Article

The market revolutions continue

The green and digital revolutions will continue to dominate markets and economies.

| 4 min read

We have long held that the two main waves of change of our era are the green and digital revolutions. Both are vast in scope, both affect so many companies, sectors and everyday lives. It is impossible to understand stock markets, share prices and economies without forming a view of how far and how fast these forces of change are going.

The transition to ‘net zero’ is government led. It is proscribed in international treaties and laws and is driven by the wish to end fossil fuel use throughout the world economy. This entails changing the way we generate electricity, it requires removing the world’s car park of diesel and petrol vehicles, as well as changing the way people heat their homes and how factories fire their processes.

It requires shifting from meat to vegetable-based foods. It means new types of planes and ships. So far, the more willing governments have done the easier things, switching some of the older coal and gas fired electricity plant to windfarms and solar arrays, and requiring large companies to set out on their own roads to decarbonisation. It will get more difficult from here. To succeed, it requires buy in by billions of people to the products and services that deliver less carbon.

The digital revolution is powered by a lively market of entrepreneurs, small emerging technology businesses and now by a cluster of US and Chinese giants pioneering and inventing as they go. They are providing an ever-expanding range of products and services.

It must be consumer driven

It is consumer driven, with people and businesses wanting to make many of the changes. Shoppers turn to more online transactions. Individuals keep in touch with family and friends by social media. Families download digital entertainments and online newspapers. Businesses add increasing amounts of complex software to automate their systems. There is an explosion in data held in computer systems and in data processing to improve personal and business information.

As a result, the digital revolution has been proceeding more quickly than the green, driven by consumer enthusiasm. For the green revolution to sustain and pick up pace it will need a range of products and services which the public wants to buy and can afford.

The contrast is striking if we look at some of the key products of the two waves of change. The iconic embodiment of the digital revolution and the personal access point to it for most people is the mobile phone. There are now 8.6 billion mobile phone subscriptions worldwide. This is more than the 8 billion people in the world, though some people do not have a phone – and some have more than one. There are just 18 million battery electric cars in the world, the iconic product of the green revolution. There are more than five billion internet users in the world. There are 177 million installed heat pumps.

There has been a substantial increase in the provision of renewable electricity generation. Now it needs big changes in consumer behaviour.

So far, the green wave has been about big business. There has been a substantial increase in the provision of renewable electricity generation. Now it needs big changes in consumer behaviour. The full electrical revolution not only needs much more renewable generating capacity, but it needs a willingness by billions of people to switch from petrol to electric transport, from meat to vegetarian diets, and from coal, gas and oil heating to electric heating. The way people have switched from going to shops to buying online, from daily commuting to working online, from buying a newspaper to surfing the internet shows people are willing to make big changes when it gives them something better or cheaper.

For investors recent years has seen big opportunities to earn good returns on investments in the US majors that are driving search, software, social media, downloaded entertainment, online shopping and artificial intelligence. We are awaiting the iconic products of the car and home heating green wave. Tesla did well for a bit as it jumped into pole position on the electric car grid but is now struggling with more competition and consumer price resistance.

China, so far, has been better at establishing a strong position in making big batteries, electric cars, turbines and solar panels, the main steps so far taken on the way to ‘net zero’.

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The market revolutions continue

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