Economy/General

Matters of Risk

Risks lurk across the entire horizon of life, from climate risks, which the U.S. Secretary of Defense Lloyd Austin recently said was one of the nation’s existential threats, to cyber warfare, which Russia and China cyberattacks revealed the U.S. to be highly vulnerable to outside intrusions; from investing, which revealed that amateurs can scald hedge fund professionals, to real estate, which has overheated residential markets while stymying commercial markets; and from healthcare systems, which proved to be wildly unprepared for the pandemic, to crypto-everything, which has shown assets can jump up from anywhere…at least until they fall down again. Things have gotten so volatile in so many areas that determining actual risks, often hidden behind dramatic moves, has gotten more difficult. We look at COVID-19 infections, health, investment markets, energy and other areas of mounting uncertainty.

A Lot Resting on Assets

Pervasive low bond yields, creating ten to twenty trillion dollars of negative yielding sovereign government bonds over the past few years, drove investors in that important asset category to assume greater traditional risk. We noted two and a half years ago that institutional and family office money was flooding into startup private companies in any form available. Since the pandemic, and with the advent of free trading platforms such as Robinhood, individuals have acquired the feverish appetite for stocks.  While business news has been existing on the fumes of the GameStop gambit, wider and larger interest needs to be placed on market distortions, because runs of cash into equities for companies losing money and into options to make more money faster have become commonplace.  More recently, cash has been pursuing assets, many of which have acted like GameStop and skyrocketed in price and perceived value.  Risks have escalated but FOMO, or the “fear of missing out” on another big return has made concern about risks seemingly vanish. A perspective that assets only increase in value has spread well beyond the equities market and is driving prices higher for things as widespread as sneakers, wine, sports cards, and, of course, Bitcoin. Following the strong prior flows to equities from bonds, a scramble to own assets with savings resulted from service spending contraction, has moved the economy’s dependence of equities, which we characterized as “A Lot Is Resting on Equities” to something more like “A Lot Is Resting on Assets”.

Hustling in the New Economy

The New Economy facilitated and made necessary the growth of freelance and gig work and now, along with the Economic Pandemic, is facilitating the rise of a hustling class. Even when the pandemic passes, the need to hustle will remain for many individuals because the New Economy, which started before the pandemic, is unlikely to change. The rise of the gig economy benefitted freelance platforms, sites that offer easy website creation, and the companies utilizing those gig workers, among others. The beneficiaries of the hustle will be the digital platforms that allow people to earn a primary or secondary income at home, whether by trading, gambling, or selling goods, offering services, providing content, or exposing themselves. A new entrepreneurial class and economic force has gained traction in the past ten months and it is likely to grow from here.

Contexts with Increasing Momentum: 2021

2020 has been a year of change and adjustments for individuals, institutions, corporations and governments.  Some of these changes will be temporary, while others have strong dynamics behind them suggesting that they will last long after the pandemic has ended.  This is an examination of some contexts which we believe will be even stronger in the next year, as well as the implications, applications and companies that are likely to have increased tailwinds due to those dynamics.

While Attention Is Elsewhere

With the global health and economic pandemic, along with protests and social unrest, consuming both media and individuals’ attention, there are important facts and events that can fall below the radar.  Over the past few months, there have been ongoing signs of increased military aggression around the globe, environmental degradation and the buildout of 5G, all of which will have important implications moving forward.

The Coming Waves of the Economic Pandemic

The virus infections and subsequent lockdowns are likely to lead to waves of economic impacts from several major sectors, which will have ripple effects out into a myriad of industries and companies. State and Local Governments, Non-Profit entities, Pension providers, Entertainment, Travel, Restaurants, etc., are likely to roll across the economic landscape in delayed and interlocking impacts on suppliers, services, technologies and real estate, to name but a few. The timing and impacts will be important as determinants of the benefits and losses incurred. We have a view of how to assess that scenario.

The Anxious American Life

Secular forces have helped create a New Economy in the United States - an economy with less job and income security and more wage and cost pressures than citizens had experienced in the past.  Meanwhile, the pervasiveness of digital technology and digital media have created additional sources of distraction and pressure.  These combined stressors have produced diffuse, long-term anxiety throughout American society.  This anxiety is driving some individuals to practice unhealthy and dangerous coping mechanisms; yet others have sought more healthy and sustainable ways to adjust their lives and soothe their anxiety.  Finally, some are going a step further, saying “enough is enough” and looking to change society in ways that would help reduce this pervasive anxiety.

