There are more predictions posts than you can poke a stick at written at this time of the year. This is not one of them to add to the pile.

The following is a review of the forces and trends I see at work that will impact on all businesses in Australia in the coming year, most specifically the small business sector.

So here goes, in no particular order, and use the insights as you see fit.

Technology.

We are in the early stages of a move from bits and bytes to something else that will power the green revolution, medicine, and new materials with currently unimagined characteristics, that will enable all sorts of further innovation. We are seeing early signs that quantum computing is about to blow in, and blow everything else away. It is a bit like the point in 1948 just before the transistor was invented by William Shockley et all in the Bell labs. To that point ‘computers’ had been powered by vacuum tubes that were slow and tended to burn out a lot. Suddenly the transistor led to the development of the integrated circuit that has powered us since.

The rapid development of Covid vaccines is a direct result of technology, and will change the face of medical care. The Pfizer vaccine is the result of decades of perfecting the processes developed with the smallpox vaccine in the mid 1700’s first in the Ottoman empire, then in western Europe via the well-known story of the milkmaids and Edward Jenner. The mRNA Covid vaccine of Moderna is another story. It is a combination of proof of concept originally conceived by Francis Crik , one of the identifiers of DNA in the early 50’s, and CRISPR technology developed by two scientists, Emmanuelle Charpentier and Jennifer Doudna in 2007, for which they shared a Nobel prize in chemistry in 2020. Since the initial breakthrough, gene editing technology has advanced at a compounding rate. It is now at a point where a scientist friend of mine described it a few months ago as ‘almost as routine as editing a document in word.’ This technology will not only offer protection against Covid, but will be extended to any virus and parasitic driven affliction. In a short time, it will deliver the vaccine for killers such as malaria.

Politics.

There will be an election this year, and lots of pork will be promised, but for SME’s who cannot assemble a block vote that will change the outcome in an electorate, there will not be much beyond reassuring words about how well the economy is bouncing back. I do not think it will matter who wins, unless there is a hung parliament, in which case, there might be some sensible debate and actions that will benefit small business.

We desperately need a federal ICAC with teeth. However, it seems unlikely we will get one, even if the current opposition wins government, the version they install will be a vanilla version, rather than the robust body we need. They, like the current incumbents know how much they may lose personally from installing such a body, and to heck with the electors.

Regulation of social platforms.

This is coming, but I suspect not in this coming year. Besides, the major platforms are the biggest bullies in town with huge lobbying resources, and politicians will not want to annoy them. Facebook made the point by closing access for a day, February 17, causing chaos, before acceding to the governments Mandatory bargaining code passed in early 2021. Assuming a government does have a go, chances are it will be another fenced dog, good only for barking. The argument that a platform ‘smart’ enough to direct an ad to a highly specified audience in a geographic location cannot equally train algorithms to tell the difference between a fake account, set up in a post factory in Ukraine, and one owned by a kid in Blacktown is utter nonsense.

Voluntarily, Facebook and Google are retiring third party cookies, trying to build ‘social responsibility’ credentials with regulators. This means you may not be chased around the net quite as much by so called ‘remarketing,’ but given the profitability at stake, of Facebook particularly, it would be naive to believe that the changes will be too aggressive. Some added work will be required by SME’s to productively invest in digital ads.

Digital security.

This will become a major pain in the arse for small business. The big end of town has made the investment in security, and while they are still vulnerable, most SME’s by contrast are an easy target. The crims are very smart, way smarter than almost every small business operator, so it becomes a matter of time before you are targeted. Taking basic measures of security has become an essential cost of being in business, so ignore it at your peril.

Supply chain sovereignty.

Supply chains have been heavily disrupted over the last two years and will not go back to ‘normal’ any time soon. The opportunity for SME’s to step in and deliver quality product and services reliably to a timetable will increase as a result.

If the various governments decided that domestic procurement was a real priority rather than a press release, and took steps to make it so, there would be a substantial and instant increase in business. This new business will not just arrive on the doorstep, small business must invest in marketing to secure it, a skill set missing in most SME’s.

