DBS ASIAN INSIGHTS CONFERENCE 2018 POST CONFERENCE REPORT JULY 13 • 2018
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The DBS Asian Insights Conference 2018 brought together top business executives, investors, overseas delegates, and distinguished speakers to discuss new social, economic, and political dynamics that are shaping the future of Asian markets and investment, digital transformation, and Asia 2030’s driving forces.
Highlights of this special 50th Anniversary Jubilee Edition event included the DBS Asia Leadership Dialogue between famed author and professor, Yuval Harari and DBS Group CEO, Piyush Gupta. Distinguished speakers from the region included: guest of honour, Finance Minister Heng Swee Keat; Anthony Tan, Group CEO and Co-Founder of Grab; Ari Sarker, Co-President for Asia-Pacific at Mastercard; Amin Toufani, CEO of T Labs and Director of Strategy at Singularity University; Noeleen Heyzer, Former Under-Secretary-General of the UN; Peter Ho, Senior Advisor at the Centre for Strategic Futures and Former Head of Singapore Civil Service; Poon King Wang, Author and Director at Lee Kuan Yew Centre for Innovative Cities at the Singapore University of Technology and Design; Arjun Shetty, Portfolio Manager at Astignes Capital; David Skilling, Director at Landfall Strategy Group; Laurence Kwan, VP of Sunseap Group of Companies; Geert Peeters, Director and CFO of CLP Holdings; and Kenneth Akintewe, Head of Asian Sovereign Debt at Aberdeen Standard Investments.
With four out of the top five economies in the world expected to be in Asia by 2030 and over 1,000 attendees including leaders from both the public and private sectors, this event provided an excellent platform to exchange ideas and reimagine Asia 2030.
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CONTENTS
WELCOME GLOBAL INVESTMENT OUTLOOK PIYUSH GUPTA Global events in the first half of 2018 06 Message from Piyush Gupta, Chief 32 have thrown markets into a tumult. Executive Officer, DBS Group Holdings Investors are holding back and waiting and DBS Bank. for sanguine market conditions.
GUEST OF HONOUR KEYNOTE ASIAN REAL ESTATE OUTLOOK MR HENG SWEE KEAT Asia’s megacities are known for their size 14 Keynote address by Heng Swee Keat, 34 rather than investment potential. DBS’ Minister for Finance, Ministry of Finance. panel of property experts pored through more than 300 cities in the region to REIMAGINING ASIA 2030 present Asia’s top cities in 2030. NARRATIVES FOR THE FUTURE 20 Asia will change drastically by 2030. Before DIGITAL TRANSFORMATION considering potential opportunities and risks DISRUPTIVE DIGITAL AND THE to businesses, we first need to appreciate 38 TRANSFORMATION OF LARGE the magnitude of economic change. ORGANISATIONS Since its inauguration in 2012, Grab has PLENARY SESSION ON ASIA 2030 emerged as Southeast Asia’s first unicorn EXPONENTIAL CHANGE AMID THE and one of Asia’s biggest start-up success 24 FOURTH INDUSTRIAL REVOLUTION stories within half a decade. Piyush Gupta, Change is coming. For businesses to adapt DBS Bank Group CEO, sits down with and capitalise appropriately, they need to Anthony Tan, CEO and Co-founder of Grab, understand the key characteristics of the to find out why. Fourth Industrial Revolution. DIGITALISATION, BANKING, AND MARKETS AND INVESTMENTS CENTRAL BANKING G3 AND ASIA – MACRO, CURRENCY, 50 The current cost of printing and 28 AND RATES OUTLOOK circulating physical cash is exorbitant, The US-China trade war has the world’s though digital currency could counteract investors on edge. How much of their the costs. What will the medium of hesitancy is based on false premises? exchange be in 2030?
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DIGITALISED DISRUPTION - REIMAGINING BUSINESS 52 Many of our current theories on the economy, successful business models, and the optimisation of choice no longer hold true today, declares Amin Toufani, CEO of T Labs and Chair of Finance and Economics at the Singularity University.
ASIA 2030 DRIVING FORCES ASIA AND SINGAPORE 2030 56 In recent decades, Asia has experienced tremendous growth in its economies and wealth, with Singapore being one of its finest examples. However, the sustainability of rapid growth will become increasingly challenging in the coming decade.
CHINA – BRI, AUTOMATION, AND THE EVOLVING SUPPLY CHAIN 60 Our panel of expert economists discuss why ASIA LEADERS DIALOGUE the future of China continues to look bright HARARI UNLOCKS THE FUTURE in 2030 and its significant driving forces. 68 Yuval Harari preludes the DBS Asia Leaders Dialogue with a deep dive into MEETING FUTURE ENERGY DEMAND the future of humanity. IN ASIA 64 With a growing awareness of the effects fuel YUVAL HARARI AND PIYUSH GUPTA has on the environment, there is now more MODERATED BY MARTIN SOONG pressure than ever to switch to a sustainable 72 The DBS Asia Leaders Dialogue gathers source of renewable and clean energy. the region’s most influential thinkers for a candid discussion with Piyush Gupta. This year, Yuval Harari shared insights into the pressing issues of technological advancements that might shatter the CLOSING REMARKS conventional structure of humanity. PETER SEAH Martin Soong, CNBC Co-Anchor, 97 Message from Peter Seah, Chairman, DBS moderated the discussion. Group Holdings and DBS Bank.
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THOUGHTS ON THINKING ABOUT THE FUTURE PIYUSH’S WELCOME ADDRESS
ur guest of honor, Minister of Finance, I sometimes think of DBS as an equally unlikely bank. Minister Heng Swee Keat, ladies and Fifty years ago, some 16 people were carved out from the gentlemen. It’s a real pleasure to welcome development finance part of the economic development you this morning. As you’ve heard already board to go and start a new bank. This new bank was and seen, it is a special year for us. It is our not even part of the Association of Banks in Singapore. O50th year. In point of fact, people often called Singapore But perhaps as a consequence, it was able to re-imagine an unlikely country. the rules and re-imagine the way banking was done. In some ways we believe that those starts, those origins, were propitious and actually helped anchor the kind of bank that we have become today, a bank that continues to strive to reimagine the nature of banking itself.
As you can see, we are quite pleased with the journey we’ve had over these last 50 years. We grew from being relevant to Singapore to rapidly becoming a force to reckon with in Asia. Some five, seven years ago, we began increasingly to be recognized as Asia’s best bank. And in the last couple of years, we’re extremely proud of the fact that we are beginning to get global recognition.
Euromoney’s recognition in the last couple of days as the world’s best digital bank for the second time is not an insignificant recognition because it comes in the face of some stiff competition from some of the leading banks in the world.
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The recognition as the world’s best SME bank further underlines that. The recognition is really testament to the way we are trying to digitize the entire SME ecosystem and the SME supply chain itself. A Very Brief History in Time We wanted to therefore use this occasion to try and do an insight conference with a little bit of a difference. We focus every year when we do this on the short term; what’s likely to happen in the markets, what’s happening in the economies, how you might position your businesses, your investment portfolios. This time we decided to take a slightly longer view, a view out at 2030. And as you can imagine, this is hazardous. Why is it hazardous? Well, let me just take you back to 12 years ago, 2006. If you remember, in 2006, Gmail had been launched in the US for just two years. It was just beginning to get launched everywhere else in the world. Facebook had been launched, but they had 10 million users, nowhere near like the 2 billion they have today. There was no iPhone, there was no Twitter, there was no Instagram, there was no WhatsApp. There was actually no global financial crisis, no nationalism, no Donald Trump, no irrational exuberance and no declining growth.
Now, these are cyclical events. But structurally, you have to recognize that the pace of change has been so extraordinary that our lives in the way we live today are starkly different from the way we lived our lives in 2006. I was noticing this last year, just to give perspective, there were three and a half billion searches made on Google. 55 billion messages exchange on WhatsApp, six and a half million rides on Uber, 95 million posts on Instagram, and 500 million tweets of which I guess Donald Trump accounted for 80% of them. An Extraordinary Pace of Change The point is really this: the pace of change has been so rapid and so extraordinary. They’re trying to call what
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might happen over the next 12 years is going to be frightfully difficult. Now, they’re very good futurists who have a way of thinking about this. We’ve tried to bring many of them to this conference, the session after this from folks from Singularity University, the session later in the afternoon from renowned author, Yuval Harari, and introduce you to people who have thought hard and deep about where the world and mankind is going. But it just seems to me that the way we change and the way we live our lives over the next 12 years will be so dramatically different that most people might not be able to get it exactly right. Technology – the Unmoved Mover The changes in technology, of course, are going to be the fundamental drivers. If you think about artificial intelligence, it’s already making a big impact even in the consumer space. Those of you who have seen Microsoft’s new, the shy saw Google’s duplex. These are artificial intelligence, power, personal assistance, or even at a more basic level, such as Alexa and Siri. The ability of these devices to predict what you want, to respond to you, to do work for you, is already a game changer. Can the pace you imagine what will happen over the next four or five years? You think about robotics. Those of you have seen of change Sophia from Hanson and the human like characteristics and the human like emotions that Sophia is able to go has been so through. Just mind boggling. rapid and so You extend that to nanotechnology. If we extend that to extraordinary biotech and gene therapy, if you ... Just last week, I saw this article from some DNA gene sequencing scientists who are fairly confident that by 2030 aging will be cured. In fact, they went on to say that they think they can be younger in 2030 than they are today. Block chain and the impact it has to the way the world is organized between hub and spoke arrangements, which exist today, and a completed decentralized ledger system that might exist in a few short years from now. It’s quite clear that technology
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continue to be a complete game changer impacting how we lead our lives. But perhaps the downstream consequences of that are going to accelerate even more than anything we’ve seen in the past. Re-ordering the World of Work What are these? One, the future of work. It’s quite clear that a lot of the work that we know and the way work is done today is disappearing and will continue to disappear. I sometimes feel that the future of work is going to be in the gig economy and entrepreneurship, i.e. people being able to work at small scale and plug into a global ecosystem and supply chain. Now, this is obviously very significant implications for large companies, for corporations, for skills retuning, for training, for mindset, for how we need to bring people together over this next decade. It also has some really significant consequences for other stuff. The way we’re going to lead our lives in terms of the rules that define society. If the future of work is so different then you’re going to have to think about social platforms. You’re going to think about welfare in a very different way. You’re going to have to think about income redistribution models.
This is going to be coupled by the fact that demographics are changing, countries are aging without a doubt. I think Singapore’s working age population in the workforce will start declining by 2025. Japan is always shrinking at the total population. The next decade is going to see significant and stock shifts which means that allocation of resources to social goods and social platforms are going to change radically. And we’ve got to prepare for that. This should mean in a fundamental rethink of other things, the way we as society lead our lives. Think about the consequences of big data. What is okay for the state to own and not own? What are the rules of privacy? Regime and privacy controls or regulation might not work. I’ve said before, data is going to be so ubiquitous that I believe that you’re going to have to control it like air through context and use as opposed to through regulation and notice.
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A New Social Compact What are the rules of engagement when AI is driving large Every time parts of life, such as autonomous driving vehicles? The technology usual example for a driverless car goes and kill somebody who’s accountable, who’s responsible? The rules of society moves, society are going to have to be reimagined. By the way, this is not a new phenomenon. This has happened over the needs to last century. Every time technology moves, society needs evolve. What to evolve. What is different is in the past, we had time. The Industrial Revolution meant that you could take the is different is next 10, 20, 30 years for societies to evolve. The pace of change is so rapid that this time we might not have the in the past, we luxury of time. We might need to evolve some of these had time. rules of living alongside the changes in technology itself. We have to think about inequity. Over the last five, seven years, one of the biggest drivers of the sense of tribalism, nationalism, protectionism is indeed the sole question of inequitable distribution of the outcomes, whether it’s the outcomes of globalization or outcomes of technology. When does this come to the tipping point? How will this drive mass migrations? How’s this going to impact actually social justice and social strife? What do governments, people, and even the private sector need to do to stay ahead of the game and make sure that the fruits of our labor and outcomes are better balanced and more evenly distributed? I haven’t even started talking about the big issues that face our planet, climate change being the obvious one. It’s quite clear that today, despite nations having signed up to the two degree construct and having had national commitments, nobody is achieving them. The latest data in 2017 says that not one single country in the world is on track to achieve as two degree commitments at this point in time.
Scientists say that we are living within 10 planetary boundary conditions of which four have already been exceeded, and we are well on path to exceeding several others. We have to be able to remodel our business models, and we have work over the next decade to address some of these big issues around planetary boundaries and climate change as well.
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The Inexorable Shift The mass demographic reality of 50% of the world’s population being in this part of the world and the I think what is also quite clear is the shift of economic gravity massive catch up in terms of technology and innovation, from the west to the east. The ascendancy of the Pacific and the massive catch up in terms of urbanization and region. China’s increasing role on the world stage both in infrastructure means that this shift is relatively inexorable. economic and geopolitical terms. It’s going to continue to What does that mean to the world that we’re going be reality, notwithstanding trade wars and notwithstanding to live in and what we’re going to do? As I said, it’s slowdowns and bumps in the road. hazardous and difficult to predict answers to all of these things. Nevertheless, in the course of today, we expect to have many of our experts, many of DBS’ people take a stab at projecting where things are headed and what we might want to look at and what we might want to be prepared for. Have a POV or Perish I have to confess, it’s not always clear that you can call the future, right. But it is clear that you must have a point of view on the future. Our attempt today is going to help develop such a point of view. That notwithstanding, we do believe that we will not call many things but what we do want is to make sure that you’ve thought about it enough, you have enough ideas to be able to be adaptive and to be responsive. In my own view, the winners over the next 10, 12 years between now and 2030 will be the people who have been able to build nimbleness, flexibility, adaptability and responsiveness into their way of working. And that’s principally what we want to try and leave with you through the course of today.
The ability to think differently and to figure out how you might want to react and respond in an ever-changing world. Other than that, I can only promise you that it’s going to be an exciting future It’s going to be a rocky and uncertain world. Hang tight, stay calm, but do put on your seat belts.
Thank you all for joining us this morning. Piyush Gupta
Chief Executive Officer DBS Group Holdings and DBS Bank
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the winners over the next 10, 12 years between now and 2030 will be the people who have been able to build nimbleness, flexibility, adaptability and responsiveness into their way of working
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KEYNOTE ADDRESS MR HENG SWEE KEAT, MINISTER FOR FINANCE
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ood morning to everyone. Thank you for inviting me to join you today. My heartiest congratulations to DBS on your 50th anniversary and for being the only Asian bank to win two awards on this very special Goccasion – the best digital bank and the best SME bank. This is something which I think all DBS staff would be very proud of and all of us are very proud of.
