COMMENTAR Y
Global Megatrends and Implications for Leaders Cass Business School, City University London EXTRACTS FROM THE DEAN'S LECTURE GIVEN BY DOMINIC BARTON, MCKINSEY AND COMPANY
Extracts from the Lecture What I want to do for the next 30 or 40 minutes or so is just give a bit of a tour of what we think is going on in the world as we look ahead, and that sets the context for what type of leadership skills we think will be needed as we go ahead.
I have to say, especially for those that are just starting their graduate education, I’m particularly jealous because I think you’re going to be leading in some of the most interesting times in history.
I want to start with this context and why we think this period of time, the next 15 to 20 years, is historic from a human point of view.
There are going to be a lot of challenges, as when we saw the rise of China, the fall of the Roman Empire, the Renaissance and the Industrial Revolution. I don’t think we’re going to be living for another 100 years, so you can’t tell whether I’m right or wrong, but that’s my attempt right now.
There are really four forces that we think are making this period unique from an historic point of view. One is what we call the re-rise of Asia and the rise of Africa. This is going to have a massive economic power shift.
We’re in the middle of it now, but it’s going to continue to move and it’s going to change all organisations, not just businesses, but also if you’re the Catholic Church or you’re the Anglican Church or you’re a religious organisation, whatever it is, you’re going to have to think about where the footprint is going to be – it’s relevant, and it’s shifting very quickly.
The second is the power of disruptive technologies, and we would argue that we’re in the very early stage of a multiple stage technological revolution. I think it’s very difficult to predict beyond ten years what it might look like, but just given what we see today, that force in itself is going to be disrupting all of us.
When I say disrupt, I don’t mean that in a negative sense; I mean in a positive sense as well. We are going to be the most aged we’ve ever been as humans. Although there are parts of the world that will be very young, for the bulk of the world we’re going to be older. Older people cost a lot of money. Soon there are going to be 400 million people over the age of 80. The biggest impact, I think, will be on labour productivity and unless we change pension ages or retirement ages, we’re going to see a huge shift in terms of productivity.
And then the world is integrating. Despite the geopolitics that we’ve seen rise significantly in the last five years, we are wiring ourselves tighter and tighter, particularly on the data side of things and in
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terms of people flows. We think that that’s going to continue. So those are the four forces and I’m just going to spend a bit of time flashing through each one, particularly the first couple.
One way that we try and look at the significance of the re-rise or the rise of the emerging markets is from the year zero where it was somewhere north of Afghanistan or in the Afghanistan area. That’s where the world was balanced. There was a very big Chinese economy, Indian economy. In Europe there was quite a lot of activity in the Mediterranean, but not much in terms of economic significance going on west of that.
weight. It’s the speed with which it’s moving which we haven't seen before.
The biggest driver of that is urbanisation and if there’s only one number that I would want you to remember maybe from all the numbers I’m going to throw at you here is this 2.2 billion new, middle class consumers over the next 15 years. That’s what we’re going to see coming into the system.
The vast bulk of these consumers are in the Asia- Pacific region but we also have Africa, and that’s urbanising fast. I think institutions that do not have diversity will bear a cost because this is the group that you’re going to want to be interacting with over time.
“The world is integrating. Despite the geopolitics that we’ve seen rise significantly in the last five years, we are wiring ourselves tighter and tighter, particularly on the data side of things.”
Over a period of 2,000 years that centre moved to Iceland. 1950’s Iceland would be where you sort of balance it. It’s a fact that we’re going to go back to Afghanistan, or even further east of that, and the speed with which we’re going back is significant. It took 2,000 years to go to Iceland. It’s going to take us about 75 years to go back. So, it’s not only the
If you’ve been in China, you will have seen this on a regular basis, an annual basis, no matter what the context. I was there during SARS; you still had 18 million people moving from rural areas to cities. This is despite the Communist Party saying we don’t want people moving from rural areas to cities.
By the way, China’s only 54% urbanised. In the United States it’s 70% urbanised; Russia is at 80%. The OECD average is about 70%. You can see there is a direct linkage between urbanisation and GDP per capita.
This is what generates the middle class. The middle class is not like the UK or American or Canadian or Australian middle class in terms of its disposable income, but the middle class here have between $6,000 and $10,000 of disposable income a year. That’s when you can start buying refrigerators, scooters, cell phones; there’s a lot that actually shifts, so it’s not a poor middle class.
One of my favourite pictures is of Pudong in Shanghai, which my American friends call “Pu-Jersey”, sort of ‘across the river’. As late as 1995 there were onion fields and beans that were being grown there. Now it’s just a radically different place, and that’s happening in 100 cities in China, let alone what we’re now seeing happening in India, Indonesia, even Bangladesh, as this urbanisation is occurring.
Another region that I think we pay far too little attention to is Africa. We’re taught that if you look at the world, Greenland looks bigger than Africa. That was always my mental picture; that Greenland’s this massive place. When you actually look at Africa properly, when you look at what you can put inside that continent, you get a sense of the significance of that place. You can put in the US, Western Europe, China and India and have lots of white space left in that continent.
And it’s not just the resources. It is the people we’re going to see; that is the youngest population, from a continental point of view, on the planet. We’re
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