Copyright: 2009 Inferential Focus, Inc. – All Rights Reserved

Special BriefingDecember 31, 2009

ASSAYING THE AUGHTS:SOME CRITICAL SOCIAL, ECONOMIC AND POLITICAL THEMES THAT

CHARACTERIZED THE PAST DECADEAND SIGNAL WHAT IS AHEAD

Nostalgia isn’t what it used to be. — Simone Signoret, actress

The shape of things to come is indistinguishablefrom the shape of things at hand.

— Robert Heilbroner, economist

Whenever the fourth digit of a year rolls over and changes the third digit, those proneto thinking about larger contexts pause and reconsider what has taken place in the passingdecade. We at Inferential Focus feel compelled to reassess what has happened in the light ofcontexts we discovered as the decade progressed. What changes will continue to unfold, andwhich ones created the greatest changes in the decade? What has happened, we wonder, thatwill, in fact, determine what might happen in the next few years?

The first signal that significant change is underway can be seen in the all-pervasive waveof nostalgia currently swamping society. Individuals sense that significant change is at hand,and they have looked to the past to gain a more solid footing. Collectors have made suddensuccess of items from the 1930s and 1940s; plays and musicals from every decade of thetwentieth century have found their way to contemporary stages nationwide; popular music ofevery decade since the 1950s has found a revival-focused audience awaiting; and new plays,musicals, television shows, concerts and festivals have turned to the past for content andthematic inspiration. Clothing from several past eras has found its way back onto fashion-showrunways and department-store racks. Some touring rock bands are performing past albumsjust as they were released, in the same order and often with the same acoustical effects. Knitting,sewing, cooking traditional foods and playing vinyl records on turntables are additionalexamples of nostalgia’s grip on society today. So our look back over the past decade for insightsinto current changes has cultural resonance.

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INFERENTIAL FOCUS BRIEFING

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Nostalgia serves two purposes. First, it offersan outlet for those wanting to avoid dealing with theissues of the day, preferring a momentary dive into a pastthat seemed less complicated. Second, nostalgia canease the way through a difficult transition by implying thatsociety has, in the past, evolved and changed, and cando so again. Such is the complexity of our society thatthis duality is serving Americans well today.

The significant events of the passing aught decadecover a wide array of human activities. Yet surveying thisdisparate array of human actions, we see several themesemerging to prominence: Gaming; Manias and TheirCollapse; Digital Culture; and Global Realignment. Oneongoing driver seemed to be behind many of the decade’smost significant events – what we have called WorldWar III or The Battle over Permeable Borders. Takentogether, these themes and their driver depict a societygrappling with monumental change, exploited byopportunists and moving toward something of an as-yet-unclear next culture.

Gaming: A Way of Life,A Way of Doing Business

Western calendars rolled over from 1999 to2000 on the crest of what proved to be an overblownscare – the hype surrounding a great millennium computershutdown (a.k.a. the Y2K crisis). That fiasco set thestage for a decade of scams, tricks, hoaxes, deceptions,

dissembling shenanigans and bad decisions…lots ofreally bad decisions. More than a decade of gamersgaming “greater fools” left society weary and wary,brimming with jilted lovers, gullible targets, disconsolatefans and incredulous victims.

The gaming sensation seemed to rise fromnowhere, consolidating a society somehow, incredibly,enamored of games and gaming. Poker, a game oncerestricted to basement rooms filled with men drinkingbeer and smoking cigars, became such a nationallypopular “sporting” event, that it actually found slotson ESPN, the cable channel given over to twenty-four-hour coverage of sports shows. Poker was onthe same channel that broadcast games of the NationalFootball League, Major League Baseball, collegebasketball, and so on.

Poker captured an emerging mind-set. “I don’tplay the game,” explained one successful poker player,“I play the players.” Having a winning hand could be lessimportant than making those at the table believe one had

a winning hand. And that was theessential practice in the decade’s turnto gaming – not having the funds to backa given credit default swap, not havingthe wherewithal to execute energy tradesfor which deals had been made, nothaving an unaided natural ability to breakhome-run records, not investing moneythat clients thought had been invested,not finding nuclear weapons thatleaders said were there and not havingthe family-friendly home life that themedia and public-relations campaignsdepicted – all these realities matteredless than the fact that those watchingthought the person or institution had orcould have done those things. Gamingwas about illusion, even delusion, andthe decade was full of that.