In the last fifty years, our financial sector has grown significantly, with its share of GDP increasing from 3.0% in 1968 to 13.0% in 2017. Today, we are ranked amongst the top financial centres globally, home to about 1,200 local and international financial institutions... Role of Finance in Economic Development The development of our financial sector has been crucial in supporting Singapore’s economic development and Singapore’s growth over the years, channelling domestic savings and international capital flows to productive investments in key economic sectors...
DBS has contributed – from financing industrialists to set up in Singapore in the 1960s and 1970s, to providing individuals and corporates with the full suite of banking services today.
The vitality of the financial sector and the development of the real economy are deeply intertwined. Effective intermediation of capital to channel savings to productive investments enables the real economy to grow, to create jobs for people, and to fund long-term investments in social and physical infrastructures. Supporting Asia’s Growth Singapore’s financial sector and DBS is in the position to support the region’s development as the economic centre of gravity shifts back to Asia. Earlier you heard Piyush speak about some of the major trends and, in fact, in this
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year’s Budget, I spoke of three major trends that we must all stakeholders across the region to explore better ways to take into account. meet Asia’s infrastructure needs.
One is the shift in the economic centre of gravity back to The office seeks to bring together the demand or project side Asia. Second, the rapid advances of technology especially and the supply or financing side to facilitate the matching of in the information communications technology, in artificial demand and supply. intelligence, and the changing demographic patterns not One platform to do this is the Asia-Singapore Infrastructure only in Singapore but across the whole of Asia and in fact, Roundtable, which will be held in October this year... across the whole world. Now let me touch on the shift of the economic centre of Enterprise Financing gravity first. The IMF projects Asia to lead global growth at The second area is enterprise financing. Digital technologies an average rate of about 6.4% from now till 2023. Within are catalysing the development of innovative business Asia, China and India have the largest populations in the models and products in and across many sectors... world and are emerging rapidly. A study by Microsoft projects that the share of Asia Pacific ASEAN itself is a region of opportunities, with growth of the GDP derived from digital products or services created ASEAN–5 expected to be about 5% till 2023. The growth through digital technologies will increase from 6% in 2017 is largely driven from the ASEAN middle class, which is to 60% in 2021. expected to more than double in size by 2030, from 2015 levels. It is projected that based on current growth rates, At Budget 2018, I announced that Singapore is positioning ASEAN is expected to become the fourth largest single itself as a Global-Asia node of technology, innovation and market by 2030, behind the EU, China and US. enterprise. Singapore is investing significantly in research, innovation and enterprise development. We are fortunate to be strategically located in a region with strong growth potential. Let me touch on three areas where As a major financial centre, with a wide range of financial we can support Asia’s development. institutions providing a variety of funding, Singapore is a strong base to serve the needs of innovative enterprises, and Infrastructure Financing to seed the growth of the next generation of Asian growth companies. ...The ADB estimates that to maintain Asia’s growth momentum, infrastructure investment needs will total US$26 MAS has revised regulations to facilitate the activities of trillion from 2016 to 2030, or $1.7 trillion per year. venture capitalists, and to give finance companies greater scope to support small and medium enterprises. We are also Traditionally, much of the responsibility for infrastructure working with industry players to establish private market investment has fallen on the government. But given the size funding platforms to enable growth companies to gain of these needs, it is not possible for any single government better access to a wider network of investors. to fund this fully. Nor any single bank. We need to crowd in private capital from all sources to accelerate infrastructure development in the region. Adoption of
Singapore set up the Infrastructure Asia office in April 2018 Digital Financial Services to harness the collective network and capabilities of public ...Financial institutions can leverage on technology to sector agencies and private sector firms, and partner key improve efficiency through the adoption of e-payments.
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Together, let us push the boundaries of our imagination
This provides convenience for consumers and businesses In addition, the use of technology and innovation can while reducing transaction costs. help to facilitate financial inclusion, which is a key priority under our ASEAN chairmanship... In Singapore, MAS is working with the industry to enhance the inter-operability of the various e-payment In Singapore, we are also mindful not to leave behind systems in the market to encourage wider adoption... certain segments of the society in our efforts to digitalise.
Apart from improving efficiency in channelling financial flows, The government is taking the lead to create a digitally financial institutions can also adopt technology to deepen inclusive society through the Digital Inclusion Programme access to financial services for Asia’s rising middle class. run by IMDA.
A 2016 Mckinsey study showed that South and South East As the People’s Bank, POSB plays an active role in these Asia are amongst the regions with the highest number of efforts through its collaboration with IMDA on various financially excluded, and the adoption of digital financial initiatives, including the development of training courses services in these regions could potentially provide 470 with community partners to familiarise senior citizens million individuals access to a financial account while with digital banking services. I encourage DBS and POSB generating new deposits of up to US $1.5 trillion. to continue these digital inclusion efforts.
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Conclusion As we grow and develop our financial sector to serve the needs in the real economy, we must take proper risk Let me conclude. The prospects for growth in Asia is good management.At the macro-level, to maintain our resilien and our financial sector and DBS is well poised to grow ce, we must also be prepared for major disruptions in the together with the region. However, we must not forget the global financial markets. Over the years, we have evolved lessons learnt from the past crises and allow complacency three layers of safety nets: to set in. At the national level, financial institutions must be responsible for implementing prudent risk management practices, underpinned by sound regulations and effective supervision by regulators.
At the regional level, the ASEAN+3 financial cooperation process was established in 1999 to strengthen our economic and financial resilience through initiatives such as:
The Chiang Mai Initiative Multilateralisation, as the regional safety net to provide funding support for members to meet short-term and temporary liquidity needs; and,
The ASEAN+3 Macroeconomic Research Office, as the focal point for regional macroeconomic surveillance.
At the global level, the multilateral support offered by the IMF provides an effective complement to regional safety nets and national safety nets given the increasing economic linkages between countries.
We must continue to strengthen these safety nets and support the growth and development of economies all around Asia and the world.
In this changing economic environment, with the sweeping wave of technological advancements, the possibilities of what we can achieve is only limited by our imagination.
Together, let us push the boundaries of our imagination and re-imagine how we can move ahead in this regional economic, financial and digital landscape.
I wish all of you a very fruitful conference, and DBS success in the next fifty years and beyond.
Thank you.
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Singapore is positioning itself as a Global-Asia node of technology, innovation and enterprise
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REIMAGINING ASIA IN 2030
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BIGGER, RICHER, MORE TECHNOLOGICALLY SAVVY
ure, Asia will be different in 2030, but how so? To consider the opportunities and risks facing businesses in Asia over the next twelve years, we first need to appreciate the magnitude of REIMAGINING economic change. DBS forecasts Asia’s 2030 Seconomic output, says Timothy Wong, Head of DBS Research, by analysing the growth of its two constituents: population and per capita income. ASIA IN 2030 Given that birth and death rates do not change dramatically in the short term, population forecasts tend TIMOTHY WONG to be fairly reliable. DBS expects Asia’s population to be 3.5bn in 2030, an increase of roughly 293m, or the size of the US. The granularity of demographic shifts is interesting, says Wong. For instance, consider that by 2022 India will overtake China as the world’s most populous country, and by 2030, India’s working-age population will have risen by 167m while China’s will shrink by 125m.
During that time, DBS expects Asia’s mature economies such as Singapore and Taiwan to record 1-2% annual per capita income growth, while less mature economies such as China, India and Indonesia will see 3.5-4% growth. Put together, DBS expects Asia’s total GDP to increase to US$28.3trn in 2030, the equivalent of adding an economy the size of the Euro Zone, says Wong (Asia’s economy will then be roughly a third larger than the US’).
Yet it is also important, Wong stresses, to understand the drivers of income growth over the next decade. He points to four mega trends: Urbanisation, The rise of the Asian middle class consumer, Asian connectivity and Industry 4.0.
Rural to urban migrants on average experience an increase in their earning potential, and thus, urbanisation leads to income growth. Cities account for 85% of global GDP.
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‘By 2040, Asia will have added 1 billion more people to its cities,’ says Wong, ‘Think about that for a second: millions UNDERSTANDING THE of more cars, one billion more handphones and accounts.’ ‘DARK MATTER’ OF TRADE And although Asia will have 22 megacities by then, says Wong, 90% of the urban population will be in small and medium Trade frictions have dominated headlines this year, and cities – the region, effectively, will experience urban sprawl. it is unlikely that the issue will fade anytime soon. The tone of the debate however is behind the times. The Between 2015-2030, Asia will add 1.5bn to its middle-class world has changed considerably since 1987 when Donald ranks, accounting for two of three in the global middle class. Trump took a full-page New York Times advertisement The business and sustainability implications are profound. to rail against countries taking advantage of the US Wong believes we are on the precipice of ‘The Great Asian (by running ‘unfair’ trade surpluses). Over the past few Land Grab’. Firms that can develop powerful Asian brands, decades, trade has become increasingly dominated by or leverage new technologies to, say, improve service services, technology, and knowledge, rendering the usual delivery, can ‘grab land’ amid this middle-class boom. discussion on goods trade deficits moot.
China-US trade imbalances appear large only in the narrow perspective of goods balances. The US is running Asia will add 1.5 billion a trade deficit of close to 2% of GDP against China, but it runs a services surplus worth 0.2% of GDP. When other people to its middle- corrections are considered, the US current account deficit class ranks, accounting against China falls to 1.8% of GDP. for two of three in the Still, these deficits need to be financed, which ought to mean large costs of debt servicing. The cumulative current global middle-class account deficit incurred by the US during 1999-2017 was USD9.4tn. This would have implied payments of around USD350bn a year in debt servicing to foreigners.
But the data shows the opposite. On a net basis, the US Wong also sees a region with greater connectivity and actually receives payments from the rest of the world flows of capital, labour, land, and goods. Integration (e.g. USD200bn during Jan-Sept 2017). This is as if the will bump up Asia’s potential growth rate. ‘As the world country has net foreign assets of over USD5tn. So, instead becomes more insular, more protectionist, would this of owing the world USD9.4tn, the world appears to owe hasten the pace of integration among Asian economies?’ the US USD5tn. There is therefore a gap of USD14.4tn The Fourth Industrial Revolution, characterised by AI, unexplained by current account movements. gene editing, and robots, is about the digital, physical, What explains this anomalous outcome? What is the and biological spheres converging to create ‘a new exceptionally large, unseen (and hence, termed ‘dark industrial paradigm’. Asia, says Wong, is in a unique matter’) foreign assets which are yielding considerable position to leapfrog from the third (electronics, digital, income for the US, more than offsetting the payments on biotechnology) to the Fourth Industrial Revolution. This debt accumulated through its twin deficits? could have a big impact on incomes.
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Trade has become increasingly dominated by services, technology, and knowledge
TAIMUR BAIG It turns out that this is likely related to the international activities of Amazon, Apple, Facebook, Google, Hollywood, and Uber, which are poorly captured as exports of either goods or services. It is a financial return to the deployment of technology abroad, a return that other countries pay. As trade has moved from goods and services to technology and knowledge, the inherent strength of the US has shifted as well, with the current account deficit, as it is conventionally measured, offering an incomplete and misleading picture of an otherwise healthy dynamic.
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EXPONENTIAL CHANGE AMID THE FOURTH INDUSTRIAL REVOLUTION
FOR BUSINESSES TO ADAPT TO AND CAPITALISE ON THE FOURTH INDUSTRIAL REVOLUTION, THEY NEED TO UNDERSTAND FOUR KEY CHARACTERISTICS ABOUT IT, SAYS AMIN TOUFANI, CEO OF T LABS AND CHAIR OF FINANCE AND ECONOMICS AT THE SINGULARITY UNIVERSITY. AMIN TOUFANI
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irst, technological change is accelerating: in nano for this, Toufani says, is that exponential technologies tend tech, bio tech, info tech and many other areas. to create exponential winners and losers at the individual, For example, consider the rapid improvement in AI corporate, organisational, and even societal level. This is trained to play board games. In 1996, IBM’s Deep part of the reason for the growing inequalities between Blue beat world chess champion Garry Kasparov. the world’s rich and poor. While net productivity has risen FUntil recently, the consensus in the AI community was that steadily over the past 70 years, real hourly compensation a computer would not beat a human player at Go, a far has stagnated for the past 40. more complex board game from East Asia, before 2030. ‘Depending on what your world looks like, you’re either Nevertheless in 2016, Google’s Deep Mind did it. catching the exponential wave or you’re missing out.’ People ‘At any point in time, Deep Blue was considering 400 next with access to the latest technologies, including gene editing, moves,’ says Toufani. ‘And at any point in time, Deep Mind will be leading increasingly different lives from those without was considering 130,000 next moves.’ them. With gene editing and other biological advances, the big risk is that humanity may start evolving along different Ninety percent of the world’s data was generated in the last lines depending on peoples’ access to different life-extending two years. People used to ask: ‘Here are my questions What technologies. Species bifurcation, says Toufani, will have data do I need?’ Today people ask: ‘Here are my data. Tell me irreversible effects on the human race. We all have a role to what questions to ask.’ This data explosion is exciting and play in preventing what he calls ‘the Great Bifurcation’. scary at the same time, says Toufani. Widening inequalities also worry Noeleen Heyzer, a former A second key characteristic is that exponential change is Under-Secretary-General at the UN. On the one hand, she often misunderstood. Because nature generally changes in notes that there are many poverty reduction stories from a linear fashion, our conception of change tends to mimic around Asia that offer hope, including India’s Aadhaar that. For instance, when forecasting solar industry or mobile biometric ID scheme that has brought some 340m people phone growth, supposed experts consistently made linear into the banking system. On the other hand, she suggests forecasts despite evidence suggesting that these niche that the world must deal with the extreme concentrations sectors might experience exponential growth trajectories. of wealth – ‘the top 0.0001%, the billionaires and ‘We used to worry about peak oil supply,’ says Toufani. trillionaires’ – created in this time of exponential change. ‘Today the the concern is peak oil demand, which many ‘It is going to make things more difficult at a time when believe will happen before 2030.’ people are looking for safer spaces to go to in terms of identity and politics.’ Moreover, Toufani suggests that by 2030, a new incarnation of the Internet will emerge which he dubs BLAIQ-NET, in which That leads to Toufani’s fourth insight about the fourth accountability will be secured via Blockchain, Automation industrial revolution, which is that humanity needs new tools via AI, and Optimisation via Quantum computing. ‘We think for an exponentially changing world. Toufani references the BLAIQ-NET will do to the Internet what the Internet did to Exponential Economics (or Exonomics) framework as a new the library.’ way of making sense of exponential business and policy dynamics. He also believes that IQ alone does not seem to In short, the onset of all these changes and developments predict success in this world; Toufani and his team at T Labs will occur sooner than most of us think. have developed the concept of ‘AQ’, or the adaptability The third feature is that exponential change necessitates quotient as a stronger predictor of success. ‘Unlearning is new ways of living, working, and innovating. The reason emerging as a new core competency,’ says Toufani.
