Three Gigantic Global (Imminent) Opportunities
The upside of disruptive developments
Uncertainty is a two-sided coin. Lots of us focus on the risks emerging from uncertainty; we should also consider the opportunities it creates. In fact, it might be that a lack of uncertainty is a lack of opportunity. So when looking for opportunities, look for uncertainty!
The three gigantic global risks I recently highlighted will likely upend the world as we know it. Yet that very uncertainty also produces opportunities. We all need to think broadly about how the US China war, artificial intelligence, and the US dollar may change the way we live, conduct business, and govern ourselves. I suspect these disruptions will redefine our geopolitical, technology, and economic landscape for the next few decades, and in the process, create untold opportunities.
US-CHINA WAR
The escalating US China war is probably the most consequential dynamic we’ll face in our lifetimes. It will upend business models, trading relationships, travel and migration patterns, research and innovation dynamics, technology trajectories, and even relationships among countries. As countries, companies, and ultimately people are ultimately asked to pick a side, the world seems likely split into two political-economic ecosystems. China will lead one, America and its allies will lead the other.
Are there opportunities for collaboration across these systems? Many have suggested there is common ground and opportunity for collaboration in the domain of climate change. Surely there is a common interest in saving the planet from catastrophic environmental degradation, right? Well, I’m not convinced. Here’s why.
China has worked within multilateral efforts such as the Paris Climate Accords to make sure the PRC is considered a developing nation. As a result this designation, the CCP does not have to slow carbon emissions until 2030, creating a de facto incentive for them to construct and commission as many coal-fired power plants as possible before then. And, surprise surprise, that’s exactly what they’re doing. As reported by NPR, China is building approximately 2 coal fired power plants per week, and has roughly six times the number of plants under construction than the rest of the world combined. All of this is happening while they grandstand on the need for countries like America to cut emissions. Sure seems more competitive than collaborative to me!
One way to identify opportunities emerging from this bifurcated global economy is to identify cases of US dependence upon China and build those capacities either in America (reshoring) or in “friendly” countries (friendshoring). China’s recent restriction of gallium and germanium exports to the United States is a timely example of America’s dependence on imported critical materials. The PRC produces 60% of the world’s germanium and 80% of the gallium, and these two materials are key inputs to the defense, semiconductor, and renewable energy sectors. The opportunity to reduce American vulnerability in rare earths and critical materials is enormous. Consider MP Materials, a company that states “Our mission is to restore the entire rare earth supply chain to the United States of America.” (Those interested in learning more may enjoy watching my conversation with James Litinsky, Chairman and CEO of MP Materials).
The bifurcation of the global economy will produce similar opportunities in the pharmaceutical sector, the semiconductor industry, and many other areas as well. Let’s also not forget that America has the world’s most developed venture capital industry, the best higher education system, and many of the planet’s most advanced laboratories. One of the reasons I pursued a PhD in technological innovation and a masters degree in Security Studies while in graduate school was that I firmly believe America’s innovation capacity is globally unique. It’s why I think perhaps the biggest opportunity from the US China war is an unshackling of American entrepreneurship in pursuit of national security goals that ushers in a new era of innovation.
ARTIFICIAL INTELLIGENCE
Artificial intelligence is a technology that will impact everyone, everywhere in every profession and every industry. It will replace jobs and kill companies (if not entire industries). While many of us have rightfully focused on the risks produced by the rapid adoption of artificial intelligence, there is also huge potential in the technology to improve the world and solve tough problems in a wide range of industries.
Shell and Occidental Petroleum, for instance, are each using sensors in oilfields to gather data that is analyzed by artificial intelligence to predict safety or maintenance issues before they happen. According to Neisha Kidd, operations safety manager for Shell’s Gulf of Mexico operations, “It’s a form of proactive monitoring … on steroids.” Occidental is using AI-enabled robots and cameras to detect and predict corrosion activity prior to it disrupting operations.
In healthcare, the opportunities seem limitless. Verge Genomics is a San Francisco based biotechnology company that is using artificial intelligence to address tough medical challenges. CEO Alice Zhang has noted how Verge has used AI to speed up drug discovery, decrease failure rates, and ultimately save billions of dollars and lots of lives. The company, which was founded in 2015, currently has an AI-identified drug for ALS (Lou Gehrig’s Disease) in clinical trials.
