Mega-trends

Introduction

Megatrends refer to the overarching themes that will impact on our world and communities for decades.

Need to understand the big picture, ie
"...Longevity and nutrition: the consequences of all of us living longer. Oil: the inalienable fact that it is running out, and that we need to get our energy elsewhere. Populism: the fact that countries that once led globalisation now shun it, and those that were once insular now embrace it..."
Chris Wright, 2017

We need to get out of the trenches and take a helicopter view of what is happening.

Four examples

1. Food security

The world has enough food to feed itself
"...the world produces enough food for 10 or even 12 billion people. But a third of it is lost during harvest, transportation or storage - and much of it is often thrown away by end consumers..."

However
"...it calculated by 2030 (from a base of 2013), demand for food will have risen by 35%, water 40% and energy 50%, worsening existing shortages, creating new ones and potentially endangering health and destabilising political systems. The three elements are interconnected: the agriculture sector, for example, consumes 70% of all freshwater worldwide, and not just for the food but to grow biomass for energy..."

US National Intelligence Council Report entitled Global Trends 2030 as quoted by Chris Wright, 2017

Industrial farming is causing problems, ie
"...the source of around one third of the world's greenhouse gas emissions. And that doesn't include the energy necessary for food transport and cooling......responsible for much of the species loss, environmental pollution and water shortages that plague our planet. Intensive use of pesticides and other pollutants, chemical fertilisers and heavy machinery endanger soil, water and wildlife. And, by extension, the basis of food production..."
Bartholomaus Grill et al, 2017

This is linked with developing countries leasing land to foreign agricultural companies that produce food for export only, ie the locals go without

Interdependence and connectivity has risks, ie
"...a globalised......system in which many countries are dependent on imports contains many risks......the problem is that if foods like rice or wheat suddenly become scarce - due to a conflict, because of a natural disaster, as a result of speculation or a disruption to the transportation system through a terrorist or cyber attack..... Then the producing countries will reduce exports in order to provide for their own population...... food, as much as possible, should be produced where it is eaten and needed..."
Bartholomaus Grill et al, 2017

 Hunger
"...Since 1990, the number of people suffering from hunger has dropped by more than 200 million..."
Bartholomaus Grill et al, 2017

Despite this there are still around 800 million people starving

What happens when you are starving, ie
"...In the first days without food, metabolism slows, a kind of natural power saving mode, and the organism obtains glucose for the brain by breaking down glycogen reserves in muscles and the liver. Then, fat reserves are targeted before the body begins to break down proteins from muscles and organs. Starvation victims feel confused and fearful and brain activity slows. Many suffer from diarrhoea and infections or slip into a coma; some suffer heart attacks. Children, in particular, develop oedema, causing their bellies to swell. After 20 to 60 days, death results..."
Bartholomaus Grill et al, 2017

An impact of climate change is that the rich industrial world caused it, yet suffer less than the poorest nations. Climate change is causing wild, unpredictable fluctuations in weather patterns like flooding, droughts plus rising sea level, increasing saltiness of soils, deforestation (leads to landslides, produces charcoal, etc),.

Hunger is more a product of war than climate change, eg corrupt authoritarian regimes will give preference in food supplies (local or imported, including aid) to their armies and supporters.

Additionally, corruption can consume a large proportion of state revenues and there are significant amounts of wasted efforts from aid projects that lack coordination or are of questionable benefit.

Malnutrition, especially amongst children under 2 years old, can cause brain damage that is permanent.

"...On average, the world's poor spend 70% of their money on food..."
Bartholomaus Grill et al, 2017

If food prices rise for the basics like rice, wheat or corn, the world's poor can find themselves in life-threatening situations. Fluctuations in commodity prices can be accentuated by the activities of the financial industry including investment banks, speculators, investors, commodity traders, etc who are active players in the commodity markets. This happened in 2010, when rapidly rising prices between summer and winter of that year pushed around 44 m people into poverty.

