2020s will be a K-Shaped Decade
Income inequality is going to be only one part of it.
This is not a political writeup, but an enumeration of the factors that may entrepreneurs, businesses and individuals may find useful as they think about the next decade.
Joe Biden will take over as the President of United States in 2021 after 80 million people voted for him. This is unprecedented in US history, so are the 74 million votes that his opponent received. A central issue in the divisive election was the K-shaped recovery from pandemic-induced economic hardships in 2020. The idea that the rich keep getting richer while poor, poorer was bitterly contested in the election, as it has been in many elections before.
Truth is, such K-shaped progress has been obstinate in US history for nearly half a century. The recovery from the Great Financial Crisis of 2008 was particularly K-shaped. Data after data, stats on top of stats bear the thesis out. In the link below you will find some of these numbers from Pew Research Center. There is similar data available for most advanced and most large economies in the world; this is by no means a US-specific phenomenon.
Trends in U.S. income and wealth inequality
Barely 10 years past the end of the Great Recession in 2009, the U.S. economy is doing well on several fronts. The…
In my opinion 2020s is going to be much worse in dividing Americans and other peoples of the world, and the systemic income inequality is going to be only a part of it.
1. The Tech K
Artificial Intelligence has reached escape velocity. While the hype around its wonders continues unabated, the real, working applications of AI are growing exponentially as well. Companies that are building their own solutions, vendors that help such companies, startups along certain established archetypes and people who work for these are the ones capturing most of the value.
Advances in robotics and connected-sensors (think IoT) accompany AI. These three enable each other, and are creating new ways of thinking about everything, e.g. self-driven trucks and human-less shop floors. Robotic or intelligent process automation is part of this trend.
While these technologies will disruptively improve productivity of the global economy, create unprecedented wealth and propel countless ‘winners’, they could leave a large section of society disenfranchised. Such tech-divide is nothing new to human societies. After all, we are all still living in a world carved by the steam engine. I suspect 2020s will see the beginnings of a re-shaped world.
In real terms human labor could continue to become cheaper while the value of a PhD in STEM increases. As a result companies that either leverage a concierge experience e.g. a private bank, or provide a self-serve model, esp. where someone else is paying for it, e.g. Google, will do very well. There will be more celebrated chefs and more food banks, with less and less room in between.
2. The Data K
A similar dynamic is likely to play out in the corporate world. It’s beyond doubt now that technology hardly matters to the business of AI. The differentiator is the data to train AI models. Companies with access to more proprietary data are going to become more powerful at the cost of SMBs and even other, smaller incumbents. Such power only gets more power, in the form of more proprietary data.
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For this reason access to data will also become harder. This seems like a paradox — after all we are creating data at an unprecedented rate. However, technology is so freely accessible that the data in public domain is unlikely to pay any economic rent. It’s the proprietary company data that counts. Regulations like GDPR and CCPA, while well-intentioned and meant to solve a different problem, create more barriers as a side-effect. Apart from companies with such data, this trend also bodes well for cybersecurity as an industry.
This Data K goes beyond software or internet companies. Tesla is Tesla not only due to Elon Musk’s vision but also the fact that every mile driven on a Tesla helps optimize something. Related, the first commercial unmanned vehicles have been Caterpillar’s that are helping mining companies better manage costs and regulation. AI is helping grocers, oil companies, hospitals, farmers — companies in every aspect of global economy, but only the large ones with sufficient data.
3. The Food and Medicine K
Who can forget September 9, 2020. This was the day when the sky above San Francisco Bay Area turned surreally red. Due to a combination of nearby forest fires and wind patterns, it was refracting sunlight at a different end of the spectrum. This was just a warning sign. Currently the symptoms of Earth’s health are deteriorating faster than even the pessimist projections. Sea levels are rising, hurricanes are more frequent and stronger, forest fires claim millions of acres every year, and sensitive ecosystems, like coral reefs, are disappearing at an alarming rate.
If the trends continue 2020s will see more humanitarian crises in terms of migration and food security. In the past such factors have led to nationalist politics and ethnic strife esp. in under-developed regions. Such strife always compounds migration, food, and healthcare related problems in a vicious cycle. Human dignity inevitably suffers in these cases.
At the same time the world is going through a slow and silent revolution in healthcare which can increase the quality and length of human life meaningfully. Digitization of life sciences, the idea of whole person care, better access and insurance coverage, and the success of precision medicine technologies like immunotherapy, are some of the factors in this revolution.
Only the nations with strong social institutions will benefit from the better healthcare. They will also be able to invest more in social welfare, and become even stronger magnets for migration, legal or illegal. More of these stable nations are following through on their climate change commitments like in the Paris Accord. For example, India and China are already ahead of the curve, while US is close to it despite withdrawing. Societies in other nations could end up at the mercy of forces of nature.
4. The National Security K
Xi Jinping appears to be dug in. Joe Biden will reveal his cards soon, but the political climate world over points to a highly polarized world. The recent struggle of the Australians in managing the two geopolitical behemoths is a poster child for the national security K. A full scale military conflict is unlikely in 2020s. That may become 2030s’ problem. Still, the insecurity of peoples caught between US and China will only deepen.
Many will remember how the US-USSR cold war was exceptionally brutal to the peoples at flashpoints between the two powers. If the situation worsens to the point of en masse uncoupling of trade between American and Chinese spheres, a lot many winners and losers will emerge as supply chains get consolidated within the respective spheres of influence, and manufacturing returns to high cost locations, but driven buy automation and robotics.
This is not a comprehensive list by any stretch. I have deliberately omitted some areas like space and quantum computing, which are also likely to see considerable progress in 2020s but may not contribute to human divisiveness till the next decade.
These four factors are enough to paint a stark picture. Consider a successful Silicon Valley entrepreneur building, say, advanced sensors for automated manufacturing shop-floors. 2020s will be very bright for her. Not so much for a shopkeeper on a coastal village in Philippines. These two have too many of these Ks between them to find anything in common.