The End Of Part II – Reflections Of The Past 20 Years And Predictions For The Next 20.

End Of Part II

Next weekend marks the 20th anniversary of when I packed up my bags and left Glasgow to take my gap year in Israel, a country that I had never been to before at that time. I wanted to mark this anniversary on my blog by reflecting on the past 20 years and some lessons I picked up along the way, as in many ways, this anniversary marks the end of Part II of what has been a life lived in remarkable times.

Back in 1994 the world was a simpler place. Francis Fukuyama’s “End of History” was doing the rounds and it really felt that the world was looking up. The Cold War had ended and the warm embrace of Bill Clinton was reassuringly hugging the warring factions of the world, promising a new era of global peace and prosperity. In the UK, the 1992 recession was over; economic growth was 4.5%. The average salary was £17,000 and the average house price was £51,000, 3 times salary.

There was no Playstation, no MP3 player, the major public figure was Princess Diana and the world was intrigued by the white Ford Bronco driven by OJ Simpson, racing through the streets of Southern California.

Here is a refresher to 1994!

However the most striking difference between then and now was the way we communicate.

Mobile phone use was not widespread and the internet and email were limited to a very few academics and computer geeks who had both access and know-how to this technology. Life as a teenager in 1994 was defined by how you made decisions without the information and insights that are available today, and this inherited knowledge was the determinant of success or failure.

Twenty years on, the world is unrecognisable from that point, yet as a generation we have witnessed and adapted to the phenomenal changes in the world around us. We have seen technological advances that would have been perceived as science fiction in 1994, such as Skype (for FREE), the use of email, the internet, cell phones, laptops, Wikipedia, digital cameras, digital video, Flat screen TV, the way we buy and consume, and the entire way we interact.

We have lived through the most turbulent economic times in a century, where financial ruin was no respecter of reputation, class, education or status. Average incomes have risen to £26,500, but the average home has risen to £186,500 – over 7 times salary – and a whole lot more if you are in the capital! The gulf between rich and average (note, not poor) has been dramatic and Thomas Piketty’s analysis of inequality and wealth is the bedtime reading of the enlightened class.

So when the participants of my gap year reunite for the first time in 20 years, we will be the same people in a very different world. I doubt any generation in history has witnessed so many changes in such a short period of time, and looking at the world today it is easy to declare that the world is not a better or safer place than it was 20 years ago. And the next 20 years may yet be more perilous and difficult than what we have lived through to date. In 20 years time, some of us 1994 year-coursers will be grandparents. It is likely that some of us will have passed on. However, for those who are interested in the views of a social scientist, turned information scientist, turned investment strategist, turned academic, here we go on what I think some of the biggest issues and trends of the next 20 years will be.

Decline Of Corporates, Rise Of Families In Business.

I have been saying this for a while. I was never turned on by a career at IBM or a pension fund, where you do a job, get paid and process. It is very unlikely that the traditional corporations of the past 50 years will repeat their successes in the next twenty. This is why. Corporates are big, slow and in many cases conservative. Their successes have not been been in powering innovation, but buying competitive advantage through capturing market share and destroying opposition based on the Porters’ 5 Forces business strategies. This is no longer the case.

Three of the top five US companies by market cap are Microsoft, Google and Apple (the others are ExxonMobil and Berkshire Hathaway). Three of these still have their founders involved (and as we all know Steve Jobs would still be at Apple, save for his early passing.) 20 years ago these were GE, Shell, Coke, Nippon and Exxon.

That fact that the upstart companies have been driven by both tech and individual vision tell only half the story as many large companies are in fact unlisted – including many of the tech companies that have yet to list. Moreover the next round of innovation is funded by the families and the family offices that have profited by the growth in tech and asset prices (as our friend Thomas Piketty alludes to). In fast moving times, individuals –and by extension family offices have proved more than adept in responding to the new environment.

X Wealth Billionaire Projections
X Wealth Billionaire Projections

X Wealth believes that in the next 5 years the numbers of billionaires will double. How is this possible in a world when economic growth is unlikely to see double digits in any western economy? The answer is a combination of international capital movement and value enhancement and in my opinion, the way that corporates cannot compete in this type of environment. Moreover, working for families can be more engaging, particularly for Gen Y and millennials, who repeatedly display non-financial motives in making career decisions, as in many cases, philanthropy is at the core of private capital in a way that corporates must satisfy their shareholders.

China

Four years ago I went to mainland China for the first time. I challenge any human to go to Shanghai and Beijing and not be amazed by the size, scale and scope of modern China. This is the major economic power of the next century – and maybe beyond. One cannot generalise about a country of 1 billion people, but I am going to be lazy and do just that! The Chinese are industrious, daring, focused and smart, and the centrally controlled Chinese economic model of industrialisation leading to initial exporting, before reverting to increasing domestic consumption has to date, worked.

0023ae606c3e158755a82c Granted, Chinese growth will slow down (a low growth global environment cannot sustain growth in consumption) but with a huge domestic market emerging out of poverty, China should manage (although there are fears within the unregulated shadow banking system) and indeed begin to look at international markets for investment in brands, patents and for (historically) less volatile strategic investments.

For the sources of capital or access to the markets of the future, as Horace Greeley might (not) have said, “Go East, Young Man!”  

