Futurist Speaker Gerd Leonhard: Digital Transformation of Society and Business (DST Advance 2017)

Pleasure to be here. So I wanted to start off by saying, you know, I lived in the US for 17 years, a long time ago. And so I'm very close to what's happening in the US. I currently live in Zurich, Switzerland. I'm originally from Germany, so if my presentation is perfect, that's why. Just kidding. And I really look forward to talking to you about the future. You know, it's really interesting to see, we talked about politics a little bit yesterday and Trump and all the things. And to that I would like to quote Peter Drucker, who once said that a crisis is a terrible thing to waste. And I think it's really interesting to see all the things that we are talking about now, where the future has taken us. And I want to sort of start off by saying what I do as a futurist. You know, if you don't know what a futurist is— most people don't know what a futurist is— I don't predict the future. There's no such thing as predicting the future. Some people could do this, Arthur C. Clarke, you know, and people like Victor— Isaac Asimov, and, you know, basically Nostradamus kind of thinking. I just observe the future. It's very important to observe things. There's a great saying in China that says, "If you want to know about the future, ask your children." Because children are not busy running companies or making money. They experiment, they play, they try things. And in the financial industry, it's increasingly important to know about the future. Because you're not investing in what has been, you're going to invest in what will be. This is crucial. And now today, the speed of change is absolutely mind-boggling. I mean, just sit down for half an hour, you're like, "I can't believe this is actually possible." Science fiction has become science fact. Self-driving cars, automatic language translations, Barbie dolls connected to the Internet, right? Did you see that the other day? There's a Barbie doll that talks to you like Siri or Cortana, where kids are learning to speak with the cloud, you know, whatever that is supposed to do, I don't know. But science fiction is science fact. If you don't know about the future, you will be exponentially left in the dark. Especially when it's about money. While we can't predict the future, we can observe it, we can understand it. And this, by the way, is the number one thing that sets us apart from machines. Keep that in mind. Machines are going to be so powerful there will not be a science fiction movie we can quote to describe it. In 7 years, the first machine, roughly, will have the power of the human brain in terms of computation. That's 40 quadrillion calculations per second. In 2050, one computer, the most advanced computer, will have the capacity of all human brains. That's 10 billion at that point. We will have machines with an IQ of 50,000, and they will cost as much as my iPhone. So we're going to a world where machines will be very, very powerful. But you know what they can't do? They can't really be human. They cannot understand humans. They can read humans, yes, but it's quite different than to be human. You know, machines are calculating with zeros and ones, obviously, for the time being. And they will be so powerful they can look at a trillion data points and come up with a solution. We can't do that. A doctor that wants to keep up to date has to look at 8,500 new oncology studies a week. Imagine you have a doctor treating cancer. How are you going to read 8,500 oncologies? It's impossible. The computer reads— IBM Watson reads 1 million books in a minute. But does the computer understand? Human relationships? Does it know about trust, values, emotions? You know, if you picture the computer as one linear stream of intelligence, that stream will go on an exponential curve straight into the sky in the next 10 years, like unlimited essentially. But picture human intelligence. It's like we have 1,000 streams of intelligence. We have emotional intelligence, we have social intelligence, And all those streams are happening in parallel. It'll be a long time before a computer can match that. So don't be worried about machines. Maybe in 100 years it would be a good time to worry about that. But I think what we need to do is we need to understand the machines also and see what they can do for us, because if we don't employ technology to get better, we'll be left behind. So that's point number 2: understanding. The third one is imagination. If I would ask you today, what does your business look like in 5 years? Do you have an answer? That's the question you must answer today because the 5 years will happen in 2 years, in 18 months. Much quicker than you think. You know, years ago when I was on the internet, I used to be a musician and producer. Then I went on the internet doing digital music. And then we went through this whole transformation. And we talked about the paperless office. Remember the paperless office? It didn't happen. And why is that? Because it wasn't ready. But today, it certainly is happening. As Bill Gates once said, sometimes we think it's going to happen much quicker, but then when it does happen, it's much bigger than we ever thought. It's very important to imagine what that future looks like. The next one, and the final one, is to develop foresight. Not predictions, foresights. Foresights mean you know for sure that this will happen in 5 years, and then you can act accordingly. Here's a key foresight: we're looking at the end of oil. This is a certainty. It's just as certain as I used to be in the music business looking at CDs and downloads and how we buy music. And we said in 1999 that music is moving to the cloud. The cloud means, you know, you click on the button and it plays. No plastic, no CDs. So what do we have today? 