Blog James Sweeney: Technology is the Most Permanent Source of Disruption
The theme of this year’s Credit Suisse Asian Investment Conference is 'Disruption as Usual'. What does disruption mean to you?
James Sweeney: Disruption occurs when the profitability of a business or industry permanently changes. This differs from an ordinary “shock” because those wear off. With disruption, something that worked before no longer works; or something that wasn’t previously possible, now is.
Sources of disruption can be new technologies, but they can also be new regulations, business practices, or geopolitical realities. Sometimes, something as simple as shifts in the competitive landscape of an industry can create disruption, such as when an industry with many competing firms collapses into oligopoly, duopoly, or monopoly.
The most permanent sources of disruption, however, are indeed technological innovations. Unlike rules, practices, or politics, technical knowledge never goes back to what it was. Therefore, businesses must be especially aware of technological shifts that can permanently disrupt those business models that worked yesterday but might never work again.
Technology is the biggest disruptor of the global economy, as the prospects of whole economies, sectors, businesses, and groups of workers shift.
Do you think disruption is the new norm? Why do you think that?
JS: No. The natural state of the world is constant flux and disruption. We must guard against expecting things to stay as they have been.
Disruption: Friend or foe for investors?
JS: Disruption is a friend to some and a foe for others. Entrenched interests are always threatened by disruption. But of course there is always a vanguard that benefits from new ways. In general, an investment environment in a period of high disruption has a richer opportunity set for investors. But there will be more failures too, as incumbent businesses that fail to adapt lose.
What disruptive forces present the most significant threats to the global economy?
JS: The word “threat” makes this a difficult question. Currently technology is the biggest disruptor of the global economy, as the prospects of whole economies, sectors, businesses, and groups of workers shift. But is this a threat to the economy as a whole, or its savior? I tend to think of technological improvement as a positive force for factors including growth and living standards.
Perhaps the real threat is the political disruption partly related to these technological changes. Insecurity appears to be on the rise, and many people seem to be looking for easy solutions to these challenges. But the real solutions are not easy. Political institutions across many countries are evolving in response to the pressures of disruption. But are those institutions really evolving in a way that leads to the right responses? I’m not so sure.