If the first industrial revolution was about mechanisation, the current one is about digitalisation. The internet has unlocked the ability to move products and ideas instantly and has become the primary vehicle for sharing knowledge and doing business globally. For the first time in late ‘90s intangible assets (IP, brand, data etc) overtook tangible ones (property, plant etc) in their worth on collective business balance sheets, and this is set to continue.

Built on the back of digitalisation is virtualisation: the ability to carry out activities, formerly reserved from the real world, in new virtual settings. At its simplest, this is eCommerce, the ability to browse and buy something from a without going into a shop. In 1995, the closest that one could get to this was a mail-order catalogue. Now it accounts for >30% of all sales. Then came working from home. In 2000 this meant taking your paper files home and buying a fax machine; now it means interactive video calls and cloud file storage. As technology improves bit-by-bit, carrying out tasks through virtual means approaches fidelity to the real world. Importantly, virtual mechanisms are being used not just for functional tasks, but also for fun. Starting in the world of video games, the number of people using virtual worlds as a venue for interacting with each other is rising sharply.

Kondratiev Waves: Relationship Between Economic Growth Cycles and Technological Innovations

Source: Allianz Global Investors ‘The Sixth Kondratiev Wave’


1 Cushman & Wakefield | Future of Cities |

What might change? We stand at the precipice of what might be the biggest shift in the history of human evolution. By 2040, virtual reality technology is likely to have evolved to a point where virtual environments are practically indistinguishable from the physical world. Screens will be first replaced by headsets, and then contact lenses and other wearables to stimulate touch, smell and taste. Ultimately, implanted chips will send signals direct from the internet to the brain. This is no longer science fiction, but rather just a matter of time. The big question is whether, presented with this technology, humans will choose to adopt it or reject it. Safety and privacy considerations will need to be set off against access to what could be a better version of existence than the real world for many. If society does move in this direction, all bets are off. Cities and real estate are predicated on there being no alternative to the physical world. A viable digital substitute would radically transform the nature of cities and the nature of reality. Noting that virtual environment ‘Fortnite’, has 350m regular users, and an alternative ‘Roblox’ has 150m regular uses (both many factors larger than the population of the world’s top cities), we cannot escape the possibility that the biggest UK city by 2040 could be a virtual one, where people spend the majority of their time, spending virtual money on virtual rewards and enhancements.

More likely, the real cities of 2040 will be heavily augmented with digital realities. In the same way that your phone currently allows you to supplement geo-spatial information with information from the internet, the level of augmentation will soon include wide-scale real-time visual data. Taking the form of glasses, contact lenses, follow-me signage, or just your phone screen, the fabric of our environments will become interlaced with data about where you are, advertising as you pass shops, and public art. Dystopia or panacea? We may well be about to find out.. Takeaways » Digitisation has not run its course, and will continue to influence how we work, shop and live » Virtual environments will be improved by processor power, wearables, and ultimately implanted chips » People are increasingly seeking out virtual worlds for leisure and the experience is improving » Increased virtualisation puts pressure on the demand for the physical alternative of cities » The city of 2040 will be

augmented with visual data; our experience will be forever altered

Black Swan Risks » Virtual takeover and the collapse of cities

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