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Yet according to Peter Ho, there is still a perception, WHAT CAN YOUR particularly among some in the West, that China is a copycat, that a country with an authoritarian system ORGANISATION DO? of government cannot innovate. ‘That is a deep This trend of accelerating change has many implications misunderstanding of the nature of competition that for every organisation, according to Peter Ho, Senior China poses.’ The reality, he says, is that China has the Advisor at Centre for Strategic Futures, Singapore. capacity to excel in many areas. It has some of the fastest ‘Decision cycles are getting shorter and leaders have less supercomputers in the world and is becoming a leader time to react to change. They have to make decisions with in AI and robotics – partly, Ho contends, to alleviate the uncertainties and a certain boldness is increasingly part and decline of its working-age population. parcel of running any organisation with ambition,’ he says. Indeed, if other Chinese and Asian brands can emulate In this complex world, we don’t know what is going to the likes of DJI – now a beloved household name among happen until it happens; this is the property of emergence. drone enthusiasts globally – then perhaps by 2030, the To operate in this environment, pilots and experiments, nativism and protectionism of today will seem like the with driverless cars, for instance, are crucial. ‘The biggest distant past. failure is to not try things out… we can take a failsafe approach but we will be left behind. I think we have to take a safe fail approach… for example with a regulatory sandbox. If it works, great. If it doesn’t work, put it down to good experience.’ POON KING WANG In order to deal with the ‘future of work’, says Poon King Wang, Director at Lee Kuan Yew Centre for Innovative The Cities at the Singapore University of Technology and Design, organisations need to adopt better tracking tools. biggest This will help them understand the speed and scale of disruption. ‘Jobs are replaced task by task,’ he says. failure is to not try UNDERSTANDING things out CHINA’S EXPONENTIAL CHANGE Arguably, the country that best demonstrates the power of exponential change is China. ‘China seems to have caught up with the US on all fronts, including technology, AI, and deep learning,’ says Tan Su Shan, Group Head, Consumer Banking and Wealth Management at DBS. She highlights DJI, the world’s largest drone company based in China, as an indicator of how far the country and its corporate sector have come.
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POON KING WANG TAN SU SHAN PETER HO NOELEEN HEYZER
The reality is that China has the capacity to excel in many areas
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G3 AND ASIA – MACRO, CURRENCY, AND RATES OUTLOOK
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The looming trade war G3 AND ASIA – between the United States and China has the world’s MACRO, CURRENCY, investors on edge. How much of their hesitancy is AND RATES OUTLOOK based on false premises?
Taimur Baig, Chief Economist and Managing Director, Group Research at DBS Bank, questioned a panel of experts composed of both DBS veterans and successful businessmen from the region. They each shared their thoughts about the true ramifications of the trade war on Asia’s economy and how uncertain rate fluctuations will affect the rest of the globe in the years to come.
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fter briefing the panellists and audience are serious, but we should filter out the noise from the alike on the current economic state of macro, and the macro is showing us that the labour affairs, Baig asked Kenneth Akintewe, market is tightening.’ This resonates with the shrinking Head of Asian Sovereign Debt at Aberdeen unemployment rate in the US and optimistic projections Standard Investments, to describe his firm’s suggesting stability. He closed by affirming, ‘The FED can Atake on the Asian market and what it has done to stay in still hike twice this year and probably a few more times the green, given the unstable nature of the region. next year,’ leaving some leeway for the Federal Reserve to mitigate any unexpected inflation. ‘Step outside the way you look at normal markets … you must look for opportunities that are difficult to Taimur Baig pivoted to Phillip Wee, Executive Director access by other investors,’ Akintewe said. He went on to of Currency Research at DBS Bank, to find out if his describe anomalous market activity, ‘The fundamentals perspective differed much from Leow’s, ‘Will the dollar of Indonesia are good… but when 40% of your market keep on strengthening, even as growth rates are starting is owned by foreign investors, you have [a] big problem to stagnate?’ Wee remarked that although his bull-dollar when global sentiment turns negative.’ call earlier in the year came true, ‘People are not running to buy dollars; they are adjusting their positions based Investigating niche points of market entry is generally on how the dollar changes.’ This explains the increased a risky and tedious endeavour. Akintewe went on to trading of the euro, yen, and pound in the past year. demonstrate this point by describing positions in Sri Lanka, ‘This is not a market in most people’s indices [as it is] Wee went on to describe how real rates have switched fundamentally not very strong, but its bond market has from negative growth in past years to align with the been one of the top performing [markets] of the past year.’ Federal Reserve’s inflation target, suggesting that strong trading opportunities exist for those following bonds. Eugene Leow, Rates Strategist at DBS Bank, weighed in He further considered China’s position in the trade war, on delivering some clarity to what he believes is a false ‘From the perspective of the Chinese Government, narrative on the American currency, ‘On a macro front, it’s a catch-up. It looks like the trade war’s tension is I am even less worried for the US because the US has weaponisation of the currency, but it’s more like a been performing incredibly well. For me, trade tensions managed recovery.’
PHILLIP WEE EUGENE LEOW
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Step outside the way you look at normal markets … you must look for opportunities that are difficult to access by other investors
KENNETH AKINTEWE
Additionally, there is a shift in the investment of funds from the West to the East. China’s burgeoning bond market, says Arjun Shetty, Portfolio Manager at Astignes Capital, elucidates that investors are moving their funds out of traditional Western market centres and into China. ‘As access to the Chinese economy has increased in recent years, investors want macro funds based in Asia in order to invest in Chinese bonds,’ Shetty explained. China is making a concerted effort to better compete in more
than just the bond market. In fact, countries that formerly ARJUN SHETTY exported heavily to the Chinese market are now confronted with China’s internal growth programmes in both its agriculture and technology sectors. These are serving to curb competition from nations like Australia and Indonesia.
Contrary to the optimistic projections on the FED suggesting stability, Shetty wrapped up the conversation by contemplating the consequences of trade war, ‘If one were to get more serious on trade issues, the US’ (rate) curve is flat, so we should expect trade freight to continue growing; their curve steepens when trade starts to take a turn for the worse and the market questions if the FED can continue its current course.’
TAIMUR BAIG
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SAFE INVESTMENTS HOU WEY FOOK IN SEA OF UNCERTAINTY
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fter a smooth and steady year for investors of investors. The internet has taken over advertising, led by in 2017, the first half of 2018 has been quite online monsters like Google and Facebook. the roller coaster. The recent trade wars ‘The top searched are the top winners,’ said Hou. ‘Get with nearly $200 billion in tariffs imposed by involved in online advertising and e-commerce, especially President Trump have hurt Asian markets. since it is just beginning. We are becoming a cashless AAlong with this situation, Italy is throwing investors into society and data is becoming the new oil. Banks that can apprehension, undermining their trust in the Euro Zone. centralise data in the wake of digitalisation are the ones to Investors are holding back and waiting for more sanguine watch out for.’ market conditions, Hou Wey Fook, DBS Chief Investment Officer explained. Within Asia, as the Chinese middle class is growing at a steady and aggressive rate and Asian tourism is spiking, only He pointed out that the Asian emerging economies are 8% of the Chinese population has been granted passports, some of the most impacted victims when people decide but the Chinese government might increase that number, to sell down. pumping millions of dollars into popular tourism spots However, Hou reminded the audience that the world is across Asia. still growing in a positive trend and that the Fed has kept Janice Chua, DBS’ Regional Head of Research, agreed that inflation under 2%. The Fed has been ahead of the curve by Singapore’s high yields and great rates make investing in means of interest rates, raising them just before necessary the country an obvious choice. Chinese developers are a to give the US the flexibility to cut rates if needed. Europe reliable choice as China is on track to increase the number of has had a soft start at 2.2% growth and will not raise rates. megacities. Diversifying your portfolio across international Instead they will slow down their money printing. Asia has waters will give back as the global economy has overall had stable rates and should mirror US rates in the following growth. months of this year. Regardless of Japan’s ageing population and demographic challenges, they have retained steady growth of 1.1%. As such, Hou feels the macro outlook of We are 2H18 is overall positive. Amid a raging sea of uncertainty, there is still an array of reliable investment options in the becoming remaining months of 2018. a cashless Following President Trump’s tax reforms, US earnings have been very robust and when earnings are positive as they society now are, the stock market grows. Thus, Hou recommends to and data is diversify 50% of your portfolio with equities. The US dollar has also steadily increased in value since the beginning of becoming the year. Therefore, the US remains the focus of the market. It will continue to grow, Hou explained. ‘Everyone must the new digitalize to keep up, and the situation of today is on a much oil. different scale than the tech bubble that burst in 2000.’
As the internet begins to take over the world, online advertising and e-commerce should be catching the eyes
JANICE CHUA
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34 DBS ASIAN INSIGHTS CONFERENCE 2018 POST CONFERENCE REPORT
ASIA’S TOP CITIES IN 2030
sia’s megacities are typically known for their size and sprawl rather than investment potential. DBS’s panel of property experts pored through more than 300 cities from India to China in order to identify the region’s Atop cities by 2030 in terms of wealth creation, innovation and livability.
According to these criteria, China headlines nine of the top ten 2030 mega cities. 1 SHENZHEN 3GUANGZHOU 2HONG KONG 4 SHANGHAI 5SINGAPORE 6 NANJING 7 BEIJING HANGZHOU 8 QINGDAO 10 WUHAN 9
The greatest investment potential in the residential sector will be seen in Changsha, Wuhan, and Guangzhou; in the office sector, Guangzhou, Wuhan, and Hangzhou warrant investment. Guangzhou, Nanjing, and Beijing will see the highest investment potential in the retail sector and Shanghai, Hangzhou, and Shenzhen headline hotel sector investment potential.
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MARKETS AND INVESTMENTS ASIAN REAL ESTATE OUTLOOK 35
CAROL WU , JEFF YAU, DANIELLE WANG & DEREK TAN
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Beijing Tianjin CHINA
Wuhan Nanjing Shanghai Hangzhou
Hong Kong Guangzhou Shenzhen Singapore
Eight Chinese cities will see their economic size eclipse Retail Sector the economies of Hong Kong and Singapore today: Shanghai, Shenzhen, Beijing, Guangzhou, Tianjin, Panellists also pointed out, China’s retail space is not overly Nanjing, Wuhan, and Hangzhou. supplied as many people and investors have come to believe. China’s retail space per capita is relatively low in comparison Elaborating on the first criterion of wealth, panelists to mature cities like San Francisco and New York City. identified the drivers behind the potential upward real estate price trends in Asia’s would-be top megacities by 2030. As Chinese consumption power continues to grow, the current space for retail in shopping malls will be filled. More importantly, China’s affluent population will Residential Sector continue to grow at a fast pace and support the retail Using the correlation between income and residential market going forward. The affluent population as a property prices, the panelists forecasted the price percentage of total population will grow from 10% today of homes for 50 Asian cities. The findings showed a to 35% by 2030. Chinese cities Guangzhou, Nanjing, doubling of property prices across several Chinese cities. and Beijing will see higher investment potential because Three Chinese cities, Changsha, Wuhan, and Guangzhou their retail sales per capita are much higher than the cost stand out in terms of investment potential, with home of ground-floor rents. property prices increasing by more than three times by 2030. Meanwhile, the growth potential of Singapore, Hotel Sector Hong Kong, Beijing, and Shanghai will diminish in the coming 12 years, as the residential price to GDP per Other Asian cities will also benefit from the growing capita ratio is already high. Chinese affluence and consumption power. The armies
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of Chinese tourists have augmented regional hotel The greatest demand. Rising incomes in China will sustain this trend of outbound tourists in the foreseeable future. investment potential Given the strong correlation between income and hotel in the residential revenue identified by the panelists, they see the regional hotel sector as one of the main beneficiaries of a growing sector will be seen in Asian middle class. Changsha, Wuhan, Office Sector and Guangzhou; In their Asian cities study, the panellists saw a close relationship between a thriving services economy, the in the office sector, number of unicorns, and the demand for office space. Guangzhou, Wuhan, First, office rental prices in Wuhan and Hangzhou are relatively low compared to the level of GDP generated and Hangzhou by the services sector. Second, Singapore is to see higher warrant investment. office sector growth versus Hong Kong. Third, the 2030 rental forecast and compound annual growth rate Guangzhou, Nanjing, (CAGR) reveal that Guangzhou, more than any other future megacity, is to see the greatest rental upside. and Beijing will Furthermore, China accounts for the largest number see the highest of unicorns in Asia with 98. The second most unicorns (10) are based in India. Asia’s only other privately held investment potential companies valued at or above US$1 billion can be found in the retail sector and in Korea (3), Singapore (2), Japan (1), and Indonesia (1). The large majority of these Chinese unicorns are Shanghai, Hangzhou, concentrated in three cities – Beijing (44%), Shanghai (41%), and Shenzhen (11%). and Shenzhen In 2030, Shanghai and Shenzhen will house the largest headline hotel sector Grade-A office space and top the list of cities with the best office sector outlook, followed by Hong Kong, investment potential. Beijing, Guangzhou, and Singapore.
Over the next 12 years, the panellists point out China’s service sector will become the main driver of the economy and in turn channel investment capital towards the commercial sector over the residential sector.
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DISRUPTIVE DIGITAL AND THE TRANSFORMATION OF LARGE ORGANISATIONS
Piyush Gupta, DBS Bank Group CEO, sat down with Anthony Tan, CEO & Co-founder of Grab, Southeast Asia’s first unicorn, to discuss the core tenets of Grab’s self-disruptive digital progress and organisational transformation.
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Piyush Gupta: I want to welcome Anthony. As everybody knows, he needs no introduction. He’s probably the most successful entrepreneur startup businessman in our part of the world… I’ll try to frame my questions into two or three categories. The first is really around how to think about business itself. All of the stuff we’ve seen in the morning, the world is changing, technologies are changing. But I want to figure, does that lead to a way that companies need to think about the business opportunities. Purpose-Driven Business Model So, let me ask you: When you got into this whole space, how did you think about what it is that you’re trying to do? How do you think about business, and as you evolve, you keep adding stuff? How do you think about your role, mission? What is it that you’re trying to do and is there something that companies like us need to be thinking about differently?