Social and Consumer

The Focus on Sustainability

Society is transitioning from a grand narrative that favored growth-at-any-cost to a grand narrative that favors less waste and more sustainability. With a seemingly infinite choice of brands, products and services, consumers increasingly have the option to choose those offerings that align with their sustainability preference.  To meet those customer desires, companies, either on their own or with investor and government prodding, are offering greater transparency and improving their sustainability practices related to their products and supply chains. The process and progress will be slow, but the focus on sustainability will continue to grow.

The Next Grand Narrative: Repair & Enhance

The post-WWII driving force was growth – at almost all costs – which led to bigger houses, bigger cars, bigger corporations, bigger governments, bigger bodies and bigger debt.  Following that period of strong economic growth, family formation and a baby boom, many developed economies, but primarily the U.S., entered a period of asset inflation and income stagnation. Despite that stagnation, societal norms and expectations have been centered around the assumption that standards of living would increase, enabled by corporate and government stability and support. In recent years, these expectations have been not fulfilled for many families and that reality has resulted in a decline in family formation, birth rate, marriages, and real family incomes.   It is also resulting in changes to how we measure success and achievement - both at work and outside of work.   These changing priorities and evolving approaches to life, work and corporate practices create an emerging perspective, or New Grand Narrative, which we have called, “Repair and Enhance”.

It's Great to Be Young, Right?

While the economic reality which back-to-back crisis in 2008 and 2020 and mushrooming student debt helped define the legacy and reality which Gen X and Millennials inherited, they have pivoted the metric of success to a moral and ethical one. More than replacing the mantra of “too much ain’t enough” with “enough is enough,” these numerous young adults in the US and Europe are pressing for a reassessment of ways of spending, ways of living and how to measure actions from a perspective of moral and ethical rightness. Battling through the psychological challenges of the current pandemic realities, this cohort is leading the way to a beginning of a new Grand Narrative.

The Luxury Market

The retail industry has spent almost a decade scrambling to restructure in the face of lower barriers to entry, technological advances, changing consumer preferences and the rise of online shopping. This topic explores the many active change dynamics that are impacting the luxury market and some of the implications which suggest the current state of luxury, what is necessary for success and what new iterations will develop from here.

The Pandemic and a Better Life

Since the end of the Great Recession, the aftereffects of which never ended for many, more and more Americans have been moving slowly toward embracing what we have called a Better Life, and away from the idea that a rapid, ever-increasing standard of living should be the goal.  This is partially due to the growing recognition and acceptance that for some in the New Economy, the American Dream, or the idea that each generation will do better economically than the previous, may no longer be achievable. People are using this current health and economic crisis to rethink what fundamental issues are important to them; to rethink how, when and where they want to live and work; how they want to spend their money; and to focus on the things that will improve their, and the country’s, overall well-being in the short and the long term.

From Department Stores to Marketplaces

For years, department stores have, for the most part, unsuccessfully managed what we have called Retail’s Great Restructuring. The declining appeal of department stores, and some other physical retailers, is coinciding with the rising appeal of online marketplaces. Online marketplaces, similar to department stores, bring together a wide range of goods from numerous sellers, all in one location, but, unlike most department stores, the marketplaces are attuned to the needs and desires of the digitally trained consumer. This new restructuring pressure for retail will benefit those in tune and leave in the dust those who are not.

Rethinking Spaces

In late 2018, we started discussing a context that we called “Changing Places (and Spaces),” in which retailers and other businesses with physical real estate were changing the size, configuration and utilization of spaces and offering new kinds of experiences in order to align with the needs of the digitally trained consumer.   In essence, they were rethinking how they needed to change their available space to remain a viable, sustainable business.  Now, with a global pandemic making some indoor gatherings impossible and others risky at best, countries, cities and companies are rethinking how to best utilize spaces available to them in order to keep citizens, employees and customers safe and to create sustainability both in the short and long term.

