Megachange

1
Megachange 1946-2066 Business intelligence in a
changing world Daniel Franklin Baltimore, June
2006
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The excuse a 60th birthday

• The Economist Intelligence Unit was formed out of
  The Economist in 1946, advertising for its first
  Director of Intelligence in October of that
  year.

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When we were born

• Britain still had an empire, running India and a
  large chunk of Africa
• Food rationing was still in place
• The Economist Intelligence Unit started writing
  reports on subjects like
• The control of nationalised industries (1948)
• Forecast of traffic through the Suez canal
  (1956)
• The effect of the Common Market on major British
  industries (1959)
• The climate for entry of major British
  contractor in Iraq (1961)

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How has the world changed in 60 years? What about
the next 60?
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1. People
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Global swarming

• Global population expands by over 150 since
  1950, from 2.55 billion people to 6.47 billion,
  with 80 living in less developed regions
• In 2050, according to UN projections, the world
  will have 9.08 billion people, 40 more than
  today
• Europes share declines rapidly, from 22 in 1950
  to 11 today and 7 in 2050. Africas share
  rises, N. Americas falls only slightly

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Bigger, smaller, longer

• People have got bigger in the late 1970s, less
  than half American adults were overweight or
  obese, now two out of three are
• Families have got smaller couples in developing
  countries now have three children each on
  average, compared with six in 1970
• Globally, life expectancy has increased by 20
  years since 1950, to 66 years

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and much more urban

• In 2006, for the first time in 25,000 years of
  human history, more than half the worlds
  population is urban, rather than rural

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Long-term world population growth, 1750 - 2050
Billions
Millions
Population size
Annual increments
Source United Nations Population Division
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Share of world population,
Source United Nations
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A grey future

• Over the coming decades, the world will get
  older the median age of the worlds population
  will rise from 28 today to 38 in 2050
• Some countries will shrink Italy will lose 7m
  people (12 of its population today), Japan will
  lose 16m (12), and Russia 43m (22)
• Age dependency ratios will rise sharply in many
  places, including China
• At the other end of the spectrum, in some parts
  of the world, especially Africa (Benin,
  Mozambique, Tanzania, Congo, Niger), nearly half
  the population under 15 in 2015

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Population aged 15-64
of total population
Source United Nations
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2. The world economy
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For richer, for poorer

• The world economy is nearly ten times bigger in
  2006 than 60 years ago
• Real GDP per head is 3.6 times bigger
• In the G7, real GDP is five times bigger
• The share of people living on less than 1 a day
  (PPP) fell from 40 to 21 between 1981 and 2001,
  thanks to progress in Asia
• BUT
• In sub-Saharan Africa the proportion of people
  living in extreme poverty rose from 42 to 46

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Money matters

• Enter the euro (and the lit, the lat, the som etc
• Exit cash?
• The number of debit-card transactions in the UK
  was ten times higher in 2004 than in 1991, and
  credit-card usage increased threefold
• And inflation?

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Dynamic markets
Real output, 2005100 E7 China, Brazil, Korea,
India, Russia, Mexico, Taiwan Source Economist
Intelligence Unit
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The world in 2020

• World economy will be two-thirds bigger in real
  terms in 2020 than in 2005
• China, India and US will account for 55 of
  global GDP growth in 2006-2020
• US will grow at 3 per year and outpace other
  rich countries

• US to remain sole superpower
• EU partly compensates for slower growth with
  territorial expansion
• Average EU income per head at 56 of US level in
  2020
• Japan in decline

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The largest economies
US PPP trn Source Economist Intelligence Unit
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Shares in world GDP (at PPP, )
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3. Globalisation
Source WTO
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Three ages of globalisation

• 3. Make anywhere, control globally
• 2000s onwards
• Death of distance
• The earth is flat

• 2. Make globally, control at home
• 1990s, big rise in FDI
• Cost-cutting, outsourcing
• Rise of anti-globalists

• 1. Sell abroad, manufacture at home
• 1960s-1980s
• Global markets, standard products
• Operations controlled from home base

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Global direct investment inflows (US bn)
Source Economist Intelligence Unit
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What if

• anti-globalists gain the upper hand?
• Main risk to benign growth scenario is that
  globalisation could be unwound
• Scenario of descent into serious protectionism
  shaves 2 percentage points off average global
  growth (stagnant per capita income), according to
  Economist Intelligence Units long-range
  forecasts

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4. Countries
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Expanding country club

• In 1946 the UN had 55 members now it has 191
• Decolonisation break-up of federations has bred
  new countries
• Farewell
• Soviet Union
• Yugoslavia
• Czechoslovakia
• Hello
• Montenegro, Timor-Leste, DRC, CAR, UAE, Burkina
  Faso, Eritrea, Namibia

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Freedoms progress

• 63 of the worlds population now live in free
  or partly free countries

Source Freedom House
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Future countries, future freedoms?

• End of history?
• Hardly nationalism could lead to further splits.
  
• Some candidates
• Kosovo, Transdniestr, Scotland, Wales, Corsica,
  Sardinia, Quebec, Kurdistan, Euskadi, Catalonia,
  Chechnya, Abkhazia, South Ossetia, Somaliland,
  Puntland, Palestine, Western Sahara, Wallonia,
  Flanders, Padania, Siberia, Tibet, Guangdong,
  Xinjiang
• Will supply of democracy grow to meet demand?

