The 2022 Grey Swans
Twenty-one improbable, but high impact events for the coming year
News Wrap Edition #50 of Volume 1
Authors: Rob Tyrie & Sean Moffitt
Prediction machines are inherently flawed as the future is rarely if ever a straight line projection of the past. Alas, predicting is tough business for three big principal reasons:
A. No one gets to predict the future
— the best we can do is to proof against it. It’s why casinos, insurance companies and business forecasters always make money. If you believe that you have domain over the future and is yet to be predetermined (as many of us in the Guild do), then the future is an inherently human, occasionally irrational and very volatile concept. Even more so in a connected world that fans the flames of big events, phenomena and metatrends widely and quickly.
The value in predicting is trapped in taking actions in the now as we prepare for a potentially much different future.
B. Some are on the right scent, but are way off on time
— people could (and did) predict a future pandemic, however did anybody happen to mention that it would happen January-March’20? and this one would bring us to our knees? Ummm, no.
I’ve been predicting electric automobiles for the last twenty years and have made some unwise investment decisions (file under Ballard Power Systems circa 2007). I was so right it turns out, just fifteen years wrong. As we have seen with countless companies (e.g. Sony could have owned social media/music streaming, GM could have been, and is madly transforming to catch up to be, Tesla), waiting until the last minute of certainty is frequently too late.
Predicting and envisioning different plausible futures can bring the clock and action forward for countries, companies and individuals.
C. Consultancies, media firms, researchers, thought leaders and experts hate being wrong
— we have just chewed through 100+ end of the year research reports from the Mckinseys, The Economists and the Fast Companies of the world. many of them really are the off-the-shelf trend cough syrups. Most have a horrible aftertaste, generic in purpose, inherently actionless and perhaps deal with a few symptoms of change but not the causal and systemic factors,. They are a poor prescription, maybe not snake oil but certainly not prophetic panaceas.
If we read one more well-moneyed pontificator surmise that the future of work has changed forever (with no accompanying implication), someone please put us out of our misery. One of the big reasons they are so inert — if pundits don’t stick their neck out on predictions, how can they possibly be accused of being wrong?
The startups and savvy Incs. are the ones constantly battling inertia and acting against conventional thinking, In the short run, many people like to cover their ass. In the long run, fortune indeed rewards the bold predictors, not the safe ones.
Our “Grey Swans” Criteria:
With our list of twenty-one prospective Grey Swans below, we have purposely dismissed the status quo thought-stream and focused on a full blackjack of solutions that have three uniquely different characteristics:
- they candidly have less than 25% of happening — at least on the timing we have claimed
- If they did happen, they would have big societal, planetary, industrial, cultural and ethical implications
- they have a chance of happening, starting or accelerating in 2022
We are more than willing to revisit many of these in 365 days and with the benefit of hindsight tell you why some of these didn’t happen and maybe humble brag a little about the ones that did.
This Year’s Edition of the 21 Grey Swans:
Esoteric futuristic music. Check. Self-important and urgent drumbeat. Check. Big voiced announcer voice with montage of twenty one grey swans flying in V-formation: Boom. Here are our twenty-one Grey Swan postcards from the future:
1.A Major Southern USA Climate Disaster Digs Deep into the Environmental Conscience. We have been playing a game of environmental roulette but very soon, perhaps this year, we will be faced with the climate urgency up close and personal. Choose your big population center poison:
- Miami will run out of drinking water and the Florida Keys will be under threat due to rising waters and stronger hurricanes
- New Orleans will be breached again as rising seas, sinking earth levees and year-over-year hurricane battering seep in, this time questioning rebuilds ever again
- Higher temperature, drought and lower river water levels will affect agriculture, ranching, health and tourism in the South-West (Texas, New Mexico and Arizona) with trickle down effects felt in Mexico
- Los Angeles, San Diego and San Jose will be affected by continued heat waves and resulting drinking water issiues, forest fires, air pollution and interstate and intrastate political issues over water.
