Predicting the future with The Economist

A 90% economy, the return of consumer spending and sci-fi for business— key takeaways from our latest webinar

In the second of a new series of events for marketers, ‘A conversation with The Economist Group’, we invited two leading journalists from The Economist’s editorial team to discuss making predictions, spotting trends and understanding their implications.

Tom Standage, Editor of ‘The World in 2021’ and Deputy Editor of The Economist, was joined in conversation by Anne McElvoy, Director of Economist Radio.

Together they explored how the editorial team approach the challenge of predicting the future, and how marketers can take a similar approach. What might 2021 have in store for us? Read on for all the key talking points…

Why is making predictions a good idea?

In a year that has seen the world upturned, why even attempt to predict the future? Tom Standage explained that predicting the future is in itself an interesting exercise if you’re intellectually curious.

“Readers of The Economist in particular are very interested in the future, not only because they want to thrive in it, but because they want to shape it.”

Learning what the future is about and even more than that, actually attempting to inhabit it, is what journalists and marketers are both looking to do — to see round the corner, to anticipate the next thing and how they can take advantage of it.

Tom, who is also responsible for the newspaper’s digital strategy and the development of new digital products, finds sci-fi a good exercise in stretching the brain to imagine how the world could be. Whilst people often consider sci-fi to be about the future, it’s actually about the present, taking ideas of the present to their logical extreme. It’s such a useful exercise that businesses and governments are now using sci-fi as a way to broaden their scenario planning.

Scenario planning

What we’re seeing in this pandemic is a lot of strategy and scenario planners being asked to predict the next one or two years, instead of the typical 10–20 years, Tom said. Scenario planning involves coming up with three or four different future scenarios and mapping out how you would respond in each case. It’s incredibly useful for marketers as you can monitor developing events, noting which scenario is closest to what’s really happening and already have your company response ready to deploy.

There are many examples of business leaders undertaking scenario planning, including Brian Chesky, CEO of Airbnb. He’s prepared a range of scenarios looking at the varying amounts of times it might take for leisure travel to come back after covid-19 and the different levels to which it will return.

This is a practical way of trying to imagine different futures which companies can take and marketers can prepare for.

“One of the key things in scenario planning is that when you map out scenarios, most should be really horrible. They should be things you don’t want to happen, that would be unpleasant. You have to imagine the world not going the way you expect it to.”

Companies including Nokia, which Tom gave as an example, have fallen at this hurdle. Nokia did actually see smartphones coming and how they would become your wallet and keys in one, but they missed that it was going to be the internet in your pocket and invested in hardware, viewing software as a sideshow. As a hardware company which Tom had reported on in the past, they saw the world in the way they were used to seeing it and the way they wanted to see it. As such they were not prepared for the value in mobiles moving from hardware to software.

A consumer look into next year

The big question for next year in terms of consumer trends Tom and Anne spoke about, is to what extent will the behaviour changes we’ve seen during the pandemic snap back? Partly it depends on the environment detailed Tom, and here we can consider Sweden and Denmark who approached lockdown very differently. Sweden famously did not have a significant lockdown whilst Denmark did and yet their economies shrunk by roughly the same amount, with Sweden’s economy down by 25% and Denmark’s by 29%. So consumers, even when not compelled to lockdown, did still cut down on spending almost as much. This tells us it’s more about individuals and how they respond, than it is about governments.

In other areas, they discussed how we’re going to see the trends that started during the pandemic continue to accelerate after lockdown. Tom used the examples of doctor’s appointments and how they will not return fully to face-to-face, some will remain remote appointments. In learning and education also, we will continue to see courses blend-in virtual learning on an ongoing basis.

Attempts to bring back retail and hospitality after lockdown could be the area that sees the greatest increases in innovation. Tom highlighted:

• The ‘outdoor economy’ at restaurants. The larger, upscale restaurants cannot yet reopen but you can open the likes of Shake Shack which is largely outdoors with a simple menu. Noma has just reopened in Copenhagen in a similar way.
• The ‘appointment economy’ in stores. Some high-end retailers are experimenting with this, allowing customers to book virtual appointments with a personal shopper who will walk around the store for their clients.
• The ‘touchless economy’, of which the most famous example is the Amazon Go stores with their “just walk out shopping” experience that has removed the checking out process entirely.

These technologies being applied more widely are extensions of what we’re seeing now and we’ll see more of it being applied in other areas too.

Alongside these advancements, Anne predicts luxury fashion will bounce back over the coming months. She said that whilst our appetite for party dresses might not be the same, the desire of shoppers to see something beautiful and want it around them will increase in this domestic era. Purchases will move towards having something pleasing on your desk, or attractive jewellery that will be seen on video calls. She predicts the desire for beautiful things will continue, but the kinds of beautiful items bought will shift.

