An overview of the trends driving opportunities and risks in the world to 2030.

1. Global Trends and Risks
Framework Considerations on Systemic Change
Seán Cleary
Global Philanthropy Forum Conference
April 22, 2015

2. Past the worst in the U.S.?

3. Where are we now?
• Coordinated monetary easing and fiscal
stimuli avoided implosion - followed by
series of UMPs
• Focus on capital adequacy (quantity and
quality) - and liquidity of banks; efforts
to avoid regulatory arbitrage
• Fiscal, financial and structural reforms
needed to repair banking systems,
achieve fiscal sustainability
• Trade-offs between stability and
economic growth – deflationary risk in
Eurozone; low rates in U.S.; Europe APP
(€60 bn/month for 19 months); Japan
wider quantitative & qualitative easing
• Long-term debt up; UMPs impacted
EMs – higher nominal yields $1.1tn flows
to EMs - $470bn > L-T structural trend:
drove up equity markets, exchange rates
– asset bubbles. “Tapering” pulled it
back; low rates encouraging new surge
• Moral hazard exacerbated; global
imbalances moderated – household
debt overhang in AEs
OECD, 15th
September, 2014

6. Global Trends to 2030
• Continuation of geo-economic trends – CoG
Atlantic to Pacific - inflection points
• Higher returns to capital; falling returns to
labour – rising inequality and social tensions
• Breakthrough disruptive congruent
technologies
• Return of geopolitics
– Rise in migratory flows
• Weakening paradigm of representative
democracy
– Reversion [in some areas] to more-
primitive identities
– Onset of post-Westphalian order
• Gaia in the Anthropocene
– Rising pressure on planetary boundaries

7. Geo-economic trends continue…
…the unwinding of an era

8. Growth Trends

9. Shifting Geo-economics
• Global GDP – 2000:
– US 31%
– Japan 14%
– EU 26%
– China 3.7%
– ASEAN 1.5%
– LAC 6.6%
• Global GDP – 2018
– US 21.6%
– Japan 6%
– EU 20%
– China 15.3%
– ASEAN 3.3%
– LAC 8.3%
Globalization and World Order, The Royal Institute
of International Affairs, May 2014

10. …and out to 2030
50 per cent of global GDP in Pacific in
2015 – significance of TPP, and TTIP

11. Economic history in context
India’s
decline;
China’s/
Europe’s
rise
China’s 1st
peak; The
rise of the
West
W. Europe’s
peak
U.S.
peak

12. Higher returns to capital; falling
returns to labour
…and rising inequality

13. 13
Rising inequality Rising wealth/income
Falling interest rates
10-year Yield 20-year Yield
%ofnationalincome
%
Rising leverage
Wealth, Debt, Inequality and Low Interest Rates:
Four big trends and some implications,
Adair Turner, 26.03.2014
World capital to income ratio

14. [In]equality and Social Pathology
• Richard Wilkinson and Kate Pickett
(University of York) - The Spirit
Level: Why More Equal Societies
Almost Always Do Better:
– high measures of income
inequality strongly correlated
with dangerous social
pathology in all societies
– greater equality of income
correlates with better social
indicators across the range.
• Based on a global analysis, as well
as across all 50 states in the USA
• Data cover physical and mental
health, educational performance,
child well-being, trust and
community life and social mobility,
teenage births, obesity, drug
abuse, violence and imprisonment
• Even the privileged in unequal
societies suffer higher pathologies
than their peers in more equal
societies

15. Breakthroughs in disruptive
congruent technologies
…reinforcing returns to capital

16. Economic landscape changing
• Robotics,3D-printing, driverless/electric
cars, new energy exploration, efficient
alternative energy, composites. Close to
tipping point, challenges significant
• Acceleration in CPU capabilities and big
data drive continued automation of
repetitive actions - manual (assembly),
or mental (accounting/audit, legal
discovery/precedent search; general
medicine – baby heart models
• Disruptive technology breakthroughs -
new unforeseen shifts in employment
patterns and opportunities
• Concentration/acceleration of innovation
- falling cost/rising investment in info-,
bio-, nano– and cognotech further
enhance returns to capital (RoI/Ro
technology ownership) rather than
labour
http://www.thefinancialist.com/3-d-printing-from-toys-to-jet-engines/

17. “…college grads age 22 to 27 are stuck in low-paying jobs that don't even require a college
degree. The percentage of young people languishing in low-skill, low-paying jobs is 44%, a 20-
year high. Only 36% of college grads have jobs that pay at least $45,000, a sharp decline from
the 1990s, after adjusting for inflation. …the percentage of young people making below $25,000
has topped 20%, worse than in 1990.”
Another way
of looking at
it…

24. Implications for income and education
• Power law distribution of wealth/income:
U.S. 1% share national wealth/income doubled
in 30 years; manufacturing wage static; middle
class lost decade after 2001.
• Continuing demand for personal services –
price increases for prestige items. Sharp rise in:
aging (>60s 11.7% (2013) to 21.1% (2050));
urbanizing (>51% of 7.2bn (2014) to 67% of
9.4bn (2050); consumption; and expectations.
By 2050, 2.3bn more on planet; 3bn more in
middle class; but 3 bn slum dwellers - unless
breakthroughs.
• Mid-20th century education unsustainable:
Integrate from preschool through
VTE/university, enable continuous learning,
upskilling, horizontal/ diagonal migration. Digital
provision of knowledge and VTE, but
access/attainment uneven.
• Flexibility, adaptability, social capital/social
cohesion needed to manage transitions.

