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The Fortune crystal ball

December 19, 2013, 5:25 PM UTC

Up through the 1960s, meteorologists forecast the weather by measuring the present state of the atmosphere and extrapolating forward. They’d throw some data into a computer simulation — wind direction, barometric pressure, moisture in the air, temperature — and out would come a prediction of the weather a week or two hence. Most often, it was wrong. As an MIT researcher named Edward Lorenz discovered, the tiniest errors in measuring the atmosphere soon doubled in magnitude, and doubled again, turning the best predictive modeling into a demonstration of chaos. The weather doesn’t follow straight lines. Neither does business. Or the economy. Or technological innovation. All of which would suggest that trying to predict what’s going to happen across a span of industries in 2014 is a fool’s errand. We thought we’d try anyway. For our first foray into prophecy, however, we also tried to think nonlinearly — dancing past the obvious (when we could) and asking our expert sources to do the same. What follows is a look into the hive mind of Fortune as we ponder the coming year. For each prediction, we’ve given our best guess as to the probability, in percentage terms, that it will come true by Dec. 31. The only thing we’re quite sure of? It’s more fun than predicting the weather.

By Ryan Bradley, Geoff Colvin, Catherine Dunn, Leigh Gallagher, Stephen Gandel, Miguel Helft, Jessi Hempel, Marty Jones, Adam Lashinsky, JP Mangalindan, Megan McCarthy, Tory Newmyer, Jennifer Reingold, Daniel Roberts, Alex Taylor, Shawn Tully, and Jen Wieczner

Elon Musk will have a change of heart

After an early 2014 white paper shows major challenges for the Hyperloop, Elon Musk lobbies his fellow billionaires to join him in investing in high-speed rail. Odds: 10%

Another snooping scandal will break

Last year the NSA leaks were the most followed news story -- more Americans tracked our government's efforts to track us than watched or read about the Boston bombing. According to Pew, 70% of us believe the government uses information gleaned from our telephone and Internet use for purposes other than investigating terrorism. Are more snooping revelations on the way? Hmm. The Guardian says it has published perhaps 1% of the files given to it by Edward Snowden. Odds: 36%

Twitter will close below its IPO price

In the coming year the Blue Bird of Chattiness falls to earth -- as do the valuations of other social-media giants. (For more, see "Tech's Smart Money Will Exit.") Odds: 56%

Democrats will hold the senate

Senate Minority Leader Harry Reid (D-Nev.) said Thursday that Senate Democrats will force their GOP colleagues to vote on the most controversial proposals from Donald Trump.

An improving economy -- scratch this if there's a banking crisis (see "Mis-tapering") -- puts control of the Senate out of reach for the GOP. Republicans have to net six seats to retake the Senate in 2014, and they've got pickup opportunities in seven states that Mitt Romney carried in 2012. But to pull off the sweep, the party needs things to be going very badly next fall. Chances are, they won't be. Odds: 71%

Mark Hurd will ride again

Larry Ellison turns 70 in 2014, and he's riding high. His America's Cup team pulled off a miraculous defense in San Francisco Bay. His real estate projects (from Malibu, Fla., to Lanai, Hawaii) make him the most interesting landowner since Ted Turner. Yet Ellison's company, software maker Oracle (ORCL), is stuck in neutral, losing ground to upstarts like (CRM) and Workday (WDAY). It's a perfect time for Ellison to hand the CEO reins to his co-president, Mark Hurd, whose scandalous departure from HP (HPQ) three years ago is all but forgotten in the land of short-term memory, Silicon Valley. Odds: 81%

The next bubbles

Plenty of air was pumped into the already tumescent market for fine art last year. First a painting (or one set of three) by Francis Bacon sold for $142.8 million, the most ever paid for a work at auction and a 165% spike in price from when the last Bacon triptych sold, in 2008. Then a dog sculpture by Jeff Koons fetched $58 million, the most ever paid for a work by a living artist. That this happened on the same night, in the same Christie's auction, could mean one of two things: rampant speculation portending the end of a bubble as everyone scrambles to sell, or just plain rampant speculation. Odds that the art market collapses this year? Only slight. Too many billionaires these days need to fill too many walls: 14% 

Student Loans 
There is an estimated $150 billion in outstanding student loans weighing down most recent and not-so-recent college graduates. For millions of young Americans, it's a genuine problem. But is it a bubble? Not really -- at least by the standards of history. Look back to 2006 and 2007, when banks traded nearly $135 billion worth of Sallie Mae's student-loan asset-backed securities (known as SLABS). Today many banks are out of the student-loan biz altogether, and just $1.1 billion in SLAB trading makes waves in the papers -- barely a ripple compared with far frothier times. Still, count on many in the media (and pretend media) to call it that. Odds that Aaron Sorkin will write it into the plot of The Newsroom75% 