Reality-game competitions covered theairwaves, starting in 2000 with “Survivor,” the programthat required contestants to feign friendships andalliances in the short term to survive to another episode,continuing until everyone would eventually turn oneveryone else. Being victorious was just part of “surviving”the game; the added step involved taunting the loser withrituals of being “voted off the island” or in other arenas,

- 3 -facing a panel of judges. Winning became even moreimportant because the price of losing seemed so high.

Televised reality programs “gamed” love,marriage, jobs and physical appearance. From poker,reality programs and professional sports, individualslearned one easy lesson: Everything can be gamed.And then attentive viewers quickly realized one morething: Winning is all that matters. When “referees”went missing – that is, regulators, managers, auditors,et al. – then more and more people concluded thatthey just needed an angle or a scam to assurethemselves a spot in the medal ceremony or on the listof high-bonus payoffs. Enron sold shares for energyit did not have and created fake market shortages;AIG sold credit default swaps it did not have themoney to fulfill; athletes used steroids to createtainted records in track and field, baseball, bikeracing, skiing, skating and other sports still beingsurveyed; Bernard Madoff passed nearly $80 billionthrough a fraudulent investment scheme, and he wasonly the most publicized of a rash of Ponzi gamers; theUnited States went to war in Iraq because ofnonexistent weapons of mass destruction; and a trailof men in politics and sports, all projecting images ofa happy home life, proved that the allure of a sexualsideshow, a rationalized perk of power and fame,was stronger than their sense of honor.

Manias: If You’re Not in, You’re Pitiful

While gaming became a national preoccupationin the aught years, it could not have been successfulwithout an equally strong streak of gullibility and greedon the part of those being gamed. In the distant past,when a carnival barker promised wonderful prizes andmunificent rewards for playing a simple and easy gameof skill, most passersby might have looked askance atthe offer and walked on. But society in the era of theaughts seemed to suspend disbelief very willingly for achance to grab those prizes and rewards. It was adecade in which more and more people felt they couldreap huge returns in no time at all. All they needed wasa perfect poker hand to blow away the pretenders at thetable, a one-off drug sale that assured sporting dominanceand financial freedom, a huge financial company tobackstop their bets, a hot stock that skyrockets afterbeing bought, a new financial instrument that does awaywith risk or a brand-name investor with an amazingrecord of returns. To the decade’s mind-set, anythingthat was once highly improbable became highly likely.

The aught years started with a full-blown mania,an obsession with hyperbolic rewards so appealing andso seemingly credible that it seemed something totallyunique in history had been born – a system, a model andan economy that defied classic interpretation – indeed,

“Whoa, whoa, whoa, hold the phone. You’retelling me that this whole time you’ve just been

making up the horoscopes?”

“I understand completely – you don’t feelcomfortable risking your nest egg. That’s

where I come in – I risk it for you.”

- 4 -a New Economy. Companies could gain huge marketcapitalization without profits…even without a product.Future sales and future growth were all that was needed.

The world was different because a newtechnology had ushered in an entirely new way ofconfiguring business and measuring value. Grab a pieceof an initial public offering in the morning, and then sell itfor an unimaginable profit later that day. This obsessionwith the seemingly endless money machine had, as wenoted at the time, several attributes: “The perception ofwhat is taking place is different from the reality; talk,among fellow participants or in the press, pushes theaction; not to be part of the action (or at least believe inits rightness) is a sign of naïveté or worse; participantsare in a vortex of self-fulfilling actions, where the morepeople talk about their actions, the more participants feelvalidated; and only a minority of society at large isactually participating [in the winnings].”

