Readers of this column will know that I write regularly about legacy challenges, changing core systems, digital transformation, innovation and the growing northern and southern hemisphere divide. But this was brought home to me in a major way as I pondered the fact that those who move first leave last.
This is not a new thought or phrase, but it is one I’ve been using a lot lately to illustrate the issues of North America and Europe compared with those of China and India. Fifty years ago, America and Europe began automating and implementing infrastructure. We invested heavily in IBM mainframes and, through the years, layered on minicomputers, Microsoft client-server architectures and more.
Today, we have 50 years of infrastructure, some of which is fit for purpose and some not. To change the older systems, however, is hard, as they are at the centre of the business running our back offices. That is why we have crashes, outages and a high risk of systems change. In fact, the high risk of systems change is why we don’t change them. So, in 1970, we moved first; now, as we approach 2020, we will leave last. By this, I mean that we innovated with technology first, but will leave behind those innovative technologies of 50 years ago last.
Leap-frogging old systems
Meanwhile, the parts of the world with the least automation last century are now becoming the most innovative in this century. Hence I point to China and India, but also Indonesia, the Philippines, Thailand, Pakistan and more countries every day, which are leap-frogging the aching old systems of Europe and America.
It is best illustrated by the $15000bn of mobile payments in China in 2017, compared with US's paltry $150bn. The US is struggling to get merchants and customers off magnetic stripes and onto chip and PIN; to get them to even consider using a mobile phone for buying fruit at their local street market would be mind-blowing. Yet that’s exactly what the underdeveloped countries of the past century have done.
I wonder what we will be saying in another 50 years? As American and European infrastructures struggle to leave their handcuffs of heritage, will they be the regions that are innovating the most in 50 years? If that is the case, will Chinese, Indian and other markets be struggling to leave their handcuffs of heritage 50 years from now? Will the roles reverse?
It’s a good question, as we are continually developing our world with technology. I’ve written here before about cloud computing getting rid of the high costs of hardware and software; blockchain getting rid of the high costs of databases and enterprise computing; and artificial intelligence getting rid of the high costs of humans and buildings. Will we be wondering how to get rid of cloud and blockchain, as quantum computing takes over? Will we be reversing the trend towards automation to bring back those buildings and humans?
I have no idea. All I do know is that for the past centuries, the markets that move first are often the ones that leave last. The British Empire was a thing, but its legacy leaves much to rue; the American century as a superpower created globalisation and overt capitalism, but also left a legacy of ruthlessness and arrogance.
In case you have not realised, this is the Chinese century; so as the Chinese move first in creating a cashless country with fast-cycle innovation, what will they leave?
Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.
