Global Investor 1.17, January 2017
Expert know-how for Credit Suisse investment clients
INVESTMENT SOLUTIONS & PRODUCTS
Solutions for a better world
Yoshiyuki Sankai Asimov was right: how robots can help to ensure
a better future. Fabian Waltert Looking for a housing solution?
Think small. No, smaller. Uwe Neumann The advent of digital farming.
Henry Siu Redistribution between generations binds society together.
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GLOBAL INVESTOR 1.17 —03
Responsible for coordinating
the focus themes in this issue
CHRISTINE SCHMID is Head of Global
Equity & Credit Research at Credit
Suisse International Wealth Management.
She has 23 years of experience and
covers the financials sector. She holds an
MA in Economics from the University
of Zurich and is a CFA Charterholder.
RETO HESS is a senior research
analyst at Credit Suisse International
Wealth Management with 12 years
of experience in equity research and
investment management. He heads the
Global Equity Research team and
covers the European and US industrials
sector. Further, Reto is a CFA and
CAIA Charterholder and holds a Master of
Science from the University of Zurich,
Photo: Steve Vidler / Alamy Stock Foto; Illustration: Martin Mörck
UWE NEUMANN is a senior research
analyst in the Global Equity & Credit
Research team at Credit Suisse International
Wealth Management, covering
the telecom and technology sectors.
He has 29 years of experience in the
securities and banking business, holds
a Master of Economics from the University
of Constance, Germany, and is a CEFA
The majority of citizens in today’s Western democracies are concerned,
and even fearful, about the effects of globalization, digitization
and a rapidly aging society. A desire for deglobalization and multipolarity
and a determination to “put one’s own country first” have
come into sharp focus. Well-educated white-collar workers – the
middle class – see themselves at risk of losing their job as digitization
progresses. Moreover, aging populations in most countries are likely
to place an immense burden on healthcare, social and pension
systems in the future. Global central banks’ very accommodative monetary
policy has already weakened social and pension systems, putting
pressure on future expected income.
The prosperity that has been achieved since the middle of the last
century is built on a generational contract which, given today’s challenges,
needs to be redefined. Education for the young is still funded
by the older generations, but the required skill set for today’s job market
and that of the future will force us to rethink our education system
to better align it with the changed environment. Pension systems
and social systems were built on assumptions of infinite economic
growth, but global resources are finite. Thus, the new generational
contract must be based on the premise of ensuring a sustainable
These changes open up business opportunities for companies and
sectors alike, with the economy serving as a solution provider, and
policy makers pushing for a framework that allows everyone to prosper.
Consumers drive success through demand and spending.
A number of sectors are poised to deliver pioneering solutions for
the future. Healthcare is at the dawn of a wave of innovation as advances
in digital means allow for more efficient and tailor-made treatments.
Data produced and used for the good of society can further
improve our lives. Mobility 2.0 is on the horizon, and blockchain technology
is set to revolutionize contracts and trade platforms by establishing
a new environment of trust.
This issue of GI features our thoughts and expectations regarding
these developments. I hope you enjoy the read!
Christine Schmid, Head of Global Equity & Credit Research
GLOBAL INVESTOR 1.17 —05
Global Investor 1.17
Collages in this issue
The world today is in
rapid flux. Technology,
globalization keep people
and jobs on the move.
This ferment is giving rise
to new ideas and ways
of thinking about how we
live and work.
Prosperity is a two-way street
Finding ways to evolve and improve the
intergenerational contract is key to ensuring
a cohesive society, writes Henry Siu.
When I’m sixty-four
Economists Yikai Wang and Martin Eichler
reflect on issues affecting the
pension systems in China and Switzerland,
Cyborgs made for walking
Don’t just focus on building robots, says
roboticist Yoshiyuki Sankai. Instead,
think about the problems you want to solve.
Reshaping patient care by bits
The healthcare industry has traditionally
been slow to embrace digital health, writes
Lorenzo Biasio. This time, it’s different.
The Internet –
our friend and caretaker
Don’t let visions of Orwellian dystopias
put you off connectivity, argues Uwe
Neumann. The Internet has a caring side.
The dark side of digitization
Cyber risk is the price you pay for an open
cyber society. It also spells opportunity
for the IT security industry. Ulrich Kaiser
The age of cryptofinance
Democracy is finally coming to finance
in the shape of digital cash, says
Johann Gevers of Monetas, and it will
boost the global economy.
Putting a roof over your head
Forget about your home being a castle.
Fabian Waltert takes a look at housing
trends, and discovers that sharing is the
name of the game.
Labor in the new millennium
In today’s job market, the right employee
may well not meet your ideal profile, says
Randstad CEO Jacques van den Broek.
Young and car-free
Driving is losing its cachet among
young people in industrialized countries.
Julia Dumanskaya examines the
Millennials drive sustainability
Sustainability is a key concern for
millennials, writes Julie Saussier, and it’s
leading companies to adapt production
The arrival of digital agriculture is
thrusting farmers into the role of chief
technology officers. Uwe Neumann
surveys a surprising new landscape.
Disclaimer > Page 52
The six illustrations by Vincent Poinas
creatively evoke some of the issues
at the heart of the current conflicts between
generations, including sustainability,
pensions, healthcare, privacy and robotics.
For more on the artist, see p. 54.
GLOBAL INVESTOR 1.17 —06
Photo: Kamil Bialous
According to economist Henry Siu, the cohesiveness of society depends on its willingness to distribute resources among generations.
GLOBAL INVESTOR 1.17 —07
Given the dramatic changes that population aging, globalization and technological
progress have brought to society, there is renewed discussion on how the
intergenerational contract should evolve and improve. By doing so, we reaffirm our
belief in a cohesive society and the value of taking care of those most in need.
TEXT HENRY SIU
n intergenerational contract is an agreement made by
society to transfer resources between individuals who
are at different stages of life. In almost all instances, this
takes the form of transfers from those of working age,
to senior citizens (who have left the workforce) and the young (who
have not yet entered it). Intergenerational contracts need not be codified
by law, and in most times and places in the history of humanity,
they have been informal in nature. Perhaps the most obvious example
we see today is the multigenerational household. The parents provide
income, food, and shelter, as well as their time and care to their children
and their own parents, the grandparents. Grandparents benefit from
these transfers and, in turn, help in the care of the children, utilizing
the time and accumulated wisdom they have at their disposal. The
children in the household receive transfers with no cost to their present
selves (except, maybe having to clean their rooms and take out
the garbage). However, the implicit understanding – the contract – is
that they will provide the same transfers to their parents and children
when they become working-aged themselves.
Of course, intergenerational contracts also take more explicit
forms, codified broadly as social security systems, administered >
GLOBAL INVESTOR 1.17 —08
by governments in most countries around the world. Perhaps the
most prominent example is that of state-funded pension programs,
providing transfers and benefits to the retirement-aged. In industrialized
economies, these programs have become increasingly burdened
due to falling birthrates, increased life expectancy, and, in some
cases, poor budgeting and underfunding. For instance, in the United
States, the most recent Social Security Administration Trustees Report
indicates that the program ran a USD 6 trillion deficit in 2016; that’s
almost USD 20,000 for every man, woman and child living in the USA.
is the skill and
earnings are based.”
Forecasting into the future and accounting for the present value of
all future benefits and taxes, the system is currently USD 32 trillion
in deficit. While presently in less dire circumstances, Switzerland is
engaged in its Retirement 2020 reform to their state pension system.
This is in anticipation of the rise in their dependency ratio. Currently
there are about 30 people aged 65 and over drawing from the pension
system for every one hundred 20–64-year-olds contributing to
it; but by 2060, this figure will nearly double to about 55 taking out
for every 100 paying in.
Equally – if not more – important in the intergenerational contract
is the transfers made to the young via publicly funded education and
healthcare. These matter because education and health investments
are the means by which societies create human capital. Human capital
is the skill and knowledge upon which working-aged earnings are
based, and is perhaps the prime determinant of the size of a society’s
economic pie and social well-being. In certain places, these systems
are failing to provide enough investment for the young.
Redefining the contract
Against this backdrop, and given the dramatic changes that globalization
and technological progress have brought about, there is renewed
discussion on how the intergenerational contract should evolve,
what should be changed, and how it can be improved to better suit
the 21st century. But informed discussion requires a fundamental understanding
of its place in society. What role does it serve to transfer
resources to and from people at different points in their life?
Fundamentally, the intergenerational contract is about redistribution
between generations. It makes sense for society to codify and
administer this redistribution given that we feel that those who are in
need deserve to have more, and those that have more can do with a
bit less. So how should we conceptualize the intergenerational contract,
so that we can evaluate whether such a contract is desirable,
fair and working for the greater good of society?
A useful way to understand the contract is as a form of social insurance
across generations. Other forms of social insurance, like social
assistance and welfare programs, do not depend on one’s stage in
life. The desirability of insurance that crosses generations becomes
obvious when we realize that many aspects of our working lives are
like a giant game of roulette, except that the odds are actually stacked
in our favor. Most of us will be relatively lucky and do just fine: we’ll
have meaningful careers that pay well and steady work with few, short
spells of unemployment. This will allow us to enjoy a comfortable life
in retirement. But a small number of us will be unlucky during our
working years and suffer the consequences of disability, stints of
long-term unemployment, the loss of a vocation or the obsolescence
of skill that we spent decades learning and investing in. These sorts
of events lead to difficulties in old age.
Social insurance for the elderly
This is precisely the sort of negative outcome that social security is
meant to guard against. In fact, in many countries, this objective is
stated directly in the name of the program. In both the United States
and Switzerland, the social security program is called (or translated
as) Old-Age, Survivors and Disability Insurance; in Germany, it is
called the State Pension Insurance. Insurance programs are those
that we pay into in good times and claim benefits from, if and when
we are hit by negative shocks.
But in the past 50 or 60 years, social security has evolved from
insurance programs to largely become publicly funded pension or retirement
benefit plans that all are entitled to draw from. But none of
us feel entitled to draw upon our auto insurance on days when we
don’t get in a car accident, or to draw unemployment benefits when
we are working. Given this, why should we all receive old-age security
simply because we are past the age of eligibility, especially those
of us who have had the fortune of successful careers working in wellpaying
jobs? Retirement saving is equally well performed by ourselves
on an individual basis; it is unclear why it should be done by transferring
income from one generation to the next. Therefore, an important
question to be addressed is whether government-sponsored, old-age
social security should be reserved for, and thereby made more generous
to, those truly in need.
This is made especially pressing given the dramatic labor market
changes the global economy has experienced in the past 30 years.
With advances in robotics, information and communication technology,
and computing power, automation has made obsolete the accumulated
skills of a wide swath of the population nearing retirement
age. Advances in machine learning and artificial intelligence threaten
to erode the value of knowledge and skills in which an ever-increasing
number of highly educated workers have invested. Prioritization
of old-age insurance should be given to those who have experienced
these outcomes during their working careers. And because of the inherent
uncertainty of longevity, it should also benefit those that have
been unlucky enough to live longer than expected when they made
their retirement savings decisions.
Social insurance for the young
To the extent that the outcome of one’s working career and end of
life is a gamble, it is swamped by a much bigger risk factor determining
lifetime well-being: the lottery of birth. This is a concept that has
been discussed at least since the time of the 18th century by philosopher
Jean-Jacques Rousseau, and in our times by the philosopher
GLOBAL INVESTOR 1.17 —09
John Rawls and philanthropist Warren Buffett. The idea of course is
simple: prior to birth, we have no choice as to whether we are born
with ability or disability, into a rich family or poor one, or into a society
that values basic human rights or not. A lottery determines whether
we enter life into a circumstance of ability and opportunity, so the
foundational building blocks of success and fortune are determined
by pure luck.
Viewed this way, it is decidedly compelling that the intergenerational
contract should transfer resources to the young in order to provide
insurance against poor early-life outcomes. The most important
way we can do this is through fair and effective publicly funded education.
