In his speech during the celebration of the “2018 Kick-Off Masterclass Seminar” in Palm Beach, Henk Grootveld, Head of Trends Investing at Robeco, compared two photographs of New York to explain the next wave of digitalization. The first one, was taken in the year 1901, at Fifth Avenue, and only one car was driving among a vast amount of horse carriages. The first internal combustion engine had been invented 20 years ago by Mr. Benz and his nephew, and the use of cars was far from extended. However, in twelve years’ time, in the same street and city, horse carriages became the exception and the first car models dominated the streets. New York went from one scenario to the other quite fast, simply because cars were cheaper than horses and easier to maintain.
In the same way, consumers went digital when Apple introduced its first iPhone in June 2007. The world has changed, and smartphones are a vital part of daily activities, a third of relationships between people and half of purchases are made through smartphones.
Today, the digitalization of the world has led to the introduction of collaborative robots. Rethink Robotics has created Sawyer and Baxter, ‘smart’ robots that can be taught new skills rather than being programmed and that can work together with humans, as they are full of sensors. Most of collaborative robots are used in the car’s industry, which is experimenting a high degree of transformation.
“In Germany, this process of transformation has been called the Industry 4.0, because it is the fourth attempt to become more efficient. The first industrial revolution started with the use of steam, the second one, brought manufacturing processes, the third, introduced computers and simple robots, and in the fourth revolution, robots can be connected and communicate with people through the internet of things. This new phase will radically change production in the next 10 years, in the same way as the smartphone introduced a change on how we think about consumption”, he said.
The rise in robot use is particularly pronounced in Asia, specifically in the countries that have a problem of demographic aging, like South Korea and Japan, whose working population has been shrinking in the last 6 years.
“China’s working population is also diminishing, there will be a huge need to replace labor for robots. Specifically, they are expecting to go from the current rate of 68 robots per 10.000 employees to 150 robots. It is possible that they could get this target sooner or that they overshoot it. It is my belief, that by 2022, China will be somewhere around 200 hundred robots per 10.000 employees, while in the United States, the current number of installed industrial robots per 10.000 employees is 190”, he added.
Automatization and digitalization are transforming all different sectors in the world and will definitively change the way people is related to reality. The Economist magazine has a very positive view, about robots, production of food and the idea that everything comes cheaper and is locally produced. However, The New Yorker, has a gloomier view, depicting a world in which robots will take all the jobs, showing two sides of the same coin. “Some estimates foretell that more than 50% of the known jobs in the world will disappear in the next 15 years. People will start to work in new companies”.
According to the World Economic Forum, advanced technologies will increase efficiency and reduce costs by up to 30%. Moreover, they forecast that factories can shorten their production times by 20% to 50%. They believe that globalization will become a trend of the past, production will become more local, transforming manufacturing into specialized and flexible production hubs able to be adjusted to the needs of consumer. “Adidas has already moved their manufacturing line from Thailand to Germany, where they are producing all their expensive running shoes as customers order them. They measure clients’ feet, in the shop or online, and within 24 hours, they produce the shoe and send it to customer’s door using smart manufacturing and 3D printing. Another example is Maserati, the Italian exclusive automaker, that has introduced a software in designing and production that has reduced the time-to-market by 50%, from 12 years to 6 years, by implementing technology related to the internet of things. At the same time, 3D printing technology is allowing huge advances and positive effects to the needs of every individual, for example, the technique of making 3D printed prosthetic limbs is very valuable in building prostheses for children, which are normally more complex due to their small size and constant growth”.
The electric self-driving car
At the same time, the artificial intelligent co-bots will change our society and the car industry. The introduction of electric self-driving cars will reduce accidents by roughly a 90% and will erase the need for repair shops or car insurance.
“Electric cars will eliminate all nitrogen oxide fumes and fine particulate matter, as well as it will reduce smog. China has become one of the largest advocates of electric vehicles, Beijing will replace all its buses with electric engines in one year. Breathing Beijing’s air reduces 10 years the expected life of its population versus any other city in China”.
The digital content per car will increase by 450% and will turn the car from hardware to software. “Two Swedish companies, Ericsson and Volvo, are working together to develop intelligent media streaming for self-driving cars. The idea is to adjust the journey to reduce the time in the car, but maximizing the time to watch content, allowing customers to choose routes and select content tailored to the length of their commute”.
Additionally, the introduction of robot taxi’s will improve mileage per car, dissolve traffic jams and make most parking spaces useless. “We normally only use a 5% of the time of our cars, and the other 95% is not used, while robo-taxis use the 43% of the time, gaining a huge efficiency and avoiding the need of parking lots. Waymo, Robo Taxi and Smart Nation Singapore are the leaders”.
Digital finance
When it comes to digital finance, emerging markets are in the lead. “During the Chinese New Year celebrations of 2017, about CNY 462 billion (approximately U$D 68 billion) were exchanged in online payments, representing 343 million transactions, a 48% year on year increase, and 760,000 hongbao’s per second – hongbaos are red envelopes with cash as a monetary gift, a Chinese tradition during Chinese New Year believed to symbolize good luck and ward off evil spirits-. China and India are set to become larger in listed FinTech than the rest of the world combined.
In the next ten years, cash will become an exception and online payment methods will become mainstream. Digital finance will open the way to 2 billion people who currently do not manage their financial affairs.
Cyber Insecurity
Finally, the lack of cybersecurity is the biggest threat to digitalization. In July 2017, global companies like Maersk, WPP, FedEx and Merck struggled to continue with their normal operations after being victims of a huge cyber-attack that compromised hundreds of computers, equipment and other technology. Some months before, the malware Wanacry had hit around 150 countries around the world, demanding ransom payments in the Bitcoin cryptocurrency. But far from being addressed, the problem will get worse in the future with the increase of cloud computing, which intensifies its vulnerability.