Labour

Finding and keeping skilled labour is a huge problem for most SME’s. In the midst of unemployment, we have pockets of extreme demand that must be met if the economy is to grow. This is not about imported labour doing the menial jobs Aussies frown on, it is the high value technically skilled jobs required for manufacturing and the digital transformation happening around us. The tight market taken as the average will increase rates, increasing pressure to digitise, or go out of business.

Retail’s last mile

The retail ‘last mile’ has been comprehensively disrupted over the last 2 years. While we have been locked up, we also looked increasingly to ‘instant gratification’ in everything from the routine purchase of groceries to major purchases, investments, and entertainment.

The metaphorical ‘last mile’ typically the most expensive part of the logistics chain, as well as being subject to all sorts of dead ends and side paths, is being completely rebuilt by technology and VC investment.

The number of start-ups around the world, but particularly the US that have market valuations in the billions and revenue numbers akin to a kid’s pocket money is enormous. Gorillas, Jokr, Gopuff, Getir, Zapp, and a host of similar all looking to knock the king of logistics, Amazon, off their perch. It is beginning to look like the dot.com boom/bust of 1999 all over again.

Climate change.

Irrespective of individual views, climate change is a scientific reality. Argue if you like about the extent, but the sources are indisputable: humans have screwed the pooch, and are continuing to do so. In the absence of change, our great grandchildren will not enjoy life as we have. Even though we can reasonably expect technology to continue to accelerate and deliver benefits, without a place to live those be benefits will be claytons benefits.

Despite the determined effort by the current government to deny this reality, and double down on fossil fuels, they will continue to look like King Canute keeping the tides at bay. There will be a tsunami of change happening in areas from vehicles to devices that capture and store power, science will not be denied. There will be huge opening for SME’s who identify a niche in the sustainable/renewable energy supply chain, and fill it.

Will the pace of global warming continue, the story of the last couple of years, fires, drought, flood, cyclonic activity, all indicate not just a continuation, but an uptick on the rate. A natural barometer of this is the rate at which coral reefs are bleaching. Numerous studies of the great barrier reef, and others around the world over the last 20 years clearly indicate the warming of the waters.

Space has become a tourist destination. Captain Kirk, alias William Shatner became the oldest person to go into space, courtesy of Jeff Bezos.

Non-Fungible Tokens. NFT’s.

The definition of ‘Fungible’ is that it can be replaced by an identical item, there is absolute interchangeability. Therefore, a Non-Fungible item is irreplaceable, there is no substitute. The token part of ‘NFT’ is the proof of ownership held on a blockchain. NFT’s have created a new way to create value. The essential characteristic of a buy/sell relationship is that the seller has the right to sell, and that the buyer is not just buying the original item, they are also buying the right to resell it. Blockchain, on which NFT’s are stored, and ownership tracked, has created a way to make this determination for the original of a digital product. JP Morgan recently put the current market value at 7 $billion, from nowhere a year ago.

Those who can claim ownership now have a new way to monetise that ownership. Consider the Mona Lisa. There is just one Mona Lisa painting, housed in the Louvre, but there are millions of reproductions, from photos people have taken on their phones to professional reproductions. The original painting is non-fungible, there is only one irreplaceable painting. That great photo you took of your new product prototype before it sold millions, or that sporting moment when your 6-year-old, who ended up playing for Australia scored his first try, may suddenly have value as an NFT. If I was the marketing manager of Soccer worldwide, I would be creating a store of NFT’s of the great stars of soccer in the form of photos and gifs, of their great moments. This is a new asset class that will only grow as we come to grips with it.

The Cloud.

Cloud infrastructure is a race for the dominant position currently held by Amazon, spending massively to retain that position, but being chased by Meta (Facebook) Microsoft, currently in second place, and Alphabet (google). Between these 4, they spent $40 billion in the year to September 2021

What the internet did to music and newspapers is being repeated everywhere else.

TV viewing and advertising has been remarkably resilient in the face of digital ads and streaming, but the advent of net connected smart TV and streaming will kill TV as we knew it quickly. The attraction is the 4 billion ad dollars currently going into live TV in Australia. We are followers, the impetus will come from the US, where the ad pool prize is massive.

