Predictions for 2016?

Who has predictions for 2016 to share? I’ll go first…

Software: the iPhone will continue moving in the direction of Android and Windows. More capability, but also more crashes and unpredictable behavior such as slow response time.

Hardware: the beginning of the end of Intel’s dominance? As the desktop continues to die and the newest chips aren’t that much faster than the old chips (just more cores), why should anyone know or care what the CPU is inside a tablet or notebook computer?

Televisions: the premature death of OLED? Could it be that LCDs with higher dynamic range and/or ridiculously low prices will strangle OLED in its crib?

Politics: Hillary Clinton wins the presidential election by the same margin that Barack Obama had in 2012. Does it matter who is unfortunate enough to win the booby prize of the Republican nomination (previous posting on the unwinnability of this one for Republicans)? I don’t think so, but I will guess that it will be Ted Cruz based on the fact that he is a professional politician, unlike Donald Trump. With government spending now at roughly 50 percent of GDP, the election is important. As the government has grown (chart) people are more passionate about getting on the right side of this rich entity. The vote should basically come down to people who benefit from a big government (either they collect welfare, free housing, etc., work for the government, or have a close family member who works for the government, or work for a government contractor or crony (e.g., health care)) versus people who are economically disadvantaged by the government growing larger (e.g., people who pay taxes but don’t have an obvious way to collect a lot of benefits in return).

Economics: As predicted by Mancur Olson, the U.S. economy continues its stagnation, with per-capita GDP growing only slightly (of course the total GDP can still grow robustly if the U.S. population grows larger, e.g., through immigration). If we model the half of the U.S. economy that is now centrally planned by government as being like the former Soviet Union, we would expect half the economy to grow at an annual rate of between 0 and 0.75 percent. If we model the other half as being like a modern high-income free-market economy, such as Singapore or Hong Kong, that half could grow at a 3-4 percent rate (maybe at the higher end of this range due to the dead cat bounce that we’re probably still in following the Collapse of 2008). That leads to a maximum potential long-term average per capita GDP growth of about 2.4 percent, but let’s assume that the tangle of regulations imposed by the planned portion of the economy drags this down to 1-1.5 percent. If you live in one of the handful of desirable cities in the U.S. the result of this “growth” will be a reduction in your spending power due to (a) higher taxes, and (b) inflation in the cost of housing and services.

Work: The growth of the American welfare state will continue with higher minimum wages and other regulations discouraging companies from hiring the least-able Americans (see also “Can Puerto Rico be a laboratory for the future of the rest of the U.S.?” and “unemployed = 21st century draft horse?”). Higher tax rates and more lucrative child support guidelines in some states (e.g., Kansas), plus the message from politicians and meida to women that they can’t get fairly compensated in the workforce, will contribute to a continuation of the 15-year slide in the labor force participation rate of women. An increasing percentage of young women will be primarily stay-at-home wives (The inquisitive gender studies student and Sheryl Sandberg) or profit from their fertility without being married (chart showing a peak shortly after the Federal mandate for states to develop guidelines that made it easy to calculate the profits from a casual sexual encounter or short-term marriage (History); see also divorce litigators’ analysis of Ellen Pao’s career options)).

Leisure: With fewer people working and higher costs for employers making hotel rates grow faster than official inflation there will be a lot of demand for fun stuff that Americans can do from home, e.g., streaming video, video games, etc. I predict that the first virtual reality headsets will arrive in 2016 as planned but that consumers will be slow to adopt these innovations.

Health care: With no changes in financial incentives, I expect no changes in this sector (nearly 20 percent) of the U.S. economy. Due to the fact that viruses are smarter than humans, I expect no major breakthroughs in treatments.

Government: More outsourcing to cronies. From a bureaucrat’s point of view, a contract with a crony provides a great way to say “no” to the public. Instead of “We don’t want to give you that service,” a bureaucrat can say “We contracted out that function for five years to Vendor X and the contract doesn’t require them to give you that service. It is a great idea, though, and I’m sorry that they aren’t doing it.”

Businesses: Big companies will manage to work around new regulations and taxes. The keys to continued profits will include a combination of purchasing political influence, turning U.S. operations into a subsidiary of a foreign corporation headquartered in a country with lower tax rates (e.g., via an inversion), and expanding in growing markets overseas. Operating a small company in the U.S. will be increasingly untenable, unless it is a startup that can expect to be acquired fairly quickly. “Go big or go home” will continue be the message, e.g., communicated with double the effective tax rates on small corporations compared to large ones with their crews of full-time tax attorneys, offshore subsidiaries holding patents, etc.