25. Opportunities and risks
• Opportunities: new flows of goods, services,
finance, people, data/information and
disruptive technologies (3d printing/additive
manufacturing) may collapse global supply
chains – and create many new opportunities in
substitution, optimization, and virtualization
• Creation of new ideas, large-frame pattern
recognition, and complex communication
• Disruption likely from:
– asynchrony between technological
capabilities and normative frameworks
– geopolitical, environmental or pandemic-
based dislocation of global tourism,
migration and supply chains
– ecological catastrophe overwhelming
planetary boundaries in the context of
complex adaptive systems
– hubris – exceeding our ability to
understand and thus manage our socio-
economic and bio-geospherical CASs

26. ‘Governing’ technology
• Technologies embedded in socio-economic/socio-
political systems: Change produces both expected
and unexpected social, cultural, economic and
political outcomes. Marshall McLuhan, “We shape our
tools and thereafter our tools shape us.”
– Many socio-technological systems (energy, info -
nano-, bio, neuro-, cogno- etc) each with unique
regulatory environment/stakeholders
– Technological change not linear - highly
dynamic, some innovations endorsed over
others – drive new trajectories
• How to advance public good – balance
economic/political/social welfare – e.g.
– Ethical and economic considerations (e.g.,
neurocognitive technologies – pressures to
promote and to restrict
– Challenges of convergence – e.g., when does
biotech/nanotech reach into health; or robotics
into military ethics/policy? Transhumanism…?
• Technology governance is social policy: Seek to
govern technology, while enabled and governed by
technology: As we seek to guide (and constrain)
technological change, technologies guide (and
reshape) our sense of what policy can/should be.
Bostrom & Yudkowsky, The Ethics of Artificial
Intelligence, 2011 - increasingly complex decision-
making algorithms inevitable and desirable – so must
be transparent to inspection, predictable to those
they govern, and robust against manipulation.

27. Return of geopolitics
• From the Mediterranean to Central Asia
• In East Asia
• On Russia’s borders

28. Zones of geopolitical tension

30. Tensions in East China Sea
Offset by regional monetary swap arrangement
China/Japan - Chiang Mai Initiative (2000)

31. Tensions in the South China Sea

32. The Putin Doctrine
• First imperative: maintaining nuclear
superpower status and strategic
parity
• Second objective: maintaining
Russia’s status as a great power
• Third objective: regional hegemony -
effect political, economic, military, and
cultural reintegration of the former
Soviet bloc under Russian leadership

33. Political systems transforming
• Weakening of paradigm of representative democracy
• Reversion [in some areas] to more-primitive identities
• Onset of post-Westphalian order
• Rise in migratory flows

34. …past the apogee of representative democracy?
• Social media empowered millennials - 76% own
smartphone; most online >6 hours/day – but 52%
say their country’s political system doesn’t
represent their values/beliefs: >60% in Europe and
LatAm, 53% in USA, 44% in Asia, 41% in the
ME/Africa. Family (85%), school (61%) and friends
(56%) (technology 30%) have shaped their outlooks,
government influenced only 8%
• “Most important way to make a difference in the
world”: 42% “access to [quality] education”; 41%
“protecting the environment” (+24% “promoting
sustainable energy”; 39% “eliminating poverty” (+
24% “providing basic food/shelter to people”)
• 62% believe can impact, as individuals, on local
issues; only 45% believe possible through the
political system. Very high percentages believe
digital networking is effective in influencing
outcomes; 40% believing they can have a global
impact
• …but Facebook and Twitter haven’t built
organizations or leaders …

35. Bangkok, Rio, Kiev and Hong Kong

36. A democratic polity doesn’t fall from the sky…
• Democracy not just overthrow of an autocrat, or even
popular elections: It Involves constitutional
entrenchment of:
– fundamental human rights, including rights of
assembly and political organisation;
– the rule of law and equality before the law
– the separation of powers; and
– free elections, usually based on adult suffrage
• Elected representatives exercise power subject to the
law, under a constitution protecting the rights and
freedoms of individuals and limiting the right of the
majority to override minority interests
• Liberal democracy requires all parties to accept:
– legitimacy of the state and the political system
– the principle of sovereignty of the people
– equal rights to participate in society and the
economy, and
– political competition
• Personal and economic freedoms associated with the
“middle class” and a broad-based civil society, probably
essential – deferment of immediate gratification
• Free elections alone don’t bring transition from
autocracy to democracy. A wider shift in political
culture and establishment and entrenchment of
institutions of democratic government are needed.

