Prospect 2021+ (Part 2/2)
In the first part I discussed the current state and #trends related to COVID and the environmental issues. In this second part I will touch on prospects in other areas including society, science and technology, economy, politics and global dynamics.
1. Social Transformation
1.1. Moving and Socializing
In 2020 social dynamics was affected by two major forces: COVID-19 and violence against people of color. In the U.S. — and probably other developed nations — two interesting phenomena were observed during the pandemic. First, people relocated to more livable places with lower cost and better quality of life. This was possible due to the flexible work policy [DAIL20]. Second, there was an increase of cross-border online-socialization. As video communication became ubiquitous, people started reconnecting with their geographically distributed families and friends. Moreover, there was an increase of global dates, people searching partners beyond their local area [BBC].
1.2. Black Live Matters
The discrimination against black people altered the society as well. Black Lives Matter movement had its genesis in 2013, protesting the case of the shooting death of African-American teen. Since then, it continued the protest against racially motivated violence against black people. This time the brutality against George Floyd, Breonna Taylor and others penetrated deeper into people’s hearts. Because of the pandemic, people were more sensitive, attentive, and had the time to think about the situation and participate in the rally [TNY20]. The corporates promptly reacted with solidarity spreading the awareness and fostering discussion. Today we see venture capitalists allocating money specifically for black entrepreneurs; we see multinational companies pledging jobs for black people [WSJ20]. Yet, the real story is in the numbers: according to the World Economic Forum, 17% of white owned businesses failed while 41% of black owned businesses collapsed [WEF20].
1.3. Regressive Effect on Gender Equality
In contrast, gender equality took a step backwards. On one hand, domestic abuse, mostly targeted to women and children, rose during the lockdowns [HHP, USH20]. It is thought that domestic violence increased 20 percent with the lockdown measures [BBC20]. On the other hand, working women were severely impacted, losing their jobs at 1.8 times higher compared to men [MCKI20]. Women, especially women of color, are more likely to have been laid off or furloughed during the COVID-19 crisis [UN, MCKI20]. The gender gap is projected to further widen [UNDP]. It is time to remind the industry about the many studies on gender diversity showing that women’s representation in organizations is associated with higher growth [SA14, HBR19].
1.4. Aging Population
Another important factor that will morph the society in coming years is the aging population. By 2030, every Baby Boomer will be age 65 or older, which means that 1 out of every 5 U.S. citizens will be of retirement age [BI21]. The aging population trend is global and has profound implications for nearly all sectors of society, including labour and financial markets, housing, transportation, social protection and the demand for goods and services[UN]. In a few years these people will start using their savings and the deficit will start having a major impact in the economy. The national policies, healthcare system and economic system must be prepared to maintain the overall quality of life with minimal impact on the other global challenges.
Until now, the society in developed countries has shown resilience during the pandemic, but the road ahead is not rosy. Herculean efforts will be needed to fix the society into a more equitable one and maintain it in a properly functioning state while adjusting to the aging population.
2. Science and Technology Acceleration
2.1. Bioscience & Biotechnology
Nowadays climate change and COVID-19 are two major forces that are driving innovation. We already saw significant progress in bioscience with the mRNA technology. Another significant milestone was achieved last November when AI solved one of biology’s grandest challenges: determining a protein’s 3D shape from its amino-acid sequence [NAT20]. Scientists have also been experimenting with the gene editing tool CRISPR to identify COVID-19 [SD20]. Today, the scientific communities have at their disposal different tools and techniques that can boost innovation. Some of these innovations may lead to uncharted territories.
2.2. Clean Tech
Sustainability is also prompting innovation. The advances in clean technology has brought down the costs, but the fact that renewable electricity is now cheaper than fossil fuel is not a reason to rest. Greenhouse gas emissions keep raising global temperature and pollution keeps damaging nature. We will require massive scaling of carbon reduction and carbon sequestration technologies to meet the green targets. AI & Machine Learning could play a key role in addressing the environmental issues. Ultimately, a successful clean technology will require a well choreographed dance in between science, technology, engineering, policy and consumers.
“We haven’t created ‘the Google’ or ‘the Facebook’ of the climate revolution yet.” Jim Coulter, Co-CEO & Founding Partner, TPG
As humanity is navigating through major crises, scientists and engineers — augmented with AI — are working relentlessly together with business leaders and policymakers to come up with innovative solutions. Humans have a track record of overcoming obstacles with innovations, but the current challenges we are facing will demand universal engagement.
A word of caution — as science and technology improve by leaps and bounds, we must ensure these advances fall within the moral and ethical framework. A small alteration in genetics can modify the entire course of species.
3. Industry and Market Disruption
3.1. Companies Adapting to the Market
Larger businesses have been resilient to the pandemic. Unfortunately, COVID-19 left a long-lasting damage to small businesses that did not have the resources to cope with the sudden changes.