First thing first: There is a conference named BubbleConf; it is for entrepreneurs, but more telling, it was born out of its founders' need to simply "organize a conference." The U.S. Bureau of Labor Statistics expects the convention and event industry, which already generates an estimated $80 billion a year, to expand by 44% over the next decade -- Fortune, of course, has a few conferences of its own. But nothing captures the conference proliferation quite like the American Planning Association's 2014 gathering in Atlanta -- which, literally, is a conference for planning more conferences. What are the odds that Bravo will develop a reality show around the people at the conference of conferences? A near-sure thing: 97%

The Arctic Circle will be a hotspot

An eighth of the world's undiscovered oil and 30% of its natural-gas reserves are locked beneath it. Six nations claim slices of this polar pie. Two of the biggest companies in the world, Exxon Mobil (XOM) and Royal Dutch Shell (RDSA), are spending billions to probe its seabed. Chances that a geopolitical spark will catch fire in one of the most frigid spots on earth? 8%.

Fuel-cell cars will hit the show room floor

At, Hyundai Tucson was most searched by women.

The first commercial fuel-cell vehicle will be launched in the U.S. this spring by Hyundai: a Tucson compact crossover powered by hydrogen that emits only water from its tailpipe. The fuel-cell Tucson (above) has a range of 300 miles, can be refueled in a matter of minutes, and will lease for $499 a month -- though at first only in Southern California because of the limited hydrogen infrastructure nationwide. Toyota (TM) will be next (in late 2014). Honda (HMC) will follow suit in 2015. General Motors (GM) has racked up 3 million test miles with a fleet of 119 Chevrolet Equinox fuel-cell crossovers but has no plans to market one. Count on new CEO Mary Barra to feel the hydrogen heat. Odds: 98% - 100%

The next Brooklyns ... and Detroits

The American geography of prosperity has been driven by two big narratives in the past few years. On the one hand, there's Detroit, with its $18 billion in debt, pension mess, and population loss. On the other, there's Brooklyn, with its rocketing real estate prices, hip-luxe condos, and freshly foraged food stores. But what's next for this Tale of Two Cities muni-drama? Our bets for 2014's breakout and breakdown towns. 

New Brooklyns 

Cleveland. The city (above) is in the midst of a downtown revival that has seen not one, not two, but three Williamsburg-esque neighborhoods emerge: Tremont, Ohio City, and Gordon Square. Odds: 63% 

Louisville. A thriving indie music scene, food trucks galore, and a monthly flea market (that seems "like Etsy came to life," according to Yelp) now fill this blue dot in a red state. Odds: 91% Detroit. College-educated settlers under 35 are drawn to sub-$1,000 rents and the chance to be pioneers. A telltale sign of change: NO HIPSTER graffiti tags showing up around town. Odds: 39% 

Runners-up: Chattanooga; Newark 

New Detroits 

Woonsocket, R.I. The onetime prominent textile hub fell victim to deindustrialization, then the recession, then severe cuts from state aid. Unemployment is now 10%. Odds: 38% 

Puerto Rico. The public debt of this commonwealth is $70 billion, unemployment (at 14.7%) is higher than in any U.S. state, and labor force participation (at 41%) is the lowest. Odds: 54% 

Fresno. The central California agricultural hub has little cash on hand, an ongoing gang issue, and a five-year foreclosure rate of 94.5 per 1,000 households, according to Metrostudy. Odds: 86% 

Runners-up: Atlantic City; Gary, Ind.

The federal minimum wage will rise 39%

Two decades after the Living Wage movement began in Baltimore (when local homeless shelters began filling with residents who had full-time jobs), popular support for a hefty increase in the minimum wage resurges. States are already taking action (see upcoming map). Odds that the federal minimum wage is increased to $10.10/hour, from the current $7.25: 48%

Rand Paul will support ending ban on pot

Senator Rand Paul of Kentucky.

The Kentucky senator has already pushed to legalize industrial hemp as a jobs boon back home. In 2014, Paul goes much further, saying the drug should be taxed and regulated. It's a dicey proposition for the likely 2016 presidential aspirant. Evangelicals in early Republican primary states like Iowa won't like the stance, but millennial voters strongly support legalization. Odds: 52%

States that will legalize same-sex marriage

States are busy rewriting the rules when it comes to same-sex marriage, raising the minimum wage, and marijuana use. Here are our predictions on where the laws of the land will change by the end of 2014.

