A while ago, The Franklin Templeton Institute published their Deep Water Waves paper, in which they identified several powerful, connected, and long-duration factors that will have a significant impact on investment returns over the next decades. One of these is the Technology Wave, a significant component of which is the digital ecosystem.
The digital ecosystem is a dynamic collection of inter-related and mostly synergistic assets that are in perpetual motion. They rise and fall, grow and evolve, spawning new varieties and creating new pathways, via digital innovation. Think of a coral reef, the rainforest of the sea. The digital ‘reef’ is composed of various layers, each contributing to the whole, but also fostering the innovation of specialist areas. These areas benefit as the digital innovation triggered by the ecosystem is leveraged to solve existing business problems.
The development of the digital ecosystem inevitably triggers digital innovation which has the potential to revolutionize areas like fintech and supply chain design. This paper is the first in a series of four papers designed to offer a long term, 360-degree overview of the digital ecosystem, with views on the impacts and risks for investors.
The interdependent drivers of the digital ecosystem
A technology “wave” manifests as a widespread boom in investment in innovation across all economic sectors. It will be driven by demographic changes and geopolitical imperatives, not just economic logic. For the digital ecosystem, the demographic “wave” is a powerful catalyst. In certain areas, digitalization can help boost productivity and may be enough to convince governments to develop accommodating policies. Areas that can demonstrate increased efficiencies can expect a favorable reception. On the other hand you have geopolitics which is set to increase its influence on investment outcomes over the next decades, as the confrontation between the United States and China plays out. Unless an accommodation is reached, tensions between the giants of global growth now appear irreversible and will set parameters for investment in most sectors. Technology is clearly the immediate and most intense battleground.
The digital ecosystem is a powerful catalyst for wide ranging innovation
The digital ecosystem is a wide-ranging, dynamic, constantly evolving universe of inter-related and mostly synergistic assets that are in perpetual motion, rising and falling, growing, and shrinking with the tides of evolution. The development of the digital ecosystem will inevitably trigger digital innovation in areas as diverse as security trading, legal agreements, fintech, and the valuation of intangible assets. Investors face two main challenges when researching the ecosystem: To understand the full extent of reach of the practical applications of this technology and to imagine how disruptive and transformational it will be.
Read part 1 of this series to learn, amongst others, why blockchain is the key to technological development; why central banks will continue to develop digital currencies; why these digital currencies can be helpful in time of conflict and how NFTs can improve investor accessibility and help value intangible assets.