37. Gaia in the anthropocene
• Rising pressure on planetary boundaries
• Increasing incidence of extreme weather events

38. Gaia in the anthropocene
• Biological organisms and inorganic
surroundings form a self-regulating,
complex bio-geosphere enabling and
sustaining life on the planet. [James
Lovelock, Lynn Margulis]
• Human society (CAS) core component
of the bio-geosphere (a larger CAS):
Adaptive change in bio-geosphere
formerly main cause of uncertainty
• Today in Anthropocene aggregate
human behaviour using technological
capacity is primary destabilising
element – oceans, atmosphere, N&P
cycles, fresh water usage, destruction
of biodiversity
• Managing this is imperative

39. The impossible is already here

40. China’s scale enables solar PV
breakthroughs
• Solar energy could be top
source of electricity by 2050,
due to plummeting costs,
International Energy Agency,
October 6, 2014
– solar photovoltaic (PV)
systems could generate
up to 16% of the world’s
electricity by 2050; while
– solar thermal electricity
(STE) - from
“concentrating” solar
power plants - could
provide a further 11%.

41. Distributed grids; supertlight vehicles; modular
housing; urban farming

42. Recycled plastic printed housing; and silk-leaf
photosynthesis – Royal College of Art

43. World's first 3D-printed apartment building in China
Michelle Starr, CNET, January 19, 2015
• In March 2014, WinSun printed 10
houses in 24 hours, using a 3D printer,
construction material and industrial
waste, in a base of quick-drying cement
with special hardening agent
• In January 2015, WinSun delivered 5-
storey apartment building and 1,100 m₂
villa, in Suzhou Industrial Park
• 3D printer array, developed by Ma Yihe,
is 6.6 m. high, 10 metres wide and 40 m.
long. It fabricates large pieces at
WinSun's facility; assembled on-site,
with steel reinforcements and insulation

44. …and in development

45. Disruptive technology, capital and business models
• New CIT - big data, ubiquitous sensors, and
mobile connectivity creating new economies of
scope and scale due to massive cheap, granular,
and actionable information
• Energy tech. integration: Across RE, EVs (PIGS* to
SEALS**) smart grids, and storage - creating new
performance standards and synergies
• Capital innovation: Sophisticated investors
shifting capital flows and lowering cost of capital
• Disruptive business models: New business
models in disruptive companies (e.g. Uber, Tesla,
SolarCity, Nest, Crowley Carbon) creating value
and fostering innovation – Mobility as a System
• Corporate innovation: Google and Apple in
mobility, Apple and Walmart in RE, and Cargill in
shipping are rattling incumbents.
• Cities and regions: Local governments showing
leadership in regulatory reform for climate
mitigationAdapted from Rocky Mountain Institute, February 2015
*PIGS: Personally-owned, independently used, gasoline, steel vehicles
**SEALS: Shared, environmentally-aligned, autonomous, lightweight vehicles

46. Understanding and Mitigating Risks

47. WEF Global Risks 2014
Risk Interconnection Map

48. WEF Global Risks 2015
Risk Interconnections map

49. Global Megatrends
– A systemic view
• Continuation of geo-economic
trends - inflection points
• Higher returns to capital;
falling returns to labour –
rising inequality and social
tensions
• Breakthrough disruptive
congruent technologies
• Return of geopolitics
• Political systems transforming
Weakening paradigm of
representative democracy
• Gaia in the Anthropocene
Rising pressure on planetary
boundaries

50. Embedded, complex adaptive systems
and a spontaneous symmetry break
• Human society is complex adaptive system,
incapable of directive control; embedded
in larger more complex adaptive system –
bio-geosphere
• Symmetry break occurs when working of
complex system transitions from a
symmetric but ill-defined state, to more
clearly-defined state. In spontaneous
symmetry breaking, underlying laws are
unchanged, but the system changes
spontaneously from a symmetrical, to an
asymmetrical, state
• Profound, multivariate asymmetry
between scale and depth of global
economy, absence of a commensurate,
inclusive community, and the defective
state of global polity, may make
spontaneous symmetry break inevitable

51. Mitigating and managing risk
in uncertain conditions
• Invest in insight and foresight
– first-rate, relevant information, skills
and knowledge
• Brace for certainty of turbulence;
accept need to manage risks
inherent in uncertain conditions
– ensure organic ability to anticipate
rapid and discontinuous change
– resilience allowing for adaptation
and management of shocks one
could not foresee.