Group items tagged

Even if some of the plans for making our own fuel, water and oxygen play out, the bare bones infrastructure and ability to prep a spacecraft for flight on another planet is astoundingly difficult. 

Dozens of states have been considering legislation that would make it illegal to discriminate against the long-term unemployed. Some proposals would even allow unsuccessful applicants to sue under the same discrimination laws that apply to race or gender bias.

The Obama administration, for its part, has proposed a few other ideas, including training programs and tax credits for businesses that hire the long-term unemployed. (The latter were even included in the American Jobs Act that Republicans blocked in Congress.)

First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well.

by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.

Compare these circumstances to those of 1911, a century ago. Even in the wealthier countries, the average person had little formal education, worked six days a week or more, often at hard physical labor, never took vacations, and could not access most of the world’s culture.

when average people read about or see income inequality, they don’t feel the moral outrage that radiates from the more passionate egalitarian quarters of society. Instead, they think their lives are pretty good and that they either earned through hard work or lucked into a healthy share of the American dream.

There’s a great deal of hostility toward various government bailouts, but the idea of “undeserving” recipients is the key factor in those feelings. Resentment against Wall Street gamesters hasn’t spilled over much into resentment against the wealthy more generally.

their constituents bear no animus toward rich people, only toward undeservedly rich people.

in the United States, most economic resentment is not directed toward billionaires or high-roller financiers—not even corrupt ones. It’s directed at the guy down the hall who got a bigger raise.

The high status of the wealthy in America, or for that matter the high status of celebrities, seems to bother our intellectual class most. That class composes a very small group, however

Income inequality has been rising in the United States, especially at the very top.

income growth at the very top

greater inequality throughout the distribution

When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007. As noted, those figures are from pre-tax income, so don’t look to the George W. Bush tax cuts to explain the pattern. Furthermore, these gains have been sustained and have evolved over many years, rather than coming in one or two small bursts between 1974 and today.1

Caution is in order, but the overall trend seems robust. Similar broad patterns are indicated by different sources, such as studies of executive compensation. Anecdotal observation suggests extreme and unprecedented returns earned by investment bankers, fired CEOs, J.K. Rowling and Tiger Woods.

But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.

The broader change in income distribution, the one occurring beneath the very top earners, can be deconstructed in a manner that makes nearly all of it look harmless. For instance, there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary.

Economist Thomas Lemieux at the University of British Columbia estimates that these demographic effects explain three-quarters of the observed rise in income inequality for men, and even more for women.2

Attacking the problem from a different angle, other economists are challenging whether there is much growth in inequality at all below the super-rich. For instance, real incomes are measured using a common price index, yet poorer people are more likely to shop at discount outlets like Wal-Mart, which have seen big price drops over the past twenty years.3 Once we take this behavior into account, it is unclear whether the real income gaps between the poor and middle class have been widening much at all.

And so we come again to the gains of the top earners, clearly the big story told by the data.

If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.

It’s not obvious what causes the percentage of threshold earners to rise or fall, but it seems reasonable to suppose that the more single-occupancy households there are, the more threshold earners there will be, since a major incentive for earning money is to use it to take care of other people with whom one lives.

The funny thing is this: For years, many cultural critics in and of the United States have been telling us that Americans should behave more like threshold earners. We should be less harried, more interested in nurturing friendships, and more interested in the non-commercial sphere of life. That may well be good advice.

Their data do not comprise the entire U.S. population, but from partial financial records they find a very strong role for the financial sector in driving the trend toward income concentration at the top.

The authors also relate that they shared their estimates with a former U.S. Secretary of the Treasury, one who also has a Wall Street background. He thought their estimates of earnings in the financial sector were, if anything, understated.

Finance aside, there isn’t much of a story of market failure here, even if we don’t find the results aesthetically appealing.

When it comes to professional athletes and celebrities, there isn’t much of a mystery as to what has happened.

We may or may not wish to tax the wealthy, including wealthy celebrities, at higher rates, but there is no need to “cure” the structural causes of higher celebrity incomes.

Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed.

Does that kind of pattern sound familiar? It happens in finance, too. Betting against a big decline in home prices is analogous to betting against the Wizards. Every now and then such a bet will blow up in your face, though in most years that trading activity will generate above-average profits and big bonuses for the traders and CEOs. To this mix we can add the fact that many money managers are investing other people’s money.

And let’s say the whole thing does blow up in your face? What’s the worst that can happen? Your bosses fire you, but you will still have millions in the bank and that MBA from Harvard or Wharton.

They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors.

In short, there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good.

But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.

The more one studies financial theory, the more one realizes how many different ways there are to construct a “going short on volatility” investment position.

In some cases, traders may not even know they are going short on volatility. They just do what they have seen others do. Their peers who try such strategies very often have Jaguars and homes in the Hamptons. What’s not to like?

