“Think ahead, Think across, and Think again! Strategic futures and predictive analytics is essential for cities and is critical for thinking ahead. It is also important to think across through data unification and creating data platforms. And the whole paradigm of innovation is thinking again.”
The Digital Economy – a term first coined by Don Tapscott in 1994 – is not easy to define or measure. At one end, it is limited to the production and consumption of digital goods and services. On the other end, according to the European Parliament, “The digital economy is increasingly interwoven with the physical or offline economy making it more and more difficult to clearly delineate the digital economy“. We are, however, witnessing the Digital Economy transitioning to an economy that is digital.
Given the pervasiveness of the Digital Economy, its future will be determined by the complex interplay of several trends. Some of the trends that illustrate the future trajectory of the Digital Economy are:
We will see AI becoming ubiquitous as it is leveraged in every sector and sphere of activity. According to one estimate, AI is estimated to contribute USD 15.7 trillion to the global economy by 2030, which is more than the current GDP of China and India combined! We are also likely to see rapid progress in technologies related to Extended Reality (XR) in the coming years. COVID-19 is accelerating this trend, as we can see from the offerings of companies like Spatial and MeetinVR that facilitate virtual business meetings. The analog world’s rendering into its digital twin will see us moving towards a metaverse – a virtual shared space imagined in Neal Stephenson’s novel Snowcrash. Some of the biggest names in the tech industry – Apple (Apple glass), Facebook (Oculus), Sony (Playstation) – are assiduously working towards this direction.
Given the importance of telecom infrastructure to the Digital Economy, 5G networks are being rolled out in countries worldwide (Figure 1). However, even as 5G is being deployed, the buzz around 6G is getting louder. 6G may transmit data 100 times faster than 5G and may see deployment by 2030 given the decadal cycles for telecom: 1G in the 80s, 2G in the 90s, 3G in the decade following 2000, 4G in the decade starting 2010, and 5G beginning in the 2020s.
The availability of high bandwidth, low latency networks could lead to newer applications and further breakthroughs in innovative technologies.
The Future of Work
With the rapid growth in automation and AI, we are likely to see significant labour market disruptions. Moreover, COVID-19 has been a watershed for the global economy – its impacts will continue to be felt for many years to come. According to the International Labor Organization, 495 million full-time jobs were lost in the first two quarters of 2020 due to COVID-19. Lower and middle-income countries have suffered the most, with an estimated 23.3% drop in working hours – equivalent to 240 million jobs.
A recent report from the World Economic Forum estimates that by 2025, 85 million jobs may be displaced due to automation and AI, while 97 million new roles may emerge. We will see significant changes and turbulence in labour markets across multiple industries and geographies in the years ahead. If we look at how the top ten skills required by the top 10 US companies have been changing over time, we get an indication of the Future of Work. Companies are more focused on “soft” skills, that are not easily addressed by AI & Automation.
We are also likely to see a shift from humans adapting to technology to technologies adapting to humans. For example, the acceleration in digital twins combined with advancements in XR could allow unskilled workers to do skilled jobs. AR could guide a worker to repair a piece of mechanical equipment without long years of previous training. Similarly, the emergence of ‘Low Code No Code’ (LCNC) applications will allow ordinary individuals to do tasks that previously required specialised training.
Scientists have long focused our attention to limit the carbon dioxide in the atmosphere to 450 parts per million to avoid catastrophic climate change. In 2016, the World Meteorological Organization reported this concentration had crossed 400 parts per million, leaving us with a shorter runway to prevent calamitous climate change. We are, therefore, likely to see increased efforts to tackle climate change in the decade ahead.
Digital technologies can impact the global climate agenda in multiple ways: smart grids, smart buildings, smart appliances, intelligent transport systems, shared mobility, and 3D printing, to name a few. Digital technologies will also allow new sources of renewable energy to be tapped. For example, the molten core of the earth is over 6,000°C. “Just 0.1% of the heat content of Earth could supply humanity’s total energy needs for 2 million years,” according to AltaRock Energy. Advances in the use of digital technologies that allow for precise directional drilling will allow for advanced geothermal systems to be established as reliable power sources.
Tech bloggers like Doc Searls and Stephen Lewis had begun to theorise about a Splinternet as early as 2008. There was a danger of governments carving the world into geopolitical blocks and creating technology barriers. China’s Great Firewall and the US’s recent responses under the Trump administration are likely to hurtle us in the direction of a fractured internet. We may end up with the US dominating the western internet and China dominating a competing block of countries. The Digital Economy’s evolution would fracture into different camps, making it very different from what it is today.
The most valuable companies in the world today are in tech. Seven of the top ten companies in the world by market cap in 2020 are tech companies.
The recent investigation into competition in digital markets undertaken by the US House Judiciary Committee observed: “Over the past decade, the digital economy has become highly concentrated and prone to monopolisation. Several markets investigated by the Subcommittee – such as social networking, general online search, and online advertising – are dominated by just one or two firms. The companies investigated by the Subcommittee – Amazon, Apple, Facebook, and Google – have captured control over key channels of distribution and have come to function as gatekeepers. Just a decade into the future, 30% of the world’s gross economic output may lie with these firms, and just a handful of others.“
The call for the regulation of big tech will gain momentum in the coming years. The European Union is likely to lead here, just the way just it did in the case of its General Data Protection Regulation.
Governments will also require data monopolies to share data. China mandates its automakers to share data generated by electric vehicles with a government research institute. This data is essential for public safety and planning battery-recharging stations. The Australian Government promotes the concept of sharing “designated datasets” that could include data held by the private sector that has significant community benefits. Similarly, France’s Law for a Digital Republic requires the sharing data by certain categories of the private sector. Such blurring of boundaries between public and private data will become more important.
We will also see the growing importance of data trusts. These are structures where data is placed in the custody of a “Board of Trustees” who have a fiduciary responsibility to look after the interests of data owners. Such data trusts might give individuals better control over their data.
Every aspect of the economy is being digitalised today. In the next decade we are likely to witness foundational shifts in how the Digital or Data Economy is structured. It will also see increasing risks as cyber threats grow exponentially from cybercriminals and state actors. That the world in 2030 will be very different from today is obvious. We may, however, be surprised by the extent and sweep of the change ahead of us.
Singapore FinTech Festival 2020: Economic Summit
For more insights, attend the Singapore FinTech Festival 2020: Economic Summit which will cover topics tied to the state of the economy, path to recovery and re-framing the new financial services landscape