If I could break all laws of reality, I would try to solve it by …”).

e.  Wishful Thinking

This is akin to step 3 in the Problem Definition procedure outlined above (“What I would really like to do is …”).

f.  Nonlogical stimuli

One good way of generating ideas is through forced comparisons, in order to develop ideas for solving a problem.   It is akin to step 6 in the Problem Definition procedure outlined above (“Another, even stranger, way of looking at it might be …).

g.  Design Tree

The design tree is another name for the Mind Map technique, which is a trademark of Tony Buzan.  You write a single word representing the issue you want to deal with–and then draw a circle around it.  Next list all the ideas that come to you.   Connect them to the first word with lines.  Continue examining each new word in turn for the ideas it might trigger.   It is akin to step 1 in the Problem Definition procedure outlined above (“There is usually more than one way of looking at problems.  You could also define this one as …”).

8.  SHAREHOLDER EXPECTATIONS

The reason for creating a clear shared mission and vision for your project is so that you can clarify the stakeholder’s expectations.  If they have totally unrealistic expectations about the deliverables and results of a project, you need to adjust those expectations at the BEGINNING of a project.

9.  PROJECT MANAGEMENT ASSUMPTIONS

The big fallacy in project management is the assumption that the world will stand still while we execute our project plan.   In particular, software development projects have targets that are constantly moving, which is one reason why Agile management methods are being adopted by IT and software project managers.

If you are faced with a change to the project while it is being executed, you must decide if the change is needed to make the final result as functional as it must be in the final application.   Try thinking about the situation in the negative:   if the change is not made, can the resulting product be sold?  Will it be accepted by the customer?

In other words, project planning must be done with enough flexibility to respond to legitimate environmental forces.

 

The World In 2014–Science, Technology and Culture


Every year at this time, besides the personal planning I do for the coming year, I relax and read the Economist’s Double Holiday Issue and look through their special report The World In 2014.    I am taking notes on the various articles during the next few days to see what The Economist predicts will be the most significant global events that will take place in the coming year.   The reason why I’m doing this is not just to gain an understanding of these events before they happen, but to preserve a record so that next year at this time, I can look back and see how well the events were (or were not) predicted.

Here are the articles at the end of The World In 2014 that cover various trends in science, technology and culture.

A.  SCIENCE AND TECHNOLOGY

1.  Clone Not Alone

The movement to revive extinct species will take on momentum in 2014.    The project of bringing back the Pyrenean ibex, or bucardo, from extinction using the same process used to clone the sheep Dolly back in 1996, will continue in the coming year after being halted in 2003.    The new effort will use the more recently developed technology of writing genomes called “synthetic biology.”

2.  Comet Clues

In January, the European Space Agency probe Rosetta will approach its goal after traveling for 10 years, the comet with the unwieldy name 67P/Churyumov-Gerasimenko.    By May it will fly closer to its goal, and then launch a small craft named Philae which will land and then drill down into the interior, and anchor itself to the surface.   So as the comet approaches the sun, there will be a probe traveling alongside the comet while one sits on its surface.    Samples  if frozen gases from the comet may provide clues about how the early solar system formed.

3.  Moore No Moore

The so-called “Moore’s law” predicted that the number of transistors that could be etched onto a given surface area of silicon would double every two years.   However, as a number of increasingly-expensive technologies must be developed for each generation of ever-smaller transistors, the shrinkage in the transistors will no longer cut the transistors’ cost, thereby reducing the economic impetus for such shrinkage to continue at the same pace.

4.  Reusable Rockets

Elon Musk, SpaceX’s boss, predicts that a Falcon first stage rocket could return to its launch site by the end of 2014.  This may become be a game-changer for the future of space travel as it allows the private sector to enter into an arena that had previously been the province of national governments.

5.  RNA Reaches New Acceptance

The Human Genome Project that concluded two decades ago did not bring the medical advances that had been predicted because it was not understood at the time that the real significance lies with RNA.   It was once thought that the RNA was just the workforce that put proteins together.    In reality, their role is far more significant:   rather than being the “labor force” of the cell, they are its “management”, in that they control what a cell does, from birth to death and everything in between.   This understanding will begin to shed light on disease in 2014.

B.  CULTURE

1.  Internet–taking TV from the Boob Tube to YouTube

The following trends will increase the role of online video in our culture:

  • Faster broadband will make it easier to watch videos delivered online
  • People will buy more internet-enabled “smart” television sets
  • Sony and Intel will launch “over the top” services which deliver television programs over the internet.
  • Video subscription services like Netflix and Amazon are investing in their own high-quality “TV” shows
  • YouTube is trying to launch its own “channels” with professionally produced shows

This has increased the phenomena of “binge-watching”, that is, watching all of the episodes of a single season in single sittings.   It will increase the development of more serialized dramas, and more content that is crowd-sourced.