Society had fallen for what was called a NewEconomy, which, as social satirist Dave Barry noted,was based on a breathtakingly simple investment angle:stupidity. As we wrote at the time, the big differencebetween such a mania and more common fits ofirrationality, such as fads and crazes, was that maniaseventually crash. When the New Economy collapsed,some made it out but most did not.

The trillions of dollars of value lost to maniacal“stupidity” might have provided a lesson that wouldendure for more than a decade, but alas, it was soonforgotten, as a risk-free perspective grew rapidly aroundwhat could be called a New Finance. If the NewEconomy depended on stupidity ornamented with new-tech gimmickry, the New Finance arose from “cupidity”ornamented with mathematics. This time, you know, itwas different.

In the most egregious example, banks likeGoldman Sachs, Deutsche Bank and Morgan Stanleysliced and diced all levels of rated securities and thenplaced them in so-called synthetic collateralized debtobligations (CDOs), new financial instruments that thebank sellers insisted had outmaneuvered risk. However,the sellers might not have believed their own hype,because after selling the CDOs to buyers who werehearing the carnival barker’s call of munificent rewards,those same sellers turned around and shorted the veryfinancial instruments they had just created and sold.Some CDOs failed a mere month or two after being soldto pension funds and insurance companies.

Selling such instruments freed more capital tocirculate back through the economy into anotherinstrument, and so on. With lax regulatory oversight,these confectionary concoctions turned up to thirtydollars of liquidity loose in the economy for every realdollar in someone’s account. As a result, some assetclass was bound to inflate with imaginary wealth, andreal estate, first residential and then commercial, was thesitting target of the decade’s second dive into mania.Liquidity became so plentiful because of these financialinstruments, that banks and mortgage companies soonlowered their loan standards to move the money throughthe housing market…and get the transaction fees.

"What's interesting is the rate at which they part."

“Hi, J.B. Guess where I am.”

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The gaming metaphor, when applied to themanias, lacked one critical element. When someonefailed on “Survivor,” he or she was insulted and voted offthe island. Or when a poker player failed to produce thecards he had bluffed about, then he lost whatever he hadin the pot. But when these trick financial instrumentsfailed, those who held them were not the only ones wholost. These instruments involved leverage, the practiceof making more financial capability without more money,and that required a string of interdependent financialarrangements. When these went bad, they took a stringof others with them. Or, to continue the poker metaphor,when one financial player’s bluff failed, he took downhimself, everyone at the table and nearly everyone in theroom.

Gaming dominated the decade, lining thepockets of those who managed to find the exit beforethe financial police arrived. Gaming also created alengthy list of “losers,” those who yielded late to thecarnival barker’s call or who said “Let it ride” when earlywinnings came through. Yet society as a whole lost aswell. The total return on the Standard & Poor’s 500from the end of 1999 through the middleof December 2009 was a negative9 percent. Also, the decade producedthe lowest increase in the U.S. grossdomestic product since the decade ofthe Great Depression. Now lawyersand the courts will decide if anyone isresponsible for the gaming and if anyonewill actually have to pay for society’stangle with the decade’s darker side.

The question becomes: Aftertwo diversions into mania in less than adecade and after nearly $20 trillion inlosses, have those who gamed liquidityby exploiting what seemed like anendless supply of “greater fools” andthose who should be regulating thewould-be gamers learned anythingthat will last longer than a few years?Indeed, did taxpayers, who were theultimate greater fools in the liquiditymania and its collapse, learn anything?More problematic, is a new maniaalready stirring somewhere beneath theeconomic surface?

Digital Culture: Changing Operations,Relationships and Brains

Starting in the early 1990s, when we first notedthat new data compression techniques would changeinformation distribution and computing capabilities, wehave followed the rise of digital culture. For not onlywere new devices and more complex software changingoperational behavior, they were also changing the humanbeings who took advantage of them. The decade of theaught brought these effects to new highs and the spreadof new capabilities into nearly every household. Thesetechnological changes brought personal changes as well.

This was the decade that put an end to sizableprofit margins for many businesses and put consumers incontrol of many marketplaces, a decade when what wehave called the New Industrial Revolution finally playedout. The New Industrial Revolution, which we identifiedin the early 1980s, took place when marketers anddistributors, those who had the direct relationship withconsumers, gained market leverage against producers,who had become so plentiful and so competitive that

“Nothing up my sleeve, nothing in my hat – what do youexpect in this economy?”

