1. Introduction
2022 was a year of continued volatility. Coming after the distinctly difficult prior two years, last year did not turn out to be the period of rest and recovery that many people toasted to on new years eve. Most unsettling was Russia’s full-scale invasion of Ukraine after years of predominantly low-intensity hybrid war following its initial 2014 invasion of “little green men.” The conflict breathed new life into NATO’s raison d’être and gave rise to calls to increase EU military integration, while the distinct energy needs of EU member states contributed to underlying tensions. Russia’s Ukrainian adventure raised the stakes of long-standing geopolitical tension across the Taiwan Strait. Rising (and easing) inflation, increasing interest rates, the risk of recession, slow growth in China, and the crypto “winter” were economic warning signs, while flooding in Pakistan kept the impact of climate top of mind.
There were signs of normalcy and progress. Most of the world spent the year successfully managing covid. The James Webb Space Telescope gave astronomers a view deep into the origins of our universe and the rest of us breathtaking images. Stéphanie Frappart became the first woman to officiate a men’s World Cup match and Lionel Messi secured his place in football history with Argentina’s victory at the World Cup in Qatar.
Simple’s 2023 signals analysis, digs behind the headlines and market assessments to take stock of the future. We use the analytic frame of “megatrends” to identify and evaluate the forces shaping the foundations of our society and economy. Most businesses and organisations examine trends and megatrends to guide their strategic thinking. They align opportunities and threats through the lens of their own strengths and weaknesses. Family offices, however, have an additional layer to consider beyond the function of their own organisations. They also look to megatrends and market shifts to guide their thinking of the investment theses at the core of their mission as family offices.
About the Authors
David Struthers
Research leadDavid Struthers is the research and technical report writer at Simple.
Connect with David Struthers
Nicolas Arroyo
Strategic foresight & experience designNicolas is Co-Founder & Foresight Director at a Futures Studies and Experience Design firm. Nicolas uses the power of foresight and design to help family businesses gain insight into future scenarios and their strategic landscape.
Connect with Nicolas Arroyo2. How we did last year
We led last year’s trends review by asking if we are seeing “The end of globalisation as we know it?” With the pandemic lingering, yet mostly managed, and supply chains recovering some may be forgiven for wanting a return to what came before. Russia’s invasion of Ukraine raised the spectre of a real conflict coming out of the tension between China, Taiwan, and its allies. Many firms are taking a long and steady approach to secure their future by making their supply chains less reliant on the region. Globalised production will continue and these shifts will take time, but they are underway and globalisation will not look the same afterwards, especially in economic sectors deemed strategic.
We also wrote about the “rise of Web3” and its interrelated technologies of blockchain, cryptocurrencies, and NFTs. The jury is still very much out on how broadly and what the ultimate use cases will be for these technologies. What is clear is that the rampant speculation and the outright fraud in this space that wiped billions off the books and from investors’ savings has forced a reckoning in this startup industry.
The remainder of the trends analysed last year continue to see strong signals going forward. The energy impact of the internet (and everywhere else) remains of the utmost importance. While the moment of the “YOLO economy” may have passed, its impulses remain as do the changes brought by younger generations entering the economy. Likewise, the continued relevance of the “environment: regenerative everything,” “a new health focus,” and “politics: the rise of all voices” are reflected in our analysis this year.
3. The Year That Will Be
Volatile political landscape
The global political arena faces pressures in the new year from continued shifts in the balance of power between states. A ceasefire or formal peace agreement seems a long way off in Ukraine and continuing to climb the escalation ladder through a game of tit-for-tat is a possibility. In the case of the United States and China, while tensions may increase, they remain conscribed to the economic realm with equal parts interdependence and contest. A potential military conflict is the focus of long-term strategic military preparation and spending for both countries. Domestic political volatility is also a defining issue looking forward. Russian President Vladimir Putin has thus far maintained control despite military setbacks. China’s Xi Jinping presented a dramatic show of his power at the 20th National Congress of the Communist Party of China in October. China’s quick retreat from its zero-covid policy in response to the largest protests in China in years was met with enthusiasm from investors, while its full human cost and political fallout are unclear. Democracies–the United States and Brazil come to mind–have faced pressures that appear set to continue going forward that we might trace to economic restructuring and the shifts in values discussed in more detail below. Furthermore, small wealthy countries will continue to claim more space on the global scene.