The Brain and The Virus

Permeable borders have reached a new level with the coronavirus’s transgressing the human body.  This latest crossing of a border by an “invader” that is little understood and for which humans have no natural immunity has provoked different reactions among individuals, with one group wanting to “fight” the invader and act like it is beatable now and another group preferring to take “flight” from it by depending on social isolation and medical science. To understand the tension in the fight-or-flight response, we need to look at what we know about the brain; how the brain is being stressed by both fear of sickness and death and fear of economic ruin; and how the brain responds to uncertainty, confusion and loss of control. One thing that emerges is that the current situation, which is challenging for both the fear/irrational and rational aspects of the brain will cause errors in thinking and decision-making. Where will the brain take us in the months and years ahead?

So Much is Becoming Too Much

The New Industrial Revolution and the Battle for Consumer Time have led to an overwhelming amount of products and media from which to choose.  There are now so many reviews to help with product and media decision making that they are actually contributing to the overload and indecision.  The overload has now become so significant that it is starting to change consumer behavior as it relates to deciding what products to buy and what media to consume.

Less of This and More of That

Consumers are becoming comfortable with buying and having less, even as they seem to be finding things that entertain them more.  In the decades following the Second World War, during which time the Dispersed Wealth Grand Narrative held sway, Americans pursued growth at any cost - more clothes, larger houses, bigger profits, more energy, more comfortable cars and on and on.  “More” was a mantra, and costs in terms of personal lives and the environment became substantial.  As that Grand Narrative fades into history, new ways of thinking and operating are surfacing, and as a result, a new dynamic has emerged between less and more. An increasing number of individuals and companies are shifting the kinds of things they want less of and the  kinds of things they want more of, and that shift is becoming a critical in consumer markets.

Brands, Branding and Changing Market Dynamics

The terms “brand” and “branding” are getting more widely applied, creating confusion among consumers, who seem less and less interested in purchasing “overpriced” branded products. Thus, the rising appeal of private-label or store brands – which can be lower priced and are “good enough” for a busy consumer. With the advent of consumers armed with product information and reviews from pros and friends (and “friends”), online buying possibilities, store brand availability and the related decline in number and shrinking in size of retailers, brands face many challenges. Several old beliefs about brand names – Brand Names Sell Products, Brand Names Attract Consumers, Brand Names Enable Product Extensions and Brand Names Provide Stability – are proving harder to realize. In all, the function of a brand name is changing; its claim of superior quality is weakening; its higher prices are being challenged; new competitors are coming from everywhere; and its once stable place in the market is becoming less tenable.

Society, Reason & Emotion: Decision-Making & The Brain In Today's Context

“Our point is not that people are ignorant.  It’s that people are more ignorant than they think they are.”  That is how psychologist Steven Sloman and cognitive scientist Philip Fernbach explain the results of their research.  Meanwhile, back in the 1950s, famed psychologist Leon Festinger described how individuals with convictions think:  “A man with a conviction is a hard man to change.  Tell him you disagree and he turns away.  Show him facts or figures and he questions your sources.  Appeal to logic and he fails to see your point.” Together these pieces of research provide insight into how humans deal with contemporary society with its widespread uncertainty and resulting anxiety.  The human brain does not like uncertainty, and so it seeks out information that confirms what it already believes (and issues a shot of dopamine when confirming information is found to make that belief feel good). When the mind has reached a decision, it does not want to change because such challenges are seen as threats to one’s personal identity.  These kinds of realities make decision-making more difficult to do objectively. We have some lessons learned that could guide the decision-maker interested in overcoming society’s and most people’s current biases…and ignorance. 

International

China's New Financial Architecture

China continues its effort to create financial mechanisms which will place itself in a more favorable global position within the financial universe. Recent moves to open up bond and equity markets in Shanghai, Shenzhen and Hong Kong provide for an alternative to London and New York. International trade is now increasingly done in Rmb with China and their currency is now part of the IMF basket. Mobile payments and a recent move to cyber payments allows for increased non- US/European/Japanese currency trade, lessening dependence on those currencies.       

 

The U.S.’ threat to restrict Chinese companies listed on American exchanges has given those companies an incentive to raise money and list on Chinese markets. Successful capital raising capabilities have shown that China’s markets are a viable alternative.

