Global fintech and funding innovation ecosystem

What do the next ten years hold?

Expoential View | Azeem Azhar | Jan 2020

twin towers - What do the next ten years hold?I’m Azeem Azhar. I’m exploring how our societies and political economy will change under the force of rapidly accelerating technologies and other trends. I convene Exponential View to help us explore these topics.

Making predictions is complicated once we understand that the system we are trying to predict is a complex one, of interwoven forces that affect each other, each layering one atop the next. And that we don’t have clarity of when certain technical breakthroughs will occur or how political forces will shape the implementation of technologies (or vice versa).

Then presenting predictions as a list, a set of steps, in this case one to ten, is necessarily a shallow representation of this dynamic system built up of feedback loops of uncertain gait.

And then the prediction-maker is faced with the next challenge. At what level of abstraction should one make predictions? At the atomic level of technological progress (that chips will get faster, the cost of genome sequencing will decline), or at a highly macro level that describes population aggregates. I think the mezzanine layer that sits between the micro- and macro- is most relevant for understanding how our lives will change. This is where things get complicated and where our social institutions (like cities, firms, industries, communities) exist: where, in short, we spend most of our time.

Today, in the shadow of the climate threat, there is no guarantee of a naïve direction of aggregate progress, the sort of simple analysis which merely tracks longer lifespans, larger populations, wealthier societies. Wealth and health are undisputable markers. In the last century we did pretty well on that basis; we increased global GDP per capita on a purchasing-power-parity basis 5.7 times while increasing human population 4.1 times.

A climate catastrophe could unpick that simple teleology and reverse it sharply.

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And, of course, values and beliefs change. The wealthiest societies in the world now have fewer children, absolute population levels are no longer a marker of bounty and power. The richest nations have lower birth rates, many with declining populations.

One of the largest collective fictions we’ve engaged in, the nature and operation of the economy itself, is ripe to be unpicked. It will be clarified by new methods from science and social science that better help us understand the processes that underpin economic behaviour and outcomes. This rethinking of economics will happen, given urgency by our collective experience at the sharp end of neoliberal, financialised economic thinking.

Many of these dynamics will result in the transfer of power from one group to another, some equitably, some less so. I can’t gauge accurately how willingly those transfers of power will occur.

We do have some clear choices, forks in the road, up ahead.

My suggestions for the shape of the next decade are based on what I consider a roughly optimistic reading of those choices. I’d welcome your comments, particularly from members, below.

  1. Climate change will be the dominant narrative. We will achieve global peak emissions this decade, as Michael Liebreich argues. I believe we can go further than. Renewables are cheaper than most forms of new fossil fuels and are getting progressively so, even when you add the costs of storage. Founders I meet are bringing the same entrepreneurial skill set that brought us Facebook, Google and Amazon to the climate change problem, including those hard-to-decarbonise sectors (like steel or chemicals). Governments, like the EU and the UK, have announced net zero targets to be enshrined in law. And the financial markets are under pressure to better price in carbon risks, which will increase the financing costs of climate-deleterious investments relative to clean ones. What we can’t be certain of is how rapidly our climate is changing (something we discuss in this briefing call with one of the lead authors of the IPCC 1.5 degrees report, Professor Myles Allen). The speed of this change will determine how we shape our investments into urgent mitigations and disaster relief against sustained investing in shifting our energy mix. We’ll probably need to do both. Addressing climate change will require a concerted effort of World War II scale, but a genuinely global one. During 2019, I had dozens of conversations in boardrooms, with public market investors, entrepreneurs and venture capitalists which lasered in on the imperative to achieve net zero. So perhaps we have a chance to launch a modern-day Manhattan Project to tackle climate breakdown.
  2. Our geopolitics will continue to fragment and this will result in more conflict. This is not merely a story about China’s growing economic power and global influence, exporting its political capitalism and authoritarian capabilities through its technologies and across the One Belt, One Road initiative. Global geopolitics will need to factor a broader rise of Asia, India becoming the world’s 3rd largest economy by 2030, closing in on a $10 trillion GDP. The world will comprise of three major blocs. The EU promotes a citizen-centric model, China a state-centred one. The US lacks an up-to-date cri de l’esprit: the American dream has got mired into the tar of social immobility & profit-at-all-costs companies, which puts off the young, the environmentally-minded, and even many financiers (see trend three.) An inconsistent and unilateral foreign policy chafes capitals around the globe. America’s status as the home of opportunity and world’s moral guardian is weaker than it was twenty years ago.
    Outside of those major blocs, there will be significant players whose alignment will be somewhat unclear, including hypersonic Russia, brexit Britain, the major African and Pacific economies. Lurking, demanding a seat at the table, are the major technology platforms—how will they play their cards? Critically, we’ll need to ask where the forums for co-operation and mutual benefit will reside. Much of the benefit of the Internet derived from its widely available standards and global interoperability, as it starts to fragment into four, or more, Internets, will we lose those benefits associated with openness and the democratisation of technology?
  3. In what we have generally thought of as the West, we’ll rethink the shape and purpose of our economies. We’ll ask hard questions about ‘rentier capitalism’, which is the end-state of the Fordist mass production model, the Friedman doctrine coupled with corporate capture, particularly of antitrust. Yes, neoliberalism will be put to bed. We may go as far as rethinking the purpose of our economies to sustainably deliver on the needs of its population, as some have suggested. We might break the simple linear division society encouraged by neoliberalism: markets which work and states which do the rest, each measured solely by their efficiency. Rather, we’ll recognise the value that responsive states provide in creating a secure, kind, purposive substrate in which we can live our lives. Many states will rethink the ‘social contract’ for a new world of work. They will also realise they need to take a more active role in directing investments in technology and shaping our societies. This will take the form of DARPA-like basic research, what economist Marianna Mazzucato calls the mission-driven state. Smart nations will figure out how to do this while facilitating basic science and accelerating the entrepreneurial urge.

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