States that will raise the minimum wage

States that will legalize marijuana

Anheuser-Busch InBev will buy Guinness

In 2013 the Belgium-based, Brazilian-managed, biggest beer company in the world bought up Grupo Modelo, adding Corona to its portfolio of globally recognized brews such as Budweiser, Becks, and Stella Artois. What next? Analysts won't go on record speculating, but, says one, "the big companies are so much bigger than the small ones that anything not owned by ABI, SAB, or Heineken is pretty much up for grabs." So why Guinness? It may be the most iconic brand of those not owned by one of the big three. Guinness's owner, Diageo, which focuses mostly on spirits, has said it wants to keep the popular stout. But if the price is right, expect Diageo to sell. ABI (BUD) CEO Carlos Brito is famously cagey about M&A and insists that his company will focus on the brands it already has -- but he said the same thing right before he moved on Corona. Odds: 24%

Google will develop killer app for the soul

Google (GOOG) releases a "quantified self" app for Glass that tracks respiration, eye movement, and other data to determine your emotional well-being. With a Google+ plug-in, you can share results with your friends -- so they can send supportive messages on tough days. Odds: 76%

Tech's smart money will exit

Anyone who has seen Silicon Valley's boom-bust cycles before knows there's a bust on the way. When pre-revenue Snapchat (see our feature story) turns down a multibillion-dollar buyout offer from Facebook (FB), when Twitter (TWTR) and LinkedIn (LNKD) trade for many multiples of their relatively puny sales, when mimics Oracle by closing down San Francisco streets for its annual user conference, you know the peak isn't far away. This is when savvy investors run in the opposite direction. Odds: 58%

BMW will outcool Tesla

While Tesla (TSLA) struggles with battery fires in the Model S and the delayed launch of the Model X SUV, BMW will introduce a pair of vehicles that knock the socks off the stock-options set -- the all-electric i3 (above), a practical sedan with BMW panache, and the exotic i8, a nearly $140,000 plug-in hybrid with racecar performance. Odds: 50%

AT&T will merge with Vodafone

Rumors have been swirling for a decade about a possible merger between American telecom giant AT&T (T) and its British counterpart Vodafone (VOD). But while a 2004 deal fell apart, speculation intensified again this past September after Vodafone agreed to sell its 45% stake in Verizon (VZ) back to that company. (Many view that as a needed step before Vodafone can pursue a deal with AT&T, the second-largest telecom firm in the U.S. after Verizon.) AT&T has expressed interest in European acquisitions in 2014 and is quietly eyeing Vodafone, according to news reports, though neither company will confirm it. Further consolidation in the telecom industry -- as with reports that Sprint (S) is pursuing T-Mobile (TMUS) -- could make a deal more likely. Odds: 75%

Investor activism will intensify

Activist investors in 2013 stormed the gates of even the most valuable companies -- Apple (AAPL), Procter & Gamble (PG), Microsoft (MSFT) -- and they're likely to grow still bolder in 2014. That's because activists far outperformed the S&P (earning 25%, vs. 19% through 2013's first three quarters, says Hedge Fund Research), attracting more billions to wield. But after so much activity, who's left to go after?

Consider four possibilities: 

Nelson Peltz will take on Wal-Mart. Peltz likes moving in on famous consumer stocks (H.J. Heinz, Kraft Foods, PepsiCo) and wouldn't be intimidated by even the world's largest retailer. Wal-Mart's (WMT) share price suggests lowered investor expectations, and Peltz might see an opening when Doug McMillon takes over as CEO in February. Odds: 20% 

Bill Ackman will take on Caterpillar. Ackman has drawn attention for investments that have failed (J.C. Penney, Target) or been controversial (Herbalife), but he's done well by shaking up big B2B outfits like Canadian Pacific Railway. Cat's (CAT) stock, the Dow's best performer in 2010, has been among its weakest and most heavily shorted in 2013. Odds: 20% 

Dan Loeb will take on Cisco. Loeb isn't afraid of technology; he famously rattled Yahoo's cage and made $1 billion. Cisco (CSCO) has been performing excellently, but the stock has lagged in large part because investors worry the good news can't last. CEO John Chambers has said he plans to step down in one to three years. Odds: 15% 

Carl Icahn will take on Exxon Mobil. Icahn is on a roll with energy companies. He got CVR Energy to break itself up and recently persuaded Transocean to pay a special dividend and cut costs. Yes, Warren Buffett recently invested in Exxon (XOM) -- but famed short-seller Jim Chanos is betting against it. The share price reflects shrinking profit expectations. Odds: 10%

Apple will shoot another blank

Apple's CEO Tim Cook.

The iWorld expects -- nay, demands -- an iTV, an iWatch, an iSomething, dammit, from Apple this year. Don't bet on it. Nor will Apple's failure to deliver something amazing under Tim Cook reflect the CEO's inability to conjure the magic of his predecessor, Steve Jobs. Those who will claim this (reporters, investors, fanboys) forget that six years separated the release of the iPod and the iPhone. It has been only three years since Apple's last great hit, the iPad. Apple's next new thing will come ... when Apple is good and ready. Odds: 60% Whatever product Apple releases (or does not release), there's a 100% chance you'll have to buy a new cord.

