Building a new economy for Jersey, doesn't just mean recovering from the effects of covid and Brexit - it means harnessing the massive changes being driven by technology, AI and data.
Last week, a group of islanders called the Economic Council published a document called 'New Perspectives' setting out five themes which they believe should help form a long-term vision for our economy. Continuing today, Express is publishing more detail on each one of those themes...
"This chapter describes objectives for growing Jersey’s Economy productively during and after Covid-19, taking into account the global economic trends in Artificial Intelligence (AI) and Data.
AI is the single largest contributor to the global economy in this decade. Combined with data-driven business, it is the single leading economic component and by far its fastest growing item for the foreseeable future. AI/Data is a fraction of what is informally named, for the sake of brevity, 'The New Economy' (NE). Other segments include, the software industry, semi-conductors, personal devices, wearables, personal health systems, electronic systems, cryptography, DeFi (decentralised finance), cybersecurity, etc. It is an open-ended list and growing rapidly.
The corresponding 'Old Economy' (OE) was characterised by the earlier part of the 20th Century when industrial, commercialisation and innovation were expanding, globally. Comparatively, NE refers to the significantly higher-growth, and higher productivity due to certain technical innovations that have been commercialised in the last decade of the 20th Century, and the continued march of such 'silicon and software' innovations in the 21st Century.
These were driven by Moore’s law, build-out of the internet, software, data-com-cloud, 4G-5G-6G progression, and increasingly Machine Learning, Artificial Intelligence, Advanced Data Analysis, Algorithms and certain broader societal applications of data, networks, learning systems, full scale automation and anti-fragile systems. These businesses are providers of global-scale, life-essential products and service products. We all use these things, daily, and they have fuelled our massive productivity increases in the last 40 years. This acceleration of productivity has only just begun. Cognitive systems operating broadly in society-cloud-culture, will contribute more, and then more in the coming decade. These continue to decisively win through ease-of-use, improved efficiency/effectiveness, and higher performance.
Pictured: data is part of the New Economy
We should always adopt continuous improvement (Kaizen) in keeping up to date with all existing businesses, institutions, and organisations (including governments), with paperless, app-based processes, e-commerce, transforming business processes to address the internet age. But these are all things that we need to do, so we catch up and compete effectively, modernising existing OE environments (a process often referred to as Digital Transformation or Digitisation). These activities are necessary to keep up, but not enough for economic renewal and strong growth. The theme of this chapter is more profound, in that it is about establishing new 'true' NE leading businesses, mostly disruptive rather than evolutionary, that will fuel Jersey’s economy from today, and for decades to come, alongside our existing valuableindustries. As the saying goes, at JP Morgan, “All Businesses are technology business, and we certainly are.” Success in this requires operating at a significantly higher velocity.
Global GDP will be 14% higher in 2030 as a result.
In macro-economic terms, 98% of the global economy was OE until 1985. Contrast today, where rapidly growing and leading companies, products and services are created as NE using root business models, having AI + Data as their business core. NE and generated consequentialbusiness, is now 15 to 25% (depending on which yardstick) of global GDP, and most of societal economic growth. As economic validation, we all noticed Apple became financially larger than the entire FTSE100, and there are four other such tech companies of almost exactly that size, right behind. And another ten not too far behind them. None of these companies would have been significant within the lower ranks of the FTSE100 25 years ago.
They are now individually larger than the bulk of the British Business Economy. By 2030, AI alone, (as a fractional part of NE) will increase global GDP by 14%. More than 85% of all growth in ALL SECTORS of the global economy lies with Data + AI. This process is driven by AI-Data and this accelerated significantly during Covid-19. Evidenced by passionate declarations from Pichai (Alphabet), Nadella (Microsoft), Modi (India), Xi Jinping (China), Cook (Apple) and hundreds of other leaders, all declaring “Covid-19 has dramatically accelerated new technology, across the board”.
Pictured: Many people in the OE fixed mindset, find it hard to comprehend the disruption and growth thinking required to even get started with NE businesses.
