The Future of STEEP An Analysis of the Future of the Social, Technological, Economic, Environmental, and Political Paradigms of the Future

Chartrand, Wyatt

Goldberg, Mike

Krone, Christopher

Nguyen, Hai

Usmanov, Sarvar

MGMT 311-91, Group 12

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Abstract: This research paper will analyze and project the future of five dimens ions

of life: the Social dimension, the Technological dimension, the Economic

dimension, the Environmental dimension, and the Political dimension.

Summarized below are our topical predictions for each dimension:

Social dimension: Privacy will continue to decrease, and we will emphasize

this in a business, online, and content context.

Technological dimension: Wearable technology will reach dizzying heights

and will include mech suits. Emphasis will be on full-body technology.

Economic dimension: Main prediction will be the development of two

classes: an underclass and an upper class. Emphasis will be on middle class

decline and the implications of this.

Environmental: Main focus will be water scarcity, with special attention

given to the business conflicts arising from the depletion of this resource.

Political: Political fracturing of the Republican Party will be emphasized

in this last dimension.

These projections are assumed to be roughly ten years out from the present,

although in reality they may take longer to materialize. Because the financ ia l

industry has become such a dominant force in America today, we will also conclude

each dimension with a discussion of how each dimension will affect the financ ia l

industry in relation to our predictions. In order to display the especial importance

of the dimension of Economics, we will also present an infographic illustrating our

primary prediction for it. The infographic was created using the website Venngage.

Works Cited are included at the end.

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Social & Social Financial Implications:

As time progresses into the future, people will have much less personal privacy than they do today.

This rapid decline in privacy will result from gradually increasing surveillance, includ ing

surveillance in public, in the workplace, and online. Congress recently issued a new mandate that

allows the Federal Aviation Administration to use unmanned aerial drones with the intention of

providing domestic surveillance and national safety (Calo). Privacy will continue to decline in

society because of the lack of laws that prohibit these new forms of surveillance. It is continuous ly

becoming easier to retrieve anyone’s personal information, and this trend will have an effect on

the financial industry.

One effect on the financial industry that the decline of privacy will have is that it will alter

the way that businesses and their online practices work. One of the biggest risks a company can

face is the loss of consumer data that is collected online (The Futures Company). This information

is very valuable to companies because they use it for product targeting and special offers. However,

consumers are also becoming more aware of the value of their data as their amount of privacy

decreases. As a result, many consumers will be much more hesitant to release any informa tion

about themselves to these businesses. This will hurt many online businesses in the future; as

consumer data will become a very significant measure of a company’s success and competitive

advantage.

As a standard procedure, online companies have had to receive some type of implied

consent from consumers before they are legally able to collect and store that consumer’s

information for strategic use. The idea of implied consent insinuates that these online companies

can assume consent from the consumers, based on the consumers’ behavior as revealed by their

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browser settings. One way that this collection occurs is through the use of cookies. Cookies are

defined as “Simple uncompiled text files that help coordinate the remote website servers and your

browser to display the full range of features offered by most contemporary websites” (All About

Cookies). Cookies use form information and ad tracking to store personal information that

companies may retrieve and assume as consent. However, as society is becoming more protective

of their incessantly sought after private information, companies can no longer rely on implied user

consent. Many people are deleting their cookies so that this kind of personal information can no

longer be stored. Rather, the user consent must be explicit, meaning that the consumer must

formally give the company consent before their private information can be used. The ePrivacy

Directive, which is a 2009 amendment created by the Online Trust Alliance, has already been put

into effect with many companies conducting business within the European Union. The ePrivacy

Directive provides a new approach to obtaining explicit user consent before their information can

become attainable (Flamant).

Personal privacy is in imminent decline in today’s society, and people will continue to

respond to this trend by becoming more protective of the information that they once lent out

without fear. Online businesses will have to overcome this scarcity of information in order to retain

their competitive advantage in the financial industry.

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Technological & Technological Financial Implications:

In 10 years from now, wearable technology will be much more developed than it has ever

been. More and more developers are investing their capital in such innovative yet practical gadgets.

The market for wearable technology is predicted to triple in the next few years. Google Glass and

smart watches from companies like Sony or Samsung are currently the most talked-about wearable

devices. These offering have a significant barrier to widespread adoption, high price points. These

gadgets debuted with high hopes and many promising features but with a relatively high price.

