In 1999, serious governments were convinced that as the clock struck midnight on December 31 the world's computers would shut down. But on New Year's Day there was no millennium disaster. Unlike then, there's actually a lot to worry about this year: Donald Trump might remain president; the Democrats might impeach him; Australia might have four prime ministers; populism might keep growing; Brexit might happen or it might not; China's economy might decline; Putin's Russia might continue its ascent; Sydney and Melbourne house prices might continue their descent; the ALP might win the federal election and nationalise the means of production; and a team other than the Swans might win the AFL grand final.
Here is my list of events I believe will definitely happen.
Middle and working-class Australians will continue to be underpaid but will generally be better off.
While labour's share of income has been in decline for more than 40 years, Australians are better educated, healthier, safer, richer and leading more enjoyable lives. In May the new Shorten government will introduce policies to give labour a bigger share of the profit pie, thus reducing inequality. But it will take some time to make a difference. The outcome for most companies is obvious.
Humans will not be replaced by robots or AI (well, not yet). Most Australians worry about the impact of Industry 4.0 on their jobs. A significant number worry that robots and AI will take over their jobs and the world (think Blade Runner and The Matrix combined). Over the medium term robots will take over a lot of the jobs people don't like doing. In fact, they will work alongside humans. But as Harvard psychology professor Steven Pinker says: "The Robopocalypse (robots and AI taking over the world badly) makes as much sense as the worry that since jet planes have surpassed the flying abilities of eagles, someday they will swoop out of the sky and seize our cattle."
Australian companies will do even worse for shareholders.
While there won't be much of a financial crisis, oil prices will be down, China will stimulate its economy and most major global markets will be down. In Australia, part of the reason will be the government reducing the size and cost of running large companies with a stronger emphasis on anti-competitive behaviour, more legal action, attempts to put executives in the slammer, a tougher focus on directors, and more regulation in consumer-facing sectors such as banking, aged-care, health funds and utilities. Remember that over the past 10 years, 30 per cent of S&P/ASX 200 companies have not met their cost of capital, even with interest rates at record lows.
Most companies will still not understand trust.
The western world's fastest-growing industry is trust consultancy. Taking over from the reputation consultants, the trust spinners have the answers for the death of faith in institutions, sports stars, politicians, business leaders, clergy and religion. Except it's more complex than that. While the Hayne and Orr royal commission wasn't the best ad for banking practice, despite the horror stories there was no run on the banks. On the other hand, millennials trust banking-type apps more than they trust traditional banks.
They would prefer to bank without friction via an Apple, Amazon or Uber than with a big four or five. Millennials and Gen Z want to work for companies that have a purpose, are doing good in the world, want to develop them and have a good culture.
Facebook will decline. Traditional media will regain some power.The scandals at Facebook have hurt user and advertising numbers. There is a growing shift to Instagram and Twitter (helped by continuous promotion from President Trump). But many global marketers, large corporates and political parties have realised they have been putting too much budget into digital and paying the price in terms of customer acquisition, long-term brand building and voter impact. An Ipsos study last year for Australia's newspaper industry found readers rated newspapers and news websites above all other media as the most trustworthy. This improved their views of advertising in newspapers and on their online sites.
This article by John Connolly appeared in the March 2019 issue of The Deal