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The 8 Major Forces Shaping the Future of the Global Economy

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The 8 Major Forces Shaping the Future of the Global Economy

I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.

– Jimmy Dean

The world is changing faster than ever before.

With billions of people hyper-connected to each other in an unprecedented global network, it allows for an almost instantaneous and frictionless spread of new ideas and innovations.

Combine this connectedness with rapidly changing demographics, shifting values and attitudes, growing political uncertainty, and exponential advances in technology, and it’s clear the next decade is setting up to be one of historic transformation.

But where do all of these big picture trends intersect, and how can we make sense of a world engulfed in complexity and nuance? Furthermore, how do we set our sails to take advantage of the opportunities presented by this sea of change?

The Intersection of Data and Powerful Visuals

Interpreting massive amounts of data on how the world is changing can be taxing for even the most brilliant thinkers.

For this reason, our entire team at Visual Capitalist is focused on using the power of visual storytelling to make the world’s information more accessible. Our team of information designers works daily to transform complex data into graphics that are both intuitive and insightful, allowing you to see big picture trends from a new perspective.

After all, science says that 65% of people are visual learners – so why not put data in a language they can understand?

While we regularly publish our visuals in an online format, our most recent endeavor has been to compile our best charts, infographics, and data visualizations into one place: our new book Visualizing Change: A Data-Driven Snapshot of Our World, a 256-page hardcover coffee-table book on the forces shaping business, wealth, technology, and the economy.

The book focuses on eight major themes ranging from shifting human geography to the never-ending evolution of money. And below, we present some of the key visualizations in the book that serve as examples relating to each major theme.

1. The Tech Invasion

For most of the history of business, the world’s leading companies have been industrially-focused.

Pioneers like Henry Ford and Thomas Edison innovated in the physical realm using atoms – they came up with novel ways to re-organize these atoms to create things like the assembly line and the incandescent lightbulb. Then, companies invested massive amounts of capital to build physical factories, pay thousands of workers, and build these things.

The majority of the great blue chip companies were built this way: IBM, U.S. Steel, General Electric, Walmart, and Ford are just some examples.

But today’s business reality is very different. We live in a world of bytes – and for the first time technology and commerce have collided in a way that makes data far more valuable than physical, tangible objects.

The best place to see this is in how the market values businesses.

Market capitalization of tech companies

As you can see above, companies like Apple, Amazon, and Microsoft have supplanted traditional blue chip companies that build physical things.

The tech invasion is leveraging connectivity, network effects, artificial intelligence, and unprecedented scale to create global platforms that are almost impossible to compete with. The tech invasion has already taken over retail and advertising – and now invading forces have their eyes set on healthcare, finance, manufacturing, and education.

Will atoms ever be more valuable than bytes again?

Interesting Facts:

2. The Evolution of Money

Money is arguably one of humanity’s most important inventions. From beaver pelts to gold bars, the form and function of money has constantly fluctuated throughout history.

In the modern world, the definition of money is blurrier than ever. Central banks have opted to create trillions of dollars of currency out of thin air since the financial crisis – and on the flipside, you can actually use blockchain technology to create your own competing cryptocurrency in just a few clicks.

Regardless of what is money and what is not, people are borrowing record amounts of it.

The world has now amassed $247 trillion in debt, including $63 trillion borrowed by central governments:

Global debt by gdp

In today’s unusual monetary circumstances, massive debt loads are just one anomaly.

Here are other examples that illustrate the evolution of money: Venezuela has hyperinflated away almost all of its currency’s value, the “War on Cash” is raging on around the world, central banks are lending out money at negative interest rates (Sweden, Japan, Switzerland, etc.), and cryptocurrencies like Bitcoin are collectively worth over $200 billion.

How we view money – and how that perception evolves over time – is an underlying factor that influences our future.

Interesting Facts:

3. The Wealth Landscape

Wealth is not stagnant – and so for those looking to make the most out of global opportunities, it’s imperative to get a sense of how the wealth landscape is changing.