Local production is the key to handling hunger
"...local production and local consumption stimulate each other and create a cycle that helps curb hunger..."
Jose Graziano as quoted by Bartholomaus Grill et al, 2017

For example India
"...If there is any country out there that is well-positioned to feed its hungry, India is one. Its economy is growing faster than that of almost any other country, and according to the International Monetary Fund, it will replace Germany as the world's fourth largest economy within five years. In recent decades, the country has also managed to double its food production and has become a net exporter of rice and beef. India has a functioning government and a growing middle class. But India is also home to more undernourished people than any other country in the world: 195 million. almost 40% of children under five are underdeveloped because they have not received the nourishment they need......the problems India has with feeding its population are rooted in distribution shortcomings and in inequality..."
Bartholomaus Grill et al, 2017

"...Never in the history of humanity has a country created so much prosperity while achieving so little social justice..."
Jean Deeze as quoted by Bartholomaus Grill et al, 2017

Diet

There are 3 categories of foodstuff
"...Those that build the body, those who protect against disease and those that give strength and energy. Meat belongs the first group......vegetables to the second and rice to the third. Every day, we should choose something from each group..."
Bartholomaus Grill et al, 2017

NB Most people assume that dieting is about losing weight. Many people have lost weight, many times.

Dieting is about losing weight and keeping it off. To be successful you need to change your mindset and behaviours.

2. Ageing

As people are living longer, eg in Australia, the average life expectancy is projected to rise from 83 years to 89 by 2050.

Ageing and the falling fertility rates are leading to lower population growth which will have an impact on the labour force, dampen economic growth and increase the pressure on government budgets. As a result, governments are encouraging people to work longer, especially as they are mobile and healthy.

3. Urbanisation and the rising middle classes

There is a continuing worldwide trend with people moving to urban areas with rising income levels. This is most obvious in places like China, eg
"...China is turning from the world's factory to the world's innovator.....Three of the top five smart phone producers in the world are Chinese. the e-payment market size is 50 times larger than that in the US; it is the number one e-commerce market in the world..."
Cheuk Wan Fan as quoted by Chris Wright, 2017

China is at the
"...intersection of numerous supportive underlying themes: large population, rising middle class, comfort with the smart phone for transactions, a historically weak banking service for retail and lots of young people wanting to consume..."
Chris Wright, 2017

India also has a surging middle-class.

Furthermore, China is becoming the world's main engine of globalisation with its 'belt and road' initiative. This is resulting in an enormous amount of infrastructure development across Asia, into the Middle East and Europe.

4. Artificial intelligence

Major misconceptions around AI

i) information (AI is more about the value of the data and information rather than the software or computers, ie
"...People think the intellectual property value is in the silicon - in the software, the algorithms. But it is not, it's in the data. If you don't have data you can't access the analytical potential..."
Martin Reeves as quoted by Robert Bolton, 2017

ii) the fear of job losses (much false anxiety about the impact of job losses from AI, ie
"...the business of making judgements: there are some decisions that an algorithm cannot make, which is why there will always be work for people. Evolution has made humans good at pattern recognition. It means we good at perceiving threats. We see anomalies. We are also good at 'level shifting' - we can quickly put a problem or threat in perspective......we're good at doing this with relatively little data. If anything AI should make the human side of work more effective..."
Martin Reeves as quoted by Robert Bolton, 2017

iii) the fear of machines being uncontrollable (once new technology becomes commonplace and accepted like all the uses of smart phones, etc)

NB A computer is only as good as the date put into it, ie garbage in, garbage out.

Human intervention is essential, despite its fallibility!!!

Need look at all data (both positive, negative and interesting data, eg need to understand catastrophes that are relevant to your business)

Big data sets allow traceability, ie
"...If failures arise, it is possible to dig into the history of events to find the weak points..."
Martin Reeves as quoted by Robert Bolton, 2017

Need to understand geopolitical and historical trends, and their impact on your markets, industry and organisation. There are no easy answers to deciphering the forces at play in global markets.

Need to turn information and knowledge into insights. This requires imagination, curiosity and context plus understanding the transmission mechanism, eg in 2016/17 events like BREXIT, Trump's election in USA, terrorist attacks in western countries, North Korea dispute, mass shooting in Les Vegas, growing power of China, etc. For example, technology is a far bigger threat to jobs than trade. In the current situation with information overload there is a need to prioritise information

There are short-term and long-term trends with the latter harder to predict than the former. Examples are

Some current short term trends (more likely to occur in 2020)

i) extreme monetary policy and excess liquidity since the GFC (starting 2007) has created massive distortions in asset prices (financial assets appreciate strongly while the real economy prices, like wages, are depressed). This has produced greater inequality.  However the central banks have eased the qualitative easing (starting in 2018) which is adding to financial markets' volatility in the short term. The low interest rates coupled with US Trump-inspired fiscal boost, has dramatically increased the value of the growth companies. This could pose a problem with a greater risk of a significant correction.

