Dr Stephan Sigrist is the founder and head of W.I.R.E., a leading interdisciplinary think tank. He recently led the panel discussion on Megatrends at the annual Finanz 19 financial fair in Zurich. We believe there are five mega trends which will shape our economic and social outcomes. These are Demographics, Climate Change, Natural Resources, Digital Revolution and Inequality. 

The following Q&A was conducted after the event.

 

How do you establish which trends have long-term potential?

Our environment is changing at an increasingly quick speed, bringing new challenges but also opportunities. It can be difficult to evaluate which of these different developments and trends we see unfolding are actually relevant.

Thousands of companies and people with new ideas are hitting the markets all the time. Every one of those, of course, is presented as a revolution. We believe there are there is a need for cleverer, more differentiated tools that give us clarity on which ones actually matter, in the long term.

It's the concept of sustainability which underpins all of this. It is not just about looking at ecological changes but combining technological and social developments with ecology. This broader understanding it helps us to identify patterns, filter out the things which are not relevant, and then out of this big picture analysis, identify the key drivers.

 

What are the main drivers of change?

When we look at the drivers of change, there are plenty of facts that give us a clear indication of some of the long term developments that will be relevant for markets. For example, we know that there is significant population growth across the world.

Overall, the global population is rising by 1.1% or 83 million people, annually. Global population is expected to reach 8.6 billion in 2030 and nearly 10 billion in 2050, and this has serious consequences for everyone. For example, this is putting ever greater pressure on ecological systems.

The proportion of the world's population aged more than 60 years is expected to double, from 11% in 2000 to 22% by 2050. This change is especially prevalent in threshold countries. There are some people saying that China will become old before it gets actually rich. In concrete numbers, the people aged 60 years and over is expected to increase from 600 million to 2 billion in the same period.

This trend is often referred to as the ‘Silver Economy’ because, with this change in the population spectrum, there's also economic changes that lie ahead. Low and middle income countries will likely experience the most rapid and dramatic demographic changes.

These changes are also now happening faster than ever. It took more than 100 years for the share of France's population aged 65 old and over from 7% to 14%. In contrast, countries like Brazil and China will take less than 25 years to match this.

The world will also have more people who live to see their 80s and 90s. This is going to have an impact, for example, given that it will inevitably result in a larger number of people who suffer from chronic diseases, more people that will be dependent on aid when they're older. It will also impact the large number of services that are going to be associated with that. The number of very old people will quadruple between 2000 and 2050 to nearly 400 million.

As we have more people, who are living for longer, we use going to have to find more resources.

 

What impact will this have on natural resources?

Estimates say that by 2025, 1.8 billion people will be living in regions with absolute water scarcity. Key resources will become scarcer, including water, oil, natural gas, phosphorous, coal, and rare earth elements.  Of course, these shortages are not only relevant for the companies looking for oil, but for everyone in the supply chain. Companies that use plastic and these resources to drive their businesses will also have to confront shortages.

The global food demand is expected to rise by 35%. The last time we had such a huge increase in population growth was during the first Industrial Revolution, that made it possible to produce food on a large much larger scale. And again we are suffering from the same challenges. So there will be a need in new models on how we distribute food and also how we produce it.

 

If these are the social developments, what are the technological ones?

By 2020, approximately 70% of the purchases in China will be made online. For the US it's lower, at around 46%. Since 1980, the annual price associated with computing has declined to 64%. There has been an explosion in computer power, characterized by Moore’s Law.

There are an estimated 8.4 million things on the internet and this ‘Internet of Things’ grows larger every day. We're looking at a future where everything where every object, from lamps to suitcases, will all be connected. There are challenges ahead associated with this trend, which we’ve already seen signs of around the discussions with Uber and Facebook.

A more digital economy, however, is likely to emphasize inequality, in part based on jobs that are going to be lost, and by the growth of the so-called super firms. Huge companies will increasingly account for a bigger share of growth and this points to inequality when it comes to the size of the companies.

We have to be agile. The world is changing quickly and we need to understand what's going on. But at the same time, there is no need to follow up on every trend at the same speed they are being presented.

One key strategy is to stay critical, lean back and pick out the truly important elements that genuinely require our attention.