If you’re wondering, right before the Great Depression of the 1930s, bank profits and finance-related earnings were also especially high.8

The moving-first phenomenon sums to a “winner-take-all” market. Only some relatively small number of traders, sometimes just one trader, can be first. Those who are first will make far more than those who are fourth or fifth.

Since gains are concentrated among the early winners, and the closeness of the runner-ups doesn’t so much matter for income distribution, asset-market trading thus encourages the ongoing concentration of wealth. Many investors make lots of mistakes and lose their money, but each year brings a new bunch of projects that can turn the early investors and traders into very wealthy individuals.

Still, every now and then Goldman will go bust, or would go bust if not for government bailouts. But the odds are in any given year that it won’t because of the advantages it and other big banks have.

In any given year, this practice may seem tolerable—didn’t the bank earn the money fair and square by a series of fairly normal looking trades?

It remains to be seen whether the new financial regulation bill signed into law this past summer will help.

The bill does have positive features.

What about controlling bank risk-taking directly with tight government oversight? That is not practical. There are more ways for banks to take risks than even knowledgeable regulators can possibly control

It’s also not clear how well regulators can identify risky assets.

It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem.

Once a financial crisis arrives, politicians will seek to limit the damage, and that means they will bail out major financial institutions.

One worry is that banks are currently undercapitalized and will seek out or create a new bubble within the next few years, again pursuing the upside risk without so much equity to lose.

A second perspective is that banks are sufficiently chastened for the time being but that economic turmoil in Europe and China has not yet played itself out, so perhaps we still have seen only the early stages of what will prove to be an even bigger international financial crisis.

A third view is perhaps most likely. We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are.

They are sitting on money rather than lending it out. The biggest risk today is how few parties will take risks, and, in part, the caution of banks is driving our current protracted economic slowdown. According to this view, the long run will bring another financial crisis once moods pick up and external scrutiny weakens, but that day of reckoning is still some ways off.

For a long time, I was misled by the fact that 90% of the available books frame globalization and the emergence of modernity in terms of the nation-state as the fundamental unit of analysis, with politics as the fundamental area of human activity that shapes things.

But the more I’ve thought about it, the more I’ve been pulled towards a business-first perspective on modernity and globalization.

Culture is the most mysterious, illegible and powerful force.

But one quality makes gravity dominate at large space-time scales: gravity affects all masses and is always attractive, never repulsive.  So despite its weakness, it dominates things at sufficiently large scales. I don’t want to stretch the metaphor too far, but something similar holds true of business.

On the scale of days or weeks, culture, politics and war matter a lot more in shaping our daily lives.

Business though, as an expression of the force of unidirectional technological evolution, has a destabilizing unidirectional effect. It is technology, acting through business and Schumpeterian creative-destruction, that drives monotonic, historicist change, for good or bad. Business is the locus where the non-human force of technological change sneaks into the human sphere.

Culture is suspicious of technology. Politics is mostly indifferent to and above it. War-making uses it, but maintains an arms-length separation.

It is business that creates the world of magic, not technology itself. And the story of business in the last 400 years is the story of the corporate form.

What was new was the idea of a publicly traded joint-stock corporation, an entity with rights similar to those of states and individuals, with limited liability and significant autonomy

In politics, Mercantilism led to balance-of-power models.

In business, once the Age of Exploration (the 16th century) opened up the world, it led to mercantilist corporations focused on trade

The forces of radical technological change — the Industrial Revolution — did not seriously kick until after nearly 200 years of corporate evolution (1600-1800) in a mercantilist mold.

Smith was both the prophet of doom for the Mercantilist corporation, and the herald of what came to replace it: the Scumpeterian corporation.

The corporate form therefore spent almost 200 years — nearly half of its life to date — being shaped by Mercantilist thinking, a fundamentally zero-sum way of viewing the world.

The Black Hills Gold Rush of the 1870s, the focus of the Deadwood saga, was in a way the last hurrah of Mercantilist thinking. William Randolph Hearst, the son of gold mining mogul George Hearst who took over Deadwood in the 1870s, made his name with newspapers. The baton had formally been passed from mercantilists to schumpeterians.

for America, corporations employed less than 20% of the population in 1780, and over 80% in 1980, and have been declining since

Certainly corporations today seem far more powerful than those of the 1700s, but the point is that the form is much weaker today, even though it has organized more of our lives. This is roughly the same as the distinction between fertility of women and population growth: the peak in fertility (a per-capita number) and peak in population growth rates (an aggregate) behave differently.

a useful 3-phase model of the history of the corporation: the Mercantilist/Smithian era from 1600-1800, the Industrial/Schumpeterian era from 1800 – 2000 and finally, the era we are entering, which I will dub the Information/Coasean era

To a large extent, the history of the first 200 years of corporate evolution is the history of the East India Company. And despite its name and nation of origin, to think of it as a corporation that helped Britain rule India is to entirely misunderstand the nature of the beast.

At a broader level, the EIC managed to balance an unbalanced trade equation between Europe and Asia whose solution had eluded even the Roman empire.

