The future of almost eve.., p.18
The Future of Almost Everything, page 18
Illegal cartels and semi-monopolies will grow in numbers and strength – typically raising prices by around 20%. Past examples include: airlines fixing the costs of $20bn in air freight – which led to fines and compensation of more than $4bn; car part manufacturers fixing a huge range of component prices; rail and subway contract price fixing in Brazil; Libor interest rate fixing in Europe and America; and the huge semi-monopolies of Apple, Google and Amazon.
Global citizens
We will see a new breed of hyper-mobile globalised individuals with no national loyalty or identity and no commitment to any geographical area, yet with friends in every city. These industrialised techno-gypsies consider themselves global citizens. They will be hard to tax and hard to count in census surveys, as well as hard to police.
We see them already: for example, the senior executive who spends more than half the year away from home, equally divided between two other continents, and who decides to take a flat in another city, which she visits frequently. Where is her home?
Future of global manufacturing
All manufacturers will find extra cost savings, and so the prices of most goods will fall in real terms over the next three decades. They will achieve this with greater automation, larger factories, better design, thinner and stronger materials such as carbon fibre and composites, more recycling, improved energy efficiency, shorter supply chains, lower stock levels, and by moving factories from nation to nation, to regions where labour costs are lower or to where demand is growing fastest.
Future of trade, logistics and supply chains
Moving a container 150km by lorry from Birmingham to Southampton costs the same as moving the same container 10,000km by sea from Southampton to Beijing. It is cheaper to transport melons from Istanbul to Naples than to drive melons from a village up in the Italian mountains, to the same market.
This overwhelmingly huge difference in freight costs will be one of the single greatest drivers of future global trade, despite increases in energy prices. It is the primary reason why global trade has grown at twice the rate of global production over the last 30 years.
Look out for trade growth in Latin America and Africa – both of which have huge manufacturing potential close to the sea. Areas with major container ports will on average grow up to 40% faster over the next three decades than cities, regions or nations that are landlocked.
Take Uganda and Kenya, for example. Uganda has no port and all exports travel on huge trucks along hundreds of kilometres of dusty single carriageway road. Follow the same trade route in the other direction and it takes you down into the heart of rural Africa: Burundi, Malawi and beyond.
Expect over $22 trillion a year of global trade by 2030, up from $13 trillion in 2015. The use of shipping containers has grown twice as fast as international trade, as companies seized the opportunity to be more efficient. But the container revolution is now complete, and so the growth difference will ease.
Regional trade will grow – and global trade will slow
‘Outsourcing’ jobs to low-cost nations is a controversial and sensitive subject, as I have discovered on my website and YouTube channel. Just mentioning the word can cause a massive hostile reaction on social media, mainly from people living in America who are scared by the rise of China, and think their jobs are threatened.
However, these people are behind the times. Ten years ago, many global manufacturers were stampeding to move their factories to China and other parts of Asia to save costs, while banks were shifting call centres and IT support teams to countries like India. Several years ago I predicted that outsourcing would start to go into reverse, which is exactly what has happened.
The simple model of outsourcing factory jobs from America or Europe to Asia is nearly over. Asia is becoming more expensive. Long supply chains are easily disrupted by sudden events. Cultural gaps, tariff barriers and varying exchange rates can often be troublesome. Local demand in Asia is also growing.
So we will see more clusters of regional suppliers, delivering components to make products that will often be sold within the same area. That is why ‘south to south’ trade will grow significantly (e.g. India to Brazil, China to Malaysia, or South Africa to Tokyo). Such trade doubled from 12 to 24% of global trade from 2000 to 2011, and will increase to more than 40% by 2030. Half of all trade in Asia is already within the region itself.
A significant amount of offshoring is already being replaced by nearshoring or reshoring of manufacturing – ‘jobs moving back home’. Jobs are also moving around Asia. So Intel has built a new $1bn chip factory in Vietnam, just a few miles from the border with China where labour is twice as expensive. Samsung has switched almost all manufacturing of electronic goods out of South Korea to many other lower-cost locations within Asia.
How to save money on logistics
At least 30% of all trucks on the road in the EU are empty, transporting nothing but air over 150 million kilometres a year. Tens of thousands of journeys a year are wasted carrying identical end products, components or raw materials in opposite directions from different producers, factories, warehouses – literally passing each other on motorways. Expect new websites to sort this out, and to become money-spinners.
We will also see great efforts to speed up shipping. Automated cranes can already unload a giant container ship and reload it in 24 hours, re-sorting containers on the dockside as the Post Office sorts letters and parcels.
Every day counts. An average delay of a week on the shipping time to a particular country can mean a loss of up to 25% of trade, depending on how time critical those deliveries are. It is often 20% more expensive to trade with a low-income country than a middle-income country, because of lack of infrastructure, red tape, slow customs, form-filling and maybe pressures for bribes to keep goods moving.