Young people often opt for cell-phone only coverage with no land line, and in a similarly way, they are opting for online-video service and broadband rather than cable pay-television.

2.  Enter the Engineers

The penchant for dystopian literature in science fiction will give way to more optimistic fare in 2014.    An example of this at the end of 2013 was the popularity of the movie of Gravity, about astronauts coping with the dangers of space through a combination of personal bravery and problem solving.    Neal Stephenson is coming out with an anthology of sci-fi work that exemplifies this new optimism.

3.  Independent Museums

In America the long-standing tradition has been for private art buyers to leave their collections to a local museum (aided by the tax system that allows these gifts to be tax-deductible).    However, the new trend has been for some rich patrons to build their own museums.    Private museums are becoming increasingly influential, such as the first museum of contemporary Western art built by Indonesian-businessman and collector named Budi Tek, which opens in Shanghai in May 2014.

4.  Bard Birthday

Shakespeare was born in 1564, 450 years ago, and there will be many celebrations not just in Britain but in the entire Anglophone world as well.    I’m planning to celebrate his birthday by fulfilling a life-long dream of reading all of his works, his plays and his poetry!   I’ve read various individual plays and seen productions on TV and in movies throughout my life, but with the aid of Harold Bloom’s book Shakespeare: The Invention of the Human, I intend to read all the plays in roughly the order they were written.   It’s a once-in-a-lifetime project to commemorate a genius that has occurred only once in the history of mankind!

The World in 2014–Business and Finance


Every year at this time, besides the personal planning I do for the coming year, I relax and read the Economist’s Double Holiday Issue and look through their special report The World in 2014.    I am taking notes on the various articles during the next few days to see what The Economist predicts will be the most significant global events that will take place in the coming year.   The reason why I’m doing this is not just to gain an understanding of these events before they happen, but to preserve a record so that next year at this time, I can look back and see how well the events were (or were not) predicted.

The articles I’ve reviewed in the past few days deal with the geopolitics of the various regions of the world.   The next two articles in the The World in 2014 magazine deal with the state of business and finance in the coming year.

A.  BUSINESS

1.   America’s companies on top once again

Five years after the collapse of Lehman Brothers, the prospects for American business will be pretty good for the following reasons:

  • Demand is steadily recovering
  • Housing market gains strength
  • GM and Chrysler will be profitable again
  • Falling unemployment will boost consumer confidence
  • Natural gas and oil will continue to be cheaper because of fracking (despite increasing regulatory pressure)
  • American business will lead the world into the next phase of social media

On the down side, corporate America will still be obsessed with short-term profits, and the gap between the pay of the boss and the average worker will continue to widen.

2.  Data protectionism

Worries about the American government utilizing data from private firms to spy on Americans will be the impetus for more cloud-computing services in Europe.   A think-tank in Washington has estimated that, in the worst case, the American companies’ share of the cloud-computing market outside the United States may drop from 85% to 55% over the next three years.

3.  Social media grows

The success of Twitter’s IPO will not only lead to Twitter’s acquisition of more businesses, but also the increase of competition between it and other social-media behemoths such as Facebook and Google.   Some had speculated that the social-media land grab had come to an end, but Bob Zukis, author of the book “Social Inc.” thinks that Twitter’s IPO will inspire other social-media outfits such as Pinterest to consider going public.

4.  2014 will be boring

In 2014 there will be a record length of tunnels bored around the world, some 620 miles in all.   Much of this will occur in China, India, the Middle East, and Latin America.   China has revived a plan for building the world’s longest sea tunnel across the Bohai Strait, linking the cities of Dalian and Yantai.

However, Europe will also experience quite a few construction projects, such as the Crossrail, Europe’s largest construction scheme.    Tunnel-boring machines are getting more sophisticated, allowing for the digging of ever-deeper tunnels, including those under the sea like the Channel Tunnel (completed in 1991).

5.  Airline economy class:   quantitative squeezing

Airlines will be trying to squeeze more revenue from economy class seats by offering differential pricing for slightly larger seats, such as exit-row seats or wider aisle seats.   However, few airlines will go the route of Samoa Air, which charge passengers by the kilo!

6.  Legalization of narcotics

The legalization of cannabis has come to the United States in Washington and Colorado.   The next states to propose legalization are Alaska, Arizona and Oregon.   This will cause Mexican drug cartels to abandon the pot business, because of the competition from legal growers in the United States.

Other more ambitious legalization projects are for coca in Bolivia, and synthetic narcotics in New Zealand with such fanciful names as “Apocalypse” and “POW”.

B.   FINANCE

1.   Trade liberalization

There will be three trade agreements in the pipeline in 2014.

