By No Means is it the Same Old World

Sure, there have been other times in world history, during war or plague, when turmoil has been so intense as to test, to the limits and beyond, the fortitude of mankind and womankind.

2016 05 05 By no means the same old world Graphic 1

Still, I’m not sure humanity has ever before been on the cusp of so many changes that are already, or are on the verge of, shaking up the ways in which we live and interact with one another, and govern our economic and social affairs; and inspire dreams about really and truly astonishing futures.

The notion of writing this article first came to mind on account of six or so major trends that I’m always mulling over when I write about the economy and the construction sector. Upon deeper reflection, the number of discernible seismic shifts quickly expanded to a dozen.

There may well be more. Feel free to contact me if you believe I’ve failed to mention something equally or more important.

The following 12 sections have also been inspired by the question I’m always asking myself and which I know is of prime concern to you as well. What will be the implications for the construction sector?

I don’t like to use the word ‘huge’ now. It’s been hijacked for a political purpose. Let’s rather say that the repercussions will be awesome.

So without further ado, here they are. These are at least a dozen easily definable ways in which much of the world is transitioning to …

(1) An aging population. Let’s get this rather prosaic one out of the way early, since it’s a trend that’s been known and talked about for a very long time. The post-World War II baby boom generation is moving tortoise-like but formidably into its senior years and, of course, that will have big ramifications not only for entitlement programs such as pensions and health care but also for construction activity through the building of hospitals, seniors’ home and associated medical facilities.

There’s much more to consider as well. A recent Bloomberg News story pointed out that while most of the major technological advances of our modern age (e.g., mobile phones and gaming systems) have been geared towards an onrushing millennial cohort, and those even younger, one of the next giant advances – driverless cars – will better satisfy an older generation.

One can certainly understand the advantages of fully or semi-autonomous vehicles for those individuals who, on account of an accumulation of years near the allotted ‘four score and ten’, are finding that their reflexes have slowed. Many of them are undoubtedly thinking, “Wouldn’t it be nice to just sit back, relax and let a machine take over?”

There remain glitches to be worked out, though. Insurers are expressing a logical concern. The first-stage advance is likely to be semi-autonomous motorized transport demanding human interaction when unusual situations arise. Snowy conditions, for example, remain a big problem for the new motion sensors being developed. Riders won’t be free to do whatever strikes their fancy while they’re traveling. From time to time, they’ll be called upon for manual overrides.

Already, there have been reports of individuals brushing their teeth and reading newspapers while being mechanically chauffeured along. On a prurient level, there’s speculation about a possible rampant increase in the number of ‘canoodling’ incidents that will take place behind the wheel − or beside it, or maybe even under it, depending on the couple’s proclivity for adventure. (See, it’s not really so difficult to insert a mention of ‘sex’ into an economics story.)

(2) A still rising China: Worries about skyrocketing debt levels and slowing growth aside, China’s role in world affairs will become ever wider and more profound. In the middle of the last decade, a suddenly surging Chinese economy absorbed about 40% of all the world’s major raw material output. This initiated the commodity super-cycle.

China’s more recent descent into ennui concerning its economic expansion prospects has depressed commodity markets, sending prices plummeting. Since all building products have a commodity or raw materials base, in one form or another (e.g., hydrocarbons used to make plastic plumbing pipes), material costs of construction have mainly flat-lined.

There is another way, though, in which China is assertively impacting construction − through its aggressive investments in major projects in other nations.

The largest nuclear power plant in the world is currently under development at Hinkley Point in the southwest corner of the United Kingdom. Evolutionary power reactor (EPR) technology will be provided by two French firms; Areva and EDF. France will pony up two-thirds of the necessary total project financing, but the other one-third has been offered by China.

In Canada, Chinese engineers are examining the viability of building a railroad line into the Ring of Fire region in northern Ontario, where there are massive deposits of nickel, copper, chromite and platinum. Chromium is a key component in the production of the stainless steel used in many of the consumer products increasingly in demand by the expanding middle class in the Middle Kingdom.

China’s largest printing company, Sun Publishing, has announced that it will be building a $1 billion-plus pulp and paper plant in Arkansas, not far southwest of Little Rock. Care has been taken to assure the public the new facility will be the most environmentally progressive in its market niche.