100 million people paying $10 a month for things like Spotify and listening, of course, free on YouTube. That's 1.6 billion people. Music is in the cloud. So you have to have foresight because when you understand, for example, in the energy business, in 20 years we'll be able to supply the world's energy from solar power. 20 years, that's the estimate. So who in their right mind would invest in gas pipelines now? Answer that question. No matter what the president thinks about this, that is foolish. Yes, it can be done, there's enough gas around for everyone. But it's not going to be a business. In fact, most of the oil companies have already decided they're leaving the oil business. Shell and ExxonMobil have transition plans. The state of Saudi Arabia has announced they're going to transition away from oil. I don't really know what that means, probably to golf or something, because what else are they going to do there, right? It's kind of a tough proposition to be in. So, imagination develops foresight. Here's the bottom line of this: the future is already here, we just missed it. We just haven't paid attention to it. It should be 5% of your time. If you can make it 10%, it's to look at the future, things that are not already here. If you're in the money business, that's essential. So, you know, I once worked for a company that makes satellites, shoots them out to space to do whatever they do up there. And, you know, if you shoot a satellite in space, you must decide 15 years into the future what this thing is going to do when it's up there, because you can't go back and then, you know. In investment business, you need at least 5-year foresight. It's not prediction, this is just understanding. Then I want to say, I wrote this before Donald Trump, but anyway, it's still true, the future is better than we tend to think. You know, you wouldn't believe how many people I talk to that say, "The future really is— I'm worried about the future." But the fact is, if you're looking at this graph, a little bit hard to see, we're going to make the slides available for download later so you can look at more detail. The positive thing is extreme poverty has declined, education has increased, literacy has increased, democracy is on the rise, child mortality, vaccination, everything being solved. You know what the next thing is that we're going to solve? Energy. Water, food, diseases, solving by technology. There will be many side effects of doing that solving, you know, which we'll talk about as well. But the future doesn't look bad. Keep that in mind. The future actually is huge potential for us, not just financially but also as people. So it's very important to keep in mind, as the former Secretary of Health said in the US, we're continually faced with a series of opportunities disguised as insoluble problems. I mean, it's actually much better than that. I think we can do things much better. So here's the key slide of today. We're living in an exponentially changing world. Exponential means— you're familiar with Moore's Law, Metcalfe's Law— exponentially counting: 1, 2, 4, 8, 12, 16, 32, and so on. Basically means doubling every 18 months in power. Moore's Law is kind of ending because the power of chips is already at the nano level. But this exponential curve means that every 12 to 18 to 24 months, technology is making a leap that's twice as big and half as expensive. Now, if you had 0.01 at the beginning of the curve, you double to 0.02, it's nothing, right? You won't even notice. But now we're at the pivot point. Don't be mistaken for a second here. We're at the takeoff point, which means in 7 years we're 30 times as far along in technology as today. The kids of my kids will never know how to drive a car themselves. They will just go into a computer car. They will never know what a CD looks like or a DVD. In fact, today, if you buy a CD for Christmas and give it to your kids, they'll call a therapist. Because you're from the past. So exponential change, and this will be, you know, if you're not familiar with this, it will be detrimental if you don't expect this. And the military calls this VUCA, right? You've heard about the term volatility, uncertainty, complexity, and ambiguity. That's our future. Don't expect any different anytime soon. We have to learn how to live with that and how to react to it. That's not necessarily a bad thing, it's just we have to realize the world isn't going back to more secure environments. So there's great opportunity in this exponential curve if we understand it. And this is our challenge as people. People are not exponential. I mean, we are limited. We have to sleep, we have to eat, we have downtime. We can't plug in some more CPUs up here. I mean, at a certain point, we're just who we are. We're just people. We're linear. We shouldn't expect to be exponential, and don't make yourself work exponentially. That will kill you. Multitasking doesn't work. Computers can do that. We can't do that. So it's very important to keep in mind the difference between being human and being a computer. So when I was in the music business, you know, I was part of the first wave of disruption. In the Bay Area, involved with Napster and MP3.com and many other companies in the '90s. And the record companies, in their wisdom, said that they wouldn't support the internet. Because, of course, the internet would make distribution very cheap. And what happened, as you know now, Spotify is what, $10 a month? How many songs do you have? I think 21 million songs on Spotify. Used to buy a CD for $20. There were 12 songs on it, and now I buy Spotify for $10 and it's 21 million songs. So the song is worthless, right? It's basically free. Disrupted. Can you make money in the music business? Absolutely you can, but you're not going to do it by selling music. Music is basically just the reason to be there. So take a look at the media business and the first waves of disruption. Phone companies, internet access, e-commerce. And on top of that wave right now is the car companies. You know, 7 years ago we did a workshop with the CEOs of a German car company. We'll not