Paperwork and customs delays still account for over 10% of all shipping costs in many countries. We will see huge efforts by the World Trade Organisation and governments to solve this with secure electronic bills of lading and other freight records, together with wider use of electronic tags on every item.
Many emerging economies will also invest in combined rail, road and port facilities. Mexico has spent over $220bn on such a super-hub in the past eight years.
3D printing – overhyped yet revolutionary
Custom manufacturing will grow – whether personalised clothing or high-speed development of prototypes using 3D printing. However, 3D printing has been much over-hyped. Around 10–20% of all homes in developed countries will own a 3D printer by 2040, but this will have very little impact on sales of pre-manufactured products.
3D printers are limited in the kind of materials they can print with, and in the size of what they can make. Next-generation printers will use raw materials that can be ‘fired’ in a microwave or domestic oven. Resolution depends on nozzle size, and the better the resolution, the longer printing takes. Home-based 3D printers will be too small to make larger products without assembling them from many different pieces.
Having said this, 3D printing is already a very important technology to prototype new engineering parts for an auto company, or for dentists to create false teeth. For example, with a 3D printer, Airbus can make a new bracket for an aircraft door using 90% less titanium.
Robots taking over the world?
Despite all the talk of robots taking over most menial jobs and putting tens of millions out of work, the growth of robots in factories has been slow – up from 92,000 to a mere 170,000 a year from 2000 to 2012. Compare this to growth of smartphones, for instance, and the pace is snail-like. Sales of such robots are likely to increase by around 7% a year – mostly in the auto industry, which owns most robots in America. Robots will become cheaper and more intelligent, but smaller models will still cost over $20,000 each in 2020.
Expect rapid growth in military robots – with tens of thousands of drones owned by the Pentagon alone, raising the prospect of swarms of small, flying robots being thrown into the air above a major battle zone, at a cost of less than $1000 each. However, they are not true automatons (yet), as each has a human pilot back at a military base.
Domestic robots are already here, of course – cleaning floors, for example – but other uses will be hard for consumers to justify, apart from control devices in things like heaters or fridges as part of smart homes. The biggest personal use of robotics will be in cars – self-parking is already well accepted as a feature of new vehicles, and self-drive will be common too.
Robots as personal servants or friends?
The greatest nonsense of all has been the notion that within a couple of decades, in most homes, you will find a walking, talking cyborg-type robot that smiles, tells jokes, does a range of household tasks, or helps with personal care, and becomes a close friend. The truth is that it will be many decades before such machines become cheaper, better and more acceptable to people than real human beings.
However, we will see major advances in devices that think ‘intuitively’, able to infer meaning from things. Google is investing a huge amount in ‘Semantic Search’, for example, which goes beyond the keywords you enter to try to understand what you are really thinking about.
We are still a very long way from being able to have a sophisticated conversation with a robot, on a wide range of themes, where you cannot tell if a human is replying or if it really is just a machine. Expect many more experiments, with far more realistic conversations by 2025.
Future of Asia as a global growth engine
When historians look back in 500 years’ time they will record this period as the ‘Century of Asia’, built on manufacturing and cheap labour.
India and China will dominate our globalised world, with a third of world population, and relentless economic growth, driven by low-cost labour and emerging middle-class consumers. More than 85% of all the world’s new graduates in science, technology, engineering and maths (STEM) over the next two decades will be from Chinese or Indian universities. Expect to see the same pattern in software development, medical research, business studies and accountancy.
Asia now represents over 40% of the world’s GDP on purchasing power parity (PPP) terms. It is the world’s factory with complex regional supply chains, smelting 76% of the world’s steel and emitting 44% of global pollution. However, apart from giants like Toyota and Samsung, the region still has few truly global players. Expect this to change, especially in areas such as Chinese e-commerce, or Big Data companies in India, or biotech in South Korea.
Expect joint action by China and India on a growing number of issues by 2025, acting together as a powerful force in global politics. India’s growth will be held back by poor infrastructure, while China will be burdened by its ageing population. Both countries will start experiencing severe shortages of highly trained managers, engineers, scientists and other groups, reflecting in a salary inflation of more than 20% a year for the fortunate few. Both nations will also continue to be affected by corruption.
Future of China – shifting from factory exports
China is a wealthy ‘nation of nations’ with a huge middle class, gigantic manufacturing capacity, its own dotcom boom, the world’s largest high-speed rail network, and one of the best educated work-forces in the world. But China is evolving rapidly and for many globalised corporations manufacturing in China is becoming a rather old-fashioned idea, because of rising costs.
China is now the world’s largest economy according to the World Bank, on the measure of purchasing power parity (PPP), which looks at what the local currency will actually buy, after adjusting for international exchange rates. But even on an absolute dollar basis, China will be the world’s largest economy by 2024, propelled by a threefold rise in annual consumer spending from $3.5 trillion in 2014 to $10.5 trillion by 2024. This will all be part of a transition from an export-led, manufacturing economy to a more balanced economy serving Chinese consumers.
