• Paul Tero

Local Economy Futures - computerisation

Information Technology has changed your Local Economy in recent years, how should you prepare for the changes that Information Technology will cause in the years ahead?

On a day to day basis we don’t witness significant change, but we can see it when we step back and look at the bigger picture. And although we are comfortable talking about change and what the future could look like in the abstract, its not until we examine our local economy in terms of “its not the same as it used to be” that we can better prepare for what lies ahead.

Consider the last 10 years or so. Apart from the ravages of the COVID-19 pandemic, we have experienced the storms of the global financial crisis, the far-reaching influence of the smartphone, a rising awareness of societal inequalities, the growing ubiquity of digital commerce, significant reductions in the costs of renewable energy, the profound effects of social media, shifts in geopolitical balances. and the increasing acceptance of automated transport systems to name but a few.

If all this has happened over the last 10 years or so, what is likely to happen over the next 10 years or so?

Your locale’s economy has no doubt been affected by one of more of these prominent experiences, the question is: what is likely to happen over the next decade?

Very few of us in 2010, no doubt, could see that by 2020 local traders would be affected by online shopping or by the prominence of digital marketing, let alone the pummeling by an infectious virus. Similarly, we may not have been awake to the growing clamour to draw energy from renewable sources, to operate businesses according to ESG (environmental, social, governance) principles, or to the attraction and success of social entrepreneurship.

So, at the cusp of the third decade of the 21st Century how different will the start of fourth decade be? What sectors of your local economy will be doing well, and which will be classed as sunset industries. What changes are we likely to witness in say housing, in transport, in manufacturing, and in services? What trends are driving these changes?

Preparing for 2030 today

For me, the relevance of thinking about the 2030’s today is this: if our strategic plans have a time horizon of say four or five years, then the fulfillment of the vision these plans embody marks the half-way point between now and the fourth decade of the 21st Century. That the agreed strategic objectives of a plan constructed during 2021 will in essence be describing what 2030 is expected to look like.

A strategic plan that has 2025, give or take a year, as an end point should be referencing 2030 rather than 2020.

Taken from another angle, we are assuming that these four or five year strategic plans are in alignment with the current trajectory of change. That they are not at odds with the trends that are driving change, and are indeed preparing all of the stakeholders in the local economy for how things will pan out during the second half of this decade.

And given that the current trajectory of change has been affected by the prominent experiences of the pandemic, of technology, of geopolitics and so on, shouldn’t the assumptions that go into the plans take into account similar significant events in the time ahead? Indeed, any trend that is driving change should not be ignored!

Now. While change can be wrought by local trends, there are significant trends that drive change at a national and international level. These significant trends can be harder to resist than more localised ones. They can not be ignored (eg. digital commerce). These significant trends, which can also be called global megatrends, have to do with demography, with the environment, with society as well as science and technology. While the balance of this article will be on technology, particularly automation, computerisation and digitisation, we need to briefly reflect upon the other three megatrends.

Future profiles of people and place

First, the global megatrend of demography. According to the United Nations, between 2015 and 2030 the proportion of those over 60 across the world is expected to grow by over 50% to 1.4 billion people. That’s to over 16% of the expected 8.5 billion people who will be alive in 2030. About one in every six people will be nearing pensioner status.

There are, obviously, implications for the health sector in terms of the costs of provision of care and the availability of a workforce that can provide this care. But a local economy can also be impacted by housing and mobility needs, differing demands for education, and shifts in the types of popular community activities.

Second, the environment. We are witnessing shifts in weather patterns, increases in ocean temperatures, rising rates of abnormally high seasonal temperatures, stressors on agricultural yields, and ongoing interruptions to the rhythms of fauna and flora around the globe.

The impact of these environmental effects upon local economies will continue. For example, farm profits will be affected, retail customers will increasingly choose goods and services from businesses that are environmentally responsible, and those who deliver green-rated domestic and commercial construction activities will do well.

Third, society. There is complexity and nuance to the changes that are happening to individuals, communities and societies across the globe. More and more people are willing to pursue what they see is best for themselves rather than for familial networks. Associated with this is the increasing willingness to live alongside people and communities that are different. A business related shift relates to entrepreneurial activity: the social enterprise is becoming a dominant economic force.

The ramifications of this societal dynamic will continue to be felt in company boardrooms and their human resource departments. Locale’s could find themselves hosting clusters of social enterprises instead of industry-based clusters, resulting in increased investments in activity centres and in their creative and night-time economies.

Potential information technology capabilities

Having briefly considered demographic, environmental and societal global megatrends, let us turn in greater depth to science and technology. Specifically how the local economy will be affected by information technology over the next 10 years. With a focus on automation, computerisation and digitisation.

