Clem Sunter
21st Century
Megatrends
Perspectives from a
FOX
Human & Rousseau / Tafelberg
Introduction
Think about how much life changes in a century, let alone a millennium. Our Victorian antecedents would have had no idea about how the car would change the way we live. Air travel would have been way beyond them. Phones they might have had an inkling about as the device was invented towards the end of the 19th century. Nevertheless, I doubt that they would have any grasp of so many aspects of our existence which we now take for granted. Of course, trains and ships, trade and wars, love and hate and many other things they would be familiar with.
So here we are at the beginning of the 21st century without much of a clue of what the world will be like at the beginning of the 22nd one. In the same manner as the original telephone did, the internet, the mobile and other late 20th century devices do provide some indications of the way the next two generations will evolve. However, we might be as surprised as the Victorians about some of the things we would encounter if we were around in the 2090s.
The title of this book, therefore, is not meant to imply that as a scenario planner I can look that far forward. It is more about identifying the forces shaping our lives for the next ten years which have become apparent since 2000. It is the subject of the first article of a set of weekly columns I have written for News24 between March 2012 and July 2013. The remainder cover a wide range of issues, but the theme of some of the most important ones is about how South Africa must establish an economic platform which will launch a new generation of entrepreneurs. Only by doing this will we make the rest of this century a prosperous one for all our citizens. Several also identify the red flags that we have to keep down to avoid a crash landing before a new economic model has kicked in.
I would like to thank Aneeqah Emeran at News24 who assists me every week in publishing my articles and Annie de Beer for the production of this book. I would also like to thank my colleague Chantell Ilbury for all the work she has done in making the ‘mind of a fox’ brand such a global success. The reason that a South African idea can break new ground in the field of strategic thinking is that we know – living on the African continent – that much of the future is uncertain and beyond our control. Like true foxes, South Africans invariably rise to the challenge of adapting to whatever the future throws at them. They have the resilience and spirit of innovation to thrive in the 21st century. All that is needed is leadership of the right kind.
Clem Sunter
21st century megatrends
Despite the unpredictability of the future, a competent scenario planner can identify certain major trends shaping it. Here is my best take.
Remember all these megatrends are beyond your control, so you must adapt to them. I have added an extra one since writing the article. We are entering a post-American world following the latest revelations about America’s spying activities – even tapping the mobile phones of heads of state who are supposed to be allies. It shows a significant level of desperation and loss of leadership in the world’s most powerful nation.
Not only has its relationship with the other G8 nations deteriorated, its influence among them has diminished. With the rise of China and other emerging economies, America’s share of global GDP is declining. With its burgeoning national debt, its indebtedness to the rest of the world is growing. We are entering a leaderless world with increasing potential for conflict and unpleasant surprises.
Now that we are entering the 14th year of the current century, some of the megatrends shaping this century have become evident. As a 21st century fox, here is my top 10 list bearing in mind that these megatrends will apply for all global economic and political scenarios. In other words, they are universal rules of the game, not variables that may or may not come into play depending on which scenario you choose. I have also run them by my fellow fox, Chantell Ilbury.
1. Populations are ageing
One of the problems making the budget deficit of the US so difficult to solve is the extraordinary number of elderly people who over the next 50 years will qualify for state-funded medical care and social security. Europe and Japan are in even more difficult situations given that the population is declining in numbers in countries like Italy and now Japan. China faces a demographic cliff in about 20 years time because of the one-child policy introduced in 1978 and, at this stage, the nation has very little in the way of pensions and medical cover for the elderly.
Of course, India, Africa, South America and Indonesia still have relatively young, growing populations where the challenge is to raise general living standards. Nevertheless, depending on the degree of success in achieving the latter objective, they too will one day face the same ageing problem as increasing longevity goes hand in hand with rising income levels. The number of people over 100 years old living on this planet is set to explode and somehow will have to be catered for.
2. More economies will return to a steady state
Japan has led the way. Having been a high growth economy for the 1970s and 1980s, it has had somewhere between zero and one percent annual growth since 1990. They have done everything to try and revive the economy and now have the highest national debt to GDP ratio in the world. Europe is about to follow suit, while America with its younger demographics will probably manage two percent per annum.
Growth, as a concept, has really only been around for 200 years. Prior to the industrial revolution and the massive increase in population in the 19th and 20th centuries, it was only the favoured few who expanded empires and trade. Now once again, we face a relatively flat economic universe driven by static populations in the more advanced economies.
3. We have moved from the Age of Knowledge to the Age of Intelligence
The internet now means that access to knowledge and facts has increased exponentially over the last 20 years. The differentiator now is the way we use the existing knowledge to create new knowledge and connect the dots by dreaming up ideas that have not been dreamt up before. This is all about intelligence which comes back to teaching children cognitive skills. In a steady state economic universe, the penalty for not having an intelligent strategy as a business is no longer slower sales growth than your competitors. It is death. Innovation has become an even more important element of a company’s life cycle since to grow, somebody else has to shrink. Competition in being original has just undergone a quantum leap.
4. It is more about defending your wealth than growing your wealth
Since 2000, food price inflation has averaged around 10% a year. Petrol prices have climbed too. In fact, the only thing that has checked the rise in the consumer price index is property (and mortgages). Meanwhile, interest rates are at all-time lows and returns from most asset classes since the beginning of the century have been subdued. It is the classic squeeze particularly in Britain and Europe. It is thus becoming more difficult to make money with money unless you are prepared to take a higher risk of losing it. In fact, preserving the real value of your savings is now a stretch.
In a steady state universe, you have to be a value-driven investor intent on stocks offering a satisfactory dividend yield and modest price–earnings ratio. Put another way, you have to be a dog whisperer where you can tell the difference between the apparent dogs that offer the upside because they are priced cheaply on account of general market conditions and the real dogs that are cheap for a valid reason. All in all, the retirement age for the remainder of this century has risen to between 70 and 75. Even then, you will still need an intelligent financial adviser. Otherwise, it becomes a race between poverty and death.
5. Education is out of sync with the job market and changing nature of work
Around the world, youth unemployment is a real issue and in some countries has hit record highs. One of the principal reasons is that schools are educating pupils for the job market of the middle of the last century, not the one that exists now. In those