Comparison of OE with NE shows immediately marked differences in content, talent, methods, attitudes, value capture, growth dynamics, supply chain, necessary knowledge/ learned practices and starkly different productivity. All conventional business and Public Service institutions must take great care to avoid underestimating the challenges posed by this shift and overstating the “formerly adequate” level of achievement being made in the older paradigm. Many people in the OE fixed mindset, find it hard to comprehend the disruption and growth thinking required to even get started with NE businesses. This is not patronising, but stated strongly, as a clear warning signal for Jersey. We need to recall that OE businesses have value determined by their cash and derivatives, real estate, physical assets and equipment. Contrast NE enterprises, having value in Ideas, Intellectual Property, People, Data, Networks and Talent.
These primary items add to a lower content of conventional OE assets. OE businesses grow by linear addition of people, footprint, energy and costs, so that they can acquire more customers and revenue. NE enterprise is characterised with marginal, sometimes near-zero increase in costs, as business grows. This is the KERNEL of the difference in model and operations. This requires central necessity of “SCALING” built into the original core business model. OE companies mostly average £50k to £200k revenue per employee per year. NE enterprise, where productivity is NOT linear with employees, space, and facilities, achieves £400k to £3M annual revenue per employee per year. Very wide differentials in economic performance occur inrevenue, profit, business velocity, quality of life, employee personal growth, performance acceleration and footprint. Without a total change of business models, we cannot convert OE businesses to NE businesses. Think Marks and Spencer versus Amazon. This is one reason why old suppliers get disrupted in all sectors. IBM was not immune, HMV was not immune, Kodak was not immune, Thomas Cook was not immune. Neither are a raft of financial and related service businesses. The world has moved on.
NE as a fifth or quarter of World Economy today, is rapidly growing against OE’s three- quarters, for all of the reasons above. Jersey as a location has an economy that has stubbornly remained, greater than 95% OE business with an atypically low content of NE business activities, and little driven by AI/Data. Let’s not forget that there are one or two success stories, and let’s learn from them. Several recent analyst reports explain that up to 30% of Jersey jobs may be lost forever to automation, in the next decade. Jersey has an unusually older demography (median age 52), a limited appetite for and stringent controls on immigration, so a realistic and practical pathway to AI-Data based business is very important. Jersey, as a small location, needs a portfolio of businesses that start-up fast, scale fast, fail fast and well, grow much more quickly, with 5-10x lower footprint and 5-10x higher productivity suitable for a fully-employed, thriving, high life-value, sustainable, employed economy.
We all have several years of Covid-19 headwinds in front of us. This is a marathon and not a sprint. We need to grasp that Digital Transformation, eCommerce and paperless processes are largely done within OE businesses models and these will not bring the benefits described above. Nor can they become NE businesses with simple addition of software. Wrapping Appsaround existing OE businesses is a minor economic upgrade that must be done for defensive purposes, with a negligible shift in performance. The problem here is “what else and different”causes sufficient AI/Data scaling of local societal economic output. We are in the realm of New Business Models and Disruptive thinking. Clearly Jersey has “been there before” in the 1960’s and found novel solutions. This is about renewal as opposed to “more of the same”.
Pictured: Healthcare is sector ripe for tech innovation
Jersey has attempted to diversify its economy over the last fifteen years, specifically inclusive of the idea to expand the technology content of its business, but our rate of progress significantly lags where we need to be. Hence the need for this chapter. There are examples of successful global technology businesses that have been conceived and started in Jersey, well-known examples being WorldPay (founded in 1989) and Play.com (founded 1998).
These businesses were started some time ago, and new business development momentum today needs to increase, significantly. This is an example of the need for deeper commercialisation skills, good practice and Best Known Methods (covered in the Innovation and Enterprise chapter). Often such successes have migrated away early in their scaling-up. There are multiple reasons for this, including local talent shortages. When we have twenty- five such new businesses created each year, many will fail, some will move, but even with two growth survivor NE businesses created each year a major economic contribution can be built. Additionally, others may move into Jersey.