Alliances, Agreements and Reserve Currencies

Competition is heating up worldwide, even as sports seem to be in retreat. Competition among nations reaches nearly every corner of activities, from space and medicine to technology and weaponry. At a higher level, a competition between ways of attracting allies is emerging, a competition between geo-economics and geo-politics. The U.S., with its superpower status and influential reserve currency, continues along its geo-political pathway, while China, with lots of capital and often innovative ideas, is using geo-economics to spread its influence. But China’s use of the geo-economic approach has a larger purpose than just gathering allies through financial arrangements or challenging the stability of historic alliances. Beijing is seeking equivalency of its economy and its currency with those of the U.S., which could represent a challenge to the dollar’s primacy as the world’s lone reserve currency.

China Coming Out of the Pandemic

While much current attention is being placed on an escalating conflict between the U.S. government and Beijing, China is aggressively pursuing a national strategy to both stimulate growth from the first economic downturn in decades as well as establish a leadership role for a new set of business and economic realities.  A combination of monetary, tax and fiscal responses are intended to bring the Chinese economy out of a first half 2020 seven percent economic decline caused by the pandemic. In addition, the country is funding and coordinating public/private investments in a series of new capabilities. The vision is to take leadership roles in AI, Robotics, electric vehicles, 5G, Big Data analytics, advanced and distant medicine and hyper efficient logistics. The goals are to establish a series of “new infrastructures” and thus to lead over the next several years in a transformed business environment.

Ecosystems

Ecosystems represent an evolving model for doing business.  This is especially true in emerging markets where customers are Skipping a Step to new technologies and accessing new services such as mobile banking and payments.  The corporate ecosystems are attempting to offer convenience and simplicity to consumers by allowing them to access everything in one place, while also attempting to lock those consumers into a walled garden of services.  Most importantly, in the process, these ecosystems are able to collect and analyze large amounts of accumulated data, allowing them to understand what consumers desire and move into new business areas where the data suggests there are opportunities.

The Digital Silk Road

The Belt and Road Initiative (a.k.a. the Silk Road Project) has created a whirl of activity along the land and sea routes that are combining under Chinese leadership to create an international marketplace.  Yet moving ahead of these massive infrastructure projects is another piece of the project, the Digital Silk Road.  This aspect of the larger initiative seeks to expand communications and networking across the Eurasian and African continents, all pointing toward one large, global online marketplace.  E-commerce drives the digital infrastructure buildout, which can move ahead via the Skip-a-Step routine much faster than the larger projects that require physical buildouts.  The Digital Silk Road has generated business and deal-making in three components: Systems and Networks; E-commerce; and Payments. 

Russia Goes After the World's Vulnerabilities

Russia has a strategy to enhance its image in the world and to expand its influence in a location it identifies as vulnerable.  That strategy involves identifying a vulnerability anywhere and then exploiting it to the Kremlin’s advantage.  This practically assures victory.  Russia has applied the strategy to its own domestic troubles, charging and imprisoning more dissenters recently to keep the citizenry feeling uneasy.  It entered the Middle East when the region seemed vulnerable to falling into a new era of chaos, asserted its military weight.  Russia utilized social media to confuse, anger and divide American voters, by using its own cyber-trolls to further the cause of a candidate the Kremlin preferred.  The odd thing about the strategy is it mirrors that of terrorists, who have always identified a vulnerability and then exploited it.  Terrorists are fighting an asymmetrical battle, they being less powerful than the entities they attack.  Is Russia admitting to a similar relationship of power?  Or are its actions clever judo moves?

Global Realignment Underway: The Appeal Of The New Autocrats

A new form of autocratic leadership is ascendant globally.  These leaders use strongman tactics to make quick bold decisions, which appeal to neighboring countries, while the global West remains mired in internal political struggles.  This autocratic leadership is realigning the world and undermining established institutions and international networks, while creating news patterns of friendship and cooperation.