As a direct consequence, global trade in the renminbi (RMB) will rise. It has already overtaken the euro as the world’s second most important currency for trade after the dollar.
Expect consumer spending in China to continue to grow by at least 7% on average each year for the next 15 years, with occasional dips in the adjustment process. By 2025, China’s consumer market will be three times larger than Japan’s.
President Xi Jinping is becoming the most powerful leader that China has seen since Chairman Mao, with popular agendas such as stamping out corruption, breaking up state monopolies, faster economic reforms, greater equality and developing China as a powerful nation. We can expect him to run China efficiently, to a grand master plan with visionary investments for China’s future.
China’s leadership will do all it can to maintain economic growth above 5–6% a year for the next two decades, to reduce risk of civil unrest. It is likely to succeed. The memory of revolution is recent, strong and unsettling. Every adult in China aged 65 today has vivid memories of life as a young adult under the Red Guards and the Cultural Revolution led by Chairman Mao.
The workforce in China
As we have seen, at least 300 million of the poorest Chinese people will migrate to cities over the next 25 years, seeking a better life, and providing extra labour to compensate for the ageing workforce. A further 600 million middle-class people will be expecting better choices, personal freedoms, and will be increasingly strong in their private opinions about how their region should be governed, about pollution and corruption, size of their families or future well-being of their children. Expect China to further develop its own form of democracy, allowing regional voting for candidates with different policies, even if technically as part of a one-party state, within the limits of national policy.
China will continue to age as a society because of the one-child policy. Shortage of younger workers has been partly hidden by migration from rural areas. An additional challenge for China is that many families over the last 30 years have chosen to have a boy as a single child – either by selective abortion or in some cases infanticide. There is now a significant gender imbalance – 50 million women may be ‘missing’. More Chinese men will look for a lifelong match with someone born outside China, using dating agencies and other means.
China will relax further its one-child policy, worried about meeting the needs of an ageing population, and about the lack of younger workers. The population of working age is shrinking by several million a year.
Regionalisation within China
There is more than one China: culture, tastes and fashions vary hugely from one part of the country to another, together with what is permitted locally. Over 400 million people do not speak Mandarin. Expect large companies to decentralise their decision-making within China rather than concentrate leadership in a city like Shanghai or Beijing. Expect more localised product development, branding and marketing.
Freedom of speech, religion and fertility in China
As we have seen, Chinese is already the dominant language of the web, and many of the world’s greatest online companies over the next two decades will be born in China. Expect the government to continue to walk a narrow line between embracing the freedoms of the virtual world and wanting to control it.
Senior government leaders recognise that many profound changes are inevitable soon if the nation is to transition peacefully. They recognise that major unrest could be triggered not only by lack of jobs and lower economic growth but also by anger over corruption, inflation, inequality, pollution, over-zealous censorship and lack of religious freedom. The government also fears wider contagion from regional unrest in places like Xinjiang, among Muslim Uighars, and also in Tibet.
Stamping out official Chinese corruption
Expect rapidly growing numbers of arrests for corruption. Many suppliers of premium retail such as watches, perfumes and hotels have been hit by an absolute ban on expensive business gifts and extravagant lifestyles by public officials.
The fifty wealthiest members of China’s National People’s Congress are said to own more than $94bn. Expect many more probes into how and where leadership wealth was made. Over 250,000 officials have been prosecuted, removed from office or punished in other ways in less than three years.
Renewable energy will improve China’s environment
We are already seeing investment on a vast scale into renewable energy, especially wind power, to reduce air pollution in major cities (and seize the global market in renewables). Expect far-reaching measures to reduce water pollution and food contamination. China now requires 15,000 enterprises to publicly report their air pollution levels, water use and heavy metal discharges in real time – until recently such matters were government secrets.
From export-led growth to domestic-market dominance
China’s image as the factory of the world will change, as costs of manufacturing in China continue to rise. China will lose jobs to nations like Vietnam, Cambodia and Myanmar – even to Europe, Mexico and the US. China’s future economy will be driven more by domestic demand from its own growing middle class, and by investment in new technologies such as high-speed rail, wind energy and biotech. Growth of retail spending in China is likely to exceed GDP growth by 3–5% on average over the next decade, as middle-class consumers save less, and draw down their assets.
China buying up the world
A growing part of China’s sovereign wealth is being diversified into new investments in other nations: property, farmland, mines, factories, utilities and other infrastructure. Back home, expect booms and busts in Chinese real estate, with risks of a severe banking crisis due to poorly controlled lending and accumulated bad debts, particularly in the state sector.
We will continue to see bold, visionary moves by the Chinese government, resulting in giant industrial enterprises and breathtaking infrastructure projects. China will continue to spend between 6–8% of GDP on infrastructure for the next decade.