Formal education systems can never fully undo all of the disadvantages
that may befall someone at birth. However, public education
should do its best to redistribute to those in need and help to
even the playing field at life’s outset. At the very least, it should not
magnify the unequal outcomes of the birth lottery. But in some places
around the world this is what happens. Perhaps an instructive
example is the United States where public education funding is determined
disproportionately by the local tax base: spending is higher
in rich suburbs and much lower in rural and inner-city settings. This
magnifies inequality. In a 2015 report issued by the Education Law
Center, only four states out of 50 (Minnesota, Massachusetts, New
Jersey and Delaware) received a rating “fair.”
contract is about
Of course, the USA is not alone. Every three years, the OECD conducts
the Programme for International Student Assessment (PISA),
a survey intended to evaluate education systems worldwide. The most
recent information (as of this writing) is available for 2012. According
to the PISA, in countries as diverse as Turkey, the United Kingdom
and Austria, student-teacher ratios are tilted in favor of socioeconomically
advantaged schools compared with disadvantaged schools.
This is in contrast to places like Belgium and the Netherlands where
the student-teacher ratio is used to mitigate socioeconomic disadvantage.
In this respect, lessons can be drawn from Germany’s recent experience.
Between 2003 and 2012, Germany was successful in reducing
inequality among students’ PISA test scores and simultaneously
increasing average performance. While causality is hard to
establish, many believe the gains were in large part achieved by providing
school-based support and targeting the most disadvantaged
students, oftentimes immigrants and the children of immigrants. This
targeting of benefits is precisely in the spirit of redistributing to those
most in need, those disadvantaged by being born in places and >
is an associate professor in the
Vancouver School of Economics at
the University of British Columbia.
His research focuses on issues
related to labor and macroeconomics
such as automation and the decline
of middle-class jobs, recessions
and jobless recoveries, and youth
GLOBAL INVESTOR 1.17 —10
Photo: Vorname Name/Agentur
GLOBAL INVESTOR 1.17 —11
“The climate deficit the global
community is running on a perpetual
basis is simply stripping resources
from our children and grandchildren
for our own benefit.”
circumstances lacking for opportunity. This principal of inclusiveness
is also fundamental to providing fair educational opportunities at the
university level. Initiatives such as the Erasmus programe of the European
Union and the establishment of uniform tuition fees for EU
students fosters equality of access to human capital investment and
generates mobility across borders within a cohesive society. If not for
social insurance motives, these objectives are valuable and worthy in
their own right.
Social insurance for current and future generations
Finally, an integral part of an evolved intergenerational contract must
include action on climate change. Though much of this discussion
has centered on redistribution for insurance purposes from the lucky
to unlucky, a more basic priority should be fairness across generations.
Accumulating unfunded social security liabilities, coupled with
political inaction is, quite simply, a transfer from future generations
to current and past ones, without regard for need or disadvantage. In
the same way, the climate deficit the global community is running on
a perpetual basis is simply stripping resources from our children and
grandchildren for our own benefit. This violates the basic proposition
that the intergenerational contract should not be benefiting the welloff.
As policy makers we have the tools to curb greenhouse gas emissions.
At a minimum, greenhouse gas-emitting activities should be
taxed. This provides incentives for reducing such harmful activities
and developing more socially responsible energy sources. An even
more equitable solution would be to redistribute these tax receipts to
future generations, transferring resources in the right direction.
Moving forward, our intergenerational contract should evolve to ensure
transfers are made to those who need it most, including our
seniors, our children and future generations who have and will face
misfortune. Prioritizing those in need helps ensure the long-term sustainability
of our social insurance programs and our societies.
GLOBAL INVESTOR 1.17 —12
Photo: Vorname Name/Agentur
GLOBAL INVESTOR 1.17 —13
Photo: Sigrid Bjorbekkmo
Old-age pensions are an entitlement in many countries around the
world. But aging populations make it more difficult to finance
these systems. We look at solutions to the pension question in
two very different countries: China and Switzerland.
INTERVIEW BY GISELLE WEISS, freelance writer
is an assistant professor in the
Department of Economics at the University
of Oslo, specializing in quantitative
macroeconomics and the Chinese
economy. He received his PhD in Economics
from the University of Zurich in
2014. From 2011 to 2012, he was a
visiting scholar at the Massachusetts
Institute of Technology.
Even in industrialized countries,
guaranteeing pensions is no
easy matter. China is a devel oping
country with a huge and rapidly
aging population. How is it addressing
the issue of retirement income?
Giselle Weiss: Do the Chinese think
in terms of baby boomers and millennials
and so forth?
Yikai Wang Actually, my generation is
known as the “after 1980s.” Because we
were born after the market reform, we never
lived in a planned economy. And we were
the first generation to really be restricted by
the one-child policy, which became quite
tight after the 1980s. We had cousins to
play with, not siblings. So we think a little
differently from previous generations.
In 2012, you and your colleagues wrote
a paper on Chinese pension problems that
got picked up by the “Economist” magazine.
What was that about?
Yikai Wang We were interested in
two questions. First, the replacement rate
for Chinese retirees – the percentage
of pre-retirement income that is paid out as
pension – is quite high. How sustainable
is the current pension system? And, second,
because Chinese incomes have been
growing very fast, older generations are
poorer than future generations will be. What
amount of intergenerational transfer – i.e.,
using the contributions of younger workers to
fund current retirees – will improve the
welfare of the older generations without
hurting future younger generations?
Very-fast-growing income sounds like a
Yikai Wang For the older generations,
though, it isn’t necessarily. Take someone
who entered the Chinese labor market in
1970 and someone who entered it in 2000.
During those 30 years, wages grew at 6%
per year on average. Which means that a
person who entered the market in 2000 can
expect to earn six times as much as the
person who entered the market in 1970.
Moreover, traditionally, most older
generations just put their money in a bank,
and they had little to begin with.
What percentage of the population
in China can expect a pension?
Yikai Wang Broadly speaking, only
urban workers are covered by the pension
system, and of those workers, only 60%
participate. The system isn’t compulsory.
There’s basically no pensions in the rural
areas, which since the end of the planned
economy in 1978 have officially been
responsible for taking care of themselves.
What do old people in the rural areas do?
Yikai Wang They rely primarily on
support from their children, who work in
urban areas. We actually wrote a follow-up
to our paper in which we hypothesized how
a universal pension system that includes
the rural areas might not be a major burden
because worker income there is so low.
What makes the pension
situation in China so acute?
Yikai Wang The Chinese population is
aging very, very fast. For example, right
now, the old-age dependency ratio – the ratio
of old to young – is a bit more than 0.1.
It will take China only 40 years, say until
around 2055, for the old-age dependency
ratio to increase to 0.5. That means one
senior for every two working-age persons in
China. And that’s if you compare the over-
65 population with the under-65 population.
A second factor is that there is a huge
movement of young people to the cities.
That slows down the aging problem in the
urban areas, but it aggravates it in the countryside.
By one measure that we used,
there will be 1.6 seniors for each workingage
person in rural China by 2050.
If the government is worried about
the sustainability of the pension system,
wouldn’t it make more sense for the
system to be mandatory?
GLOBAL INVESTOR 1.17 —14
“Broadly speaking, only urban workers
are covered by the pension system,
and of those workers, only 60% participate.”
Yikai Wang To do that, you have to first
be able to check and enforce contributions,
which isn’t easy in developing countries with
large populations. Moreover, China has
many small firms and self-employed workers,
which makes collecting pension contributions
even harder. Second, the timing has
to be right. For example, the US introduced
social security after the Great Depression.
Many European countries set up their
systems after World War II. In the current
climate in China, a law mandating pensions
would be unlikely to pass.
So how do you increase voluntary
participation in the system?
Yikai Wang One reason many private
workers do not participate is because their
employers don’t want to (workers contribute
8% to the system, and employers 20%).
Employers would rather pay workers extra
than contribute to the pension system.
Here, economic incentives might help, as
would making the system a little more
compulsory. Right now, the discussion is
tending toward changing the form of the
pension system itself.
You and your colleagues have proposed
a different recommendation for funding the
pension system than the government has.
Yikai Wang Yes. Because the government
is focusing on the financial sustainability
of the system, it wants to move to a
system in which there is little intergenerational
transfer and everyone relies on their
own contributions. But we think that keeping
an element of intergenerational transfer –
similar to the current pay-as-you-go system
in most continental European and Scandinavian
countries – is important. This would
ensure that the current old persons will
receive a decent pension.
And the sustainability issue?
Yikai Wang It can be solved using other
measures. For example, extending the
retirement age, which at present is still 60
for men and 50 for women. Or reducing the
replacement rate for future generations,
since they will be richer overall.
Among Western industrialized countries,
Switzerland stands out as a model of prosperity
and innovation. But the challenges to the pension
system that it faces are typical.
Giselle Weiss: In 2012, BAK Basel projected in a report to the Swiss
Federal Department of Home Affairs that the old-age dependency
ratio in Switzerland would increase from 29% (at the time of
the report) to 56% by 2060. What is the significance of that figure?
Martin Eichler The old-age dependency ratio tells you how
many working-age people are available to finance one retired
person. This ratio will increase substantially over the next 20 or 30
years: more retirees and fewer people to finance them than
today. And that’s only the financial side. There are also political and
societal consequences of the growing weight of pensioners.
How does Switzerland’s old-age dependency ratio compare with
those of other countries?
Martin Eichler Switzerland is fairly typical of modern Western
industrial economies. The number of retirees is projected to increase
substantially in all these economies. Within Western Europe,
Switzerland is actually slightly better positioned than most countries
today – particularly due to immigration. And we expect that to
continue in the future.
How would you characterize the state of the Swiss pension system?
Martin Eichler The Swiss system is based on three pillars
for stability. Each pillar has advantages and disadvantages. The payas-you-go
part of the system – the AHV – is vulnerable to unbalanced
population developments. The second pillar (BVG), which is a
capital-based system, is less vulnerable to these changes. However,
it is susceptible to financial market fluctuations, which we are seeing
at present. As the time horizon of a pension system is 60 years
or more, you can see how having a mix of pillars is well suited to a
range of eventualities.
GLOBAL INVESTOR 1.17 —15
What are the main challenges to
Martin Eichler Apart from the stress on
the financial markets in the short term, the
main challenge at the moment is a convergence
of three different factors. The first
is baby boomers, who are now approaching
retirement. The burden they represent is
temporary (although it will last for about 30
years), but it’s substantial. And it’s particularly
hard for the AHV system, the payas-you-go
part. Initially, the baby boomers
put more money into the system than they
took out, which actually was a double-edged
sword in the sense that it masked other
challenges to the system.
Such as …?
Martin Eichler Despite Switzerland’s
high level of immigration, we are facing a
declining population. At the moment, the
population is still rising, but at a fast dropping
rate. Our birthrate is substantially
below the 2.1 children needed to maintain
the size of the population. Already in the
medium term, all the projections point to a
declining population. It may take 10 or
15 more years, depending on migration, until
we reach the tipping point. But it will certainly
happen. To illustrate the problem:
according to a back-of-the-envelope calculation,
it would take about 100,000 additional
net migrants every year of 20-year-old people
to keep the old-age dependency ratio stable.
That would be politically impossible,
Martin Eichler Yes. It means more than
doubling net migration every year. It’s also
very difficult to attract that many people.
Remember that other countries around us
are also facing declining populations as well.
In any event, it’s not a solution. Migration
can help, but it’s not enough to solve the
And the third challenge?
Martin Eichler Increasing life expectancy.
Not only are we getting older, we’re
also healthier and stronger. That’s great,
but it puts pressure on the pension system
in that pensions are paid out for longer.
What role does the low-interest-rate
environment play in the challenges to the
Martin Eichler It’s difficult, of course,
especially for the capital-based pillar.
