Knight Foundation
Jan 19, 2017 · 11 min read

Part 3 of 4

Summary

This scenario depicts a world of adaptation and prosperity. New technologies drive a booming economy, akin to the growth that characterized the second half of the 1990s with the dot-com boom. The absolute standard of living rises for all, even though many relative differences remain. This era of economic success provides a sense of security, although some of this is an illusion. The changing demands of a new economy, shaped by a vast and accelerating diffusion of next-generation technologies, require nations, communities and individuals to adapt to new realities. Those that embrace the changes thrive; those that do not lose relative ground. The period is bittersweet, with improvements for many despite increasing pressure to adapt and retool.


How We Got There — Key Drivers

Domestic and Global Economy

In the years leading up to 2026, a technology-driven economy leads to greater output and economic growth, with rising incomes across all levels of earners. Thanks to strong financial and real estate markets, the gains of widespread growth disproportionately benefit those at the top of the income and wealth ladder. Even as incomes rise, the absolute gap between the richest and those in the middle widens. But the trickle-down effect is real in economic terms, just as during the second part of the 1990s, when a groundswell of economic growth raised prospects for many.

As people’s sense of well-being is highly dependent on their relative position in society (rather than absolute income or wealth), the good times do not fully blunt discontent for many in the middle and bottom of society. Although significantly diffused by the relative prosperity, issues of fairness, a rigged game, and the limits of supply-side economics and trickle-down effects continue to simmer beneath the surface.

Pew Research Center. “The American Middle Class is Losing Ground,” (December 9, 2015). Available at:
http://www.pewsocialtrends.org/2015/12/09/5-wealth-gap-between-middle-income-and-upper-income-families-reaches-record-high/

Massive technological advancement and disruption — particularly advances in communications — reshape industries and the comparative advantage of nations. The information revolution continues to spawn new devices, which tend to be faster, cheaper, more secure and highly connected. Countries in the lead of this revolution, notably the United States, South Korea, Estonia and much of Western Europe, especially benefit because they can build on a strong foundation and extend their reach into making cities smart, transportation fast and electricity sensitive to consumer preferences.

Yet many governments are overwhelmed by the technological tsunami; only the best and the brightest are able to adapt quickly. As government lags, multinational, technology-driven firms grow exponentially more powerful and influential, while weaker governments outsource many of their modernization initiatives in response to impatient citizens who are reminded daily, through ubiquitous media, that their nations are falling behind.

Pew Research Center. “The American Middle Class is Losing Ground,” (December 9, 2015). Available at:
http://www.pewsocialtrends.org/2015/12/09/4-middle-class-incomes-fall-further-behind-upper-tier-incomes/

In this environment, geographic borders, flows of people and goods, and “walls” become less relevant. The information revolution reduces the power of sovereign nations while harmonizing people’s expectations around the globe about getting the latest and greatest for themselves. The main corporate power brokers use information to win the hearts and minds of consumers, while vastly enhancing their economic and social power.

Bolstered by U.S. economic stability and growth, countries that are open and able to tap global flows in technology and data thrive. Europe begins this transition, and nations with robust connectivity surge. Similarly, Africa’s economies that “leapfrogged” to digital services through mobile become major hubs of the global economy. In China, political authoritarianism slowly gives way as the economic realities of a digitally driven world make it increasingly difficult to resist broad political and societal reform.

Winning countries and companies recognize early on that economic elites increasingly see the world in terms of interconnected global hubs (rather than unitary domestic regions). They shape their trade and economic policies to facilitate transnational relationships and data flows. This leads to a more open global web, as pressures to Balkanize governance, either in the name of data protection or national control, lose out to the widespread hunger for economic advancement.

Nations that retreat inward during the intervening years fall behind and become vulnerable to unrest from within. In some states, tech-enabled populist movements bring about democratic reform. In others, non-state actors exploit the weakening relevance of formal governmental institutions to foment violent insurgencies. Apart from China, this dynamic is especially potent in the Middle East and North Africa, which is gripped by a “Second Arab Spring,” this time extending to even centralized and insulated states such as Saudi Arabia. Russia also experiences significant unrest as political authoritarianism is unable to cope with digital insurgencies and dissent. In failed states, ISIS-like non-state insurgencies persist because they are able to use information more effectively than weak or nonexistent governing institutions, which are mired in corruption and incompetence.[5]

McKinsey & Company, “Digital Globalization: The new era of global flows.” (February 2016).
Available at: http://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-globalization-the-new-era-of-global-flows.

