By Simon Bond

Seeing the world through the lense of connectivity generates new visions of how we organise ourselves as a species. Global infrastructures are morphing our world system from divisions to connections and from nations to nodes. 

We are moving into an era where cities will matter more than states, and supply chains will be a more important source of power than militaries. The main purpose will be to protect supply chains rather than borders. Competitive connectivity is the arms race of the twenty-first century.

There is no better investment than connectivity.

If current trends continue, people will need, and use, connections of a gigabit per second by 2020. That might seem wild. It is not, and simply reflects a continuation of existing trends. The data is stubborn and clear: Internet access bandwidth has grown about 50% annually since 1984.

Nielsen's Law is similar to Moore's Law. You might predict that computing capabilities would increase faster than access bandwidth, simply because access networks are construction intensive. Moore's Law suggests that computers double in capabilities every 18 months corresponding to about 60% annual growth. Nielsen’s Law predicts bandwidth will grow at about 50% a year.

Infrastructure is like a nervous system connecting all parts of the planetary body; capital and code are the blood cells flowing through it. More connectivity creates a world beyond states, a global society greater than the sum of its parts.

Much as the world evolved from vertically integrated empires to horizontally interdependent states, now it is graduating toward a global network civilisation whose map of connective corridors will supersede traditional maps of national borders. 

Each continental zone is already becoming an internally integrated mega-region (North America, South America, Europe, Africa, Arabia, South Asia, East Asia) with increasingly free trade coupled with intense connectivity across their thriving city-states.

Today’s leading organisations are network-centric and are creating remarkable economic returns by capitalising on network advantages, such as co-creation with their customers (Facebook); digital platforms (Amazon); shared assets (Uber and Airbnb); and big data insights (Netflix and Google). And when this growth comes at nearly zero marginal cost, well, that’s why digital networks are expanding at an industry-gobbling pace.

Networks tap in to the excess capacity of assets that previously were unrecognised (for example, the network’s professional relationships, or ability to review restaurants) or underutilised (for example, cars and guest bedrooms). In many cases, the cost to access these previously ignored assets is very low.

As recently as 1975, 83% of the market value of the S&P 500 companies was made up of tangible assets. In those days, leaders had to focus on plants, inventory, and production. By 2015, however, the proportions had reversed. In 2015, some 84% of market value was now composed of intangible assets.

Leaders and investors who want to participate in the network revolution need to envision their future, and the future of their industry, based on the intangibles and networks or risk falling behind.

The new economy of experience over “things”. The accelerating rate of technological change, while previously a topic of interest only to futurists and related technophiles, is now at a stage where insufficient awareness has tangible costs to individuals.

Economic growth, which has always been closely pegged to technological progress, has similarly been accelerating through centuries of data, and we are now entering a steep trajectory for the trendline, indeed the ‘knee of the curve’. The world economy has been underperforming for years, with growth rates continuing to register well below the aforementioned trendline rates. This is due to the silent suppressive effect of some outdated policies and macroeconomic assumptions.

Technological deflation, while easily accepted when one is a shopper for a new computer, is almost entirely ignored by macroeconomists, even as effects of this deflation on economic data are pervasive and rising. Technological disruptions across disparate areas are all interconnected with each other, and mutually reinforcing. There is a fixed - but rising - amount of aggregate disruption that is underway at any given time, in accordance with the accelerating rate of technological change. 

Monetary expansion by central banks has served to merely offset the accelerating deflation that technology is generating across the economy. This deflation is international in nature, and so is most monetary expansion, no matter which country originates a particular expansion program.

Artificial Intelligence (AI) will be able to move many types of productive output into tax-free locations, eroding the tax base of high-tax locations. The borderless and untaxable nature of AI will effectively tighten the screws on nations and jurisdictions that tax productive output excessively.

Excessive fear of inflation, and assuming that even 3% inflation is high, has led to a chronic decline in Nominal GDP. This is a source of many types of malaise in the economies of wealthy countries that ‘Real’ GDP will not detect, and is constricting the rate of technological progress and productivity gains.

Barring the pre-emptive adoption of technology-friendly monetary policies, another major financial crisis and deep recession will possibly commence by around 2017. Existing methods of monetary expansion will prove ineffective, causing great fear and doom-centric commentary. Monetary expansion has to be of a direct, diffuse nature. Current methods of bond-buying used by the US Federal Reserve are well into the point of diminishing returns, and end up concentrating the QE in very few hands.

The US is not going to be the first nation to transition to a new policy era, and certainly not before the next crisis. Hong Kong, Singapore, Canada, and Switzerland are more suitable candidates to be the first countries to reform in favor of 21st century economic forces.

Few individuals, even if they work in the technology industry, have trained themselves to think.

Thinking can be very profitable once adopted, and will become one of the core skillsets that an adult needs to have in order to prosper.

So why wait?