This March 2021 note sets out five trends IRG considered worth watching: regulation driving stakeholder capitalism, subscriptions, calls to break up the largest technology companies, the circular economy, and disintermediation in healthcare and education.
Key findings
- The US Securities and Exchange Commission’s acting chair set out an agenda to make ESG issues central to the commission’s mission and potentially part of every financial transaction.
- Other countries were treating similar legislation as a competitive advantage, with the UK reportedly refusing to align with upcoming EU rules and aiming to lead in green finance, and China reportedly set to lead on disclosure.
- The largest technology companies made up over 20 percent of the entire value of the S&P 500, and calls for their break-up were growing.
- The circular economy rests on three principles: design out waste and pollution, keep products and materials in use, and regenerate natural systems.
- COVID accelerated the removal of intermediaries from business to consumer relationships, with telemedicine as the clearest case.
Regulation and stakeholder capitalism
The trigger cited is a speech by Allison Lee, then acting chair of the SEC, laying out an agenda that would put ESG at the center of the commission’s mission. Her argument was that the supposed distinction between what is good and what is profitable, between environmental and economic sustainability, and between the public interest and the bottom line, is increasingly diminished. She also said there is no historical precedent for the magnitude of the shift in investor focus over the previous decade.
The note reads the regulatory competition as a race rather than a convergence. Countries were treating this legislation as a potential competitive advantage, with the UK reportedly declining to align with upcoming EU rules while aiming to lead in green finance, and China reportedly on course to lead the world on this kind of disclosure in the early 2020s.
Subscriptions and rundles
The subscription trend is read as an attempt to secure regular revenue and to monetize businesses that had depended on venture capital, with antecedents in the various as-a-service models. Twitter, described as the least successful social platform on monetization, had announced it was examining subscription options, and car makers had moved from talk to reality with Audi Select and Care by Volvo.
The variant the note highlights is what Scott Galloway calls rundles, or recurring revenue bundles. The example given is Apple offering music, television, cloud storage, payments, device care and regular hardware upgrades for one monthly fee, displacing Spotify, Netflix and third party cloud. Amazon Prime is named as the originator.
Two further examples widen the category: subscription clothing through Rent the Runway, and subscription niche journalism through Substack, which lets known writers monetize their work without depending on a larger publication.
Big tech, and what the break-up would do
With the largest technology companies exceeding 20 percent of the value of the S&P 500, break-up calls had broad support among American voters, and the EU had already taken the lead in cracking down on their behavior. The note is careful not to predict the outcome: some argue a break-up would unlock greater value in the separate components, others that it would stifle innovation.
The circular economy
The definition used is the Ellen MacArthur Foundation’s. Looking beyond the take-make-waste extractive industrial model, a circular economy aims to redefine growth around positive society-wide benefits, gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system.
Two offshoots are named: growing pressure on manufacturers to make products and devices repairable, and louder argument from economists such as Mariana Mazzucato about whether GDP is a valid measure of growth.
Disintermediation in healthcare and education
COVID accelerated the removal of intermediaries from business to consumer relationships. Telemedicine is the key example, since difficulty visiting doctors and hospitals during the pandemic changed medical practice. Schooling saw a similar shift, and the note argues that combined with the high cost of higher education, particularly in the US, the trend seems likely to continue.
The large platforms were already moving in, with Google offering certificated courses, and Coursera about to go public in a way that would fund further expansion.
Scope and limitations
This is a watch list written in March 2021, and several of its claims are flagged in the source as reported rather than confirmed. Its own assessment of the break-up trend is that the potential impact is unclear.
Source
This page summarises Megatrends to watch, by Institute for Real Growth, March, 2021.