Stuart Dunbar, partner, Baillie Gifford
Ways the world will change, from smarter robots to medical breakthroughs achieved at speed.
As with any investment, capital is at risk.
The Swedish physician and academic Hans Rosling became a YouTube sensation by pointing out to the world that things are rarely as bad as they seem. Negativity dominates the headlines, but progress is relentless. If you haven’t already, cheer yourself up by taking a look at Gapminder.org, the independent Swedish foundation he created with his family.
For sure, there’s a lot to worry about right now. War, climate change and geopolitical sabre-rattling top the list, with interest rates and unsustainable government borrowing not far behind. These are important issues. But look a little deeper, and you will find that underneath it all, remarkable changes are happening in how we all live our lives. Technical progress is delivering real-world impact at a rate we haven’t seen for decades.
How does progress happen amid such uncertainty? It is because many academics, entrepreneurs and others with drive and ambition refuse to be sidetracked by the constant flow of things to worry about – they focus on what they can do, not what they can’t. For growth investors, a similar mindset is invaluable.
We know that the best companies don’t rely on GDP growth to succeed. They create wealth by changing how people live and consume, and by investing to out-innovate their competitors. They adapt, they make their own futures, and they keep their eyes on the horizon. Even as we are bombarded with everything that’s going wrong in the world, could we take a little time to consider what might go right over the coming years? On that basis, here are five inevitable shifts set to transform our world.
1. Robotics
In much of the world, a declining working-age population is leading to labour shortages. This gives impetus to the advances we are seeing in robotics. Ageing societies need to automate everything they can, leaving the falling number of working-age people to focus on complex areas that require judgment.
We are already seeing a swathe of companies react to and benefit from this. Not just hardware manufacturers but those providing the sensors, datasets and AI learning capabilities that are drastically changing our understanding of what can be automated.
Robots are advancing from fixed-location repetitive tasks to being able to ‘see’ and ‘understand’ their surroundings laying the path to them safely working alongside humans in unstructured environments. Ecommerce firms, including Amazon and South Korea-headquartered Coupang, already use robots to shuffle goods across their warehouses. Manufacturers are starting to adopt them on production lines. And tens of thousands of surgeries each year are machine-aided, resulting in shorter, less invasive procedures and much-reduced recovery times.
2. Medical treatments
Drug discovery has historically been more trial-and-error than intelligent design. Today’s blockbuster weight-loss drugs were an unexpected outcome of investigations into diabetes treatments. Now, mass gene sequencing and cloud computing services combined with AI are helping companies such as Recursion Pharmaceuticals gain a more informed understanding of how drugs work. Treatments for previously untreatable diseases and chronic conditions are just around the corner. Many companies are already benefiting from this reallocation of research spending. The potential cost savings for health systems are vast.
3. Energy
Regardless of political cycles, our energy transition from fossil fuels will happen. Wind and solar are already cheaper than fossil fuels for electricity generation, but we don’t have the means to store enough energy to rely on intermittent sources.
Battery technology is evolving at a furious pace to overcome this challenge, with costs per kilowatt hour (kWh) having fallen by 90 per cent since 20101. There are firms specialising in creating batteries from recycled materials. For instance, Redwood Materials is breaking down end-of-life batteries and using the recovered materials to make components for new ones. Others are experimenting with alternatives to lithium-ion batteries to reduce the pressure on natural resources2. Best-in-class cable manufacturers, such as Prysmian, and copper miners look to have a rosy future as we electrify everything we can.
4. Infrastructure
Growth isn’t limited to exotic technologies. Some developed economies have such dilapidated infrastructure that a major upgrade is necessary just to maintain current productivity levels, much less improve them. This is wrapped together with the need for improved defences against extreme weather events and the creation of a decentralised grid. The result: everything from Advanced Drainage Systems’ stormwater chambers to Martin Marietta Materials’ supply of gravel and other aggregates looks set for a boost.
5. Autonomous transport
Zipline pioneered using drones to deliver urgent medical supplies, and a combination of sensors and AI is helping others manage logistics far more efficiently. Full self-driving cars may always seem to be just around the corner, but automated long-distance trucking looks imminent thanks to Aurora Innovation, whose autonomous technologies are fitted to other vehicle makers’ rigs.
This is far from an exhaustive list. Who stops to think about the internet’s unseen financial plumbing, which lets companies handle dozens of currencies and multiple forms of payment? Or the specialist machines and power management systems that make it possible to manufacture computer chips and operate data centres?
This is progress, thanks to the advances made by all these companies. It doesn’t get much attention because it happens day after day after day. There is no big news item. And therein lies the opportunity. Opportunities abound thanks to the inevitability of progress.
Hear this and other Short Briefings on Long Term Thinking podcast episodes at bailliegifford.com or wherever you access your podcasts from.
Stuart joined Baillie Gifford in 2003 and became a partner in the firm in 2014. He is Chair of the UK Business Group as well as coordinating global marketing and product development activity and sitting on various management groups including the firm’s Strategic Leadership Group and ESG Steering Group. He graduated BA in Finance and Business Law from the University of Strathclyde in 1993.
Important information
This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.
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