tell you which one, but you take a wild guess. We're sitting around the room and saying, well, the future of the cars is really— first, kids don't want a car. They don't even get a driving license. In most major cities in the US, driving licenses are declining. Then there are sharing cars, and there are electric cars, self-driving cars. In Norway, 37% of all cars are electric vehicles. I know it's far away, but still, it's an interesting status. Basically, the thing is, in the future, in 10 years, very few people will buy a car with a gas engine. and a lot of people will share their car. I mean, this is unthinkable for a German, of course, to share your car, because you would never do that. But we can learn from this industry. Today, that company that we talked to 6 years ago, they wish they wouldn't have laughed about this idea of electric vehicles and autonomous cars, because that's the number one initiative. Who is the leader in the car market now? Tesla, Google, Toyota, because they have gone all the way, and maybe General Motors to some degree. And after that is the Germans. They're going to have to pay billions to catch up, and they will catch up, but it's going to be painful. The entire operating system of autonomous cars is Silicon Valley, it is not BMW. There's a lesson to learn. So we can learn something from this, right? Because financial services are next. Well, I'll put you right here on the wave, right up here. You're following the core guys into the wave of transformation. How do people asset their money? How do they manage their money? How do they manage their wealth? How do they do their banking? Will dramatically change because of technology. And some will be great and some other ones will not be so great. For example, decline of margin and price pressure and all these kind of things, right? But if you understand what's coming, You can formulate a piece of action. It's very important to understand that we're not going from today into the future by applying various band-aids and fixes. That's called innovation, right? We're going from the future backwards, understanding what the future is and then transforming. I mean, car companies are a great example. All the major German car companies are now saying, well, We're not going to sell cars in the future. We're going to sell mobility. You want an electric bike or take the train or swap your SUV against a sports car on the fly? We'll do all of that for you. Selling mobility. I mean, Cadillac just announced 2 weeks ago the first flat rate that they're going to roll out, I think, later this year. You buy this flat rate for $1,500 a month and You can use public transportation, some private planes, the local bike rental, and swap any Cadillac for anything anytime you want. Well, think about the change in business model here. This is a mind-boggling shift. The same thing is going to happen with financial services, and you have to be smart with new offerings for that to happen. So this wave of disruption is now coming. I think it's good to be prepared and think about this. Basically, This is the disruption: ever-increasing customer demand for immediacy, connectivity, ubiquity, lower prices, increasing fee pressure, radical transparency, more regulation. I mean, it's a perfect storm in a way. And I think out of that perfect storm, we can formulate a response, and it has to do with the fact that our world now is solidly in the hands of technology. I mean, just 10 years ago, look on the left side of this chart, right? 2006, who are the most powerful companies in the world? Oil companies and banks. Now that has changed. The most powerful companies in the world are technology companies. And look how much more market cap they have. Twice as much. Apple, Google, Alphabet, Microsoft, Amazon, the lonely oil company, the rest, the next 20, are Chinese companies. Not US companies. The world is now heading, you know, driven by technology. And sometimes I like to say, you know, data is the new oil. I said this first 15 years ago, you know, and now it's finally true. In 2016, the value of companies that use data, like internet companies, social networks, is $7.8 trillion in revenues as compared to the oil business, roughly about $7 $7 trillion. So this is really important when you think about oil, think about data, and what you're going to do with this. Basically, they have this full convergence. Financial institutions are becoming tech companies, and digital platforms are becoming financial service providers. So you're no longer just in the money business, you're also in a way in a technology business. This is why DST is going to help you hopefully with that becoming a technology oriented company. It's very important to think about this as the future. Basically, good enough is dead. Remember years ago when we started having Netflix in the US? People were saying, like, why do I have cable television if I can get internet access and Netflix and Hulu and Amazon? Do I really need regular television? The answer is probably not really. Maybe for news and sports, yeah? Okay, so Good enough is dead. It's not anymore good enough just to do something right. You have to have new models. For example, many banks are now using the robo-advisor. It's an online system that you can call in on a messenger, or I'm sure you've seen it, right, and will give you advice. Right now it's not so hot, right, but it will get so good you wouldn't know the difference to a human. 