  • Trans-Pacific Partnership (TPP):   under negotiation since 2005, involving several large economies including America and Japan; will be concluded in 2014
  • Trans-Atlantic Trade and Investment Partnership (TTIP):  involving America and the European Union; will be negotiated in 2014.
  • Multilateral trade (Doha) deal:    talks resumed in December 2013 in Bali.   Success is not certain, and will be complicated by India’s election.

The issue that affects all three of these deals is American politics.    Fast-track authority, the mechanism by which the president can simply submit the trade deal to the legislature for a simple yes-or-no vote without the possibility of amendment, expired in 2007.    Partisan enmity and the mid-term elections in November 2014 could keep the Congress from renewing fast-track authority, despite a broad array of American business interests that support the trade deals.    Overall, the Economist is more optimistic about the outlook for trade compared to where the world was a few years ago.

2.  Banks retreat

Regulators will keep on pressuring the banks to reform as they have ever since the Great Crash of 2008.   The principle that investment and retail banking should be disentangled has been fairly well established, although the final rules implementing the Dodd-Frank Act in America and the Vickers Commission in Britain have still to be settled.

3.  Euro zone

In response to the euro crisis, policymakers will take the first step towards a banking union, moving the responsibility for supervision of the euro area’s biggest banks from national authorities to the European Central Bank (ECB) in late 2014.    This is only one-half of the banking union, however.

The second step of the banking union, the creation of a single resolution mechanism or SRM that would be responsible for restructuring and, if necessary, propping up failing banks, is meant to be agreed upon in 2014.   Without an SRM, the banking supervisor will have to rely on national budgets to resolve big problems.

4.   Commodities supercycle not quite over

For various reasons, such as the slowing of growth in China, the commodities “supercycle” is running of steam.   However, because of the time lag for the huge, capital-hungry mining projects that started during the boom, new supply is still arriving and more is in the cards.   Prices are close to the bottom of the cycle, and may starts to climb again by the end of the year.

It looks like qualified optimism is in store for 2014!

 

 

 

The World In 2014–Britain and Europe


Every year at this time, besides the personal planning I do for the coming year, I relax and read the Economist’s Double Holiday Issue and look through their special report The World in 2014.    I am taking notes on the various articles during the next few days to see what The Economist predicts will be the most significant global events that will take place in the coming year.   The reason why I’m doing this is not just to gain an understanding of these events before they happen, but to preserve a record so that next year at this time, I can look back and see how well the events were (or were not) predicted.

A.   BRITAIN

Scotland will vote on whether to remain a part of the United Kingdom in the summer of 2014.    The Scottish National Party, led by Alex Salmond, is pushing for independence.    However, the majority of Scots don’t want independence, but rather more powers for their country, which was the direction the country had been quietly heading on anyway.

The British economy will face an upturn, but with high employment holding workers wages down.     The coalition government between the Conservative prime minister David Cameron and his Liberal Democrat deputy Nick Clegg will complete its fourth year in May 2014.

B.  GERMANY

The parliamentary election at the end of 2013 was messy.   A small majority of Germans voted for center-right parties, but these were balanced by the three left parties, leaving Mrs. Merkel to broker the stalemate between the left and right.     The main problems to be dealt with will be the euro crisis and the transition of the economy to run on renewable forms of energy.

C.  FRANCE

The Socialists will face increasing discontent due to lacklustre economic growth and a 16-year high in the unemployment rate.    The biggest political upset will come from the gains made by the far-right National Front party headed by Marine Le Pen.

D.  SPAIN

The five-year double dip recession will end, but the recovery in jobs and household incomes will lag.    If this lag continues, the centre-right People’s party currently in power may be in trouble in 2015.

E.  ITALY

The longest recession since the second world war should end in 2014, with a miniscule growth rate of 0.2%.   It will take until 2015 for the recovery to really feel like it has taken hold.

F.  TURKEY

The brutal police crackdown that occurred in late May 2013 has caused the reputation of the prime minister, Recep Tayyip Erdogan, to suffer irreparably.    In order for him to become president, he will have to hand power to somebody else, probably to Mr Gul, a much more popular figure.   This political turmoil will come during a time of economic difficulty for Turkey.    If these problems weren’t enough, there will be spillover from the civil war next door in Syria.   Turkey will probably be in a mood to try new leadership under Mr Gul to handle these problems.

G.  RUSSIA

How long will Putin’s rule last?    There were mixed signals from Mr. Putin on whether he would stop his slide towards authoritarianism.    The problems with the economy will continue, with annual growth down to 1.5%.   His strategy was to divert the people’s attention with various nationalist, anti-American, xenophobic and homophobic movements.    It will remain to be seen whether Russia gets an international PR boost from the winter Olympics in February 2014.

The main foreign policy issues will be the easing of diplomatic tension with the west over the fate of Syria’s Assad regime, and the reaction to Ukraine’s decision to have closer ties to the European Union.   One thing is for sure:   Russia will not be easy to deal with internationally, no matter what happens at home.