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5. Military power
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Balance and imbalance of power

• Cold War balancing act NATO/Warsaw Pact
• Small nuclear club (US, USSR, China, UK, France)
• Grows to India, Pakistan, Israel
• Iran, North Korea on the fringes
• How many nuclear states in 2066?

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Super-dooper-power
The world's top 10 defence spenders, share of
global military spending, 2004, at market
exchange rates,
Source Stockholm International Peace Research
Institute (SIPRI) Yearbook, 2005
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6. Life and death
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Peace dividends
Battle-deaths
International crises plummet
Source Human Security Report 2005
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A safer world for now

• Fewer people are dying now from war than at
  almost any time since the 1920s
• The 1980s were bloodier than the 1990s, but the
  1950s, 1960s and 1970s were the deadliest, with
  most of the fighting in East and South-East Asia
• Improvement thanks to end of Cold War, wind-down
  of many conflicts in Africa, rise of peacekeeping
• Peecekeeping peaking

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Can it last?

• The dark side of globalisation
• Asymmetric conflict dirty bombs and biological
  briefcases
• Religious wars?
• Water wars?
• Chinas peaceful rise?
• Asias future flashpoints
• India/Pakistan
• North Korea
• Taiwan
• China/Japan

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Diseases dark shadow
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7. Social revolution
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Womens world

• In 1950, only one-third of American women of
  working age had a paid job now two-thirds do
• The inactivity rate for working-age women in
  the UK fell from 41 in 1971 to 27 in 2005
• Globally, since 1970, women have filled two new
  jobs for every one taken by a man
• In the UK, single-parent households make up 24
  of households with children, up from 8 in 1972
  42 of births are outside marriage, up from 10
  in the early 1970s
• The number of women MPs in the UK rose above 20
  in 1945, and above 120 in 2005

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Knowledge and leisure

• In America, 140 women enrol in higher education
  each year for every 100 men
• In the 1960s, one-third of the South Korean
  population had completed secondary school now
  97 of 25- to 34-year-olds have high-school
  education (the highest among the industrial
  countries)
• UK residents made 42.9m holiday trips abroad in
  2004, up from 6.7m in 1971

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8. Technology
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Mass markets

• Cars 70m on the worlds roads in 1950, over 1
  billion now
• Air travel up from 9m passengers in 1945 to 1.8
  billion in 2004
• The Internet from zero to 1.2 billion users
• Mobile phones from zero to 2.1 billion users

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The next big things

• Biotechnology comes of age
• Death of old age
• Technology for Africa
• The greening of technology

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9. Companies
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Creative destruction speeds up

• Of the 500 companies in the SP 500 in 1957, only
  74 remained on the list in 1997
• In the 1920s and 1930s, turnover rate in the SP
  90 was about 1.5 a year in 1998, the turnover
  rate in the SP 500 was close to 10
• Extrapolating, by 2020 the average lifetime of a
  corporation on the SP will be down to 10 years
• Source Creative Destruction, by Richard Foster
  and Sarah Kaplan

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Market moves

• SP 500, 1980
• IBM
• ATT
• Exxon Corp
• Standard Oil, Indiana
• Schlumberger
• Shell
• Mobil
• Standard Oil of Cal
• Atlantic Richfield
• General Electric

• SP 500, 2005
• General Electric
• Exxon Mobil
• Microsoft
• Citigroup
• Procter Gamble
• Wal-Mart
• Bank of America
• Johnson Johnson
• AIG
• Pfizer

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From Detroit to Bentonville

• Fortune 500, 1955
• General Motors
• Exxon Mobil
• U.S. Steel
• General Electric
• Esmark
• Chrysler
• Armour
• Gulf Oil
• Mobil
• Du Pont

• Fortune 500, 2005
• Wal-Mart Stores
• Exxon Mobil
• General Motors
• Ford Motor
• General Electric
• ChevronTexaco
• ConocoPhillips
• Citigroup
• AIG
• IBM

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Best global brands, 2005 (Interbrand ranking)

• Coca-Cola
• Microsoft
• IBM
• GE
• Intel
• Nokia
• Disney
• McDonalds
• Toyota
• Marlborough

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Globalcorp 2066?

• Exxon-Hydro
• Tatasoft
• Quaero
• GGS (formerly Google Goldman Sachs)
• Shanghai Automotive
• RambaxiPfizerSmithKlineBeechamNovartis
• OxbridgeHarvard
• MyMcSpace
• WholefoodsTesco
• BollyDis

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10. The planet
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Warming

• Over past 20 years, mean temperature of the
  lowest level of the atmosphere has increased by
  0.4ºC
• Warming seems to be accelerating models suggest
  rise of 0.5ºC 1.0ºC over the next 20 years
• Possibilities
• Approaching a tipping point
• Era of mass extinctions
• Extreme weather becomes more common
• Certainty environmentalism pervades politics,
  business

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Fasten your seatbelts

• Past 60 years has seen extraordinary change
• Next 60 will see even faster change, due to
• Rise of China and India, 2.5 billion people
• Unprecedented spread of information, thanks to
  the internet (still in its infancy only 10 of
  worlds information available online, 80 of
  worlds population still to be connected)
• Application of vast computer
• power and scientific discovery
• Prepare for a risky ride, but also
• an exhilarating one