Technology

Technology is the key growth driver over this period. Advances in artificial intelligence, machine learning, and sensors reach an inflection point and begin to widely reshape industries and sectors with accelerating speed. This digital evolution continues to fuse with the life sciences to take medicine to new heights, from new drugs thanks to genomics, proteomics, and synthetic biology to vastly improved medical records, hospital efficiency and error reduction.

As a result, economic output and living standards increase, but the pace of technological innovation and adoption also eats into a large number of low- and medium-skill jobs through automation. Still, the traditional middle and working classes are able to grow their earnings, but only by hustling in an economy dominated by part-time, gig-based, and contractor arrangements.

Despite a precarious and uncertain labor market, many regard the situation as fair, buoyed by improved purchasing power through lower technology costs and widespread benefits portability. Merely a decade earlier, small- and medium-sized enterprises struggled to offer employee benefits such as health care and retirement. Now that responsibility rests with efficient, affordable marketplaces that offer a range of portable benefits to working Americans at all income levels. Although this does not match the economic security of Western Europe decades ago, limited benefits and income support are more evenly distributed across society.

Rising incomes and lowering technology costs also work hand-in-hand to help people of all income and wealth levels plug in. Internet access is freely available through devices distributed by leading technology companies, which are hoping to reap benefits from subscription services and reach for advertisers. Because these players control the access point to the internet, they also exert enormous influence over content distribution. Consumers become more dependent on those that hold both the information conduits (the pipes) and the content flowing through them.

Data collection becomes increasingly important and is often integral to the business models of the major players. Consumers have little hope of understanding — let alone controlling or owning — data collection through increasingly sophisticated technologies. The consolidation of data ownership in the hands of the few also has the perverse effect of reducing data security. Consumers continue to be surprised by major data breaches, and wonder why cybersecurity remains such a challenge. The reasons range from terrorism and state-sponsored espionage to criminal enterprises and rogue isolated hackers having fun.

The enormous economic power of companies and governments, coupled with rising momentum for reform of data collection rules and better cybersecurity standards, proves insufficient to protect those connected to the open internet. This is the price of an interconnected society, which continues to bestow benefits that most deem well worth the cost.


Impacts on Core Areas of Concern

Communities

Lowering technology costs and wider adoption rates have transformed day-to-day life in communities. Because most people have access to “smart” devices, they can enjoy the conveniences afforded by mobility, ubiquitous connectivity, and tools that can learn and anticipate their preferences and needs. Implementation of new technology-enabled transit options that complement traditional public transit, such as autonomous cars, have made society more mobile and independent than ever.

Although rising incomes broaden the tax base, many cities face fiscal stress from large pension and health care burdens. The country’s mid- to large-sized cities have begun to divide into winners and losers. Cities under greater fiscal stress are falling behind the curve in the adoption of smart technology and improved amenities, such as transport. As a result, these cities prove less attractive to younger, talented workers, and major corporations leave for greener pastures. Such communities in high corporate income tax states fare the worst. The “winner” cities have parlayed rising tax revenues into more connected, livable, and attractive communities. Increasingly, they are becoming magnets for human capital and corporate growth. This trend is especially pronounced in low-tax states.

Government is also ceding interactions with residents to private corporations. This has led to two types of public services: those offered by private entities and enabled by seamless connectivity and on-demand services models, and those that take place within the confines of a traditional governement that is seen as hopelessly anachronistic.

Reproduced courtesy of the National League of Cities. See National League of Cities Center for City Solutions and Applied Research, “City Fiscal Conditions 2015,” (2015) Available at: http://www.nlc.org/find-city-solutions/city-solutions-and-applied-research/finance/city-fiscal-conditions.

This trend affects patterns of civic engagement. As formal and traditional institutions grow increasingly irrelevant, people turn away from them. At the same time, people armed with new ways to connect both face-to-face and virtually are organizing into small and sometimes temporary interest groups to address community issues — often seeking substitutions for government activity in lieu of advocating for a government response.

This duality of “winners and losers” — across communities and within communities — strains social bonds. With improved economic security, most people are content with the state of kitchen-table concerns. But the gaps in experience also give rise to festering resentments. The wealthier have better access to health care, education and other basic services; they are living longer, making more money and enjoying more mobility. This raises expectations for everyone, yet those earning less feel they have to work harder than ever to reap the gains of economic growth.

Because patterns of opportunity and wealth accumulation follow historical patterns, the losers in economic landscape disproportionately represent people of color and rural communities unable to adapt to the technology-driven economy.