But we see that as a temporary effect. It
might well last for another few years;
however, we do expect the situation to
normalize at some point.
is chief economist and member of the
board of directors of BAK Basel
Economics AG. He heads up BAK Basel’s
analysis and forecasting, and consults
both within Switzerland and abroad.
He studied Economics at the University
of Constance, Germany, and at the
University of Western Ontario, Canada.
“Particularly for millennials
and other younger
generations, the question
is how long we wait to
react. The longer we wait,
the harder it will hit!”
So what is to be done?
Martin Eichler Particularly for millennials
and other younger generations,
the question is how long we wait to react.
The longer we wait, the harder it will hit! We
do need migration to cover some of the
stress in the system, and higher contributions
to social security are inevitable. Furthermore,
I believe that at some point we will have to
increase the pension age in Switzerland. With
a mix of actions the system can be saved
if we – including the citizens, who will have to
vote on it – want to save it.
What impact do you expect the
changing nature of work to have on
the pension system?
Martin Eichler With less stable kinds of
employment, longer periods of education
or self-employment for example, we probably
need more flexibility, especially with
the employer-backed second pillar. We need
to ensure that different parts of a working
life add up to a substantial pension without
too many holes. But that doesn’t require
a completely new system. I’m convinced that
it can be achieved.
on our map
GLOBAL INVESTOR 1.17 —16
GLOBAL INVESTOR 1.17 —17
Dr. Yoshiyuki Sankai, the founder and CEO of Japanese robotics company CYBERDYNE,
talked to Angus Muirhead, Senior Fund Manager for the Credit Suisse (Lux) Global Robotics Equity
Fund, about robotics, their medical robot suit “HAL” and his vision of an automated future.
INTERVIEW BY ANGUS MUIRHEAD, Credit Suisse
Angus Muirhead: Where did your journey
into robotics start? What first inspired you?
Yoshiyuki Sankai In third grade, my fate
was decided when my mother bought me
the science fiction novel “I, ROBOT” by
Isaac Asimov. From that point on I decided
in my heart that I wanted to invent things
that would bring people great happiness.
In the novel, Asimov talks about three laws
of robotics, the first of which made a great
impression on me: “Robots must not hurt
human beings.” So all through my childhood,
I dreamed of science and robotics and began
creating my own experiments. In my
school graduation paper titled “ 夢 ” (“yume” =
dream), I wrote: “When I grow up I want to
be a scientist and I want to invent and build
a robot in my lab.”
Tell me a little bit about your medical-use
Yoshiyuki Sankai Well, HAL is the
world’s first therapeutic robotic device to
be covered by public health insurance. It is
designed as a robot suit to be worn by
people who are unable to move freely due
to disease or aging, to help them to
walk and assist in therapeutic treatment. Our
technology enables the system to pick up
the neural signals sent from the brain down
to the lower limbs and to respond mechani-
cally as the leg muscles should do. There
are other use cases for HAL, but this
medical use case is our most commercially
And what makes HAL different to similar
systems being developed?
Yoshiyuki Sankai HAL is unique in that
it is the only robot in the world to be approved
for therapeutic medical use. In other
systems, when the exoskeleton moves,
it simply pulls or carries the patient’s limbs
with it, without direct interaction with the
patients’ nervous system. In HAL’s case,
the movement is initiated directly by signals
from the human brain and the resulting motion
is fed back to the brain via the nervous
system. By reconnecting this continuous
feedback loop, there is evidence to suggest
that patients are starting to experience
So the HAL system is now approved in
Japan and the EU?
Yoshiyuki Sankai Yes. Already ten
years ago, back in 2006, we started clinical
research to prepare for the commercialization
of the prototype HAL as a medical therapeutic
device for the Japanese market.
Then we leased HAL systems to a number
of hospitals and clinics and, using the data
gathered from these real-world patient tests,
we received approval for use as a medical
device in November 2015. Then, in September
2016, the first commercial healthcare
medical treatments using HAL finally started.
In the process of getting HAL approved
as a medical device in Japan and the EU,
we formulated a number of rules for the
definition and use of medical robots.
We have now established a number of ISOapproved
Since you first introduced HAL almost a
decade ago, the level of sophistication
has increased tremendously. What
technology changes in the last few years
have enabled these rapid advances?
Yoshiyuki Sankai In the first decade,
the HAL system was a development project
at the University of Tsukuba. Then, since
2004 when we founded CYBERDYNE,
we have taken HAL through an extremely
advanced and innovative development
process to arrive at the robotic therapeutic
treatment device we have today.
What are the key technology challenges you
face today in developing robotics?
Yoshiyuki Sankai There is a long way to
go before the technology that might allow
people and robots and digital data to function
seamlessly together becomes accessible
and applicable to more areas of our >
GLOBAL INVESTOR 1.17 —18
“The future will be shaped
by what kind of technologies
is CEO and founder of robotics company
CYBERDYNE Inc. He is Professor at the
Institute of Systems and Engineering at
Tsukuba University and visiting Professor
of Baylor College of Medicine, Texas.
He has won a number of awards including
the World Technology Award and
Entrepreneur of the Year Award Japan.
daily lives. I think focusing on developing
robots is the wrong starting point. The
focal point should be to think about what
problems we face and what we need to
do to solve specific problems or provide a
specific benefit. With this goal, I believe
CYBERDYNE has already successfully
pushed into an area of technology that no
one else has really touched, and we feel
compelled to follow the course further, even
if it takes us into areas where we currently
have little expertise.
What do you imagine will be achievable in
robotics in the future?
Yoshiyuki Sankai CYBERDYNE will
continue to focus on the use of robotics
beyond traditional industrial robots, in areas
such as lifestyle, healthcare, entertainment,
education and communications. As well
as the therapeutic uses, there are also other
applications of the HAL technology, such
as HAL used by able-bodied people in nursing
homes and on construction sites or in
logistics to enable them to lift heavy objects
or to carry patients from their bed to the
bathroom, for example. Today, you will also
find some of our other robots equipped
with artificial intelligence at Tokyo’s Haneda
Airport being used for cleaning and transport
And how do you think society will benefit
from the advances in robotics?
Yoshiyuki Sankai Robots equipped with
artificial intelligence could become hugely
valuable to our society, as we are living
longer, but at the same time are seeing a
fairly low birthrate. For example, we might
well have robots do our shopping. Furthermore,
it’s also conceivable that there might
be various other robots for the elderly or
infirm to improve mobility, to help people
to wash and bathe and to stay in touch with
relatives and caregivers. In fact, a new
concept which I am developing is to build a
“Cybernic City” incorporating all these
robotic technologies. With this goal in mind,
we have acquired a large piece of land
in Tsukuba City near CYBERDYNE’s headquarters
and are cooperating and developing
partnerships with a large number of
companies and organizations.
Several technologists have voiced concerns
about the risks of developing powerful
artificial intelligence. Do you think these
concerns are warranted?
Yoshiyuki Sankai In the future, it will be
extremely important that we focus on the
human perspective and the ethics of society.
The future will be shaped by what kind of
technologies are developed and how they
are used, and that is why it’s important
to design technology that offers benefits to
society and with the vision of a better
future in mind.
on our map
GLOBAL INVESTOR 1.17 —19
HAL (Hybrid Assistive Limb) is the world’s first cyborg-type robot which enables the fusion of “man” with “machine” and “information.”
When a person wears HAL, the system assists, supports and even augments their physical movement, and over time may accelerate and repair a patient’s
damaged cerebral nerves. Source: CYBERDYNE
First of all, think
“I want to walk!”
When a person
moves the body, he
or she first thinks
about the motions in
his or her brain.
By thinking “I want
to walk,” the brain
signals to muscles
the motions through
Receiving the signals,
In the healthy body,
each muscle is able
to receive signals
destined from the
brain to it and move
as strongly and fast
HAL reads signals.
Signals sent to
muscles by the brain
leak on the skin
surface as very faint
signals, so called
(BES).” HAL is able
to read BESs by only
attaching the originally
detectors on the surface
on the wearer’s
skin. By consolidating
what sorts of
motions the wearer
HAL moves as the
HAL, in accordance
with the recognized
its power units. This
HAL to assist the
wearer’s motions as
he or she intends
and exerts bigger
power than he or she
The brain learns
motion. The mechanism
to move the
human body does not
end up with only moving
muscles. The brain
confirms how the body
moved on what sort
of signals. When HAL
has appropriately assisted
of walking, the feeling
“I could walk!” is fed
back to the brain.
By this means, the
brain becomes able to
learn the way to emit
for walking gradually.
This leads to the
important first step
in walking of the
person without being
assisted by HAL. The
only robot that can
solutions for motions
to the brain is HAL.
Illustration: CYBERDYNE, The Noun Project
GLOBAL INVESTOR 1.17 —21
care by bits
In most of the developed world and increasingly
in emerging markets, healthcare costs are on
a steep upward trajectory. Not only do societies
spend more as they get wealthier, they also
spend more as healthcare moves up on people’s
priority list. In the quest to optimize patient
outcomes and healthcare expenditure, digital
health opportunities play a vital role.
TEXT LORENZO BIASIO, Credit Suisse
Digitization has become a staple of our lives and daily routines
in areas such as news consumption or shopping and
it is also making inroads into health management. With
new tools at their disposal, people are increasingly assuming
responsibility for their health and well-being as well as disease
management. At the same time, insurance companies are eager to
get patient data to price risk. Furthermore, care providers are innovating
and using digital tools to drive better patient outcomes.
Traditionally, the healthcare industry is slow to embrace change,
but to us, this time feels different. With the emergence of remote patient
monitoring solutions, telehealth offerings and the fact that health
education and health management portals are gaining traction, digital
health is visibly reshaping the current standard of care.
Remote monitoring stands out
When looking at the wide range of what digital health encompasses,
remote monitoring strikes us as the area that provides the highest
value added given its utility in managing chronic diseases. Considering
that an estimated one-third of total US healthcare spending goes
toward the management of chronic diseases, the savings potential
that remote monitoring offers becomes evident.
A case in point is the solution Vivify Health provides for patients
with heart failure, a condition that costs the US healthcare system
almost USD 40 billion annually. Almost half of this expenditure is attributable
to inpatient stays, which are costly compared to daily per-patient
costs of just several dollars for stable patients. Vivify’s solution
comprises a tablet (incl. software), two diagnostic devices, plus a
scale. These tools allow doctors and nurses to assess the patient
continuously and detect alarming signs and worsening trends between
regularly scheduled visits. Furthermore, they can even reduce the
number of necessary inpatient visits – in Vivify’s pilot, from over >
GLOBAL INVESTOR 1.17 —22
three monthly visits to fewer than 0.4. Moreover, the tools reduced
very costly emergency room visits by over 70%.
Health advice traveling the distance
Another digital health solution is to provide medical advice at a distance.
In Switzerland, health insurers have long been employing insurance
models that require patients to seek telephone assistance
from an insurance-designated general practitioner. Under such a
model, through the triage of patients by a healthcare professional,
patients can be channeled to the appropriate care setting, eliminating
redundancies in the system and driving savings for the insurer.
Such ideas can be taken much further still. Doctor On Demand,
a USA-based service, provides a showcase of what could become
much more widespread in future. Using any device, the service allows
patients to get counseling from a specialist for most medical and also
some mental conditions. If we assume that such a service is applicable
to about a third of all physician visits at a stated price point of
USD 49 and, as has been reported, that the average person visits
their physician about three times a year at a current all-in price per visit
of USD 150, the theoretical savings amount to over USD 30 billion.
As such services are rolled out in the emerging markets, healthcare
provisioning can change profoundly. Immobile patients as well
as remote areas should benefit dramatically from such offerings as
virtual physician consultations become possible.