5, 6 years for that. And of course you may know the difference to a human, of course, in some ways, but not in terms of information. So here's a map of all the changes happening. I will not trouble you by going through all of them because it'll be tomorrow morning when I do that. You can take a look and download this later. But the bottom line is, in the financial business, here's some hotspots that are going to be important. Big data analytics, cognitive systems, the blockchain, artificial intelligence, digital money. You know, it's totally clear that in the next 5 to 7 years, money is going digital. Which means we have a global currency that's digital. It's going to be much easier to transact. Probably easier to be tracked as well. That's maybe not such a good thing. We will keep cash, I think, because we all like our cash, you know, to do things that we don't want other people to know about, like buying a beer or having a drink, smoking a cigar or something, right? It's not a good thing, we should never do that. But this is basically what's happening. When money goes digital, you know what's happening there, right? Transaction costs dive 90%. Things become more transparent, our logic changes. Compare it to Spotify and the music business. So, in this exponential and combinatorial world, Basically, wait and see means waiting to die. That's one side of the coin, is that we cannot afford to say, well, let's just observe and see, like the paperless office. We're beyond the pivot point. There's no such thing as waiting. And the flip side is we shouldn't do everything that technology can do just because it can. Should we go as far as saying that we monitor every single piece of our transactions, how we drive, what we drink, our health data, and monitor all of that to see if we're compliant? That would not be a good idea. That would be George Orwell. So, technology has always this side, you know, basically some people say technology is morally neutral until we apply it. So, we have to use our judgment correctly there. But just as a mission for today, as you go through the day, imagine exponential financial services. What would that look like? You know, when I speak to companies all over the world about how they can improve their business, they say, "We'd like to have 10% more revenue growth," or, you know. In Silicon Valley, if you go to people, you know what they're saying? They're saying, "We're going to make this 10 times better." That's 1,000%. The 10x thinking Google calls it. What would that look like? In 2020, we're going to have 66% of the world online, roughly 3 billion new customers for financial services. Right now there's about 3.5 billion online. The biggest banks will be technology companies in 2025, and there's over 8,000 financial technology startups, including what's called regtech for regulation. 8,000, and they're funded between $1 million and $200 million. They're inventing the future as we sit here. So if you're smart, you know what they're doing. You can collaborate with those kind of companies, because one thing is for sure: exponential tech is changing all the segments of asset and wealth management: client relationships, transactions, and the product itself. But you're in a fabulous position because you're not too late. I mean, if you were Sony Music, you would be just seriously too late. There's nothing you can do about that anymore. It's somebody else's business now. Spotify, YouTube, Baidu, Twitter, whoever they are. So you still have a slope of reinvesting this. So we're going to have huge progress in client profiling analytics. I think our host is working very heavily on this analytics part. Significantly better informed investors. You're losing your, your information advantage. People are not going to just going to come to you for advice because they can look it up, and they can look it up much better than ever before. The shift towards benefiting the asset owners. And quants and AI reduce the need for human routines. Artificial intelligence is what I'll talk about in a second. So in this new world, this is 3 big points that are happening. First, everything is connected. Not just ourselves, but our money, our health records, all of our information. Everything is going to cloud data and intelligent machines. Machines that can actually simulate what we would do. You've seen this already happening now with Amazon Alexa Echo. Some of you may have an Echo at home. It's a box that you can speak to. Or Google Home. Basically, in the very near future, just about 2 years away, we're not going to download apps, we're not going to do a web browser, we'll just speak to a machine. I mean, it's mind-boggling when you look at what's happening there. Try out Amazon Echo if you can buy one. You basically put it in your living room, then you say, "Hey, what's the weather?" It will just speak. You say, "What noise does a whale make?" and it plays the sound. I don't know what else it's going to ask questions, but it seems like it can do pretty much anything. But very soon you're going to sit down at your office and say, "I got $10,000 to invest. I do not want to invest in the oil business. I want to invest somewhere interesting and future-focused. What do you suggest?" It will just speak to you like a person. Person. That's already working. It's a little bit geeky still. I mean, that's the future that we're going to see. Data is the new oil, and intelligence is the new petrol. So in that future, I think we can safely say that machines and technology will rule, but I think humanity will not become less important. It will become more important, and I'll tell you why. And that's my new book, Technology vs. Humanity, is talking about this topic. Marshall McLuhan, years ago, talked about this very important sentence. Marshall McLuhan was a media philosopher. About 50 years ago, he said this. He says, it's the framework that changes with each technology, not the picture. So when you're looking at your business, it's not about having a fancy app. You should have a fancy app, right? It's not about analytics. You should have that too, right? It's about how the entire framework of what we're doing is changing. Think of yourself as BMW and face in the future that people will no longer buy cars but buy mobility. So in the future, people will buy services and experience from you, not just products. That's a gigantic opportunity. I have these 10 shifts, and again, I won't go through it. You can see it online at megashifts.com. But, you