Danish physicist Niels Bohr, who won the Nobel Prize for explaining atomic structure and quantum theory, once said: “Prediction is very difficult, especially if it’s about the future.” Since I write the regular Tech column for The Edge Singapore, I have the difficult task at the end of every year to try and predict the key tech trends that will be worth watching in the New Year.
Tech has a reputation of being overhyped. We tend to overestimate the short-term potential of any new technology and, ironically, way underestimate its longer-term potential. Over the past four years, investors have been far too optimistic about some of the near-term tech bets like cloud computing software-as-aservice firms that have commanded valuations of close to 100 times annual revenues, but are often dismissive of long-term technologies like electric vertical take-off and landing (eVTOL) flying cars that are likely to be in commercial service by the end of the current decade.
“Moonshots are radical technologies that have not been commercialised yet, but clearly have the potential to change our lives,” Haim Israel, head of thematic investments at Bank of America, told me recently. Think of Internet before the dotcom bubble or smartphone before the first iPhone. Ten years ago, the vast majority of the people did not have a smartphone. Now, almost everyone who has a phone has an Internet-enabled smartphone. In North America, China, Europe and even Singapore, it is increasingly on the 5G network. Indeed, it is hard to buy a cellular handset these days that is not a smartphone.
So, how should we value disruptive technology? Should investors pay ridiculous multiples for companies that are leveraging disruptive technologies? Or value them more conservatively, the way they gauge other older economy players? In hindsight, if you had asked any seasoned Wall Street tech investor whether they would be willing to pay ridiculous multiples for a smartphone company when Apple first came out with its pioneering Internet-enabled iPhone, you would have heard a resounding “yes”. If you had told them in 2002 that Amazon.com was going to be an “everything store”, would they have paid US$5 a share for it? Probably yes, because what is now an e-commerce behemoth changed the way we buy things. Twenty years on, Amazon’s stock has risen 700 times from its 2002 lows.
Indeed, if you had invested money in Internet and tech companies in 2005, or five years after the dotcom bubble burst, you would still have made a ton of money. As an example, Amazon shares are up nearly 105-fold since mid-2005 while Apple stock is up a whopping 120 times over the same period. “Back then, you could have waited for five years and still be okay,” says Israel. The trouble is, “we don’t have five years anymore”, he says.
Technology these days is moving at warp speed. “The tech cycles are getting shorter and shorter,” notes Israel. “Investors have traditionally tried to model growth of technologies linearly”, much like they measure growth of consumer goods companies, he says. “The problem is that most disruptive technologies are actually growing exponentially or way beyond our expectations,” says the Bank of America strategist.
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So, what’s driving the pace of technological change? It is a combination of factors — economics, demographics and technology. Take economics: The cost of capital for the past two years has been almost zero. Indeed, even before the pandemic, the cost of capital was very low compared to 10 or 20 or 50 years ago.
That means a lot of money is still flowing into long-gestation tech products, software and services, even if interest rates go up slightly — from zero to say 2% over the next two years, as the US Federal Reserve warns we will be in an environment of very cheap capital for a very long time. That means investors will still want to bet on technologies that can give them outsized returns.
The Bank of America strategist argues that “tech cycles are getting shorter because technology is progressing very rapidly with artificial intelligence, big data, machine learning and deep learning, so we now have these technology super-cycles that last far longer than the economic cycles of the past.”
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All about data
Moreover, we now use data much faster and much better than we have ever been able to. Every day, the world now generates 2.5 quintillion bytes of data. A quintillion is actually a million trillion bytes of data. The astounding thing is that the huge number is doubling every two to three years. So far, we have been using only 1% of the total global data that is being generated every day. Now, with advanced semiconductors and more computing power, as well as supercomputing, we are using higher and higher percentage of the ever-larger pile of data that we keep generating every day. How much more computing power? Consider this: the processing power of computers has increased more than a trillion-fold since Apollo 11 carrying three astronauts landed on the moon in 1969.
And then there is the demographics. Gen Z or people born between the end-1996 and end2012, or those between nine and 24 years old, is the first generation born in an entirely online world. They were born after Amazon, Internet and e-commerce. Most were born after the first search engines were unleashed and many were born after the first social media platform went live. They tend to do everything online. They are clearly not comfortable with the offline world. Is it any wonder, then, that their rate of adoption of new technology is far faster than any other previous generation?
So, how should we look at technology in 2022 as well as the year or two following the incoming New Year? I went back to my notes over the past several months, and indeed even way back to the pre-Covid months, to glean some nuggets of tech wisdom.
