Hopeful 2023 Scenario Bits

As 2022 winds down, FSG principals have been collaborating on our year-end ritual of exploring positive developments in the world and speculating on their impacts in the coming year. Here are five hopeful 2023 scenario bits that caught our attention. We invite our readers to share their own in the comments section below. Happy Holidays!   

1. Inflation fever could be breaking 

That’s the view of The Economist magazine for one. No question, the latest surveys of prices and consumer sentiment point to a weakening of inflation. The New York Federal Reserve’s latest Survey of Consumer Expectations showed one-year inflation at 5.2%, down 0.7 percentage points from October and the lowest level since August 2021. One of the biggest worries of the year past was the threat of a prolonged inflation spiral, akin to the stagflation death march of the 1970s. The threat is still there, but some current indicators, including bond prices, show movements in the right direction. 

So, are happy days around the corner? Not quite. The Fed’s pretty clear that interest rate hikes will continue into 2023. And what’s also clear is that their impacts will worm their way into markets and consumer sentiments, hampering growth if not causing an actual recession. The thinking is that reduced consumer spending, tightening labor conditions, and easing of supply chain shortages will brake inflationary momentum and allow the Fed to ease monetary policy sometime in 2024 – and maybe before. So, our hope is that any recession is brief and not excessively painful, especially for those least equipped to struggle through it. 

2. Autocracy may be on the wane 

Late 2022 has been a bad time for some autocrats and would-be autocrats. Xi Jinping’s attempts to completely lock China down to stop COVID-19 resulted in mass protests, which in turn caused him to reverse course on a major and visible policy for the first time. And the mass outbreak of COVID that appears to be following his reversal of course, instead of proving his earlier stance to be right, may weaken him even further, by causing him to appear inconstant. Putin’s “special military operation” in Ukraine, to paraphrase Hirohito’s surrender speech, “has developed not necessarily to Russia’s advantage, while the general trends of the world have all turned against her interest.” The strong stances of the US and both NATO and the EU in response to the Ukraine war have put nationalist “illiberal democrats” such as Viktor Orban of Hungary in a difficult position, while causing anti-immigrant sentiment in Poland to be suspended, as hundreds of thousands of Ukrainian refugees are welcomed in. The Baltic republics are more surely in the NATO camp than ever, while Sweden and Finland have been shoved into the club, an unthinkable prospect less than two years ago. 

Of course, this could prove a false midnight for autocracy, but the infinitesimal chances of a President Alexei Navalny in Russia, and someone other than Xi in charge in China, may be greater in 2023 than in 2022.

3. Will voters become less polarized?

Many people in the US – pundits and voters alike – held their breath as the midterm elections approached. The elections were closely watched, seen as a test of America’s fraying democracy, particularly in light of the January 6^th insurrection. And yet they came and went without incident, with a relatively strong turnout and results that gave both political parties some gains, but neither party complete control of Congress. There are some grounds for optimism emerging from this.

It is not FSG’s belief that the US public has fundamentally changed in its range of political views. In fact all available data suggests that while the demographics have changed, party affiliation overall has remained fairly stable for the last 20-30 years, with the largest proportion leaning “independent” and describing themselves as ”moderate” regardless of party affiliation. And while it is undeniably true that political polarization seems to have increased in recent years, as we have previously noted this has also corresponded with the use (and abuse) of social media, the reverberations from which are felt broadly, being given further oxygen by the mainstream media on both sides of the spectrum. 

But it seems people have eventually seen through this, and the silent majorities on both sides have become less silent, urging pragmatism both in print and more powerfully, at the polls.

4. Your password has expired

First, the bad news: All of our personal, proprietary, and financial data crown jewels currently protected by sophisticated mathematical algorithms will be hackable in minutes or less once criminals get their hands on a ready quantum computer.  In fact, they are stealing data now so they will have it when that day comes. It’s called, Store Now, Decrypt Later (SNDL).  How long it will take for that to happen is unclear, but it could be within a few years.  Similar to the Y2K bug, it is feared planes will fall from the sky and nuclear reactors will be tripped to blow.

Now the good news. Like they did with the Y2K bug, smart computer scientists are actively working on the problem and are well on their way to solving it.  In the US, the National Institute of Standards and Technology is hosting a six-year competition to develop Post-Quantum Cryptography to make our current mathematical encryption “quantum-proof.”  The first round of winners in that competition were announced in 2022.  Another path being researched is Quantum Cryptography, which creates new, unhackable encryption using physical quantum principles.  2023 looks to be a breakthrough year, not only to protect our systems from a looming vulnerability, but to make them considerably stronger.  

5. Chaos Cooking

A fad that did not rise to the level of trend in 2022 was “Chaos Cooking”. The idea was to take foods that seem to have nothing in common—Mexican and Japanese, for instance—and combine them to see what happens. You might get tuna sashimi tostadas, for example, which once it happens sounds logical. Even tasty.

Chaos Cooking is an analog to this age we are living through. Under stress we are undergoing crazy mashups of politics, society and economics. New normals are born, and we grow comfortable in them. An idea like “govcoin,” for instance, would have seemed outlandish even five years ago. Now it feels inevitable.

The fascinating thing about Chaos Cooking is that you don’t know what you will get once you start mixing ingredients. When Xi Jinping assumed a third term as China’s president in October his authoritarian grip looked stronger than ever. Weeks later unprecedented rioting broke out in parts of the country over Xi’s brutal “Zero Covid” policy. Amazingly, Xi’s government responded with compromise. Is it the beginning of something new or an isolated event? You tell us.

FSG scenario consultants don’t do predictions. But it is safe to say there will be more chaos cooking in 2023 as we work our way through these pandemic years and into a future where we may not even want to go back to the way things were.

The principals of FSG wish our clients, collaborators, and friends a peaceful, healthy, and happy holiday season, and much success and fulfillment in the New Year.