The modern view is either extremely healthy or bubbly, depending on how you look at it: Amazon and Apple are worth over $1 trillion, Jeff Bezos has a $100+ billion fortune, and the current bull market is the longest in modern history at 10 years.

Will this growth continue, and where will it come from?

Here’s one look based on projections from the World Bank:

Where is Global Growth Happening?

Despite these estimates, there is a laundry list of items that the ultra-wealthy are concerned about – everything from the expected comeback of inflation to a world where geopolitical black swans seem to be growing more common.

Here’s why those building and protecting wealth are rightly concerned about such events:

Geopolitical black swans and the S&P 500

But the wealth landscape is not all just about billionaires and massive companies – it is changing in other interesting ways as well. For example, the definition of wealth itself is taking on a new meaning, with millennials leading a charge towards sustainable investing rather than being entirely focused on monetary return.

How will the wealth landscape look a decade from now?

Interesting Facts:

4. Eastern Promises

The economic rise of China has been a compelling story for decades.

Up until recently, we’ve only been able to get a preview of what the Eastern superpower is capable of – and in the coming years, these promises will come to fruition at a scale that will still be baffling to many.

Understandably, the scope of China’s population and economy can still be quite difficult to put into perspective.

The following map may help, as it combines both elements together to show that China has countless cities each with a higher economic productivity than entire countries.

China cities vs. country GDPs

In fact, China has over 100 cities with more than 1,000,000 inhabitants. These cities, many of which fly below the radar on the global stage, each have impressive economies – whether they are built upon factories, natural resource production, or the information economy.

As one impressive example, the Yangtze River Delta – a single region which contains Shanghai, Suzhou, Hangzhou, Wuxi, Nantong, Ningbo, Nanjing, and Changzhou – has a GDP (PPP) of $2.6 trillion, which is more than Italy.

Interesting Facts:

Don’t forget: our new book covers
all of these eight themes in detail:

5. Accelerating Technological Progress

As we’ve already seen, there are many facets of change that will impact our shared future.

But here’s the kicker: when it comes to technological progress, the rate of change itself is actually getting faster and faster. Each year brings more technological advancements than the last, and once the exponential “hockey stick” kicks into overdrive, innovations could happen at a blindsiding pace.

This could be described as a function of Moore’s Law, and the law of accelerating returns is also something that futurists like Ray Kurzweil have talked about for decades.

Interestingly, there is another offshoot of accelerating change that applies more to the business and economic world. Not only is the speed of change getting faster, but for various reasons, markets are able to adopt new technologies faster:

The accelerating rate of technology adoption

New products can achieve millions of users in just months, and the game Pokémon Go serves as an interesting case study of this potential. The game amassed 50 million users in just 19 days, which is a blink of an eye in comparison to automobiles (62 years), the telephone (50 years), or credit cards (28 years).

As new technologies are created at a faster and faster pace – and as they are adopted at record speeds by markets – it’s fair to say that future could be coming at a breakneck speed.

Interesting Facts:
Future tech facts

6. The Green Revolution

It’s no secret that our civilization is in the middle of a seismic shift to more sustainable energy sources.

But to fully appreciate the significance of this change, you need to look at the big picture of energy over time. Below is a chart of U.S. energy consumption from 1776 until today, showing that the energy we use to power development is not permanent or static throughout history.

Energy Use Since 1776

And with the speed at which technology now moves, expect our energy infrastructure and delivery systems to evolve at an even more blistering pace than we’ve experienced before.

Interesting Facts:

7. Shifting Human Geography

Global demographics are always shifting, but the population tidal wave in the coming decades will completely reshape the global economy.

In Western countries and China, populations will stabilize due to fertility rates and demographic makeups. Meanwhile, on the African continent and across the rest of Asia, booming populations combined with rapid urbanization will translate into the growth of megacities, holding upwards of 50 million people.

By the end of the 21st century, this animation shows that Africa alone could contain at least 13 megacities that are bigger than New York:

Megacities demographic animation

By this time, it’s projected that North America, Europe, South America, and China will combine to hold zero of the world’s 20 most populous cities. What other game-changing shifts to human geography will occur during this stretch?