Anthony Tan: Yeah. So, I’ll start with the beginnings. DISRUPTIVE DIGITAL AND When we first started, it was all about solving a real customer problem and that was safety, especially for woman. So for those who remember our brief history of six over years. We started as MyTeksi. It was to solve THE TRANSFORMATION OF a safety problem for woman in KL. Then we realized actually it’s not just KL that has this safety problem, Manila, Bangkok, many other cities so we then scaled all LARGE ORGANISATIONS across. But beyond solving and focusing on the customer problem and falling in love with the customer problem and how to solve it, I want us to just think about how we built the business model.
So, when I was at Harvard Business School, my first case study was this thing called the lap desk. It was basically to solve a problem. A lot of children in Africa have writing material but they have no place to write on. So, they came up with the idea of a lap desk; literally a plank of wood and they could carry it around. And they could monetise it through displaying ads on this plank of wood when they walked to school.
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It imprinted the concept that was completely alien to me is focus with a purpose. Most startups would talk to you then, which was, you can create economic sustainability and about this purpose thing. How do you make an impact on social good. That was like a paradigm shift for me. Since society and communities? This is a general frame. I think then, we’ve built MyTeksi, Grab, GrabTaxi and it has evolved for many of the startup companies and Grab is not an from a taxi-hailing app to what it is today which is the exception, is genuine commitment to try to impact change largest O2O or online-to-offline company in the region. and trying to solve the problems of the world. The second piece is this dramatic customer obsession. This thing of Now, why do we focus on O2O? First, our vision from saying what is the true customer problem? day one was, how do we drive Southeast Asia forward together using technology with love? And the mission In the previous context and one of the things that we try from that was we are here to serve the communities. to do in the last three-four-five years as well, which is try to That’s our mission: to serve the communities because we train up people to really think about what is the true job to were born in South Asia. We live in Southeast Asia. We will be done? When somebody comes to us for a mortgage, the die in South Asia and we will do everything for Southeast job is not to get a mortgage. The job is they want to buy Asia. There is no one who is more committed in this region a house. So how you help in the ability to buy a house for than us. So, how do we serve the communities? The somebody is very different from being a mortgage provider. mission was, we bring people closer to what matters to Most legacy companies find it difficult to change their them. What does that mean? frame of thinking to really address a true problem and So, for example, in mobility we were the first to provide be obsessed with what the customer need is and the wheelchair access, baby booster seats. And for somebody customer solution you’re trying to solve for. else it means a hot meal. What it means for us, for Anthony Tan: That’s exactly right. society and Grab is to think about how do we collectively alleviate poverty. Let me extend a bit more. Piyush Gupta: Because with today’s technology you can do it very differently from the way it used to be done in When we said, in the beginning, bring us back to the the past. But the second learning and talking to Anthony first mission, to bring people from A to B safely. Now, on the sidelines, I figured it out that your obsession goes we are bringing from one current economic reality to a to the extent that you’re willing to destroy your existing new economic reality. Today, we do that for about over business case and your business model because you 7 million drivers, agent partners, merchant partners. think there is a better and right way to do it. You want to We want to move that 7 million to 100 million and narrate the story of how you move from one to the other. collectively with our partners really make a huge dent on poverty alleviation and bring society up. Anthony Tan: Sure. When we were taxis we showed tremendous traction. So we were close to 97% market So, from that mission, we then build the best mobility, the share of all the taxi space. Then we had to launch GrabCar best food deliveries, fintech, providing agents more income, to disrupt our taxis. So, everybody was like, “We’re already and GrabExpress which is our e-commerce logistic platform. making money. Why are you doing this?” Especially our internal guys were like, “Anthony, we’re going to be People before profits profitable, why do this?” And the internal guys were Piyush Gupta: So let me try and summarise and I think pushing back hard and frankly if we didn’t launch GrabCar, this is true for a lot of startup companies. Two things, one I don’t think I would be here speaking to you today. Then again, we didn’t disrupt for the sake of disputing.
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you can create economic sustainability and social good. That was like a paradigm shift
ANTHONY TAN
Piyush Gupta: You disrupted yourself. customers are very expensive in this part of the world outside of Singapore. So, we said “Hey, why don’t Anthony Tan: We disrupted ourselves because that’s every one of our drivers, every of our agent network what customers wanted. They wanted to go beyond becomes a mobile ATM where they can top up.” So our taxis. Then in certain markets like Vietnam, I’m sure when drivers evolved from just being a driver to being a top-up you go, you realize that in fact, the primary mode of channel for cash-in. Because they want more cash, they transport is motorbikes. So then, we launched GrabBike. need liquidity in their pocket. So it’s again, solving a We’re the first in the region to launch GrabBike and that problem for our customer who is also our driver partner; disrupted GrabCar, that disrupted GrabTaxi. Then after solving a real problem. Many people in this part of the we said, “Hey, people also want the same cost as a bike world pay between 5% to 15% to top up their wallets. but they want a car when it’s raining.” Then we launched So solving a real problem as you said customer obsession GrabShare and it pulled more people into one car where and being super localised to solve it. everybody shared the same vehicle. Piyush Gupta: This whole thing about being so Anthony Tan: Then we said what about drivers’ income customer-obsessed and problem-focused that you’re and all that? As you know the cost of cash-in for
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willing to disrupt a profitable business, which startups do Getting the right people uniquely well. Frankly, a lot of older legacy companies find that very hard to do. Because you have an existing Piyush Gupta: How do you think about capital, cash-cow. You have an existing business model. You’re shareholders and governance? It seems to me that the an existing profitable business. Why would you try and other big area of high-level distinction is really that. We disrupt yourself? But startups think very differently about tend to have shareholders, public shareholders, public that and because the pace of change is so fast, this markets and are driven by very short-term imperatives of mindset that if you’re not willing to do it to yourself, many of our shareholders including our boards. somebody else is going to come and do it to you anyway. You might as well be the leader and do it. That’s not an In your context, you often have the luxury of having easy mindset for existing companies to embrace. I find investors who are willing to give you money to burn for that to be a big distinction between the way people like like five years and they have a long-term view. But do you operate and the way people like us and the old- think about this proactively, do you try to shape who fashioned economists tend to operate. your investors should be? Do you try to shape the nature of your board? How do you think about the choices Anthony Tan: One of our key principles is disrupt or be between accessing a lot more money more efficiently disrupted. If you don’t eat your own lunch, somebody in the public markets versus staying private for a longer else will. period of time, and are there lessons to be learned for us from that thinking?
Anthony Tan: I think, first of all, all investors I would say are rational. Masayoshi from SoftBank, Cheng Wei from Didi, Dara from Uber, and Toyoda-san and Tomoyama from Toyota. These guys put in as you correctly mentioned large amounts of capital. Obviously, they do want to see financial returns. But the competitive advantage that we’ve had was, we chose strategic partners that could think very long term. First of all, why do we choose Didi and Uber? They are fellow operators. So, the top three global ride-sharing companies are Didi which is number one in terms of volume, number two; Uber, number three; us.
So, I can probably bluff you about ride-hailing but I can’t bluff these guys. They really understand ride-hailing. They are fellow operators. The second is if you think about why That type of do we choose a partner? Recently, we were very blessed with Toyota putting in a billion dollars. Toyota is a company partnership, that understands. They’ve been in this part of the world for 80 years. They truly understand and are localised. They’ve money been hyper-localising so for example, in Indonesia they cannot buy built the Kijang which is essentially the national car.
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Because they understood the region, they came with us it doesn’t even come to them. So it’s left to us even in such a big way. It wasn’t 10 million, 50 million, 100 though, of course, we have audit committees, we have million. It was a billion dollars. It was sending a sign that compensation committees. So we’re run in a way where ‘this is our partner, we’re going in strong.’ And because if ever we want to go IPO, we have that governance we can appreciate Toyota production systems so well, we structure. But at the same time, so much empowerment want to introduce how do you take Toyota production is given to us that we can run tremendously quickly. system into ride-hailing to become the most efficient Piyush Gupta: Well, to me, that’s a second really ride-hailing, O2O company in the region by far. So that important lesson, which is, how do you constitute your was why we brought in these strategically versus just ownership structure and governance structure so that it is collecting a bunch of fragmented money. Because money long thinking, future-thinking, and it gives and empowers is not something that we needed in a short run. management to go ahead and do things? This is a big We needed investors who could share our vision and our challenge for most legacy companies because we are die-hard mission to be committed in this region and I’ll dictated by what I call, the tyranny of the quarterly result. share with you. Yesterday, I was with Toyoda-san and In the strange way, we at DBS are somewhat blessed. We Toyoda-san said, “I love Southeast Asia.” He used to run don’t have all of it, but to a large extent because we have Southeast Asia (for Toyota) as the GM and he said, ‘I love a single anchor shareholder. Temasek owns 30% and your passion and we are going to really serve Southeast that gives us the confidence to know we have an anchor Asia strong together.’ That type of partnership, money shareholder who’s also prepared to take the long view. It cannot buy. is a source of strength.
Piyush Gupta: Your wife, Chloe, was mentioning earlier A lot of companies find that difficult because you don’t that you turned away some investors. In fact, you took have that. Interestingly, the way you do we’ve tried money at lower valuations because you wanted to shape that as well. It’s not that easy for us. It’s how do you the kind of long-term knowledgeable investor you could actually try and shape the nature of your investor base get. Do you want to talk about that? to look for people who are willing to take the long view with you. Some other CEOs of companies I know have Anthony Tan: Sure. A lot of times, we actually had to been even bolder than I have, have gone and put public turn away capital that just wasn’t strategic; it didn’t add statements saying if you want quarterly results, don’t value. I would argue that it would actually destroy value. invest in us because we’re quite happy to look at the They would make life more difficult for us and even long term. It’s not necessarily an easy thing to do. But I though it was a higher valuation, higher headline figure, think it also goes back to the nature of the boards. That more money. That is not what we should be optimising the distinctive thing to me about the Grab board is the for. What we instead optimised for was the partner that four or five people in the board have deep subject matter we can co-create tremendous value or see the value knowledge. They have deep knowledge, they know the being on a table and making sure that all that fat and business and they bring value. waste is removed so we become the most efficient O2O company in the region. We’ve tried to do that on our board as well. Of our 11 people board, seven are ex-bankers. So people sometimes Piyush Gupta: How about the board itself? argue you have a lot of bankers. My own view has been Anthony Tan: They give us so much independence that it’s easy to get trophy board members but you don’t we can run tremendously fast. Until it hits a certain limit, know a thing about my business, so what’s the point?
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Humility, heart, hunger, and honour Piyush Gupta: All right I want to move to a third thing through we could talk about which is the people dynamic. So how does your organisation processes work? How do you find your people? What are the kind of person you’re looking for? And how do you try and make sure the company stays nimble and quick and responsive as things keep changing around you?
Anthony Tan: I’ll start with how we think about people and then I’ll end with nimbleness and agility. On people, we have what we call our DNA, which can be narrowed down to 4Hs and it comes under the umbrella notion of servant leadership. So I serve our subordinates here and they serve their subordinates. That takes tremendous, the first H, humility.
Exactly how can we go down to the ground and really serve. Last week, I went to 18 malls in one day, to go and talk to our merchants, to go and talk to our mall owners. Really going down and I can go to the street side store and go, “Who’s serving Roti Bakar Premium” and go, I’d rather have people on the board who can actually “Boss, how can I serve you?” and he is like, “My God, I bring some value in terms of direction, knowledge and never imagined somebody will come down.” have an understanding how the business dynamics really work. But I do find that as you think about change in this The second is the heart. How can we make sure that we changing world for the next 12 years, having governance, have people that really feel passionate about going to the leadership, and ownership gives you the flexibility and ground and lifting these people up? Because they are also capacity and the trust to play the long game. It’s going to our customers: the Roti Bakar Premium guy with a side be crucially important to be able to get ahead. store in Bogor or Malang.
Anthony Tan: Just on the long game, although we are The third is the hunger. When we’ve shown traction to only six years old but because I have Toyoda-san as my this level, people are like, ‘We already won right?’ So mentor and Tomoyama and Masayoshi they think of a lot of people that we take are guys who came from business for the next 100, 200, 300 years. That has been failed startups and they have this hunger to prove that a great mentorship and imprint on how we plan Grab. We they can win, that they will win the hearts and minds of don’t optimise for quarterlies. We optimise for the next 30, customers. (They failed because it is) just about timing or 50, 100 years. So when we think about mobility, when we just about some external circumstance but they have the think about the future of food, cloud kitchens, the future DNA. (Humility,) heart, hunger, and honour the last one. of money, we think of it for the next 50-100 years. Do you honour your word?
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Because one thing that in the end as a startup, a lot of people say ‘Just do whatever it takes.’ I say in the end, can you sleep at night when your children go and talk about you, do they say, ‘Oh, my dad lied and got his way through,’ or does he say ‘Whatever he said I believe him because he never lies; not even a white lie.’ Because reputation, and you’ve built a great bank reputation, is sacrosanct. How we do make sure that everyone thinks that way? So that’s the 4Hs… We hire, we fire, we demote, we promote, evaluate performance as much as outcomes; those 4H are evaluated. Business organisation Anthony Tan: Now, the second part is agility. How do we think about creating a very agile organisation? One is we have a culture of fail-fast, learn-fast. How do you create that psychological safety? As long as the guy or girl fights hard and fights in line with the broader vision and mission, you’re not going to crucify that person. You are not going to say, ‘Joker, he lost us a bunch of money; you go to hell.’ At a recent town hall, one of the guys come out and say, ‘We learn from our ventures and we grow and we iterate.’ I want to celebrate him for the kahunas for standing on stage and being proud about it. Piyush Gupta: I have a question here as well. How do you make sure that people are leveraging the technology, Then we set up three specific teams. One, the growth resources, and assets we have as opposed to developing team that thinks about conversion optimisation. That all different kinds of new technology? thinks about growth, specifically on growth, so highly driven. Second, a ventures team that finds other faster- Anthony Tan: I think I obviously have very strong CTO so moving startups than us across the region. The third is a all of our six engineering centres are coordinated; they all platform that we call, we just launched this two days ago: report to one CTO. That’s one way you have essentially The GrabPlatform. The GrabPlatform basically allows for and then obviously we have it ‘sync’ all the time between other startups to leverage off the tech stack that we’ve all the six engineering leads to make sure that and built: local routing, optimising the POIs, the payments sometimes we actually choose to duplicate things for infrastructure, the licences that we have across the region, speed. We actually make those conscious decisions to the fraud user trust abilities that we have already built. say, hey, it’s okay to create duplication as long as we have higher efficiency and time to market is faster to the Our goal is to serve these startups so that they grow… customer and we want the product in customers’ hands. And when you give them a platform to grow, our users get more engaged. When the users get more engaged, Piyush Gupta: We were doing some work trying to more partners are attracted so it’s this virtuous upward think about how big techs are organised and one of cycle that’s very positive. the intriguing things I found in many of the technology
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companies is actually that technology runs the business. How does it work in Grab? The relationship between the engineering side and the business side; are they equal in number? Do they work together as core teams? Is it the business comes up with the idea of technology or the engineering people deliver?