However, in ten to fifteen years, wearable technology will focus on something that is more health-

oriented with more affordable prices that will lure in more consumers. For example, Tokyo

University in Japan is developing a robotic suit powered by pneumatic artificial muscles that help

humans with heavy work. With the control of a pair of McKibben artificial muscles, this suit

consequently provides support to the user’s back, shoulders and elbows that helps your arm easily

hold two more sacks of rice (which totals about 110 pounds) (Lai). This robotic suit itself weights

about 20 pounds and will make quite a spectacular outfit. The suit is still in the works, which

means that the design will be even better once it has actually launched. Another fascinat ing

wearable device that is focused on the environment is called Wristify. It is essentially a

thermoelectric bracelet that can reduce the energy needs associated with heating or cooling an

indoor environment. This MIT student-developed bracelet works on a principle that heating or

cooling the skin on one part of the body can make the entire body feel warmer or colder. The

current prototype is capable of changing the rate up to 0.4° C (0.7° F) per second (Quick). The

team that developed the device strongly believes that this little personal device could help cut

energy usage for an entire building. It allows significant savings and convenience to consumers

when they carry it at any time. Given current energy consumption patterns, this device would

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potentially cut about 16.5% of all US primary energy consumption. Still in the prototype stage,

many developments need to be made until the final product is released.

Many businesses are also reaching out to international markets. As such, something like a

portable necklet that allows translating up to 25 different languages could be very useful. This

personal translator is called SIGMO. SIGMO connects with smartphones via a Bluetooth

connection to utilize the power of web-based translator such as Google Translate or Siri on iPhones

for language conversion (Schreiner). The compact size and cool stone-like design make it look

fashionable and quite trendy. With a built-in external loudspeaker, consumers will be able to

translate simple sentences and short phases. Targeted to business consumers with limited language

skills, SIGMO will fulfill a major need when they travel internationally, although it will not replace

human translators.

The wearable technology market is on the fast track growth-wise since they provide a range

of benefits to users, from informing and entertaining, to monitoring health, to improving fitness,

to preserving the environment, to acting as personal assistants. Shipments for wearable devices are

predicted to rise 500% in 5 years from 2011 to 2016 (SEGUNDO). This could result in nearly $30

billion in revenue (according to analyst Shane Walker at IHS Global Insights). In fact, the current

Google Glass or Samsung’s Smart Gear are affecting those respective companies’ stock

substantially (Keris Alison). Each of these devices has a very promising future within the financ ia l

industry since each segment will have unique customizations. Hence, devices that have the same

features but with different designs such as different colors could provide huge collections for

consumers to choose from. This will give consumers the opportunity to have the flexibility to buy

the products the way they want. Consumers will feel like they can buy something fashionable yet

smart and useful for personal purposes.

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Economic & Economic Financial Implications:

One of the prevailing economic forecasts is income inequality. As bad as it already is,

income inequality will be considerably worse in ten years, and this will have a host of negative

effects. The predominant effect will be the gradual erosion of the middle class, which will cause

our class system to be virtually unrecognizable in ten years. Instead of numerous class brackets,

there will be two primary economic classes: The upper-middle to upper class (which we will

simply call the “upper class”) and a lower class, or the working poor. This is corroborated by The

Huffington Post article “This Map Will Show You The Staggering Growth In Income Inequality

Over The Past 40 Years,” which explains that in between 1979 and 2007, the wealthy saw their

income go up by 275 percent, while everyone else’s income increased by only 20 percent (The

Huffington Post).

At that rate, we can infer that in ten years socio-economic stratification will have been

magnified even beyond what it is now, effectively creating a two-tier economy (upper and lower

classes). So what will this new class system mean for America? Rick Newman, in his Yahoo

Finance Article "How Americans Will Adapt to Lower Living Standards," explains that Americans

will have to adapt to lower living standards by cheapening their tastes. Three main structural

changes ten years out will become evident based on this new class system and Newman’s article:

People will either sink to the bottom of the income ladder or rise to the top of it,

with little mobility in between.

It will be tougher to survive without highly relevant skills, as their will no longer

be much of a middle class left to protect mid-skilled workers.

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There will be economic wealth opportunities only for the highly skilled and

ambitious, or the lucky.

These three key points from the article suggest that in the not-too-far-off dystopian future, there

will only be winners and losers, with no middle ground (Newman).

As disturbing as this is, this is the key trend our economy is moving towards. As an aside,

it should also be noted that this two-tier class system will have one other significant side effect.