Beyond the enormous economic, natural and people stresses, will this provide the U.S. impetus to take real action on the climate agenda not just virtue signalling? We hope the former doesn’t have to happen for the latter to occur.
2.Large Failure and/or Major Acquisition of a Top Four Major Automaker Involving Tesla. Massive retooling of the auto industry is occurring to become more electric, more data-savvy and more autonomous. Why — the market demands it, and the combined successes of Musk’s company have made Tesla stock a powerful currency.
With a business model that Wall Street buys and hefty price-earnings valuations, Tesla is valued higher than it’s top 5 automative rivals COMBINED (these include Toyota, Volkswagen, Daimler AG, General Motiors and Nio — China’s version of Tesla). Combine that with Tesla’s market breakthroughs (e.g. Hertz just ordered 100,000 Tesla cars for its fleet), soft passenger car industry overall, and Tesla’s operational challenges in pushing out supply , it all makes Tesla acquisition power plays come into full view.
Tesla can buy a big brand, merge with one or wipe one out in a span of a weekend. Being based in Texas will change Musk’s thinking yet again. Three Texas sayings he will inculcate — Everything in Texas is Big. Keeping it Weird is Austin pride… and The Yellow Rose State is known by Texans as the “Promised Land”.
3. Housing Market Slumps and Starts a Chain Reaction. Okay yes, most urban real estate markets did quite handsomely over our worst global health challenge over the last century and yes, global housing stock remains precariously low in supply, driving up value and shutting people out of markets but follow us here…
Real estate is only as strong as the ground that it is built on. Inflation is up in every country around the world ex. Japan . What calms inflation — higher interest rates. What kills real estate markets and speculative real estate — high interest rates. Think about interest rates being 5% and above. Not possible? Remember, in May 1981, the US federal funds rate peaked at an unthinkable 19 per cent but has slid to a barely over 0% now.
With US inflation hitting a 13-year high of 5.4 per cent, the brakes may be screeching on. Combine that with imbalances of housing equity and it may mean an accompanying rise in: communal living concepts, tiny homes, mass 3D building of low income homes and repurposing retail and commercial real estate to residential needs.
4. A Gunfight in the Pacific, involving China and spin that wheel …some major country with 90% likelihood …click, tick, click…Taiwan. With rising global ambitions, nationalist sentiments, confidence in its government and historical acrimony, China is feeling a little belligerent. And Taiwan? — well, it’s because of the island being so close and all, that submarine nuclear platform too and … well what are you going to do with all those new jets you finally got operational? Oh … and those new aircraft carriers too. Not much of this armament is actually built for civil war in China. Plus, China believes Taiwan is a breakaway province heading toward declaring independence. It would rather stop that chess move ahead of time.
A Pentagon report last month said the Chinese navy was the world’s biggest maritime force, with 355 vessels. It said China was expected to expand the fleet to 420 ships in the next four years, and to 460 by 2030. Taiwan freely admits China could launch an effective full scale invasion by 2025 and invites military accident by flying into their air space routinely.
Unfortunately for Taiwan and other nations in the region, the U.S. simply can’t match this reach. Nor given U.S. isolationist sentiments over the last decade will they have the political mettle and standup to a showdown in the East. And if Taiwan falls, could Korea be far behind?
5.Inflation in double digits is setting in like rot. Supply chain challenges are structural. Energy prices are surging and can’t be addressed by sustainable capacity … at least not yet. Environmental challenges are stressing grocery baskets and commodities. Labour markets are tight. Government support programs are providing purchasing power for less and less goods. Consider the minor pandemic rebounds of things like travel and lack of slack in industries overall. And it means inflation for the long term. Now will it be 4% or 24%.
Remember on the other side of our last pandemic, inflation in the U.S. surged to an all-time high of 23.7% in June of 1920. Will we have a repeat?
6. Quantum becomes the new Bitcoin, but much realer. You hear bits and pieces about quantum computing in tech circles and it has some of the impressive resonance and allure that people conjure up when they say “artificial intelligence”. But essentially it has been part of geek world.