With physical distancing measures, businesses had to quickly adapt to online solutions. In addition, companies started forming partnerships to create synergy and complement their deficiencies, as well as right-sizing their businesses to reduce costs while still satisfying consumers’ needs and demands. One area that requires further optimization is in logistics. The surge of online orders increased the volume of delivery of goods, but the utilization of warehouses and transportation is suboptimal. Last mile warehousing and application of AI can improve the situation.
To circumvent the lockdown and physical distancing, companies had the majority of their workforce telecommute. For businesses with proper infrastructure, distributed working did not incur productivity loss [SHRM]. In fact, there are reports indicating that productivity increased attributing to less distraction [BBC]. Not surprisingly, many tech and financial companies are extending their work-from-home policy [FORB]. In addition to increased productivity, work-from-home can bring other benefits to the employer including increased pool of talents, savings in unnecessary relocation, and reduced office maintenance. It is also a chance to incorporate more diversity by retaining talents that otherwise would have to stay home to attend the family.
3.2. Environmental, Social, and Governance (ESG)
Another industry-shaping force that is gaining momentum is Environmental, Social, and Governance (ESG). ESG is no longer considered a philanthropy, but a necessity. It is no longer an option but an essential competitiveness factor and core part of branding. Industry is waking up to the reality that sustainability is directly related to profit, and social equity is directly related to productivity. There are compelling economical reasons to adopt diversity and inclusion, and green practices.
Corporates that learn the art of balancing purpose and profit will remain competitive.
“We are in business to save our home planet” — Patagonia
4. Economic & Finance Transformation
4.1. Stimulus Packages, Stock Market and World Debt
In 2020 the world experienced the sharpest contraction of gross product since the Great Depression, falling by an estimated 4.3 per cent. To avoid global economic catastrophe, the governments worldwide have injected $12.7 trillion into the economy in the form of stimulus packages. The liquidity did not go to fixed investments — which are critical for creating jobs and propelling economic growth — instead, it went to financial assets. The result is record increases in major stock market indices that we have been witnessing since March 2020 [UN21].
The stimulus packages may have avoided a possible economic meltdown but we are left with the uncertainty of second and third order unintended consequences. The world economic decline increased the total public debt worldwide by an estimated $9.9 trillion in 2020 [UN21]. The current and future generation would have to bear the burden of the debt.
4.2. Financial Technology
Financial technology (FinTech) played an instrumental role during the pandemic. The economy kept in motion thanks to the online/mobile financial services. The usage of online financial services increased 35%, and contactless payment went mainstream [DELO]. COVID-19 was a catalyst for rapid adoption of financial services by baby boomers — those in between 55 and 75 years old.
It is also fascinating to see the ascent of the retail/individual investors [CNBC]. The easy-to-use retail investment apps such as Robinhood, Webull, etc., lowered the barrier to entry into the stock market for individuals increasing the volume of retail investment. This trend will continue, expanding the influential power of collective individuals in the wall street.
If you have been following the news and social media, cryptocurrency should not be a foreign term to you by now. The price of Bitcoin started in the low $7,000 in January 2020. In February 2021 Bitcoin hit the $50,000 barrier. Bitcoin is just one of the thousands cryptocurrencies traded in the exchange today, albeit the one with the highest market cap. Bitcoin was introduced in 2009 but it wasn’t until late 2017 when the price passed $10,000 per coin. The cryptocurrency and Decentralized Finance (DeFi) has the potential to disrupt the entire industry. People Accessibility, low transaction and transfer fees, near-real-time transaction are some of the immediate benefits. The “smart contracts” in DeFi will yield middlemen unnecessary in a transaction, removing time and effort overhead. DeFi will also allow for a more feature-rich and efficient finance ecosystem. This could incentivize entrepreneurs to start their business, even from least developed countries. The cryptocurrency and centralized digital currency could increase open doors to financial inclusion and empower people on how they spend, save, send, and secure their money [HBR20]. As is always the case, this technology is a two-edged sword, because of the anonymity, the cryptocurrency can be used in black markets without being tracked.
4.3. The Growing Gig Economy
Another noticeable trend is the growth of the gig economy. With the advent of Uber, Lyft, DoorDash, AirBnb, TaskRabbit, Fiverr, Etsy, Wyzant, and many more platforms, it is easy to find temporary jobs. This is a great opportunity for those unemployed including college students. The main limitation of gig jobs is the lack of any benefits, which affects those people whose main source of income is the gig job platform. Legislations such as Proposition 22 passed in California in 2020 will certainly affect the gig market.
The hope is that the lawmakers act in the interest of the society in general and implement laws and regulation that do not hinder innovation and helps the underserved population as much as it helps businesses of all sizes recover and thrive.
