In 2022, Amazon will become the largest company in the world based upon revenue. One could easily submit that this event will represent the demarcation point symbolizing the day the world moved from an energy and oil-based economy to a data driven economy. This transition from oil to data represents the most momentous economic and […]
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In 2022, Amazon will become the largest company in the world based upon revenue. One could easily submit that this event will represent the demarcation point symbolizing the day the world moved from an energy and oil-based economy to a data driven economy. This transition from oil to data represents the most momentous economic and geopolitical development of the last 100 years.
Oil became the central driver of the rapid economic growth of the 20th century. Political structures were centralized, social goals were dramatically expanded, and an entire middle-class consumerist society were created on the back of the oil economy. Oil also had a profound impact on the world’s geopolitical map as nations and industries competed for access to these resources.
The economic dominance of oil is clearly demonstrated by the fact that in 2020, eight of the ten largest companies on the Fortune 500 list were oil or energy related. Oil producers and carbon users – Sinopec, State Grid (coal fired electricity), China National Petroleum, Royal Dutch Shell, Saudi Aramco, BP – represent six of the participants. Two auto companies, Volkswagen and Toyota, are also among the ten.
By 2030, the economic world will look very different. Ten years from today, eight of the Fortune 10 will likely be data driven technology companies. They will also be much bigger than the industrial giants of the past. Amazon will almost certainly top the list with well over $1 trillion in annual revenues. Apple, Tesla, Google, Microsoft and Facebook will each have revenues in the $500 billion to $1+ trillion range.
The scale of these new tech giants will be unprecedented. Together, these data driven companies will have annual revenues easily exceeding five trillion dollars by 2030. This will mean that their aggregate revenues may very well exceed the GNP of every individual country in the world with the exception of the United States and China.
As has been said, data is the oil of the information age. Just as the Middle East and the Suez Canal emerged as the lynchpin of the oil age, the new tech giants will control much of the world’s data outside of China. Google will know everyone’s thought patterns. Amazon will understand all consumer desires. Facebook and WhatsApp will oversee the public’s communication habits. Netflix will understand cultural dynamics. Tesla will be privy to daily migration and energy consumption patterns. And all this knowledge will be immediate and instantly actionable.
The 20th century’s energy-based industrialization led to the greatest voluntary migration in human history. In the late 1800’s, 80% of the population worked on the land in rural environments. By the end of the 20th century, a mere 5% worked the land and the majority of the population inhabited large and mid-sized cities. In the past, people would never leave their home village and were unlikely to ever travel more than 20 miles from their place of birth, with the exception of wartime. In the new world, personal mobility has become the norm rather than the exception.
This migration had a significant impact on self-identity. The tight family and relationship bonds inherent in a rural environment were displaced by the relative anonymity of urban life. In exchange for much higher living standards and significant protection from the potential harshness of nature, the average person accepted much greater government intervention in their lives and the imposition of many more rules and laws. People began to view themselves primarily as citizens of the state.
The vibrant economy created a new human species: the consumer. Given the significant wealth generated in the capitalist economies, there was unprecedented demand for new goods and services. Improvements in nutrition and health care led to significantly longer lifespans and rapid population growth. Together, these two developments created enormous strains on the environment as a result of the resources consumed and the need to dispose of the vast waste created.
Going forward, the current focus on environmentalism and a slowdown or rejection of mass consumption are likely very long-term trends. The more profound question, however, will center on individual perceptions of their self-identity. Individuals may well begin to define themselves and make life choices to an even greater extent upon lifestyle, rather than merely monetary economics. This may, in turn, alter how people perceive themselves relative to their environments and their role in society and the state. It would not be inconceivable that the average individual begins to identify themselves less as a citizen of their state and more as a member of a group that they have virtual ties with.
Just as important, people may begin to question the roles of identity, societal participation and anonymity. There will very likely be an ongoing conflict between the desire for greater privacy and the enhancements to life made possible by the greater capture and leverage of data. This will likely have the biggest impact in two areas: health care and crypto-currencies.
The data driven world will lead to a reordering of industrial and national economic competitiveness. From a national perspective, nations that maintain an environment of easy capital formation, strong IP rights and flexible workforces will perform even more strongly. Nations with inflexible workforces, poor rule of law and protectionist economic policies will decline even further.
From a corporate viewpoint, the next two decades will undergo more competitive disruption than has occurred in a hundred years. To survive, legacy corporations will need to restructure their operations such that data is their most important asset. Data will be the hub from which all other elements of the organization become spokes. Consumer tastes may shift, political and regulatory pressures may alter, individual products may rise and fall – but data will remain central to negotiating these accelerating changes.
Oil allowed manufacturing companies to “Fordize” their production methodologies and distribute their products more efficiently. The modern centralized corporation emerged for the purpose of utilizing resources in the most efficient organizational structure to leverage these new economies of scale.
The data driven world may counterbalance some of these twentieth century developments – or even reverse them. Given the virtual nature of digital assets and the seamless and easy flow of data, greater decentralization may become the preferred corporate model. This will allow organizations to more rapidly respond to local market requirements and also provide them with greater flexibility to respond to local regulatory limitations or taxation concerns. The 20th century model was based upon economies of scale and commoditization of products via centralized production. The data driven world will be defined by mass customization, local autonomy and hyper-segmentation of customers.
Companies will also dramatically flatten their reporting structures to minimize the middle management layer whose sole function is to capture, control and distribute information. This flattening will become even more pronounced as emerging Artificial Intelligence technologies develop. AI will eliminate knowledge workers in the same way mechanization reduced manual labor on the factory floor.
ABOUT THE AUTHOR:
Steve Kostyshen is Chairman of K2View
The post The Projected History of the 21st Century – From Oil to Data appeared first on eWEEK.