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they lost their power to influence markets. Distributorscould play one producer in one place in the worldagainst a producer in another part of the world for thebest price – all well and good for the distributors. Butthis past decade saw the power that marketers anddistributors gained in the New Industrial Revolutionmove to consumers. With brick and mortar stores,catalogs and an endless string of Web sites, consumerscould play one distributor in one location – physical orvirtual – against another in some other location for priceadvantage. In essence, the Internet economy forced theplaying out of the New Industrial Revolution, and whenthe playing out was completed, consumers held theleverage in the marketplace.

This decade also introduced many digitalenthusiasts to a virtual world – an online real-timeanimated replication of the physical world. Enteringone such virtual world, Second Life, users couldcreate two-dimensional animated figures – oravatars – to represent themselves in this world. Theavatar being the same gender, age or body type as theuser was, of course, optional. This avatar of the usercould then be moved in and out of various gatherings ofother two-dimensional animated figures, entercommercial establishments, buy and sell things, andmeet, date or even marry another avatar. The creatorsof Second Life wanted visitors to be able to do anythingand everything online that they could do in the physicalworld.

If living a second life seemed insufficientlyexciting, users could visit the World of Warcraft,where they could fight the good fight against this orthat foe, acquire skills and rewards, and exist in aworld completely unlike the physical world. As thedecade progressed, a new video game machine, theWii, connected more of the body to the game worldthan just the hand on a joystick, enabling users tophysically act out a golf swing, for instance, and affecta ball’s flight on-screen. As the decade closed,“augmented reality” programs overlaid data-basedcontent on images of the physical world captured witha Web cam or cell-phone camera. Point a cell-phonecamera at a building, for example, and informationfloods the screen, telling the user of the building’shistory, architectural style or current occupants.Whereas Second Life tried to fabricate a paralleldigital world, augmented reality sought to enhance theexperience of the physical one. Either way, digital

technology was changing how humans interacted withone another and with their physical surroundings.

The early 1990s mantra about the imminentability of digital communications to enable a user todo anything, anywhere, anytime came to reality in thisdecade. With the advent of more powerful laptopsand ultimately high-powered smartphones, users coulddo all the things they once needed a desktop computerto do, and they could do all these tricks on the go,wherever a wireless signal could be found, which, asthe decade progressed, meant pretty much anywherein the country. Watch movies, live television andvideos; listen to streaming or stored music, live radioand voice messages; access databases, libraries andarchives; type communications, documents and blogs;browse and search the Web; buy and sell goods;make banking transactions; join a conference call andSkype a friend halfway around the world – all whileriding a bus or lounging at the park. Social networkscreated new ways for individuals to interact with oneanother, social media Web sites such as Facebookenabled users to create new ways to presentthemselves to the outside world, and networkingsystems helped individuals access resources andinsights from a wide spectrum of other users, most ofwhom the original user did not personally know.From the humanist perspective, new technology wasteaching humans new ways to behave.

"Nice try, Brian, but my attorney says a game of'Rock, Paper, Scissors,' does not represent

a binding contract."

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These kinds of capabilities, like the “amazing”financial instruments that sent investors into a whirl, camewith elevated risks. Terms like identity theft, cyber crimeand cyber warfare entered the lexicon, as more andmore capabilities meant more and more points of accessfor those who would use data for criminal or othernefarious purposes. A kind of cyber-security battle wasenjoined, with escalating firewalls bringing moresophisticated attacks. As this decade rolled through,risks have reached such a proportion that companiesand individuals might need to reassess the balancebetween risks and rewards, a balance that will no doubtland in the hands of insurance companies…and thecourts.

