This phenomenon is not limited to the US, and it appears that aging demographics may have a role to play. A recent study by the International Monetary Fund (IMF) found that population aging alters the effect of government spending on economic output levels. In non-aging economies, increases in government spending of around 1% of GDP were associated with increases in economic output of around 0.6%.2 For aging economies, a similar proportion of government spending did not result in a statistically significant output boost. With more debt being created less productively, one unintended consequence of further policy stimulus might be ever-greater asset price inflation.
The cloud is underhyped Many analysts highlight the potential of AI and 5G, but we believe that the public cloud as a computing evolution is actually underestimated and that it will continue to create significant economic value over the long term. One reason is that the cloud deploys computing power as a utility service. Many of the largest technology companies today are service-based platform companies that would not exist without the cloud, including the likes of Netflix, PayPal and Salesforce.
Living on the edge: The Internet of Things Much is made in the media about what 5G means for driverless cars and virtual reality. But our conversations with the largest mobile companies lead us to believe that the first scale applications will involve smart manufacturing, warehouse automation and remote applications in the mining and energy industries.
Fiber to the home Many are familiar with Moore’s Law, wherein Gordon Moore, co-founder of Intel, perceived that the number of transistors on a microchip would double every two years. It’s one of the best-known and consistent exponential growth functions in recent history. Less well-known is the exponential growth of internet speeds and network access over the past three and a half decades, as Figure 5 shows.
1. Bureau of Economic Advisers, Office of Management and Budget and Haver Analytics, as of 12/31/19. Gross federal debt based on fiscal year.
2. IMF Working Paper No. 20/92, as of 6/12/20.
3. Ned Davis Research, as of 8/31/20.
4. I/B/E/S data by Refinitiv, as of 9/18/20. “FAANGM” stocks include: Facebook, Amazon, Apple, Netflix, Google (Alphabet) and Microsoft. Note: Both classes of Alphabet are included.
5. Smil, Vaclav. Growth: from microorganisms to megacities. Cambridge, Massachusetts: The MIT Press, 2019.
6. Gartner, Inc., as of 7/23/20.
7. Mills, Mark P. Digital cathedrals. New York, New York: Encounter Books, 2019.
8. Internal Blackstone analysis.
9. Forbes, as of 12/15/2017.
10. Emerson Electric, as of 2/13/20.
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