Interesting Facts:

8. The Trade Paradox

By definition, a consensual and rational trade between two parties is one that makes both parties better off.

Based on this microeconomic principle, and also on the consensus by economists that free trade is ultimately beneficial, countries around the world have consistently been working to remove trade barriers since World War II with great success.

But nothing is ever straightforward, and these long-held truths are now being challenged in both societal and political contexts. We now seem to be trapped in a trade paradox in which politicians give lip service to free trade, but often take action in the opposite direction.

To get a sense of how important trade can be between two nations, we previously documented the ongoing relationship between the U.S. and Canada, in which each country is the best customer of the other:

USA/CAN Trade Relationship

With the recent USMCA agreement, the two countries seem to have sorted their differences for now – but the trade paradox will continue to be an ongoing theme in economics and investing at a global level for many years to come, especially as the trade war against China rages on.

Points to Consider:

How You Can Visualize Change

The forces behind change are not always evident to the naked eye, but we believe that by fusing data, art, and storytelling together that we can create powerful context on the trends shaping our future.

If you enjoyed our summary above, you can explore these ideas further with our book “Visualizing Change”, which offers 256 pages of infographics, data visualizations, and charts on the future direction of the global economy and technology.

Get your copy of Visualizing Change today

Our book makes a great holiday gift. Get it on Amazon.com or Amazon.ca, or even customize a bulk order with your logo

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Cannabis

The Dramatic Rise and Fall of Cannabis Company Stocks

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The Dramatic Rise and Fall of Cannabis Company Stocks

The unprecedented expansion of cannabis across North America took the investment world by storm, as investors raced to cash in on the “green rush”.

Yet, even as changing regulations unlock new opportunities, it seems as though the cannabis stock bubble has already burst — at least temporarily.

Today’s visualization dives into the roller coaster of cannabis company stock valuations over the past few years, and which companies remain standing in this hazy market.

A Wild Ride for Cannabis Stocks

The North American Marijuana Index tracks the equally-weighted stocks of leading companies operating in the legal cannabis industry in U.S. and Canada. Companies listed on the index must have at least 50% of their business strategy focused on the legal industry, including ancillary operations that support companies and consumers.

At the tail-end of 2017, the promise of upcoming legalization in two immense markets—California state and Canada—had investors all fired up. The index’s low (105.31 on June 27th, 2017) shot up almost three times to 358.93 by January 8th, 2018.

Things took a sharp turn in the second quarter of 2019, as the expectations for cannabis company stocks encountered a harsh reality post-legalization.

IndexNorth America🇺🇸 U.S.🇨🇦 Canada
52-week High319.73137.07727.25
52-week Low110.1751.40195.73

Note: 52-week period data captures Dec 9th 2018-Dec 9th 2019.

What are the reasons behind such a nosedive? Could the cannabis industry still make a comeback in 2020? We look at some opposing perspectives to answer these questions.

So Much For the Green Rush

The cannabis industry is experiencing significant challenges. In the U.S., legal cannabis faces high taxes—come the new year, consumers in California will see an 80% mark-up on their cannabis at checkout, up from 60%.

North of the border, federal legalization led to immense consumer demand for Canadian cannabis—but supply can’t keep up. To make matters worse, retail stores are slow to roll out, which means Canada is feeling the crunch.

Steep prices, and difficulty purchasing products post-legalization, allow the black market to thrive. It’s clear many cannabis companies have taken a big hit as a result.

