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Will the 21st Century Be African?

September 21, 2018

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By the end of this century the world will be transformed.  Technological changes will have reshaped the way we live, work and communicate.  We will (we hope) have access to abundant and cheap clean, renewable energy.

But humanity will look different as well.  It will be a lot more African.  Current UN demographic projections suggest that Africa’s population will double from just under 1 Billion at the start of the present century, to over 2.4 Billion at its mid-point, and possibly 4.1 Billion at its end, which would make Africa the most populous of all the continents.  If current trends continue, by 2050 there will be more people in Nigeria than in the USA. What started as an Asian Century may end as an African one.

It has been easy for western analysts to overlook Africa – or at least to see it as a continent to which things are done, rather than one which could be a world leader in itself, or could contain countries which will become world leaders. We wanted to examine this in more detail from a futures and strategy perspective. It seems to us that there is a “tipping point” coming, and that any global scenario planning needs to take Africa much more seriously, and consider its potential and its possible impact on the course of global social and economic progress.

This blog series therefore examines Africa’s future. We hope it provides a useful guide, and perhaps sparks thoughts about opportunities and risks which may help all those concerned with the continent’s future.

A STEEP Ascent

We intend to approach the question using the STEEP methodology. Initially, we can see the following trends, each of which we will look at more closely in turn in future articles:

Social – the very fact of such a fast-growing population will catapult Africa to the top of the agenda as a potential economic powerhouse, as a market and a producer of goods and services, and a source of young minds and bodies in an ageing global population.  At its best Africa could become the most dynamic and creative of the continents.  In a worst-case scenario, the teeming population will be impoverished, discontented and prey to disease, malnourishment and exploitation.

Technological – there are emerging signals already of Africans using technology as a springboard for economic progress, access to finance and primary and preventive medical care. In a positive scenario, Africa is ready to grasp the opportunities of new technologies, unencumbered by an infrastructure reliant on old ones.  In a worst case, the traditional route out of poverty will no longer be available as automation destroys the market for unskilled and semi-skilled workers to progress up the social and economic ladder.

Environmental – rapid and massive population growth will mean many more mouths to feed, increasing demand for water, productive agriculture etc, and potentially placing new pressures on Africa’s unique natural environments.  Climate change will have a significant impact. In a positive scenario, Africa will emerge as a leader in innovation, using new technologies to promote flexibility and sustainability.  In a worst case, there will be an environmental calamity, leading to conflict, mass-migrations and impoverishment.

Economic – a young and growing population, allied with Africa’s great wealth of natural resources, offers the opportunity for Africa to become a global powerhouse, better able to harness its own resources for its own benefit, and able to mobilise, educate and reward its billions of young working-age people.  Cities like Kinshasa and Lagos will compete with Shanghai and Tokyo as the great megacities of the late 21st century.  At worst, the population growth will become too much, too rapidly. There will not be enough opportunities to go round, and the great cities of Africa will become giant slums.

Political – a growing and confident Africa will become less dependent on the rest of the world.  It will trade with other countries on an equal basis, and its young, increasingly educated and tech-savvy population will be envied. A rising middle-class will demand, and get, better governance.  Demands from civic society will continue exert downward pressure on the endemic corruption which plagues modern African government. Working together, African nations will collaborate closely to take advantage of the opportunities and deal with the challenges ahead.  They will articulate an Afrocentric world view to challenge those of the West and East.  In a worst case, corrupt governments and large numbers of disaffected young people will spell trouble – with rising crime, and no shortage of recruits for armed forces and insurgencies.  Other countries will exploit these weaknesses to their own benefit.

Watch This Space

In this series of articles, we will look in turn at the prospects for Africa through each of the five STEEP lenses.  After that, we will bring them together to identify a set of scenarios for Africa as it reaches the middle of this century.  In doing so, we will give food for thought for people in government, in finance and trade, who will need to take increasing account of the rise and the sheer growth in human terms, of the African continent.

Written by David Lye, SAMI Fellow and Director and Jonathan Blanchard Smith, SAMI Fellow and Director

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at newreader@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

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Megatrends and how to survive them – Population

September 14, 2018

Megatrends and How to Survive Them is the title of our book that is due to be published in October this year, by Cambridge Scholars Publishing. The book launch is on November 8th from 5 to 7 at the Reform Club in Pall Mall, London. Numbers are restricted but if you would like an invitation please let Tricia know.