A common refrain on the part of Russian, Ukrainian, and NATO/EU leaders is that all wars ultimately end in negotiation. The global balance of power will be shaped for years to come through the ultimate outcome of the eventual negotiations to end Russia’s war in Ukraine and will shape other emerging conflicts around the world.
The Simple take:
In a world marked by stark inequalities between and within countries, the impact of global economic volatility is uneven and is being experienced differently according to local contexts. For example, the strength of the Indonesian economy is a positive sign and unemployment numbers in the United States are remaining relatively low despite inflationary pressures. Inflation, especially in energy prices, is creating a cost of living crisis in Europe and the UK that will have political ramifications going forward. Perhaps most importantly, domestic and international political stability will greatly influence the ability of countries to take decisive actions to advance the green transition.
Think About
How can your actions, network, influence, or capital be invested to promote equality on a local or international level?
Economic uncertainty
If “war is a continuation of politics by other means,” then, perhaps, the present economic uncertainty is an extension of politics by other means. Globalised supply chains and the pressures they face, reliance on fossil fuels, particularly the EU’s dependence on Russian natural gas, reflect past political calculations and put politics strongly back into “political economy.” There are signs in Europe that the energy crisis is pushing policy shifts and investments that fuel the green transition and secure immediate energy needs. Similarly, the supply chain fragility revealed by the pandemic that continues to ripple through the global economy is leading to investing in local manufacturing capabilities. This is in contrast to the continued global focus of most firms and new “born global” companies that leverage technology to achieve dramatic growth. This points to the different logic and pressures faced by the goods economy and the services economy. Further, ageing demographics in developed countries coupled with an aversion to immigration will continue to be an economic drag for years to come.
The Simple take:
Current economic forecasts range, but there is some degree of consensus around the risk of recession (most see a soft landing), inflation (most believe it has peaked), and monetary policy (central banks shouldn’t be expected to come to the rescue). Economic volatility will continue for the immediate future, but, thus far, this period looks different than recessions or full-blown economic crises in the past. What seems clear is that we are entering into a period where limits might be reached. Firms and consumers will experience a “shortage economy,” where limits on resources, energy, and water will pressure the bottom lines of firms and our needs. The cost of goods and services will increase and the shortage economy will extend to the more intangible facets of life like trust, time, and attention with spin-off effects on politics and societies. These pressures present opportunities to create new efficiencies that recognise the limits of natural resources and of our societies.
Think About
What makes the present period of economic uncertainty different from the 1970s stagflation?
Climate crisis grows in urgency
The long drumbeat of increasing urgency of the climate crisis continues. However, the climate crisis has yet to unite global powers under the same objective, if only to present a veneer of global solidarity. This too is an arena for economic and political contest. While the transition to a carbon-neutral economy may not create net economic losses as long thought, it still requires wholesale and interdependent changes around the world; it requires multinational governance and business collaboration. Progress is being made. In Europe, the energy crisis is accelerating investments in renewable energy and Germany has signed a raft of measures to increase its use of renewables. Protecting biodiversity is a more immediately achievable goal that is seeing much progress. Countries recently signed an agreement at the COP15 UN biodiversity summit to protect 30% of the planet for nature by 2030.
The Simple take:
The countries leading the way in climate responsibility by shifting their economies and protecting biodiversity are positioned to mitigate risks and realise economic gains through the green transition. Further, there is reason to remain sceptical of an electric-only future. While leaving gas for electric vehicles has immediate benefits, it also incurs costs associated with the mining of battery components, notably lithium, and increases the importance of clean electrical generation. Calls for climate reparation agreements will increase as a way of financing climate adaptation and mitigation measures in developing countries. Expect climate activism to become more radical as the impact of climate change increases the urgency for change.
Think About
What are the investment opportunities for family offices to finance the green transition?