According to the Marijuana Index, here are the 10 biggest companies in the space now:

CompanySymbolMarket Cap (US$)Country
Canopy Growth Corp.NYSE: CGC$5.6B🇨🇦 Canada
Curaleaf HoldingsCNSX: CURA$3.67B🇺🇸 United States
GW Pharmaceuticals PLCNASDAQ: GWPH$2.98B🇬🇧 United Kingdom
Aurora Cannabis Inc.TSE: ACB$2.85B🇨🇦 Canada
Green Thumb Industries Inc.CNSX: GTII$2.42B🇺🇸 United States
Cronos Group inc.TSE: CRON$1.83B🇨🇦 Canada
Trulieve Cannabis CorpCNSX: TRUL$1.91B🇺🇸 United States
Tilray Inc. NASDAQ: TLRY$1.46B🇨🇦 Canada
Aphria Inc.TSE: APHA$0.96B🇨🇦 Canada
Harvest Health & Recreation Inc.CNSX: HARV$0.94B🇺🇸 United States

Note: Companies listed on a Canadian index have had their market cap converted from CAD$ to US$. Top 10 companies are based on those listed on the North American Marijuana Index. All values as of Dec 9th, 2019.

Only one company outside of North America—and even the cannabis sector—lands on this list. The UK-based Big Pharma company GW Pharmaceuticals is steadily growing its industry presence, as it currently holds 41 cannabis patents in the U.S. and Canada combined.

Still, even these big players have seen their valuations drop since the industry was at its peak. Unless the aforementioned issues are ironed out, investors may continue to pull their dollars from the cannabis industry.

A psychological shift has taken place from everyone wanting to own (cannabis) to everyone involved now feeling burned. I think many investors are now over it.

Chris Kerlow, portfolio manager at Richardson GMP

On the flip side, some investors aren’t calling it quits quite yet.

Long-Term Prospects Are High

While cannabis seems plagued with issues, some argue that these are simply short-term growing pains and will be solved as the industry matures.

Particularly in the U.S., experts predict that cannabis sales could reach immense heights in the next decade:

  1. $30 billion by 2025 (New Frontier Data)
  2. $50 billion by 2029 (Jefferies Group LLC)
  3. $75 billion by 2030 (Cowen Inc.)
  4. $100 billion by 2029 (Stifel Financial Corp)

Compared to a benchmark of $13.6 billion today, these numbers may seem ambitious—but they’re backed by major industry trends. 2020 could well be the year the market stabilizes, as consumers explore an array of retail options and vote with their wallets.

What’s more, key players in consumer industries—from alcohol and tobacco to beauty and fitness—are making big bets in cannabis and CBD-infused products. A higher number of partnerships could spark the next uptick for the industry’s potential.

The marijuana business is not for the faint of heart. But this is a big long-term game.

——Mark Zekulin, CEO of Canopy Growth Corp.

An Eye on What’s to Come

It’s clear there are differing viewpoints on the future of cannabis companies and their respective investors. As this snapshot of cannabis stocks unfolds and transforms in 2020 and beyond, could companies potentially buck the current trend and bounce back? Or will stocks continue to go up in smoke?

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Banks

The Making of a Mammoth Merger: Charles Schwab and TD Ameritrade

A look at the histories of Charles Schwab and TD Ameritrade, what comes next after the merger, and the potential impacts on the financial services industry.

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Charles Schwab and TD Ameritrade: A Mammoth Merger

In this era of fierce competition in the discount brokerage space, scale might be the best recipe for success.

Charles Schwab has once again sent shockwaves through the financial services industry, announcing its intent to acquire TD Ameritrade. The all-stock deal — valued at approximately $26 billion — will see the two biggest publicly-traded discount brokers combine into a giant entity with over $5 trillion in client assets.

Today we dive into the history of these two companies, and what effect recent events may have on the financial services industry.

The Evolution of Charles Schwab

1975 – U.S. Congress deregulated the stock brokerage industry by stripping the NYSE of the power to determine the commission rates charged by its members. Discount brokers, which focused primarily on buying and selling securities, seized the opportunity to court more seasoned investors who might not require the advice or research offered by established brokers. It was during this transitional period that Charles Schwab opened a small brokerage in San Francisco and bought a seat on the New York Stock Exchange.

1980s – The company experienced rapid growth thanks to a healthy marketing budget and innovations, such as the industry’s first 24-hour quotation service.

