Reading the work of the late Peter Drucker opened my eyes to the power of one particular kind of information to predict the future. It is demographics: the profile of a population in terms of age, income, ethnicity, health, political views and other factors. Mr. Drucker liked to point out that every person who will have a measurable effect on the economy, society and politics in the next few decades is alive today. Knowing key facts about the population from age 0 to 20 can tell you really important things about the world 20 or 30 years from today.
The same holds true of technology. The range of possible futures for technology is a lot broader than that for the population – people being far more predictable than gadgets – but you can still learn a lot about tomorrow by watching the crazy stuff being done today.
A case in point is the recent special report from The Economist on "smart systems." It is about the explosion of smartphones, sensors, the broadband-connected "Internet of things" and the amazing applications they are spawning, and how they will impact business, society, geopolitics and your daily life. One section, titled "Augmented Business," made me ponder a fundamental question.
Why do we buy stuff? I'm not talking about the basics of food, shelter and clothing. I mean all the discretionary purchases that, taken together, driven the immense consumer economy in industrialized nations. Some of it, of course, is ego: I like owning something bigger, better, faster or shinier than you. But the principal reason we buy stuff is that owning is cheaper than renting, over the long term. America offers large tax breaks to home owners but not to renters. So we tend to own our homes. People worldwide buy cars because renting them is far more costly. Organizations buy and run their own phone networks and IT systems because it is cheaper and more productive than renting their use. Municipalities buy billions of dollars of equipment for road maintenance, landscaping and construction, which stands idle much of the time, because it is the cheapest alternative.
Well, what if it wasn't the cheapest alternative? The Economist article takes you through the implications of a world awash in data gathered from billions of embedded systems and suggests three trends: “First, since smart systems provide better information, they should lead to improved pricing and allocation of resources. Second, the integration of the virtual and the real will speed up the shift from physical goods to services that has been going on for some time. This also means that more and more things will be hired instead of bought. Third, economic value, having migrated to services, will now increasingly move to data and the algorithms used to analyze them. In fact, data and the knowledge extracted from them, may even be on their way to becoming a factor of production in their own right, just like land, labor and capital. That will make companies and governments increasingly protective of their data assets.”
What does this tell you about the future? It suggests to me that traditional manufacturing will grow even more efficient, which means that it will shrink even more as a source of employment in rich nations – and even in developing ones. In a world where Rolls Royce is beginning to rent instead of sell the jet engines it makes, charging airlines for their actual use, there's no room for less than peak efficiency.
It suggests that the next decade will be very good to ICT service businesses – software analytics, data storage, data mining, simulation – because they will be the means to unlock value from the coming "data storm." And it implies that whole categories of business – think of Zipcar in car sharing or Velib in bicycle sharing – will arise to make possible temporary rental of stuff we used to permanently own. Our economic development strategies need to take this coming boom into account, or risk missing the upside of recovery.
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