For this scheme to work, three foreground things and one background thing had to happen: the corporation had to effectively take over Bengal (and eventually all of India), Hong Kong (and eventually, all of China, indirectly) and England.

The background development was simpler. England had to take over the oceans and ensure the safe operations of the EIC.

eventually, as the threat from the Dutch was tamed, it became clear that the company actually had more firepower at its disposal than most of the nation-states it was dealing with. The realization led to the first big domino falling, in the corporate colonization of India, at the battle of Plassey.

The EIC was the original too-big-to-fail corporation. The EIC was the beneficiary of the original Big Bailout. Before there was TARP, there was the Tea Act of 1773 and the Pitt India Act of 1783. The former was a failed attempt to rein in the EIC, which cost Britain the American Colonies.  The latter created the British Raj as Britain doubled down in the east to recover from its losses in the west. An invisible thread connects the histories of India and America at this point. Lord Cornwallis, the loser at the Siege of Yorktown in 1781 during the revolutionary war, became the second Governor General of India in 1786.

But these events were set in motion over 30 years earlier, in the 1750s. There was no need for backroom subterfuge.  It was all out in the open because the corporation was such a new beast, nobody really understood the dangers it represented.

The East India bubble was a turning point.

Over the next 70 years, political, military and economic power were gradually separated and modern checks and balances against corporate excess came into being.

It is not too much of a stretch to say that for at least a century and a half, England’s foreign policy was a dance in Europe in service of the EIC’s needs on the oceans.

Mahan’s book is the essential lens you need to understand the peculiar military conditions in the 17th and 18th centuries that made the birth of the corporation possible.)

arguably, the doings of the EIC and VOC on the water were more important than the pageantry on land.  Today the invisible web of container shipping serves as the bloodstream of the world. Its foundations were laid by the EIC.

I call this the “most misleading table in the world.”

corporations and nations may have been running on Mercantilist logic, but the undercurrent of Schumpeterian growth was taking off in Europe as early as 1500 in the less organized sectors like agriculture. It was only formally recognized and tamed in the early 1800s, but the technology genie had escaped.

The Schumpeterian corporation was about colonizing individual minds. Ideas powered by essentially limitless fossil-fuel energy allowed it to actually pull it off.

it is probably reaosonably safe to treat the story of Schumpeterian growth as an essentially American story.

In many ways the railroads solved a vastly speeded up version of the problem solved by the EIC: complex coordination across a large area.  Unlike the EIC though, the railroads were built around the telegraph, rather than postal mail, as the communication system. The difference was like the difference between the nervous systems of invertebrates and vertebrates.

If the ship sailing the Indian Ocean ferrying tea, textiles, opium and spices was the star of the mercantilist era, the steam engine and steamboat opening up America were the stars of the Schumpeterian era.

The primary effect of steam was not that it helped colonize a new land, but that it started the colonization of time. First, social time was colonized. The anarchy of time zones across the vast expanse of America was first tamed by the railroads for the narrow purpose of maintaining train schedules, but ultimately, the tools that served to coordinate train schedules: the mechanical clock and time zones, served to colonize human minds.  An exhibit I saw recently at the Union Pacific Railroad Museum in Omaha clearly illustrates this crucial fragment of history:

For all its sophistication, the technology of sail was mostly a very-refined craft, not an engineering discipline based on science.

Steam power though was a scientific and engineering invention.

Scientific principles about gases, heat, thermodynamics and energy applied to practical ends, resulting in new artifacts. The disempowerment of craftsmen would continue through the Schumpeterian age, until Fredrick Taylor found ways to completely strip mine all craft out of the minds of craftsmen, and put it into machines and the minds of managers.

Blitzeconomics allowed the global economy to roar ahead at 8% annual growth rates instead of the theoretical 0% average across the world for Mercantilist zero-sum economics. “Progress” had begun.

Two phrases were invented to name the phenomenon: productivity meant shrinking autonomously-owned time. Increased standard of living through time-saving devices became code for the fact that the “freed up” time through “labor saving” devices was actually the de facto property of corporations. It was a Faustian bargain.

Many people misunderstood the fundamental nature of Schumpeterian growth as being fueled by ideas rather than time. Ideas fueled by energy can free up time which can then partly be used to create more ideas to free up more time. It is a positive feedback cycle,  but with a limit. The fundamental scarce resource is time. There is only one Earth worth of space to colonize. Only one fossil-fuel store of energy to dig out. Only 24 hours per person per day to turn into capitive attention.

There is certainly plenty of energy all around (the Sun and the wind, to name two sources), but oil represents a particularly high-value kind. Attention behaves the same way.

There is a lot more money to be made in replacing hand-washing time with washing-machine plus magazine time, than there is to be found in replacing one hour of TV with a different hour of TV.

. To get to Clay Shirky’s hypothetical notion of cognitive surplus, we need Alternative Attention sources. To put it in terms of per-capita productivity gains, we hit a plateau.