Some bets here, Netflix, the current market leader will be taken over by one of Amazon, or Disney, who have multiple revenue streams to pump out content, and Disney has many other brands, like Marvel, 20th century, Pixar, national geographic, and an unparalleled back catalogue. HBO is currently owned by AT&T, so will probably be sold, and then there is the Chinese platforms, Tencent and Baidu, Huge in China and Asia generally, who will be looking towards the US and Europe with acquisitive eyes. It will be interesting.

Many small businesses have migrated to cloud accounting software, and a specialist application or two, without making a real commitment. The pace of development means that you are either on the cloud, leveraging the tools to scale productively, or being left behind. For most SME’s it is a big capability gap, and again, most have been bitten by salespeople making big promises, but delivering little, but it is time to go again. Find a person or firm you are comfortable with, and have them beside you for the journey.

Demography.

The developed world is getting older, and more demanding of governments, while there are increasingly less people to pay for the demands. The currently developing world is on the other end of the continuum, they want what we have, but are lacking the resources to get it, so are migrating, jumping the stages of technical development we older developed economies went through, such as going straight to mobile in Africa, jumping the infrastructure costs of fixed line. Human beings have migrated since the beginning of our evolution. Just because there are now national boundaries in place, that migratory drive will not go away in a flood of nationalism and self-preservation, it is exactly self-preservation that will drive it.

Resource access.

We can live with all sorts of shortages, except those of food, shelter and water. Specifically water, without which, we humans die in a few days depending on temperatures. Beyond those three necessities, we need a whole range of other resources to maintain a standard of living. Those with the access will be the owners of the world in the future.

The huge challenge is how do we allocate our limited financial resources against the various demand for spending? The inclination is to spend it to address the short-term irritations and public demands, tactical stuff, but unfortunately they win elections. It is the long-term stuff we need to really consider, as they are expensive, risky, but important, despite not biting us on the arse today. Broken down is it driven by the simple fact that some have it, and most do not, and the forces to equalise will, over time, play a key role in the shape of the world

The economy. 

Who really knows what will happen? Certainly, the politicians do not, and economists can only make a best guess based on what has happened before, and current theories about how the past will impact the future. There are many diabolically difficult decisions to be made on the allocation of shrinking resources against increasing demand, with voter and lobby groups opposed to the changes in the tax regime required to increase the tax base. The fundamental mismatch between the short-term focus of government and the necessity to invest for the long term, with the increased risk profile such long term decisions require will remain an intractable problem in the absence of a sense of common purpose amongst all Australians. Clearly the current political leadership is across the body politic, incapable of meeting this challenge.

Closer to home, inflation will kick along which may prick the housing bubble in Sydney and Melbourne, or not, depending to some extend on the truth to the claims that prices are supported by international tax money seeking refuge in our lax regulatory environment.

The frenetic building activity of the past few years will probably cool off as demand slackens, which might see the cost of trade skills soften. The continued absence of migrant agriculture workers due to Covid will see the cost of produce increase significantly, leading to many smaller farming enterprises to merge to fund automation.

Then, you have the uncertainty of the trading relationship with China feeding into our economy in all sorts of ways over which we have no control at all. It seems unlikely any fences will be mended soon. We are being both taught a tough lesson, and being held up as an example to others, and the collective impact on our economy is substantial, and likely to increase. Currently China imports about 60% of its iron ore from Australia, and 20% from Brazil. Imagine the impact as that equation switches, as it will, as China diversifies its supply away from Australia. They have demonstrated that a bit of domestic pain is irrelevant by squeezing imports of Australian metallurgical coal, switching to supply from elsewhere, and simply using less. The bans imposed on wine, barley, meat, and lobsters will be pocket money by comparison.

Having said all of that, look forward to 2022 with optimism. Australia is still the best place in the world to be despite the challenges.

Header photo credit: The photo is of ‘Black Jack’ crossing the line first in the 2021 Sydney Hobart. I have reproduced this photo accredited to the ABC, but somebody owns the original. It can transfer onto an NFT platform, and traded. Meanwhile, I can reproduce it, but never own it.