This is one of a series of blogs based on the work we have done for the book. In discussing the megatrends, we start with Population. This is because this trend drives most – if not all – of the others.  The world population is still growing, although the rate of growth has slowed with some countries experiencing negative growth. Today’s growth is mainly in Asia and Africa.

When we explored this megatrend,  we were helped by using the UN terminology popularised by Hans Rosling as Levels 1, 2, 3 and 4, for people’s living standards.  A quick aide memoire for the living standards of each Level is:

Level Billions Dental hygiene
1 1 A person brushes their teeth with a finger or a stick
2 3 There will be one toothbrush for the whole family
3 2 Each family member will have their own toothbrush and they can probably afford a dentist
4 1 Each family member will have their own electric toothbrush, they will go to the dentist at least once a year

Levels 3 and 4 are often referred to as “middle class”. Today there are 3 billion “middle class” globally. It is this growth in the middle classes that drives all the other trends.  When people get to level 3 or 4, they have the ability to exercise choice.  Choice in what they buy, where they live, what work they do and how they do it, what they do for recreation and where.

Population growth peaked (2%) between 1965 and 1970 and has declined to just over 1% between 2010-2015.  It should decline yet further by 2032, despite rising longevity as the size of the age group of 65+ grows.  A key risk to note is that the IMF projects that in Europe, the dependency ratio will go from four workers per retiree to two workers per retiree by 2050, while the median age in Europe will increase from 37.7 (2003) to 52.3 by 2050.  What might your organisation need to do about this?

What surprises us is that up until quite recently, demographics has been mostly forecastable.  But looking at the graph above, it becomes clear that today, we really have no idea what the population will be in 2100.  That doesn’t take into account the deflections we could see, caused by war, catastrophic events and pandemics.

The opportunity that arises from improving health and the fact that more than half of us live in urban environments is that the education level of all is rising.  This is especially important for women, because educating women leads to improved health and well-being, as well as a rise in life expectancy across the board.

TL Blog 3 picture

We continue our horizon scanning: some recent headlines that might be of interest are:

Some questions you might like to consider, looking towards 2032:

  • Thinking about population change in your country, how might your strategy and business model need to change in order to continue to be successful?
  • Who do you think you will be selling to, and where will they be located?
  • How might your product/service offering need to change.

We live in interesting times!

Written by Patricia Lustig, SAMI Associate and MD, LASA Insight, and Gill Ringland, SAMI Emeritus Fellow and Director, Ethical Reading.

The views expressed are those of the authors and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at newreader@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

Red Lights on the Dashboard – What if The World Suffers Another Crash?

September 6, 2018

Since the crash of 2008 and the Eurozone crisis of 2011-12, forecasting what will happen even the near future has become a lot harder.  The rise of populist parties on the left and right; the UK vote to leave the EU; the election of Donald Trump as US President all marked a climate of “no-one knows anything” in World Affairs: a climate where political, economic and generational uncertainties are supplemented by the great unknowns of the 4thIndustrial Revolution and its impact on jobs, wealth distribution and society.

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Those in search of a quiet life might have hoped that this period would play out over time, and things return to “normal” – if such a state exists.  They are likely to be disappointed, and it may be that things are about to get a lot more unpredictable.  There is a lot of “noise” on discussion groups and social media about the possibility of another economic crash, following on from 2008.

In its Global Risks Report for 2018, the World Economic Forum identified its own economic risks which highlighted as warning factors:

  • unsustainable asset prices, eg US stocks, which have only reached higher levels in 1929 and 2000, or the global house price bubble;
  • indebtedness, where we have seen significant increases in the amount of public debt in the major economies, and where non-financial sector debt has risen from $80 trillion in 2007 to $135 trillion in 2016; and
  • structural weaknesses in the global financial system, with doubts about the robustness of banks’ risk-weighting mechanisms, and further concentration of assets in the hands of the 30 biggest banks.

WEF identified three new and emerging challenges:

  • Limited Firepower to combat a downturn – for example the lack of further scope to reduce interest rates;
  • Technological disruption through the impact of the 4th Industrial Revolution, affecting employment in developed economies and destroying the conventional pathway to growth for developing economies; and
  • Politics and protectionism – whether disputes within blocs (Brexit, NAFTA), between blocs or between nations (US, EU, China).

While the WEF noted that 2017 had been a year of recovery, the Economic Risks report concluded,

The risk is that we will hit a tipping point at which point everyone prices in these tensions, with a rush to the exits that hits asset prices, strains the resilience of the global financial system and tests whether policy-makers retain the firepower to prevent deep and long-lasting impacts on the real economy.”