Anthony Tan: No, we build it as a tech family. The tech family will have a product manager, will have a business manager. So essentially every tech family, say solving the navigation problem, like a GEO team will have a business owner, a product owner, and an engineering owner. So, you basically create a CEO, CPO, CTO structure in each of these. In fintech, we have one. In payments, we have one. In lending, we have one. In micro-lending, in micropayments, we have one. So each one operates as a self-contained unit.
Piyush Gupta: Well, one of learning that we’ve had at DBS as well. So one of the things that has allowed us to be somewhat quicker that many of our traditional bank competitors has been this thing of re-organizing and getting people to work in this fashion we call it an agile way which is not different from what Anthony described. Bring the business, the technology, and the product business manager into small teams and make them feel part of a unified mission. And if you can do that then we get much quicker outcomes than the traditional way of the front office and the back office, if you will. So taking away this whole notion of front office and back office and creating common teams with a common agenda is something we’ve also found quite useful.
I think that’s one of things which is somewhat different from the way startups tends to work and again, old legacy companies work in their approach to thinking about the nature of the teams, the cross-functional teams, the putting-a-solution and then finding a solution orientation around it as well. Do you actually work and outsource technology at all or is it all homegrown, all internally developed?
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Anthony Tan: It is, I would say 99.9%. We work with Piyush Gupta: One of the things we found at DBS again AWS, for example, that’s our outsource. We work with in terms of transformation is actually not impossible. In cloud to optimise our infrastructure. Besides that, our fact, it’s not that difficult to get old technology people chat we build our own. A lot of our routing is ours, so I to really learn and embrace new technology. Actually, I would say majority is organic. saw at YouTube where the Netflix CIO was asked where he was getting new kind of engineers from, and he said, Piyush Gupta: And where do you get your engineers “I’m hiring the people you’re firing,” which just says that from? Are they all young graduates? you don’t necessarily have to get all the young kids to Anthony Tan: It’s a nice mix we have. The average get started. You can actually get people at different age age, if you look at Grab’s demographics, about 44% groups and rescale and retool them quite adequately. of our of Grabbers are women. All Grabbers come from about 43 different countries across the world, so Competition tremendous diversity. Age-wise the average is probably Piyush Gupta: A related question, how do you think about 28 years old on average but if you look at the tech about competition versus collaboration? So in your space leadership, it’s between the late 40s, early 50s all the way these days, the talk is that if you’re in the Ali Baba camp, to late 30s. They come from the FANGs: the Facebooks, you can’t work with WeChat and vice versa. But by and the Alis, the Googles, the Twitters; the whole works. So large, the startup and technology culture has seemed to the leadership comes from all the top Chinese tech, the be more collaborative. You’re willing to work with many top American tech.
Everything is 30 minutes. If it’s not 30 minutes, don’t talk to me. Everything needs to be on demand
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different kinds of people. How do you think about it and Trends: the future on the is it changing? Are there more competitive boundaries drawn around the technology companies as well? horizon
Anthony Tan: How are we thinking? Grab was born Piyush Gupta: …Do you have a general view for the into competition. The day we started, we had multiple future how you might think about it? competitors so we embrace competition because we believe Anthony Tan: I think, let me talk about the trends. in again, something that we talk about in Grab a lot: Iron The first three trends are one, there is still a very large sharpens iron. So with that, we keep getting better. When I underserved, under-banked population in this part of the first met Dara, I remember we had chat like this. He asked, world and that will continue until people like us solve ‘What do you think of Uber?’ And I said, ‘I love Uber.’ We it... That means large poverty traps so we as corporate were still fighting tooth and nail and a street fight every day citizens have to do something to solve these poverty and he said, ‘Tell me more,’ and I said, ‘Iron sharpens iron.’ traps, … for example, the cost of being poor is very high. He said, ‘Wow that’s a great quote.’ In Indonesia to buy a rice kettle in Malang or Makassar is And he said, ‘Why do you think that?’ I said, ‘Look, Uber 50% more than somebody in Jakarta, for example. How forced us to be faster and more customer-focused and do we, using Kudo, our massive agent network, solve the we self-innovated.’ So when Uber launched Uber ice logistic issue and get it to them. That’s one. cream and I shared this in an Uber town hall recently to Knowing that these trends will exist, how do you solve 20,000 Uber employees and I said, we thought it was these big problems, logistics, poverty trap? Now, the brilliant but we launched Grab Durian. And you want second big trend you’re seeing is smartphone penetration MuSang; you want D24; what do you want? You could will continue going up. Wearables will become very see like everyone in the Uber team was remembering pervasive. … The speed of Internet and data connection Grab Durian and how awful it is for them but we loved it. will go up. We believe that and we are betting everything First of all, competition forces you to be innovative… and so is Toyoda with us…personal car ownership is a but customers don’t leave you for competition. They thing of the past. We will move into mobility as a service. leave you because you stopped loving them. That’s the It’s all about multi-modes so today … issue. So you’ve got to stop thinking about oh my god In Singapore, there is Grab Shuttles. There is Grab Cycles. there is so much competition. There is. You’re going to There are multi-modes. In the next 12 years in Singapore, have; you’re guaranteed, in fact, the only thing you can you’re going to see autonomous vehicles. We invested guarantee as a constant is competition. heavily in a pilot. We’ll continue to invest in the future of Piyush Gupta: So, I want to echo that. So that’s the mobility. So mobility as a service with autonomous and other big thing that we’ve embraced at DBS. Irrespective with the AI trend coming up…. autonomous is a reality of how you think about it, there is going to be 10 people in Singapore in the next 12 years. Then the second is in who are going to compete. It will be the old players; it food, …. restaurants will have less tables and chairs…the will be the new players. If you can really think about a cost of making food will be higher…there will be more differentiated customer experience, if you can really think and more cloud kitchens…and the inconvenience again; about what brings value to the customer, the customer people just want to eat. will stay with you. If you can’t do that, the customer is They don’t want to go line up, wait. All that is pain. going to go. How do you take away all the customer pain to a cloud
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kitchen and optimise the delivery? And people want for old companies to change. We’re like dinosaurs, only everything on demand so betting and then obviously companies which come out of garages can do it. But I the e-commerce is going to take place in a big way. In think that’s also changing. Increasingly, you’re finding a this part of the world, logistics is broken. How do we lot more old world companies who are embracing new solve logistics using technology? And your children and thinking, new way of working and the new set of tools, my children, they cannot wait, two days shipping, that’s and are able to be as customer focused. crazy. Everything is 30 minutes. If it’s not 30 minutes, Anthony Tan: And DBS is an example of that. don’t talk to me. Everything needs to be on demand. Piyush Gupta: Well, I don’t know if DBS is an example Piyush Gupta: So if I had to summarise, I’ll start with but we certainly try to copy you, Anthony. You’re very the back end. First, it’s important to have a point of view hard to follow. on the future. Nobody knows exactly what’s going to happen, but like Anthony, I think a lot of the startup Anthony Tan: We’re also copying you. companies develop a point of view and then they back Piyush Gupta: But I tell people a very simple solution: it. To back it, you need a couple of key things. One, just be shameless, copy Anthony and you’ll be okay. you need to make sure you have shareholders, a board, Ladies and gentlemen, you’ll agree with me that he’s people who are willing to bet for the long term or a five- been extremely generous with his thinking, with his time, year view or eight-year view because you might not see and perhaps all of you got some perspective on how do short-term impact. we want to address the next 10 years, and how do we Second, you need to be relentlessly focused on the make changes in our own companies. Please join me in customer problem are you trying to solve. What is the giving Anthony a great round of applause. social need you’re addressing? What customer problem Anthony Tan: Thank you. Thank you. are you trying to solve? Because if you’re already focused on that, you’ll get the right kind of outcomes. And in being that customer-focused, if it means disrupting yourself and disrupting your current business model, you’ve got to have the gumption to be able to do that. If you think about the transformation of existing companies, each one of these things is like putting water up a hill. It’s not easy to make that change happen. But I often say that the technology that Anthony uses is available to all. The people he is hiring are available to all. The culture he’s creating is available to all.
So if there is any reason for any legacy company to not change, it is only our own inertia and our own inability to embrace some of the new ways of thinking and embrace some of the changes in the world. And frankly, there is no reason why you should not at least give it a shot. Now, having said that, it’s obviously not easy. Commercial literature keeps saying it’s very hard
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CASH, CARD AND CRYPTOCURRENCIES WHAT WILL THE FUTURE’S MEDIUM OF EXCHANGE BE?
he current cost of printing physical cash and They reasoned that if everyone had access to a central getting it into circulation is extremely high bank digital account, the bank could potentially distribute and the introduction of a ‘Central Bank-issued funds to those in need directly and even adjust interest Digital Currency’ (CBDC) could counteract rates of individual accounts to stimulate or discourage those costs, argued Taimur Baig, DBS Chief spending. A system of this sort could also be beneficial TEconomist and Xie Taojun, SMU Research Fellow during to developing countries going through extreme the session on the future of central banks. hyperinflation. A case in point Baig and Xie pointed out is Venezuela; their currency could receive a major credibility In addition to improving efficiency with cost, a digital boost if they implemented a CBDC in the right way. central bank would allow for much greater ease of implementing monetary policy during times of recession. However, the reality today is most digital or crypto-
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also not user-friendly for making transactions. The processing power of Smaller daily transactions per second for most cryptocurrencies is transactions far behind that of central are more banks and companies like Mastercard, Sarker pointed convenient out. This is due in part to the blockchain technology with a credit that cryptocurrencies are built on; every ledger in card the system must verify and agree on modifications to the ledgers. While this slower process provides extra security, since each transaction in the ledger becomes irrefutable and irreversible, consumer demand for instant processing leaves the widespread use of cryptocurrencies as a medium of exchange unlikely.
Besides, cash may still very well be with us in the foreseeable future. Despite predictions that deepening digitisation of money in the financial system would lead to the death of physical cash, evidence from recent WHAT WILL THE FUTURE’S MEDIUM OF EXCHANGE BE? research conducted by Baig and Xie suggests otherwise. They found a significant increase in bills larger than S$50 in circulation, while there is a drop-off in bills smaller than S$50. This suggests that the use of large currency as a ARI SARKER , TAIMUR BAIG & XIE TAOJUN store of value is increasingly attractive while smaller daily transactions are more convenient with a credit card and currencies are non-government backed, extremely other forms of electronic payments. volatile, and face many regulatory questions, explained Nonetheless, further advances in technology may bring Ari Sarker, Co-President of Mastercard. The volatility of about the implementation of central bank-backed digital cryptocurrencies is connected to the extreme levels of currencies in the near future. The problem of speed in speculation. Many people treat cryptocurrencies as an processing digital currencies could be overcome in the asset rather than a currency, he observed. By trading and next few years with the power of quantum computing. investing in cryptocurrencies rather than using them to At current levels, the panellists were not satisfied with the make purchases, it has become increasingly difficult to efficiency of processing, but they recognised the potential monitor the true value of the various cryptocurrencies. for digital central bank accounts to become a reality in a Not only does cryptocurrency have volatility issues, it is decade.
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AMIN TOUFANI
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THE ERA OF EXONOMICS FOUR WAYS TO REIMAGINE BUSINESS
Many of our assumptions about how economies function, how business models operate, and about how individuals optimise their choices no longer seem to hold true, says Amin Toufani, CEO of T Labs and Chair of Finance and Economics at the Singularity University. This is because we are entering a period of what he calls Exponential Economics, or Exonomics.
New drivers 1 of business value Companies will be virtually or digitally connected to their customers. They will have mastered just-in-time delivery processes and services, ‘the Uberisation of many different industries.’ And because the marginal cost of production has (or will have) dropped exponentially, their offering will be hyper customised to an ever more diverse and demanding customer base.
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Differential and The main question many firms will ask themselves over the next decade is: ‘How do I move from a product/ 2 dynamic pricing service model to a platform model?’ Another way of Because the marginal cost of supply will drop, firms asking that question, Toufani says, is ‘How do I make the will find it easy to sell to customers at any price point. lives of my competitors easier?’ To maximise profits, firms should sell their product at Consider that Google did this with Google TensorFlow, different prices depending on who’s buying it, why when it created an open-source library for machine they’re buying it, and when they’re buying it. learning models. So did Tesla when it made public its ‘There was a time when you would go online and pay the electric car patents. same price as everybody else. Today, it’s very hard to pay It is counterintuitive because it requires possibly forgoing the same price. Dynamic pricing is everywhere.’ short-term profitability to establish oneself in the long- Toufani joked that one day physical supermarkets might term as the defacto platform. even charge different prices to different customers – the At the very end of the spectrum is what Toufani calls ‘an price of the tomatoes changing as you reach for them. ‘It operating system: an invisible system that’s operating in sounds like science fiction but there are start-ups that are the background… connecting multiple technologies to working on ‘affluence detection’ based on how you walk, multiple sides of the market’. The firms he sees closest what you’re wearing, and all of that.’ to achieving this are Alibaba and Amazon – which are attempting to become the operating systems for retail. Yet Market power shifts with Toufani expects some 27 different operating systems that 3 new business models might ‘come online’ within the next decade. Toufani depicted five types of business models across which firms operate. At its most elemental, there are From collaboration to content providers. There is little market power here 4 coordination because content has been commodified, says Toufani, At the core of this operating system revolution, says and the marginal cost of copying it is approaching zero. Toufani, is the tension between collaboration and Further up in the power chain are sellers of a product or coordination. He uses the example of road behaviour service, ‘which is where most of us live’. Firms here have to describe the evolution from collaboration to more market power than content providers but less than coordination. On a street where there are no traffic platforms, which are further up the power chain. lights, all participants – pedestrians, bicycles, cars, etc. – must collaborate continuously to ensure that traffic flow Toufani describes a platform – a much abused word, he progresses without accidents. says – as a ‘value bridge: you’re creating a bridge to connect multiple sides of the market. Most importantly you should On a street with traffic lights, participants are resist the temptation to be on one side of the market.’ coordinated, guided by the system of lights. ‘When we do have accidents, it’s often because people get cute, When multiple platforms are interlocked, this creates an and they try to collaborate.’ If everybody sticks to the ecosystem. The only real example of this today, according rules, nothing happens. The traffic light is an ‘exponential to Toufani, is WeChat. operating system’.