Another serious issue can be inwards-looking, over-focusing about “local” services and products. We can immediately see together, that it is not surprising that WorldPay and Play did succeed because they were not locally constrained. They were from the start, global-centric businesses. We should have confidence in our ability and strive, team and collaborate togetherto achieve much more, to exploit the opportunities presented from AI & data (and rebalance against the threats they also represent to OE businesses).
And this will largely be a disruptive and not an evolutionary process. This especially applies tothe next very large wave of opportunities, and these are of a different order to those of the last few decades, namely, those digitising Old Economy businesses. These need significant talent addition, new ideas, much deeper skills sets, much better commercialisation, best known methods and resources. Embracing Multiple Career Thinking and Continuous TechnicalTraining, to enhance our Talent Mobility, which is important everywhere, will be a critical multiplier in a small community that is limited in immigration.
It is the making and driving of such businesses with AI-Data core, where the majority of increased prosperity will lie. These businesses will normally often have distributed teams around the world and in many locations, as similarly well-described recently by Nick Ogden and others. Ideally, some successful growth examples will have ownership and IP located in Jersey, along with a growing (and learning) cohort of locally residing expertise. This global virtual horizontal teaming process allows rapid horizontal cross-learning of the New Economy cohort. Such cross-learning form the best experts in very strong locations, is the nature of NE business, (as discussed in many references such as Anna Lee Saxenian (1)). The nature of these businesses can have models that are built with sustainable long-term profitability, people-knowledge-growth, and effective circular beneficial prosperity. Higher productivity is a requirement to achieve this circularity. Such business models also promote Growth Mindset and Disruptive thinking. And these modes are essential in winning NE locations.
Many have said previously, Jersey should set specific ambitious targets and adopt a rigorousnew approach. This requires Jersey to determine the necessary and sufficient concrete actions to achieve (or better, and preferably, to exceed) global average economic performance (iedecide, up-front, numerical outputs in terms revenue, productivity, number of new local innovative patents, new deals etc.) in AI/Data-core new businesses by 2030. It would be sensible to have 4 or 5 process checks or milestones. Assuming the goal was agreed to have 20% (or whatever is set, these numbers are merely, examples) of GDP in 2030 in AI-Data core businesses there will be a number of interim goals aligned up-front perhaps 5% of GP in 2022,10% in 2025, 15% in 2027 and finally 20% in 2030. This significant societal advancement will require substantial societal rebalance of NE culture from its baseline of a few percentage points of the total economy size of Jersey, to the increasing global average (currently, around 15-25% of the whole GDP and rising). We must note that this value of content is growing and Jersey likeeverywhere else is faced with a rising target. It will take high velocity, just to keep up. This large chunk of work is just a part of such a metric-driven approach to set baseline and standards. The objectives must be outputs and not inputs. Often these kinds of goals are set as inputs, likeachieve X investment, or have Y employees, or create Z start-ups. These approaches always fail, as they attempt to control inputs rather than outputs of the process. A large part of the required“engine” to drive this, is the necessary shift from Fixed Evolutionary Mindset to DisruptiveGrowth Mindset. Jersey needs an early, clear understanding of Lessons-Learned and Best Known Methods from success around the wider world (and not limit itself to Jersey local and UK approaches) and an honest assessment of the barriers to progress made locally to date. These might include Talent Mobility and Taxation Philosophy amongst many possibilities.
This will require rapid development of productive partners outside of the small community of Jersey. Certainly, major research Universities will be required, not limited to the UK, but rather, global centres of appropriate AI-data, Software, Machine Learning and related excellence. Better for this to be extended to Global Trade Associations, Research Labs, Industry Road-mappers, Track Record Experts, multiple deals and business partnerships. This is a strong and necessary requirement from a talent perspective. Jersey needs high velocity scale-up of education at all levels and an enhanced suitably qualified workforce (think “10x” education in schools and further education, especially in STEM), 10x employee retraining and lifelong technical training, 10x talent mobility, and high velocity adoption of global ‘Best Known Methods’. In the end, education is the foundation for all and any success, and lifelong learning is the operating paradigm of the New Economy. Working through Covid-19 and the consequential changes everyone realises that much of this training will naturally be virtual."
1. Dean of the University of California, Berkeley School of Information
Read the full report here.