Disruption: Buckle up for the ride

by Leo Johnson Partner, Disruption Lead

Email +44 (0)20 7212 4147

In PwC’s disruption team, we are seeing weak signals of four radically different scenarios for the future.

The first is the Rise of the machines, where exponential technologies reshape the landscape of business and society. It sounds like paradise. Driverless vehicles blitz air pollution, eradicate road deaths, and seamlessly deliver us via multimodal transport wherever we want to go. AI has automated away both blue and white collar drudgery, with citizens empowered to live a creative existence. Financial stress is reduced; there is universal basic income and cheap digitally distributed goods and services.

But what are the knock-on effects of such exponential technology? A second scenario, Global Rationing, sees us heading for a period of consolidation - a world where widespread job losses resulting from AI undermine business models and destroy public confidence, triggering a flight to protectionism.

Two waves of impacts resulting from exponential technologies create this scenario. The first is direct. What happens when 3D printing obviates the need for nearly half of air cargo? What happens to motorway service stations when inductive charging or autonomous trucks start to erode the traditional customer base? These are material liabilities.

But there’s also a second wave of disruption, with potentially a bigger structural impact.

We’ve lived in an era dominated by mass production, with business models anchored around high volume, low margin economics. What happens to these businesses if artificial intelligence eliminates an estimated 47% of white collar jobs in the US and UK by 2035? This type of tech-driven unemployment carries a deflationary effect risk. For an economy that’s based on pumping goods out and amortising against fixed costs of centralised production, you need huge numbers of consumers buying up those goods. If those numbers start to get smaller, a lot of businesses start to look vulnerable.

If you extend this line of thinking to its most pessimistic extreme and layer in disruption amplifiers - an ageing OECD population, the pensions crisis, climate-driven distressed migration - you see our third scenario, Survival of the fittest. This worst case scenario sees the economics of mass collapsing entirely, and innovation retreating. Urbanisation and climate change keep advancing; the disintegration of the current political order leads to the shutdown of government, the rise of parallel societies, and the collapse of the state.

However, we see the growing possibility of a fourth scenario. In the Local Hero scenario, our new arsenal of technologies is deployed with the intent to raise productivity and solve the problems of the many. In this scenario we advance technologically, but not in a centralised fashion; not with the algorithms owned by the few, nor the dominance of the platforms; but instead through a highly distributed economy. This could be local councils using drones to cut the time for delivery of defibrillators from 21 to five minutes. Or 3D printed houses, created in 24 hours, costing less than £8000. Or micro-irrigation of farmland to eliminate water losses and improves crop productivity. Across water, sanitation, housing and education, we have the technological capability to deliver solutions that raise productivity, boost prosperity and happiness.

I am optimistic that the fourth scenario is the most probable. Why? Because technology, as Kentaro Toyama said, is not the answer; it is the amplifier of intent. If capitalism is smart, if it does what it says on the tin, there is only one of the scenario that really grows global markets. And there’s only one, I would guess, that you would want to live in.

by Leo Johnson Partner, Disruption Lead

Email +44 (0)20 7212 4147