Powerful innovation enables self-management
Advances in information technology are also changing medical sensors,
enabling them to shrink in size and become more versatile. One
technology unthinkable without recent advancements in sensor technology
stands out in terms of impact on patients’ quality of life: CGM,
short for continuous glucose monitoring. With the use of extendedwear
(multiple days) CGM sensors connected to a dedicated receiver
or smartphone, diabetic patients can monitor their blood glucose levels
continuously. The significant CGM benefit is that it allows patients
to identify potentially dangerous episodes that they may miss with
traditional one-off measurements using capillary-drawn blood. By involving
a smart device in CGM, patient-specific alert levels as well as
rules for automated notifications based on glucose readings can be
preset (to parents, for instance). Given the magnitude of this innovation,
it is no surprise to read that the technology is reported to have
saved lives. If, as one major medical expenditure survey shows, slightly
less than 20% of diabetes expenditure attributable to emergency
room visits and inpatient stays – which could be, at least partially,
avoided using CGM – the savings potential amounts to more than
USD 10 billion.
Looking ahead, we believe that it is only a matter of time until an
artificial pancreas, that is, a CGM system connected to an insulin
pump, will come to market. There are still some technological challenges
and regulatory hurdles to be overcome, but we are steadily
nearing the emergence of such an artificial pancreas, termed by many
as the “holy grail of insulin therapy.”
Venture funding of digital health companies
In 2015, venture funding of digital health companies amounted to
USD 4.5 billion, or 7% of total venture funding. Although
deal volume was relatively flat, late-stage deals were up 23%.
Source: Rock Health, Digital Health Funding: 2015 — Year in Review
WebMD use on the rise
WebMD user statistics show a steady increase since the inception of
the service. Today, more than 200 million unique users visit the Web site
every month, to access health, nutritional and wellness information.
Users in m
2011 2012 2013 2014 2015
2008 2009 2010 2011 2012 2013 2014 2015
Health literacy is not universally positive
With the advent of health information Web sites like WebMD and services
such as 23andMe (a personal genomics company), people are
increasingly given digital tools that promote health literacy. While we
do believe that health literacy should be an aspiration of every modern
society and, ideally, increasing health literacy should lead to >
GLOBAL INVESTOR 1.17 —24
health issues in
see the foldout map.
“Traditionally, the healthcare industry
is slow to embrace change, but to us, this
time feels different. With the emergence
of new tools, digital health is visibly
reshaping the current standard of care.”
more informed conversations with physicians, our assessment of the
current developments is mixed. Our conversations with physicians
point to some undesirable developments: with the increasingly widespread
availability of health information, it is not uncommon for patients
to arrive at the doctor’s with a set idea about their diagnosis
and even wishes for specific kinds of treatment. Such behavior may
require lengthy explanations from doctors, but there are bigger risks
such as possibly unnecessary diagnostic testing and potentially dangerous
This is not to say that the health information on offer is flawed.
Offerings aimed at improving health literacy are useful – we simply
believe they should be focused on the prophylactic setting, for instance
giving wellness and nutritional tips. When it comes to more
severe diseases, we believe that health information should be accessed
with the guidance of a healthcare professional – a view supported
by the fact that early 23andMe products were banned from
the market by the US Food and Drug Administration, which found the
information to be prone to misinterpretation.
ingly stretched healthcare systems. When used properly, we are optimistic
that digital health solutions can produce winners along the
healthcare value chain – patients, physicians, caretakers, hospitals
and insurance companies. However, in order to succeed, it will be
paramount for digital solutions to be properly and carefully balanced
with tangible and empathic expert advice from an actual physician.
Digital health – a new era
We do believe that we are at the dawn of a new era with regard to
digital healthcare services. Digital health solutions undeniably create
large efficiency gains and convenience advantages across the entire
healthcare value chain. Thus, digital health solutions are key enablers
to drive substantial system-wide savings that benefit today’s increas-
Equity Analyst Healthcare
+41 44 333 14 79
GLOBAL INVESTOR 1.17 —25
The Internet – our
friend and caretaker
The Internet continues to expand. Data collection, management and analysis are growing
exponentially. Many people fear this development, viewing it as an Orwellian risk. However,
the Internet and the Internet of Things also offer ways to find solutions for a better world.
& LIFE SCIENCE
Illustration: The Noun Project
Digitization is spreading into our daily life
The expanding Internet offers the capability to solve not only complex problems, it also can help us to make our world more healthy, efficient,
mindful and secure. Source: Beecham Research Ltd.
GLOBAL INVESTOR 1.17 —26
The title “Ask Mom” is often used for
how-to books that provide tips on
how to treat a cut, how to prepare or
store food or how to remove a stain
from a shirt. In the past, such knowledge was
passed on from generation to generation by
word of mouth. Later on it was written down
and printed in book form. In modern times,
the same information can be accessed and
read on mobile devices or personal computers.
The technological progress achieved
through digitization makes it easier than ever
to save data and ensures that information is
no longer lost. The expansion of the Internet
to mobile devices and to things has led to a
massive increase in data and digital communication.
300 billion tweets have been sent
since Twitter came into being, and every second,
5,000 new ones are added. Whether
one disseminates digital communications or
censors or processes data, it is vital to identify
the best way to read and manage such
Creating a global conscience
“‘Caring’ smart objects
put people and their
needs at the center of
This technology has given rise to a ubiquitous,
all-encompassing communications system
that is self-sufficient and can also provide extensive
benefits to others. Not only does it
grant access to a wide range of knowledge,
it also establishes a platform for creating a
global conscience, as information, opinions
and assessments from around the world become
more transparent and accessible. The
insights gained from social networks could
increasingly contribute to a common awareness
and acceptance of how to make the
world a better place. Politicians and other decision-makers
are well advised to employ the
growing global bank of knowledge for the
good of society and not let it morph into a
kind of big-brother-is-watching-you society.
As online activity is continuously monitored
and measured, there is the inherent danger
of users being monitored and punished for
voicing their views and opinions, etc. At the
same time, however, transparent near-time
user feedback in response to, say, political
events, driven by a regional, or even global,
conscience, can also paint a more accurate
picture of the mood in society and can help
lead to change. A case in point – companies
such as BrandsEye or MogIA, which used
data from social media such as Google, Facebook
and Twitter, successfully predicted the
outcome of the US election, while traditional
polls got the result wrong.
Internet-connected devices look after you
Apart from the Internet’s ability to “care” for
users, there has also been strong growth in
new markets that provide “caring” objects, i.e.,
smart objects that put people and their needs
at the center of their services. If asked what
a caretaker should provide, most people
would probably say they should care for our
physical health and mental well-being as well
as our safety and security. Moreover, a caretaker
should manage communication within
New devices such as Google Home and
Google Assistant could one day become our
new friend and caretaker who looks after the
family. These devices are connected to the
Internet, have a camera, an invisible microphone
with intelligent speech recognition and
loudspeakers. They can tell you where your
keys are (provided they are also connected);
they can answer children’s questions by accessing
the Internet; and they can start playing
your favorite morning music upon request.
Other companies such as Amazon with its
Echo device and Apple with its HomeKit
products aim to provide similar services. They
are vying to become a central hub within our
homes to ensure our health, security and
Internet of healthy things
The supply of Internet-connected health devices
is also on the rise. In 2015, Partners
HealthCare announced a partnership with
GLOBAL INVESTOR 1.17 —27
Samsung Electronics to develop the next
generation of personalized digital and mobile
solutions for health and wellness. In 2016,
Nestlé Institute and Samsung announced
plans to pool their resources to build a connected
health and lifestyle platform that will
interact with everything from smart TVs to
wearables to helping people make healthier
choices. Several fashion firms launched socalled
tech shirts in 2015, i.e., shirts that measure
heart rates, breathing or live biometrics.
Fitbit’s success with its activity and heart rate
trackers is another example of a gadget that
monitors our health. Research and Markets
expects the wearable device market to
grow from USD 23 billion in 2015 to USD
173 billion by 2020. However, selling devices
and apps is only a small piece of the connected
health market. Collecting, analyzing
and managing the data is where the true
potential lies, helping to find better solutions
for our healthcare market.
Internet of mindful and security things
helped create a
With GPS-enabled devices such as the
TrackR Bravo, finding lost keys or bags has
never been easier. If the item is attached to
your key or bag, you can easily locate it using
an app on your phone. With a smart sleep
mask, you can track your sleep using medical-grade
sensors. The tracking enables you
to improve your sleep habits. With a Vigo
headset, you can track your alertness (for instance
when driving long distances by car)
and it can send an alarm if your alertness declines.
When Alphabet (Google) acquired
smart thermostat and smoke alarm maker
Nest in 2014, it approached the ability to capitalize
on the rising demand for home security
the smart way. Nest also provides a Dropcam
that helps to monitor movements in your
home using an Internet connection and live
streams via an app on your smartphone when
you are away. Robots are becoming more intelligent,
too, and can help to keep people in
need of care at home longer by connecting
them to a smart-home Internet caring hub.
The smart-home market is expected to reach
a value of USD 122 billion by 2022 and is
estimated to grow by a compound annual
growth rate of 14% between 2016 and 2022,
according to MarketsandMarkets. “Smart
home” encompasses everything from lighting
and entertainment control to security and access
control to smart kitchens as well as
smart meters and smoke detectors.
For some readers, some of these developments
may invoke visions of George Orwell’s
“1984.” People who oppose the idea of
an interconnected world are typically concerned
about protecting their privacy as well
as the risk of misinformation and manipulation.
However, society can also find ways to
harness the technological progress for educational
purposes and to bring people closer
together. For example, young children are increasingly
using programs such as YouTube
to learn about cooking (and pretty much everything
else). Or consider apps like SideChef,
which provides step-by-step instructions on
how to cook a meal. Such tools can help keep
the family together at dinner time, as children
will want to share what they bake or cook with
the rest of the family. And parents can use
devices such as a Wi-Fi-blocking pepper
grinder to make sure their children cannot
access their smartphones or iPads during
dinner. Viewed from that perspective, there
is indeed a lot to be gained from today’s connectivity.
+41 44 334 56 45
on our map
GLOBAL INVESTOR 1.17 —28
Photo: Vorname Name/Agentur
GLOBAL INVESTOR 1.17 —29
The dark side
In the old PC-dominated IT world, you had a protected private environment that could
be ringfenced with perimeter and infrastructure security, separating it from the outside
world. In today’s globalized world, digitization and the younger generation’s IT consumption
patterns represent a challenge to ensuring a safe cyber environment.
TEXT ULRICH KAISER, Credit Suisse
Back in the 1980s when the Internet
was in its infancy, cybersecurity
was not an issue. Since then, however,
the number and sophistication
of cyberattacks have increased. The topics
making the headlines these days include
the ransomware epidemic, the refocusing of
malware from PCs/laptops to mobile devices,
the deployment of billions of unprotected or
little protected Internet of Things (IoT) devices
or cyberattacks targeting businesses and
governments. According to several sources,
there are at least 70 million different pieces
of malware in circulation worldwide. They are
disseminated in particular by smartphones
and other handhelds. Moreover, at least 70%
of e-mails are spam.
Compared with a few decades ago, our
dependence on the Internet and other networks
for critical services and information has
grown tremendously. Particular growth has
occurred in the mobile Internet-enabled new
types of technology infrastructure such as
power grids, cloud computing, industrial automation
networks, intelligent transportation
systems, e-government and electronic banking,
which are becoming more and more interconnected.
As failure in one technology can
affect other technologies, greater convenience
and efficiency increases vulnerability
to cyberattacks and makes any defense
against such attacks more difficult.
There is a looming risk that cyber-attacks
may cause the Internet to break down. In fact,
if we do not do anything soon, we risk causing
permanent damage to our economy. The
incoming US president Donald Trump said during
his campaign that cybersecurity would be
“an immediate and top priority” once he comes
to power. With an emphasis on improving vital
infrastructure, we therefore expect to see an
increase in federal spending on security, which
should benefit cybersecurity companies such
as Cisco Systems, Palo Alto Networks or
Check Point Software.
