The new revolution

Keith Suter

Life doesn't get better by chance – it gets better by change.  

We are living through a new economic revolution. The first revolution occurred in the Middle East about 12,000 years ago, after the last Ice Age, and it gave us farming. Instead of the usual question 'where do we find water?' someone asked 'how can we make water come to us?' and thus irrigation began. Nomadic people were able to stay and settle on the land.

The second change occurred in the UK around 1750: the industrial revolution. This gave us the factory system of production, and the model by which we run schools and offices as well as factories: centralisation of control, hierarchy, synchronisation and uniformity of produce. The factory was a wonderful invention for getting things done.

The current revolution is partly based on information technology and the service sector ('experience economy'). Invention is now even more systematic, and new products and services get spread more quickly.

Gordon Moore is a founder of Intel. 50 years ago – on April 19 1965 - he predicted that the power of computers will double every 18 months-2 years, and the price of computers will halve every 18 months-2 years. This is now called 'Moore's Law'. This was the most important 20th century prediction to affect us in the 21st.

There is far more computing power in a car today than in the spacecraft that took a man to the Moon
in 1969.

The pace of change is getting faster. A next stage will be 3D printing ('additive manufacturing').These machines print one layer at time. Owing to the method of construction, there is no waste: only the material that is needed gets used. For example, the International Space Station needed a particular type of spanner; instead of waiting for the next delivery, the plans for one were sent up electronically and a new spanner was printed out for immediate use.

The 3D printer will manufacture for you at home. Recall that servants were replaced by the washing machine and vacuum cleaners. Photographers no longer need Kodak for colour photographs; they can do so themselves via a mobile phone.

Meanwhile Google is pioneering driverless cars. For how long will we continue to allow dangerous humans to drive vehicles (road crashes kill 1.2 million around the world each year)? Google predicts that human drivers be gone in 15 years. A person will call up a car on their phone; the car will take them to the destination (they can text or sleep on the way) and their bank account will be charged. The car will then drive itself onto the next customer. This will mean less road trauma cases. Given the high rate of road fatalities, humans have set the bar very low. Google cars will be preferred for their safety – and no more parking problems.

As in 1750 the next Revolution is creeping up on us.

The new era is also high tech/high touch. Globalisation has meant that there is now greater wealth in
the world than ever before. Consumers now drive the pace of economic activity (rather than government expenditure).

A new economic stage has been reached – the 'experience economy'. This is an escape route from merely competing on price. This is an unlimited area because of the human appetite for amusement, excitement, learning, pleasure and spiritual fulfilment.

For example, McDonald's do not just sell fast food; they sell bright, clean, safe, family-friendly eating places suitable for socializing. Starbucks sell more than coffee; they provide the 'third' place (after 'home' and 'work'). Wineries that now host music/ comedy festivals are providing a 'grape grazing' experience. Educational institutions now provide a 'lifelong learning experience'.

There are therefore many new business opportunities opening up. This is an exciting time to be alive.

Keith Suter

The future is coming, much faster than you think! To hear more from Keith Suter, join us at the IOOF leadership series 2015 as we discuss what's ahead for global investment markets.

The information contained in this newsletter is provided on behalf of the IOOF group of companies and is intended for financial adviser use only. It is given in good faith and has been prepared based on information that is believed to be accurate and reliable at the time of publication. Any examples are for illustration purposes only and are based on the continuance of present laws and our interpretation of them at the time.