Part 3:
IMPLICATIONS OF THE FOUR TRANSFORMATIONS
1. The War in Iraq
In some ways, the war is going very well. Afghanistan
and Iraq have the
beginnings of a modern government, which is a huge step
forward. The
Saudis are starting to talk about some good things,
while Egypt and Lebanon are
beginning to move in a good direction. A series of
revolutions have taken place in
countries like Ukraine and Georgia . There will be more
of these revolutions for an interesting reason. In every revolution,
there comes a point where the dictator turns to the general and says,
Fire into the crowd. If the general fires into the crowd, it stops the
revolution. If the general says No, the revolution continues.
Increasingly, the generals are saying No because their kids are in the
crowd.
Thanks to TV and the Internet, the average 18-year old
outside the U.S. is very savvy about what is going on in the world,
especially in terms of popular culture. There is a huge global
consciousness, and young people around the world want to be a part of
it. It is increasingly apparent to them that the miserable government
where they live is the only thing standing in their way. More and more,
it is the well-educated kids, the children of the generals and the
elite, who are leading the revolutions.
At the same time, not all is well with the war. The
level of violence in Iraq is much worse and doesn't appear to be
improving. It's possible that we're asking too much of Islam all at one
time. We're trying to jolt them from the 7th century to the 21st century
all at once, which may be further than they can go. They might make it
and they might not. Nobody knows for sure. The point is, we don't know
how the war will turn out. Anyone who says they know is just guessing.
The real place to watch is Iran . If they actually obtain nuclear
weapons it will be a terrible situation. There are two
ways to deal with it. The first is a military strike, which will be very
difficult. The Iranians have dispersed their nuclear development
facilities and put them underground. The U.S. has nuclear weapons that
can go under the earth and take out those facilities, but we don't want
to do that.
The other way is to separate the radical mullahs from
the government, which is the most likely course of action. Seventy
percent of the Iranian population is under 30. They are Moslem but not
Arab. They are mostly pro-Western. Many experts think the U.S. should
have dealt with Iran before going to war with Iraq . The problem isn't
so much the weapons, it's the people who control them. If Iran has a
moderate government, the weapons become less of a concern. We don't know
if we will win the war in Iraq We could lose or win. What we're looking
for is an indicator that Islam is moving into the 21st century and
stabilizing.
2. China
It may be that pushing 500 million people from farms
and villages into
cities is too much too soon. Although it gets almost no
publicity, China is
experiencing hundreds of demonstrations around the
country, which is
unprecedented. These are not students in Tiananmen
Square. These are average citizens who are angry with the government for
building chemical plants and polluting the water they drink and the air
they breathe.
The Chinese are a smart and industrious people. They
may be able to pull
it off and become a very successful economic and
military superpower. If so,
we will have to learn to live with it. If they want to
share the responsibility of
keeping the world's oil lanes open, that's a good
thing. They currently
have eight new nuclear electric power generators under
way and 45 on the books
to build. Soon, they will leave the U.S. way behind in
their ability to
generate nuclear power.
What can go wrong with China ? For one, you can't move
550 million people
into the cities without major problems. Two , China
really wants Taiwan , not so
much for economic reasons, they just want it. The
Chinese know that their
system of communism can't survive much longer in the
21st century. The last thing
they want to do before they morph into some sort of
more capitalistic
government is to take over Taiwan
We may wake up one morning and find they have launched
an attack on
Taiwan . If so, it will be a mess, both economically and
militarily. The U.S. has
committed to the military defense of Taiwan . If China
attacks Taiwan , will
we really go to war against them? If the Chinese
generals believe the answer
is no, they may attack. If we don't defend Taiwan ,
every treaty the U.S. has will
be worthless. Hopefully, China won't do anything
stupid.
3. Demographics
Europe and Japan are dying because their populations
are aging and
shrinking. These trends can be reversed if the young
people start breeding. However, the birth rates in these areas are so
low it will take two generations to turn things around. No economic
model exists that permits 50 years to turn things around. Some
countries are beginning to offer incentives for people to have bigger
families. For example, Italy is offering tax breaks for having
children. However, it's a lifestyle issue versus a tiny amount of money.
Europeans aren't willing to give up their comfortable lifestyles in
order to
have more children. In general, everyone in Europe just
wants it to last a while longer.
Europeans have a real talent for living. They don't want
to work very hard. The average European worker gets 400 more hours of
vacation time per year than Americans. They don't want to work and they
don't want to make any of the changes needed to revive their economies.