know, the most obvious ones we've done already, right? Digitization, mobilization, that's clear. Now there's all these other ones. I'll talk briefly about those that you have to be aware of. All of these 10 megatrends, mega shifts, are impacting what we do with money. Virtualization, automation, anticipation. Now there's computer systems that can predict the change of currency fluctuation in the next 2 weeks very accurately. I mean, as you know, of course, this has been going on for a long time, but There's a bunch of components, you know, cloud computing, the blockchain, digital money, that we need to understand. And here's what CXOs are thinking, C-level executives at companies. Number 1 in the banking industry is thinking about cognitive computing. You know, machines that can think for us. Intelligent machines. And don't think for a minute when I talk about intelligent machines, I'm not talking about Ex Machina. I'm not talking about Blade Runner, right? I'm talking about machines that are not programmed, that observe things and give us advice in a completely different way. You may have heard about, of course, IBM, Kasparov, you know, the chess game 12 years ago. That's an old hat. Computer beat the guy, world champion of chess. Last year, 2016, the world champion in Go, which is the most complicated game in the world, a Korean-Chinese game, 3.5 trillion moves, possible moves. The computer beat the world champion in Go. And 2 weeks ago, this is the worst, or the best, you could say, the computer beat all the world champions in poker, 2 weeks ago. I mean, poker is not a logical game, it's a bluffing game, right? How could a computer be good at bluffing? Mind-boggling, right? So, that's the number one thing to look at, and I'll do that with you. So, when you package all these things together, you get like a formula. And here's a short clip by IBM that shows you how they visualize data and how they can change the way that we look at data. Get some sound? This is the— So what IBM did at the US Tennis US Open for tennis, is that they visualized all of the data at the game. How fast the ball flies, where it goes to, the heart rate of the player, everything. And you could go inside of this data like you would go in Minority Report. Imagine you can do that for financial products, and you can. People can actually do that now on the internet. Predictive analytics, very, very powerful tool. In some ways you could say if this works, you know, if we can predict things and analyze all the data, we can do the work of 100 people with 1 person. Let's see if we can find another place for the 99. You know, hopefully we'll be able to do that as well. The other thing that's happening is that we can see things differently. You may have heard about Google Glass and Oculus Rift and all that stuff. That's all geeky stuff. The future is having a 3D vision, especially in the financial business, where you can actually pull down a visor and dive into this world of data. This is a short clip of Microsoft HoloLens. Microsoft HoloLens brings holograms into your real world. Using transparent lenses, spatial sound, and an understanding of your environment, holograms look and sound Well, you get the point there. It's only $5,000. But I mean, yes, it's expensive now and you have to train on it. But, you know, 2 or 3 years from now, you're an asset fund manager, you use this thing and you can see the world in hyper warp drive. It'll be $100. So just like you use a mobile now when you're on the road, you're going to use this. You know, it's not socially, of course, like, you know, hopefully not while you're having dinner. But now we have intelligent digital assistants. We have computers who are playing the role of people, albeit in a very narrow way, but still quite helpful. This is— any lawyers in the room? There must be some lawyers there. There's lawyers everywhere. But this is actually the world's first intelligent lawyer.

Todd's an exceptional lawyer with tons of clients. Todd doesn't understand artificial intelligence and probably thinks machines could take over the world. But in an ever-changing legal market, he knows that he's got to remain competitive. But Todd's stuck in the mundane and repetitive task of legal research that's weighing him down with unbillable hours and hardly any time to focus his time on what's most important—his clients. So Todd turned a new leaf and put his trust in artificial intelligence with ROSS. His own personal artificially intelligent researcher. Ross has access to a vast legal database that effortlessly reads.

Okay, now don't forget this is marketing, right? So this is kind of working, but it's not really at that point to where you would probably jump up and down with excitement about it. But it kind of shows you where the future is. I mean, if you have kids, don't let them become paralegals, right? There will be no such thing as a paralegal in 5 years. I mean, looking stuff up, verifying facts. You speak to the computer and say, "Check out on this, check this particular contract situation on prior cases," and all these things, and the system takes 12 seconds to come back and say, "92% likely to lose." That's what the paralegals used to do. It took them 3 weeks and 40 people. So, that's our future, that's where we're going, and Amazon has another way of saying that basically everything is becoming smart. This is a new Amazon store. Where you just walk in with your mobile, you just walk out with what you buy, you literally don't pay. Well, you do pay, but it's kind of like Uber, you know, you don't know that you're paying, you just walk out the door. I don't know, they probably need a lot of security guards in certain places for that to work. But this is a store that's basically a self-serve store. It's a store where we don't need people to take your money, it's all automated. Starbucks will have a virtual assistant that can take your order. So you pull up your assistant on your mobile phone and you