Furthermore, several of the tallest upcoming office and residential towers currently being planned for Manhattan, Brooklyn, and Jersey City will be undertaken by Chinese developers and financial institutions, including China Oceanwide Holdings, China Overseas America and Greenland Holdings, a state-owned enterprise headquartered in Shanghai.

These investments will give China a vested interest in how well those recipient economies are performing. (Saudi Arabia’s plan to sell shares in Aramco is a different take on the vested interest angle. It will lead to outside investors having a stake in the stability of the Saudi royal family at the top of the nation’s power structure. For many observers, that’s a harder sell.)

(3) A feistier and less malleable electorate: Globalization and the greater prominence of China, together with the emergence of certain other low-wage nations, with all that has meant for the offshoring of jobs, has left a significant portion of the populace at home feeling dispossessed, alienated and resentful.

It has become abundantly clear what many voters are now thinking. They’ve embarked on a journey into a new political landscape where they can more openly express their testy mood.

Maybe I’m forgetting too easily. Maybe a significant portion of the voting public has always been especially prickly. It does seem, however, that this current caucus and primary season has been quite different – for its level of name calling and aspersion-casting − from all others that have preceded it.

I suspect a survey of political junkies and pundits would verify they’ve reached the same conclusion.

It’s not just in the United States. Political leanings in Europe have also been fracturing into more extreme left and right wing positions. In Brazil, a vote will soon be held about whether or not to impeach that country’s leader, Dilma Rousseff, for misuse of public funds during the most recent election campaign. (Impeachment, however, isn’t exactly a new phenomenon.)

What’s particularly fascinating is the manner in which they so readily bleed into one another.

(4) Rockstar central bankers: Given that establishment politicians have been passing out of favor, maybe it’s just as well that central bank Chairmen and Governors have stepped into the spotlight.

Changes to taxation, spending and other fiscal tools to guide the economy have fallen out of favor and almost the whole responsibility for managing output, employment, and other prosperity  indicators has fallen on each nation’s central bank.

How long will this go on? In most countries, there is no apparent end in sight. (Canada, where debt is being piled on to finance infrastructure projects, is an exception.)

At least, thanks to central bankers attaining semi-celebrity status, many among the general public have now been introduced to another hierarchy of leadership.

The names of Janet Yellen (Federal Reserve), Mario Draghi (European Central Bank), Mark Carney (Bank of England), Haruhiko Kuroda (Bank of Japan) and Stephen Poloz (Bank of Canada) are often spoken of as reverentially as their corresponding Presidents or Prime Ministers.

Inflation continues lower than desirable and the ‘threat’ of deflation persists. Some nations are now stuck with negative interest rates. Nobody is sure what the eventual repercussions of negative yields will be. Lying so far outside the norm, they’re a source of anxiety all on their own, probably undoing whatever good might otherwise come from their implementation.

Interest rate policy inevitably has an influence on capital investment strategy. Combined with the degree to which domestic yields can sway the value of a nation’s currency, thereby attracting or repelling foreign capital, the construction shock waves can be dramatic.

(5) A cashless society: Maybe the shift to a cashless society will be similar to the earlier supposed move to a paperless world. With respect to the latter, e-mail, text messaging and social media have certainly cut into the circulation of paper, but it has far from disappeared.

PayPal, Apple Pay, and other digital payment systems are changing the way we handle our finances. Sweden is said to be in the forefront of this trend. In that nation, so it has been reported, even homeless street people who are seeking handouts carry credit and debit card readers.

I can’t help but wonder if that’s an example of an urban myth, but it’s a tale too compelling not to pass along. It’s one of those stories that begs to be believed, even if it isn’t entirely true.

In any event, a prime advantage of doing all financial transactions electronically is the creation of a clearly visible documentation trail. This will supposedly discourage crime since law enforcement agencies will have a heightened ability to back-trace transactions.

Besides, there’ll be no more masked bandits charging into banks and demanding everyone prostrate themselves face down on the floor.

Frankly, I’m not so sure about that argument. In the movies, the biggest heists, involving billions of dollars, are perpetrated with the touch of a finger to a hand-held or laptop keyboard that sends funds scurrying to tax-free havens around the world. Although let’s also recognize that international efforts are underway to reduce the presence of such shady harbors.