When Asia hits Peak Attention (America is already past it, I believe), absolute size, rather than big productivity differentials, will again define the game, and the center of gravity of economic activity will shift to Asia.

Once again, it is the oceans, rather than land, that will become the theater for the next act of the human drama. While American lifestyle designers are fleeing to Bali, much bigger things are afoot in the region. And when that shift happens, the Schumpeterian corporation, the oil rig of human attention, will start to decline at an accelerating rate. Lifestyle businesses and other oddball contraptions — the solar panels and wind farms of attention economics — will start to take over.

Coasean growth is not measured in terms of national GDP growth. That’s a Smithian/Mercantilist measure of growth. It is also not measured in terms of 8% returns on the global stock market.  That is a Schumpeterian growth measure. For that model of growth to continue would be a case of civilizational cancer (“growth for the sake of growth is the ideology of the cancer cell” as Edward Abbey put it).

Change will be primarily violent in nature -- and thus harder to miss -- in the Middle East.

The United States is also not immune to change. In this generational shift, and all the tumult that comes with it, Washington will be forced to learn the value of restraint in balance-of-power politics, preferring to lean on regional partners and encourage strategic competition as a way of preserving its own power.

The Arab world is moving uncomfortably between two eras. The post-World War II era, in which Arab dictatorships and monarchies supplanted colonial rule, is now roughly blending with -- or in some cases outright colliding with -- a fractured landscape of long-repressed Islamist forces.

This dynamic will be particularly visible in the northern Levant region this year as Syria and Lebanon continue coming apart. From Stratfor's perspective, the regime in Syria has already fallen and is giving way to a familiar state of warlordism, where militias and clan interests reign supreme. There is no longer a political entity capable of wielding control over the entirety of Syrian territory, nor will there be for some time.

once Syrian President Bashar al Assad is removed from power, whether through a negotiated deal or by force, the Sunni forces will fragment along ideological, ethnic and geographic lines, with Salafist-jihadist forces battling against a more politically minded Muslim Brotherhood and secular Sunnis.

As their grip over Aleppo slips, Alawite forces will try to hold Damascus while preparing a mass retreat to their coastal enclave. The battle for Damascus could extend beyond the scope of this forecast.

The potential use of chemical weapons by Alawite forces in a state of desperation could accelerate the unraveling of the region; a U.S.-led coalition would have to assemble in haste to contain the chemical weapons threat.

The growing disparity in the U.S. and Iranian negotiating positions will largely relegate Iran to the role of regional spoiler. So long as Iran can create pain for its regional adversaries, it can slow its own descent.

Iraq remains Iran's primary regional imperative, however. The momentum building among Sunni forces in Syria will eventually spill into Iraq and challenge Shiite dominance.

Iran's presidential elections in June will reveal the declining relevancy of the clerical elite and the populist faction embodied by outgoing President Mahmoud Ahmadinejad. This creates a political void for the Revolutionary Guard to fill. The Supreme Leader Ayatollah Ali Khamenei will try to check the Corps' growing influence by bolstering rival military and security agencies and backing a less controversial and more politically malleable ally from the pragmatic conservative camp for the presidency.

In Egypt, the military will adapt to an emerging Islamist political order. The military will remain the ultimate arbiter of the state and will rely on a number of factors -- including a fragmented judiciary, the military's economic leverage, a divided Islamist political landscape and the military's foreign relationships -- to check the Muslim Brotherhood.

Jordan, the oft-overlooked casualty of the Arab Spring, will continue to destabilize quietly and slowly in 2013

Israel and Turkey are both greatly affected by the shifting political dynamics of the Arab world, but both have little means to influence the change. The two former allies will continue exploring ways to restore a quiet working relationship under these new regional stresses, but a public restoration of diplomatic ties is less likely.

Israel will struggle internally over how to adapt to a new regional framework in which the reliability of old working partners is called into question.

Turkey sees an opportunity in the rise of Islamist forces in the Arab world but Ankara's limited influences restrain its actions beyond Turkish borders.

A more aggressive Saudi role in Syria will aggravate the civil war and create competition with other regional stakeholders, including Turkey, Qatar and Jordan.

In 2012, the European Union took numerous steps to mitigate the financial impact of its ongoing crisis.

First, the European crisis is fundamentally a crisis of competitiveness.

Second, the crisis has a political aspect. The European Union is not a federation but a collection of nation-states bound together by international treaties.

Third, the European crisis is threatening the social stability in some countries, especially in the eurozone's periphery.

In 2013, the two largest economies of the eurozone (Germany and France) will face low growth or even stagnation. This will have negative effects across Europe.

The conspicuous divide between the ruling elite and the populations of the periphery will be a key element in 2013, and some governments could fall. But even if opposition parties take power, they will face the same constraints as the governments that preceded them. In other words, a change in politicians will not bring a substantial change in policies regarding the European Union.

