‘The New World Economy in 5 Trends’ and More Trends To Watch

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• The future remains unpredictable, but one thing is clear: The global economy is in turmoil. Investors, businesses, and governments need to reconsider their strategies in response to rampant inflation, the persistent climate crisis and an aging population. Additionally, they face unprecedented peacetime debt, disruptive innovations and the impacts of multi-globalization.
• With so much occurring at once, distinguishing significant trends from minor fads is challenging. In their book “The New World Economy in 5 Trends: Investing in Times of Superinflation, Hyperinnovation and Climate Transition,” Koen De Leus and Philippe Gijsels analyze trends that will shape the markets (and our everyday lives) in the coming decades.
• How will artificial intelligence (AI) change the economic landscape? Will robots take our jobs? Which companies will emerge from the AI revolution with a stronger (human) workforce? Koen and Philippe talk about their book and provide insights into these questions and many more.

Koen De Leus and Philippe Gijsels, the authors of “The New World Economy in 5 Trends: Investing in Times of Superinflation, Hyperinnovation and Climate Transition,” field lots of questions about the future, but there are two they hear more than any others.

The first one is, “Is AI for real?”

That’s a “very fair question,” says Koen, Chief Economist at BNP Paribas Fortis, the largest bank in Belgium. “Because we’ve had five waves of AI already over the last 50 to 60 years, and each and every time it was a hype that died out reasonably quickly.”

As you might imagine, it’s no longer just hype and the answer is a resounding yes. But what’s different about today?

Koen points out that centuries ago, Leonardo DaVinci drew detailed sketches of parachutes, helicopters and submarines, just to name a few innovations.

“But these products never came into being until 300 years later, because he did not have the parts,” he says. “If you want a helicopter, or an airplane, or a car, you need a motor. When you want a computer, you need a microchip.”

The “parts” we need for artificial intelligence are quantum computing power and big data — the ability to process, store and analyze it.

“These two parts are … on the table [today]. So therefore, I believe that AI is for real,” Koen says.

The next question inevitably is, How do we benefit from AI?

In “The New World Economy,” Koen and Philippe, the Chief Strategist at BNP, explore this concept as one of the five “global megatrends” to expect between now and 2050 (along with inflation, climate change, demographic shifts and massive debt).

Koen and Philippe joined host Kevin Coldiron on an Ideas Lab installment of Top Traders Unplugged to discuss their book and their forecasts for the decades to come, including commodity trends, supercycles, energy transitions and more.

Read on for their insights on how AI will shape the labor market — and our everyday lives.

Hi, robot

Artificial intelligence is fascinating and full of promise. But it’s also the subject of widespread fear: What if we’re replaced by machines and lose our jobs? 

According to Koen, McKinsey has estimated that between 2030 and 2060, about half of the work activities performed by humans today could become automated.

“That's scary,” he admits.

However, he notes that in 2020, the World Economic Forum estimated that 85 million jobs will disappear by 2025 — but 97 million jobs will be created in the age of AI.

“The big question is, who loses their jobs?” Koen asks. As he sees it, the “losers” will be the companies that do not invest in AI technologies now and shape the innovation landscape in their favor.

The companies that harness AI and — critically — train their people to use it, will make their own opportunities, increase their market share and attract top talent.

“You don’t have to be afraid of artificial intelligence,” he says. “You really have to be afraid [if] you don’t use artificial intelligence yourself.”

‘Factories of the Future’

“The New World Economy” profiles a program called “Factories of the Future,” administered by Belgian technology consortium Agoria. Only the most “forward-looking manufacturing companies using the most advanced digital technologies” can earn this distinction, says Koen. Today, the label has been bestowed on about 60 Belgian firms, and the program is being rolled out all over Europe.

“The factories of the future are coming,” Koen argues. He explains that he and Philippe surveyed a range of companies in their native Belgium. Unsurprisingly, those with a “Factory of the Future” designation have a very different take on the impact of automation on jobs than those that do not. Forward-thinking companies tend to be optimistic that AI’s net disruption on the labor market will be minimal in both the short and long terms. But more traditional companies were “very afraid” that their industries would “lose quite a lot of jobs.”