According to Google Trends, AI dwarfs it as a 13X more popular search team.No blockbuster movies have had quantum as its central theme. No activists worry about the ethics of quantum. And not many Silicon Valley-ers are banging the quantum drum. Perhaps only thousands around the world know how it really works. 2022 changes that.
Without getting geeky, quantum computing is an emerging technology that leads to a remarkable increase in processing efficiency and computation time saved that supercomputers can’t get close to achieving. Massive advances in quantum computing and measurement can impact all industries, and will start to kill off weak members not able to adopt it soon enough. The next pandemic may be prematurely stopped and next breakthrough vaccines may be developed via quantum. Nearly half of companies believe quantum will have a big effect on their industries over the next 3–5 years. The early players will start seeing the benefits in 2022.
New material development, new drugs, new fertilizers, new energy-efficient batteries, new display sources, new bio-friendly plastics, new financial models, new supply chain ecosystems, finding life in space, detecting mental health issues before they happen, spotting crime, they are all on the table for quantum application, and many more. We are entering an era where the true innovation of our times can’t be seen anymore, but certainly can be felt.
7. Massive retail bankruptcies and 100+ Detroit-level city bankruptcies loom ahead around the world.
Global debt in 2020 reached $226 trillion dollars. I’ll repeat that $226 TRILLION. That’s 256% of the world’s economy. Record levels are being set across public debt, business debt and household debt thresholds. We are essentially riding the planetary credit card.
Back to our earlier points about housing markets and rising interest rates, financing conditions are starting to tighten, building a noose that leaves governments with less and less wiggle room to sustain COVID recovery programs. And when that carpet starts to be taken away this Spring when pandemic numbers settle, it may look scary, particularly for people who live in inner cities, and the businesses that support them.
Let’s tie a few things together:
- trips to downtowns rest between 25–50% of pre-pandemic levels, a lot of that may be structural now, affecting major pockets of retail traffic
- retailers continue to be under stress, about half of retail CFOs are still considering the idea of restructuring and bankruptcy given major debt, low patronage, shifting business models and murky pandemic futures
- with sales and property taxes providing as much as 70% of state and local revenues, lower sales and vacant retail properties create a challenge to local tax bases
- if Federal funding pulls back, expect to see it having a big trickle down effect to local areas
At the break of the pandemic, there were cities across North America, Europe and Asia clamoring to be saved from bankruptcy. The headlines have gone with federal debt funding, but they could easily return in 2022.
8. A massive terror attack with 4,000+ civilians killed in a G20 country. We have seen a levelling out of terrorism and conflict around the world over the last two decades. Twenty years removed from 9/11, we have fortunately not seen a similar scale of terror attack in G20 countries. We should not take that for granted.
With Afghanistan in Taliban hands (and communication to the world of swift American retreat), 27 military conflicts going on around the world, South American and Mexican political instability and cartels, and a rise of in cels, anything could literally go boom.
Terrorism affects people directly, rhe psyche of a country, its systems & institutions, and destabilizes multiple Industries and the GDP of the country. Yeah. Essentially terrorism really really sucks.
Now with the countless number of soft targets, the ability to organize sleeper cells, the impact even crudely developed weapons can now make and the polarized hatred that exists across religious, cultural and political divides, a number of nations and causes could support a terrorist group doing dirty bombs against a country aligned with or close to US, Russia or China. On this one, we fervently hope we are wrong.
9. COVID morphs again, this time more deadly and extending us three years into the future. Think about a pandemic worse than COVID-19's first variant. Never mind our already stretched patience and willingness to sit through another quarantine. What about a novel virus that kills young humans and or makes them sick for a long time?
To contain most contagious viruses like measles, we need population vaccination rates of about 95%. Currently, only 60% of the world is partially vaccinated and just over 50% are fully vaccinated with many parts of Africa below 20%. With global travel and movement, we have already seen viruses be able to adapt and become more contagious, with the recent Omicron variant as evidence. It’s not unthinkable to think this virus morphs, particularly in a non-vaccinated person, in a different and potentially more fatal or furtive direction.