Beyond Davos

Looking beyond the WEF’s warnings, we see risky behaviour in the major economies, for example the growth of covenant-lite loans in the US, which looks uncomfortably similar to the derivatives boom that led to the 2008 crash.  In Italy the new coalition Government is threatening a confrontation with the ECB and the creditor nations in the Eurozone over the size and terms of Italy’s sovereign debt, which could precipitate a crisis in Europe bigger than the one of 2011-12.

Meanwhile many of the most important developing economies: such as China, Turkey, Russia face financial, fiscal and monetary problems of their own.

The Importance of Scenario Planning

In the long period of almost uninterrupted growth from the late 80s until the 2008 crash, it was possible for strategists to assume relatively stable and benign economic circumstances.  This is no longer the case, and Governments and businesses – in formulating their medium-term strategies – need to consider the impact of adverse economic weather on their aims and objectives.

The WEF’s new and emerging challenges, combined with a further downturn, would create an extremely difficult environment, both economically and politically.  2008 has seen the loss of confidence in political and economic institutions, and the concomitant rise of populist politics, both on the right and the left.  Countries that are dealing with increased levels of debt and citizens, many of whose standards of living have stagnated or fallen since 2008, may struggle to survive another serious downturn.  Last October I blogged about the possibility of a new “Year of Revolutions”.

An economic crisis would make this considerably more likely.  And it would raise further uncertainties that only a scenario planning approach can truly factor into strategic planning.  Here are just three:

  1. Would a second financial crisis further undermine confidence in “established” institutions and political parties, or would it lead to a shift in opinion against populism (if the blame for the new crisis were attached to populist politicians)?
  2. Would the major economies have the firepower to respond to a second crisis; if not, what would be the social and political consequences? How to avoid a year of revolutions?  And what sort of societies and systems would emerge from the upheaval?
  3. How would emerging technologies play in such an unstable and volatile world economy – for example with increasing inequality leading to political polarisation?

Here at SAMI we’ll be keeping our eye on these trends and possible scenarios that might arise. Can anyone afford not to?

Written by David Lye, SAMI Fellow.

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at newreader@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

Megatrends – what are they and in what timescale?

August 22, 2018

 This is the second blog based on the work we did writing Megatrends and how to Survive Them, which is due to be published by Cambridge Scholars Publishing in October this year. 

In the first blog we explained why we wrote the book. As one of our reviewers said (better than we could), “I was very pleasantly surprised about how readable this book really is–it will make excellent reading for a wide audience especially anyone with an interest in the future of our beautiful planet. Readers will find the book’s statistics and projections give them an unfair advantage in a discussion about where it’s all going, down the line.” 

We have chosen a timescale of 2032 for the trends we consider. We often hear people talking about 2050 or 2100 when they talk about the future. In that timescale some things that we haven’t put in this book, like maglevs under the sea, or commercial space travel and tourism or replicators (as in Star Trek) to 3D print our food could be possible. We are looking closer in time than that, so we can base our discussion on evidence, and make extrapolations. But why 2032? 

The trends we discuss will continue beyond 2032, but we think 2032 makes a convenient reference point. We choose 2032 because based on current arrangements, 2032-33 will likely see elections for new Politburo Members in China, and a new President in the USA. So, 2032 could be an interesting year because there may well be changes of leadership emerging in both the USA and China. Much of the geopolitics of the next decade is likely to be dominated by these two powers. 

In considering 2032, remember that a lot can happen in 14 years. Think back to what life was like in 2004…. 

For instance: 

  • • This was before it was normal for family members to use videoconferencing between continents on a regular basis. 
  • • 2004 was before Al Gore’s film, An Inconvenient Truth, which alerted large numbers of people to climate change. 
  • • 2004 was before immigration from the Global South hit the headlines in the USA and Europe. 

Now imagine the potential for similar changes going forward. There will definitely be some in the timescale we are working with. 

The book focuses on 12 megatrends – global forces that are changing our world. This blog describes the structure we used for each chapter to explore the trend. But first perhaps some background to the trends – they have emerged from our work and the work of others in SAMI (and LASA) from projects, workshops and horizon scanning studies over the past few years. They are not independent, but we have found that groups – Boards, management teams, operational and functional teams – can quickly grasp the essential implications of 12 trends for their organisation or circumstance before focusing on a few, to manage the associated risks and opportunities. To help this we provide a summary of each trend on a page – with a few bullet points and a diagram like this one showing interconnections of trends: this one shows that Shifting Values is particularly linked to Connected World, Social Structures and Economic Activity trends. 

