Growing income disparities

No matter how efficient a society strives to allocate scarce resources, there is always that segment that doesn’t get enough share of the pie. In most parts of Asia, for instance, you feel the rising consumer affluence as you stroll through the busy shopping malls and dining hubs, but then reality bites when you see mendicants or a colony of shanties.

In East Asia and the Pacific region, 14.3% of the populace live on U$1.25 a day, the threshold for extreme poverty. The poverty headcount in my country, the Philippines, is higher than the average at 18.4%, while that in China, which has seen a prolonged high-growth period (albeit on a slow landing now), is 13.1%. We are even luckier than South Asian neighbours India and Bangladesh, whose ratios are 32.7% or 43.3%, respectively, or even compared with Nigeria (68%), Madagascar (81.3%) or Liberia (83.8%), where living on U$1.25 a day or below is the rule rather than the exception. 

It is not just the scourge of the developing world, however. A report from the Organization for Economic Cooperation and Development (OECD) says that the average income of the richest 10% of the OECD population is about nine times that of the poorest 10% and the disparity has widened in the past two decades. Thus, mendicants exist even in Western cities such as New York or Paris.

As reflected by the World Economic Forum Global Agenda Councils survey, the issue of global income disparities is the most underestimated trend, and this year’s lower poll weight of 14% from 22.8% probably only highlights how underestimated it is. It’s a ticking time bomb just like the one that sent Marie Antoinette and Louis XVI to the guillotine during the French Revolution. Widening disparities can fuel socio-political unrest, territorial disputes, extremism and stunt growth prospects.

But as developing countries increasingly realize that they must seek an inclusive growth model, this issue spawns more questions than answers. Is plutocracy the natural order of mankind? Is globalization to blame? Should we otherwise be living in that classless society envisioned by socialists? How effectively can benefits/tax systems, social safety nets, changing technologies, corporate social responsibility, civil society, social entrepreneurship fill the gap?

What’s certain is that multilateralism and regionalism can play a key role. Beyond expanding healthcare, education, infrastructure, financing and job opportunities within one’s territory, experts say rethinking cross-border trade and investment systems, human capital flow and official development assistance may spell the difference. And given what we’ve seen from the recent global crises, we can’t leave everything to market forces.

Ageing

For the past 66 years, corporations around the world have profited from the baby boomer market. As baby boomers now swell the ranks of the 810 million people aged 60 and over, their economic impact continues to be felt. “Thirty years ago there were no ‘aged economies’ in which consumption by older people surpassed that of youth. In 2010, there were 23 aged economies, and by 2040 there will be 89.” (UNFPA and HelpAge International)

An example of this can be found in the US where the older market represents more than US$ 2.3 trillion in spending power (Age Wave), it is 47 times richer than its younger counterpart (Pew Research Center), controls roughly 50% of all discretionary income (Deloitte), and dominates 1,023 out of 1,083 categories in the consumer packaged goods industry alone (Nielsenwire).

On paper there is no reason to neglect this sector. Yet that is exactly what occurred in a recent World Economic Forum survey. Respondents ranked population ageing highly as an issue thought to be underestimated in current times. Of particular interest is the fact that survey respondents from business backgrounds – the single largest group of respondents – completely neglected the topic. In other words, other sectors of respondents disproportionately raised this trend enough for it to come fourth on the survey’s list. 

Think about this for a moment. Many corporations have profited from these consumers for more than 50 years, yet today they are ignore this group. Why?

Is it that these businesses cannot see the economic power of the older consumer? To answer this question we need look no further than the following findings:

1. “Many companies are either not aware of the potential or have failed to respond and adapt to the changing market and demand for products.” (Ageing Well Network)
2. A widespread lack of thought exists in this area, resulting in “limited availability of goods, products and services appropriate for people in older age groups”. (Futureage)
3. 88% of survey respondents in the hospitality and leisure industries claimed to be highly engaged with the over-65s. However, almost 62% did not offer any specific product or service for these consumers. The research indicated that 82% of survey respondents with no offering for the older consumer had no plans to introduce any. The main reason was because they simply had not considered it. (Barclays Corporate)

What does this mean to you? Immense opportunity! By creating or adapting your products and services to meet the needs, wants, dreams, desires and expectations of an ageing world, your organization will profit from the “aged economy” now and well into the future. 

Is social gaming a waste of time?

We are living in a world where so many people thrive on the instant satisfaction of being rewarded for their efforts and expect the same thing every time they return. Nowhere is this more apparent than in gaming.