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In almost every exponential growth curve, says Toufani, there is a collaboration zone and then as complexity increases, there is a shift towards coordination to handle that complexity.
From 1900 to 1920, the number of cars in the US rose from 8,000 to 8m. Because of that exponential growth, an exponential operating system – the traffic light – was needed.
Similarly, exponential teams in the era of Exonomics will be doing less collaborating and more coordinating. Modern management science has told us that collaboration, or teamwork, is the high water mark for how we should be running our businesses, says Toufani. Yet that model is losing relevance.
The best businesses are increasingly going to be operating with exponential teams, which all have three attributes: adaptability, scalability, and the ability to self-manage.
Since collaboration creates friction, businesses will be figuring out how to minimise collaboration and increase coordination. ‘Most teams naturally move in this direction,’ he says. ‘How do you expedite the process?’
The best businesses are increasingly going to be operating with exponential teams, which all have three attributes: adaptability, scalability, and the ability to self-manage
To find out more about Exonomics, go to www.TLabs.com
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A NEW ECONOMIC MODEL FOR ASIA BY 2030
DAVID SKILLING
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ver the past few decades, Asia has experienced tremendous increases in wealth production largely due to catch-up economic growth. No country has been a greater example of this than Singapore, having Orapidly bridged the gap from the third world to the first world. Yet despite this positive track record, continued growth prospects for both Asia and Singapore will become increasingly challenging during the next decade.
Focusing broadly on Asia and the region’s future, David Skilling, Director of Landfall Strategy Group, opened the discussion by stating that the region’s past performance alone cannot be used to predict future trends. Skilling noted that the conventional lenses for growth, demographics, and productivity must be broadened to include the lenses of institutions, technological disruptions, globalisation, regional integration, and environmental concerns such as climate change.
Firstly, while some Asian countries are aging such as China, Japan, and Singapore, others are gaining a younger working age population including India, Malaysia, and Indonesia. For the former, automation will be the best solution to combat this trend, while the latter will need to determine how best to deploy a large and less experienced workforce in an automating world.
Next, as Singapore has demonstrated, institutions and effective leadership have proven to be critical to a nation’s economic standing and innovativeness.
Thirdly, trade and the forces of globalisation have been crucial to Asia’s growth, despite recent threats to the rules-based multilateral trading system. Several Asian countries maintain great reliance on economic integration, as witnessed by significant proportions of trade as a percentage of GDP. Fortunately for Asia, a growing middle class less dependent on global demand will likely cushion slowdowns to global free trade.
Finally, the threats of climate change and related weather crises in the region will require new environmental
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solutions and disaster management by business leaders Turning the gaze towards Singapore, Irvin Seah, DBS and policy makers. Senior Economist, observed its overall steady economic growth since independence. However, he flagged the Skilling also cast his doubts about the future viability nation’s susceptibility to swings in the global economy, of the ‘flying geese model’ of economic development since Singapore’s trade levels exceed one hundred for Asian countries such as Cambodia and Vietnam. percent of GDP. Major deviations from a global free According to this model, countries will successively trade environment will continue to disrupt Singapore’s develop more advanced industries as leading countries economic objectives. Fortunately, Singapore has will pass on manufacturing practices and technology diminished reliance on the US economy from 40% to to developing countries as these leaders advance their 10% of trade activity over the past few decades by own economies. While the economic gains realized by ramping up regional economic connectivity, especially the Asian Tigers benefitted from this model, several with China and Japan among other Asian neighbors. challenges will prevent the next wave of countries from doing so. These challenges arise from institutional and Besides threats to an economically integrated world, political factors, increasing gaps between countries’ Singapore will have to overcome an aging population productive capabilities, and automation causing the projected to reach a median age of 45. This demographic disappearance of low-skilled labour opportunities. shift will intensify strain on the budget and demand new
Innovation and reinvention will be vital for Singapore to avoid stalling growth levels and to maintain global IRVIN SEAH competitiveness
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solutions with a heavy focus on leveraging technology Past to offset the rising dependency ratio. Innovation and reinvention will be vital for Singapore to avoid stalling performance growth levels and to maintain global competitiveness. alone cannot Seah concluded his analysis of Singapore’s future by describing three possible outcomes tied to differing levels be used of growth. Seah’s first outcome projects Singapore to to predict continue steady, historic growth and face the risks of free trade disintegration and an aging population. Second, future trends Singapore could fail to make prudent decisions while these challenges weigh more heavily than expected. This situation would cause economic stagnation and fail to prepare the nation for necessary changes and innovations over the following decades.
Finally, Singapore could adopt a high-risk, high-reward strategy revolving around reinvention and ‘smarter’ solutions. This scenario has the potential to propel Singapore to become the wealthiest nation (in terms of GDP per capita) in the world. Yet, as will be the case for Asia, Singapore must meet the challenges of the next decade with nimbleness, adaptability, and disruptive ingenuity.
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TRENDS THAT 3WILL ENTRENCH CHINA’S ECONOMIC IMPORTANCE IN ASIA
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LESLIE TEO, CHRIS LEUNG, NATHAN CHOW AND MA TIE YING
Belt Road IN A SESSION MODERATED BY LESLIE 1 Initiative (BRI) TEO, GIC CHIEF ECONOMIST, THREE DBS Among the three lines planned for the BRI, the central PANELLISTS DISCUSSED THE FUTURE line that runs through Southeast Asia is most important to China and therefore most likely to see the greatest OF CHINA BY THE YEAR 2030 AND ITS progress by 2030. The central line runs directly through MOST SIGNIFICANT DRIVING FORCES. the wealthiest countries in Southeast Asia. AMID NUMEROUS CHALLENGES Chris Leung, Executive Director and Chief China Economist, DBS Bank, Hong Kong SAR, noted that one INCLUDING A LOOMING TRADE WAR possible challenge may be China’s relationship with WITH THE UNITED STATES, THE FUTURE Thailand, which sits at the centre of the railway. It is within reason that Thailand may use its strategic positioning to LOOKS BRIGHT FOR CHINA. renegotiate terms in order to continue production, as it currently pays high interest rates to China.
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However, due to the vast size of the BRI project, it is rather increasingly dissatisfied and unwilling to work the same jobs difficult to analyse progress. This is one of the pitfalls of that their parents and grandparents held. China’s massive undertaking of such a grand endeavour. As China seeks to automate its industrial functions, the In Leung’s opinion, China needs to slow down the BRI market makes room for higher-skilled jobs. Increased to properly execute on its plans. The threat of trade war automation means that the previously lower-level workforce with the United States might stymie China’s plan to move can be retrained to participate in higher-skilled jobs. full steam ahead with BRI. This is precisely what Leung The issue, however, is found in the transition period as believes China may need. these higher-level jobs are slow to arrive in regions that have historically relied on lower-skilled factory jobs. The Automating available and predominately younger labour force are not 2 China likely to take jobs which exceed their qualifications. China faces a real impetus to pursue automation and create Interestingly, Nathan Chow, DBS Senior Economist, jobs for their new and improved population of working believes that if a trade war were to break out, it adults. As the population ages, the newer generations are would only hasten the pursuit of automation. To stay
if a trade war were to break out, it would only hasten the pursuit of automation
IRVIN SEAH
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China needs to slow down the BRI to properly execute on its plans competitive, China would have more reason than ever to pursue a cheaper and more efficient means of production. This would subsequently affect the Asian supply chain as a whole. Closer than ever - Asia’s 3 Integrated Supply Chain The supply chain for Information Communication Technology (ICT) is extremely high as every country is deeply linked through the production of products like the iPhone, says Ma Tie Ying, Regional Economist, DBS Bank. For example, although many products like iPhones are labelled ‘Made in China’, in reality, all of the components ‘hopscotch’ around the Asian region.
The supply chain integration doesn’t stop there. 70% of China’s exports go to other Asian countries.
In summary, China’s prominence in the world will only increase by 2030 due in large part to the BRI, automation, and supply chain integration. Even amid looming trade war, there is little doubt in China’s ability to remain a prominent economic driver of the world’s economy.
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MEETING FUTURE ENERGY DEMAND IN EAST ASIA
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IN A SESSION MODERATED BY HONG TECK KHIAM, MANAGING DIRECTOR OF INSTITUTIONAL BANKING GROUP DBS, THREE EXPERT PANELLISTS DISCUSSED ASIA’S DEVELOPMENT OF THE RENEWABLE ENERGY SECTOR TO MEET ITS EVER-INCREASING APPETITE FOR ENERGY.
THEY IDENTIFIED FOUR CRITICAL TRENDS THAT WILL ACCELERATE THE DEVELOPMENT OF RENEWABLE ENERGY IN ASIA.
Locally sourced 1 investment There is the capital for investment in energy and an enormous conscience to do so, according to Geert Peeters, Executive Director and CFO at CLP Holdings. Advanced urban societies must determine the manner in which they replace their usage of fossil fuels with renewable energy. Moreover, they must decide how to best enable less developed rural communities to feasibly make this transition. If energy systems in rural India for example, are to be sustainable in the long run, they must be locally financed and not dependent on foreign currency. ‘Local development banks must take the lead to generate sources of capital,’ says Peeters.
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Commercial viability of Improvements in battery 2 investment in sustainable 3 storage technology energy Solar will be dominant in equatorial regions due to sun For investment in sustainable energy to be viable exposure. The question then becomes: How do we store in the long term, it must generate returns. The that energy when conditions are cloudy or during the recent imposition of tariffs on renewable energy night? Battery storage technology must be improved. In has corresponded with low double-digit returns on terms of technological advances, Peeters claims, ‘Battery investment. Investors ought not to expect returns on technology is more important to consider than blockchain renewable projects in the short term; thus, regional technology. When improved, it will be more revolutionary development banks are necessary to raise capital for the to achieve green targets.’ According to Laurence Kwan, long run. Vice President, Energy, Sunseap Group, even with a good internal rate of return, energy storage life cycle technology (five to six years) is too short. Infrastructure needs storage that lasts at least several decades. Moreover, the skillset to maintain this system of new technology is costly and requires education.
LAURENCEIRVIN SEAH KWAN MIKKEL LARSON
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Battery technology is more important to consider than blockchain technology
GEERT PEETERS
Public support for the 4 transition from non- renewable energy sources Like technology, political factors are central to Asia must unite with the West in making technological the development of significant renewable energy advances to resolve problematic infrastructures. infrastructure. Without governmental support, the Additionally, engineering and future technological change from non-renewable to renewable energy innovation should be priorities over data analytics, said is unlikely to occur, so long as fossil fuels are less Peeters. Nevertheless, Mikkel Larson, Co-Chairman of expensive. Kwan noted, ‘“Good” governments DBS Sustainability Council, contends that data analytics like Singapore will invest, but other less reputable and information dispersal are necessary to bring the governments in the region will not comply in investment public’s attention toward its energy consumption; this will and collaboration efforts.’ positively impact the public’s behaviour by encouraging lower levels of energy usage. Looking to the future, the panellists offered mixed optimism and ambivalence regarding the prospects of the future development of renewables. Peeters asserts that the transition to renewable energy must be a societal decision made on a global level. For cities like Singapore, the required space for solar production exceeds its capabilities.
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HARARI UNLOCKS THE FUTURE Yuval Harari dives deep into the future possibilities of humanity. He addresses the achievements of the past century and presents the challenges that he believes to be progressing in the 21st century.
n the last century, humans have overcome famine, plague, and war. Throughout history, humans have lived on the brink of starvation due to famine caused by the ravages of Iflood and drought. Millions died due to the lack of food, whereas today, humans have the capability of growing an abundance of food. In fact, Yuval Harari, Israeli historian and New York Times bestselling author, asserts that far more die from eating too much than too little. So why are people still dying from starvation? Harari attributes the issue to political famine, or the country’s leaders prioritising personal interests at the expense of their people. The second achievement of humankind in the 20th century is the overcoming of plague. Humans are now living long enough to experience the threat of old age diseases. The final and most surprising human achievement is the ability to move past war and violence as the solution to solve all problems. In history, war was the natural human response to conflict, leading to many casualties. However, Harari claims that today, suicide kills more than war and ‘sugar is more dangerous than gun powder.’ These three, once threatening realities have been overcome by humans prior to the 21st century, which poses its own distinct challenges.
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According to Harari, humanity is living in the most peaceful that humans must ‘sustain economic growth without era yet, but that does not mean that challenges cease to exist. destroying the ecosystem.’ As it stands today, economic In the years to come, our species will face the return of war, activity is damaging to the environment, thus, bringing climate change, and technological disruption. climate change to a complete halt would necessitate stopping economic activity. War Will Return Although war has fizzled from being the immediate Technological Disruption solution to world problems, Harari believes that it has the As technology peaks, more powerful than ever before, potential to return. He warns to ‘never underestimate Harari argues for the possibility of humans becoming human stupidity,’ because it takes just one fool to lead ‘gods of the earth.’ The strength of technology that lies the masses astray. If humans begin to make unintelligent in the near future has the potential to disrupt biology, decisions, war is imminent. While countries promote society, and politics. By learning how to engineer plants nationalism, it will take global cooperation to achieve and other living organisms, Harari thinks that the next peace. With technology on the rise and nations racing to products will be bodies, brains, and minds. This would be on top, war is bound to break out. It takes the whole become the greatest revolution of all time. He discusses world working together to remain peaceful. the laws of natural selection and the potential for artificial intelligence (AI) to replace it. It is up to humankind to Climate Change be responsible with future developments. The impacts that AI could have on society lie within the social classes, Climate change is a present reality. The international where inequality goes beyond income disparity. The collective development of new eco-friendly technology divergence will become ‘biological inequality,’ leading to is necessary, according to Harari, to combat the issue of the most unequal societies yet. climate change. Claiming that economic growth is the number one value in any government, Harari explained On top of that, political disruptions could arise with the potential of a digital dictatorship. Harari recalls ancient times when land was the most important thing to a dictator. In the present era, machines are the most important, and in the next it will be data. The reign of dictatorship would mean that all the power is concentrated in one place. Harari says, ‘There is no doubt that humanity will become far more powerful,’ but power does not easily translate into happiness. So, if humanity advances, expectations advance, making it harder to satisfy mankind; as Harari puts it, ‘people will simply become irresponsible and dissatisfied gods.’