The only country in the eurozone periphery that has scheduled elections is Italy (in February). If the next Italian government fails to achieve political stability and apply economic reforms, the increased market pressure on Italy will make Rome more likely to require financial assistance from Brussels.

Because of the fundamental contradictions in the national interests and foreign policy strategies of the EU member states, the European crisis will continue generating political and economic divisions in the Continent in 2013.

Outside the eurozone, the United Kingdom will seek to protect its sovereignty and renegotiate its status within the European Union. But London will not leave the European Union in 2013.

Domestic Issues After the political tumult of 2012, Russia will face another year of anti-Kremlin protests, tensions among various political factions and ethnic groups, crackdowns and government reshuffles. Overall, the political tensions will remain manageable and will not pose a serious challenge to Moscow's control.

Russia has made significant progress recently in re-establishing influence in its former Soviet periphery.

Russia's relationship with Ukraine could be its most important connection in the former Soviet Union in 2013. Russia has been pursuing integration with Ukraine, primarily by taking over its natural gas transit infrastructure and calling on Kiev to join the Customs Union.

Georgia will be Russia's main concern in the Caucasus in 2013. With the political emergence of billionaire tycoon Bidzina Ivanishvili and his Georgian Dream movement, Russia's position in the country strengthened at the expense of the anti-Russian camp of Georgian President Mikhail Saakashvili.

In the past year, Russia has changed its tactics toward Europe to preserve its presence and leverage for the future. Russia's primary link to Europe is the Europeans' dependence on Russia's large energy supplies, which Moscow knows will be threatened when more non-Russian supplies become available.

The United States and Russia will continue sparring over trade matters, negotiations for a new nuclear arms treaty and Russia's role in Iran and Syria. Stratfor does not expect major changes from Washington or Moscow that would break the gridlock in negotiations on these issues.

The low-level violence and instability that occurred throughout Central Asia in 2012 will continue in 2013.

Three things will shape events in East Asia in 2013: Beijing's struggle to maintain social and political stability amid lower economic growth rates; China's accelerating military modernization and increasingly aggressive moves to secure its territorial and economic interests in the region; and varied efforts by other regional players, including the United States, to adapt to China's changes. 

In 2013, the Chinese economy will continue the gradual, painful process of moving away from high export-driven growth and toward a model that is more sustainable in the long run.

But barring another global financial meltdown on the scale of 2008-2009, China's coastal manufacturing economy will not collapse outright. The decline will be gradual.

The ongoing, gradual eclipse of coastal China as a hub of global manufacturing over the next several years will lead to higher unemployment and social dislocation as more of China's 250 million-strong migrant labor force returns inland in search of work. 

Shadow banking is by no means new in China. But it has grown significantly in the past few years from the geographically isolated informal loan markets of coastal cities to a complex network of semi-legal entities that provides between 12 and 30 trillion yuan (between $1.9 trillion and $4.8 trillion) in credit -- at interest rates of 20-36 percent -- to thousands of struggling small businesses nationwide.

The Party's growing sense of insecurity -- both internally and with regard to the social consequences of China's economic transition -- likely will be reflected in continued censorship of online social platforms like Weibo, crackdowns on religious or other groups perceived as threatening, and the Chinese military's growing assertiveness over China's interests in the South and East China seas and Southeast Asia.

The decline of low-end coastal manufacturing in China will present enormous opportunities for Southeast Asian countries like Indonesia, Vietnam, the Philippines and potentially Myanmar -- all of whom will continue to push strongly for foreign investment not only into natural resources and raw materials industries but also into developing better urban, transport, power generation and materials processing infrastructure.

Meanwhile, Vietnam and the Philippines -- China's most vocal opponents in Southeast Asia -- will continue to push for greater integration among members of the Association of Southeast Asian Nations and for U.S. business and military engagement in the region.

The Coming U.S. Withdrawal from Afghanistan Ahead of the 2014 drawdown of U.S. troops from Afghanistan, efforts will intensify to negotiate a settlement that gives the Taliban a place in a new government.

The negotiations will face numerous obstacles this year. There will be an upsurge in violence -- both in terms of officially sanctioned attacks designed to gain advantage on the negotiating table and spoiler attacks by Taliban elements allied with al Qaeda on both sides of the Afghan-Pakistani border.

Washington's intention to reduce its presence in the region will spur regional actors to fill the void. Pakistan will increase its interactions with Russia, Central Asia and Iran to prepare for a post-U.S. Afghanistan.

India will also turn its attention eastward, where the United States is quietly trying to forge a coalition of regional partners to keep a check on China in the Indo-Pacific basin. Myanmar in particular will be an active battleground for influence this year.

Preparing for a Post-Chavez Venezuela After a year of successful campaigning for re-election, Venezuelan President Hugo Chavez is in questionable health. Although the ultimate outcome of December's medical treatment for the ailing leader is unpredictable, Chavez's decision to name Vice President Nicolas Maduro as a political successor at the end of 2012 indicates that there is significant concern for his ability to remain in power.