Obamacare cost will explode

After months of hemming and hawing, the Obama administration admits that the long-term cost of the Affordable Care Act will be twice what was originally predicted. By this fall the Congressional Budget Office will double its estimates for the annualized cost of federal spending on Obamacare in 2023, from $134 billion to around $270 billion. The reasons for the jump? First, the program will fail to attract a sufficient number of young, healthy workers to sustain it on an actuarial basis -- a concern raised by the American Academy of Actuaries. Second, companies in low-wage industries from mining to retail will flee the health care business. Many more than expected will drop their plans, pushing droves of workers into the Obamacare exchanges. Odds: 70%

Sound sharing will become as popular as photo sharing

Already, 11 hours of sound are uploaded per minute, and it's much more than music. As for who will be the YouTube of this movement, our Magic Eight Ball has little doubt: the audio platform SoundCloud, which boasts 250 million active listeners around the world, a 25% jump since July. Odds: 100%

Freework will reign

In 2014 there's a very good chance most of us will work for tech companies for nothing. We'll log traffic accidents on Google-owned Waze, enter our sleep patterns on our Jawbone Ups, and tell OpenTable (OPEN) just how much we hated the swordfish at St. Vincent. We'll do it with the same fervor we reserve for our Candy Crush habit. Odds: 62%

Same-day delivery will go standard

Customers shouldn't expect their packages by drone anytime soon. But as Amazon (AMZN), eBay (EBAY), and others push ahead with faster delivery, $5-plus same-day service will become reality for most U.S. shoppers. To wit, eBay Now already approaches one-hour deliveries in five locales (Chicago, Dallas, New York City, San Francisco, and San Jose).

Here, what will happen in 2014:

eBay Now expands to 25 cities: 84% 
Amazon partners with Uber: 52% 
Wal-mart hires off-duty cashiers to drive purchases to customer doors: 10% will buy the post office

Seven straight years with a net loss. Sounds a lot like other startups Amazon has invested in. Except we're talking about a fiscal 2013 loss of $5 billion, and we're also talking about the U.S. Postal Service, which Amazon announces it will buy for, well, free. Unions are up in arms; drones rejoice. (No, this won't and can't happen in 2014. But the odds of the USPS getting privatized by 2020? Hey, not that small ...) Odds: 22%

Janet Yellen will get into a shouting match

Fed Chair Janet Yellen

The Federal Reserve's Open Market Committee has long been one of the most collegial institutions in policymaking, with disagreements couched in econo-speak and tucked away in old meeting minutes. Rare is the spat that breaks into the open. But in 2014 all that changes, as disputes over the pace of tapering play out in fiery speeches and news-media interviews. Odds: 59%

Future celebrity product launch

Louis CK: CK9 cologne 

Odds: 4%

McKesson will buy Rite Aid

No. 14 on the Fortune 500 buys No. 113. The generic-drug industry has been quickly consolidating, and major distributor McKesson Corp. (MCK) is pursuing new ventures. But while it went shopping in Europe, its American competitors called dibs on the top two U.S. pharmacy chains, striking purchasing deals with Walgreen (WAG) and CVS (CVS). The odd men out, Rite Aid (RAD) and McKesson, could become bedfellows, analysts say: "If I'm Rite Aid, seeing two of my biggest competitors partnering up for better deals on generics, I might be motivated to try and keep up," says Tom Gallucci of FBR Capital Markets. McKesson has denied interest in a U.S. retailer, but "seems like the most logical partner," he says -- if not outright buyer. Odds: 20%

Crowdfunding's big year

LendingClub will go public in a highly successful, drama-less event. Then will come the blowback. If loan default rates rise because of a stumble in the economy, then the sky-high returns that lenders are getting now may well tumble -- from the current average 9% or so to about 5%. Traditional lending institutions are also likely to grumble about the competition, claiming that peer-to-peer funders are crippling the long-term viability of that classic American company-builder: the small-business loan. But somehow both the S&Ls and P2Ps survive the year, albeit with increased regulation for the latter. Odds of a LendingClub IPO in 2014: 85%

Bitcoin will stay irrelevant

The hyped-up crypto-currency and darling of the techno-libertarian set has a problem: It's fairly difficult to spend bitcoins on everyday transactions. For the most part, owners horde their stash or trade it on Mt.Gox rather than use it to pay for, say, toothpaste. Will 2014 be the year that changes? Honestly, no. Here, the chances a business will announce "bitcoins welcome":

New Egg: 40% 15% 
McDonald's: 5% 
IRS: 1%

2014 will bring 3-D everything

Decent 3-D printers drop to the sub-$1,000 mark, laptops get a third dimension of display, and Googlers add holography to their widely used in-house videoconferencing system -- making faraway co-workers feel as if they're in the same room. Odds: 73%