Stocks: Due to the above, the S&P 500 should continue to grow in after-tax value at the same rate as world GDP (about 3 percent), even if the U.S. economy stagnates. (i.e., I am predicting that the S&P 500 will be approximately 60 points higher a year from now.)

Education: Mediocrity will continue to be accepted by Americans at all levels of the educational system. The U.S. will continue to spend more on this sector than all but a handful of countries (OECD chart), but most people in the education industry won’t have any incentive to achieve high performance. Incumbent nonprofit colleges will keep fighting back against for-profit colleges and increase their share of government handouts.

Cars: Innovations in self-driving and electric-powered cars will be significant and heavily publicized, but hard to deliver. Thus by the end of 2016 consumers will try to avoid buying a new car and/or enter into short-term leases in hopes that by 2017 or 2018 there will be mass-market cars with dramatic innovations.

Internet: Continued slide in readership and participation for anything that isn’t Facebook.

Income Inequality: Will continue to widen. Politicians who get a boost from complaining about income/wealth inequality will open the doors to a lot of immigrants with zero income and zero wealth, thus immediately worsening the statistics. Population growth from this immigration combined with the obstacles to building in the U.S. will favor existing owners of real property (i.e., Americans who are richer than the median). Increased complexity from regulations, taxes, and tax differentials from place to place and from company to company (e.g., depending on political connections) will favor the cleverest and best-educated (i.e., Americans who are probably richer than the median).

ISIS prediction: We won’t hear too much about ISIS in Syria by the end of 2016. Backed by the Russian military (will they trademark the phrase “What a real ally looks like”?), the Syrian government should be able to get its territory back under control. So ISIS will contract to almost nothing in Syria and grow in Iraq.

Migration into Europe: Every current migrant will tell 10 friends or family members about how well it is working out. Roughly one third of the friends/family will act on the advice. Thus there will be approximately three times as many migrants coming into the EU at the end of 2016 compared to now.

Readers: Your turn now!

16 thoughts on “Predictions for 2016?

  1. How many of your other predictions are contingent on Hillary winning? You should tell us how they will change if (1) Trump wins or (2) Cruz wins.

    I predict that, if Hillary wins, the increasing unreality of and polarization resulting from American Federal government policies will cause serious economic recessionand social unrest, worse than what we saw from 2008. If Cruz or Trump wins, the economic situation will not be as bad but the social situation will be worse because the media and popular culture will go insane with rage and spite.

  2. Desktop computers aren’t “dead”. I’ll bet you wrote this post on a desktop or laptop. Sales have plummeted simply because the platform has peaked. There’s no reason to replace the machine you bought five or six years ago with a new one.

  3. Bell’s 505 helicopter will be certified in the US and Europe, and nobody will ever buy a new EC120 or R66 again. Very few people will buy another AS350/EC130 for that matter, when for the same $ they could buy 3 505’s and carry 2x the passengers.

    Cessna/Beechcraft will show off renderings of a carbon-composite single-engine turboprop with club seating for 8 passengers.

    Diamond’s DA50 will be delayed until 2017.

    EPS Aero’s clean-sheet 350hp diesel aviation engine is delayed until 2017.

    Computer flying aides, such as emergency auto-landing, are introduced to the global general aviation market by Chinese manufactures.

  4. Philg: Internet: Continued slide in readership and participation for anything that isn’t Facebook.

    This, at least, you (and all) can do something about: inform your “Facebookfriends,” that you won’t be “friends” with them there anymore… given that they’re but a packaged ad-demographic product to the proprietors. Welcome them back to your own place.

  5. I agree that Clinton would beat Cruz, for the reason you say, but Donald Trump is going to be the nominee and he is going to beat her by a wide margin.

    :Europe is doomed if it keeps taking migrants.

  6. These are just a few of my predictions:

    BUSINESS: 5 different big internet companies will tank. 2016 will be the year of shame for this kind of companies (unicorns) after their crazy accounting techniques, that inflated their valuation as private companies, are revealed. A number of VCs will suffer inspections by the market and tax authorities. A number of VCs will bankrupt. Investment will start draining slow at first and really fast by the end of the year. The situation will take a toll on the stock markets around the globe.