China Building Out

One aspect of China’s long-term strategy is to “go out” and invest in both emerging markets and developed countries and purchase global strategic assets. Beijing continues to consolidate state-owned-enterprises to reduce oversupply while simultaneously pursuing the long-term Silk Road Strategy by deploying their sizable foreign reserves. These strategies will impact raw materials markets, basic industries and the growth of other emerging markets.  At the same time, China is investing domestically in innovation in order to develop new products and services to sell into the global marketplace.

Technology

Here to Stay: Digital First

Over the past decade, digital technologies have been incorporated into the ways companies operate and have trained individuals how to think, behave and live their lives.  That shift from analog to digital was accelerated when the global pandemic made operating via digital technology a necessity.  The pandemic may be coming to an end, but the shift to digital as the primary way of connecting, selling, communicating and being is just beginning.

Technologies and Capabilities Coming Out of the Global Pandemic

As with other physical wars, capacities and technologies used in that war emerge and are important in the aftermath. Recognizing what and by whom and the impacts of these capabilities provides a forewarning to an aspect of the other side of the pandemic period. There are observable early indicators as to that impact to explore.

(Update) Tracking 2.0: Monitoring and Surveillance

At least 133.5 million American adults in 31 states are now represented in a facial recognition database accessible by U.S. law enforcement, not including U.S. passport and visa photos, which are also searchable by the FBI. Countless other individuals are in facial recognition databases of tech giants like Facebook, Amazon, Microsoft and Google or smaller technology companies, such as Clear. Despite instances of pushback from employees at some of these companies, errors in the technology’s conclusions and conversations around passing regulation, experimentation with and use of facial recognition and biometric technologies continue to gain momentum, especially as they relate to venue security and making things easier and faster for the Digitally Trained Consumer.

The Streaming Deluge

The first two industries that have been impacted significantly by streaming – music and video – are both now seeing how a change in the way content is distributed is actually also changing the content itself.  New areas, including retail, are just now experimenting with streaming and the impacts will likely be significant.

Mobile Payments: The Ultimate Trojan Horse

If Jack Ma is correct in saying that “data drives the internet economy,” mobile payments, where massive information sets are captured, can be the mechanism to gather that “fuel.” Mobile payments continue to expand globally, especially in underdeveloped countries, as part of the “skip-a-step” phenomena. And this information is now being utilized in loan, insurance, and “social measurement” operations. 

5G Applications

Similar to the changes that came with the development and spread of digital broadband, 5G capabilities will usher in  new applications. With faster digital speeds and reduced latency, some of those applications will include:  Smart Factories; Distant Medical Treatment; Autonomous Vehicles; Advanced Facial Recognition; Advanced Virtual Reality; Video Gaming; Distant Controlled Robots; Ultra High Definition TV; Smart Agriculture and Internet of Things.  All of these applications will create multiple ripple effects, especially in Manufacturing; Entertainment; Medicine and Agriculture.   

(Update) From Mobile-First To AI-First

In our original look at Artificial Intelligence (AI), we explored the scramble by companies such as Google, IBM, Facebook, and Baidu to develop an “AI First” strategy as AI capabilities quickly developed and redefined how people and machines interact.  Those capabilities can be categorized to include voice recognition, language processing, image recognition and pattern recognition.  In this first update to our AI topic, we explore how those capabilities are now being applied in various industries, including healthcare, finance, retail, defense, automotive, and media. 

Industry

Advanced Logistics

Over the last few years, retailers, grocery stores, and logistics providers have experimented with different modes of distribution to align with changing consumer expectations for faster delivery speed and easier pickup options. As those expectations continue to increase, so will spending on advanced logistics technologies, including warehouse and delivery robots, supply-chain software with artificial intelligence, drones, and autonomous trucks.  Reducing delivery times, while at the same time increasing operational efficiencies, are becoming necessary to compete in an omnichannel environment.

The Rise of EVs: Implications

The auto industry is embarking on a major overhaul of its products, suppliers, employment needs and business models. Given the current indications about accelerating climate change, which is driving the shift to EVs, the speed and intensity of this change is likely to accelerate. With the technology rapidly advancing and fundamental issues of profit margins, supply chains, sales methods and competitors unresolved, this major industry is certain to experience restructuring greater than any industry before it.