Professor Richard D. Wolff’s article “Rising Income Inequality in the US: Divisive, Depressing,

and Dangerous” presents stark evidence that income and wealth inequality will foster envy,

resentment, tension, and depression. It goes on to explain how income inequality will also init iate

a vicious cycle of frustration, blame, and destroyed self-esteems. This has created, in his words

“Harsh, mean-spirited movements that demonized and dehumanized their targets.” (Wolff). In ten

years, these problems will almost certainly have been maximized by the exacerbation of increasing

wealth inequality, almost entirely afflicting the lower class.

The effect these things will have on the financial services industry will be profound.

According to the article "The Engine Of American Inequality: The Consequences Of A Free

Wheeling, Unchecked Financial Industry" by Jim Lardner, in a nutshell, as income inequality

worsens, the financial sector will grow larger and larger as income moves towards the top and

financial institutions sit on cash, putting less and less back into the economy. Eventually, the

financial services sector will exist only to feed itself (Lardner). He ends with “If we believe in our

founding ideal of America as a land where children should start off on roughly the same footing

regardless of history or ancestry, we will all have to screw up our courage and refocus on (among

other challenges) the unfinished work of making sure we have a financial economy that serves the

real economy, not the other way around” (Lardner).

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Environmental & Environmental Financial Implications:

Water scarcity is an issue for public utility companies who use bonds to finance their

infrastructure projects. Because of the capital-intensive nature of the utilities industry, companies

issue large amounts of debt. Generally, utilities are extremely water-intensive; a moderate to severe

water shortage could seriously hinder their ability to provide some 260 million Americans with

the water they need every day (UNESCO, 2012). This coming water scarcity issue, however, is

currently not well reflected in the pricing of these bonds; and investors have insuffic ient

information to mitigate their exposure to water scarcity in holding such bonds. If water supplies

do run short, utility revenues might fall, causing such companies to scale back operations, and

possibly rendering them unable to fulfill their debt obligations. Investors will lose confidence and

look elsewhere to invest their money, perpetuating the problem. Without more investment into

R&D efforts such as waste management and sustainability, companies will not be able to keep up

with the growing gap between water supply and demand.

At the same time, as America’s water infrastructure continues to age, it is not uncommon

for pipes and mains to have been built over a hundred years ago. Additionally, there are roughly

240,000 water main breaks per year. The 2013 Report Card for America’s Infrastructure, an annual

report published by the American Society of Civil Engineers, placed America’s drinking water at

a D, equivalent to “poor” on the report’s scale. (ASCE, 2013) Essentially, utilities will become

undervalued and will need to look to other sources of capital if they wish to retain comparable

levels of service. This means that if consumers expect to maintain the level of service they

currently receive from utilities they are going to have to pay a higher price for their water. The

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ASCE Failure to Act report estimated that the US is at risk of losing over $400 billion in GDP by

2020 due to the increased cost of water and loss of productivity (ASCE, 2011). Businesses will

bear the brunt of the burden, losing close to $150 million within that time span.

Water scarcity will also have a significant impact on the food and beverage industry. Water

scarcity can lead to the increased price of several food commodity inputs and animal and crop

yields will be negatively impacted if the water that is essential to these industries becomes more

expensive to acquire. Also, water scarcity creates operational disruptions, as it is a base ingred ient

in food production processes, in addition to its other crucial roles in production. Thus, the most

financially significant impacts to this industry due to water scarcity will be increased input prices

and higher processing costs. As with utility companies, the risk investors face due to water scarcity

is not communicated as firmly as it should be.

Both of these industries are extremely sensitive to the level of water supply and availability.

As such, both analysts and investors must take steps to lay out groundwork to navigate the complex

problem of water scarcity. Analysts should look to explore the potential financial impacts on water-

reliant industries and include these findings in their reports. Municipal bond ratings, such as the

ones that fund utilities, are determined by ratings agencies such as Moody’s and Standard and

Poor’s. To better understand a company’s sensitivity to water risk, ratings agencies must

implement water-risk stress tests, rewarding companies that use strategies to mitigate this risk.