Although it remains possible that Chavez will stay in power through the year, for Maduro to capitalize on Chavez's recent political gains, elections may need to be called sooner rather than later, regardless of Chavez's immediate health status.

Throughout 2013, Colombia will continue the incremental process of negotiating an end to the conflict with the Revolutionary Armed Forces of Colombia, known by its Spanish acronym FARC.

This will be a year of significant transition for Mexico. Policy issues that were bottled up by intra-party competition in the waning years of the National Action Party's administration have begun coming to the fore and will dominate 2013. These include socio-political issues like education, tax and pension reform.

This, along with reaction to the Russo-Georgian war, led investors to take more than $130 billion — nearly 11 percent of Russia’s foreign investment stock — out of Russia in the last quarter of 2008.

These tremors in the Russian economy undermined the Kremlin’s confidence in its ability to hold its consolidated state and periphery in the long term.

in the late 1980s, then-Soviet leader Mikhail Gorbachev introduced Perestroika, which allowed Western influence and technology to flood the country. This was a major component of the Soviet Union’s collapse.

In order to entice foreign businesses and money back into the country — especially those with modern technology — Russia has had to do some restructuring to make itself more attractive for investors, yet it must stand its ground in certain areas to prevent a flood of foreign influence.

To do business in Russia, one still has to be on the Kremlin’s good side. The political, regulatory and judicial environments in Russia remain restrictive, and the regulations are still convoluted to the extent that the Kremlin, regional or local governments decide what to enforce and how. The changes are intended more as confidence-building measures aimed at firms who want to enter (or return to) Russia. The legal shifts also make it easier for foreign firms and investors to comply with domestic and international laws on investing abroad.

And let me just -- let me end with one story. This illustrates how brilliant the Chinese geopolitical behavior can be. You know, in my previous book, I tell this story. You know, after -- as you know, after United States invaded Iraq, in March 2003, you discovered you had a problem because there was no Security Council resolution -- (inaudible) -- invasion. Technically, the American/British occupation of Iraq was therefore illegal under international law. And the previous Security Council sanctions were still in place for America to not export Iraqi oil.

it’s not immediately obvious that I can say anything useful about a civilization run by beings vastly more intelligent than us. I’d be like an australopithecine trying to visualize daytime cable TV.

The idea of an AI singularity

if you start trying to visualize a coherent future that includes aliens, telepathy, faster than light travel, or time machines, your futurology is going to rapidly run off the road and go crashing around in the blank bits of the map that say HERE BE DRAGONS.

at least one barkingly implausible innovation will come along between now and 2061 and turn everything we do upside down

My crystal ball is currently predicting that base load electricity will come from a mix of advanced nuclear fission reactor designs and predictable renewables such as tidal and hydroelectric power.

We are, I think, going to have molecular nanotechnology and atomic scale integrated circuitry.

engineered solutions that work a bit like biological systems

Mature nanotechnology is going to resemble organic life forms the way a Boeing 737 resembles thirty tons of seagull biomass.

without a technological civilization questions of network security take second place to where to get a new flint arrowhead.

if we’re still alive in the 26th century you’re welcome to remind me of what I got wrong in this talk.

we’re living through the early days of a revolution in genomics and biology

We haven’t yet managed to raise the upper limit on human life expectancy (it’s currently around 120 years), but an increasing number of us are going to get close to it.

another prediction: something outwardly resembling democracy everywhere.

Since 1911, democractic government by a republic has gone from being an eccentric minority practice to the default system of government world-wide

Democracy is a lousy form of government in some respects – it is particularly bad at long-term planning, for no event that lies beyond the electoral event horizon can compel a politician to pay attention to it

. In general, democratically elected politicians are forced to focus on short-term solutions to long-term problems because their performance is evaluated by elections held on a time scale of single-digit years

Democratic systems are prone to capture by special interest groups that exploit the information asymmetry that’s endemic in complex societies

Finally, representative democracy scales up badly

Nor are governments as important as they used to be.

the US government, the largest superpower on the block right now, is tightly constrained by the international trade system it promoted in the wake of the second world war.

we have democratic forms of government, without the transparency and accountability.

The good news is, we’re a lot richer than our ancestors. Relative decline is not tragic in a positive-sum world.

Assuming that they survive the obstacles on the road to development, this process is going to end fairly predictably: both India and China will eventually converge with a developed world standard of living, while undergoing the demographic transition to stable or slowly declining populations that appears to be an inevitable correlate of development.

a quiet economic revolution is sweeping Africa

In 2006, for the first time, more than half of the planet’s human population lived in cities. And by 2061 I expect more than half of the planet’s human population will live in conditions that correspond to the middle class citizens of developed nations.

by 2061 we or our children are going to be living on an urban middle-class planet, with a globalized economic and financial infrastructure recognizably descended from today’s system, and governments that at least try to pay lip service to democratic norms.

