The digital culture that has emerged in the U.S., combined with economic realities, is starting to create new cultural values of Restraint, Simplicity, Connectivity and Experience.  This shift in priorities implies that:  Experience is becoming more important than assets; connectedness and interactivity are more important than individualism; and flexibility is more important than control.

Global economic and political realities that took hold in the early 1980s and shaped the world’s economy for the next 3 decades are fading. In developed countries this era (Phase I of the Big Shift) was a period of excess supply, imported deflation, job outsourcing, hollowed-out manufacturing bases, rising trade deficits, salary stagnation and productivity enhancements.  For developing economies, this meant an expanded manufacturing base, dynamic domestic economies, greater employment possibilities and increasingly useful infrastructure.  Now the world is moving into Phase II of the Big Shift, and the seemingly temporary changes of the Phase I start to look permanent, with considerably negative and positive effects on citizen/consumer expectations.  These realities will affect the global economy for years.

First, there was asymmetrical warfare; now there's asymmetrical economics.  Asymmetrical warfare gave undersupplied and less developed countries (or organizations) the ability to challenge the power of great military forces.  Asymmetrical economics is enabling emerging countries to challenge developed economies for influence in the world.  The meetings in Durban, South Africa, of Brazil, Russia, India, China and South Africa (so-called BRICS) seemed to launch an official effort among emerging countries to challenge the global leadership in the world's financial architecture.

The Spanish economy's recent siesta is coming to an end.  Spaniards are realigning their expectations to the new economic reality - a transition which has seen unions make concessions, the government seek to loosen labor laws, and a drop in overall labor costs in Spain.  Now, multinational companies are moving manufacturing from other parts of the EU into Spain.  With new support coming from Germany, as well as Madrid attempting to buttress the real estate market, Spain appears on the verge of experiencing its own "Green Shoots" moment that signals economic recovery.

China's new leadership is managing a fundamental shift in its economy and society from investment to consumption, from industry to society and from central control to market orientation.  New demands (consumer spending, pollution reduction, income inequality, reducing property confiscation) require effective responses from the new leadership.  Thus far, the new leaders' actions appear to be impactful.  Also, attaining global financial power is emerging as a priority of the new leaders.  The yuan is emerging as a truly international currency, helping Beijing gain financial clout.

After struggling through the trials and tribulations of 2011, Japan, Inc., seems focused on making significant changes in the way the country’s government and corporations are structured and operate. Critical attributes that made Japan, Inc., so successful in the past, namely keiretsu, kaizen and suriawase, are undergoing revision, if not elimination. Japanese corporations are undertaking practices that seem contrary to those once-valued characteristics. They are: outsourcing production to replace domestic production, engaging in new international arenas, collaborating with competitors, forming national champions and changing corporate culture. Some roadblocks in the process lie ahead, but these kinds of changes could bring about a “new Japan”.

A little more than a decade since the Economist called it the "hopeless continent," Africa continues to be one of the fastest growing regions in the world.  While the continent has benefited from the commodities "super-cycle," it is also growing due to an expanding middle class and "The Shift from Geo-Politics to Geo-Economics".

Cash rich countries, including China, Russia and Japan are again, "Making a Move" by investing in overseas assets.  When we first introduced this three years ago, these countries were focusing their purchases on agriculture and resource acquisitions.  The most recent iterations, however, are more strategic in nature and include financial and high-tech properties.

China is elevating the profile of its currency, the yuan, creating a variety of new uses for both its own citizens and foreigners.  China is allowing the yuan to be used in a variety of other transactions, including foreign trade, debt-issuance by foreign companies, foreign acquisitions made by Chinese companies, investment in yuan-denominated stocks by foreigners at the Hong Kong stock exchange, options trading on the yuan in Hong Kong, foreign access to China’s interbank bond market in China, and foreign exchange by individual foreign investors at the Bank of China’s New York City branch.  Most recently, many central banks, including Japan, have signaled willingness and indeed, a preference to add Chinese government bonds to their portfolios.  Such actions allow China to reduce its reliance on dollars and other currencies that have to be recycled.  Also, such actions encourage China to push the currency rate higher.  Strengthening the yuan can help China control inflation by lowering the costs of imported food and fuel.