speak to it and it will make your cappuccino when you're a couple blocks away. So this is part of our future. Now I want to ask you, I think that is something to think about, right? Is this creepy? Is it useful? Is it convenient? Is it distracting? Well, in a way, I like to call this Hell-ven, you know, hell and heaven. It could be both. I mean, it could be so good that nobody would ever want to talk to you. I think that's unlikely. It could be so bad that everybody would get off on the wrong track. It's kind of like TripAdvisor. You guys use TripAdvisor? You certainly don't want to eat everywhere that TripAdvisor tells you. It's a good data point, but it's almost never really correct. It's correct in some ways, but not in other ways. You don't— your life doesn't follow TripAdvisor. The best example for the mega shift is Uber. You can say what you want about Uber, about social injustice and how the drivers are being exploited and so on and so on, and how they're not paying taxes and, you know, whatever. But the bottom line is Uber has achieved something that you must achieve in the near future, and that's called flow, not friction. It's an absolutely frictionless environment. You hit the button, you see who is driving, you see his license plate, you hop in, you have a nice talk, usually a nice car, you hop out, you don't even know you've paid. That's why they're so powerful. So if you're looking at your financial products, make them flow. I do exercise like this all the time with my clients, sitting down saying, let's, let's Write down all the points that have friction in your transactional chain, right? And let's get rid of them one after the other, no matter what it costs. I guarantee you, if you remove friction, your customers will stick with you forever. Frictionless investing. Make it like Uber, make it like Airbnb. You know, there's a joke going on that I hear a lot, is that basically banks, for example, are very good at creating friction. And all of the other startups, you know, who are doing new financials, they're very good at removing the friction. So the future is not going to be about keeping friction. So the CEO of Google, Sundar, said the other day, "We're moving into a future that's not just mobile first, but it's artificially intelligent." And you're going to see Google become a company that will move from a search engine to an artificially intelligent system, a cloud. I call this the global brain, in a way. So Google knows everything about all of you if you use Google. Google has an estimated 25 million data points about all of us. You know how much Facebook has? You don't even want to know about how much Facebook has. Like 100 million for each of us. It takes only 50 likes to figure out your character. Figure out your character on Facebook based on algorithms. Literally figure out your character. So it's scary, it's both good and bad, but Google is building such a system and we have to say that first, you know, years ago, hundreds of years ago, we electrified the world and that changed everything. But now we're cognifying the world. Datafying it. We're actually using the data to make smart decisions. And I would submit to you that we must do that, we must take a look at what it can do, we must not overdo it. This is also the very important thing. Because remember that human interactions are not based on data. Not at all. Your customer relationships are based on trust, on meaning, on purpose, on relevance, on ethics. All that murky stuff that computers will never understand. Hopefully. The blockchain, which is this way of encrypted peer-to-peer network, we're going to see that in the future going in the same direction of cognifying. So machines are finally becoming smart. Remember years ago when you used Google Translate? It was a total disaster. Now when you use Siri and you say, you know, I drank too much, what should I do? It will send you to the liquor store to get more. I mean, it's not very smart, but you can see that this is dramatically improving in the language translation apps, for example. I use an app called SayHi, and the other day I was in Japan at a sushi restaurant, and I spoke to the sushi chef in German, and he spoke back to me in Japanese through the app. It worked perfectly. I mean, simple conversations, right? The machines are finally becoming smart. They can understand our language. They can speak like us. They can understand our faces. There's a first software called Enviso. It's a Swiss company that is used for asset management and financial advice. You face the screen while you talk, and the computer reads your facial reactions to the proposed investments, and then says, "You know, you actually feel pretty good or pretty bad about this based on your facial reactions," like a lie detector. It increases investment return by your actual emotions by 30%. But admittedly, it would be kind of creepy to screen your customers like this. But it's an interesting tool. So, we're moving into the world that will have intelligent assistants. Like, you know, your car can, when you're driving home, you can control your air conditioning through an app. You know, when you use Google Maps, and then we have, of course, artificial intelligence. I would say the low-hanging fruit is intelligent assistance. This is basically using computer technology to help you service your customers better. Customer relationships, process management, ERP, you know, that you should do now. The other part, I think it's going to be a little bit further away to find the value in this. Expedia is a great example. Expedia has a messenger app that you can use to book your flights. You see it running here, it's basically a chat, right? I mean, these kind of tools for asset management, wealth management, I think a lot of people will use those when they get better. So, I think the rise of intelligent machines will be hundreds of times more disruptive than industrialization. Disruptive in a good and in a bad