The summer after 9/11, France lost 15,000 people in a
heat wave. In
August, the country basically shuts down when everyone
goes on vacation. That
year, a severe heat wave struck and 15,000 elderly
people living in nursing homes
and hospitals died. Their children didn't even leave
the beaches to come back
and take care of the bodies. Institutions had to
scramble to find enough
refrigeration units to hold the bodies until people
came to claim them.
This loss of life was five times bigger than 9/11 in
America , yet it didn't trigger any
change in French society.
When birth rates are so low, it creates a tremendous tax
burden on the young. Under those circumstances, keeping mom and dad
alive is not an attractive option. That's why euthanasia is becoming so
popular in most European countries. The only country that doesn't
permit (and even encourage) euthanasia is Germany , because of all the
baggage from World War II.
The European economy is beginning to fracture. Countries
like Italy are starting to talk about pulling out of the European Union
because it is killing them. When things get bad
economically in Europe , they tend to get very nasty
politically. The canary in the mine is anti-Semitism. When it goes up,
it means trouble is coming. Current levels of anti-Semitism are higher
than ever.
Germany won't launch another war, but Europe will
likely get shabbier,
more dangerous and less pleasant to live in. Japan has
a birth rate of 1.3 and
has no intention of bringing in immigrants. By 2020,
one out of every five
Japanese will be 70 years old. Property values in Japan
have dropped every year for the past 14 years. The country is simply
shutting down. In the U.S. we
also have an aging population. Boomers are starting to
retire at a massive rate.
These retirements will have several major impacts:
Possible massive sell off of large four-bedroom houses
and a movement to
condos. An enormous drain on the treasury. Boomers
vote, and they want
their benefits, even if it means putting a crushing tax
burden on their kids to
get them. Social Security will be a huge problem. As
this generation ages, it will
start to drain the system. We are the only country in
the world where there are no
age limits on medical procedures which is an enormous
drain on the health
care system. This will also increase the tax burden on
the young, which
will cause them to delay marriage and having families,
which will drive down
the birth rate even further.
Although scary, these demographics also present
enormous opportunities for
products and services tailored to aging populations.
There will be tremendous
demand for caring for older people, especially those
who don't need
nursing homes but need some level of care. Some people
will have a business where they take care of three or four people in
their homes. The demand for that type of service and for products to
physically care for aging people will be huge.
Make sure the demographics of your business are attuned
to where the
action is. For example, you don't want to be a baby
food company in Europe or
Japan . Demographics are much underrated as an indicator
of where the
opportunities are. Businesses need customers. Go where
the customers are.
4. Restructuring of American Business
The restructuring of American business means we are
coming to the end of
the age of the employer and employee. With all this
fracturing of businesses
into different and smaller units, employers can't
guarantee jobs anymore
because they don't know what their companies will look
like next year. Everyone is
on their way to becoming an independent contractor.
The new workforce contract will be: Show up at the my
office five days a
week and do what I want you to do, but you handle your
own insurance, benefits,
health care and everything else. Husbands and wives are
becoming economic
units. They take different jobs and work different
shifts depending on where they
are in their careers and families. They make tradeoffs
to put together a
compensation package to take care of the family. This
used to happen only with highly
educated professionals with high incomes. Now it is
happening at the level of the factory
floor worker. Couples at all levels are designing their
compensation packages based on their individual needs. The only way
this can work is if everything is portable and flexible, which requires
a huge shift in the American economy.
The U.S. is in the process of building the world's
first 21st century
model economy. The only other countries doing this are
U.K. and Australia . The
model is fast, flexible, highly productive and unstable
in that it is always
fracturing and re-fracturing. This will increase the
economic gap between
the U.S. and everybody else, especially Europe and
Japan .
At the same time, the military gap is increasing. Other
than China , we are
the only country that is continuing to put money into
their military.
Plus, we are the only military getting on-the-ground
military experience through
our war in Iraq . We know which high-tech weapons are
working and which ones
aren't. There is almost no one who can take us on
economically or militarily.
There has never been a superpower in this position
before. On the one
hand, this makes the U.S. a magnet for bright and
ambitious people. It also
makes us a target. We are becoming one of the last
holdouts of the traditional
Judeo-Christian culture. There is no better place in
the world to raise
children and be in business. The U.S. is by far the
best place to have an idea, form a
business and put it into the marketplace. We take it
for granted, but it isn't as available in other countries of the world.
Ultimately, it's an issue of culture. The only people who can hurt us
are ourselves, by losing our culture. If we give up our Judeo-Christian
culture, we become just like the Europeans. The culture war is the
whole ball game. If we lose it, there isn't another America to pull us
out.