Towards a more decentralised tech landscape
The distrust of the tech giants – ”Big Tech” – that increased as the scale and perceived power of these firms grew is beginning to manifest in technology solutions that aim to decentralise the services and experiences that tech giants monopolised (DAO’s, for example). The biggest limitations of these new approaches are adoption and scaling. One case in point is Elon Musk’s antics at Twitter leading some users to leave for Mastodon, a different microblogging platform. Thus far, the adoption of new social media platforms is decentralising the space, viewers, and advertising revenue, while lowering stock values, but not eliminating existing players. The potential for regulation and its realisation is reinforcing centrifugal user trends. Europe’s regulation of privacy, content and the port type of devices and Brazil insisting that Apple supply chargers with phone purchases should all be viewed as symptoms of the pressures working against the concentration of the tech landscape. Additionally, the mainstream adoption of AI-powered tools (text, image, audio, code) will continue. DALL-e, Davinci, Open AI, Midjourney, etc. have been unleashed on the world and have the potential to dramatically change industries in the next 5-10 years.
The Simple take:
The sprint to disrupt and the fantastic growth of new businesses often pushed discussion about the impact of new technologies aside. Issues such as job displacement and the ethics of how data is stored and used by technology companies will increase in visibility and importance in public discussion and in the halls of legislative chambers. Expect pushback to extend to cryptocurrency. The “crypto winter” that has settled in, and the apparent outright fraud at FTX, did not infect the mainstream financial sector, but we may see stronger regulation and capital controls as result. Venture capital and retail investors alike will look to this space with increased caution. Rather than prohibition, institutions, countries, and banks may move into crypto during this stabilisation period to offer increased trust and transparency to this highly volatile landscape.
Think About
How can you cut through the “AI Noise” to follow real signals?
Hybrid reality becomes the norm
We are moving towards a hybrid world where digital spaces blend with the physical world. The shift to online meetings, hybrid schedules, and working from home caused glitches and headaches but some employees also felt new forms of freedom. The technologies facilitating these connections and continued productivity blur the lines between work and personal life. Calls by firms for employees to return to the office have been met with mixed success, leading to experimentation and flexibility to maintain productivity and extended negotiations with employees. Younger generations are even more comfortable in this new technological reality and do not distinguish between the digital and physical worlds. This brings new values to workplaces, media, consumer practices, and even health care and governance.
The Simple take:
The future of work is already hybrid and asynchronous. The outward flow of these practices into all areas of life will define the coming decades. While the metaverse, or more accurately, the multiple competing metaverses competing for users grabbed headlines and were subjected to some ridicule for the poor quality of their avatars, the broader diffusion of a suite of existing technologies across work and life over the last few years will continue, creating a new normal of hybrid reality in our work, lives, and relationships.
Think About
What are emerging investment opportunities that align with your hybrid reality?
A new set of values
We are seeing the consolidation of a new set of values that recognise the importance of health and mental well-being. There is also a broader acceptance of neurodiversity, new family structures and ways of parenting. Diversity and inclusion will remain at the centre of public conversation, advertising, and politics. However, these changes will continue to bring value clashes between countries–for example, the recent claims about the “sports washing” in Qatar–and within national political arenas where opposing views remain retrenched in opposition. Even individual choices to limit environmental impact can rise to the level of a value clash, rather than a simple consumer decision. These shifts and contests are reflected in political volatility and economic uncertainty.
The Simple take:
The current pressure on the political, economic, and social domains should not be viewed as having an ultimate outcome in the future. Rather, in our present moment and as we lumber into future moments, we should recognise that the frictions caused by uneven shifts in social values, economic organisation, and political ideals rarely allow the opportunity for complacency. The speed of change may vary, but change is constant.
Think About
Do your investments still align with your values?
4. Methodological Note
We use a heuristic process throughout the year to organise distinct data points that will help us make sense of the currents with the most staying power and potential to create lasting change. Some information appears as front page headlines, while other data materialise as inconsistent blips of a faint pulse. The STEEPV – social, technological, economic, environmental, political, and values – gives us intellectual bins to store signal events and transformative ideas that we identify for further analysis. The results of this process are the points discussed in this article.
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