What’s To Be Optimistic About 2021?
As 2020 comes to an end and as we look forward to 2021, I want to take some time to share a few thoughts on themes that are still in the very early stages of playing out and will continue to impact the world for at least the next decade.
The continued advancements in these fields will materially impact everyone’s lives. I hope from this, people can take away that despite the challenges of 2020, there’s much to be optimistic about the future.
I will broadly group the themes into two rough categories:
(1) improvements to existing processes and human behavior;
(2) technological advancements that will bring categorical changes to the human experience.
You will find that many of the themes will be interrelated as it is often with everything in our world.
I. Improvements to Existing Processes and Human Behavior
1. Labor Productivity, Labor Efficiency, and Automation of Business Processes
In plain English, this is to (i) make people do their jobs easier, better, and faster and (ii) simplify and automate repeated business processes. This is most importantly playing out in the enterprise software space with an explosion of very high growth companies, typically with a software-as-a-service (SaaS) business model, which have commanded extremely high, sometimes eye-popping, valuations in both the private and public markets. While the valuations may seem high vs. the current size of the market or a company may already have a very high % of the market share, people often underestimate or have a lack of appreciation of the baseline or the inherent growth of the underlying market. Just as when the first computers came out, Thomas Watson of IBM reportedly said the whole world market for computers is maybe five computers. This theme will continue to play out for many years to come, and when viewed in that lens, some of the excitement may be justified.
2. Information Efficiency, Information Transparency, and Information Asymmetry
This has been a long-standing theme that has been playing out for at least the past two decades. For many areas of our lives, there have been dramatic improvements in the ease of accessing information. Information search and ecommerce are two great examples. Google and Amazon have lowered information costs materially to allow for the removal of transaction costsand better connect supply and demand, thus increasing the ease of transactions to the delight of each consumer. Despite these improvements, there remains other areas where transaction costs are very high and where information quality is still an issue. Common examples include conducting real estate transactions, selecting quality doctors and lawyers, finding knowledgeable home improvement technicians, and picking talent agents (i.e. for athletes, musicians, and artists). There are inherent reasons why some of these areas are more difficult, such as the infrequency of interactions, heterogeneity of the product, the variance in quality, and the inherent uncertainties in outcomes. However I believe we will see more improvements in these areas to come as a result of technological advances which I will discuss more near the end of the article.
3. Physical Asset Utilization and Supply-Demand Matching
The easiest way to understand this point is to just take a quick look at your closet. Look at how many pieces of clothing you have vs. how many pieces you wear in a day. If you are like a typical person, the chances are that your utilization of these assets are in the single digit percentages. I would not be surprised if for some people reading this, the number will be less than 1%. There are many assets in the world today that are much underutilized and as a society, it would be a pareto improvement to increase their utilization. The potential benefits can be enormous. Just take a look at the value creation that can happen with the sharing of cars (Uber) and homes (Airbnb). An even bigger area of value creation is cloud computing. Just take a look at how much value and growth of the largest technology platforms (Amazon, Microsoft, Google, Tencent and Alibaba) are being contributed from their cloud divisions.
II. Technological Advancements that will bring Categorical Changes
What I mean by this is to describe the areas of technology that are very nascent, with limited existing adoption, and ones I believe can become game changers. Think of the proliferation of the internet or Steve Jobs with the introduction of the iPhone.
1. Personalized Health and Wellness
Our existing healthcare system is extremely inefficient and while it is much better than a couple hundred years ago, it is still very poor. Our existing model of healthcare is heavily focused on treating patients when illnesses have already arisen. Doctors treat for specific diseases, usually simply following suggested treatment options. There is limited personalization and very little focus on preventative care or being earlier in the process at the wellness stage. This will likely be a multi-decade theme as the focus of healthcare moves to earlier in the process with the key being the overall wellness of the individual. Health plans will be tailored to an individual’s specific circumstances. It is no surprise that when Tim Cook, the CEO of Apple, was asked in a recent podcast about the future of Apple, he said that in the future, he expects Apple’s greatest contribution will be in the area of healthcare and wellness.
2. Better Entertainment
Humans have always wanted and needed entertainment. We are no different from the ancient Romans who watched and cheered gladiators in the Colosseum. This year in particular, the digital content available has exploded. Just look at the rise of Netflix and Disney+. While COVID has accelerated this trend with a step-function change of the amount of digital entertainment consumed as people were forced at home, I would argue this is a trend that has just started. This is playing out in three ways:
(I) better recommendation engines that allow platforms to deliver tailored content that consumers want;
(II) technology improvements that make entertainment more engaging and encapsulating. Just check out the unbelievable qualities of the latest video games to come out of the Unreal Engine and compare them to those of 20 years ago;
(III) the ability for consumers to be immersed in a content universe across multiple mediums. No longer is hearing your favorite book being adopted into a movie the most exciting thing. Today, one can be fully immersed in the Marvel Cinematic Universe across books, movies, streaming series, and video games with like-minded people who share the same passion on a 24/7 basis.
Behind these themes, there are common and interrelated technological advances that are enabling these improvements. I will highlight three — (i) the lowered cost of personalization, (ii) the computational advances of AI and machine learning, and (iii) the explosion of big data. Humans are increasingly better at leveraging these tools to improve human lives. As we look out, I’m confident that we would be able to find more efficient solutions to existing problems and unearth new solutions and capabilities to problems we currently cannot address.
As we leave behind 2020, there’s much to be optimistic about the future. To a better 2021.