Fig 3 from PL GR book

The discussion of a trend in its chapter is then divided into headings that many readers may recognise as based on the ideas behind Three Horizons: Why this is important, How we got here, Current trends, Deflections we might see, How this might affect you by 2032, and a last section with a set of questions to help readers think in greater detail about how each trend might affect them in greater detail. These are: What does this mean for your business? People you work with? Customers? Products and services? Community? Networks? 

Our reviewers found this easy to follow, and in addition liked that we not only considered global trends but also had a table in each chapter showing how the trend affected each global region. They also related to the early indicators – newspaper headlines you might see– that could indicate the direction a trend was taking. An earlier paper for Strategy & Leadership which described the use of early indicators with operational managers was among the most highly requested download ever! So clearly a useful way of helping people relate to potential futures. 

We have been careful to “always look on the bight side of life” as well as consider downside implications of the trends – and this has been welcomed by one of our reviewers: “At any given point, we have the potential to move forward in both a positive and negative direction. The positive and the negative will co-exist forever, but the challenge we face is which one spreads across the greater part of the planet. I think laying out both interpretations of the trends really helps shape a more nuanced understanding. We need to be constantly vigilant about the possibility of negative trends being exacerbated, which is why this book could make an important contribution.” 

Written by Patricia Lustig, SAMI Associate and MD, LASA Insight, and Gill Ringland, SAMI Emeritus Fellow and Director, Ethical Reading.

The views expressed are those of the authors and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at newreader@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

 

The new UK Corporate Governance Code – time for boards to get their heads out of the sand

August 15, 2018

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The New UK Corporate Governance Code looks very different from previous versions. It is shorter, places greater emphasis on applying governance principles and for the first time explicitly requires boards to consider stakeholders other than shareholders and to assess and monitor culture. Will it make any difference?

A test of its efficacy is whether it would have helped prevent the failure of Carillion. It can only be a theoretical test because the failure was in the past and, arguably, it is hard to spot such a failure before it happens – ask the Carillion directors and its auditor KPMG. Hard to spot? – perhaps but not impossible. It is relevant to consider whether the new Code would have made failure less likely. Previous codes were, it would seem, ineffective.

The governance statement in the Carillion’s 2016 Annual Report (reported against the 2014 Code) gave the impression of a well governed company. Amongst other things its statement on its reviews of board and individual director effectiveness claimed they were all highly effective. It also reported the audit committee had concluded the board could have ‘a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment’.

A key factor to emerge from the collapse was whether the financial statements overstated the value of work in progress on its various contracts. Reassuringly the governance statement said ‘a significant proportion of the (audit) Committee’s time is spent reviewing contract judgements given the Group’s extensive portfolio of contracts. The Committee reviewed, through discussions with management and the external auditor, the positions and judgements taken by management…. the Committee concluded that the positions and judgements taken in relation to the contracts reviewed and the licence income recognised were reasonable’.

With the benefit of hindsight, and the findings of the Parliamentary Investigation, it seems clear that the directors and the board were not effective, that contracts were significantly overvalued and that the viability review was flawed. We may never know whether the directors knew in early 2017 that Carillion was close to insolvency and allowed misleading statements to be made in the 2016 annual report or whether they were ignorant of the gravity of the situation. In spite of years of refinement since the first (Cadbury) governance code in 1992, and the lessons from numerous subsequent corporate failures, it would seem we have not yet found way of constructing a governance regime that prevents knowingly or negligently misleading statements about a company’s financial position and board effectiveness.

The new 2018 Code may at first sight offer little improvement in this respect. But there is some scope for optimism;. requiring, as the new Code and new draft legislation do, boards to make public statements on how they have had regard for various stakeholder interests and other factors set out in S172 of the 2006 Companies Act could make it harder for boards to flout the interests of employees, contractors and pension funds. A company which makes misleading statements runs the risk that stakeholders, including employees, will call foul. In the Twitter age this could mean rapid significant negative publicity for the company and public censure for directors. The requirement for boards to assess and monitor culture may also help; if boards actually look for culture risks they may help spot a culture which, for example, encourages misplaced optimism and discourages staff from raising concerns.

Ultimately whether or not a company thrives or fails is down to the leadership of the board and particularly the chair and the CEO. CEOs are paid to be optimistic and take calculated risks. It is largely up to the chair to ensure that this is in pursuit of long-term value creation and that the board sufficiently understands the risks being run and provides proper checks and balances. Unfortunately not all boards want to understand the risks properly. The more you look the more you are expected to know. Chairs and non-executive directors may hope that nothing blows up while they are in office. Like Ostriches sticking their heads in sand they may choose not to ask the right questions thinking that ignorance is a reasonable defence provided they can demonstrate they went through the motions.