"...It is important to recognise that volatility in share prices......in many cases it is not rooted in the fundamentals of the company. Rather, much of it is noise generated by trend of following algos and quant strategies that are distorting the market moves..."
Hamish Tadgell as quoted by Debra Cleveland 2019

"...past cycles and history are littered with examples of companies that have performed strongly, corrected, looked attractive, recovered some performance, but go on to flame out as true quality (or, more to the point, low quality of the businesses materialise and momentum turns..."
Hamish Tadgell as quoted by Debra Cleveland 2019

ii) the changing market cycle (the current cycle is atypical for a couple of reasons, ie its length and equity market returns have been strong despite weaker average economic growth)

iii) political and social changes like rising popularism (dissatisfaction with the current political elites and uneven distribution of the benefits from globalisation, technological changes, multilateralism, etc).

Post GFC, populism is on the rise and expressed in numerous ways, eg

- opposition to immigration, especially to African and Arab refugees arriving in developed countries like in Europe
- hostility to Muslim fundamentalists and extremists
- the results of the BREXIT referendum in UK
- Donald Trump's US presidential victory in 2016 (his main campaign slogan "Make America Great Again")
- trade war between China and USA and its allies
- disenchantment with globalisation
- rise of white supremacists
- nervous cultural conservatives who
"...feel that society is changing too quickly on issues such as black and gay rights, transgender toilets, immigration and political correctness..."
Andrew Clark, 2017

Furthermore,
"...heavy government and personal debt, added to greater human longevity, also means relatively less spending on social services and tight budgets in retirement. All of this - along with technological disruption to job markets - helps explain the rise of populist politics across the West..."

Pippa Malmgren as quoted by Mark Mulligan, 2017

Populism is based upon the majority of the population perceiving that they are not reaping their fair share of the benefits that the elites are obtaining from new technology. With the disappearance of many traditional manufacturing jobs (blue-collar workers), many workers' expertise is irrelevant in the new technological age of the Internet, AI, digitalisation, etc. The benefits of the new technology are not being shared equally; many people fear they are missing out.

There is rising inequality:
"...primarily in the United States, but also certain areas in Europe, a growing part of the industrial workforce has essentially not been able to adjust to global competition, to the increase in technology and the displacement by new technology..."
Raghuram Rajan as quoted by Patrick Commins, 2017

iv) "unknown knowns" events (an unlikely but predictable event occurs like Covid-19 pandemic of 2020, ie it is known that a pandemic will occur but when is unknown)

Some long term trends

i) technology and communication revolution has radically changed the way we use and share information and data

ii) private sector needs to serve the public good, ie go beyond the short-term profit

"...encourage companies to have a clear mission, consider their communities and steer their innovative impulses to good ends..."
Larry Fink as quoted by Andrew Edgecliff-Johnson 2019

"...Need to move away from the single focused, self-interest identity to the multipurpose, publicly orientated corporation..."
Colin Mayer as quoted by Andrew Edgecliff-Johnson 2019

The talk of the triple bottom line, corporate social responsibility (CSR), environmental, social and governance (ESG), shared value, inclusive capitalism, circular economy, B Corporations, etc is getting more focus from the corporate world, as they try to convince the world that business cares for more than just the bottom line. Yet scandal after scandal (social media with privacy, banks with poor governance, etc) shows otherwise.

iii) the rise of China as a global superpower with its associated geopolitical and trade tensions, eg trade war, Belt and Road initiative, etc

iv) climate change, eg move away from fossil to renewalable fuels

v) waste (FAO estimates that 1/3 of all food produced globally is wasted; efforts are underway convert food wastage into new products, eg
- surplus bread used to make beer
- packaging is biodegradable
- recycling water
- waste turned into bio-fuel
(sources: Debra Cleveland 2019; Andy Lowe 2019)

vi) surveillance capitalism (monopolising of  data and information) on the rise. Capitalism is changing with companies like Amazon, Google, Facebook, etc are rewriting the fundamental nature of capitalism, especially the notion that markets are the king, ie
"...No bureaucracy could ever match the miracles of the market, which spontaneously and efficiently aggregates the knowledge of the society. Where markets collectively set a price, that price reflects discrete bits of knowledge scattered amongst executives, workers and consumers..."
Friedrich Hayek as quoted by Franklin Foer 2019