Here are some of the trends that I will be watching in Tech next year and beyond.
Big Tech gets reined in big time
Regulatory pressure on Big Tech — Apple, Microsoft, Amazon, Google’s parent Alphabet and Facebook’s parent Meta Platform — is mounting both in the US and Europe. The Biden Administration and new Federal Trade Commission (FTC) chief Lina Khan have made it clear that substantive mergers and acquisitions by Big Tech are now a thing of the past. Indeed, Khan’s FTC is looking at some of Meta’s previous transformational acquisitions from its Facebook days like Instagram and WhatsApp, which could lead to the break-up of the social media giant. Stricter legislation in the US is unlikely because of the divided nature of the Congress.
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With mid-term elections just 10 months away, it is unlikely that a bipartisan compromise will be struck to allow controversial tech laws through. But Europe could take up any slack. A new Digital Markets Act there gives the EU the right to terminate “killer acquisitions” aimed at buying up innovative startups to prevent future competition. It also tightens restrictions on targeted online ads and will force social media and messaging services to work with each other to avoid a single platform to be in a dominant position. That means Big Tech platforms will only be able to grow organically and will increasingly encroach on each other’s territory to grow, which will help create more competition.
Augmented, virtual and mixed reality
After years of hype, virtual reality (VR) headsets and augmented reality (AR) glasses will finally arrive in 2022. Meta Platform, the social media giant formerly called Facebook, is expected to introduce its new Meta Quest 3 VR headsets in the second half of next year. Apple is expected to release its own VR-augmented reality headset in the last quarter of next year. Apple’s AR glasses are now expected to be launched in 2023. Xbox Series X console creator Microsoft, Amazon and Taiwan’s HTC are all expected to launch their own AR/VR or mixed reality hardware over the next 18 months.
Future of work and city centres becomes clearer
In 2021, as the world gradually began to reopen after 18 months of Covid-related lockdowns, hybrid work beckoned. In some of the busiest city centres like New York, offices were still at less than half of their capacity at their peak in early December. Corporate captains were hoping that as Covid was banished, they might eventually have more than 80% of their staff back on their old desks with just 10% to 20% still working from home. But the “great resignation” of 2021 and near full employment are forcing companies to be more flexible and allow more people to work from home. Already, studies show most workers are as productive, if not more productive, working from home.
2022 will be the year when the Office of the Future begins to take shape. Over the next two years, companies will start to resize their offices and redesign the workplace. Big global financial centres like New York and London could see up to 30% of their current office space become redundant. And as more retail business moves online, city centres will have more boarded up “dark stores” catering to 15-minute grocery deliveries and “ghost kitchens” catering to 20-minute food delivery services.
EV charging infrastructure
2021 was the year of electric vehicles or EVs. Tesla became a trillion-dollar company and briefly was worth more than all other listed auto companies combined. It was also the year that legacy auto makers like Volkswagen, General Motors, Ford and others were forced to become more serious about their own EV strategies.
2022 will be the year of EV infrastructure — particularly in the EV charging space. There are already 1.3 million EV charging points around the world, but consultancy McKinsey & Co estimates at least US$90 billion ($122.8 billion) will be spent on 40 million more by 2030 as battery EV sales grow 25% annually until 2030. Governments and private-sector firms need to spend US$1.6 trillion on charging infrastructure to achieve net-zero greenhouse gas emissions targets by 2050. US President Joe Biden’s signature Infrastructure Bill provides for a national network of EV chargers in 2030.
Biotech boom
In the aftermath of the Covid pandemic, 2020 and 2021 were great years for innovation in healthcare. Pfizer (with its partnership with Germany’s BioNTech) and Moderna used mRNA technology to be first off the gates with their respective Covid vaccines. mRNA, or messenger RNA, vaccines that teach our cells how to make a protein that triggers an immune response, were mostly unproven before the advent of Covid, despite decades of research. Given the rapid proof-ofconcept for mRNA vaccines during the pandemic, it is now clear that mRNA can produce highly effective and safe vaccines.
In 2022 and beyond, the focus of mRNA will shift away from boosters for Covid variants to tackling an array of other vaccines and treatments in less time and at lower costs than traditional methods. Already, mRNA vaccines are being developed to battle malaria, tuberculosis and the human immunodeficiency virus, or HIV, that causes Aids. Moderna has been doing research to use mRNA technology to fight cancer.
Assif Shameen is a technology and business writer based in North America
Photo Caption: Meta Platforms CEO Mark Zuckerberg with his avatar. Meta will release new VR headsets next year / Bloomberg
