• 15-OCT-2015

Globe Asia: Perfect Capitalism in a Digital World

Patrick Speaking at the Panel Discussion

Perfect capitalism in a digital world

To say that the world is changing fast is a well-worn cliché. But every cliché is based on an undeniable fact and there is no denying that technology and innovation are now the key drivers of change and economic dynamism. Intellectual capital, rather than commodities or financial capital, is the key creator of wealth in the 21st century. Over the past 200 years, the world has undergone three distinct waves of technological revolutions from the steam engine to automobiles and electricity to computers and high-tech. In a wide-ranging and mind- opening presentation, futurist and theoretical physicist Michio Kaku provided a glimpse of the future at the recent Singapore Management Festival organized by the Singapore Institute of Management. The world, he said, is moving from a type one civilization, which is basically anchored on Earth, to a type two civilization, which will be interplanetary. This transition will be driven by new forms of technology that are already being developed. Each technological wave lasted roughly 80 years and the fourth wave is just starting. Nations and corporations need to get on the freight train now or risk being left behind in the dust of history. “Where does wealth come from Kaku asked. “How does a nation become a leader not just a player? Ultimately wealth comes from science.” The fourth wave, he added will be driven by bio-technology and computing power which will be omnipresent. “Electricity will disappear from the English language.” Much of today’s computing technology is based on Moore’s law. Gordon E. Moore, the co-founder of Intel and Fairchild Semiconductor, wrote in 1965 that the number of transistors in a dense integrated circuit doubles approximately every two years. His prediction proved accurate for several decades and the law was used by the semiconductor industry to guide long-term planning and to set targets for research and development. Advances in digital electronics have been strongly linked to Moore’s law but that is about to change, said Professor Kaku. “Quantum physics will change Moore’s law. In the next 10 years, the internet will be everywhere and we will have made great advances in pattern recognition,” he noted. “Internet contact lenses will become a reality. Augmented reality – having information at anytime – is already being used by the US military.”

Brave new world

These developments are part of a bigger process. The future of money will no longer be paper and plastic. Digital paper will allow individuals to access information from their wallpaper and talking to the wall will have a whole new meaning. Tomorrow’s living room will pro- vide access to lawyers, doctors and many other service providers. “Capital- ism itself will be digitalized,” said Kaku. “The music industry is one startling example of what happens when an industry resists. The next industry to be digitalized will be media.” “Then it will be transportation, medicine and education. Our lives will change dramatically. The living room of the future will have 360-degree wall screens which act as doctor, secretary and even matchmaker.” Shopping will move from mass production to mass customization. In the future all clothes will be customized with digital chips embedded in them. In Silicon Valley, driverless cars are a reality. This will impact not just car manufacturers but also insurance and other industries. NASA, the US space agency, has set 2025 as the target for a new type of supersonic jet without a sonic boom. According to Kaku, these developments will create perfect capitalism where supply and demand will be perfectly matched. The role of the middleman will become obsolete and producers will use big data to figure out exactly what and how much to produce. In his view, the next big revolution will occur in medicine with the creation of digital and diagnostics chips one can swallow. Smart toilets will monitor the user’s health three times a day and pick up enzymes that can yield information before cancer forms. “Breast cancer will go the way of leeches,” he noted.

Impact on business

Digitalization will also have a huge impact on businesses and entire industries, noted Professor Gordon Hewitt in his presentation. Adjunct Professor of Business Administration at the Stephen M Ross School of Business, University of Michigan, Hewitt is one of the world’s forefront names in business strategy. In his presentation, he noted that in 2007 Nokia, Motorola, Apple and Google were all competing in the mobile market and digital space. At that time, the market capitalization of BlackBerry maker Research in Motion was $70 billion, far larger than Google. Today both Google and Apple are competing head-on while the likes of BlackBerry and Nokia have fallen by the wayside. Apple, with a market capitalization of $700 billion, is even larger than most oil giants and is on course to become the world’s first trillion-dollar company. “Apple and Google created operating systems. They did not focus on product functionality but on the customer experience,” he noted. “Never confuse resources and resourcefulness.” In his view companies need to move beyond the strategy legacy and focus instead on creating value in dynamic, complex markets. They need to go deep but with a light touch. “Whenever organizations fail it’s never because of lack of IQ or data,” he said. “The question is what kind of intelligence is required to create fundamentally new forms of consumer and business value.”