The psychological effects of digital culture arejust now being recognized and discussed. What wehave called the “short-message brain” is the phenomenonof human thought capacity being shortened and agitatedto the point of easy distraction, and beyond that to thepoint of dependence on constant stimulation. Certainlyan “always on” and an “always with you” broadband-connected smartphone can provide constant stimulation,and already, China, S. Korea, England and the UnitedStates have clinics and retreats to redress the damagesof digital addiction. Those admitted to these clinics arelike those who believed in the New Economy or whobelieved that residential real-estate prices would alwaysrise and financial instruments could outmaneuver risk.They just wanted more and chose to ignore overallcosts.

Global Realignment: A Consuming-Producer Dynamic Plays Out

While Americans seemed engrossed in gaming,manias and digital culture, much of the rest of the worldmoved forward, making substantive changes in howgovernments interact and in who leads what. Much ofthose changes were the result of realities seeping into theglobal set of international relations.

The decade showed the world the effects oflarge numbers. The great spread of productioncapabilities increased standards of living in some of thecountries with the largest populations – specifically,China, India and Brazil. As a result, millions of peoplewere moving from mere subsistence to low-levelaffluence – that is, they had more money available tothem than they needed to subsist.

The good news of lifting more and more peopleout of extreme poverty triggered concern: Spreadingaffluence will stress the world’s resources. Thatrealization hit the oil industry as markets pushedprices past the $140-per-barrel price point beforesettling down. Then markets turned to food supply, andprices of grains and other foodstuff shot through the roofas well. Suddenly water moved to the forefront ofpeople’s attention, and conservation became a newissue. Next, countries that import food and had thewealth started looking for arable land to buy…anywherein the world. Middle Eastern countries, China andothers started a “land grab,” buying agricultural land inAfrica, Central Asia, Eastern Europe and elsewhere, allto secure food supplies in the coming years. China,meanwhile, also looked to secure energy and rawmaterials to feed its production engine in the yearsahead, and it made deals across Africa, Latin Americaand the Middle East to assure supply. Countries with themoney were, as we said, “Making a Move.”

During the decade, the U.S. lost its positionas the world’s lone superpower, and four PowerCenters – the U.S., Europe, China and Russia – viedfor political position in what we called The Great GameGoes Global, an updated term based on the nineteenth-century Great Game between Russia and England forinfluence in Central Asia. The contests between economicand political models and the quest for desired resourcesinspired us to characterize a major portion of this decadeas Contentious Times, as countries pursued their ownbest interests with greater and greater intensity.

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Countries that were successfully making a moveand exploiting the parts of the world that were enduringthe Great Recession were some of the same countriesthat had aggregated huge amounts of capital by exportingneeded products and commodities to consumingcountries. For years, consuming countries have beentransferring great amounts of wealth to producingcountries. In 1973, Western industrial countries got ashocking realization of this flow of money when themembers of OPEC decided to force a rapid escalationin prices. World markets were underpricing oil products,the oil producers reasoned, and OPEC decided to forcean adjustment. The “oil shock” took nearly two decadesto work through the economies of industrialized countries.

A similar wake-up call did not take place withregard to industrialized countries accessing theproduction capabilities of China and other Asianproducing countries. Yet, perhaps such a signalevent, little noted at the time, did take place whenU.S. retailer Wal-Mart dropped its Buy Americancampaign and started filling its shelves with productslabeled “Made in China.”

As a result of that transfer of wealth, the decadeof the aught seemed to be a time of reckoning for muchof the world, including the U.S. – a time when the truecost of all those wonderful upside benefits came due.Nowhere is that clearer than in the still developingrealignment of power and prestige on the global stage.And nowhere is that point more forcefully made than inthe realization that in a relatively short period of time, theUnited States moved from being the world’s largestcreditor nation to being the world’s largest debtornation…and the price of that transition started becomingclear in this decade.