However, they are proving the statement that those having exclusive access to, and control of, data and information are king

At the same time, many people have access to data, information, etc for their decision-making

However, organisations like Amazon are getting a monopoly on data and information, eg
"...At any moment, its websites have more than 600 million items for sale  and more than 3 million vendors selling them. With its history of past purchases, it has collected the world's most comprehensive catalogue of consumer desire, which allows it to anticipate both individual and collective needs. With its logistics business - and its growing network of trucks and planes - it has an understanding of the flow of goods around the world......Amazon's cache of knowledge gives it the capacity to build its own winning version of an astonishing array of businesses..."
Franklin Foer 2019

vii) future shock (this happens when the world starts changing faster than we can keep up with, eg there is a lot of future shock around concepts like digitalisation, automation, artificial intelligence, etc)
"...Estimates 85% of jobs needed in 2030 have not even been invented yet..."
Dell Technologies as quoted by Hannah Tattersall 2018

They are gradual yet powerful trajectories of change (social, economic, environmental and/or technological) that will at some point express themselves with explosive force. We need to read early signals before they become strong and take proactive action early. We ignore these forces at our peril.

"...there are trends - patterns of change over time - that signal this possibility, which morphed into likelihood which morphed into certainty which morphed into reality..."

Stefan Hajkowicz, 2015

We need to be careful of complacency, especially as many trends are positive, such as improvements in longevity, incomes, education levels, health facilities, governance, etc. But this does not guarantee a better future.

These megatrends are different from wildcard events like black swans, ie nobody saw them coming

It is often hard to distinguish the difference between signals and noise.  For example, fragments of seemingly unconnected data and information exist well before an event occurs. This is relevant whether the events are major, eg September 11 terrorist attacks (2001), collapse of the Berlin wall (1989), Cuban missile crisis (1962), 1970s oil shock, global financial crisis (2007), etc or small, eg somebody hurting themselves, a car accident, meeting someone by accident, etc. In hindsight it is relatively easy to identify what information mattered and what information was irrelevant. On the other hand, connecting the signals in advance of the event requires great analytical skills, pattern recognition and powers of deductive reasoning.

"...Part of the challenge is thinking outside the box. We need to make imaginative leaps into the future to envisage what might be possible. This takes us beyond the world as we know it today..."

Stefan Hajkowicz, 2015

Our ability to respond to events is based on our ability to accurately identify, interpret and act upon signals, and to separate the signals from the noise. By getting a picture of how the world is changing, it's possible to start separating signal from noise and to make wise choices, ie right choices at the right time, and develop strategies to best handle them.

For example, the rise in populism worldwide since GFC, eg BREXIT, the election of Donald Trump as President of United States, rise of populist leaders in Europe, etc, is posing a challenge how to handle popular prejudices against people of different racial/ethnic groups, immigration, globalisation, distribution of benefits, etc. There is a dire need for leaders to explain complex truths in a compelling and comprehensive way.

We need to understand how online things happen.

Foresight is the art and science of understanding change and exploring plausible futures so that you select the most suitable.

"...the future is slippery and hard to grasp. It's a fascinating place where emotions are mixed with logic and it becomes difficult to neatly separate imagination from evidence.
To think about the future we need a mental model to give structure to our thoughts......thinking about the future is about preparedness..."

Stefan Hajkowicz, 2015

Use the 4 Ps ( possible, plausible, probable & preferable) to look at the future, ie

i) probable (past events that are likely to recur, eg using long-term, historical rainfall patterns to forecast the likelihood of future rainfall (within set levels of confidence), financial booms and busts like tulip mania in 17th century , South Sea bubble in 18th century, Great Depression of 1930s, Asian currency crisis in the 1990s, NASDAQ technology crisis in 2000s, GFC in 2008, etc)

ii) plausible (events that may not have occurred and are not necessarily feasible to occur; evidence-based on logic and reason, eg the emergence of online retailing in the late 20th century was a plausible event with the development of the Internet and associated functions like websites, credit cards payments, electronic banking, encryption technology, transport and logistics systems to deliver goods, smart phones, etc)

iii) possible (anything that potentially could happen in the future, irrespective of probability and unknown consequences, eg aliens visiting earth, increasing human lifespan, etc; unknown unknowns)

iv) preferable (the desirable pathway of change; where foresight (what might happen) makes changes in your selected strategy (what should we do about it); making unknowns knowable)
Four stages of foresight study (systematically exploring the future)

"...To see the future we need inside to understand pattern change, ascertain their importance, deduce likely future scenarios and then make wise choices......history provides critical insights about the future..."