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Political & Political Financial Implications:

Throughout history, the Republican Party has been a powerhouse of a political party, and

has produced many presidents throughout its 150-plus year history. It has survived many problems

over the years, and a few periods of playing second fiddle to the Democrats. However, the

Republican Party is in a bad way right now, and it could be enough to send it over the edge. The

recent Tea Party movement has caused a split between the smaller but much more radical Tea

Party and the more conservative GOP. The Tea Party may be substantially smaller, but they have

a lot more capital, which compensates for their smaller population. In fact, the Times said that

right-wing conservatives are spending more money to attack Republicans than Democrats are (Van

Howe 1). The recent government shutdown was caused largely in part by the desire of the Tea

Party to get their way and the rest of the government trying to stop them, including the GOP. If a

Republican candidate does not agree with Tea Party policies, they will threaten to kick them out

of office. Even the party’s most favorable candidate, Chris Christie, criticized his own party’s

“toxic internal politics” (Peoples 1). If the Republican Party continues down this path, the situation

will not get any better for them. It could cause them to lose power over the next few years. For

the party as a whole, it could be a much larger problem. They seem to be at war with the Democrats

during every single election year, and they cannot afford to be fighting amongst themselves. It is

a very bad situation for the party if they have to side with members of the opposing party in order

to keep certain members of their party from gaining any form of political office. Voters are being

urged to vote in favor of any candidate that is not being endorsed or funded by the Tea Party (Van

Howe 1). If the Democrats gain control of the government, the Republicans will not be happy for

a very long time.

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The Tea Party is known to be strong-willed and inflexible on issues they are passionate

about. This combination of attributes can lead them to do whatever it takes to get what they want,

and they have the funds to do just that. When a stubborn group of rich people does not get what

they want, they have not been known to go down without a fight. In a world where money is

power, it would seem that the Tea Party could gain quite a bit of clout among congress. In fact,

the last Government shutdown was largely in part due to the “Tea Partyers” playing hardball to

get their way. There is nothing stopping them from doing it again. If they continue to shut down

the government whenever they do not get their way, the entire country, and the world, could suffer.

The financial services industry could be very negatively affected by this issue if it

continues. For starters, if the government is shut down, then the Small Business Administra t ion

will stop providing loans crucial to small businesses just starting up. Without small businesses

opening, borrowing on a large scale and many small-town economies would suffer. According to

a survey of small business owners, a long government shutdown would cause them to pull back

on hiring plans (Plumer 1). A really long shutdown would cause some small businesses to close.

Small businesses are an integral part of the American economy, especially in smaller towns where

larger businesses do not operate. In addition to the loss of small businesses, shutting down the

government is expensive. The government shutdown cost the country around $24 billion in total

(Dockterman 1). That was for a shutdown lasting 16 days. That comes out to $1.5 billion per day.

What happens if the Tea Party decides to shut down the Government again, but this time, for even

longer? Another long shutdown without time for recovery could be crippling for the nation, and

the world. If the Government keeps shutting down, then the U.S. will keep losing money, and if

the problems continue for a long time, it could cause problems for the entire world. If the U.S.

loses enough money, they might have to default on their loans. If that happens, then the country’s

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credit rating will fall, and cause the US to lose their status as an economic superpower. If that

happens, then a worldwide superpower would falter, causing a state of panic around whole world.

The fracturing of the Republican Party has already caused problems all over the country, and has

the potential to cause more problems, for a very long time. If it is not taken care of soon, the Tea

Party will continue to grow in power to get what they want. If that happens, the government could

be shut down again and again.

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Infographic Analysis:

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Conclusion:

Given all of the above predictions, our group predicts a violent, sicker, poorer, darker future.

Socially, our privacy will have declined in an increasingly globalized and interconnected world.

Technologically, we will make great breakthroughs in the field of wearable technology, but this

technology is likely to be prohibitively expensive and availab le only for the upper-class, further

widening the gulf between rich and poor and helping to create a two-class system in America, as

per our Economic prediction. Environmentally, we will live in an age of scarcity, with wars and

infighting over such precious resources as water, which will also entail a great many business

disruptions. Politically, we will become more polarized, more partisan, and more extreme. This

will lead to the fracturing of the Republican Party, as detailed in our above analysis. Gridlock,

ineffectiveness, and disintegration will ensue. In all of this, the financial industry will continue to

primarily benefit the rich, further lending credence to our Economic prediction, and the various

other ways in which the financial industry will be impacted by STEEP are described above. All

of the things will build to a perfect storm of uncertainty with all of the ills described above. With

little hope going forward, the future appears decidedly less bright then it did not so long ago.

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This Map Will Show You The Staggering Growth In Income Inequality Over The Past 40 Years

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Works Cited for Infographic Analysis

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