Food in the Pandemic and Beyond

The pandemic has advanced the experimentation period of the Great Restructuring, and it has accelerated changes being made in the food industry. After doing the usual things businesses do in any recession (cutting costs and offering discounts), industry players have started trying real innovations. We have noticed this in numerous areas including online sales (including direct-to-consumer, or D2C, sales); delivery, and drive-through/ pickup operations.  As businesses become more innovative and individuals become more creative, all in their responses to conditions imposed on them by the novel coronavirus, the long-term effect of society’s encounter with the pandemic could well be an innovating force for changing ways of operating.

New Ways of Operating

“New Infrastructure” is a major part of the Chinese government’s strategy for leaping ahead of the west in the next several years. This emphasizes the aggressive development of technologies such as AI, 5G, sensors, Blockchain, Cloud Computing, fintech, Big data analytics, Ultra High Voltage power, and their applications. Applying these and other capabilities to a variety of sectors can lead to new ways of operating, resulting in new forms of Retail, Mobility, Finance, Logistics, Communication, Medicine and Manufacturing.

Society's Rethinking: Work and Office Real Estate

The changing nature of work has already impacted office real estate globally, and recent facts and events suggest that for office workers, the nature of the “office” is fundamentally being rethought, with traditional full-time work in a traditional communal office unlikely to revert to pre-pandemic levels anytime soon. Many ripple effects emanate from that essential reconstruction of work including local services, real estate, urban business vitality, cultural organizations, e commerce and food consumption, to name some.

Omnichannel Everything

Almost a decade ago, Inferential Focus suggested that Simplicity, Connectivity and Experience were the top three rungs of what we called the Consumer Value Hierarchy. Initial omnichannel offerings were often designed to satisfy the Simplicity value. Now, in the midst of shelter-in-place orders and social distancing needs, people have been unable to interact with friends, family or colleagues. Nor have they been able to pursue the experiences that they have so highly valued.  At the same time, companies, organizations and artists have been unable to connect with or sell to their customers or constituents in the usual manner, leading them to create and offer omnichannel Connectivity and Experiences.  In doing so, these entities are also aligning with the digitally trained consumers’ expectation for access to information, products, services and entertainment – when, where and how they want them. While some of the omnichannel experiments will end along with the pandemic, many others will prove to be popular, profitable, and part of the new way of operating.

Update: Battle For Consumer Time

For more than five years, new technology and changing consumer preferences have pushed media and entertainment industries into some version of the Great Restructuring. Consumers’ time has continually been divided, subdivided and spread over several screens, sometimes at once.  Consumers are  multitasking and spending even more time with media, which has created many winners including content providers, especially those that have shown a history of attracting audiences.  Video games and esports, social media, streaming content, podcasts and social media have all taken consumer time away from other pursuits, but in this next stage, they will have to compete among themselves.

The Digitally Trained Consumer and Finance

Like automobiles before it, digital technology is creating its own reality - that is, digital tech is essentially training humans how to think, act, read, behave and experience life. From this point in time, we can see numerous things that digital tech has taught consumers, and they are causing challenges and forcing changes for any company wishing to attract those trained consumers. First, Distractions are appealing. Second, Impatience has become ingrained. Third, Expectations are rising. And finally, consumers get better at Resourcefulness.  These teachings are impacting what financial products and services individuals are attracted to, and offer a roadmap for how financial companies need to interact with their customers. 

Esports: Finding the Truth Between the Hype and the Reality

Among the hype and high expectations, esports are facing growing pains as companies continue to experiment with different revenue models. However, our observations also suggest an industry that is still in its early stages with increasing appeal for consumers, companies and marketers. A discussion about the present and future of the esports industry.

Retail 2020 and Beyond

Over the past decade, digital technology has become ubiquitous and in the process it has “trained” consumers in how to behave and has reset their expectations. Consumers demand convenience and speed while they also seek novelty and expect personalization.  Individuals also have changed their values and perspectives as it relates to sustainability, which has  led individuals to become satisfied with access to goods that previously had to be owned.  Meanwhile, the retail industry has spent almost a decade scrambling to restructure in the face of lower barriers to entry, changing consumer preferences and the rise of online shopping. This topic explores the current state of the retail industry and where it will go from here.