As a result, political disaffection due to economic inequality periodically boils to the surface, sometimes violently. In economic hubs that attract a large influx of immigrants, protest and violence occasionally break out. And, in regions that lose jobs to digital outsourcing and “remote work” (sometimes to other countries, sometimes to other parts of the U.S.), the unemployed and indigent protest major employers and lobby government for increased support.

Lauren Weber, “Companies Flock to Cities With Top Talent,” The Wall Street Journal (April 12, 2016). Available at: http://www.wsj.com/articles/companies-flock-to-cities-with-top-talent-1460482766
Mark Scott, “The Spanish Town That Runs on Twitter,” The New York Times (June 7, 2016).
Available at: http://www.nytimes.com/2016/06/09/technology/the-spanish-town-that-runs-on-twitter.html

Arts

This period of relative prosperity allows more and more patrons to participate in America’s cultural life, and potential audiences are larger and, in many ways, more informed than ever. In communities around the country, audiences are more representative of the increasing diversity of society, driving demand for arts experiences. But with more content than ever being pushed to them, audiences are also fickle, with growing demands for their attention from the mobile and “smart” devices that provide an organizational structure for much of their lives.[6] There is, nevertheless, great potential for artists and institutions. The challenge for both is to adapt to maintain their relevance in such a saturated ecosystem.

This is a period of digitally driven disruption. As happened in the past with film, electronic and radio technology, and computers, new structural forms of the arts are emerging rapidly. For example, virtual performance companies are formed that pick performers from vast and distributed populations and stream into immersive devices across the globe. Because technology has lowered the cost to disseminate content and aggregate audiences, some small institutions and individual artists also adapt their business model. They form temporary collectives and ride widespread benefits portability to lower the costs of doing business.

Legacy institutions that anticipated shifts in technology are able to exploit them. When they had access to capital, these leading-edge organizations reinvented themselves. They now deliver content differently and make it easier to engage with the arts by enhancing in-person and remote experiences and creating a more inclusive feel.

Other institutions, particularly regional arts organizations that rely heavily on an aging member base, have not kept up. Some tried to transform themselves and failed. Others are stuck in a bunker mentality, resisting the winds of change. This segment of the arts in communities is failing, afflicted by a wave of closures.

Journalism

The news landscape is highly consolidated. Over the preceding decade, trends around the fragmentation of audiences intensified dramatically. Individuals now increasingly seek and encounter highly personalized content that comingles news with other forms of entertainment and information across a growing array of integrated, ubiquitous, on-demand devices. Previous distinctions between “official” content and that produced by disparate individuals have evaporated, so that the information environment for any one person evolves into a continuous stream of content, curated algorithmically in response to personal attributes and micro-behaviors.

Economic growth provides enough runway for some legacy institutions to survive and transform themselves, but they struggle nevertheless to keep up with the rapid pace of innovation hitting the industry in tidal waves. Major news organizations that persist have vertically integrated content production into a handful of major technology platforms that control distribution. These entities now exist as news “divisions” within larger content and information companies.

The “news” still conforms to journalistic practices, but the kinds of stories covered and reported are optimized for commercial viability. In these organizations, newsrooms rapidly accelerate the transition in human capital from traditional “reporters and editors” toward experts in digital content.

Some forms of in-depth and investigative reporting thrive in this model, particularly through video offerings produced by one or two individuals that can saturate adequately sizeable niche markets of news “super-consumers.” Many other forms of investigative reporting, however, particularly on local issues, just disappear because they simply are not viable.

Locally, the news landscape is in transition. The previous 10 years brought a virtual end to regional newspapers, which could not find a new business model. A few properties still exist in some markets, but the remaining vestiges of the illusion that regional papers could reinvent themselves are disappearing.

Hyperlocal news organizations continue to survive, however, and some are making a turn into a new model of digital information management. As all kinds of community information — about government, weather, traffic, local events and the like — become open in machine-readable formats, small organizations that can manage and make sense of multiple data streams now produce a low-cost model of digital news distribution. These entities — essential local news micro-organizations — curate data streams for sizable local audiences that can support highly targeted local ad content.


Informed and Engaged

Our goal is to foster informed and engaged communities, which we believe are essential for a healthy democracy.

Knight Foundation

Written by

Supporting transformational ideas that promote quality journalism, advance technology innovation, engage communities and foster the arts. KF.org

Informed and Engaged

Our goal is to foster informed and engaged communities, which we believe are essential for a healthy democracy.

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