5. U.S. Politics: Politicising and Polarizing
A healthy dose of polarization can help democracies by introducing different perspectives to the discussion and increase civic engagement, but when the polarization becomes too pronounced, it can hinder democratic methods for solving societal problems [HALT20].
According to studies [HALT20], polarization recently reached an all-time high in the U.S. Media coverage of politics is saturated with partisanship. Political discussions are filled with offensive rethorics and distrust. Politicians are using anger as a primary tool for motivating voters. The harmful effects of polarization are amplified through social media that rewards sensationalism, which is precisely the characteristic of polarizing narratives.
Politicians did not hesitate to politicize COVID, which was evident in the news [HART]. The end result was confusion, inadequate response to the crisis and loss of public trust [HPR]. This is a warning sign that members of the governments are in discord and their ideological disagreement is impeding them to focus on solutions and executions.
We must break out of the media echo chamber, balance our internal conflicts and engage in a constructive dialogue. We are living in a critical time that necessitates putting our heads together and quickly moving towards convergence in actions.
6. Global Dynamics
6.1. Unequal Recovery
There was an enormous gap in stimulus spending per capita in between developed countries and least developed countries (LDCs). Developed countries spent $10,000 on stimulus per capita whereas LDCs spent a mere $20. The lockdowns crushed industries that rely on external demands — tourism and manufacturing are examples of such industries, which happens to be the major industries of LDCs. It is projected that the pandemic will leave a long lasting negative impact on developing countries, probably in the order of decades [WD21].
“The rising inequality could threaten the stability of political systems of nations and undermine their ability to address our shared challenges” — World Economic Forum [WEF20].
6.2. Multilateralism in Multipolar World
Even before COVID-19, the world was experiencing the severe crisis in multilateralism [DELE19]. The emergence of great superpowers — namely China and Russia, who are pushing their own agenda — and the shift to nationalism have contributed to the weakening of multilateral order [TGO19, BBC19]. Recently, the pandemic pressured countries even more to turn their arms inwards, focusing on their own interest and deprioritizing international cooperation.
The prior U.S. administration played a substantial role in important international negotiations such as the Abraham Peace Accords and the Peace Deal with Taliban. However, the administration has also deteriorated the relations with other countries and multilateral bodies such as NATO [FP20], WTO [NYT19] and WHO [BBC] fracturing the tie with the global community.
U.S.-Russia relations are at their lowest since the Cold World War [CSIS20]. The two countries are in disagreement on important themes such as Strategic Arms Reduction Treaty (START) and involvement in Eastern Mediterranean political conflicts.
Likewise, U.S.-China relations are at their worst since the Tiananmen incident. The relation decline started since the Obama administration clashing on various topics of national interest such as trade and security [CSIS20]. As of today, China has been aggressive in taking the position of global leader taking advantage of the opening created by the recent U.S. foreign policies. China announced victory over COVID-19 early-on, provided assistance to other countries and publicised its success [FA20]. Clearly China has risen to a global leadership position. China is already the world top trader [VC20]. And policies such as “Made in China 2025” or the “New Generation of Artificial Intelligence Development Plan” are accelerating the key technology areas that will shape the future of industry [CEIP]. China has shown space ambitions and reached major milestones. In February 2021, China’s Tianwen-1 probe successfully entered the Mars orbit.
The dominance of the U.S., China, and Russia’s power in the world has been well studied and observed, but there are other players in the arena. For example in Asia, there are other countries exerting influence regionally and globally [LOWY20].
“Multilateralism is under fire precisely when we need it most.” — UN Secretary-General António Guterres
7. Conclusion
We are facing global challenges in an extremely volatile and uncertain world. Climate change is threatening the world with global disaster [OECD] at a time when nationalism is undermining multilateral cooperation and the global economy has been debilitated by the pandemic. The possibility of another wave of coronavirus, the second and third order consequence of the relief packages, increasing plastic pollution and habitat destruction, and aging population are all factors contributing to the uncertainty. The stakes are too high; the consequence of inaction could be an unparalleled calamity.
Despite the devastation, perhaps the timing of COVID-19 was opportune. The pandemic has uncovered many vulnerabilities in our system. It has identified the fragile points in the economical, political, societal structures. Humanity was given this one chance to learn and make corrective actions to confront greater challenges ahead.
History has shown that crisis propels creativity and innovation. Today we are squeezed by multiple mega crises. This and the following few years will be a crucial time in which wrong decisions or inaction can lead to irreparable consequences. No one is immune to the aforementioned crises; all of us have to participate and contribute. We have to face the uncertainty head-on, reimagine our systems and processes, and take the boldest actions.
“2021 will be a time of historic consequence, with much riding on how the world’s governments answer the urgent call to revitalize global cooperation” [WPR].