Consider a computer’s processing power. Referring to Moore’s Law, the well-founded observation that computing power effectively doubles every two years while its price halves over the same time period, a standard laptop computer in 2030 will be more than 30 times more powerful than the ones in use today. With this ability to process much more data and at a faster rate the performance of all information technology in 2030 will be substantially greater than today.

For example, the successor to 4K UHD streaming video and free-to-air television will be standard. Picking the difference between physical reality and immersive augmented reality will be extraordinarily difficult. And let us not forget the ability to store and process the torrent of data, images and video from all manner of sensors and cameras.

Consider the progress of automation. One of the key principles of automation is that if a task is routine, it can be automated. That is, if you can write down the steps of a task that someone does in the workplace then there is a good chance that you can convert those steps into an algorithm for a computer to process. Then with the right software and hardware, that particular task can be automated.

This labour replacement is underway in sectors such as manufacturing, professional services and transport. In manufacturing, robots in factories across the world are performing many repetitive tasks that humans were doing (globally, in 2015 there were 66 robots per 10,000 manufacturing workers. At the time of writing the ratio is about 113 per 10,000). For professional services, software is being used to automate tasks in the legal profession (e.g. research and document processing), in journalism (e.g. sports and finance reporting) and in accounting (e.g. data and report analysis and reconciliation) to name but three. And we are well aware of the automation occurring in transport, for example passenger cars and delivery drones.

Consider the promise of quantum computing. The capabilities of this type of computing are considerable (it does not work the same way as today’s computers – which are all using the von Neumann architecture). However, the underlying quantum physics does indeed verge on the fantastical. Even Einstein called it spooky.

In the world of quantum computing there are terms such as quantum entanglement (objects interacting at a distance), superposition (multiple states at the same time) and tunneling (breaching impossible barriers). These are words and concepts with which we may become quite familiar with over the coming years. For example, the quantum computing term of Qubits, the basic unit of quantum information (and analogue to our current basic computing unit of “bit”) is starting to be used in mainstream press and publications.

Across the world there are many nations, universities and companies involved with quantum computing. IBM have built a commercially available quantum computer called “IBM Q”. D-Wave, a Canadian quantum computing company, have partnered with Google and NASA. Microsoft is developing applications for these new types of computers. The governments of Germany, France, South Korea and China are among the leaders in developing this technology.

And the benefits of quantum computing? One is the ability to replicate any physical system or object down to a sub-atomic level. This means the discovery or creation of new ways to put atoms together (new materials, new medicines), deeper understanding of global climate systems, and the optimisation of complex man-made systems (e.g. supply-chain logistics, global currency and capital markets).

Processing power, automation and quantum computing – all aspects of information technology. And progress in these and other aspects of information technology will ensure computing in 2030 will be quite different to that which is experienced in 2020. For, the cost of computing will further reduce and the power, complexity and capabilities of the software and the devices that computers interact with (the sensors, actuators, motors and cameras to name but a few) will increase. Artificial General Intelligence could well be commonplace. Without a doubt, the science and technology of this century’s 4th decade will be more advanced than that of the current 3rd decade.

Local impacts of automation, computerisation and digitisation

We can wonder at these advancements, but what are the local implications? We can understand the forward momentum of information technology in a broad sense, but at a personal level all of this can go over our heads. We can struggle to comprehend these developments in terms of their influence upon how our community lives their lives. How they operate their businesses. What investment decisions they make. The profile of their staff. That is, there will be change wrought upon the locale in which we live.

So, how will all this automation, computerisation and digitisation affect the local economy? What are the potential changes that information technology will usher in through the course of this third decade of the 21st Century?

Let us briefly consider several industry sectors.

Regarding agriculture, forestry and fishing. Increasing computational power, rising ubiquity of sensors and continued improvements in automated machinery will continue to drive down the cost of production. Although yields will increase, only those who leverage the capabilities of information technology in response to the changing climate will maintain profitability. More than likely the pull of aggregation, in the form of industry consolidation or expanding cooperatives, will continue to be a feature.

Regarding mining. Automation will continue to drive profitability through reducing costs. Advances in quantum computing may well give rise to the discovery of new materials, potentially turning marginal mineral deposits into valuable feedstock.

Regarding construction. Advances due to the feasibility of schemes such as building information modelling will improve all aspects of the lifecycle of large physical assets. Automation may well impact some trades negatively on the one hand, but increase the need for those with advanced thinking skills (e.g. project management).

Regarding manufacturing. Given the complexity of current supply chains, it is a given that this complexity will remain and will be optimised for greater efficiency and capability using quantum computing. Together with advances in additive manufacturing (3D printing), computerisation is likely to drive costs lower for both repetitive and discrete processes.

Regarding transportation. We are well aware of the advances being made with respect to driverless transportation systems (land-based is maturing, while sea and air are lagging they are following a similar trajectory to land-based systems). It is not farfetched to imagine fewer manually-controlled vehicles on the road by the early 2030s. Together with governmental limitations on the fossil-fuel powered vehicles and the pervasive use of Smart City technologies, computerisation is likely to lead to increasing traffic density, the rise of on-demand transit systems, moderated insurance premiums and reduced employment opportunities for mechanical-maintenance trades.

