null 2022: Technological Disruptions and Business Threats
To date, Tesla has a larger market cap than the world's ten largest publicly traded car companies, which include giants such as General Motors, Nissan, and Volkswagen. Although many criticised Elon Musk and his business project, the market is proving him right. What underlies it is not a battle for a market, but a disruptive way of understanding business.
It is possible that a few car companies will not survive such a disruption, just as companies and sectors that were once leaders ended up falling as a result of their delay in understanding the magnitude of a disruption.
As an example, the railroad sector represented more than half of the market capitalization in the US and the UK. Today its weight is negligible. A similar phenomenon is occurring in the television sector, which is threatened by the rise of platforms such as Netflix and HBO.
Covid has been referred to as a ‘Cambrian explosion’ that has accelerated digital disruption by many years, which can in turn accelerate the fate of companies and sectors. Suffice it as an example that virtually a very small number of listed stocks (especially technology stocks) have generated almost all of the returns of the US stock market (in turn, the strongest performer) in recent years.
First: The mobility revolution. We're not just talking about the thirteen-fold increase in the number of electric cars this decade. We are also talking about the impact that autonomous vehicles will have on important sectors. Artificial intelligence makes it easier for autonomous trucks, already on the road in Nevada, to be a solution to the labour shortages seen in several economies, but also a major threat to a large profession. Driving around cities with autonomous cars is more difficult for a robot, but in Yokohama, Nissan's driverless cabs are already on the road.
Second: The acceleration of robotics. Facing the so-called ‘great resignation’, which signals a tight labour market in the OECD, companies react by increasing the volume of robots. As workers' wages go up, robots' wages go down. Robot sales have skyrocketed since the pandemic (they have another advantage, they don't get infected). There is already evidence showing how higher robot penetration can drive higher productivity gains. However, this process may generate substantial social scars that need to be anticipated.
Third: Prioritising cybersecurity. Global businesses lose six trillion dollars to cyberattacks per year. As companies accelerate their digitisation spurred by covid and facilitate teleworking and hybrid work, their vulnerabilities are also increasing. A board-driven cybersecurity strategy is a key priority to address this threat, especially if the evolution of the company's technology is not keeping pace with the maturity of its cybersecurity.
Fourth: The advent of the metaverse. With 4.5 billion people connected to social networks out of a total of 7.7 billion people on earth, the possibility of us creating avatars of ourselves, called ‘digital twins’ to interact in the metaverse generates multiple angles. Avatars will be able to use augmented or virtual reality to, for example, visit the Colosseum in Rome as it is now, or to visit a virtual reconstruction of the building in its heyday. They will also be able to socialize with other avatars, including those of people who have passed away but keep their avatar with their characteristics in the metaverse. Nike and Adidas have already announced that they will sell their digital products in the metaverse (to fit our twins), developing an ad hoc e-commerce. If transactions in the metaverse become widespread in the ethereum cryptocurrency, the impact on traditional currencies, and even on the reserve currency, will have to be analysed. In addition, industries associated with both the data and advertising that the metaverse will generate will emerge.
Fifth: The triumph of e-commerce. Covid has advanced an unstoppable trend of e-commerce adoption by five to ten years, just as it did in China during the SARS pandemic.
Once a user has tried e-commerce for the first time, he or she is likely to become a repeat user. Amazon already generates a very significant volume of U.S. postal shipments and, incidentally, already sells more third-party products than its own. Moreover, companies like Canada's Shopify have built platforms rivalling Amazon's with over $120 billion in sales in a matter of a decade. The implications for last-mile logistics are obvious. As the book Where is my flying car? points out, Machiavelli, in The Prince, wrote that innovators are opposed by those "who have done well under the old conditions." It has been pointed out how this process also affects the production of scientific knowledge and even in the business world. The short-term system is averse to change and rewards incumbents against ‘non-Ptolemaic’ ideas: The earth is the centre of the Universe. Electricity was discovered in 1881, but factories did not radically change processes until the 1920s.
That said, the history of economics and business is categorical: Innovation and truth always win out over resistance to change and old beliefs. That's why Tesla is worth more than the ten largest car companies combined.