 

The World In 2014–The Middle East and Africa


Every year at this time, besides the personal planning I do for the coming year, I relax and read the Economist’s Double Holiday Issue and look through their special report The World in 2014.    I am taking notes on the various articles during the next few days to see what The Economist predicts will be the most significant global events that will take place in the coming year.   The reason why I’m doing this is not just to gain an understanding of these events before they happen, but to preserve a record so that next year at this time, I can look back and see how well the events were (or were not) predicted.

Today I am going through their article on the Middle East and Africa.    Here are some of the predictions the Economist gives for what will occur of significance in the coming year.

NOTE:   Those countries which are at very high risk of social unrest in 2014 will have a (*) symbol placed after their name.

A.   MIDDLE EAST

1.  EGYPT (*)

After the reversion to military rule in 2013, there should be parliamentary and presidential elections in the first half of 2014.   Some Islamists will be persuaded to run in the absence of any of the Muslim Brotherhood being allowed on the voting lists.    It is possible that General Abdel Fattah al-Sisi, the power behind the throne, will put himself forward for the presidency.

On the economic front, there will be an attempt to reign in some of the subsidies in order to get control over the country’s finances.    However, in my opinion, an attempt to go too far too fast on structural reforms of the economy in Egypt may create more political turmoil for the government.

The biggest reason to watch what is happening in Egypt is the fact that the crowds in Cairo’s Tahrir Square have demonstrated the ability to bring down a military government and an Islamist one.    Certainly the rest of the Middle East is watching this, with the increased access the middle class now has to social media and the Internet.

2.  SYRIA (*)

Bashar Assad’s regime will not lose, but neither will it achieve an outright win.   The country will settle into three self-contained regions that will remain hostile to each other:

  • West (stretching from Damascus down the coast to the Alawite homeland near Latakia)–controlled by Assad
  • North, Center and East–controlled by rebels
  • Northeast–controlled by Syria’s Kurds

The trend to watch will be the increasing rivalry between the jihadist rebels and the less Islamic ones.    If the bloodshed in Syria intensifies, this violence could spill over into Lebanon and Jordan, and increase sectarian strife in Iraq.

3.  IRAN

Must will depend on whether the Americans are able to cut a deal with Iran over its nuclear program.   If this is successful, this will have a positive effect on the Syrian conflict as they join the efforts for regional diplomacy.  It could even have a positive effect on the chances for a deal between Israel and the Palestinians.

4.  IRAQ (*)

As mentioned in the paragraph on Syria, if the dominant Shias in Iraq feel a kinship with the Syrian Alawites, then persecution of the Sunnis could intensify and tear apart the very tentative democracy in Iraq.

5.   TUNISIA

This country, the first one to feel the effects of the Arab Spring, will have its ruling Nahda party seek to compromise with more secular groups and trade unionists to keep the country’s fragile new democracy alive.

6.   LIBYA (*)

There are a plethora of militias defying the authority of the central government.    If elections are held, this may placate them enough to allow for the country to stabilize somewhat.

7.  MOROCCO

The monarch will try to institute minimal constitutional reforms to stave off demands for more far-reaching ones.

8.  ALGERIA

As President Bouteflika’s health fails, a succession struggle may develop.

9.   YEMEN (*)

The successor to Yemen’s long-standing dictator Ali Abdullah Saleh, Abd Rabbo Mansour hadi, will struggle to forge a national consensus, in counterbalance to the regional forces such as the southern secessionists, northern rebels and al-Qaeda linked jihadists that are trying to undermine the central government.

10.  SUDAN (*)
The President Omar al-Bashir, after ruling for more than 24 years, will face growing opposition even in his own ruling party.

11.  SAUDI ARABIA

The succession crisis will continue rumbling underneath the surface, unless King Abdullah makes it clear to the younger generation of princes that they can take over after the rule of his brother Prince Salman.

Notice the number of countries in the Middle East which are listed at very high risk for social unrest.   That is why it is one of the more critical regions to watch in 2014!

B.   AFRICA
The most important trends in Africa in 2014 are the following:

  • The inflation rate will dip below the GDP growth rate of 5.5% in 2014, the first time that this has happened in living memory
  • 4 of the world’s six fastest-growing economies will be in sub-Saharan Africa
  • China will continue to be the largest trade and investment partner with Africa
  • Nigeria may overtake South Africa as the country’s largest economy
  • Rather than the production of commodities, the economies of sub-Saharan Africa will shift towards services, agriculture and manufacturing
  • Increased international attention will be paid on creating peace in the Congo

One longer-term trend to watch in Africa is the electrification of the continent, with an emphasis on renewable energy resources.    Powering Africa would have a transformative effect not just on the continent, but on the entire world!