Think about it, there are literally thousands of social games being played every day. They’ve evolved from primitive styles to the sophisticated and complex. Social gaming is still young, but growing rapidly. This rapid growth can be quite useful for developing awareness, crowdsource funding or even solving problems. However, the essential entity that draws people back is still the same – they are fun!

Just about everyone knows or heard of social gaming, many of you probably have played such games. There are, however, those who view social gaming as highly overrated and not worth the time or effort. I would have to disagree and would suspect that such people must not be playing games.

I’d like to talk about why these games are so effective at motivating people. In a TED talk, Dan Pink makes a case of favouring intrinsic motivation over extrinsic motivation at work. Interestingly, major social games such as Angry Birds contain elements of autonomy, mastery and purpose – key elements for triggering motivation. 

In many studies from top economists, groups with extrinsic motivations performed poorly when compared to intrinsic motivators. Unfortunately, it appeared that some social games were creating addiction because they were so good at rewarding people for completing challenges while playing at them. This has created some negative attitudes towards the social gaming sector.

But some people see beyond those effects. In another TED talk, Young Global Leader Jane McGonigal talks about her view of changing the world through gaming. Gamers spend about 3 billion hours a week playing games. That’s enough time to finish public education in America from 5th grade to high school graduation. The idea is to find a way to tap into this powerful human resource to solve world problems.

I shared the same vision during a video interview made by Cisco about ikifu.org, a donation platform using social networks and game thinking, where you can help people from around the world while having fun at the same time. Contributions reward you with points, which are used to compete with other users on a ranking.

So, what does this have to do with overrated social games? People enjoy them, not only because of those rewards, but because they get the feeling of being a part of something bigger than themselves. We transform into the best version of ourselves that wants to be this super-hero, a person with no faults that can solve all problems and impact the world.

This idea is relatively untapped and is highly underrated, so start investing in it and start playing now. 

Related Material & Supporting Data

•  Gamers spend about 3 billion hours a week playing games. This is equal to the time spent in public education from 5th grade to high school graduation in America
• The social gaming industry represented a US$ 8 billion-market in 2011; analysts predict it will rise to US$ 11.4 billion in 2014.
• They are 600 million social players around the world. How could they contribute to improve the state of the world?
• Could we change the world and make it fun? Find out how some people at ikifu.org are trying to combine both.

Cyber risk, ranked high both in the over and under estimated trends list

On 12 October 2012, US Defence Secretary Leon Panetta said that cyberattacks could inflict more damage on the US than 9/11. Shortly afterwards, British Foreign Secretary William Hague said the United Kingdom suffers from thousands of cyberattacks – mostly criminal – each day.

Our vulnerability to cyberattacks is increasing as we become dependent on ICT-networked systems for almost all aspects of daily life, and in particular for the smooth operation of global trading and financial systems.

At a conference on cybernorms, which I attended last month at the Massachusetts Institute of Technology, a key takeaway was that governments were starting to repatriate the Internet within the confines of national sovereignty. And, at the Budapest Cyber Conference, I found myself chairing a session of non-governmental speakers addressing the reality that cyberspace was becoming militarized. 

Over 30 states have the capacity and the doctrine to conduct offensive operations in cyberspace. Any state with a national telecommunications agency also has a signals intelligence capacity, giving it an intelligence collection and covert action reach previously available to only a handful of big powers. These developments are taking place in a context lacking any rules of the road or clear definitions of what constitutes a cyberattack and what might be a proportionate response, much less any commonly agreed conceptual models for de-escalating a cybercrisis.  

Before getting too panicked, we should recall that no one has yet died as a result of such activity in the cyber domain. And physical damage from cyberattacks is still rare. Stuxnet was an exception, but deployed on the back of a meticulous intelligence analysis and not easily replicated.

But, a much more immediate threat is the massive amount of cyberespionage and malicious criminal activity taking place on a daily basis. The networks of all Fortune 500 companies have been penetrated and many private sector companies may not even have realized that this is happening. Left unattended such activities could lead to a catastrophic collapse of confidence in online services and erode the economic well-being of nations.

The private sector has been slow to recognize and adapt to the threat and governments have been equally slow to educate them. Risk can be substantially reduced – though never eliminated – through good cyberhygiene. The private sector needs not just strong security, but also a counter-intelligence culture to mitigate the risk from cyberattack.

Related Material & Supporting Data

• On 25 October, after indications of a wide-scale cyberattack, Israeli police ordered every district and officer under its jurisdiction to disconnect their computers from the Internet and advised officers to be careful when using police computers or software
• In its annual Security Threat Report for 2011, anti-virus firm Symantec revealed an 81% increase in the number of malicious attacks.
• The Nuclear Security Enterprise experiences up to 10 million “security significant cybersecurity events” each day.