Update: Healthcare and the Digitally Trained Consumer

Digital technology has trained individuals to be impatient; to desire convenience and ease; to expect access to information; to have elevated expectations about the speed, accessibility and personalization of services; and to be resourceful in pursuit of what is in their best interests.  The retail drug sales business has been playing catch-up with other forms of retail in its attempt to offer fast and convenient omnichannel services, while hospital networks and other providers are attempting to offer patients more convenient options through telemedicine platforms. The law and insurance coverage are still expanding in the U.S. to cover more telehealth services, as payers recognize that telemedicine can lower costs and provide more convenient care.

The New Business Model: The Customer Ecosystem

Alibaba, one of China’s largest enterprises, is currently involved in at least twelve different areas of business. From education to e-commerce, from finance to the cloud, from entertainment to logistics and from sports to tourism – Alibaba is spreading out horizontally.  While Alibaba and Amazon own companies that make things, they also both have marketplaces that enable other people and companies that make things to take advantage of their (Alibaba’s and Amazon’s) logistics and delivery mechanisms to market goods.   These companies and others like them are not just focused on a specific set of market relations; rather they are creating a new business model around ecosystems – that is networks of companies focused around consumers’ wants and needs.  These companies’ horizontal growth, as they jump into new industries and across traditional categories of enterprises, outmaneuvers traditional monopoly laws; yet their influence is enormous.

(Update) The Great Distribution Experiment

It has been four years since our inFocus,  “Retail Restructuring: The Great Distribution Experiment,” and companies are still trying to figure out the best and fastest ways to get packages into the hands of customers.  This update contains new examples of how retailers are trying to respond to current consumer demand to receive their items how, when and where they want it, with implications for retailers, distributors, warehouses and technology providers.

 

The fast-developing Digital Silk Road has an important distribution/logistics component.  The developments of capabilities and new technologies and approaches are explored.

The Rise of EVs

The auto industry, already dealing with numerous secular changes, now has another significant shift to deal with., electric vehicles.  Nations across the globe are adopting requirements for hybrids and full-electric vehicles and with sales likely to increase substantially over the next few years, there are many implications for auto companies, auto suppliers, and the makers of batteries and components, among others.

Energy and Resources

Hydrogen and the Move to Green Energy

As part of the larger Spreading Attitudes on the Environment, many CEOs and government officials are recognizing that behavior must change and investments must increase quickly, if society is to successfully mitigate environmental problems caused by climate change. Increasingly, national and corporate leaders, especially in Asia, are, putting money and priority behind policies and investments that will make hydrogen another tool among several being used in the effort to decarbonize the economy, reduce emissions and address climate change.

Update: Spreading Attitude on the Environment

Extreme weather has been triggering extreme reactions, as more and more individuals realize that climate change is real and that humans have a need and a responsibility to take action. The result is that at the individual, investor, corporate, and governmental levels, doing something to address climate change has become a much greater priority. What is intriguing about this spreading attitude among such a large swath of society is that it could represent another step toward a new grand narrative, a context of unified purpose that over the decades can guide society forward. For the moment, both public and private institutions are feeling the pressure from individuals (as customers, as employees and as citizens) to take action.

Evergreens and One-Offs

Intelligence, Diagnosis and Effective Decision Making

New digital media communications get shorter and shorter, moving from Web pages and blogs to text messaging and Twitter posts.  Those shorter communications technologies along with all digital technology are reprogramming the human brain.  New-media adopters have found it easy to place three barriers between themselves and those who would like to communicate with them: Receptivity, Selectivity and Connectivity. To overcome these barriers, anyone wishing to communicate with the digitally adept must focus on these users’ minds first and then think about the technology, which may be uncomfortable for advertisers and agencies.

Unaddressed Consequences: The Risks of Not Following Cause & Effect to the End of Linked Systems

This context raises the issue of elevated risks derived from interlinking complex systems with other complex systems.  The human mind wants to make things easy and simple, and so, those in control of these systems often launch projects with an eye only on short-term benefits, choosing not to focus on the more difficult yet possibly more costly long-term consequences.  “Who could have known that…” or “I was not aware that…” are usually later public comments.  They are, so to speak, living with technological and financial changes without fully embracing the range of consequences.

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Chartwell Investment Partners

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