Beyond the indeterminate human costs, this level of fear may cause us to :
- lose our societal patience altogether
- lead to deep rifts along vaccinated and non-vaccinated lines
- generate enormous new government expenditures
- change in wealth again, but this time 3 or 5X more transfer of wealth, some unintended and some ethically questionable.
Hopefully we don’t need this to happen to have more equitable world governance standards in place. The UN has been messaging that there needs to be interventions coming to balance vaccine global strategy better than what’s happened in 2020–21.
10. A full-blown Stock Market crash due to a set of overlapping events, exacerbated by cryptocurrency and state-sponsored and private cybercrime. Nobody wants to consider it until it actually happens. This one is a real one. Some seem to agree, If a small group of people on Reddit can cause ripples that circled through the markets, and particularly stock holders of Build-a-Bear, Game Stop and AMC, something with bigger origins could create an even larger wave.
The perfect storm could lead to a depression or recession that would include multiple versions of the following:
- we’ve been suggesting a huge state-led cybersecurity attack on critical infrastructure and financial markets for years, it happens in 2022 in a big way, leading to life impacts and systemic mistrust
- a quickly spreading social phenomenon of short selling based on some real or perceived grievance of values
- a weather (or terrorism) event along the lines of “Hurricane Andrew” (described above in Grey Swan #1)
- a cryptocurrency bug that eliminates wealth, creates unregulated loopholes or influences wild fluctuations in value.
Choose two of the above and you have double digit losses in the markets sustained over 4–8 quarters.
11. Young Political Leaders Emerge. Joe Biden — 79 years old. Vladimir Putin — 69. Cyril Ramaphosa — 69. Xi Jinping — 68. Jair Bolsonairo — 66. Fumia Kishida — 64. Olf Scholz — 63. Boris Johnson — 57. Anybody see some commonalities here? Pstttt, our leaders are old.
Meanwhile in smaller countries, Jacinda Ardern — 41 (New Zealand).Nayib Bukele — 40 (El Salvador). Sanna Marin — 38 (Finland). Former Austrian Chancellor Sebastian Kurz served two terms starting at 33. Hehhh …they’re young.
But big countries will never elect inexperienced leaders you say — ohhhh really, let’s return back to world leaders in the mid-90s shall we — Bill Clinton 45, Tony Blait -44.
Given the current feeling of decay in government, the technology issues and value shifts interwoven into politics, and the rising voting tide of Gen Y/Z that make up more than half of the world’s population and are more educated than any generation before them, expect change and soon. (Editor’s Note: we were hopeful for a young fresh voice with new policies like Andrew Yang back in 2020).
With US mid-term elections and China’s 20th Party Congress, expect some young wild cards to break through as contenders to the big seat in the future.
12. A massive drought-fuelled continental firestorm occurs, affecting a major city. While British Columbia had its third worst forest fire season on record in 2021, increasingly these fires are blazing through towns and property. The towns of Lytton, Vernon and White Rock Lake were set ablaze. Tragic. Horrible. Combined population just over 50,000. One province over in Fort MacMurray, the same fate five years earlier. Population 65,000, Cost — $9.9 billion..
Now imagine the scope of peril if these cities were bigger. Think Denver. Think LA. Think Melbourne. Think Lisbon. If 500 homes can burn to the ground in Boulder…as just happened days ago IN December, then it’s possible, even in this coming year. Hit the right elements around urban settings, and it would change regulations, laws, insurance, forest and land management in the United States forever.
13. Trade Wars intensify, tariffs go up. In late 2019, what was the biggest issue on everybody’s minds before this thing called COVID came along. Trade wars. Well, they’re back.
Between boycotts over Olympics, wrangling over Taiwan and a two year trade deal that is about to terminate January 15th, 2022 and has been missed by both sides, this will dominate January headlines. This has become a China lose-USA lose ordeal embroiling other nations into the fight of economics, ideologies and human rights. There is plenty of history here.
