Home / What Edward II could teach ASFA about the next industrial revolution

Your occasional Investor Strategy News correspondent is quite a fan of the ASFA annual conference. It has that ‘trade show’ feel about it: a place where you can catch up with events, and a place where people become friends. For sponsors, it’s a place of opportunity, for delegates a place for the curious.

This year the number of delegates was up, however the number of stall holders was down compared with previous years. Perhaps this was just a function of fiscal constraint by the sponsors.

For the curious, the title global environment was sure to spike interest and Phil Ruthven, founder and chairman of IBIS World, is certainly an entertaining speaker. He covered the world scene, the Australian economy, the political scene, the social scene, financial markets and, perhaps the most pertinent for the audience, superannuation. A large portfolio of topics no doubt and time was always going to be against it.

Currently the top four economies have produced 46 per cent of the world’s GDP. The feel-good factor was up, and every slide was extrapolated forward to show a northward movement to mostly better things. Things are on the up, especially when taking the ‘long-term view’. But as John Maynard Keynes pointed out: “in the long run we are all dead”. The conclusions lean too much towards being a ‘linear’ result and the time line is too long. But as every investment product will point out “past performance is no guarantee of future return”. 

There is a lot of talk now of the deflation in the economy, quantitative easing, the  “third industrial revolution”, the effects of the zero marginal cost on society, what the ‘internet of things’ is doing to traditional businesses. These businesses include print media, pornography, power generation, music, movies and now ‘superannuation’ platform production. And all superannuation schemes are platforms, so they will be touched. The margin cost of producing these is, or has, gone to zero; superannuation platforms are now being given away. Self-managed super funds (SMSFs) are just the beginning. That is going to start having a greater effect on the ‘collective’ investment business – both retail and industry funds. SMSFs have 33 per cent of the market. That market share will increase further as selling them at zero lowers the ‘barriers to entry’ for investors.

In 1989, if I would have said that one-third of the human race would be communicating with one another in huge global networks of hundreds of millions of people – exchanging video, audio and text and also that combined knowledge of the world would be assessable by mobile phone, that every single individual could post a new idea, introduce a product, or pass a thought to over a billion people simultaneously, and the cost of doing this would be zero, I would have been derided. This is now a reality.  

Now, what if I say that in the year 2039 the bulk of our energy will be free, heating homes, using your air-conditioner, driving your car as a matter of fact most energy will be priced at zero. Platforms for superannuation, advice and investments will have a cost of no greater than 5 basis points in total and there will be no collective super schemes. Derision again.

As happened when Edward II of England got a few of his nobles together, with the thought of extracting extra money, neither he nor his associates thought they were actually going to become a parliament. Put simply when you are making history you may not notice. We are now living in the ‘Third industrial revolution’ and ASFA has not a clue.

Patrick Liddy