way, but— another example. So this is the world's first self-flying helicopter. Of course, you take a guess where they're doing this, right? In Dubai. This must be the next thing after the oil, I suppose. But would you go in such a device? I probably would never do it. It sounds like a suicide mission, right? But this is essentially a smart machine. And we're going inside of the smart machine. You know, the Hyperloop that Elon Musk is building to go from LA to San Francisco? It's a huge tunnel thing. You sit in this tube. It goes 580 miles an hour. It takes you from LA to San Francisco in 31 minutes. It'll be done in 4 years. I mean, that's a machine. You're going inside of a machine, right? Intelligent machine. So now there's the first machine that decides who should be put out on bail or not. And it's more successful than the judge. And seeing who's going to come back and commit another crime. Whether that's a way for the future, I'm not so sure, right? But I picture this, you know, that a robot would essentially eventually be sentenced for a reboot because it did something wrong. The question really is, can computers be accountable, right? And are they responsible for their decisions? That's one of the key questions. Anyway, so we're looking at the dramatic change that we see here, all of the megaships shifts that will change banking and financial services and asset management. That is absolutely inevitable. We have to understand this. And I would say right now it's 90% opportunities for us. Yes, there will be lots of things like downward price pressure and new competitors from the tech companies and so on, but understanding this will help us because this kind of global brain that we're going to see will simply be the future. In many ways, you know, there was a great feature on Time magazine the other day that says artificially intelligent software and bots will power 85% of customer service interactions by 2020. And I would say to you, that's a good thing if it's just trivial stuff. You know, if it's really personal stuff, not a good thing. That's really quite clear. That future. But we're going to see a new relationship of man and machine. A new intertwining of this, and I think that requires us to think about what is a good thing, what do we want, what maybe not want, or not quite yet. Because this is the thing the next 5 to 10 years will bring, this convergence of technology and humanity. That's what my new book is about, this whole topic. And I maintain for you that it would not be a good thing for us to say that we become technology. Because this is the thing, ultimately, technology is about convenience. You know, it's a tool. But human relationships are about trust. And we should never forget that we should not automate trust or relationships because there's no such thing. You cannot automate happiness. To make your customer happy is not a software problem. You can make them very unhappy with the wrong software. That's very important to keep in mind on this future. Because here's the bottom line: technology has no ethics. Technology knows nothing about your relationships. It doesn't care what your values are. It will do whatever. If you tell technology to make as many paperclips as possible, it will make paperclips of all of us if it can. Because that's just what technology does. It's a tool, right? The CEO of Walmart, and Walmart is one of our clients on this future transformation, he says, "As the world becomes more digital, it will be our humanity that differentiates us and wins with customers." Now, this is pretty surprising to hear from Walmart, right? Talking about how humanity is important, because, you know, they're a giant company, 2.2 million employees. They're a giant machine, you could say, in many ways. It's very important. As we use technology, humanity will make all the difference. As I like to say, culture, relationships, trust, and humanness eats technology for breakfast. But still, you got to have breakfast. I guarantee you, if you don't have technology to get you to that point to where you can be human, it will be very hard to prove that there's value there. So, it's basically a synergy of the two, ultimately, that you need. Now, in terms of our own jobs and our work, and we can discuss it later when we take some questions, but basically you could say that anything that can be digitized or automated will be. Any job that you do that is routine will be automated and digitized. That is digital Darwinism. And the flip side is this: anything that cannot be digitized or automated will become much more valuable. Don't waste your time competing with machines. You can still do that today because they're still pretty bad, right? I mean, to a large degree that we have to keep an eye on those things, right? 5 years, game over. Let's move up the food chain to do the things that we want to do, right? Which is to create happiness for our customers. That's the purpose of life, as the old Greeks have said, right? Is to create happiness, human flourishing. That's our job. It's not our job to give people technology to pretend that we're using happiness. So here's a question I have for you when you think about the future and this exponential future: which side are you on? Will you be on team robot or will you be on team human? This is a key question. And the answer is You've got to use robots, right? I mean, robots are inevitably the place where we can create value and a higher efficiency. But efficiency isn't the purpose of life. Efficiency is just one thing that we do to monetize, to create better things around us, and to create better margins, and to be more fruitful. It's very important to think about that. There's a big skill disruption coming. I'm sure you're aware of this, and the skill disruption is really number one in the financial industry. It's on top of this agenda, right? 