Stefan Hajkowicz, 2015

i) environmental scan (exhaustive search of the signal trends potentially relevant to decision-makers; cast a wide net seeking relevant information)

ii) validating and prioritising (identify trends and risks that are happening and are important)

iii) narrative of the future (evidence-based, coherent and compelling story)

iv) communicate the findings (telling the story that connects to the audience)

There are 8 megatrends

1. More from less (increasing demand of limited natural resources)

2. Going, going..... Gone? (harder to improve sustainability, ie protect biodiversity, habitats, environment, global climate, etc)

3. The Silk Highway (overland and maritime; changing economic focus to the developing world, eg Asia)

4. Forever young (uneven wealth/income distribution plus aging population with impact on changed retirement patterns, chronic illness and rising health-care expenditure).

War, crime, disaster, poverty, etc still exist today. They are more likely to be the exception than the rule

"... Despite what we hear on the news and from many authorities, the great story of the year is that we are witnessing the greatest improvement in global living standards ever to take place. Poverty, malnutrition, illiteracy, child labour and infant mortality are all falling faster than at any other time in human history. Life expectancy at birth has increased more than twice as much in the last century as it did in the previous 200,000 years. The risk that any individual will be exposed to war, dying in a natural disaster, will be subject to dictatorships has been smaller than in any other epoch. A child born today is more likely to reach retirement age than his forbears were to live to their 5th birthday..."

Johan Norberg 2016

"...in the past 25 years, the number of democratic countries in the world has almost doubled......people living in extreme poverty in the world has plunged from almost 40% to less than 10%..."

Barack Obama as quoted by Der Spiegel 2016

"...in the past century the average lifespan has doubled, while the average income has tripled. Food is 10 times cheaper, electricity is 20 times cheaper, transport is 100 times cheaper and communication is 1000 times cheaper..."

Peter Diamandis as quoted by Scott Pape 2018

This progress started with the intellectual enlightenment of the 17th and 18th century where people adopt a more scientific/objective approach rather than being content with authorities, traditions and superstitions. Its political equivalent was classical liberalism which delivered people from the shackles of heredity, authoritarianism and serfdom. Industrially, the Industrial Revolution of the 19th-century further helped to conquer poverty and hungry. Then in the late 20th-century with globalisation, Internet, digitalisation, etc the progress continued at a faster pace and larger scale.

"...humans are not always rational or benevolent, but in general they want to improve their lives and the lives of their families, and with a tolerable degree of freedom they'll work hard to make this happen. Step-by-step, this adds to humanity's store of knowledge and wealth...... more people are allowed to experiment with different perspectives and solutions to problems than before. So we constantly accumulate more scientific and other knowledge..."

Johna Norberg 2016

5. Virtually here (digital/Internet/social media, etc technology is reshaping everything we do, ie greater connectivity)

6. Great expectations (changing consumer expectations for products/services, experiences and social interaction)

7. An imperative to innovate (accelerating technological change creating new markets and disrupting existing ones)

8. Safety (personal security, eg privacy through to global safety, eg terrorism)

NB It needs to be noted that it is claimed that the basis for recent prosperity is
"...Post War experience has indeed repeatedly vindicated the view that the single most powerful driver of prosperity is profit-seeking businesses operating with a law-governed and competitive market economy, overseen by an honest judiciary..."
Martin Wolf 2019

In fact it is claimed that democracy and vast market economies are symbiotic. They are 4 core elements to this:

i) the State is central (governments need to assure that there is fair competition, the population educated and trained, research drives technological advances is funded and infrastructure required for the economy is built, ie market with the State)
ii) governing bodies are economically competent; voting people are well-educated and highly politically engaged
iii) specific skills are linked with specific locations (core activities are geographically specific, like Silicon Valley of the computer industry, New York for finance, etc)
iv) democracy is stable (this is based on the governing parties being able to satisfy the bulk of the middle class)

"...industrialisation and democracy were intimately linked, because industrialisation requires a more educated population and the latter, in turn, demands a political say..."
Martin Wolf 2019

Search For Answers

designed by: bluetinweb

We use cookies to provide you with a better service.
By continuing to use our site, you are agreeing to the use of cookies as set in our policy. I understand