(6) Downloads and data streaming: Standard programming on network television is no longer the force it used to be. If you and your family have favorite shows you like to watch, their number of episodes has become less and where they appear in the schedule more volatile.

They’re likely to be pre-empted at a moment’s notice, or disappear into a long inexplicable hiatus while you’re left to wonder – with diminishing interest as each week passes – how the latest cliff-hanger ending will be resolved.

Most of us are now satisfying our viewing pleasure through downloads (e.g., Apple TV) and/or data streaming (Netflix). We’re willing to pay for the convenience and the expanded variety.

We’ve discovered that binge-watching episodes in rapid-fire sequence is a very pleasant way to pass a workday evening or a laid-back Sunday afternoon (i.e., when NFL football is not on).

But here’s the more important question. Do you truly know what you’re kids are watching?

If you’ve let your ‘hip’ quotient lapse, then you won’t know that YouTube is way bigger than you suppose. To me, YouTube has always been a novelty viewing option, filled with music videos or quirky bits of reality comedy – think kittens ‘acting’ cute −  that only occasionally hold my interest.

There are also ’10 Best’ and ’10 Worst’ lists that dissect movies and celebrities and their concerts and romances. Plus snippets of ‘talk shows’ featuring ‘lip synch battles’.

But those don’t begin to scratch the surface. Sit down with your kids and ask them what they’re viewing. What ‘channels’ they’re turning to?

YouTube has a constellation of ‘stars’ unknown to most adults.  They may even be school mates of your sons and daughters, with their own channels, where they tell jokes about their families and buddies, perform rap songs or otherwise try to entice hordes to sign on as ‘subscribers’.

If you want to tackle more serious subject matter, there are ‘how-to’ shows. How to build a shed, lay interlocking brick, or hang drywall.

As for how else this is relevant for the construction industry, keypunch in a search for ‘Chinese bridge building machine’ on YouTube and prepare to be impressed and amazed.

And to wonder why such a grandiose idea never crossed your inside-the-box mind. Or mine.

(7) VR and AI:  For convenience, and to keep my ‘transitions’ list within reasonable bounds, I’m lumping virtual reality (VR) together with artificial intelligence (AI).

There are YouTube celebrities who play and review the games that their contemporaries are buying. They appear in a corner of the screen while what they’re seeing through their headsets occupies most of the video area. Horror shows feature best! If you’re not too scared, it makes you want to rush out and buy an Oculus.

USA Today, with its latest app update, has included a 360-degree viewing icon for nature and other shots. It offers a different version of virtual reality. As you move your iPad screen, the picture you’re seeing alters accordingly. It’s like looking out a window that pans up and down and from side to side.

The design professions are quickly embracing the potential of VR. As a shortcut to spotting assembly problems, it’s a tremendous aid in speeding up construction schedules.

Personally, I especially like the notion of eventually being able to travel ‘virtually’ anywhere in the world to see the sights. As appealing as VR visitations may be, however, they’re not likely to temper the need for new airport passenger terminals and runways. Air business and tourism travel is expected to climb exponentially around the globe over the coming decades.

I’ve been noticing how some firms, in their advertising, are beginning to refer to our new ‘apps’ age. Perhaps that’s what I should have called transition (7) instead.

As for AI, all the biggest tech companies are jumping into the field with ‘smart assistants’ – Apple has Siri, of course, but there’s also Facebook with ‘M’, Google with ‘Alexa’ (excellent name choice, by the way) and Microsoft with ‘Cortana’. Fusion with an expanding robotics universe seems unstoppable and who can’t wait until their Roomba vacuum cleaner grows legs and arms and a head…and an attitude?

Plus there are important offshoots of VR and AI. For example, aerial drones certainly warrant mention.

Real estate developers, vying for condo buyers, are able to show potential clients the exact view out the picture window of the unit they are considering purchasing through the use of aerial drones.

Vineyards in California now have the legal right to employ drones for ‘crop dusting’.

Their use to monitor oil pipelines for signs of leakage is an obvious plus. As are the advantages inherent in keeping tabs on remote land claims, as can be critically important in the exploration and extraction business.

(8) Logistics rule: One could be forgiven for thinking that better logistics is the holy grail of aspirations.