China’s Silk Road and Trade Americana are asking countries to choose sides. Despite best social interests, a chunk of Africa, Eastern Europe and Middle East may tilts East to the rising economic might of China.
Friction is up in nearly all key geographies. Stay tuned — this could get messy.
14. Influenza essentially is irradicated in the West due to accelerated vaccines, knowledge, practice and public policy. Pre-covid, promising scenarios led by the WHO wanted to eliminate influenza by 2027. What was learned through accelerated COVID vaccine development may even quicken that timeline.
Some perspective, COVID has been awful, it’s been quite contagious and been deadly by many virus standards. But it has only been two years and vaccines seem promising. Flu on the other hand, has been around every year for over a century, infecting over a billion people every year with a slightly adapted version of itself every season, killing millions in its wake with a flu shot that may only be 10–40% effective. We’ve learned to control chicken pox, measles, polio, rabies and smallpox, why not the flu?
Expect big announcements on breakthroughs in 2022. The hope is getting rid of one type of affliction, doesn’t open ourselves to others along the lines SARs. MERS, HINI and COVID Variants.
15. A weird form of sport-tainment will continue, with the largest event payouts in sports going to non-athletes. We could call this the Jake Paul effect but that is giving him too much credit. Jake Paul, for those of you who don’t know yet, is a YouTube star that has turned internet fame into a quasi-sporting career seemingly overnight by taking on flawed, over-their-prime fighters in boxing matches. He has delivered 10–20X what title fights in the UFC bring by staging these exhibitions on his own terms.
Combining the rise in popularity of combat sports with the value of real celebrity. An actor, a musician or model will take away sports biggest payday this side of Wimbledon or Conor McGregor in 2022. If Jake Paul can make $5MM fighting a no-name, what could Brad Pitt vs. Bradley Cooper bring in? Or Ryan Reynolds vs. Ryan Gosling? Maybe Jennifer Lawrence vs. Jennifer Lopez. Worlds are colliding.
16. Video Game and Internet addiction will be policed. Citing it as a public health crisis, government and self-regulated attempts will begin to set standards and reign in the more pernicious aspects of video game play and escape. As many as 1% of the Amercian population have a gaming disorder and 4% of the population may be addicted and 5–10% suffer from internet addiction. In 2018, the World Health Organization declared “gaming disorders” as a real disease.
With the onset and expansion of new technologies (enhanced AR, MR, VR) and by new companies (Facebook — Metaverse), the benefits and perils of “too much” of a good thing becomes apparent to stakeholders in power.
Revelations & stories of addiction change public policy and game manufacturing after high profile “big-tobacco-esque” investigations take place this summer. China-style limits are placed on 18 and under in the US and Europe, wiping billions off the balance sheets of gaming companies, and not relaxed until they retool for good.
Markets go south and quickly, large companies have to lay off staff. Continued pandemic issues leave retail, travel & cultural workers out in the cold. Governments can no longer sustain debt requirements of pandemic support programs. Tech workplace automation and rapid gains in e-commerce show their first big signs of digging into workplace bone. During a potential return to post-pandemic normalcy, millions of mothers and mid career-shifters try to find their way back into the workforce. Major companies shift headquarters to company-friendly geographies. The combination creates a decade-long employment malaise, felt hardest by the oldest (without tech skills) and youngest (not trained or educated sufficiently for the new work world).
18. The singularity occurs, it dawns on us in 2022. No one is sure when it happened exactly in the last decade, but this is the first year that humans realize it — singularity is here — the march to technological growth becomes uncontrollable and irreversible.
In 2022, we may realize it more prominently this year in three scenarios:
- a global cybersecurity bug takes all of our technology down for hours, maybe days and we realize our dependence on it, remember when Facebook went down for hours in 2021
- a solar flare or some climate disaster does the same thing as above
- biotech, gene editing, cloning or advancements in artificial super intelligence bring us closer to the edge of creating new versions of ourselves
In these rapidly evolving scenarios, rebalancing of the stock markets occurs and governments fall. Anarchy is a possible option but it is short-lived. Both choice and destiny are satisfied in the near term.