It’s a normative projection

I’m pretty certain that something utterly unexpected will come along and up-end all these projections – something as weird as the world wide web would have looked in 1961.

And while the outer forms of that comfortable, middle-class urban developed-world planetary experience might look familiar to us, the internal architecture will be unbelievably different.

a lot of the buildings are going to be familiar

Automobiles are automobiles, even if the ones he sees look kind of melted

Fashion? Hats are out, clothing has mutated in strange directions

He may be thrown by the number of pedestrians walking around with wires in their ears, or holding these cigarette-pack-sized boxes with glowing screens.

But there seem to be an awful lot of mad people walking around with bits of plastic clipped to their ears, talking to themselves

Our visitor from 1961 is familiar with cars and clothes and buildings

But he hasn’t heard of packet switched networks

Our time traveller from 1961 has a steep learning curve if he wants to understand the technology the folks with the cordless headsets are using.

The social consequences of a new technology are almost always impossible to guess in advance.

For example, we’re currently raising the first generation of kids who won’t know what it means to be lost – everywhere they go, they have GPS service and a moving map that will helpfully show them how to get wherever they want to go.

to our time traveller from 1961, it’s magic: you have a little glowing box, and if you tell it “I want to visit my cousin Bill, wherever he is,” a taxi will pull up and take you to Bill’s house

The whole question of whether a mature technosphere needs three or four billion full-time employees is an open one, as is the question of what we’re all going to do if it turns out that the future can’t deliver jobs.

We’re still in the first decade of mass mobile internet uptake, and we still haven’t seen what it really means when the internet becomes a pervasive part of our social environment, rather than something we have to specifically sit down and plug ourselves in to, usually at a desk.

the shape of the future depends on whether whoever provides the basic service of communication

funds their service by charging for bandwidth or charging for a fixed infrastructure cost.

These two models for pricing imply very different network topologies.

This leaves aside a third model, that of peer to peer mesh networks with no actual cellcos as such – just lots of folks with cheap routers. I’m going to provisionally assume that this one is hopelessly utopian

the security problems of a home-brew mesh network are enormous and gnarly; when any enterprising gang of scammers can set up a public router, who can you trust?

Let’s hypothesize a very high density, non-volatile serial storage medium that might be manufactured using molecular nanotechnology: I call it memory diamond.

wireless bandwidth appears to be constrained fundamentally by the transparency of air to electromagnetic radiation. I’ve seen some estimates that we may be able to punch as much as 2 tb/sec through air; then we run into problems.

One thing you can do trivially with that kind of capacity is full lifelogging for everyone. Lifelogging today is in its infancy, but it’s going to be a major disruptive technology within two decades.

the resulting search technology essentially gives you a prosthetic memory.

Lifelogging offers the promise of indexing and retrieving the unwritten and undocmented. And this is both a huge promise and an enormous threat.

Lifelogging raises huge privacy concerns, of course.

The security implications are monstrous: if you rely on lifelogging for your memory or your ability to do your job, then the importance of security is pushed down Maslow’s hierarchy of needs.

if done right, widespread lifelogging to cloud based storage would have immense advantages for combating crime and preventing identity theft.

whether lifelogging becomes a big social issue depends partly on the nature of our pricing model for bandwidth, and how we hammer out the security issues surrounding the idea of our sensory inputs being logged for posterity.

at least until the self-driving automobile matches and then exceeds human driver safety.

In particular, there’s a huge boom in new technologies for high speed gene sequencing.

full genome sequencing for individuals now available for around US $30,000, and expected to drop to around $1000–3000 within a couple of years.

Each of us is carrying around a cargo of 1–3 kilograms of bacteria and other unicellular organisms, which collectively outnumber the cells of our own bodies by a thousand to one.

Only the rapid development of DNA assays for SARS – it was sequenced within 48 hours of its identification as a new pathogenic virus – made it possible to build and enforce the strict quarantine regime that saved us from somewhere between two hundred million and a billion deaths.

we can expect eventually to see home genome monitoring – both looking for indicators of precancerous conditions or immune disorders within our bodies, and performing metagenomic analysis on our environment.

In each of these three examples of situations where personal privacy may be invaded, there exists a strong argument for doing so in the name of the common good – for prevention of epidemics, for prevention of crime, and for prevention of traffic accidents. They differ fundamentally from the currently familiar arguments for invasion of our data privacy by law enforcement – for example, to read our email or to look for evidence of copyright violation. Reading our email involves our public and private speech, and looking for warez involves our public and private assertion of intellectual property rights …. but eavesdropping on our metagenomic environment and our sensory environment impinges directly on the very core of our identities.

With lifelogging and other forms of ubiquitous computing mediated by wireless broadband, securing our personal data will become as important to individuals as securing our physical bodies.

the shifting sands of software obsolescence have for the most part buried our ancient learning mistakes.

Higher levels of female obesity correlated with higher levels of gender inequality in each nation Of course, that’s not the impression you will get from the admonishments of public-health agencies and wellness businesses.