Notably, “Factory of the Future” companies increased employment by an average of 30% between 2015 and 2020, while traditional enterprises were stagnant or experienced negative growth. Productivity at future-forward factories rose by 10% on average, but only by 5% at the conventional plants.

The ‘Magnificent Seven’ incumbents

Kevin points out that when we examine how the market reacts to AI innovations today, it appears that there’s an assumption that the current “tech incumbents” like Apple and Meta will be the long-term winners as AI evolves.

“Do you agree with the market, that these incumbents are going to be the winners?” he asks Philippe. “And if not, how do investors navigate or try to take advantage of these trends when the potential winners aren’t necessarily obvious right now?”

Philippe points out that the “Magnificent Seven” (Meta, Apple, Microsoft, Alphabet, Nvidia, Amazon and Tesla) “really dominated the market last year and the first couple of months of this year.”

He argues that “innovation also means incumbent players coming in and replacing the old companies,” noting that the last big breakthrough before AI was … well, the internet.

We saw the creation of something like 600 companies capitalizing on the Web 1.0-fueled tech boom of the ’90s, but most of them went belly up when the dot-com bubble burst. Just a few big ones, like Amazon and Google, survived and became today’s “incumbents.” However, history tells us that they’ll eventually become the old guard.

This time, it’s different … or is it?

That was the case during the early days of railroads, Philippe explains. There were hundreds of rail companies in the U.S. alone, and they “all went bankrupt four or five times,” he quips.

Now, just a relatively small handful of rail companies remain even though railways are still critical infrastructure.

Likewise, the auto industry included thousands of companies in the early 20th century.

“There was even one in Belgium — which also, by the way, went belly up,” says Philippe.

Today, there are only a few dozen automakers and far fewer big players in the automotive manufacturing world.

When it comes to AI, “we could expect …. that new incumbents come in and replace the old players,” he adds. “Now, I’m very careful when I say this, because it’s always very dangerous to say that this time, it’s different. But never before [have] we had companies with market caps of $300 billion, with so much cash, so much profit … so much knowledge, the possibility to buy whatever they want. So at this time, they [the “incumbent” companies] could take a chunk of this market. That’s always possible.”

The Domino’s effect

So what’s an investor to do? Strike out and take risks with leading-edge startups or throw in our lot with the Magnificent Seven?

“That’s the question,” Philippe says, adding that many of us are “chicken” and try to split the difference.

“We do not want to lag behind the market or competitors, so we make sure we’ve invested enough — not too much — in the big guys. But we also look for other opportunities. … We are looking for the Domino’s Pizza of AI.”

He explains that analogy by pointing out that Domino’s is a fairly big company, but it’s a pizza company — “hardly what you would call a technology company,” he says.

“But if you look at the stock [listings] and take away the name Domino’s Pizza, and ask anyone to watch it, they would say it’s like Bitcoin, or it’s a technology company because it has gone up 40-fold or something like that. And what did it do very well? Well, when 4G came into being, they used that new model to take orders … that was one of the ways to grow.”

So whether you’re aiming for a slice of the startup pie or a hefty helping from the tech giants, just remember: Sometimes, the next big thing is delivered right to your doorstep. After all, who knew a 63-year-old chain could innovate its way to grabbing the biggest slice of the pizza market pie? Similarly, in the realm of AI, the most groundbreaking advancements might not come from the obvious players. Keep your eyes peeled for those unexpected contenders—today’s humble pizza delivery could be tomorrow’s AI revolution.

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This is based on an episode of Top Traders Unplugged, a bi-weekly podcast with the most interesting and experienced investors, economists, traders and thought leaders in the world. Sign up to our Newsletter or Subscribe on your preferred podcast platform so that you don’t miss out on future episodes.