Failure of Western Political Systems

The role of the politician has changed. With information for decision making so widely available, the role of the politician in being the collator and distributor of information to their electorate is no longer viable. With easy polling and voting online, there really is no need to delegate voting powers in the historic manner. Also with technology, individuals can express their views clearly and to a mass audience – which has seen some very effective campaigns in recent years.Palace_of_Westminster,_London_-_Feb_2007 Therefore if not a representative or a delegate, what is the role of the directly elected politician?

I suppose the political arena is a tool to exercise power across legislative and fiscal matters, and allows access to the apparatus of the state to affect social change. In this case modern politicians should be strategic managers, yet management is not the typical background of the modern politician, which tends to be a shift at a think-tank, working in policy or public affairs after a couple of years studying PPE or the Classics at Oxbridge. (I believe 14 of 22 of the current cabinet and 9 of 27 Labour’s frontbench were at Oxford or Cambridge – that’s almost half of the country’s most prominent legislators having similar educational backgrounds at similar times!!)

However, as business and powerful individuals have greater ability to influence the political decision makers (and by the way, I have no problem with this if fair and transparent) it makes the overall electorate feel disenfranchised, especially as one of the defining feature of the past two decades is the centricity of the individual in his/her own decision-making. I have no idea how to resolve this, however it is likely that greater devolution of power is the answer.

As I write this, the Scottish independence campaign is in full swing, but Scotland is probably the easiest and most prominent region that would benefit (and has benefitted) from local governance. Having lived in Glasgow, Manchester and London, I can only observe that each of these cities have very different economies and identities. Unless the democratic processes address these deficits and decision makers –at a local or national level – can represent the electorates, the current political system will lose all legitimacy.

Rise of Radical Islam in the UK

My gap year in Israel in 1994 coincided with the first wave of suicide bombs on busses. The “west” excused the Hamas bombers as “desperate Palestinians”, but with a small insight to radical Palestinian groups, I knew that this was not the case and Hamas were not (and still are not) representative of Palestinians. On arrival to university, I was greeted by radical Islamists in the form of Hizb Ut-Tahrir, who were on campus. I was generally worried having never encountered such virulent anti-Semitism, and quite perturbed as the campus authorities declared how important freedom of expression was on campus (i.e. defending racists before protecting Jews).

With an awareness and sensitivity to history, I concluded that there is a very fine line between calling on Muslims to the glory of martyrdom and inciting the type of mass murder I had witnessed in Israel when the bus in front of mine had been blown up in Ramat Gan some 4 months earlier.

Jewish Chronicle 1997

This is from 1997.

8 years later 52 people were killed and over 700 were injured by 4 home grown British Islamists. The leader, Mohammed Sidiqui Khan, was radicalised whilst at Leeds Metropolitan University in 1999.

I dedicated over a decade to building bridges with non-radicalised elements within the Muslim community whilst raising the alert about the Islamist threat. One of my insights was also the general unwillingness of the UK Muslim communities to condemn and expose the extremism within. Since the 1990s, scores of people have died at the hands of BRITISH Islamists, whether in London, Israel or in Iraq/Syria. Even today the Government have not fully understood the real dangers of this threat and I live in daily fear of (the inevitable) Mumbai style attack in the UK.

Hizb

I don’t want to be too much of a scaremonger, but over the next 20 years, I predict this will become a real issue for the UK and in 20 years others will reflect why we didn’t take more stringent action when we could between 1994-2014.

Expectation Inflation

People expect more than they did 20 years ago.

They expect more from their friends, their service providers and their brands.

The friend thing is easy to relate to. I talk to maybe a dozen people regularly. I communicate with maybe 50 people on a monthly basis through Linkedin or Facebook and maybe 200 over the course of the year.

I consider myself sociable and value friendships. I just don’t have the energy for nonsense.

The same is with brands and service providers. There are some I use and some I don’t, as they are either of no interest to me or are incompetent timewasters (Tesco, BT, National Express – you know who are). This is a by-product of increased consumer engagement and obviously the overwhelming immersion in brands and multiple points of engagement.

The entire discipline of marketing has been transformed from Levitt’s thinking, which stood true from the 1960s to  the mid-1990s and now the way that science and technology is infused with the creative element sees data as a vital part throughout any strategy. Modern marketing is about connectivity, engagement and almost tribal alignment – and not about selling.

This poses particular issues for businesses and service providers as there are key strategic questions about customer engagement, customer interaction and indeed customer retention. Will brands and businesses actively seek NOT to engage customers that are not profitable, or not represent the type of customer that they want? I think so. But where does this leave the large companies that struggle with segmentation and offer a generic product? I think I know, but you will have to engage with me for the answer.

Loyalty

  Conclusion: From Disruptive Innovation to Disruptive Influencers

The past 20 years on a micro level have been marvellous and I am blessed to be so lucky to have lived through the past two decades, but on a macro level, it has been tough.

For this first time in history the promise of progress has been broken; this generation is undeniably poorer than our parents’ generation. There will be undoubtedly strong economic progress over the next 20 years as the post recession recovery takes place as growth is stimulated by cheap credit.

Established businesses will be challenged by companies nobody has heard of, as Google and Apple disrupted the behemoths a generation earlier. Technology and freedom of thought will become a greater part of our existence, but the social fabric that has stayed constant over the past generations will be ripped up by angry influencers not content with their state of being. They may have their grievances, but in my view, the next 20 years are not going to be pretty.

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