    TECHNOLOGY: We will see the first serious cyberattacks, with basic infrastructure turned down. Governments will seize the opportunity. The world will go even more crazy on security. Laws will be passed to audit the Internet in such a way that Snowden’s papers will look like jokes. A new CyberWar will start, hackers will mobilise again against the governments. VR will flop… investors will start talking about “low hanging fruit” while SpaceX start launching more and more rockets successfully. IT will start losing lustre quickly in favour of long term projects involving hardware and physical things. A drone will cause the first serious accident/incident (explosives?), regulation will be created and enforced.

    EUROPE: a big conference will be called on in Europe to prepare a common policy on terrorism and immigration. Unfortunately Europe wills suffer more terrorist attacks, paranoia regarding Muslim citizens will reach a new level. UK will put Europe against the ropes with their referendum. Seeing the army in the streets will be normal, seeing on TV news about people being detained will be normal. Nationalism and xenophobia will keep creeping in every single country. Even more after some territories start moving into even more aggressive tactics on their way to independence (Catalonia?)

    INTERNET: Facebook will keep eating up more and more of the content creation of the Internet. The internet will be more and more boring for “hackers” and “techies”. Some kind of movement for having something running “out of the government internet” (mesh networks, bluetooth, who knows) will start. Chinese companies will start appearing everywhere. Countries will start establishing “virtual frontiers” to “control terrorism”.

    In general, I predict a grim 2016. But I’m a chronic pessimist anyway.

  7. SpaceX will launch 12 of the 30 flights they plan, due to the outdated range safety system & undisclosed issues. Weather issues & payload limitations will allow them to recover 2 more core stages during the 4 space station launches they achieve. Falcon heavy won’t fly for yet another year & no stage will be reused, due to undisclosed issues.

    Interest rates will never rise above 0.25%, so the corporate debt boom continues. Mass layoffs continue but go unnoticed because startups continue to shun public equity in favor of private loans. Meanwhile, buyout fever mints more executive billionaires than ever before, sending average rent in SOMA over $5000 & the average house in Palo Alto over $6 million. The stock market hits 19,000 on buybacks. Virtual reality goggles & self driving cars remain vaporware but remain a sensation on the methusela of buyouts: CastAR buying out Steampowered for $100 billion in debt.

    El Nino is a bust, with Calif* only receiving average rain. Fewer people will have access to clean water there while more people in Uganda will, thanks to charitable donations from billionaire executives.

    Twitter will become the primary news giver, as nothing of value appears on facebook except for ads, rehashed photo quotes & “you won’t believe what happened next”.

    Bill takes over all of Hill’s campaign affairs, getting it on track to win the election. Voters appreciate the fact that Hillary is only a defacto president, with Bill pulling all the strings, proving a constitution in the fullness of time can become as meaningless against the natural will of people as corporate regulations.

    OLED will continue its slow grind into prominence, due to lower power consumption & smaller size, but be hampered by old players having access to free credit to sustain the status quo.

  8. The one thing I disagree with everyone is the certainty of Hilary Clinton winning.

    We now have 47 presidential elections since they started counting the nationwide popular vote, in 1824, and about 35 or so after the Civil War, when all states started electing slates of electors by popular vote. And American electoral patterns have been fairly consistent.

    There have been fourteen presidential elections with the same situation as in 2016, where the presidential party gained control of the White House eight years (two elections) earlier and kept it in the intervening election. Of these, in all but one case either their popular vote percentage, or their margin, though almost always both fell from where it was the previous election. The exception happens to be 1904. Though its not really applicable, the pattern even holds up well in cases where the presidential party loses control after four years, their vote tends to fall even further the election after that.

    Since Eisenhower replaced Truman in 1952, there has also been a remarkable run of the White House switching between parties every eight years, 1980 and 1988 being the exception. There is no reason why that shouldn’t continue. The Republicans also gained a big edge over the Democrats not just in Congress, but in statehouse and local races as well during Obama’s presidency, the last time they had this advantage was in the 1920s.

    There are reasons for this which would only really be shaken up by something like a Trump third party candidacy, Trump winning the nomination but most of the Republican party hacks supporting the Democratic candidate in the general election (this has been threatened), or Trump clearly getting the support of most Republican primary and caucus voters but being denied the nomination anyway. There is actually a small chance of something like this happening, but a wave of enthusiasm for Hillary Clinton wouldn’t come into play.