Cybersecurity then and now
In the old IT world, you had a protected private
environment that could be ringfenced with perimeter
and infrastructure security, separating
it from the outside world and trying to control
what gets in and out. This approach is now
reaching its limits. Firewalls stop most threats,
typically more than 99%, but unfortunately not
100%. The remaining less than 1% of threats
that still come through appears negligible at
first, but translates into the thousands, as the
total number of threats amounts to millions.
Bad news about cybersecurity is good
news for the IT security industry. We expect
spending on IT security to grow at a much
faster pace than underlying IT spending, which
means it will grab a bigger slice of the cake
going forward. Industry researcher Gartner
predicts that worldwide spending on information
security products and services will reach
USD 81.6 bn in 2016, an increase of 7.9%
from the previous year. Currently, this represents
only about 2.4% of global IT spending,
which Gartner expects to reach USD 3.4 trn.
Over the next five years, Gartner foresees an
annual growth rate of about 8%, which appears
a little light, in our view, given the growing
Preferring prevention over planning
Though many surveys conclude that spending
for cybersecurity is among the top three priorities
of chief technology officers (CTOs),
one can argue that even higher spending is
justified given the significance of cyberthreats.
There is a constraint, however, namely
the associated costs and sometimes even
the willingness to spend money on cybersecurity.
One reason not to spend more is the
lack of a mid-term cybersecurity strategy.
Many companies still adhere to a stop-andgo
policy, which means less spending if there
is no immediate threat or incident and then
panick and invest if there is. This is especially
true if an incident is widely published in the
media, for instance the Sony attack in 2014
and the attack on the US Office of Personnel
Management in 2015. As soon as the security
problem is fixed, however, spending is
usually reduced again.
Another reason for the spending restraint
is that many CTOs tend to opt for preventive
measures when planning their security strategies,
a trend poised to continue in years to
come. However, reality looks different, as preventive
measures have proven weak in >
GLOBAL INVESTOR 1.17 —30
“Bad news about cybersecurity is actually
good news for the IT security industry.”
Companies are spending
most for network security
Security and vulnerability management, and
network security are the fastest growing
segments within IT security. Corporate endpoint,
and Web security are getting disrupted by next
generation solutions. Source: IDC, CS estimates
in USD bn
Security and vulnerability
Identity and access management
blocking cyberattacks. As a result, many organizations
have adopted the detection-and-response
approach to strengthen their security.
New trends in cybersecurity
We expect security technologies such as security
information and event management
(SIEM) and secure Web gateways (SWG) to
evolve. Organizations are likely to increasingly
focus on detection and response, because
taking a preventive approach has not been
successful in blocking malicious attacks so
far and probably will not be successful in the
future. Thus, businesses should balance their
spending and include both.
We can imagine security spending to
evolve to become more service-driven as businesses
continue to struggle with an overall
lack of cybersecurity talent in the industry.
Managed detection and response (MDR)
is growing as organizations are faced with
having to use both technology and human
expertise to pinpoint risks and improve the cyber
environment. This is especially relevant in
addressing insider threats and targeted advanced
Hackers wanted – high salary reward
The purchase and implementation of new security
technologies is vital to protect businesses,
and so is the development of cybersecurity
skills in employees, which are not
reflected in the Gartner estimates and come
as additional costs. These are justified by a
shortage of skilled security professionals,
which is both dangerous and expensive since
it leaves businesses vulnerable to attack, resulting
in reputational damage and data loss.
The most highly specialized technical skills
are the ones in greatest demand and claiming
high salaries. Businesses are seeking professionals
with expertise in software development,
attack mitigation, intrusion detection,
network monitoring and other areas of cybersecurity.
They need not look far: convince
hackers to change allegiance, vindicate them
and use their skills to maintain a safe cyber
environment. Hackers are motivated by a multitude
of reasons, such as profit, protest or
simply challenge. Another reason, and one
that can be used for the good, is to evaluate
system weaknesses to help formulate defenses
against potential hackers.
+41 44 334 56 49
GLOBAL INVESTOR 1.17 —31
The age of
The invention of bitcoin in 2009 ushered in the age of
cryptofinance and promised an end to the problems associated
with physical cash. Although the hype around bitcoin and
blockchain – the public ledger that records bitcoin transactions –
is now receding, the next generation of cryptofinance technologies
is already moving ahead and applying lessons learned.
INTERVIEW BY CHRISTINE SCHMID, Credit Suisse
Christine Schmid: Tell me a bit
Johann Gevers The idea of Monetas
comes out of my desire to do something that
helps the world work better, not through
politics but through technology. I thought
long about what kind of technology would
make things better. I came to the conclusion
that the financial system is at the center
of everything, and that it is too centralized,
which creates dangerous risks and instability,
and holds back social progress. We
saw that during the 2008 financial crisis.
Moreover, the problems associated with the
crisis have not been solved. In fact, things
have gotten worse. We have some measure
of temporary stability, but the problems
have gotten bigger.
In what way?
Johann Gevers One key aspect is that
today’s financial system is too centralized:
there’s too much power concentrated in too
few hands. And that can lead to abuse of
power or massive suffering if the centralized
system fails. So at Monetas we are building
technologies to help transition the financial
system toward greater decentralization –
the democratization of finance. Our solution
belongs to the category of “cryptofinance” –
the industry term for financial technologies
that use encryption algorithms to ensure
that financial transactions are private and
What exactly is your solution?
Johann Gevers We’ve developed a technology
that gives the user more control.
It’s a contracting platform that gets around
some of the disadvantages of existing
cryptofinance technologies and allows you
to complete transactions in a fraction of
the time and extremely cheaply. This is especially
important for retail transactions.
Let’s backtrack a bit to the existing
cryptofinance technologies. Most people
still don’t know what they are.
Johann Gevers The core invention in
cryptofinance is true digital cash which –
unlike physical cash or digital music – cannot
be copied or counterfeited. This transition
from traditional physical cash to modern
digital cash brings tremendous efficiency
gains. The Bank of England, for example,
has calculated that switching from physical
cash to digital cash will generate a sustained
3% boost to GDP. That is massive,
and the efficiency and productivity gains are
even greater for developing countries.
Where does blockchain fit into this scenario?
Johann Gevers A blockchain is a distributed
database – a public ledger for digital
transactions. It’s a so-called consensus
system. In other words, it’s a way for a lot
of different people or, more specifically,
a lot of different computers all over the
world to confirm transactions by coming to
a consensus about them. If you want to
execute a transaction in a consensus system,
all these computers have to vote and agree
on it. That makes a consensus system
resistant to political influence and corruption,
as well as robust against technological
errors and failure, which is a big advantage.
Johann Gevers Consensus systems
such as blockchains are good for safely
storing high-value assets and information.
Commercial registers, which record business
entities and real estate ownership, are
one example. Secure electronic voting systems
And the disadvantages of blockchains?
Johann Gevers The downside is that
consensus systems are very expensive to
maintain and to run. In the bitcoin blockchain,
for example, the full cost of a transaction
is about five dollars. That’s a lot
of money. Moreover, let’s say you go to Starbucks
or to your grocery store and want to
buy something. When you’re at the checkout
counter, you don’t want to wait ten
minutes to several hours for a global network
of computers to reach consensus before
the transaction is approved. For retail transactions
you need a system that’s efficient,
fast and cheap – and that scales to millions
of transactions per second. The bitcoin
network can only handle a maximum of
7 transactions per second.
Which brings us back to
Johann Gevers Right. Contracting platforms
such as Monetas can execute
transactions in milliseconds, at a cost of
less than 1/10,000th of a cent, and
can effortlessly handle the entire world’s
transactions in real-time. This makes >
GLOBAL INVESTOR 1.17 —32
Photo: Thomas Eugster
“If you are restricted to
physical cash, you can only do
GLOBAL INVESTOR 1.17 —33
them ideally suited for retail transactions.
And by integrating contracting platforms
with consensus systems, you can have the
best of both worlds. You can securely store
your assets in a consensus system, and
efficiently trade those assets in a contracting
How does the Monetas platform work?
Johann Gevers In the Monetas system,
only the transaction parties need to agree,
then the transaction is completed. You don’t
need the slow, expensive agreement of
millions of unrelated parties, the way you do
in consensus systems. The first application
of the Monetas technology is a mobile
payment system. Anybody in the world can
download our software onto their mobile
phone for free and do transactions with
anybody else who’s got our software. Users
load digital cash onto their mobile phone
at an exchanger, such as a kiosk or ATM or
bank, and can then pay conveniently from
their mobile phone. The great thing about
our platform is that it is open, not locked
into any provider or device. So you can
do transactions with anyone, regardless
which mobile phone provider they use,
or which country they’re in. You don’t even
need a bank account. So our system is a
great solution for the 80% of people in
Africa who have no bank account. And our
transactions are far cheaper than any
other system on the market. In fact, they’re
even cheaper (and more secure) than
physical cash. Physical cash costs the
economy about 1–2% of GDP in developed
countries, and a stunning 5–7% of GDP in
developing countries. Switching to digital
cash will provide a tremendous boost to our
Has Monetas gone beyond the
Johann Gevers We launched a successful
pilot of our platform two months ago
in South Africa. Our partners are very happy
with the results and are now planning
to roll out our platform countrywide to over
1,000 locations, as well as to further
countries in Africa. So this is a very exciting
time for us.
Looking down the road, who stands
to benefit most from cryptofinance
Johann Gevers Well, very clearly, consumers
are going to benefit immensely.
These technologies will enable user-friendly
services that go far beyond what we have
today. You’ll be able to make transactions
“The idea of
of my desire to
the world work
is founder and CEO of Monetas, founder
of Crypto Valley, and founder and president
of the Digital Finance Compliance
Association. He is an entrepreneur with
over 20 years’ experience in business,
finance and technology, and has served
as strategic advisor to companies across
diverse industries, including awardwinning
technology start-ups. Johann is
a visionary thought leader in the fintech
space and was recently rated as one
of the Top 100 most influential finance
leaders in Switzerland.
and safely store your money without having
to remember passwords and without having
to carry around keys or electronic cards.
And you’ll be able to do it all on your mobile
phone, with better security than traditional
banking (including cloud backups).
By connecting billions of unbanked to the
global economy, these technologies will
enable everybody in the world to generate
wealth and improve their quality of life far
beyond what is possible today.
Today people are excluded from the
Johann Gevers Yes. Billions of people –
more than half of the world’s adults – have
little or no access to formal financial services,
and do almost all their transactions
with physical cash. If you are restricted to
physical cash, you can only do face-toface
transactions. That means you are part
of a very small economic network, which
severely limits your ability to create wealth.
So poor people stay poor. One of the fundamental
requirements for generating
wealth and improving one’s quality of life is
being part of a large economic network.
Today, even in poor countries, virtually
everyone has a mobile phone. Our mobile
platform gives everyone with a mobile
phone access to the world’s most advanced
financial services, and thus dramatically
boosts their ability to generate wealth.
People will use their rising wealth to improve
their healthcare, education and quality of
life in general.
GLOBAL INVESTOR 1.17 —35
a roof over
Rapid urbanization in the developing economies and demographic changes in the
advanced economies are two of the dominant trends the global economy is facing.
Factors such as migration to the cities, population aging, increasing incomes and
the growing middle class in the emerging economies will have an impact on how we
live and what our housing requirements are.
TEXT BY FABIAN WALTERT, Credit Suisse
Living in an anonymous society
comes with a loss of community spirit.
Co-housing arrangements seek
to bring back some of the benefits of
small villages in an increasingly
Due to urbanization, increasing
incomes and mobility, it has become
rare that several generations
of a family live under the same roof.