Syria has become the battleground for the Sunni/Shi'ite battle for supremacy in the Middle East, and our intelligence suggests that the conflict is reaching a critical point.  While the war rages on in Syria, Turkey is playing the geo-economics game, positioning itself as the region's power player and attempting to secure the global influence it desires, and the energy it needs.

Pressures on supply and pricing increases for commodities, energy, food, and even water are the product of secular increases in demand, one of the Effects of Large Numbers.  The steady increase in standards of living among once fairly poor countries have created new middle classes worldwide, which are creating these rapid demand increases.  The pressures caused by these types of price increases, especially in the food sector, became too much for a number of Middle East countries, where an unusually large demographic bulge of youth under the age of 26 created another kind of large-number stress.  These issues triggered revolutions and massive protests.  Elsewhere, governments are falling, and new elections promise changes as well.  We have not seen the end to the Effects of Large Numbers.

The military and other institutions that are participating in what we are calling The Great Restructuring are following a three-stage process for change identified by physicist Thomas S. Kuhn over 50 years ago; normalcy, an era of accepted wisdom; crisis and experimentation, an era in which too many anomalies make accepted wisdom no longer effective and in which new ideas and methods start circulating; and then, a new effective structure emerges.  We see this process starting in education, media, publishing, retail, advertising, brand marketing and management around shareholder value.

Secular forces are encroaching on retailers’ business models forcing the industry to restructure.  At the same time, American consumers have a new value hierarchy and are placing increased importance on experiences, simplicity, connectivity, product quality, personal engagement and local culture.  Where retailers’ experiments connect with consumer values, aspects of the new retail paradigm will emerge.

The digital revolution has given marketers a new palette of tools to reach customers.  Many of the new tools are highly targeted (using "Big Data") and companies are using these tools while decreasing traditional media spending.  This leaves traditional media, particularly static media like print, at risk of decreasing ad sales.  Some media, including online content and television, are trying to reassert their value with better targeting analytics - tools of the Data Arms Race.

Return of capital and return on capital are perennially the two warring objectives that investors pursue.  The moving variable is how much risk one is willing to assume.  In today's ultra low-interest-rate environment, we are observing extreme actions by institutional and individual investors alike on both ends of the risk spectrum, very high and very low.  How this battle turns will be explored.

Technology is training consumers to expect more from the products and services they purchase and to always seek alternatives before making a final buying decision.  Meanwhile, Pervasive Computing is making it easier and less costly for startups to challenge established companies and industries.  When combined, these two changes are making it difficult and expensive for established companies to retain customer loyalty and will put an increasing number of companies at risk. 

Within the context, Made in the U.S.A. (see below), the falling costs and rising availability of sophisticated 3-D printers and manufacturing equipment, is providing individuals and entrepreneurial companies with the ability to profitably manufacture goods on a small scale.  Some benefits of 3-D printing to manufacturers include leaving no waste, requiring fewer workers and allowing for reduced inventory – all allowing for increased earnings potential.  While this market is still small and experimental, we are also starting to see the beginnings of 3-D printing in large companies (e.g., Boeing, GE) and industries (e.g., automotive, biomedical), creating surprising parts.

Global demand from the Effects of Large Numbers, higher shipping costs, delayed delivery, a strengthening yuan, intellectual property concerns and rising wages in the developing world are creating an environment in which businesses find it advantageous to bring manufacturing back to the U.S.  The auto industry is increasing U.S. manufacturing following a union agreement to start new employees at lower wages.  Meanwhile, small-scale manufacturing, enabled by new equipment such as 3-D printers, is expanding and finding a marketplace for their products through online sites. Energy-intensive industries, such as chemical company Dupont, are also choosing the U.S. as the destination for new plants as the price of natural gas has fallen due to the shale-gas boom and has created a competitive advantage.