43% of people in the financial industry says we need different skills to deal with this future. You know what those skills are? They're not programming. They're not using apps. They're human understanding. I'll show you in a second what they are. I mean, basically, Alvin Toffler was a great futurist. He said the illiterate of the 21st century are not those that cannot read or write, but those that cannot unlearn and relearn. In a way, we have to forget about what made us successful. Because in the future, that will still be useful history, but in a world of exponential change, you know, we have to relearn and our kids have to relearn. You know that people are saying roughly 50% of all jobs around the world will be automated. By machines. Checkout clerks, fast food, truck drivers. And so the flip side of that is about 70% of all jobs in 10 years haven't even been invented yet. We have to invent them. This is not a bad thing. It just creates a bit more pressure, I would say. But clearly, you know, this graph from The Economist shows where things are going. The blue line is non-routine cognitive work. That's you guys, I would hope. The other blue line underneath is non-routine manual work. That's increasing because it's very hard to get a robot to fix your toilet. It's very simple for a person most of the time, but complex for a robot. Or to cook, or to be a dental hygienist or something would be very difficult for a robot. That is increasing. So, anything that's routine, put it on the list to be automated. Fact-checking, right? Customer service interactions that are trivial, right? Financial calculations. All of these things that can be automated. That's how we reach a place to where we can be more efficient. And the skills on the flip side are this, as the World Economic Forum has said, we're moving into the world where two things are most important: creativity and emotional intelligence. This is exactly what we didn't want to have in corporate life for a long time. We wanted nobody with emotions. We didn't want creativity. Oh my God, they would mess things up, right? We didn't want naysayers. We didn't want people asking too many questions. And now it turns out that's our future. Because asking questions is a human thing. Picasso once said, "Computers are stupid. They can only provide answers." It's about asking questions. I mean, try this, of course, you know when you talk to your clients that the most important moment is when you ask the right question. You hit the mark with the right question. This is very important. Those are the skills. So, are you ready for the end of routine? That's what's coming. I would maintain, again, that's a good thing. It may be disruptive, but it makes human factors exponentially more important. Don't be afraid of a future where technology is huge, because that future is certain and it's coming. Let's create a balance of humanity and technology that does this. These 5 points are taken from the positive psychology, the studies of Martin Seligman, who talked about basically what does make us human is positivity, engagement, relationships, meaning— things that computers don't know. So I think that's where we're headed in this future, because the bottom line is your customer is not a machine, and life is not an algorithm. It's not that simple, thankfully. So it's very important to keep that in mind when we think about software. The most important thing today was mentioned in the speech earlier by Steve. We're moving into a world that goes away from products and commodities to services, and most importantly, to experiences. If investing with you is an experience, I'm going to stick with you because an experience is what makes us human. People love experiences and all these things that make us human. I come back to the beginning, you know, to our volatile world that has only become more volatile recently. That's something we have to deal with. So how do we respond in a world of exponential change to this? I think we have to flip the VUCA, what I call flip the VUCA, and respond with velocity, with unorthodoxy, with co-creation, by using abundance. And this is why it's such great to have an event here, because we can increase our speed, we can collaborate, come up with new ideas. I think the most important one of this is unorthodoxy. Come up with something that your clients will say, "That is fantastic. I wish somebody would have thought of that earlier." Just a travel example, because I travel a lot. The other day, you know, when I fly with Lufthansa, there's 24 hours check-in, you know, when you can check in on your seat and do all these things. And so Emirates, which is the biggest airline in Saudi Arabia, flying east from Europe, right? You know what they did the other day? They said, hey, there's no reason why it has to be 24 hours. It's 72 hours for the check-in. That's— how much does that entail in terms of change? I don't know. Unlikely to be a big deal. But it made me think, yeah, that's unorthodox. Actually pretty cool. And then when you get to the 380, there's a bar in the business class, right? A real bar. You know what that is? What that's called? I don't drink when I fly, but it's nice to look at it, right? You know what that is? Experience. Because guess what? You meet at the bar. It's not for drinking. You actually go there and you meet other travelers. You have an experience. I may not care for that when I'm flying. Now, that all depends on how you like to fly. Certainly not for the drinking, but that is something that we have to think about. So flip the VUCA, respond to this uncertainty. I want to leave you with a quote from David Bowie, who was a bit of my mentor when I grew up in the music business, who said that the future belongs to those that can hear it coming. I think this is the most important thing when you're in your business. You have to hear the future coming. That gives you time to react and respond to it. Thanks very much for listening, and take a look at my book if you can. It's on Amazon. I do have a couple copies with me if you want one. Thanks very much for listening.