The manias that swept through Westernindustrial societies in the decade, and especially themore recent one tied to financial instruments, damagedthe trustworthiness of the economic giants of the post –World War II era. China did not come near economiccollapse from the Great Recession, as did England, theU.S. and much of Europe, and Beijing’s ability tomanage its way through treacherous economic timesadded to the appeal of this rising power among otherdeveloping countries. The West and its economic and

political models came to be perceived as risky andunreliable by many leaders in developing countries,especially in Africa, while China and its allies in thedeveloping-world coalition came to be seen assteady and effective. New York and London, itseemed, could not be entrusted with the reins ofglobal financial power, as reflected in the fact thatChina issued more initial public offerings in 2009than did either London or New York. SinceWorld War II, the Western model of economicdevelopment had been installed in the WorldBank, the International Monetary Fund (IMF) andWorld Trade Organization (WTO), but in theaught decade, Russia, Inc. with its “nationalchampions,” and the Beijing Consensus –comprising centralized planning, managedcurrencies, managed economies and foreign policy-linked trade – became competing models andmodels with increasing appeal to some developingcountries.

As mentioned earlier, the biggest force forglobal change was the huge transfer of wealth fromessentially consuming countries to producingcountries. That incredible wealth gave producingcountries greater leverage in international

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conversations, at the same time that the loss of prestigeamong the former economic elite started to force changesin global power arrangements. China became the largestsovereign holder of U.S. government debt, andEuropeans realized their energy supplies depended onthe goodwill of Moscow and Riyadh. Sovereign wealthfunds – several trillion dollars under the direct control ofnational governments – became a financial force in worldmarkets. African and Latin American countries shiftedtheir gaze from all things European and American tonearly all things Chinese. When in 2009 China offeredAfrican countries $10 billion in preferential loans, it wasmaking available more money to that one continent thaneither the IMF or the World Bank had available for theentire world at that time.

The world’s exporting countries, flush withcurrency reserves, sovereign wealth funds, productsand raw materials that consuming countries also wanted,demanded their place at the international power table.Their demands undermined the Doha Round ofnegotiations to advance trade issues as part of the WTO,and those negotiations finally collapsed completely afterfailed and conflict-ridden meetings in Seattle, Cancúnand Geneva. Developing countries were less and lesswilling to listen to the dictates of the industrializedcountries. As a result, the Group of 20 countriessupplanted the weakened and ineffectual Group of 8 asthe controlling entity nominally overseeing the globaleconomy.

As the decade was coming to a close, Americanscientists ran an experiment on the moon that proved theorb had water on its surface, but the experiment had totravel on an Indian space vehicle to get to the moon.Astronauts reached the international space station withsupplies in December 2009 but did so on a Russianvehicle, the first of many such trips, because the U.S.hasdbegun retiring its shuttles and had no replacements.Also, when subatomic scientists had one of their majorbreakthrough projects of the decade, they did not usethe collider that had been planned for the U.S. , buthad been cancelled by Congress for lack of funding.Instead, those researchers turned to the Large HadronCollider, which is situated in Europe. In the globalBrain Trade, the U.S. was also no longer the loneglobal super power.

Overall, the power of the dollar and its status asthe de facto reserve currency for the world, the appeal

of the West’s version of capitalism, the prerogatives andperquisites granted to the U.S. for being the world’s lonesuperpower and the so-called Washington Consensusmodel of business and government all lost ground in theaught decade.

Permeable Borders:One Force Changes Everything

The extent of changes taking place because ofthese meta-themes – gaming, manias, digital culture andglobal realignment – has triggered what we have calledThe Rethinking of Everything – the necessary task ofreworking and reassessing what is effective, worthwhileand meaningful; how institutions operate; who or whathas power and how it should be expressed; and whichmetrics work with the new realities. As this processslowly rolls across society, we can expect some socialand political instability, slow economic development,shifts in behavior and many unanticipated effects. Wealso expect that it will eventually lead to a very different-looking global and national arrangement.

The process of rethinking should start with whatis driving these meta-themes of change, and that driveris what we have called World War III, the Battle overPermeable Borders, a context we unveiled a little more

than a year before the aught decade began and havemonitored ever since. When we first commented on thisnew “border transparency,” we observed that drugtraffickers, terrorists, hackers, economic calamities,diseases, invasive species, new communicationstechnologies, the Internet and currency traders, amongother examples, seemed able to ignore the historicalconventions of border and boundary controls. Weadded that boundary transgressions were occurring inthe environment, scientific research, product security,privacy and finance. In so many different arenas anddifferent human activities, the way things hadtraditionally been was facing serious challenges.