Economics and politics

Every sector and business is affected by economics and politics and yet it’s a prediction that’s tough to be made as confidently as one might have done in the past. As Tom explains, the starting point has to be to assume a second wave of covid-19 in the winter and to remember that in 1918 the second wave was much bigger than the first. (Will people resist a second lockdown?) The second part he said, is that we have to assume there will be no vaccine until next year. So economically, you end up in what The Economist has been calling the “90% economy”.

“If we look at China, it’s one of those rare cases where we can see the future in the present and shows how we’ll end up in a strange world where we can go to work but we can’t go to the pub.”

Whilst Anne noted that 90% doesn’t, on the surface, sound so bad as first thought, Tom explained that knocking 10% off the economy is so nasty that it’s in fact worse than the global financial crisis ever was. Furthermore, the 10% missing is the fun part — it’s the restaurants, the travel, the concerts, the sporting events etc. If people can’t do any of those things, that has a significant psychological hit as well as an economical hit.

There’s then the question of how economics will connect with politics. Tom detailed how we’ve seen some countries like Spain releasing certain areas out of lockdown earlier than others, whereas that’s not something that would work in somewhere like Britain. So across the world, as different countries try to reopen in different ways, we will see a range of varying recoveries taking place.

Politically, similar to technology accelerating trends such as e-learning, they spoke on how we’ll also see a quickening of existing political trends. De-globalisation, the ‘de-Chinafication’ of moving supply chains out of China, xenophobia and protectionism are all political trends that will be accelerated by the pandemic and lead to a more ‘Trumpian’ world.

Anne referred to an article from The Economist in 2019 on ‘slowbalisation’ with Tom concurring that globalisation actually peaked around 2010 and since then, there’s been a growing shift towards more investment and trade happening in regional blocks. The current pandemic will serve to accelerate this, with the addition of countries wanting to be more self-sufficient in many other ways. This actually makes everything a lot less efficient and does not protect a country since an open trade system naturally affords a lot more resilience due to the increased trading options to take advantage of.

The new world disorder

Anne considered, could the pandemic cause people to be more cautious in their politics and stick with what they know? Tom called this pandemic a “fork in the road” with two possible approaches. There’s the optimistic view that this could be an opportunity to fix things such as climate change, social care, healthcare etc. Or the alternative view is the populist approach, that this has shown we need to close our borders, not trust outsiders and become self-dependent.

He described how with Merkel stepping down next year, Macron looking wobbly and a weakened US, we look set to continue the trend of what is often called ‘the new world disorder’. It’s the crumbling of the post-war rules-based order and the uncertainty of what replaces it. This has only been compounded by covid-19 and it’s making life easier for “troublemakers” like Kim Jong-un or Putin and gives China an opportunity to step into the leadership vacuum.

Sustainability and climate change

We have long predicted climate change, but it doesn’t seem to change our behaviours. Will the pandemic change that and deliver the wake up call we need? The trouble with predicting climate change, Tom explains, is that it always seems far away and politicians leave it to their successors. It is chronic rather than acute.

The difference with this pandemic is that it makes an overnight change and emissions will fall overall by approx 8%-9% this year. But, this is the amount they need to fall by every year until 2030 if we’re to meet the Paris target, which shows the full extent of the disruption that will be necessary to reach it.

They predict the level of emissions will snap back quite quickly after the pandemic, so this isn’t going to help in that regard. The thing that will make the difference is the stock of carbon dioxide in the atmosphere which we’ve been putting there for 150 years. Lowering emissions for six months will only put off the problem by six months, it doesn’t make a dent.

What this is though, says Tom, is a teachable moment and a time to say ‘yes we we can make changes’. But it is significant changes like restructuring and downsizing the aviation industry and car-making, along with governments attaching green conditions to them, that will make the long-term difference.

The next catastrophe?

A lot more attention is now being paid to what other unexpected events could happen which would change everything overnight. Tom listed some of the most impactful, potential catastrophes as:

• A catastrophic collapse of the internet
• A super volcano
• A solar storm. There hasn’t been one since the construction of the global electricity network. The last one was in the 19th century and it significantly disrupted the telegraph network (the closest thing to the electricity network at the time) so that could be devastating.
• The discovery of alien life

On that note, we’ll leave you with Tom’s final point:

What might be a legacy from covid-19 when we look back in 10 years? “It could be a general, greater risk aversion. A certain kind of metropolitanism could be a victim.”

‘The World If’ annual supplement launches on 4 July in The Economist. To discuss sponsorship opportunities, contact your Account Manager or email ClientMarketing@Economist.com