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Megachange 1946-2066 Business intelligence in a changing world Daniel Franklin

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

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Megachange 1946-2066 Business intelligence in a changing world Daniel Franklin

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

  2. 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.

  3. 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)

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

  5. 1. People

  6. 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

  7. 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

  8. …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

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

  10. Share of world population, % Source: United Nations

  11. Where’s my pension?! A grey future • 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 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

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

  13. 2. The world economy

  14. 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%

  15. 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?

  16. Dynamic markets Real output, 2005=100 E7 = China, Brazil, Korea, India, Russia, Mexico, Taiwan Source: Economist Intelligence Unit

  17. 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

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

  19. Shares in world GDP (at PPP, %)

  20. 3. Globalisation Source: WTO

  21. 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

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

  23. 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

  24. 4. Countries

  25. 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…

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

  27. 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?

  28. 5. Military power

  29. 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?

  30. 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

  31. 6. Life and death

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

  33. 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

  34. 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

  35. Disease’s dark shadow

  36. 7. Social revolution

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

  38. 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

  39. 8. Technology

  40. Mass markets • Cars: 70m on the world’s 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

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

  42. 9. Companies

  43. 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 1920s and 1930s, 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

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

  45. 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 From Detroit to Bentonville

  46. Best global brands, 2005 (Interbrand ranking) • Coca-Cola • Microsoft • IBM • GE • Intel • Nokia • Disney • McDonald’s • Toyota • Marlborough

  47. Globalcorp 2066? • Exxon-Hydro • Tatasoft • Quaero • GGS (formerly Google Goldman Sachs) • Shanghai Automotive • RambaxiPfizerSmithKlineBeechamNovartis • OxbridgeHarvard • MyMcSpace • WholefoodsTesco • BollyDis

  48. 10. The planet

  49. 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

  50. 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

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