Megachange 1946 -2066 Business intelligence in a changing

Megachange 1946 -2066 Business intelligence in a changing world Daniel Franklin Baltimore, June 2006 1

The excuse: a 60 th 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. 2

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) 3

How has the world changed in 60 years? What about the next 60? 4

1. People 5

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 • Europe’s share declines rapidly, from 22% in 1950 to 11% today and 7% in 2050. Africa’s share rises, N. America’s falls only slightly 6

Bigger, smaller, longer … • People have got bigger: in the late 1970 s, 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 7

…and much more urban • In 2006, for the first time in 25, 000 years of human history, more than half the world’s population is urban, rather than rural 8

Long-term world population growth, 1750 - 2050 Billions Millions Annual increments Population size Source: United Nations Population Division 9

Share of world population, % 10 Source: United Nations

A grey future Where’s my pension? ! • Over the coming decades, the world will get older: the median age of the world’s population will rise from 28 today to 38 in 2050 • Some countries will shrink: Italy will lose 7 m people (12% of its population today), Japan will lose 16 m (12%), and Russia 43 m (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 11

Population aged 15 -64 % of total population 12 Source: United Nations

2. The world economy 13

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 G 7, 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% 14

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? 15

Dynamic markets Real output, 2005=100 16 E 7 = China, Brazil, Korea, India, Russia, Mexico, Taiwan Source: Economist Intelligence Unit

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 17

The largest economies US$ PPP trn 18 Source: Economist Intelligence Unit

Shares in world GDP (at PPP, %) 19

3. Globalisation 20 Source: WTO

Three ages of globalisation 3. Make anywhere, control globally 2000 s onwards Death of distance “The earth is flat” 2. Make globally, control at home 1990 s, big rise in FDI Cost-cutting, outsourcing Rise of anti-globalists 1. Sell abroad, manufacture at home 1960 s-1980 s Global markets, standard products Operations controlled from home base

Global direct investment inflows (US$ bn) 22 Source: Economist Intelligence Unit

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 Unit’s long-range forecasts 23

4. Countries 24

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… 25

Freedom’s progress • 63% of the world’s population now live in “free” or “partly free” countries 26 Source: Freedom House

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? 27

5. Military power 28

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? 29

Super-dooper-power The world's top 10 defence spenders, share of global military spending, 2004, at market exchange rates, % 30 Source: Stockholm International Peace Research Institute (SIPRI) Yearbook, 2005

6. Life and death 31

Peace dividends International crises plummet 32 Source: Human Security Report 2005 Battle-deaths

A safer world – for now • Fewer people are dying now from war than at almost any time since the 1920 s • The 1980 s were bloodier than the 1990 s, but the 1950 s, 1960 s and 1970 s were the deadliest, with most of the fighting in East and South-East Asia • Improvement thanks to end of Cold War, winddown of many conflicts in Africa, rise of peacekeeping • Peecekeeping peaking 33

Can it last? • “The dark side of globalisation” • Asymmetric conflict: dirty bombs and biological briefcases • Religious wars? • Water wars? • China’s “peaceful rise”? • Asia’s future flashpoints: – India/Pakistan – North Korea – Taiwan – China/Japan 34

Disease’s dark shadow 35

7. Social revolution 36

Women’s 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 1970 s • The number of women MPs in the UK rose above 20 in 1945, and above 120 in 2005 37

Knowledge and leisure • In America, 140 women enrol in higher education each year for every 100 men • In the 1960 s, one-third of the South Korean population had completed secondary school; now 97% of 25 - to 34 -year-olds have highschool education (the highest among the industrial countries) • UK residents made 42. 9 m holiday trips abroad in 2004, up from 6. 7 m in 1971 38

8. Technology 39

Mass markets • Cars: 70 m on the world’s roads in 1950, over 1 billion now • Air travel: up from 9 m 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 40

The next big things • Biotechnology comes of age • Death of old age • Technology for Africa • The greening of technology 41

9. Companies 42

Creative destruction speeds up • Of the 500 companies in the S&P 500 in 1957, only 74 remained on the list in 1997 • In the 1920 s and 1930 s, turnover rate in the S&P 90 was about 1. 5% a year; in 1998, the turnover rate in the S&P 500 was close to 10% • Extrapolating, by 2020 the average lifetime of a corporation on the S&P will be down to 10 years Source: Creative Destruction, by Richard Foster and Sarah Kaplan 43

Market moves S&P 500, 1980 1. IBM 2. AT&T 3. Exxon Corp 4. Standard Oil, Indiana 5. Schlumberger 6. Shell 7. Mobil 8. Standard Oil of Cal 9. Atlantic Richfield 10. General Electric 44 S&P 500, 2005 1. General Electric 2. Exxon Mobil 3. Microsoft 4. Citigroup 5. Procter & Gamble 6. Wal-Mart 7. Bank of America 8. Johnson & Johnson 9. AIG 10. Pfizer

From Detroit to Bentonville Fortune 500, 1955 1. General Motors 2. Exxon Mobil 3. U. S. Steel 4. General Electric 5. Esmark 6. Chrysler 7. Armour 8. Gulf Oil 9. Mobil 10. Du Pont 45 Fortune 500, 2005 1. Wal-Mart Stores 2. Exxon Mobil 3. General Motors 4. Ford Motor 5. General Electric 6. Chevron. Texaco 7. Conoco. Phillips 8. Citigroup 9. AIG 10. IBM

Best global brands, 2005 (Interbrand ranking) 1. Coca-Cola 2. Microsoft 3. IBM 4. GE 5. Intel 6. Nokia 7. Disney 8. Mc. Donald’s 9. Toyota 10. Marlborough 46

Globalcorp 2066? 1. Exxon-Hydro 2. Tatasoft 3. Quaero 4. GGS (formerly Google Goldman Sachs) 5. Shanghai Automotive 6. Rambaxi. Pfizer. Smith. Kline. Beecham. Novartis 7. Oxbridge. Harvard 8. My. Mc. Space 9. Wholefoods. Tesco 10. Bolly. Dis 47

10. The planet 48

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 49

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 world’s information available online, 80% of world’s population still to be connected) – Application of vast computer power and scientific discovery • Prepare for a risky ride, but also an exhilarating one 50