Regarding utilities. While advances in software and processing power will support increasing decentralization of electricity generation, quantum computing may well lead to a step change in how energy is distributed over long distances. In the same way, the potential of quantum computing opens up new ways of treating domestic and commercial waste and new ways of efficiently using water. Each of these scenarios will lead to new commercial opportunities, regulatory change, and impacts upon relevant infrastructure.

Regarding wholesale and retail trade. Due to the pandemic we have witnessed a dramatic lift in e-commerce, with attendant impacts across the supply chain. Cybersecurity concerns have risen, so too the demand for digital services (eg. video streaming services, electronic games, internet search, etc). This acceleration is bound to continue. However, virtual tourism and other human experiences that can be delivered electronically, using say holograms, are distinct possibilities given the rate of improvement in processing power and data communication speed (consider video meetings, virtual house inspections, current AR & VR technology as a starting point).

Regarding professional services. In recent years each services sub-sector, whether health, education, legal, marketing, accounting and so on, have introduced software and leveraged the capabilities of the internet to improve efficiency, maintain competitive advantage and open up commercial opportunities. Over the coming decade this software will become more intelligent. Thus continuing the trend. Also, just as there are new types of careers today compared with a decade ago (eg. social media marketing, cloud engineer, etc), so new types of careers will arise over the next decade.

Regarding public administration. Just like the professional services sector, public administration has benefited from advances in software and internet technology. RegTech, for example, should have expanded beyond the finance industry. The advances in processing power referred to previously will lead to deeper understandings in real-time of even minor policy outcomes from thorough and exhaustive scenario modelling. Finally, artificial intelligence will lead to improved preparedness and anticipation of community reactions no matter the branch of government (e.g. policing, community support, emergency services, environmental monitoring, urban development, etc).

Common threads

From primary industries through to those at the more complex tertiary level of economic activity, advances in automation, computerisation and digitisation will impact all economies. Even those at the local level.

By identifying some common threads that weave through each of these sectors, those developing strategic plans for their local economies can do so with greater insight into what potentially lies ahead. It means that the plan’s strategic objectives will better describe what 2030 is expected to look like. And the stakeholders in the local economy will be better prepared for how things will pan out during the second half of this decade.

One common thread has to do with employment opportunities. Job polarisation is increasingly likely, where those with high skills having the best prospects. A second order effect will be felt in the demand across the range adult education options. Courses on offer should support the dominance of thinking and digital skills in the workforce, as well as developing proficiency in increasingly specialised domains.

Another thread is a company’s ability to turn data into competitive advantage (the DIKW Hierarchy – data → information → knowledge → wisdom). Where questions about a firm’s data strategy, algorithms and related intellectual property are deemed as important as questions about its employee count, market share and strategic partners when it comes to attracting investment to a locale.

Then there are employment multipliers. Given the potential negative impact on employment in the non-tradable sector, high-value businesses that operate in the tradable sector will be eagerly sought after. Given the potential for significant gains in productivity and profitability, local businesses that lean into exploiting the opportunities that will exist after 2030 will be pivotal to a local economy’s ongoing success.

A final thread has to do with communication. Just as advances in information technology have improved the capabilities of the many social media platforms in use today, similar progress will be realised in the time ahead. Consider the networks that the business community have today compared with a decade ago. These networks span the globe efficiently and effectively, ranging in focus from general to highly specialised. With even greater bandwidth and processing power, surely an individual’s holographic presence at a remote meeting will be commonplace by 2030! Even a super-abundance of relevant tacit and codified knowledge will be available instantly.

Planning for these views of the future

We have developed an understanding of the need to prepare for the 4th decade of the 21st Century today. That the global megatrends currently holding sway will continue to impact economies at national, and at the local level. And we’ve discussed the changes through which one of these megatrends, computerisation, will become apparent across several industry sectors over the coming years.

Followed by a review of some of the common factors that those with an interest in developing local economies should be mindful of.

Importantly, strategies relating to the development of the local economy can be the mechanism through which the listed industry changes and related common factors can be addressed. While the strategy’s vision can be used to bring direction to local economic activity and establish a reference point for stakeholder discussions, it is through the plan’s strategic objectives that preparations for 2030 will occur.

While it is a given that information technology will continue to advance, the images of the future presented here may be different to yours. You may see the future unfolding differently, perhaps with underlying assumptions that are darker or even with a set of brighter preferences.

Nevertheless, automation, computerisation and digitisation will continue to affect the local economy. And the potential changes that information technology will usher in through the course of the coming decades are likely to be at least as profound as those experienced since the dawn of the modern computer age.

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