In his new book, Everybody Wants to Rule the World (HarperCollins, July 2021), business analyst Ray Wang describes the future of business. His book predicts that by 2050, the global marketplace will comprise around 50 giant duopolies. In each market, there will be only two dominant giants.
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Sector after sector, writes Wang, has already become “a bloodbath” with one-or-two winner-takes-all. “Facebook dominated social media. Amazon took over commerce. Google ruled search. Netflix won the streaming wars. Add the global COVID-19 pandemic in March 2020, and the gaps between winners and losers not only widened, but the pace of change also accelerated.” And this, says Wang, is just the beginning.
In effect, Wang foresees that the same economic and technological forces that created today’s handful of digital giants will work its way throughout the whole global economy. This should be not a surprise to any who understand why digital assets tend inexorably towards winner-take-all outcomes. (If Google offers the best search, why should I use anything else?)
Wang argues that we all need to “understand the digital giants’ DNA, how they operate, why they continue to build exponential barriers to entry, and where their next foray will take them.” In business, the rise of duopolies, says Wang, “represents a life-or-death challenge for your company—no matter what sector you’re in or how long you’ve held a secure position.” In the public sector, regulators need to understand them to effectively regulate them.
Whatever Happened To ‘Digital Transformations’?
Wang notes that “the most popular business buzz-phrase of the 2010s was “digital transformation.” Wang himself led the charge to help firms with their digital transformations. But it didn’t work for most firms. “We did all the right things,” he writes. “We transformed business models. We changed engagement. We were supposed to come out winners. And yet only a few of us made it past the finish line. Suddenly successfully embracing digital transformation was not enough.”
It turned out that the game itself had changed. “Our competition was no longer whom we thought it was,” writes Wang. “Even as direct competitors fall by the wayside and pose less of a threat, competition from nontraditional players continues to increase. In many cases, adjacent value chains compete head on with our companies.”
The New Game: Data-Driven Digital Networks (DDDNs)
The new game, says Wang, involves a recognition that the most important asset in the digital age is data. The winners already are, and will continue to be, those who are able to exploit data in what Wang calls Data-Driven Digital Networks or DDDNs.
“DDDNs apply these massive digital feedback loops to all of their stakeholders — customers, employees, suppliers, partners — and use data – driven insights to mitigate risk, identify new opportunities, improve operational efficiency, anticipate customer demands, and drive dynamic pricing. For example, Google can automatically and dynamically adjust ad pricing based on the popularity of a search term or engagement in a topic. Amazon can identify which routes and markets to expand based on logistic costs and profit margins. By relying on technologies such as AI and the cloud at scale, DDDNs automate many data-driven decisions—such as what products and services to promote in what markets and at what price. This gives them an unfair competitive advantage and makes it even harder for non-DDDNs to succeed.”
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Only Three Options
There are only three options for business, says Wang.
Option 1: Become a data-driven digital network and be one of the lucky-few victorious firms over the next decade. “It won’t be easy, but it is doable. You’ll need to innovate both technology and business models. It will require mustering resources, willpower, and ingenuity to attain data supremacy…. Without a business model that generates huge amounts of data at every decision point, you’re dead on arrival.” This in turn will require “benevolent dictator” governance.
Option 2: If that is too difficult, you can “join a coalition of smaller players in your industry that can collaborate on creating a DDDN. These coalitions will play an increasingly important role in enabling competition against the digital monopolies and duopolies.” As examples, Wang cites “Microsoft’s attempt to challenge Amazon through partnerships with retailers like Walmart, Walgreens, and Kroger” and the American Booksellers Association, a coalition of independent local bookstores. Wang foresees that most firms “will choose option two—to partner with others to build a DDDN—to get started. But, sadly, many will not make the investments in resources and money necessary to succeed.”
Option 3: There is no option 3, says Wang. “Can I choose to quietly run my business in my small niche, without the backing of a DDDN and without provoking the giants? The answer,” says Wang, “is no…Like it or not, the only options are to build your own duopoly, join a coalition that can hold its own against the dominant DDDNs in your market, or give up and wait for the grim reaper.”
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Social Implications
“While the massive rise of digital duopolies will foster the next wave of disruption and innovation, it will also leave behind a path of destruction. Why? Digital duopolies will usher an era of super-efficient yet extreme capitalism.”
“Policymakers and responsible organizations building duopolies,” says Wang, “must take steps to keep fair competition alive. Successful duopolies will have to abide by guidelines that require: Open technology standards that prevent market lock-in and integration capabilities. Access rights that ensure smaller players can compete on their own merits without being duly excluded. Personal data ownership to ensure users have control over consent and usage of their personal information, transaction history, and other metadata.”
Business implications
“More than 90% of the current Fortune 500,” says Wang, “will be merged, acquired, or go bankrupt by 2050 in deals that will add up to quadrillions of investment capital. The rich (measured in capital, customers, technology, talent, and data) will get richer, and everyone else will have to scrounge for scraps.”
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“Building a DDDN is hard,” says Wang. “It requires a combination of massive computing power, products or services that engage users, AI, and billions in capital investment—a high barrier to entry that ensures only a few players in any market succeed in doing so. If a DDDN already has a foothold in a market, the power of its virtuous digital data feedback loop makes it harder and harder for competitors to catch up to it. Even if they are not already in a market, DDDNs can use their dominance in another market and their value chains to enter new ones much more easily. Most of their competitors are taken by surprise and fail to react.”
Firms attempting to create a DDDN will need to upend their business thinking as shown in Figure 3.1.
Wang figure 3-1
Ray Wang
“Even those who try to mount a defense have found it an uphill battle, especially since their ability to do the very thing that could save them — investing in innovation — has been largely quashed by a hostile investment environment.”
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“The story of how established companies got hung out to dry by investors begins in the 2010s,” says Wang. “That decade saw the financial markets skewed by the concentration of more and more investment capital among the ‘mega-investor’ class. The mega-investors who should have been pushing the Fortune 500 to invest more in digital transformation to compete against these DDDNs, instead became more conservative, demanding higher and higher quarterly profits.
There is a risk that firms attempting to create a DDDN they will fall into seven well-known traps, as shown in Figure 3.2.
Wang figure 3-2
Ray Wang
See part 2 of this article: (coming soon) an interview with Ray Wang in which we discuss the further implications of this illuminating book.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