    On top of this there about a 50-50 chance of Hilary Clinton’s health or legal issues keeping her from being nominated anyway.

    The other predictions are plausible, and of course a President who takes office in 2017 would have little effect on events in 2016.

  9. Phil,

    I wish you’d devote a post/thread to Facebook. My family and I do not participate and we are frowned up by relatives for not doing so. The only way I could get one cousin to shut up was to tell her Facebook doesn’t interest affluent people like myself. (And my definition of affluent is far higher than most). She clammed up upon hearing that incredibly facetious remark.
    But in all seriousness, I’ve never seen anything that offers so little become so popular with the masses.
    It seems like a quasi vanity play sprinkled in with the electronic version of the dreaded Christmas Card letter from Uncle Terry. I essentially look at most of the stuff on Facebook and want to scream “WHO CARES?” at the top of my lungs. I don’t give a shit if my high school pal in Texas is taking his third wife and her three loser teenagers to Six Flags and I don’t care if Rich in NYC is gonna see a play tonight. That just makes me want to go, and I cannot!!
    Maybe I’m just the 2016 version of Ebenezer Scrooge.

  10. There are far more interesting things going on in the software world than iOS bloat, notably the growth and commodization of Deep Learning (Theano, TensorFlow, etc). My daughter asked if I could build something to distinguish cancerous vs. non-cancerous moles. If a quality image set existed, I can now build and test a reasonably accurate model in a few days, which is pretty amazing. 2015 allowed computers to see (ref). 2016 will increase their abilities to perceive exponentially.

  11. Wrt FaceBook, every one of the 700 million daily image uploads is processed by two Convolutional neural nets. There is a reason why Yann LeCun moved to FaceBook.

  12. Politics: Mitt Romney will be dragged back into the race as the republican nominee to face off Clinton.

  13. Small note: the graph you link to and the text underneath it suggest total US government spending is around 36 per cent of GDP. It takes a fairly broad definition of “roughly” to say this is “roughly 50 per cent”.

  14. David: As noted in , now that the entire health care sector of the U.S. economy is government-directed (via either Medicare, Medicaid, or Obamacare), if we consider health insurance premiums to be a tax and what health insurers spend to be a government expenditure, you need to add in about 10 percent more. If you also add in government spending on unfunded pension commitments, I think the U.S. local, state, and federal governments do get pretty close to 50 percent.

  15. @Ed Re: Hillary

    I can guarantee you, Hillary Clinton will be in the White House. The odds are heavily stacked in her favor. There are a lot of women, unemployed or otherwise, who believe that a female Clinton presidency is going to benefit them, in the same way many black people believed an Obama presidency would do so for them. She will be the USA’s version of Christina Fernandez de Kirchner from Argentina.

    Cue the Evita music.. Don’t cry for me USA.. you get what you voted for…

  16. Insightful and depressing as always, this piece mentions Russia a couple of times and I can’t resist the temptation to comment:

    * The USSR is hardly a good model for the economic activity of US government, which as you mentioned often “outsources to cronies” instead of planning and managing everything itself. It’s hard to tell which is worse (if cronies are paid “cost + 10%”, then they have a much more direct incentive to increase costs than the manager of a Soviet enterprise. On the other hand, a lot of the equipment and materials used in US government projects are generally produced to be sold in a relatively free market. A Soviet enterprise rarely had access to high-quality equipment and materials, having to use products made by other Soviet enterprises.) Whichever is worse, and even if they happen to produce the same rate of growth, they seem to work too differently for one to serve as a model for the other.

    * “What a real ally looks like” indeed sounds fitting if you compare Putin’s track record of being an ally to Assad to Obama’s track record of being an ally to Mubarak. However, the phrase might have been trademarked by Hitler who according to Churchill’s “The Gathering Storm” never defaulted on the promises made to Mussolini in exchange to the latter’s support for the annexation of Austria – that is, he kept his word for as long as he could. Thus Hitler was arguably a better ally to Mussolini than Chamberlain was to Czechoslovakia; presumably a dictator is more likely to keep his word than a democratically elected government, not only because that government often changes but because the current governor worries more about his popularity at home than his popularity abroad. The bottom line for both Hitler and Mussolini, however, wasn’t that good. Perhaps Putin and Assad will do better by limiting their ambitions so that they do not exceed their military capabilities.

Comments are closed.