Finance is another domain that’s being disrupted by AI, where artificial intelligence has infiltrated credit scoring, portfolio management, fraud detection and customer service functions. In one of the more interesting applications, Lemonade (an insurance company founded in 2015) utilizes a force of synthetic agents and artificial intelligence to evaluate and process claims, underwrite insurance, reduce fraud, and improve customer service experiences.
These are just three examples of the power of AI to create opportunities for forward-looking, innovation-focused companies. There are also examples in higher education and sales and customer service, as well as many other areas. The opportunities generated by AI are mind-boggling.
On a personal note, I’ve been experimenting with an artificial intelligence that has been studying me for a while. I will be sharing my findings in the near future…the initial results are simultaneously fascinating and disturbing. Stay tuned!
US DOLLAR DYNAMICS
I think there is basically zero chance that another currency emerges in the near future to displace the dollar. Why’s that? Consider a conversation I had with the Chief Financial Officer of a large multinational technology company based in the United States.
After he expressed concern about the US dollar, we began to talk about alternative currencies. I knew his company had billions of cash on its balance sheet and suggested he hedge his bets by putting several hundred million dollars in Chinese yuan overnight. His response: “No way!!” He didn’t trust the Chinese government or their laws and simply couldn’t take the risk. I agreed with him and offered another option.
“Sberbank has a great reputation in Russia…” but before I could even finish my sentence (and this was before the Ukraine invasion), he interrupted me: “Nope, I have less trust in the Russian government…” And on and on it went. He even dismissed Canada, Europe and Japan, although he admitted they did have working capital in the Canadian dollar, Euro, and Japanese Yen. Ultimately, he agreed US dollars held at US banks was the best option, thanks in large part to America’s rule of law, property rights regime, and depth of markets. Many executives come to the same conclusion.
Given this (widespread) lack of trust in other regimes, it’s increasingly likely that any meaningful competitor to the US dollar would be backed by hard assets such as gold or some other scarce resource. Might the opportunity emerging from potential de-dollarization be in precious metals? Any meaningful uptake of a new gold-backed currency would drive gold demand (and therefore prices) much higher, producing a tailwind that would likely increase demand for other precious metals and fixed-supply cryptocurrenices such as bitcoin.
Could the dollar collapse entirely? I don’t think so. At least not anytime soon. Nevertheless, it’s worth considering what might transpire. (Those interested in reading of such a scenario might want to read The Mandibles: A Family, 2029-2047). One very likely outcome of a collapse is hyperinflation.
Sound crazy? My admittedly cursory study of Weimar Germany, Zimbabwe and Venezuela revealed three causes common to each case of hyperinflation: high debt, deficit spending, and a collapse of the currency. Put those ingredients together and …voila, hyperinflation! In America’s case, I’d suggest that we have two of the three key ingredients — $30+ trillion of debt and massive deficit spending. If the world completely abandoned the US dollar, America would be in trouble. In such a scenario, one would want to own real assets (commodities, real estate, equities) and borrow as much money as possible (ideally at a fixed rate!).
UNCERTAINTY = OPPORTUNITY!
I host a radio show called “Navigating Uncertainty” on the Pulse of New Hampshire and it’s also posted as a podcast. Each week, I interview one successful leader about how they think about navigating uncertainty.
My guest last week was Dean Kamen, president and founder of DEKA Research and Development, founder of FIRST (the world’s largest nonprofit celebrating and encouraging STEM education), and the person who invented the Segway, Autosyringe, iBot, and a host of other amazing inventions. During the course of our conversation, Dean shared many tidbits of wisdom but I’ll leave you with one simple and powerful statement he made: “I think uncertainty is nothing but pure opportunity…”
About
Dr. Mansharamani is a global generalist who tries to look beyond the short term view that tends to dominate today’s agenda. He spends his time speaking with leaders in business, government, academia, and journalism…and prides himself on voraciously consuming a wide variety of books, magazines, articles, TV shows, and podcasts. LinkedIn twice listed him as their #1 Top Voice for Global Economics and Worth profiled him on their list of the 100 Most Powerful People in Global Finance. He has taught at Yale and Harvard and has a PhD and two masters degrees from MIT. He is also the author of THINK FOR YOURSELF: Restoring Common Sense in an Age of Experts and Artificial Intelligence as well as BOOMBUSTOLOGY: Spotting Financial Bubbles Before They Burst. Follow him on Twitter or LinkedIn.