This may work in a court of law but not in the court of public opinion; it is hardly professional nor can it be particularly satisfying. A more thorough approach to risk involves boards and senior executives thinking outside their normal boxes to think the unthinkable and ask what could bring the company down or break the business model and what could be done to make the business model more resilient. The new FRC Guidance on Board Effectiveness invites boards to consider using scenario analysis to help assess the strategic importance and potential impact of challenges and opportunities. The guidance also encourages boards to test key decisions for alignment with values and consider the risk that a decision could encourage undesirable behaviours. This is good advice. SAMI Consulting is the home of scenario planning and helps organisations to make robust decision in uncertain times. Its governance experts can help boards who want to do more than go through the motions to ensure that risk governance not only ticks the box but can make a real difference.

Written by Paul Moxey, SAMI Fellow and Visiting Professor of Corporate Governance at London Southbank University.

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at newreader@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

Megatrends and how to survive them

August 8, 2018

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Megatrends and how to survive them” is the title of our book that is due to be published in November this year, by Cambridge Scholars Publishing.

We have had so much fun writing it and had so many “aha” moments that we thought it would be good to share some of these insights with a wider audience before publication. A number of people have seen and commented on drafts and we will be acknowledging these as we develop the series of blogs, but first to acknowledge with many thanks the underpinning work done by the SAMI team over the years on horizon scanning and future trends, including but not only Jonathan Blanchard Smith, Martin Duckworth, Cathy Dunn, David Lye, Paul Moxey, Wendy Schultz and Huw Williams.

In this first blog we explore why we wrote this book. It is very different from the previous books that either of us have written on Scenario Planning or Strategic Foresight, which were for people who wanted tools to work with on thinking about the future. These books did discuss why and how people and organisations would benefit from thinking about the future and building this into strategy, but their titles did not encourage the casual reader or decision maker to pick up and read the book. We started to write for an audience outside the foresight community with “Beyond Crisis” (written with Oliver Sparrow), but though this was prescient in its thinking in 2009 about “there is no return to ‘Business as Usual’”, it did not reach a wide audience. We tried again with “Here be Dragons” which combines a novelette about an organisation trying to re-invent itself, with a handbook of the tools used at different stages during the project. We are often approached by people who have been given this book as a Christmas present and enjoyed it!  Our aim was to make the books approachable, but we mostly connected with the converted; those who already were interested in using Foresight.

This new book arises from our discussions about how to empower real people – organisational leaders and line managers – with ideas about the future that can improve the quality of their decisions. Many of the foresight tools developed over the past decades have been targeted at enabling decision makers to challenge their current assumptions and world view, by creating images of qualitatively different alternative possible futures. As we write, we see headlines overturning many of our assumptions almost daily. So, our current assumptions are already being challenged.

In working with a range of organisations, we have realised that a different approach is called for. This aims to reduce all-encompassing uncertainty – which is freezing decision making – by focusing on what we know with reasonable certainty about the future.  There are a number of global megatrends sweeping the globe. Our message is: these megatrends are happening now, and you need to know how you can respond to them. Then you can face the current chaotic times and potential different emerging futures more confidently.

In working with groups, we focus on creating a timeline for a subset of these megatrends, such as population growth, economics, IT, biotechnology. We explore the timelines of the trends through increasing levels of uncertainty over time and analyse the forces that could accelerate or slow down their effects. By initially exploring the framework of forces and then exploring uncertainties and the risks from potential disruptors, the group experiences a lower level of fear, uncertainty and doubt, while encompassing a more realistic understanding of the limits of our capability to forecast the future.

In the next blog we will discuss the design of the book. It aims to support the ability of people and groups to think about the future. As one of our reviewers has said “I was very pleasantly surprised about how readable this book really is – it will make excellent reading for a wide audience especially anyone with an interest in the future of our beautiful planet.   Readers will find the book’s statistics and projections give them an unfair advantage in a discussion about where it’s all going, down the line.”

Written by Patricia Lustig, SAMI Associate and MD, LASA Insight, and Gill Ringland, SAMI Emeritus Fellow and Director, Ethical Reading.

The views expressed are those of the authors and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at newreader@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

Apologies for recent blog post notification – incorrect post published so please ignore. Keep a lookout for the correct version in due course!

August 7, 2018
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