COVID-19 has indeed exposed the existing vulnerabilities of the world, but it also shed light on models and concepts that need to be mainstreamed. That is the theme of a series of webinars by the AUC School of Business’s John D. Gerhart Center for Philanthropy, Civic Engagement and Responsible Business. In the series of articles “Changing Business as Usual”, Business Forward presents key ideas from a selected number of webinars.
In the webinar “Global Trends Affecting Business in the 21st Century” featuring Mauro Guillen, Zandman endowed professor of international management at the Wharton School, he discussed his latest book “2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything”.
Current and future trends
According to Guillen, the key trends that will greatly reshape the consumer and financial markets in the coming ten years are population aging, the emergence of the middle class in Asia and Africa, big companies and brands paying more attention to the Asian consumer, women becoming wealth holders, replacement of humans by robots and artificial intelligence in the labor market, and the usage of crypto currencies.
Unlike other pandemics in history, the current COVID-19 pandemic is an accelerator of pre-existing trends especially the population aging, the rise of East Asian emerging markets, the inequality in gender income distribution and the technology adoption.
Babies and money
Guillen’s rationale is based on following the young population- babies of today – as they are the future main market consumers, and estimating the net worth of this major consumer group by multiplying their number by the total value of their assets minus their liabilities.
Guillen analyzes the past and the current population trends as follows. In the past 70 years there has been a major decline in the total fertility rate in developed, developing and least developed countries due to better access to education for women. On the other hand, there has been a steady rise in the life expectancy worldwide to be 80 years on average in developed countries and 65 years in the least developed, with the rate of the increase in life expectancy being higher in the latter.
Guillen shares the future projections of the population change in different parts of the world. Africa (55 countries including Egypt) followed by South Central Asia (India, Pakistan, Bangladesh and Sri Lanka) will have the largest portion of population growth in the next ten years and beyond due to higher birth rates in those regions compared to other parts of the world coupled by the rapid rise in life expectancy in these regions. On the other hand, countries like East Asia and Europe are experiencing major declines in population and will continue the same trend in the future. Meanwhile, the population trends in both the United States and Latin America remain relatively stable.
COVID-19 strengthens current business trends
The current pandemic will somewhat contribute to the acceleration of population aging as well as the decline in the number of babies, thus, affecting future population projections numbers. Due to the economic uncertainty, losing jobs and declining incomes caused by the pandemic means young couples will postpone having their first babies. The mere postponement of having the first child will result in fewer babies in the lifetime of those couples and decreased total fertility worldwide. This decreased fertility coupled with the rise in life expectancy causes population aging.
“For the first time in history the population above age 60 will be the largest consumer segment in the market,” Guillen explains, “I call this phenomenon ‘The Gray Consumer’,” he adds. In countries like Japan and China, the Gray Consumer will represent 35-40 percent of the population. In the US they currently own 80 percent of the net worth.
No more typical ‘play, study, work, retire’
Guillen refers to technological advancement and longer life expectancy as the main drivers of the anticipated consumer behavioral changes and the new emerging work models. He explains that the traditional four stages life cycle model of ‘play, study, work, retire’ will be obsolete as people continue to live through their 80s. They would probably change their careers more than once in their lifetimes. The concept of life-long learning will be more popular as people would like to go back to school and learn new things at different life stages. Accordingly, companies, universities and governments will need to adapt to these changes.
The second change will be remote work. As the world went through a new human experience of lockdowns and remote work for about 12 months, it is expected that this COVID-19 driven lifestyle is here to stay.
Guillen predicts that people will move to a hybrid model that entails working from home for a couple of days a week while commuting to the office for the rest of the week.
As a result, remote work will enable the emergence of a truly global market for talent where the world will experience more off-shoring of jobs and tasks. Companies will manage to import talent from any part of the world with the least expenses. The borders between countries will dissolve when it comes to the job market.
As the purchasing power of the middle class in the emerging economies such as China and India is projected to grow, by 2050 the consumer spending in these countries will have increased to the point of causing a major shift of companies’ focus on the Asian consumer rather than the American consumer. In addition, there will be a shift in the regulation policies as “the largest markets in the world write the rules of the game,” Guillen explains. China and India will start to play a role in trade regulations and antitrust laws and competition policies just like the US and the EU. Accordingly, the world will have a major change in geopolitics resulting in a multi-polar world with several super powers.
Women becoming wealth holders and shifting market trends
Guillen refers to the growing net worth of women as opposed to men in more than 40 percent of American households, driven by better education access. Indeed, the future holds more surprises in this area, as Guillen’s projects that for the first time in history women will own more than 50 percent of the world’s net worth. This will lead to a major shift in consumption, saving and investment decisions globally. According to Guillen, as women place more value on the future they spend more money on education, healthcare and insurance, thus, causing a change in consumer markets. Women also tend to choose passive investments such as stock market index funds. Guillen calls this the ‘Wilde effect’ as “women try their luck, men risk theirs,” he says.
More Robots than workers and more computers than brains
Guillen predicts that there will be more automation in service sectors such as retail, education, financial services and healthcare, resulting in fewer jobs and more technologically displaced people. As a remedy, he suggests taxing companies that manufacture robots and allocating the revenue to re-train and reeducate the technologically displaced. He also calls for applying the concept of the universal basic income to cover the basic necessities for families harmed by the spread of the automation and artificial intelligence.
Guillen has a specific model for the future use of crypto currencies. He explains a model where crypto currencies are used as ‘digital tokens’, not just as a form of money exchange. This bundle of services can include coupons, incentives, voting processes, smart contracts and certification, among others. The model of digital tokens is already implemented in countries like Estonia, Ghana and Kenya.
Last but not least, Guillen draws the attention to the importance of building bilateral cooperation and mutual understanding between the two largest economies in the world, the Unites States and China. He advises the leadership of both countries to sit together, and develop a vision and an agenda for future cooperation. “The global economy cannot work unless the US and China are in a good relationship, because once again the two economies are so much interrelated at this point, ” he concludes.