Thus, the benefits of this arrangement
are disappearing. One initiative
to rebuild social networks similar
to families is multigenerational
Securing housing affordability
and preventing segregation is seen
as crucial for growing cities that
grapple with rising land prices
and growing land scarcity. A promising
approach is to build small
and affordable micro-apartments.
GLOBAL INVESTOR 1.17 —36
Population growth in the 21st century
mainly affects cities that are
successful in attracting people by
offering them job opportunities, decent
healthcare and affordable housing. Cities
in Asia, Africa, Latin America and the
Middle East are expected to grow at a higher
pace, mainly driven by people seeking a better
life and hoping to become part of the rising
middle class. However, urbanization is not
only a phenomenon of the emerging economies.
Cities in the advanced economies are
also growing, albeit at a slower pace. London,
for example, is expected to reach a population
of over 10 million by 2031, an increase
of 15% compared to today. It is expected that
by 2030, 41 such megacities will exist, up
from 28 in 2015. Around 12 of them will be
situated in emerging economies. The United
Nations is even predicting the advent of the
first so-called gigacity (more than 100 million
residents) in China by 2020. This trend will
take 6.3 billion people to global urban centers
by 2050, an increase of 75% from today, with
two out of three residents around the world
living in urban areas by then.
Efficiency and focus on affordability
The strong flow of people to prosperous cities
is a result of the economic benefits such
cities offer. However, attracting more and
more people is going to put pressure on infrastructure
and land prices, further lifting
prices of urban real estate and thus reducing
its affordability. Furthermore, the stronger
competition for space will increase urban
density. One answer to that development is
to reduce the size of apartments. This effect
is already visible in certain megacities such
as Tokyo, where apartments today are 14%
smaller than a decade ago. Thus, the main
challenge for residential developers will be to
find out how they can use limited space more
efficiently and in an affordable manner.
New and different types of housing
Another key challenge for nearly all countries
will be the demographic shift that will fundamentally
affect the demand structure for
real estate. According to the United Nations,
the share of people aged 60 or older will rise
by 2.8% per annum from 2025 to 2030.
While the developing economies will have the
youngest population, they will also record the
fastest pace of population aging. The growing
urban middle class of the emerging economies
will increase demand for housing both
in terms of quantity and quality. Meanwhile,
the aging baby boomer generation in the
advanced economies will require the development
of new housing alternatives. An increase
in the share of older people will
change not only the way communities organize
services so that care is more accessible,
but also the cultural view of aging to make
sure that the older generation is integrated in
Shifting demographic trends will likely
create a strong need for new and different
types of housing. As the elderly tend to be
healthier than in the past, many do not consider
nursing homes an attractive alternative
to their existing homes. At the same time,
increasing mobility – a further megatrend –
tends to increase the spatial distance among
family members. Thus, senior citizens are
likely to increasingly search for alternative
housing that is designed to accommodate
their changing needs as they grow older.
Answers to the challenges
These two megatrends – urbanization and demographic
shift – will result in several challenges:
scarcity and unaffordability of housing,
lack of accessibility of services for families
and the elderly and loss of communal
spirit. The search for answers to these challenges
is still going on. However, the real estate
industry and a multitude of local citizens’
initiatives are suggesting possible routes in
a variety of alternative housing projects that
are emerging around the globe. Among the
most promising of these approaches are: micro-apartments,
and co-housing. All of them address some of
the challenges emerging on the global housing
market and could serve as future housing
Real Estate Analyst
+41 44 333 25 57
GLOBAL INVESTOR 1.17 —37
Photo: Jeremy M. Lang
The Pacifica Cohousing community in Carrboro, North Carolina. Co-housing offers the benefits of small villages in an urbanized world.
Residents inhabit private spaces but share goods and services within the community.
Originated in Denmark in the 1960s and then picked up by
many regions all over the world, co-housing describes a
communal way of living where people inhabit private spaces
accompanied by shared facilities for the community.
The management of these communities is not hierarchical.
The inhabitants decide demo cratically by considering the
desires and needs of all residents. Life in a co-housing
community is characterized by different shared activities
within the community (e. g. group care, shared meals,
support in shopping, social interaction, etc.), where participation
is desirable, but not mandatory. These communities
are very heterogeneous in their purposes and objectives,
and they can be found in urban, suburban and rural
areas. For example, Older Women’s Co-Housing in Great
Britain seeks to establish a community for women aged
over 50, in what can be seen as a special form of multigenerational
housing. Others, like Pacifica Cohousing in
the USA, put more emphasis on creating communal
living with a focus on sustainability. The main idea behind
the co- housing movement is to find answers to the changing
needs of people around the world rather than to
provide a solution for the problems associated with the
demographic shift. The main economic advantage of
co-housing is the opportunity to share goods and services
within the community. People may also enjoy the community
spirit otherwise lost in today’s anonymous urban
areas. Yet monetary participation and cooperation among
participants is forced, which can lead to friction within
the community. However, co-housing is likely to become
increasingly relevant as a housing alternative, bringing
back some of the benefits of small villages in an increasingly
GLOBAL INVESTOR 1.17 —38
As incomes and mobility increase, it has become rare in
many countries for multiple generations to live under the
same roof. Thus, the benefits of this traditional housing
arrangement (such as free care for children and the
elderly) are disappearing. In addition, the growing number
of elderly increases public care costs. An initiative to rebuild
the social network similar to families was taken
in Germany with the so-called “Mehrgenerationenhäuser”
(multigenerational houses). The idea behind such
houses is to create an environment that accommodates
the elderly, children and nurseries, where young and old
can support each other. The “Lighthouse” in Berlin is
one example of a multigenerational house where 29 adults
aged from 26 to 70, 14 children between 2 and 13 years of
age and several pets live together, creating a family of
choice for many of them. They epitomize the very idea of
the sharing economy, as the senior residents, for example,
read books to the children and the teenagers train the
elderly to use computers. Multigenerational living is not
only a socializing project for the older generation. It also
helps provide new housing options for open- minded
younger people that are priced out of the regular housing
market and are happy to find an affordable place to live.
A more extended form of multigenerational housing can be
found in intergenerational living projects, where nursing
homes and nurseries exist under one roof. Such arrangements
are expected to significantly reduce the cost of care.
While multigenerational housing may be considered a
niche model rather than the global solution to the housing
problems associated with demographic change, it is a
promising model for the future.
The Murundaka Cohousing Community in Melbourne, Australia, is an example of multigenerational housing.
The idea is to bring together young and old in an environment where they can support each other, at affordable cost.
GLOBAL INVESTOR 1.17 —39
The Nakagin Capsule Tower
in Tokyo, Japan, was an
early experiment in microapartments.
than a big living room, these
tiny dwellings offer a solution
to the twin problems of
sustainability and affordable
housing in city centers.
Photo: Manakin / Getty Images
Photo: Chris Grose
Small, often sustainable and, most importantly, affordable.
This is how micro-apartments or tiny houses can be described.
The idea is to downsize apartments to 20 to 30 square meters,
in some cases even less, and making access to affordable
housing in city centers and near workplaces possible. One
of the first and most radical buildings with micro-apartments
was the Nakagin Capsule Tower built in Japan in the 1970s.
It contains 140 stan dardized capsules of less than nine square
meters each. Meanwhile, with cities growing exponentially
and land becoming more scarce and expensive, the idea of
micro-apartments is gaining relevance again. In New York City,
for example, a project called Carmel Place was finished in
2016. It is the first modern building in New York where the
size of apartments is allowed to be smaller than defined by
regulation, featuring 55 micro-apartments in a nine-story
building. The apartments are furnished, every room is cleaned
once a week and there are additional amenities offered to
the tenants such as a gym. Critics argue that people will feel
lonely and isolated in such apartments, that apartments tend
to become smaller while rents stay the same and that such
small living quarters may create the slums of the future by attracting
low-income tenants. However, micro-apartments
allow young people, professionals, service-industry workers
and retirees to live in central, otherwise unaffordable locations
and thus counter segregation trends.
Photo: Vorname Name/Agentur
GLOBAL INVESTOR 1.17 —40
Photo: Bram Belloni
Mid-level white-collar jobs are disappearing, says Randstad CEO Jacques van den Broek. The result is a very different job market.
GLOBAL INVESTOR 1.17 —41
Labor in the
Numerous factors that include automation and robotics, longer life expectancy,
underfunded pension systems and younger generations who think differently are changing
the supply and demand for jobs as we know them.
INTERVIEW BY RETO HESS, Credit Suisse
Reto Hess: Digitization – specifically
information and communications technology
(ICT) – is having an ever greater impact
on our daily lives, including our working lives.
How big a change are we looking at?
Jacques van den Broek We recently
published the 2016 edition of our “Flexibility
@work report” on the future of work in the
digital age, focusing specifically on the
consequences we see nowadays of digitization.
There are two trains of thought here:
one, more fatalistic, is that about 40%
of jobs are disappearing. But the second,
espoused in a separate report put out
by the OECD in May, maintains that 50%
of jobs would change naturally in any event.
What do you notice in terms of what your
clients are asking for today?
Jacques van den Broek People get fixed
on an ideal profile, which tells you right
away that they don’t know much about the
labor market. For example, a client might
wish to have a person in their mid-30s with
relevant skills who has been successful
at your main competitor but is looking for a
new challenge in your company. It’s not
going to happen. Increasingly we try to steer
companies away from their ideal profiles
in the direction of younger people, older
people or maybe people from another country.
Have you observed any shift in demand
from knowledge-based jobs to more
creative or socially oriented jobs as a result
of increasing ICT and automation?
Jacques van den Broek No. It’s a bit
early. If you’re talking about artificial intelligence
(AI), for example, the highest level
of artificial intelligence that we see today in
our sector has the intellect of a two-year-
Jacques van den Broek
is CEO and chairman of the Executive
Board of Randstad Holding nv. He
graduated in law at Tilburg University in
the Netherlands and briefly held a
management position at Vendex International
before joining Randstad as a
branch manager in 1988. He joined the
Executive Board in 2004.
old. So in 78% of cases, AI now recognizes
a picture of a cat as being a cat. When it
comes to selecting a personal profile – and
certainly that of a knowledge worker –
it will be quite a few years before technology
can make that choice. AI first has to reach
“technological singularity,” which is when
machines surpass human intelligence. If this
happens, scientists predict that cognitive
professions could be improved and maybe
That said, the report you mentioned at
the beginning does state that progress in
ICT is leading to job polarization, where
there is demand for high-tech, high-paid
jobs and low-tech, low-paid jobs,
but the jobs in the middle are losing out.
What is going on there?
Jacques van den Broek You have nonroutine
tasks at the top and low ends of
the labor market. A gardener does a nonroutine
task that cannot be automated.
A nurse does non-routine tasks that can
only partly be automated. What is interesting
is that mid-level white-collar jobs, which
previously were highly regarded, are very
quickly disappearing. And that’s an issue,
because most of the social systems >
GLOBAL INVESTOR 1.17 —42
“People become fixed on
an ideal profile, which tells
you right away that they
don’t know much about the
Jacques van den Broek
Jacques van den Broek If you’re talking
ICT professionals, their main reason for doing
a job is the attractiveness of the project.
In addition, and especially if they’re young,
they are increasingly reluctant to leave
home. And these are jobs that can be performed
remotely. So yes, the workforce
of the future – in addition to being 18 to 68,
will be partly remote and partly freelancers.
Indeed, we think that between 30% and
35% of the total workforce will have a job
that is not fixed.
In terms of generations, you have a
programin the Netherlands that helps
Jacques van den Broek You’re talking
about +Power. Which is not necessarily
to say that old is ideal. In the Netherlands,
we are heavily advocating stepping away a
bit from the bias of ideal profiles and instead
look at what people bring to the marketplace.
But it’s early days. It’s still a
hard sell for us to get older people back into
Why is that?