Knocking down barriers started in earnestwith efforts to eliminate trade restrictions everywhere,leading to the founding in the mid-1990s of the WTO.The challenge to boundaries gathered momentum whenthe Soviet Union collapsed and the Berlin Wall camedown. The borderless world really gained momentum inthe age of digitization and the advent of the Internet. Yet,the wide-eyed innocence of the advocates of permeableborders, however, received a serious blow when Islamicterrorists attacked New York City in 2001. Thencountries started to focus more and more on closingborders.

Likewise, when the world experienced the effectsof the recent financial and economic collapse,more and more countries started passing bills toprotect their workers, companies, currencies,industries and economies from the vagaries ofinternational troubles. And as a symbol of thenew concern about the risks of challengedborders, walls started going back up…literally.Israel started building a wall on the border of theGaza Strip, Saudi Arabia announced plans tobuild a wall along its border with Iraq, Chinastarted raising a fence on its border with NorthKorea, Mongolia sought to build a wall to keepdust from blowing out of China and damagingtheir crops, and the United States built a fencealong its border with Mexico. As fast as thedesire to knock down boundaries had spreadaround the world, the desire to raise protectiveborders returned. In such a way, the battle overpermeable borders progresses: For everydesire to eliminate a boundary, an oppositedesire to buttress that boundary pushes back.

This dynamic gave life to those who wanted togame the economy by knocking down any number ofboundaries, such as existing regulations that limitedbanks’ operations, ethical standards concerning financialinstruments’ ratings agencies, rules for controlling whoqualifies for a mortgage and the like. And now somewant to resurrect those boundaries. A similar story ledto the manias, as traditional rules governing valuationsand the way to create profits gave way to New Economyand then New Finance thinking. After the maniascollapsed, some started yearning for clearer and moreprecise metrics and rules. Digitization and the Internetpermitted greater manipulation of data, an expandedreach for salesmen of new financial instruments and anindifference to local rules or norms governinginvestments – that is, they enabled users to all but ignoresovereign borders and historically sensitive culturalvalues, all in favor of some universal neomathematicalcultural value set. Recently, however, concerns aboutprivacy and risks have changed some users’ openness todigital transgressions. Finally, permeable borders havestarted changing global power, wealth distribution andpolitical alliances. Whether this will trigger a backlash isnot clear, although in this country, some political leadersbelieve that the U.S. should continue to act as if it is stillthe most influential country in the world.

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"Things have changed since last time you were here.For example, we all drink Cosmos now."

The Future Is in the Present

Surveying these meta-themes, severalmessages – dare we say “lessons” – emerge, eachsuggesting a new direction for society, the economyand government.

The Consequences of Bad Decisions GoOn and On – Lifting restrictions on banks, invadingIraq, selling/buying trick financial instruments, acceptingthe reality of a New Economy and so on – the list ofmonumentally bad decisions from the aught decade islengthy. Perhaps more evidence-based decisions thatdepend on ethical judgments rather than wishful-thinkingdecisions that focus on rewards could follow in the yearsahead.

Government Controls and MarketFreedoms Need a Goldilocks Story – Too muchgovernment stifles market dynamism, but too muchmarket independence foments volatility, even collapse.Across the decade and around the world, excessivegovernment action and excessive financialaggressiveness have caused problems, either in waror in the economy. Right now, the global realignmentof power is favoring countries that express strong centralgovernments. However, a “just right” Goldilocks balancewould be nice.

It’s Not Leverage, It’s Just Debt – Investors,consumers, governments, businesses and just abouteveryone else in the developed-economy countriesbecame enamored of debt. Debt could make real nowwhat would otherwise require waiting, and in addition,debt could be recycled, chopped up, redistributed andthen made to bring something else to life that mightotherwise require waiting. This could go on forever…untilit can’t go on anymore. The illusion of growth throughdebt is one of the greater-fool economy’s dark sides.How the management of debt progresses amongindividuals and within institutions will be critical to theeconomy’s stability going forward.