Yet the scientists who study the biochemistry of fat and the epidemiologists who track weight trends are not nearly as unanimous as Bloomberg makes out. In fact, many researchers believe that personal gluttony and laziness cannot be the entire explanation for humanity’s global weight gain.

Consider, for example, this troublesome fact, reported in 2010 by the biostatistician David B Allison and his co-authors at the University of Alabama in Birmingham: over the past 20 years or more, as the American people were getting fatter, so were America’s marmosets.

‘Virtually in every population of animals we looked at, that met our criteria, there was the same upward trend,’ he told me.

It isn’t hard to imagine that people who are eating more themselves are giving more to their spoiled pets, or leaving sweeter, fattier garbage for street cats and rodents. But such results don’t explain why the weight gain is also occurring in species that human beings don’t pamper, such as animals in labs, whose diets are strictly controlled. In fact, lab animals’ lives are so precisely watched and measured that the researchers can rule out accidental human influence

In rich nations, obesity is more prevalent in people with less money, education and status. Even in some poor countries, according to a survey published last year in the International Journal of Obesity, increases in weight over time have been concentrated among the least well-off. And the extra weight is unevenly distributed among the sexes, too.

The story might go like this: being poor is stressful, and stress makes you eat, and the cheapest food available is the stuff with a lot of ‘empty calories’, therefore poorer people are fatter than the better-off. These wheels-within-wheels are required because the mantra of the thermodynamic model is that ‘a calorie is a calorie is a calorie’: who you are and what you eat are irrelevant to whether you will add fat to your frame. The badness of a ‘bad’ food such as a Cheeto is that it makes calorie intake easier than it would be with broccoli or an apple.

More importantly, ‘things that alter the body’s fat metabolism’ is a much wider category than food. Sleeplessness and stress, for instance, have been linked to disturbances in the effects of leptin, the hormone that tells the brain that the body has had enough to eat.

If some or all of these factors are indeed contributing to the worldwide fattening trend, then the thermodynamic model is wrong.

According to Frederick vom Saal, professor of biological sciences at the University of Missouri, an organic compound called bisphenol-A (or BPA) that is used in many household plastics has the property of altering fat regulation in lab animals.

BPA has been used so widely — in everything from children’s sippy cups to the aluminium in fizzy drink cans — that almost all residents of developed nations have traces of it in their pee. This is not to say that BPA is unique.

Contrary to its popular image of serene imperturbability, a developing foetus is in fact acutely sensitive to the environment into which it will be born, and a key source of information about that environment is the nutrition it gets via the umbilical cord.

It’s possible that widespread electrification is promoting obesity by making humans eat at night, when our ancestors were asleep

consider the increased control civilisation gives people over the temperature of their surroundings.

Temperatures above and below the neutral zone have been shown to cause both humans and animals to burn fat, and hotter conditions also have an indirect effect: they make people eat less.

A study by Laura Fonken and colleagues at the Ohio State University in Columbus, published in 2010 in the Proceedings of the National Academy of Sciences, reported that mice exposed to extra light (experiencing either no dark at all or a sort of semidarkness instead of total night) put on nearly 50 per cent more weight than mice fed the same diet who lived on a normal night-day cycle of alternating light and dark.

A virus called Ad-36, known for causing eye and respiratory infections in people, also has the curious property of causing weight gain in chickens, rats, mice and monkeys.

xperiments by Lee Kaplan and colleagues at Massachusetts General Hospital in Boston earlier this year found that bacteria from mice that have lost weight will, when placed in other mice, apparently cause those mice to lose weight, too.

It might be that every one of the ‘roads less travelled’ contributes to global obesity; it might be that some do in some places and not in others. The openness of the issue makes it clear that obesity isn’t a simple school physics experiment.

In a capitalistic quest for new markets and cheap materials and labour, Europeans take control of the economy in the late 18th or early 19th century. With taxes, fees and sometimes violent repression, their new system strongly ‘encourages’ the farmer and his neighbours to stop growing their own food and start cultivating some more marketable commodity instead – coffee for export, perhaps. Now that they aren’t growing food, the farmers must buy it. But since everyone is out to maximise profit, those who purchase the coffee crop strive to pay as little as possible, and so the farmers go hungry. Years later, when the farmer’s children go to work in factories, they confront the same logic: they too are paid as little as possible for their labour. By changing the farming system, capitalism first removes traditional protections against starvation, and then pushes many previously self-sufficient people into an economic niche where they aren't paid enough to eat well.

Eighty years later, the farmer’s descendants have risen out of the ranks of the poor and joined the fast-growing ranks of the world’s 21st-century middle-class consumers, thanks to globalisation and outsourcing. Capitalism welcomes them: these descendants are now prime targets to live the obesogenic life (the chemicals, the stress, the air conditioning, the elevators-instead-of-stairs) and to buy the kinds of foods and beverages that are ‘metabolic disturbers’.