Jacques van den Broek Biases are one
reason. Another is that owing to pay scales
and pay models, over time people outprice
themselves in the labor market. It’s also
linked to demand. The last time we were
really creating different profiles was in 2007,
which is also the last time we saw serious
economic growth in Europe. Ten years ago!
Once growth returns, clients will lose their
reluctance. Right now, people are thinking
short term; but in the long term, look at
the demographics. Clients need to be open
to new profiles anyway. So do employees.
When people lose their job, the first thing
they do is look for the same job that just
disappeared, which is always tough.
Employers and employees have a joint rebuilt
just after the Second World War –
pensions, healthcare, education – hinge on
a middle class. And that needs to change.
We’re looking at a different labor market.
What can be done to address the problem?
Jacques van den Broek Companies
need to do mid- to long-term planning to
see how their workforce can change. Countries
need to create proactive labor market
policies. If, as a country, you create a STEM
(science, technology, engineering and medicine)
hub – a knowledge hub – like the
Rust Belt in the USA or the Eindhoven area
in the Netherlands, for every STEM job
you attract, you get 2.5 to 4 low- to mid-level
jobs surrounding this activity for all sorts
of reasons. Canada, for example, attracts
1% of its total workforce almost every year
based on a very clear agenda. Europe has
no proactive labor market policy. And therefore,
the people who want to come here
are not necessarily the people we need.
How is your business model
at Randstad evolving?
Jacques van den Broek A few things
are happening. First, labor markets are increasingly
mismatched, both on a country
level and internationally. There’s no real
scarcity of people, but people live in the
wrong places. So we see a role for us in allocating
work around the globe. Of course,
this needs to be facilitated by governments
and accepted by clients. But eventually,
there will be no choice. We also see a much
more diverse workforce in terms of age –
18 to 68, for example – and more made-tomeasure
arrangements at work because
not everybody will opt for a full-time job. So
we see a role for us in creative workforce
Do you see much of a trend
sponsibility to safeguard employability.
We start a conversation to redefine their
competencies toward different jobs that are
available in the labor market.
What happens when you add millennials
into the labor market mix?
Jacques van den Broek You see slight
differences. Millennials are concerned
about a sense of purpose and work/life balance.
They want to work for start-ups
and small companies. As an employer, you
have to think about how to attract this
group. There is still quite a divide between
what companies think are their unique
selling propositions and what people are
looking for in the workplace. We believe that
adapting to the needs of the new generation
will be key in attracting the right talent.
As a candidate, is it an advantage
for me to be on social networks?
Jacques van den Broek Of course. If you
are unknown, it’s impossible for us to find
you. In the old days, when people came into
my branch, I’d say to them, let’s stay in
touch. Because if I have not found something
after two weeks, then all the candidates
will have come in. It works roughly the same
in social media. If you want to send a very
subtle sign that you’re looking for a job,
change your profile picture on Facebook.
GLOBAL INVESTOR 1.17 —44
For many adults, driving is associated with freedom. In many industrialized countries,
however, today’s young people are using cars less and less. We look at what caused
this trend and whether it is a temporary or permanent phenomenon.
licensed drivers aged
Source: US Department of Transportation,
Swiss Federal Statistical Office
Photo: macida / Getty Images
GLOBAL INVESTOR 1.17 —45
car used to be seen as a status
symbol, associated with freedom
and adulthood. This appears to no
longer hold true. In recent years,
there have been signs of diminishing interest
in cars among young adults in industrialized
countries such as the USA, Norway, the
Netherlands, UK, Germany and Japan. This
trend, which began in the 1990s, first manifested
itself in fewer driver’s licenses among
young adults compared to previous generations
at the same age. In the USA, for instance,
the percentage of licensed drivers
aged 20 to 24 years declined from 87.2% in
1994 to 76.7% 2014. In most countries, this
decline was accompanied by a general decrease
in car use, as evidenced in a lower
number of daily car trips and daily miles traveled
by car among young adults. While in
some countries, for instance Germany, young
adults are using alternative means of transport
such as trains and bicycles, in the USA,
travel demand among the young overall has
The drivers of changes in mobility
There are two fundamentally different theories
to help explain these changing mobility patterns.
The first is based on socioeconomic
factors, such as length of education and the
age of marriage, which have changed considerably
in recent years. The significant rise in
the economic return on education has resulted
in higher school enrollment. This trend was
additionally fueled by the recent recession. In
the USA, college enrollment jumped significantly
more than the secular uptrend, since
people with a low level of education were encouraged
to continue their education to increase
their chances of finding employment.
The proportion of 25- to 30-year-old Americans
with college degrees increased by four
percentage points between 1995 and 2009,
whereas the employment rate of the same
cohort decreased by nine percentage points.
This pattern can also be observed in most
OECD countries. Due to more years spent on
education, the age when people enter the job
market has increased, which implies lower or
no income during the student years and delayed
marriages and parenthood. If the reason
for the decline in car use is lower income in
younger years and postponed family formation,
then young adults are likely to travel more
frequently by car as they get older and settle
down. This theory is summarized in a phrase
coined by a Netherlands Institute for Transport
Policy Analysis report on the changing
mobility behavior of young adults, “not carless,
Preferences reshape mobility needs
The second theory suggests that today’s
young adults have different attitudes and mobility
preferences than previous generations.
Hence, the decline in car use is also the result
of generation-specific factors. This theory is
supported by statistics on young adults in Germany,
for instance, who despite car ownership
use their cars less often. One possible reason
for this change in attitudes is information and
communication technology, which substitutes
physical travel with virtual mobility. Much of
the freedom car ownership grants, for example
access to information and products, catching
up with family and friends, is today made
possible by smartphones, online shopping and
social media. A further change of attitude,
which is related to cars being seen as a status
symbol, is the transition from ownership
to sharing. Today the car is seen as a useful
tool that can be borrowed when needed, similar
to streaming music instead of buying a CD.
This trend is confirmed by a global rise in car
sharing. From 2006 to 2014, the number of
members of car sharing networks globally increased
from 346,610 to 4.8 million. In the
USA alone, the car sharing market is forecast
to reach 3.8 million members by 2020 (1.3
million in 2014).
Conclusions and implications
Most research studies show that the decrease
in car ownership is most likely caused by a
combination of the above factors, but predominantly
by socioeconomic ones. The social
factors outlined earlier, such as the trend toward
longer education and postponed family
formation, in conjunction with a lower income,
have created a situation in which young adults
are less inclined to use or buy a car. However,
once young adults get older, their interest in
cars is likely to increase. The impact of virtual
mobility and smartphones on mobility is
probably not quite as important since these
technologies became widely used after the
use of cars began to diminish. While a shift
away from car ownership to sharing could impact
the auto industry as personal car sales
decline, this effect could be partly offset by
increased sales of shared vehicles. Indeed, a
report by McKinsey on the perspective of the
automotive industry concludes that a shift toward
shared mobility could lead to lower
growth in global car sales. However, global
car sales are expected to continue to show
positive growth of around 2% p.a. by 2030.
Based on these arguments, the change in mobility
behavior will likely pose a challenge, but
not a severe threat to the auto industry.
+41 44 333 92 83
GLOBAL INVESTOR 1.17 —46
Sustainability is a key concern for the millennials generation.
Companies have to adapt processes and production practices to
make their products sustainable and thus seize the opportunities
this rapidly growing generation of consumers creates.
The millennials generation (people
born roughly between the 1980s
and sometime in the early 2000s) is
the most sustainability-conscious
generation. Recent studies from Nielsen and
Deloitte show that millennials are most willing
to pay more for products and services seen
as sustainable or coming from socially and
environmentally responsible companies. As
millennials are a rapidly growing consumer
market, and an influential one, we look at how
companies evolve to bring them on board,
particularly how this concern about sustainability
affects products and production in various
Fishery shows the way
Human rights violations in Asia’s fish, prawn
and shrimp farms have attracted widespread
media coverage. A major newspaper investigation
in 2014 revealed that CP Foods, the
world’s largest prawn farmer, had bought fish
from Thai suppliers operating or buying from
fishing boats manned by slaves. The fish ended
up on the shelves of leading supermarket
chains such as Walmart, Carrefour, Costco
and Tesco, forcing companies to quickly react.
Within a week, Carrefour decided to stop purchases
from CP Foods, and CP Foods issued
a statement condemning slavery and committing
itself to behave responsibly under the
monitoring of independent non-government
The sustainable seafood movement that
began in the 1990s highlighted the impact of
overfishing or destructive fishing methods on
the environment. Social marketing through
ecolabel and awareness campaigns is helping
consumers to make informed choices potentially
contributing to the conservation of the
environment. Ecolabeling consists of evaluating
the production process with set environmental
standards by independent third parties.
If the process fulfills requirements, the producer
or marketer can use the ecolabel in its
marketing and the consumer knows that the
product was produced sustainably. Producers
can often obtain premium prices for these
Sustainable supply chains are key
For the seafood industry today, this means
that companies have to guarantee sustainable
seafood, i.e. only harvesting species of fish
that are in abundant supply, caught using environmentally
friendly methods and respecting
Companies are also realizing that building
a sustainable supply chain has the potential
to bring new clients and success. Tetley Tea
(Tata Global Beverages) is growing tea sustainably
and its campaign where smallholder
farmers and tea estate workers post items
about their daily lives and work and communicate
with customers has been a great success.
Tata Global Beverages first identified
the need to develop a sustainable supply chain
following disruptions in availability and prices
of its tea supply. It now seeks to certify an increasing
part of its tea supply under the Rainforest
Alliance certification, which meets environmental,
social and economic standards.
With more food needed to feed a growing
population and ever-increasing environmental
challenges ranging from water scarcity to herbicide
resistance, the food and beverages industry
is leading the way to help set standards
for sustainable agriculture. Nestlé and Unilever
are among them. Unilever reported faster
growth for its brands with a sustainability purpose
compared to the rest of the business,
and these brands contributed nearly half of
the firm’s total growth in 2015. Nestlé has set
specific requirements for palm oil, paper and
board, sugar, soy, cocoa, coffee, diary, fish,
seafood, meat, poultry, eggs, vanilla and hazelnuts,
and sources 43% of these commodities
from sustainable sources in 2015.
More transparency in the apparel industry
After the tragic collapse of the Rana Plaza
factory building in Bangladesh in April 2013,
many global fashion companies reacted and
signed the Bangladesh Accord with the Bangladeshi
government and workers’ trade
unions to make factories safe, and global
brands agreed to monitor how the factories
supplying their goods are run.
The difficulty is that the fashion industry
constantly moves its supply chain to new locations
and suppliers use unapproved outsourcing.
Recently, a BBC investigation revealed
unethical practices in the Turkish textile
industry, involving child workers. The companies
involved claimed these practices were
contrary to their code of conduct and that they
happened in unapproved source factories.
As with the food industry, raw materials
such as cotton or processes such as dyeing
can be performed in a sustainable way. Fair
trade cotton labels appear on garments or are
developed as lines of products.
GLOBAL INVESTOR 1.17 —47
To date, the industry still lacks transparency,
but fair cotton standards and labels have
emerged and companies have developed
governance standards to foster sustainability.
In the future, we are likely to see new brands
emerge that will reinvent the business model,
using recycled or recyclable materials, or better
Reshaping the automotive industry
If we apply sustainability to the automobile industry
and the fight against climate change
and pollution in this case, we can expect millennials
to favor electric cars over diesel cars
and shared cars over owned cars.
The emission scandal involving Volkswagen
in 2015 has changed the automotive industry.
Traditional automakers are in private
discussions about the end of diesel in ten
years. Stricter emissions testing leaves no
choice for the traditional carmakers but to engage
in electric cars. Developments in technology
companies such as Google or new entrants
such as Tesla are pushing car companies
to already act today. This year, the manufacturers
have revealed ambitious electric
auto development programs. Daimler raised
its capex program at the start of the year and
will develop premium electric cars, which is a
segment dominated by Tesla at the moment.
