Ten megatrends every investor should know about
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Small cap investors are experts on bleeding edge trends.
Fast-moving small caps — which have vastly out-stripped their slower-moving large-cap cousins in recent years — are a stockmarket barometer for innovation.
From blockchain to AI, lithium to vanadium, cannabis to drones — small cap investors are always ready to back the next big thing.
So what are the next big things?
In Consultancy EY’s Megatrends report — the first since 2016 — it listed these ten areas as the next hot areas of innovation investors should get ready for:
Traditional industries will merge and defy categorisation as companies from different disciplines work together to deliver new concepts such as smart cities, lifestyle-as-a-service and precision health.
“For example, automotive manufacturing, energy, technology, media and consumer products companies are coming together not just to reimagine the car as a product, but also to reimagine how we will move goods and people in the future,” EY says.
Only two years ago, in EY’s last megatrends report, “sceptics doubted predictions about massive disruptions of labour by AI and robots… Now, we are overwhelmed with analyses of the future of work”, the report says.
The future of work is bundled up with mobility and human augmentation, says EY.
While AI and robots will continue to displace human jobs, technology such as exoskeletons (think Sigourney Weaver in Aliens) and augmented reality might allow human workers to “fight back”.
Work will become unbundled from physical location with the emergence of technology such as autonomous vehicles and augmented reality.
This will have wider impact such as the shape of cities because proximity will no longer be a major factor in where we choose to live.
“We expect the evolution and interplay of AI, machine learning, ever-present sensors, smart devices and new computing interfaces to take consumer empowerment to a whole new level — giving rise to tomorrow’s super consumer,” says EY.
Voice-activated technology will drive interactions, machines will augment human decision-making and — thanks to an invisible and unobtrusive Internet of Things — consumers will be surrounded by intelligent physical environments that are sensitive and responsive to their needs.
Augmented reality glasses, virtual personal assistants and social engagement technologies will be key.
Understanding how design motivates human behaviour will be critical for those designing human augmentation products, says EY – citing the failure of Google Glass amid privacy concerns.
Autonomous vehicles might be designed to look like an office or living room. “But the need for control might instead dictate retaining steering wheels and brake pedals.”
Virtual shopping assistants will be able to order the groceries, “but it’s not yet clear whether consumers will be comfortable surrendering control over their purchasing decisions”.
Product developers will “require tremendous focus on behavioural design: designing products, features, interfaces and messaging that account for the cognitive biases that human augmentation technologies are likely to trigger”.
The pace of change will require regulations to adapt automatically, says EY.
“Imagine a future in which consumer safety is protected not by monitoring regulatory compliance and penalising infractions, but by using big data and algorithms to prevent breaches before they can even occur. Imagine regulations that rewrite themselves to keep up with ever-changing market conditions.”
This will open opportunity for regulatory (or “RegTech”) companies “that apply technology to automate regulatory reporting and compliance”.
An era of human augmentation will also raise unprecedented regulatory challenges.
“Instead of licensing human drivers, regulators may need to certify and monitor algorithms — a task that demands a completely different set of capabilities.”
Climate change and evolving population demographics will create major shifts, “much as mass transit and cars did in an earlier era”.
Three disruptive technologies — ride-sharing platforms, autonomous vehicles and electric vehicles — will collectively transform cities.
For example, autonomous vehicles will enable seniors to lead a more active life. They may also lead to a more sedentary lifestyle, which might require new urban design and “policymakers to respond with behavioural nudges”.
Communities will change as climate disruptions, resource scarcity, pollution, infrastructure gaps and real estate valuations challenge the growth projections for the world’s megacities, says EY.
Meanwhile technologies such as additive manufacturing (3-D printing), AR and VR, IoT, and AI, will allow workers to operate from anywhere, changing the need to live close to work.
“The city is becoming a platform for innovation, not just in technology but also in public space, infrastructure and financing,” EY says.
In the future, companies from every sector will develop products and algorithms to improve individuals’ health.
Mobile technologies are helping drive this shift, transforming patients into super consumers who demand greater control of their health through new products and services, EY says.
“AI promises to transform everything, from drug R&D to clinical support. Robots have the potential to provide inexpensive, personalised home care at scale, while AVs will enable seniors to maintain active and independent lifestyles.
“DNA sequencing and gene editing could revolutionise drug development and provide new therapies for many grievous diseases. Blockchain could safeguard the integrity of supply chains and clinical trials.”
Consumers are demanding local, transparently sourced, personalised foods – while population growth means resource-intensive traditional agriculture is becoming unsustainable.
There are two key trends in food production ahead, says EY: vegetable-based meat and lab-grown meat.
Vegetable-based meat and dairy substitutes will be grown in digitally enabled vertical farms built on the edge of urban areas.
“Pea proteins, wheat and potatoes are turned into hamburgers. Oats become yogurt. Mung beans become eggs”.
Lab-grown “clean meat” will be produced from “cellular agriculture” growing animal cells in a medium of amino acids, sugars, minerals and water.
Either way, our eating will be personalised, local and increasingly sustainable for human health and the planet.
Nanotechnology is already driving significant investment and focus – and is now entering a disruptive phase.
“Our understanding of what happens at the molecular level and our ability to manipulate what we want to happen is increasing,” says EY.
Carbon is engineered at the nanoscale to create new materials such as graphene, which can be substituted for more costly metals in super-light aircraft.
Ultra-thin materials could lengthen battery life, make solar cells more efficient and desalinate water.
Self-healing materials could prolong the useful life of products, diverting them from the waste stream.
And rapid prototyping via 3D printing is minimising the R&D cycle.