About a month ago, Citi’s Disruptive Innovations report revived the debate over the cause of slowing productivity in Western economies. One insight related to how modern technology encourages smarter distribution rather than outright production growth. You don’t need to produce as many spoons because, well, in the digital age less is more and everyone drinks Soylent. You probably don’t need a big house either, because, hey virtual reality. But if true, why does it not feel like quality of life is improving in many corners of the developed world? Perhaps there is something more to it.
We’ve rushed straight from Camp Alphaville’s big data, AI and debt sustainability conversations to Paris to take part in a United Nations Environment Program-hosted symposium entitled New Rules for New Horizons: Reshaping Finance Sustainability. [As an aside - we were delivered to the venue by a particularly overjoyed Parisien taxi driver celebrating news that local protests against Uber's UberPop service, which allows non-professionals to offer rides, had successfully persuaded the Silicon Valley Taxi-Unicorn-App-Monopoly-Disruptor to suspend the service as of this weekend.] This is a very brief summary of the session we moderated on financial technology and sustainability — yes there is a connection — before a more thoughtful take on everything we’ve just downloaded sometime next week.
Standard Chartered released a big note this week on the evolution of global supply chains, looking at the effects of new information technologies as well as the changing cost structures of established manufacturing zones. One of the key themes is that manufacturing is moving westwards, away from China and over to India and Africa. China still has lower-wage areas inland and a fast-growing productivity advantage due to the rapid adoption of automation and robotics; nevertheless the centre of gravity is moving, they say. Furthermore, the westward transition is also being facilitated by technology, especially things like the falling cost of radio-frequency identification technology and inventory tagging and monitoring. We presume it’s much easier to trust new supply networks if and when you can monitor their output and productivity real-time. As Standard Chartered’s analyst team of Madhur Jha, Samantha Amerasinghe and John Calverley note (our emphasis):
Bruce Packard over at the Lafferty group has an upcoming report on the fintech disruption that’s about to hit the traditional banking sector. As he notes, most of the corporations vying for a slice of the action don’t look much like traditional banks and many don’t even have banking licenses. But they do offer substitute products that have the potential, he says, to harm bank margins. In Packard’s view, even though new entrants have been trying to disrupt old banks since the 90s, banks find themselves in a vulnerable position today because their opaque price structures and overall reliance on cross-subsidisation techniques don’t necessarily do them any favours when it comes to defending market share.