Continental, a supplier to German original
equipment manufacturers (OEMs), also just
announced a step-up in capex. Volkswagen
has announced that, by 2025, 25% of its vehicles
will be electric. BMW was among the
first to launch electric vehicles. Companies
have recognized the need to spend money now
and in the years to come.
Autonomous driving is another development.
More and more features are being added
to cars, from autonomous parking to semiautonomous
driving. While legislation hurdles
still have to be passed, we can envisage fully
autonomous driving becoming a reality in the
next decade or so. Given that millennials have
already adopted sharing behaviors, autonomous
driving will facilitate the development of
the sharing model for cars. Again, traditional
OEMs have recognized this development and
are acquiring companies in the sharing car
market to offer such services themselves.
Growth through sustainability
economy. We see spending diverted away
from traditional retail products. The sportswear
industry is benefiting strongly as sports
items have become part of everyday wear in
the search for health and wellness. Eating
smart and from organic or local sources instead
of eating food produced through chemically
polluting-intensive agricultural practices
or industrial processing has led to the development
of specialty grocers such as Whole
Foods or Sprouts Farmers Market. The traditional
food retailers have also evolved to address
this trend, and have captured a bigger
share of the natural/organic industry in recent
years. Smaller brands are appearing in the
staples industry and gaining market share. In
the healthcare industry, millennials are embracing
alternative medicine rather than conventional
medical treatments and prescription
drugs. Natural remedies and alternative medicines
feel safer and cleaner and are more in
line with millennials’ values.
Millennials are an influential and rapidly
growing consumer market. Established industries
must now adapt their business models if
they want millennials on board. Companies
must deliver good social and environmental
performance and engage in sustainable practices
or their future growth could be at risk.
New companies are being created to embrace
+41 44 333 12 56
of consuming leads to
the development of
the sharing economy.”
More generally, this search for sustainable
behavior is pushing millennials to adopt new
consumer habits, thus opening up new growth
opportunities. Sharing instead of consuming
is leading to the development of the sharing
GLOBAL INVESTOR 1.17 —48
FEEDING FUTURE GENERATIONS
How weather affects agriculture and what IBM can do with precision weather forecasts to help farmers. Source: IBM
INCREASING CROP YIELDS
of all crop losses are due to weather.
Weather-related crop damage could be
reduced by 25% using predictive weather
modeling and precision agriculture techniques.
IBM is using data to help farmers be more
efficient in their operations and make more precise
decisions about planting, growing, harvesting
and transporting crops, leading to better price
points and a stable supply chain.
IBM’s Deep Thunder is a service that
provides a hyperlocal forecast up to
36 hours in advance with 90% accuracy.
of fresh water worldwide is
used for agriculture purposes.
If farmers know when and where
it’s going to rain they can better
schedule their irrigation and
know when they should put down
fertilizer, to avoid runoff.
GLOBAL INVESTOR 1.17 —49
Farmers are among the most prominent
adopters of robotic technologies. New
applications using the Internet of Things (IoT),
Big Data and robotics may well revolutionize
the agricultural sector in the next ten years.
This could help to solve the current mismatch
between rising demand for food and limited
arable land capacity.
of food ready for harvest never
reaches the consumers mouth.
By understanding the effect of weather
on transportation networks, companies
can make better decisions on which
routes will be the fastest to transport
As farmers reduce waste
and increase crop yields,
consumers will feel the
positive economic impact
at the grocery store.
In the past, a farmer was seen as someone who loves nature and
leads a strenuous, rather solitary life with little connection to the
outside world. Furthermore, farmers were often considered to be
highly critical of progress. Today, however, automation and digitization
are becoming increasingly important in farming – a vital and
essential element to solve problems in the agricultural sector. From
vertical farming, where fruits and vegetables are digitally monitored
and grown in artificial greenhouses, to vast farmlands that are connected
to the Internet using sensors, robots and Big Data solutions
are used to reduce costs and improve crop yields. Furthermore, digital
farming can also help to cultivate new areas of farmland. In future,
therefore, farmers look set to become the chief technology officers
(CTOs) of agriculture.
Food availability constraints ask for new solutions
Illustration: IBM, C3, The Noun Project
The United Nations (UN) predicts that the global population will rise
from 7.3 billion today to 9.7 billion in 2050. The UN Food and Agriculture
Organization (FAO) predicts that this growth would require increasing
overall food production by about 70%, as the growing middle class
places increased demand on food products. Demand for livestock,
dairy products and other commodities is highly correlated to higher
income in the developing countries. There is a clear need to further
improve the efficiency of farming existing arable land and thus increase
output. However, arable land is concentrated in Oceania and the USA,
creating a major mismatch with where the global population is. For
example, food availability in China is increasingly constrained, and >
GLOBAL INVESTOR 1.17 —50
efficiency improvements alone cannot solve the problem. Cultivating
new arable land is important as well.
Robotics and drones for growers
The increasing strain on food supply, the availability and cost of farm
workers, the challenges and complexities of farm labor, shrinking
farmlands, climate change and the growth of indoor farming all argue
in favor of increasingly employing robots in agriculture. Recent progress
in making processing power cheaper, combined with artificial
intelligence and the increasing learning power of machines, enables
a new kind of e-farming.
While milking systems are already widely deployed, we believe the
demand for driverless tractors or semiautonomous vehicles, synced
vehicles and processing equipment as well as smart agriculture applications
such as traceability or swarm robots for the harvest season
could increase exponentially because of the expected momentum in
innovation. For instance, drones can be used for observation (security)
and to detect areas where crops are failing to grow. In the latter
case, the drones would call collectively programmed swarm robots
to protect or recover the affected areas. According to a report from
Tractica (“Agricultural Robots,” July 2015), annual shipments of agricultural
robots are likely to reach 992,000 worldwide by 2024, up
from just 33,000 in 2015. Tractica forecasts that some of the largest
application segments will include unmanned aerial vehicles (UAVs or
drones) for agricultural purposes, soil management robots, material
management robots, driverless tractors and dairy management robots.
Agritechnology in Africa, a new growth area
Africa is said to have a quarter of the world’s arable land, but 80% of
it is underutilized or simply lies idle. Most of the remaining 20% is in
the hands of small-scale peasant farmers that are unfamiliar with
commercial farming to improve production. There are a multitude of
projects in Africa that focus on improving crop yields and cultivating
new farmland with the help of information technology. The bottleneck
so far is access to the Internet in rural areas. However, research firm
McKinsey estimates that Africa will triple its Internet penetration
to over 50% – the equivalent of 600 million regular Internet users –
Projects such as IBM’s EZ Farm use Big Data and the IoT to provide
farmers and water service providers with insights into current
and predicted water and soil moisture levels via smartphone applications.
As part of this project, farms are equipped with cheap water
tanks, soil moisture and infrared light sensors to monitor the health
of plants, resulting in higher yields and lower farming costs. Smartphone
applications from other firms such as M-Farm, iCow, Farm-
Drive, WeFarm or MbeguChoice offer access to education (such as
feeding practices or disease control), provide better, drought-tolerant
seed varieties and give financing and troubleshooting support. The
investments for digital farming are increasingly coming from outside
of Africa. For instance, Chinese companies have acquired farmland
in Congo, Mozambique and Angola and are using IT to cultivate new
farmland in these areas.
Precision farming increases efficiency
John Deere, a leader of high-tech machinery in the agriculture sector,
is taking the IoT into the field and boosting efficiencies with the
help of SAP’s Big Data solutions. Sensors on the John Deere equipment
help farmers to manage their fleet and decrease downtime of
their tractors and save fuel. The information is combined with historical
and real-time weather data, soil conditions, crop features and
many other kinds of data. The so-called precision farming hardware
market (using displays, GPS, yield monitors and sensors) is expected
to grow at a compound annual growth rate of 11.7% between 2015
and 2020 and reach USD 4.8 billion, according to research firm
MarketsandMarkets. The potential benefits of software application in
farming – such as higher yields, low input waste, reduced financial
losses – could turn out to be very high. The FAO expects that precision
farming could lift crop yields by 70% by 2050 and thus make a
valuable contribution to feeding the world.
+41 44 334 56 45
GLOBAL INVESTOR 1.17 — 51
+41 44 333 14 79.......................................................
Lorenzo Biasio is a research analyst in Global Equity
and Credit Research at Credit Suisse, covering the
healthcare sector. Prior to joining Credit Suisse in 2014,
he was a management consultant in the pharma/
healthcare space. Lorenzo holds a Master’s degree in
Biology from ETH Zurich, Switzerland.
> Pages 10, 13, 16, 27, 33, 36–37, 41–43, 48–50, 52–53, 58
+41 44 334 56 45.......................................................
Uwe Neumann is a senior research analyst in the Global
Equity and Credit Research team at Credit Suisse
Inter national Wealth Management, covering the telecom
and technology sectors. He has 29 years of experience
in the securities and banking business, holds a Master of
Economics from the University of Constance, Germany,
and is a CEFA Charterholder. > Page 03
+41 44 333 92 83.......................................................
Julia Dumanskaya is a research analyst in Economic
Research at Credit Suisse, working in the Fundamental
Macroeconomics team. She joined Credit Suisse in
2011 and has five years of experience as a financial and
research analyst in the Foreign Exchange team as
well as in the Economic Research team. Julia holds an
MA in Economics and Business Administration from
the University of Zurich, Switzerland. > Pages 44–45
+41 44 333 12 56.......................................................
Julie Saussier is a senior research analyst in the Global
Equity team, covering the consumer discretionary sector.
She has 14 years of experience as a research analyst
and joined Credit Suisse in 2015. She holds a Master’s
degree in Business and Management from the University
of Paris-Dauphine and a Master’s degree in Corporate
Finance from the Emlyon Business School, France, and is
a CFA Charterholder. > Pages 07, 11, 15, 22, 26, 30–32
+41 44 334 56 24.......................................................
Reto Hess is a senior research analyst at Credit Suisse
International Wealth Management with 12 years of
experience in equity research and investment management.
He heads the Global Equity Research team and
covers the European and US industrials sector. Further,
Reto is a CFA and CAIA Charterholder and holds a Master
of Science from the University of Zurich, Switzerland.
> Pages 08–09, 12, 38–43, 59, 61
+41 44 334 56 49.......................................................
Ulrich Kaiser is a senior financial analyst of Credit Suisse in
the International Wealth Management Division, covering
the technology sector. He joined Credit Suisse in 1993 and
has 28 years of experience in the securities and banking
business. He received his Master of Economics from
the University of Constance, Germany, and is a CEFA
Charterholder. > Pages 17, 23, 44–47, 51, 60, 62
Head of Global Equity and Credit Research...................
+41 44 334 56 43.......................................................
Christine Schmid is Head of Global Equit and Credit
Research at Credit Suisse International Wealth
Management. She has 23 years of experience and covers
the financials sector. She holds an MA in Economics
from the University of Zurich and is a CFA Charterholder.
> Pages 14, 34–35
+41 44 333 25 57.......................................................
Fabian Waltert is a senior economist at Credit Suisse
International Wealth Management. He covers Swiss
real estate and construction and holds a PhD in
Economics from the University of Zurich, Switzerland.
> Pages 14, 34–35
Senior Portfolio Manager..............................................
+41 44 332 32 59.......................................................
Angus Muirhead is a senior portfolio manager in the
Thematic Equity team at Credit Suisse Asset Management.
He joined the team in September 2016 and
has 19 years of experience as an analyst and portfolio
manager investing in the technology and healthcare
sectors. He is currently responsible for the CS (Lux)
Global Robotics Equity Fund, together with Dr. Patrick
Kolb. Angus has a BA degree from Durham University
in Modern Japanese Language and Business Studies,
and is a CFA Charterholder. > Pages 17–19
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