Humanity has made such astounding achievements and Harari did not forget to give credit where it was due, but the new challenges of this century may very well face humanity soon. He concluded with the encouragement that humans are still in control of their future; humankind has the ability to determine its fate.
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People will simply become irresponsible and dissatisfied gods
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The DBS Asia Leaders Dialogue brings the region’s most influential thinkers for a candid discussion with Piyush Gupta, DBS Group CEO, on the pressing issues of technological change affecting Asia as well as the rest of the world.
This year, we had the honour of having with us Mr Yuval Harari, Israeli historian and international bestselling author. He shared his insight into the future of our world and humanity’s role in shaping our future. For this year’s installment of the Asia Leaders Dialogue, Martin Soong, CNBC Co-Anchor, joined Piyush Gupta in moderating the discourse.
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MARTIN SOONG PIYUSH GUPTA YUVAL HARARI
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OLD PROBELMS, Piyush Gupta: Let me try to address that question a little differently. So, one of your theses is that you might NEW TECHNOLOGY end up in a world where there is a super class, and then the rest of homo sapiens. There is a view that says that Martin Soong: Your first book (I’m sure many of there is a large part of the nationalism and tribalism you have read it already), Sapiens: A Brief History you’re seeing today, is actually a manifestation of that of Humankind, was about the past. Your second problem, but in a much lighter way, i.e. inequality. book, Homo Deus: A Brief History of Tomorrow, is So you’re already seeing a superclass which is seeing about the time to come. Your latest book which is a concentration of wealth and power and a much out next month, 21 Lessons about the 21st Century, larger bottom 80%, which is not sharing in the benefits is about the here and now, which is where I want of that wealth and power. So it’s creating tribalism, to start with you if possible. What do you think of nationalism, etc. Now extend that to your world, the age we are in now, the age of Trump, the age of where you have maybe even fewer super humans, populous politics. Did you see this coming? maybe staying in little cells in New Zealand controlling Yuval Harari: No, I am not an expert on American the world, and the rest of the world were ordinary politics or on present day politics in general. I am a people who are therefore not part of the fruits of the specialist in the macro level, in the long-term trends. new system. Is that likely to create more social tension So, I have no special abilities in predicting the next than cohesion? And the likelihood of more of these elections or the next economic cycle. circling the wagons and trying to fight for one’s rights; is what we are seeing today the tip of the iceberg in Soong: Well, populist politics is not just in the U.S. comparison to what might come? though. Harari: Yes because today the situation is not as bad Harari: Yes, that is true, but again, I don’t claim any as it could be, and still you see this wave of tribalism, special abilities to predict the direction of the wind and nationalism, and populism. Fast forward thirty in the political system globally. What I can say about years and think about the world in which a significant this new wave of populist and nationalist politicians, percentage of people have lost their jobs because of is that it makes a lot of sense if you look at it from the the automation revolution, in which the gaps between viewpoint of individual nations, but it doesn’t make the rich and the poor are not just economic, they are much sense when you look at it the viewpoint of actually biological. They can manifest in things like humanity as a whole, of the whole planet. Because much longer lives for the upper classes thanks to all nationalism offers a lot of good solutions to national kinds of new and costly treatments. In such a situation, problems, but it has no solution to the major global the anger will far succeed anything that we see today, problems that we are facing. And all the major so the kind of global inequality that could result is one problems that we are now facing are global in their of the biggest dangers inherent in the technological nature, whether it is nuclear war, or climate change, disruptions I was talking about. or technological disruption, you cannot solve any of these problems on the level of the nation or by the act Soong: So what you are basically saying is the of a single government. You must have good global current political, not just climate but also context, is cooperation in order to tackle all these three issues. not very conducive to addressing at a global level,
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the three major issues that you ticked off right: the nuclear proliferation, climate change, and also the technology disruption. The future that you painted in your second book, a lot of people have commented is, ‘Wow, that’s just so dystopian, so dark, so Brave New World.’ I looked at the other way, and I was wondering whether or not you were being a little subversive or even cheeky by suggesting these ideas as a possible future and saying, ‘Look folks, it doesn’t necessarily have to end up like this.’ Is that fair?
Harari: Yeah, definitely. I try as far as possible to emphasize that I have no ability of prophesying the future. Nobody has any idea how the world will actually look like in 2050. As I just said, new technologies never mandate a single deterministic outcome. Every new technology opens several different ways to very different futures. Now the people who usually develop the new technologies, the engineers, the startups, the high-tech companies in places like Silicon Valley, they naturally emphasise the positive and optimistic scenarios about how the new technology will benefit everybody and make the world more peaceful, and prosperous, and so forth. And they have a point, that technologies can do that, but in order to balance this picture, it is the job of historians, and philosophers, and social critics to point out the less optimistic scenarios. If the private sector would have been more balanced in its views, then we could also indulge in more optimistic forecasts. But because the private sectors, and the engineers and the startups, they tend to be so optimistic, then you have to offer the other side of the coin.
Soong: So the bleak side and we were talking about this in the green room before we came on stage, two interesting places to watch where things could go, let’s say from bad to worse quite easily would be: one, where you’re from, Israel, and two, very near to where we are, China. Talk to us about that.
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Harari: Well, my perspective is also shaped by the place where I live which is Israel, which even though it’s a part of the ‘advance guard’ of the high-tech revolution, it’s a very different place from Silicon Valley because you are in the middle of the Middle East. You are surrounded by religious fanatics and religious wars, which never allow you to indulge too much in these rosy fantasies about the future. They constantly remind you that the past is still there, that the forces of nationalism and religion in their ugliest form, they are still there. And when you put together new revolutionary technology with old ideologies and old religions, you can get a really explosive mix, which doesn’t always go towards the most optimistic futures, or towards the most optimistic scenarios. TAMING TECHNOLOGY
Gupta: So if I can ask you, if I can push back a little: On the one hand you say that technology is not deterministic, but one of the lines of thought in your book is that the path we are going down is And when actually quite inexorable, because the scale and pace of the technology change, whether it’s in AI, you put or it’s in robotics, or nanotechnology, and there is together new no coordinating agency which is thinking through: How do you connect the dots and what might the revolutionary consequences of this be? And therefore, as we go down this path, the outcomes from a probabilistic technology with basis, are likely to be less upbeat than people might think about. You might get these outcomes where you old ideologies have a new race, a new homo sapien species which and old just thinks differently and is wired very differently. So, on the balance of probabilities, do you think it is religions, you possible to shape that, or is it a path that is most likely can get a really to happen because nobody is controlling it? Harari: Well what is deterministic is that AI and explosive mix biotechnology are going to change the world. This
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is going to happen without any doubt, nobody can Harari: Definitely, I mean this is now the most stop it. The power of these technologies is just too powerful force in the world. It is going to change great, and even if one country or a few countries everything: economics, culture, society, politics more completely block all further research in AI and than anything else. It is, by its very nature, a political bioengineering, other countries will continue with question and it’s a very bad idea to leave it in the it, and those who stop the research, they will just hands of the free market or of private businesses to be left behind. But what is not deterministic is the regulate themselves. They don’t have the necessary kind of society, the kind of world that these new incentives and frankly, they don’t have the legitimacy technologies will create. And I don’t believe that to shape the world. Nobody elected for them, nobody the worst-case scenario is bound to happen. If you voted for them, they don’t even pretend to represent look back in history, so in the 1950s and 60s during humanity. That is the biggest question humanity the Atomic era, many people were convinced that faces, maybe ever; we are going to change life itself, the invention of nuclear weapons will inevitably we are going to create new kinds of lifeforms, we are lead to catastrophic nuclear war, which will be the going to change something that was never changed end of human civilization. Many, many people were in history before, which is our own bodies and minds. convinced of that. And in fact, at least as of today, We still have the same bodies and minds as in the I don’t know what will happen in the future, but Stone Age. All the previous political revolutions did at least as of today, the cold war ended peacefully. not change this, but the new technologies will change And nuclear weapons actually brought about most that. So, it’s the biggest question that we’ve ever peaceful era in human history because of the threat faced, and with all of my respect and appreciation of nuclear weapons, more than anything else. The of the people in Silicon Valley, or in Bangalore, or in nature of the international system changed and we these places, they don’t have legitimacy and really, entered this relative period of peace. the background to engage with these questions; the problem is that most governments are not SHAPING THE TECHNOLOGY even thinking in that direction. If you looked at the REVOLUTION last election in the United States, so, there was no discussion whatsoever about bioengineering and Soong: For the similar outcome, in terms of technology about artificial intelligence, the most technological though, can we, should we count on governments debate, the biggest technological issue was Hilary today to do what the they did, let’s say back during Clinton’s emails. And, you know, you had Donald the cold war, to make sure we don’t go there. Trump frightening people that the Mexicans will take your jobs, the Chinese will take your jobs, nobody said Gupta: Let me supplement Martin’s question. The that the robots will take your jobs. narrative for the technology revolution today is being left in the hands of big technology, so private sector, WHO WILL REGULATE Silicon Valley, etc. Is it imperative on somebody, DISRUPTIVE TECHNOLOGIES? governments, civil society, or think tanks, to bring some other alternative platform for thinking about Soong: And here’s where there is a bit of a this narrative and shaping the discourse? disconnect, if you’re saying that governments are the only bodies with the legitimacy and mandate to
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The narrative for the technology revolution today is being left in the hands of big technology, so private sector, Silicon Valley, etc
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make sure we don’t go down this road and make sure we don’t end up in this dark, dystopian future, a lot of governments these days, including in the United States, tend to be very, very populist. They do what it takes to win re-election, let’s say, and for what their base wants, not what the world wants, not what the world needs in terms of global solutions to this challenge of technology disruptions. What happens then?
Harari: Very bad news. The problem is that you cannot regulate the disruptive technologies on a national level. Let’s say you have a big debate in the US about, say, artificial intelligence and you conclude that developing killer robots or autonomous weapon systems is a bad idea, terrible idea, and the US bans the development of autonomous weapon systems. This has no effect in Europe, in Israel, in Russia, in China, and if even one of these other powers decides, ‘We don’t care, we develop killer robots,’ then very soon the US itself will be forced to break its own ban because they wouldn’t like to stay behind. If you want to regulate a technology, like autonomous weapons systems, like genetic engineering of human embryos, it can only be done on a global level; any attempt to do it on a national level is bound to fail. NEW ‘ARMS RACE’ FOR AI
Soong: Ok, so I have to ask you, what we have been talking about for months: US-China trade, trade war right now with the tariffs, but at a much more strategic level, there is this literal fight for the future over technology. Who controls technology in the future, including AI, will have control and power. But the US is saying, ‘Look, no, we don’t want to give you free giveaways to our key technologies.’ One of the things that might do is drive China, embolden China to literally speed up its own indigenous development. And then what happens?
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Harari: We are now beginning to see a new arms the Europeans being terrified that they are being left race for AI. Five years ago, hardly any government, behind in the AI race because of their concern for except perhaps in East Asia, the Chinese and Koreans, privacy, because of their concern for individual rights thought much about AI. And now everybody is and democracy and so forth. The race for developing realizing that this is the big thing. And anybody AI, to a large extent, depends on amassing big data left behind in the race to AI will suffer the same databases. And if you have a concern for privacy, consequences as those who missed the train of the individualism and democracy, this is a handicap. industrial revolution in the 19th century. And I think it’s no coincidence that you now see China racing to Gupta: There are two ways to think about it, Yuval. AI because they have the national trauma of being One is, we can all come together as mankind and left behind in the industrial revolution of the 19th define some rules, rules of robotics: thou shalt do century, and a century and a half of humiliation and no harm, you can’t build autonomous weapon exploitation and terrible conquests, because they systems and so on. Given the fact that other than the missed the train. And they now have a very focused United Nations, we don’t have a platform to do this. mind, ‘This time we are leading the new revolution, That sounds like a bleak hope. Now an alternative we won’t be left behind again.’ Similarly, you have possibility, that the new lives we engineer, whether
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it’s through bioengineering of ourselves or through to develop into a surveillance state, you mentioned creating cyborgs with artificial intelligence and so power is going to come from the ability to amass on, we’ll still be imbued with something which is huge amounts of data, very, very personal data essential to human life, which is the sense of right, about individual people and there’s probably very justice, emotion, fairness, and consciousness, and few other places that can do this with that kind of that no matter what development we make, the new scale than China and it’s happening right now. super-humans will be born with the sense of fairness and equity and will eventually wind up doing the Harari: In the Modern Age, it was the age of right things for all of humanity and mankind. So the statistics, that you control the population, you try to question then it takes you to: is there something predict elections, you try to predict business cycles deep within us that will force us to do the right thing, based on statistics. Now we are entering a more or is it that we are actually just a bunch of algorithms individualistic era in which you can get to know as suggested in your book and we will just do what individuals instead of just having statistics about the programs fire us to do in the future so you don’t have a conscious choice of determining right from wrong?