The capabilities of "Big Data" are fast moving beyond the most obvious uses in sales, retail marketing and targeted advertising.  Data scientists are increasingly applying their techniques to a variety of new sources of information.  Applying algorithms and insight to such data, applications of the Data Arms Race are increasingly emerging for government management, higher education, healthcare and research, risk and actuarial calculations, fraud detection, agribusiness, human understanding of complex systems, and even insight into human psychology and sociology.

Cheap sensors and other technologies are enabling the capability of tracking seemingly everything.  Machines can be made "aware" of their surroundings, and companies can track everything from worker productivity to customer behavior.  The capabilities are ramping up quickly and will have varied effects, including displacing workers, reducing fraud and increasing operational efficiency.

The restructuring of the energy market has begun.  The recent significant increase in U.S. oil and gas production has caused knock-on effects in Russia, the Middle East, Europe and Asia, and some battles for end markets are ensuing.  Russia's Gazprom has had to give concessions on gas sales in Europe, and Saudi Arabia had three quarters of its energy related computers attacked, creating what Leon Panetta called "probably the most destructive attack the private sector has seen to date."  Markets, supplies and pricing are being "scrambled".

The U.S. is poised to increase exports of natural gas and encourage the utilization of natural gas in vehicles, which will lift prices to a more sustainable level for natural gas producers and help the U.S. engage in Geo-Economics.

With news about the environment continuing to be negative, governments are shifting from discussing climate mitigation to addressing climate adaptation.  At the same time, individuals are making decisions based on personal finances and companies are making decisions based on return on investment, all of which are positively impacting the environment, without referencing ecology as a motive.

What to do about the weather?  Extreme heat, drought, wildfires and floods have been wreaking havoc in much of the world.  The effects of these extreme events go well beyond the immediate and obvious damage, affecting infrastructure, crops, health, businesses, and water supplies.  Early efforts in certain areas suggest that real discoveries are emerging to mitigate the negative effects of the damaging weather patterns that seem to be constantly occurring.  At present, however, damage from extreme weather is more severe than the human response is effective.

The U.S. electric grid is old, has seen a lack of investment and is at an increasing risk of failure.  Now, extreme weather, cyber-attacks and the integration of alternative energy sources are creating new risks (and opportunities).  Investments in redundancy and new solutions, such as micro grids, are just beginning, but they are insufficient to currently mitigate risks.

More and more individuals are becoming suspicious of some of the changes in their culture.  Efficiencies, globalization, digitization and a whole host of other changes have been "good," but they have also altered the culture in less than good ways, even pushing aside values and ideas once held as important.  Some individuals are starting to take a second look at cultural details cast aside in the rush to change communications, production, distribution and the economy.  They are now looking to revive Quality; Local Culture; Smaller Businesses; Direct, Personal and Physical Connections; and even Passion and emotion.

American society seems to be getting more interested in healthy life habits.  With an uncertain economy and an unstable job market, individuals are focusing on personal health as one area they can control.  Our observations suggest a rising focus on fresh foods and balanced diets, government policy changes to restrict access to fattening foods (particularly for the young) and to provide resources to combat obesity and the rising popularity of exercise regimens, some rather extreme.

In the early 1990s, during another time of political, economic and social upheaval, we noticed that smaller and subtler events lead by women were affecting the ways societies were dealing with their problems and suggesting major reforms.  We have begun to pick up signals that, again, women’s actions are emerging as a leading indicator of change in society, with economic and political ramifications.             

Society lacks a grand narrative, an embodiment of its ideals, values and goals.  Historically, such narratives have given cohesion and direction to society. Recent films have given voice to where society is right now, with many of the top-grossing films expressing aggressiveness as a virtue and most of the Oscar nominees for Best Picture expressing perseverance as a virtue. Both aggressiveness and perseverance are traits of a society in transition, but those in the persevering camp are more likely to be the ones who give birth to society’s next grand narrative.

Digital communications are altering human interaction, their focus on a “conversation” and the expectations of friendships and other personal relationships.  The proliferation of devices among the young and the practices those devices enable and encourage is creating a kind of social “experiment” to learn what effects such communications can have on acculturation and identity.  We have noticed four specific effects among the young: (1) Everything competes with digital communications; (2) A blinking light means I’m not lonely; (3) Writing is better than speaking; and (4) Communications "R" Us.  

