In today's rapidly evolving world, banks can't afford to simply react to change. To thrive, they need to anticipate the future and proactively position themselves for success. This is where foresight, megatrends, and strategy come into play. These three interconnected concepts provide a powerful framework for navigating complexity and uncertainty.

Foresight is more than just prediction. It's a systematic process of exploring possible futures to inform present-day decisions. It involves scanning the horizon for signals of change, emerging issues, and potential disruptions. It requires thinking the unthinkable, challenging assumptions and considering a wide range of possibilities, including "wild cards" and unexpected events. Ultimately, foresight helps create plausible stories about the future, each with its own set of implications. For example, BBVA (Banco Bilbao Vizcaya Argentaria) has a dedicated research department that analyzes trends and produces reports on the future of banking. They actively engage in scenario planning and horizon scanning to anticipate disruptions, enabling them to adapt proactively to the evolving financial landscape. Foresight empowers BBVA to move beyond short-term thinking and develop a long-term perspective. It helps them identify opportunities and threats, anticipate challenges, and build resilience.

Megatrends are large-scale, transformative forces that shape the global landscape. They unfold over years or even decades, influencing societies, economies, and industries. Consider technological advancements like artificial intelligence, automation, and biotechnology, which are rapidly reshaping industries. Demographic shifts, such as aging populations, urbanization, and migration, are altering consumer markets and workforce dynamics. Climate change and resource scarcity are forcing businesses to rethink their environmental impact and embrace sustainable practices. And social and cultural changes, including shifting values, rising inequality, and evolving consumer behavior, are impacting everything from product development to marketing strategies. Understanding megatrends is crucial for businesses. For instance, DBS Bank (Development Bank of Singapore) recognized the rise of Asia as a major economic force and the increasing importance of digital banking in the region. By recognizing these powerful forces, they can identify emerging markets, anticipate disruptions to their industry, and adapt their products and services to meet future needs.

Strategy is the bridge between foresight and action. It involves making choices about where to play and how to win. A robust strategy incorporates insights from foresight and megatrends to define clear goals and objectives for the long term. It guides businesses in allocating resources effectively, determining where to invest their time, money, and talent. Strategy helps develop competitive advantages by identifying how a business can differentiate itself and create unique value. Finally, it fosters organizational agility, enabling the business to adapt and respond to change effectively. JPMorgan Chase, for example, has focused on diversifying its business and expanding its digital offerings, acquiring a digital wealth management platform and investing in fintech startups. By aligning their strategy with foresight and megatrends, businesses like JPMorgan Chase can increase their chances of success in the long term. They can proactively position themselves to capitalize on opportunities, mitigate risks, and navigate the complexities of the future.

These three concepts are intricately linked. Foresight provides the raw material for strategy by identifying potential futures and megatrends. Megatrends shape the context in which banks operate, influencing the strategic choices they make. Strategy, in turn, guides action and helps businesses navigate the future shaped by foresight and megatrends. The success of BBVA, DBS, and JPMorgan Chase showcases how effectively integrating these concepts can lead to strong financial performance and a robust market position.

In a world of increasing complexity and uncertainty, foresight, megatrends, and strategy are essential tools for any business. By embracing these concepts, businesses can move beyond reactive decision-making and proactively shape their future.

FrankSchwab.de

Artificial intelligence (AI) is often viewed as a separate entity, but its roots are firmly planted in human intelligence (HI). AI is a creation of human ingenuity, designed and built by humans. We develop the algorithms, train the models on data we collect and curate, and interpret the results. Even the most advanced AI needs human oversight to ensure accuracy and prevent unintended consequences.

And this is exactly my experience. By now, I'm using AI tools daily, even to write this very text! It feels like we're at the beginning of a massive learning curve, akin to the early days of automobiles. Just like those first cars in 1900, AI is still a bit clunky and requires effort to master. Honestly, it doesn't necessarily save me time yet, but the quality of my output is undeniably enhanced. My writing, especially in English, has definitely improved thanks to AI assistance.

Furthermore, our very definition of "intelligence" is based on human capabilities. AI seeks to replicate these, like learning and problem-solving, but within a framework that we define. It's a reflection of our own cognition, a tool to understand ourselves better.

While AI may surpass human abilities in specific areas, it's crucial to remember it remains a tool, an extension of our own intelligence. Its true potential lies in collaboration, where humans and AI work together, each leveraging their strengths for mutual benefit. AI is not a replacement for human intelligence, but a powerful complement to it.

#AI #HI 

#SundayThoughts 

FrankSchwab.de

In recent years, my wife and I have been playing roulette in a casino every New Year's Eve. So also last week on December 31st, 2024. For years I have been playing the same system, and I have never lost so far.

The system is simple, but it requires patience, perseverance and discipline.

As soon as the same color comes up twice in a row, I bet 10 EUR on the other color. 

If I win, I take the winnings and wait until the same color comes up twice in a row, and then bet on the other color again. 

If I lose, I stick with the color and double the bet to 20 EUR. If I win, I take the winnings and wait again until the same color comes up twice in a row. However, if I lose the second time in a row, I still stick with the same color and double the bet again to 40 EUR ... 

I do this until I win.

This year, a croupier apparently recognized my system and approached me about it. He said my "progression game" was a dangerous system, because every game has the same probability of either color coming up. This statement surprised me a lot. While it is true that each game has the same probability for a color, namely 16/37 (= 0.432). But my system of doubling the stakes on the same color makes it a compound game where the probabilities are multiplied.

Example: The probability that, for example, the same color comes up eight times in a row is (16/37)^8 = 0.0031. This means that with a fair roulette you have to play 319 times for this to happen once. - So it happens rather rarely.

I would have expected a croupier to come up with arguments based on probability calculations, but in this case, nothing.

Of course, my system carries the risk of losing everything if I run out of money or reach the table limit. And of course you need "luck" to win at roulette. You can't win permanently if you play 10,000 games with a fair roulette, for example.

However, my system has worked quite well for me so far. Not to mention the fun of watching other people play roulette.

#Roulette #Groupier #probabilities 

#SundayThoughts 

FrankSchwab.de

The European project stands at a crossroads. While nationalism and internal divisions threaten its very foundation, the need for a united Europe has never been greater. In a world of rising global powers and complex challenges, a fragmented Europe risks becoming irrelevant. Only through deeper integration can the continent maintain its influence, ensure its security, and guarantee its prosperity.

However, this integration must be smart and efficient. The call for "more Europe" should not be a call for "more bureaucracy." The European Union's institutions must become leaner and more focused, shedding unnecessary red tape that stifles innovation and alienates citizens. The goal should be to create a common market that is truly free, fair, and competitive, with harmonized regulations that promote growth and opportunity for all member states.

This means daring to envision a Europe with a unified financial market, a common tax system, and a shared economic policy. It means establishing a European police force capable of effectively tackling cross-border crime and terrorism, and building a common military that can safeguard the continent's interests and values. Such ambitious steps would not only streamline governance but also foster a stronger sense of European identity and solidarity.

The future of Europe hinges on striking the right balance. We need more integration in areas crucial for our collective strength and security, but significantly less bureaucracy that hinders progress and undermines public trust. By embracing this approach, we can build a Europe that is both powerful and prosperous, a Europe that truly serves the needs and aspirations of its citizens.

#Europe 

#SundayThoughts