Harari: I think that we do have some choice here, but nothing is predetermined. I said earlier in my talk that human stupidity is one of the most powerful forces in history. Human wisdom and compassion is also an extremely powerful force, and you cannot predict in advance which of these forces will win. The problem is that, again you have this imbalance. If ninety percent of humanity agrees on the wise and compassionate thing to do, but ten percent of humanity, nevertheless, goes forward with very dangerous developments, it doesn’t matter. You need even just one country that develops a new disruptive, powerful, and horrendous technology like autonomous weapon systems in order to destabilise the entire world. So, unless we find some way to Is there reach a true, total global consensus, it won’t be enough to have a consensus of just ninety percent. something deep within us THE DILEMA OF DATA that will force Soong: In the meantime, places like China, we were talking about this, and this is probably one of the us to do the leading places to watch in terms of using technology right thing
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millions of people. You can amass enough data on credit, maybe use credit bureaux. But once we have a particular person to really hack that person, to information and data which tells me that you will understand my feelings, my desires, my thoughts, never pay me back but Yuval will, I will never lend better than I understand myself, and then to be able, to you and I will lend to Yuval; I could still do that. not just to predict my choices and decisions, but The problem is when you take this to other business also to manipulate. You just saw it in the elections, models like insurance. The basis of the insurance that you could show different fake news stories to business model is socialisation of risk. We all share different people base on their biases in order to sway risk because we work off the statistical probabilities the elections; you get to know the fears and hatreds Yuval talked about; nobody knows. But the day I of individual people and then you use my fear and know that you are likely to be cancer-prone because my hatred against me. And this is a completely of your DNA sequencing but he does not, I would not different game from what we saw in the 20th insure you but he doesn’t want insurance because he century. It’s based on amassing enormous amounts knows he will never get cancer. The whole model of of data and having AI systems that can make sense of insurance grows dark because now we will no longer all this data. And it’s geared toward the creation of share risk because we now know too much. And so what you can call total surveillance regimes, regimes the point that moving from statistical to individual that survey everybody all the time. And we’ve all knowledge will cause us to rethink many of our seen experiments with such regimes in different business models is absolutely valid and certainly places, in places like China with the social points impactful in finance but I can see in many other systems that they’ve started experimenting with and industry disciplines where knowing too much might in places like my home country of Israel. Israel is now actually cause you to rethink what you want to do. establishing a very sophisticated surveillance regime in the occupied territories, in the West Bank. Part of Soong: Do you see a point where, obviously this is the reason that Israel is so successful in controlling going to be a bit of a learning curve and a learning 2.5 million Palestinians in the occupied territories is process as well, do you see the point in the near this enormous machine of surveillance, which relies future where a lot of the technology that we’ve been not just on cameras and recordings and so forth, but talking about, even if it is applied for good and for also on algorithms and AI to make sense of all the profit, could end up discriminating unfairly against data which is being governed. certain individuals who may need access to your benefits for example, unintentionally. Soong: The positive part, I wanted to bring Piyush in and ask you a question. This, potentially, could Gupta: I think people talk about technology and begin changing for finance, for your business. digital being good for financial inclusion. I think there’s equally a possibility that it could lead to Gupta: Frankly, I think in some ways, it can begin financial exclusion and both outcomes are possible. changing for many of the business models that So, it depends on the rules of society and the rules underlie society. So, you think about banking, a of engagement that we craft. And therefore, to large part of our ability to give credit is based on that extent, I am in Yuval’s camp. I think one of the statistics Yuval talks about. We have our broad the biggest challenges we have, not even in the judgements on being able to figure out how to give long term, over the next decade, for all of us is to
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You can amass enough data on a particular person to really hack that person, to understand my feelings, my desires, my thoughts, better than I understand myself
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I don’t think we’ve thought through the pros and cons and the rules
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reimagine and re-envisage what those rules of society discrimination is that you could take political actions need to be. Is it appropriate for us to use information against it. If I’m discriminated against because I’m in some ways, when it leads to exclusion of some black or because I’m gay or because I have some sets of people? In the past, we used to prohibit kind of disability, lots of other people suffer from marginalisation and exclusion of groups of people the same discrimination and we can unite and take based on demographics. But what happens when political action. But if I’m discriminated against you wind up with marginalisation not based on because I’m me, it’s just me. There is nobody that demographics, but based on data and what I know I can come together and form a political action about you? Is that bad? Is that acceptable? I don’t group or whatever. If I’m discriminated because of think we’ve thought through the pros and cons and something in my DNA, something in my personal the rules. history, then how do you fight against such discrimination? Even worse, all this discrimination will Harari: Yeah, definitely. I mean you can have also be based probably, on machine learning, on big data the problem of self-fulfilling prophecies, like I go to algorithms. You will not even know what is wrong kindergarten and they collect data on me, on how with you. The whole idea of machine learning, of I am as a kid, and based on that, they decide not to advanced AI, is that the AI can discern patterns in the accept me into the best school because my record in data which no human being can. The AI can go over kindergarten was not very good. I was disruptive, I enormous amounts of data and say, ‘Give him a loan, don’t know what, so I don’t go to the best school. don’t give him a loan.’ Then you ask ‘Why not?’ and And then when I come to university, I didn’t go to nobody knows. the best school and based on that they don’t accept me into the best university. And like this, throughout A NEW SOCIAL CONTRACT my life, I don’t get jobs, I don’t get insurance, and it’s all because I was a bad boy in kindergarten. You get Soong: Which would require humans to intervene to caught up in your own history. Part of the advantage exercise discretion, to exercise judgement as well, and of the old statistical system, you faced the danger of will in effect, mean there will have to be a new social statistical discrimination but at least you were kind of contract. We were talking about this earlier and my sheltered from your own personal history. You could question to add onto that is, then would it be the job outgrow at least some of your mistakes and bad of governments, which have the mandate and have habits but now, you are more safe against statistical the legitimacy to, can you legislate a social contract? I discrimination, but you are unable to escape your suppose you can. own personal history. Harari: Yes, this is what governments have been TRAPPED IN DATA doing throughout history. You have new inventions and people will come and say, ‘You know, we need to Soong: So this could be potentially deterministic, is have eight-year-old kids working in coal mines. This is what you’re saying? just what the market demands. If we don’t have any eight-year-old kids in the coal mines, the Germans Harari: Yes, and you get caught up in your own will do it and they will have an advantage over us.’ personal history. Another thing about statistical And this was the argument of the 19th century
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until at some point people came and said, ‘No, kids should be in school, not in coal mines.’ And thinking backwards, we said, ‘This is a good idea: Actually when you send kids to school, you afterwards got a much better workforce than when you send kids to coal mines.’ This argument that this is due to market forces, we have to do it. It’s never true. You always have some political choice. THE ‘USELESS’ CLASS
Gupta: Martin, if I could switch the discourse a little bit to this idea of the useless class. When we get to a world where AI, the superhumans that can take care of everything and so the rest of the people really don’t have too much to do, I have two or three questions with respect to that. Question one could be, what’s wrong with that? There have been periods in history when you had the system in the old Greek civilization where large bunches of people really did nothing; you sort of weren’t born to work. I was seeing this TV series about 1912, Downton Abbey where this lady says, ‘What’s a weekend?’ She never knew what the concept of a weekend was because there never was a concept of a week. It doesn’t really matter. The second thing is, suppose you do get to that situation, then what are the most likely jobs to be displaced? The third is, again it might not be your expertise, but if you do get into a situation of that sort, this idea of new redistributive economics: Have they given any thought to this? Is there some way to think about it?
Harari: There is nothing inherently wrong in jobs disappearing. Many jobs are not worth saving. They are boring, they are repetitive, they are disruptive to the body and the mind. What we need to protect is not the jobs, it’s the humans. If you can protect the humans and provide them with income, with services, with meaning in life, many of the jobs
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of today, you don’t need to protect them. There’s Of course, also new jobs will be created. We don’t nothing wrong about these jobs like being a truck know if enough but definitely a lot of new jobs will driver or being a cashier in a supermarket. If this be created. I think the big danger of the appearance disappears, there is nothing wrong with it. of a useless class is not just because of the absolute lack of jobs; it’s because of the difficulty in Nobody’s life dream is to be a cashier in a retraining and reinventing yourself. Say you are a supermarket. You need this in order to have truck driver and you are now 50 years old and now support, to have services, to have money, but if you you no longer have a job because all the trucks are can get it from somewhere else, I’m in favor of some now self-driving, but there is a new job in designing jobs disappearing. Now which jobs will disappear? virtual reality games or in teaching yoga. Nobody knows. It is quite certain that a lot of jobs will disappear, especially the more monotonous and How do you reinvent yourself at age 50, after 30 repetitive ones. Jobs that require a higher degree of years of driving a truck, as a designer of virtual creativity will be safer, at least in the short term. worlds or as a yoga teacher? It’s not impossible, but it’s very difficult. It demands a lot from you and also
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from the government, which will have to support you and to retrain you. How do you Q&A reinvent Soong: Let’s open up this conversation to the floor and see if any of you out there have a question. In yourself at age the meantime, a couple questions coming in over 50, after 30 my iPad. These are the very carefully curated and edited ones. Yuval, Einstein regarded nationalism as a years of driving disease; with increasing populism and protectionism, do you think we’re headed toward an era that mimics a truck? World War II? And let’s layer on top of that, what could happen with technology as well?
Harari: First, I don’t think that nationalism is a disease. Nationalism also has a very good side. Nationalism has been one of the most beneficial ideas in history, because it makes strangers care about one another and cooperate to a certain extent. A nation is a community of millions of strangers and nationalism enables these millions of strangers to cooperate. This is very good. The problem is what happens when the nations begin to collide with one another, especially in an age like today, when to solve the major problems of the world, you need global cooperation, and not just national cooperation. In this situation, if your highest loyalty is to the nation, the result is likely to be trade war and real war, like the second world war, and under current condition, this probably means the destruction of human civilisation. I think we don’t need to abolish nationalism; there is an important place for nationalist sentiments in the world. What we need is to add to the national loyalty another level of loyalty to humankind and to the world. And people can have several loyalties at the same time. You can be loyal to your family, to your neighborhood, to your business, to your profession, and to your nation at the same time. You have to decide: now in this dilemma, I
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prefer my family over my business, here I prefer my visualize a society like the US where the data is business over my family, and here, I prefer my nation controlled by the big private sector, whereas in China over my business. Similarly, you need to add another where the data is controlled by the government, and layer of loyalty also to humankind and sometimes what would be the influence on society, the societal you will have to prefer the interests of humankind relationships, and human behaviour in 2050? over the interests of your nation. Harari: So, again, this is not a prophecy; this is just Gupta: That’s a great segway to actually the a possibility. But the first thing to say is that in the highest voted question, which is, what is your long run, if too much data is concentrated in one take on religion and humanity? You’re arguing place, there is no difference whether you call it that sometimes humanity or your obligation to corporation or a government. The corporation will humankind is more important than the obligation to be the government. If it has all the data in its power the mission of the tribe. Do you think religion can be and in such a situation, if there are no regulations an organising principle which helps direct some of and no limitations on what the government or that bigger picture thinking around humanity in the corporation can do with its data, then it basically absence of other platforms? knows everything about you and can control and manipulate you. And people will, in a way, even Soong: And potentially around technology? be glad to relinquish authority over their lives, and we see it beginning to happen today that authority Harari: Yeah, in the past it was indeed like that, and is shifting from humans to algorithms. Previously, religion, like any great idea, any big institution in you want to find your way around town, so, you history, it had a lot of positive and a lot of negative rely on your own knowledge and instincts. Now impact at the same time. I’m afraid that at present, we increasingly rely on Google Maps or Waze. You most religions have become a tool in the hands reach an intersection, your gut instinct tells you of nations and governments. You see that the turn right, Google says, ‘No, no, no turn left,’ and places where religion is strong is usually when a you learn by experience to trust Google, and after a government is using religion as the kind of handmaid few months, you lost the ability to navigate space. of nationalism. It happens with Hinduism in India, You lost it. Similarly, previously when people were with Judaism in Israel, with Shiite Islam in Iran, looking for answers for information, one of the most with Orthodox Christianity in Russia. Some religions important abilities in the world, to look for answers, really have a universal vision for humankind but they had all kinds of personal ways to do it. Now unfortunately today, religion has mainly degenerated you increasingly just ask Google and the first three into a kind of tool in the hands of governments and results of the Google search; this is the truth. You lose national movements. the ability to look for information in any other way. Increasingly, this will happen with more and more Soong: Okay, let’s take it out to the floor and see if decisions like, what to study, where to live, where to anybody is eager and willing now. Yes, excellent, sir work, whom to marry. You will learn by experience please. to trust the algorithms. They know me better than I Question: You talked about the power of data. know myself. This is an unprecedented situation. For Can you just fast track 30 years ahead to 2050 and most of history, almost all religion and all ideologies
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depicted human life as a drama of decision-making. Life is like a road; you reach one intersection after the other and you need to make a choice: a moral choice, a political choice, a religious choice. All the big works of art, like Shakespeare plays. You need to make a choice; Hamlet, to be or not to be? Now fast forward 40 years and all the choices are made by Google or by the government, or whatever. Just imagine a Shakespeare play, in which you get to the climactic moment, when the hero or heroine needs to make a big decision and they just say, ‘Okay Google, what should I do?’ This is the kind of world that we are getting into. It’s all based on the understanding that yes, if you have enough data and enough computing power, you can hack humans, and you can make better decisions on their behalf. This is what science is now telling us, this is the world we are getting into. Again, on this level, there is not such a big difference whether it will come from the private sector and from Google, and Facebook, and Amazon, or whether it will come from the government. In the end, it’s the same result.
Soong: Thank you for your question. I’d like to thank our special guest Yuval Harari, also Piyush Gupta and also yourselves for being with us here this afternoon.
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CLOSING REMARKS
PETER SEAH, CHAIRMAN DBS GROUP HOLDINGS AND DBS BANK
adies and gentlemen, the last session was quite As we saw then that we were entering into a very scary. I reflected over it and said, ‘One job that different world. Actually, I was serious when I said, ‘It’s is quite clearly redundant going forward is the a scary world.’ A world where our role as human beings job of the chairman. So without me, you guys decreases and hopefully, we continue to master the use will go back five minutes earlier.’ Well, ladies and of technology. But we wanted to share this with you Lgentlemen and friends of DBS, thank you so very much for because we at DBS have indeed been transforming. We coming to spend the day with us to take part in our special have massively digitised our culture. It is a digital culture. golden Jubilee Edition of our Asian Insights Conference. I We have employed big data, data analytics, AI, and we hope you had a good day and I hope you’ve enjoyed yourself have transformed the way we operate within DBS and as much as we at DBS enjoyed putting it together and hopefully, we have been an influence to how you operate, bringing it to you. especially when you transact with us.
The last 50 years was indeed a very exciting journey for So, we hope that with this conference and our ongoing DBS. If you look at us, we actually mirrored the 50 years dialogue and communication, we will both transform of Singapore moving from third world to first. We evolved together and better navigate this new world, better from a humble development bank to be a bank with global navigate the disruptions, and better employ and use the stature, the largest in Southeast Asia, the leading player in technology that is before us. And if we do so together and Asia, and top 40 in the world. And indeed, we see ourselves do it well, there will be great opportunities for both you continuing to be a very important banking player in Asia. and us to do business together, to grow together, and to face the new world together. And in the process, I really A few years ago, as we approach this 50th year, we begin hope that together, we will all build a better world for our to reflect, ‘What’s our next step going to be like? What’s future generations. So thank you again, I want to thank all the next 50 years going to be like? How do we survive and our speakers and our panellists and I hope that as you leave emerge a winner over the next 50 years?’ And so today, the conference, you can pay us no greater tribute than to we brought together the speakers, panellists, and our tell your friends, colleagues, and families: wow, what a day own colleagues to share with you our views of disruptive it was at the DBS Asian Insights Conference. technology, artificial intelligence, and geo-politics.
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