New digital media communications get shorter and shorter, moving from Web pages and blogs to text messaging and Twitter posts.  Those shorter communications technologies along with all digital technology are reprogramming the human brain.  New-media adopters have found it easy to place three barriers between themselves and those who would like to communicate with them: Receptivity, Selectivity and Connectivity. To overcome these barriers, anyone wishing to communicate with the digitally adept must focus on these users’ minds first and then think about the technology, which may be uncomfortable for advertisers and agencies.

The efficiency brought about by the digital world has a trade-off – a variety of risks to those who store data, communicate, or operate digitally.  As corporations amass data about their customers, exposure of that data increasingly becomes a risk.  Meanwhile, there are threats to corporate and national security caused by the increased infiltration of computer systems by those who wish to steal critical data.  The operation of system and infrastructure controls via digital login represents another risk.  Yet, seemingly there are not security protocols or systems in place to match the level of the threat.

Tight budgets in the developed world, ambitious military goals in the developing world, and an ongoing change in military tactics are all occurring simultaneously, causing a large-scale rethinking of military planning and spending around the world.  Developed nations such as the U.S., Europe and Japan are all facing various austerity measures, and military efficiency and effectiveness is one way that countries are seeking to save money.  Meanwhile, nations like China, India, Brazil and the Middle East continue to seek a stronger role in global geopolitics and are buying or building up supplies of military equipment to enhance those roles.  

Three changes are affecting transportation in the United State - shifting priorities and increasing spending in certain areas like road reconstruction, rail and public transit infrastructure: The Effects of Large Numbers dynamic has driven up fuel prices, increasing the operating cost of transportation.  Meanwhile the New American Lifestyles dynamic has led to a New Consumer Value Hierarchy in which consumers and citizens value Restraint, Simplicity, Connectivity and Experience.  These changes are compelling Americans to alter their transportation habits and related factors, such as where they live and work, how big their families are, and what assets they wish to own.  Finally, in spite of a gridlock at the federal government level, state and municipal governments are responding to various infrastructure wants and needs with new revenues and spending.

State governments have experienced a multi-year fiscal squeeze and are aggressively looking for ways to increase revenues with legalized gambling seen as a potential solution.  New legal rulings have opened the door for a potential expansion of in-state online gambling and states that already allow gambling are pushing for new sources (i.e. sports betting).  Private companies, especially in the online and mobile arenas, are moving to get their infrastructure in place in order to facilitate online gambling once it becomes legal.

This context raises the issue of elevated risks derived from interlinking complex systems with other complex systems.  The human mind wants to make things easy and simple, and so, those in control of these systems often launch projects with an eye only on short-term benefits, choosing not to focus on the more difficult yet possibly more costly long-term consequences.  “Who could have known that…” or “I was not aware that…” are usually later public comments.  They are, so to speak, living with technological and financial changes without fully embracing the range of consequences.

The growing use of machines in nearly every facet of people’s lives is driven by improvements in User Interface.  These machines augment and enhance mental and physical skills, thereby improving productivity and reducing the need for labor.  Individuals are embracing the bond between Man and Machine and becoming increasingly reliant on machines.  Cars can drive themselves with sensors and GPS, agribots can pick strawberries, defense systems on American warships have become autonomous and prosthetic limbs have improved to the point where individuals are opting to remove more of their own body than medically necessary to acquire more-powerful prosthetics. 

Nations and companies, facing a secular increase in demand for many commodities due to the Effects of Large Numbers of people joining the global middle class, are turning to the ocean to supply the hydrocarbons and minerals necessary to fuel economic growth. This is both because the supplies of easily available and cheap-to-extract resources have become scarce as well as the fact that new technologies have made mining the oceans economical. Nations are staking claims to vast areas of the ocean and are rushing to mine in international waters before others. At the same time, entrepreneurs are pushing the boundaries of science and exploring the deepest part of the ocean.