Permeable Borders Are Still Permeable,and Instability Rules – While some of the bad decisionscould have been stopped and much of the decade’sdamage could have been avoided, the driver that pushedthe manias and collapses remains in play: challenges toall borders, boundaries and barriers. Capabilities tocross borders are increasing apace and promise constantinsecurity and frequent instability.

Human Nature, When Armed with NewTechnologies, Can Cause Trouble – Much of whattook place in the manias and with gaming has taken placein various ways throughout history. Yet historically, sucha societal detour into irrational exuberance took placeevery forty or fifty years, occasionally within twentyyears. The fact that two such periods of excess tookplace in one decade reveals the effects that new digitalcapabilities can have. The pace of events is much, muchfaster, and the human ability to understand what ishappening has been swamped, making good decisionsmore difficult and scams and schemes easier to deploy.

It’s Just the Old Falling Apart, Awaiting theNew – We sense a seminal change in society embeddedin the changes taking place this decade. The world isseemingly passing through a period of monumentalchange, because the way it has been constituted andoperated for years has been failing to deliver effectiveresults. Anything is possible as a replacement, and thatis both concerning and exhilarating.

Onward to the Tens/Teens

Our survey of themes emerging during the priorten years suggests that more change is on the way. Weare in a moment when so much real change is takingplace that one might be too focused on the details andmiss the larger picture: One era is ending and another isbeginning. After the Italian Renaissance ended, historianswanted to know “Why?” When the Incas left Machu

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Picchu, archaeologists wanted to know “Why?” Whenterrorists attacked New York, Washington, D.C.and Pennsylvania, Americans wanted to know“Why?” And many people will be wondering why theera of Pax Americana and U.S. dollar hegemony cameto an end, or why stability and security at home had toend, and so on. The rise and spread of nostalgia suggeststhat for now, many Americans are trying to postpone thebig questions of “Why?,” with a comforting look back to“better” days.

Yet the transition will continue, and some arefinding their way into that future. We have seen somesigns that culture is slowly changing. In the second halfof the decade, the worst kinds of reality programs gaveway to rejuvenated talent contests, with one very popularprogram, “American Idol,” displacing the essence of thedog-eat-dog mind-set, “Survivor,” as the most watchedreality show. The decade featured scores of televisionprograms focusing on murder scenes, cold cases, hospitalemergency rooms and other story lines thatmetaphorically captured an at-risk society worried aboutits possible demise, especially the decade’s leadingmetaphor, the show “Lost.” But as the decade endedsituation comedies started returning to network primetime. If anything, programs such as “Modern Family,”“Parks and Recreation,” “Accidently on Purpose” and“Community” signal a new willingness to smile athuman fallibility rather than fear human failings. Theydo not change economic realities, but they do suggest aculture growing more at ease in an unstable world. Oneespecially effusive program, “Glee,” with its tie-ins tothe music world and its effusive energy, could reviveviewers’ spirits and give the music industry a boost aswell.

We have observed companies developing newbusiness models to address new market conditions andconsumers developing a new set of values to fit witheconomic constraints that will outlast the Great Recession.We have also noticed a different attitude towardinternational diplomacy, something we called DeferentialDiplomacy, an approach in which all sides get a fuller

hearing and considerations are made for differences.These are early examples of individuals and institutionsfeeling their way into a new culture.

The trouble with rethinking everything, of course,is that eventually something called “the psychology ofprevious investment” gets in the way – that is, the mind-set that rebuts the need to change anything when heavyinvestments in money, time, energy or beliefs havealready taken place. Albert Einstein gave voice to asimilar perspective when he observed that problemscannot be solved with the same thinking that was used increating those problems.

For the most part, responses to massive gaming;manias and their collapse; digital technology; and globalrealignment have exhibited the same sort of thinking thatlet those problems emerge. Yet as the decade closes,the new kinds of interests, activities and mind-sets justcited represent society’s real “green shoots,” examplesof individuals and their society finding a way to getcomfortable with new realities.

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“Okay, but I’m in charge.”