As the world saw with the pandemic, about 40% of the population in most Western countries refuse to believe this has happened and they live their lives as if it has not happened. And, in the end, that doesn’t make a difference.
Forecasting further out, there is a rash of suicides and deep mental health issues in a small percentage of the population that know that the singularity has happened. They have psychotic breaks in trying to shut it down or inform the broader population to realize that the majority of systems and governance is being operated by interconnected computing systems. Wealth inequity is reduced by 20% a year and zero population growth is attained as the world population reaches 10B. The Matrix begins in 2022.
19. The first chart topping band, produced, built and developed by AI. Welcome to center stage — AI! You know them (and they certainly know you), put your hands together for AI-DC.
AI is really good at finding, predicting and making things we like. Pop music can be very programmable with its catchy lyrics and beats. Soul or no soul, there are so many AI tools on the cutting edge of commercial music production.
At first, it will be given its own category, over time it will just be considered music. Perhaps to make it more acceptable, it will be served up as music in a duet between AI and a human (I know Daft Punk just broke up, maybe they are looking for a new music partner). We’ve already toyed with the virtual assistant-human relationships in the movie Her from 2013. This year we get a very real life wake up call in music. By September, there will be an AI chart topper.
This will make us uncomfortable and it should. If a machine can proximate the music that we love, in cascading circles of importance — What does it mean to be a musician? What does it mean to be creative? What does it mean to share your struggles in storytelling and song? What does it mean to be human?
20. Apple becomes the new gym standard. Years ago, when i joined a Nike+ app i thought they would produce their own tech-laden clothing and devices that interacted with me. Instead they partnered and outsourced it all to Apple.
Apple has a passion to want to be the hardware and apps that surround your life. They are very good at it. They launched a music store in 2003, TV in 2006, became your app store in 2011. They became your watch in 2017. They became a streaming service in 2019. In 2022, they become your gym.
Let’s pull together four shards of this argument:
- Peleton was the darling of home fitness-meets-tech set at the start of the pandemic but has hit a wall and had to write down billions in value after a recent spate of bad news
- Gyms are in bad shape, with at least 25% of them shut down and two thirds on life support, a majority of people will cancel their menberships post-pandemic and 68% of people are much less likely to go back anywhere
- Apple has $173 billion in liquidity on its balance sheet, Peloton would take $12B to buy at its current market capitalization, they could nab it easily
- Apple wants to be all about health, its CEO Tim Cook has said it as much, it’s a premium customer for both products, it’s software matched with hardware — an Apple strong suit and it could fix Peloton’s glitches and distribution issues
This will happen in the early part of the year.
21. Twenty-five countries adopt cryptocurrencies in their backing as national currencies. Right now , El Salvador stands alone in anointing Bitcoin as its national legal tender. As of November 2021, 103 countries regulate and allow bitcoin in their countries legally. Somewhere between those two realities is where we’ll be sitting at the end of 2022.
The same reasons why El Salvador introduced Bitcoin as a formal national currency is the same reason why others will too:
- savings on commissions for remittances (20% of El Salvador’s GDP)
- financial services to the unbanked
- digitization of currency, leading to potentially other services with more uses
- leading its regional financial and digital innovation
- the prospect of instant, frictionless transactions
Many of the larger countries and European Union are already planning fiat digital currencies, so El Salvador’s move may not be so radical after all.
If progress is shown and Bitcoin valuations continue to skyrocket, expect to see many other Latin & South American, some Caribbean & African nations and a smattering of Eastern European countries and other nations who already peg their currency to other more dominant currencies to join in. Expect crypto’s environmental consequences to also be mitigated somewhat in 2022, by chip efficiencies and processing time and in El Salvador’s case, powering crypto by a volcano of all things.
Grey Swan Guild — Join of 50 Shades of Grey Thinkers
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