If you look back on the history of the global economy since the Industrial Revolution, it’s clear to see where the best investments lie. To maximise your profits, you need to catch what I call “megatrends”.
What are “megatrends”?
These are the persistent global transformations, each creating a new wave of spectacular corporate giants. I’ll list a few examples. The rise of the internal combustion engine gave us giants like Ford, Standard Oil and Shell. Chemicals gave us BASF and DuPont. Semiconductors ultimately gave us Intel, Facebook and Google.
Not all of the megatrends are directly economic. Sometimes, the enabling technology is only a modest industrial sector. A good example of this is the contraceptive pill. This triggered huge social change, but led to relatively modest corporate profits. We can still see the pill’s impact, as we’ll discuss tomorrow.
Below, I’m going to list out a few of the megatrends we’ve covered in Exponential Investor before, and I’ll add a few new ones. Of course, we’ve only got space to touch on each subject briefly – but we’ll be coming back to these key trends in future issues.
Today, we’ll concentrate on technology and engineering. Tomorrow, we’ll focus on geographical changes and life science innovations.
A driverless future
It now seems obvious that driverless cars are inevitable within a few years. However, it’s not just small road vehicles that will shift: trucks, tractors, trains, ships and airliners will follow. This will result in large cost savings for commercial operators, which will open up new routes and services. Paradoxically, the onset of driverless cars will mean that few people will own a car – as taxis will become cheaper, safer and more convenient than driving could ever be.
Solar energy will be huge. Unless we get lucky with nuclear fusion, solar energy will power this century. Its steeply-falling cost will rapidly drive fossil fuels out of our energy mix. We can already see this happening at the periphery. Off-grid applications, such as parking meters, are front-runners. These are becoming solar powered because no other energy source makes sense. Similarly, we’re starting to see a revolution in the developing world where off-grid solar energy is providing electricity for those far away from infrastructure. You’ll note that I’m ignoring the much larger roll-out of power infrastructure in the developed world – because much of that is still driven by subsidies. But subsidies are already irrelevant in the sunniest states. Soon the solar revolution will engulf much of the world’s energy systems, with or without subsidy.
The history books on electricity storage are not yet written. Certainly, batteries will have a role to play in short-term storage. Other technologies, like compressed air, may also turn out to be important. But we need to store solar energy over winter and to transport it around the world. This means that transforming sunlight into chemical fuel will be one big energy technology story of the 21st century. Hydrogen is likely to be the backbone of this new infrastructure – but we could also see more conventional fuels, such as petrol, being made from sunlight on a global scale.
Space gets boring
The recoverable rockets of SpaceX herald a new dawn, where travel outside the atmosphere is safe and inexpensive. At first, it will be all about lifting satellites more cheaply – but then tourism, mining and intercontinental travel will all be opened up. In coming decades, space flight may be as boring and irritating as using the London Underground.
Self-driving cars are just one application for intelligent machines. Working in tech, I can see the broader impact of this machine learning trend. It’s now becoming simple and routine to add artificial intelligence (AI) to everyday digital products – and the change is therefore happening very fast. Everything from shopping suggestions, to social media matches and credit approvals are made with insights provided by AI. Over time, we’ll see a dramatic acceleration of this technology. It’s inevitable that computers will outsmart humans – not necessarily for all tasks, but for many. Even advanced professions, such as law, are potentially at risk of being hollowed-out by AI. Why pay a solicitor if a computer is cheaper, faster and more reliable?
The internet of everything
The “Internet of Things” is a much-hyped phrase, but its day has not yet come. However, we’re rapidly moving to a world where everything from cars to lightbulbs is networked. This is great news for controllability – but on the flip side, we should be alert to new security and privacy risks. We’ve already seen a fridge that sends spam and cars that can be hacked. This new future is full of challenges – some of which make “1984” seem like a privacy paradise.
The first skirmishes have already started. Russia and Estonia had a small cyberwar several years ago. Iran’s nuclear programme was damaged by a Stuxnet attack. Today, international conflicts are increasingly played out in cyberspace. What we’ve not yet seen is a major cyberwar. When that comes, it will involve large-scale outages and physical destruction. What could such a war look like? Airliners could be crashed. Dams could be opened, causing devastating floods. Power grids and communications could be shut down, potentially starving people in cities. In the most extreme cases, we could even imagine a country’s nuclear weapons being turned against its own people. And you might never know who did it…
I know we’ve missed some crucial technology trends (we’re only human). So, please do send us your own megatrends: email@example.com.