This fast success proved to be a double-edged sword. Charles Schwab became the largest discount broker in the U.S. by 1980, but profits were erratic, and the company was forced to rescind an initial public offering. Eventually, the company sold to BankAmerica Corporation for $55 million in stock. A mere four years later, Charles Schwab would purchase his namesake company back for $280 million.

1987 – By the time the company went public, Charles Schwab had five times as many customers as its nearest competitor, and profit margin twice as high as the industry average.

1990s – In the late ’90s, Charles Schwab moved into the top five among all U.S. brokerages, after a decade of steady growth.

2000s – The company made a number of acquisitions, including U.S. Trust, which was one of the nation’s leading wealth management firms, and most recently, the USAA’s brokerage and wealth management business.

The Race to $0

For Charles Schwab, the elimination of fees is the culmination of its founder’s vision of making investing “accessible to all”.

charles schwab falling trade fees

The company’s fees were slowly declining for decades. In late 2019, it finally took the plunge and introduced free online trading for U.S. stocks, exchange-traded funds, and options. The response was immediate and enthusiastic, with clients opening 142,000 new trading accounts in the first month alone.

Although Charles Schwab sent rivals scrambling to match its no-commission trade offer, fintech upstarts like Robinhood have offered free trading for years now. The “race to zero” reflects a broader generational shift, as millennials are simply more likely than earlier generations to expect services to be free.

The Evolution of TD Ameritrade

1975 – The origin of TD Ameritrade can be traced back to First Omaha Securities, a discount broker founded by Joe Ricketts. The company changed its name to TransTerra in 1987.

1988 – TransTerra’s subsidiary, Accutrade, was the first company to introduce touch-tone telephone trading, a major innovation at the time and one of the first early forays into automation.

Early 1990s – Ricketts’s willingness to integrate emerging technologies into the trading business helped his companies achieve impressive growth. In 1997 the company acquired K. Aufhauser & Co., the first company to run a trading website.

The Internet wasn’t a puzzle. We were crystal clear from the beginning that customers would migrate to this.

– Joe Ricketts (2000)

Late 1990s – The Ameritrade brand was solidified after the company changed its name from TransTerra to Ameritrade Holding Corporation in 1996. The newly named company completed an IPO the following year, and established its new brand Ameritrade, Inc., which amalgamated K. Aufhauser, eBroker, and other businesses into a unified entity.

2000s – Ameritrade entered the new millennium as the fifth largest online investment broker in the United States, fueled in part by marketing deals with AOL and MSN.

The modern incarnation of TD Ameritrade took shape in 2006, when TD Bank sold its TD Waterhouse USA brokerage unit to the Ameritrade Holding Corporation in a stock-and-cash deal valued at about $3.3 billion. At the time of the deal the new company ranked first in the U.S. by the number of daily trades.

2016 – TD Ameritrade acquired the discount brokerage Scottrade for about $4 billion. The deal brought 3 million client accounts and $170 billion in assets under management into the company, and quadrupled the size of its branch network.

What Comes Next?

Naturally, the announcement that these massive discount brokers plan to merge has generated a lot of speculation as to what this means for the two companies, and the broader brokerage industry as a whole.

Here are some of the consensus key predictions we’ve seen on the deal, from both media and industry publications:

  • After the deal is approved, the integration process will take 12 to 18 months. The combined company’s headquarters will relocate to a new office park in Westlake, Texas.
  • Charles Schwab’s average revenue per trade has dropped nearly 30% since Q1 2017, so the company will likely use scale to its advantage and monetize other products.
  • The merged company will continue to adopt features from fintech upstarts, such as the option to trade in fractional shares.
  • E*Trade, which was widely considered to be an acquisition target of Schwab or TD Ameritrade, may now face pressure to hunt for a deal elsewhere.

Even though these longtime rivals are now linking up, stiff competition in the financial services market is bound to keep everyone on their toes.

I think Joe Ricketts and I agree that our fierce competitiveness nearly 30 years ago is proof that market competition can be a source of miraculous innovation.

– Charles Schwab

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