In a world where rapid changes and unpredictability have become the norm, discerning between transient trends and underlying shifts is critical for strategic decision-making. During a recent interview at the Bloomberg New Economy Forum, Singapore’s Foreign Minister Vivian Balakrishnan, offered a valuable frame for assessing broader trends across various sectors.
“Now, particularly with the US and China, I differentiate between climate and weather. Right now, I think the weather is a bit sunnier. They are preparing for the APEC (Asia-Pacific Economic Cooperation) meeting. We all hope that President Xi and President Biden will have a good meeting. So, the weather has improved. But I think the climate, the relationship between the United States and China, is not in such a happy place.” Singapore Minister for Foreign Affairs, Dr Vivian Balakrishnan
Balakrishnan's metaphor, distinguishing the ephemeral 'weather' from the long-term 'climate', serves as an insightful tool to analyze and predict trends including in geopolitics, economics and business. This lens can help us to think beyond the headlines and consider the structural factors that will shape the future. Here are just a couple of issues where distinguishing climate and weather may be warranted.
Labor Market Dynamics: Today’s Shortages vs. Tomorrow’s Automation
In recent years, industries worldwide have grappled with labor shortages, particularly in sectors like hospitality, healthcare, and manufacturing. The COVID-19 pandemic exacerbated these shortages, as health concerns and lockdowns disrupted workforce availability. Businesses faced acute challenges in meeting demand, leading to increased wages and incentives to attract workers. Governments around the world have gone on the offensive, overhauling their immigration policies and proactively marketing their jurisdictions as destinations for worker migration.
However, this 'weather' of labor shortages contrasts sharply with the 'climate' of technological advancements, particularly in automation and artificial intelligence. While the current scenario necessitates immediate human labor, the ongoing developments in AI and robotics are set to revolutionize workforces. As automation becomes more sophisticated and cost-effective, its long-term impact may significantly reduce the need for human labor in various industries, reshaping the employment landscape. This looming shift raises important questions about job security, skill development, and the nature of work in the future.
Plant-Based Protein Industry: Fluctuating Valuations vs. The Protein Deficit Challenge
The plant-based, or alternative, protein industry recently experienced a significant downturn, with valuations of leading companies like Beyond Meat and Impossible Foods plummeting. Market saturation, consumer taste preferences, and economic pressures contributed to this decline, casting doubts on the industry's viability.
However, this 'weather' of declining valuations masks a larger 'climate' issue – the global protein deficit. As the world population grows, particularly in developing countries, the demand for protein-rich diets is rising. Traditional sources of protein, primarily animal-based, may not be able meet this demand, leaving aside debates about this industry’s environmental impacts. Based on the growing global demand, the alternative protein industry's current challenges are likely temporary as technological innovations, improved product quality, and growing environmental awareness are expected to drive adoption.
Cryptocurrency Market: Volatile Prices vs. Long-term Technological Integration
The cryptocurrency market is known for its high volatility, with significant price fluctuations often dominating headlines. For instance, the dramatic rise and fall (and rise and fall and rise and…) of Bitcoin's value over short periods can give the impression of an unstable and speculative market.
However, the 'climate' of cryptocurrency is characterized by the increasing integration of blockchain technology into various sectors. Beyond mere currency, blockchain offers innovations in areas like supply chain management, digital identity verification, and decentralized finance. This long-term trend suggests that regardless of short-term price volatility, the underlying technology of cryptocurrencies is gaining traction and could fundamentally transform aspects of global finance and data management.
These examples illustrate the importance of differentiating between the 'weather' – short-term trends and fluctuations – and the 'climate' – the underlying, long-term shifts in various industries. For investors, policymakers, and business leaders, understanding this distinction is key to making informed decisions and strategizing for the future.