The best strategizing generals have always known that wars aren’t necessarily won by valor or military skill.

Nor even by a single decisive victory.

To arrive at such a desirable outcome, the winning side must first have good logistics – i.e., effective means to supply warriors and machines with food and fuel. These are the secure supply lines that are so touted in military jargon.

Otherwise, you’ll find yourself retreating from Moscow, à la Napoleon Bonaparte, subsequent to a fades-too-quickly glorious success at the battle of Borodino.

In today’s fiercely contested trading environment, the best logistics are a prime means to gain a competitive edge. The public sector’s focus on new and upgraded infrastructure is really about moving goods and commuters more efficiently. Or, in the case of sewer and water projects, about keeping people healthy so they’ll be able to work more productively.

Smoother functioning logistics is synonymous with infrastructure improvements while also equating with productivity enhancements.

(9) Micro-power Generation: Mention was previously made of driverless cars, while not specifically pointing out how much of a boon that will be for makers of traffic signaling equipment, lighting gear, and other logistics monitoring systems.

There are other earth-shaking technological changes underway, with wide-sweeping impacts, where progress has already proceeded much further.

Residential and non-residential building construction are seizing on the benefits of micro-power generation.

The drive for renewable energy has been a catalyst to spur on solar panel and solar shingle production with progressively lower cost structures.

The advantages of micro power generation in terms of security of supply and control over expenses are obvious. But where does this leave the giant utilities that have been making ultra-large capital investments based on business models that assume a continuing solid base of customers?

This battle is already being fought in some jurisdictions, most famously in Nevada were Elon Musk’s upstart firm, SolarCity, is being challenged in court by Warren Buffet’s more traditional and much larger corporate entity, NV Energy.

The issue concerns what is known as ‘reverse metering’, whereby micro power owners and producers receive credit for selling some of their excess or off-peak electricity into the broader grid.

(10) An imploding OPEC: A cooperative effort among like-minded nations, which has served them so well in the past, be hanged. This appears to be Saudi Arabia’s new approach to not only its membership in OPEC but also its leadership role.

Saudi Arabia has lately chosen to go its own way in ramping up oil production and the rest of OPEC has been left no alternative but to accept the fallout from depressed oil prices.

Public sector operating budgets are being shattered by shortfalls in royalty revenues. As a consequence, there are several OPEC nations on the verge of going broke, including Nigeria, Libya, and Venezuela.

Government workers in Venezuela have been told to appear at their places of employment only two days a week because there aren’t the funds to pay them. If any of those nations does collapse, the rest of the world will be left to pick up the pieces from resulting debt defaults.

As some analysts have pointed out, it’s as if Saudi Arabia has foreseen an end to the fossil fuel era and is determined that it won’t be the nation left with ‘product’ still in the ground. It’s going to move crude to international markets, principally China and Europe, and in spite of rival competition from Russia and Iran, come what may.

For a while, North America’s oil and gas sector was thriving as a result of shale-rock hydraulic fracturing activity. Over the past year, though, energy sector capital expenditures (CAPEX) in many countries, Canada especially and the U.S. included, have screeched to a halt.

Employment in oil and gas exploration and extraction firms has been greatly curtailed. Standard & Poor’s just lowered Exxon Mobil’s Triple-A credit rating.

The trucking industry is no longer hauling as much mining machinery and equipment.

Oilfield service companies are recording lower profits. The number of on-site construction workers at former mega project sites has been slashed.

(Fort McMurray, the urban center closest to Alberta’s Oil Sands deposits, is experiencing a biblically savage year, first initiated by an energy sector crash and more recently compounded by a wildfire scourge that has forced 80,000 residents to evacuate the city.)

(11) Sustainability in all things: Sustainability in aid of the environment isn’t just being talked about anymore. It has transitioned to the mainstream.

Building product manufacturers understand the sales advantage to be gained from offering products that will reduce fuel and water intake, or improve air quality. They’ve also accepted the need to be more transparent about the materials going into the goods they are offering.

The design firms gaining the most favorable public and media recognition are the ones incorporating rooftop gardens in their projects. Or vertical vegetation enhancements inside and outside their buildings.

If air and water recycling systems can also be featured, so much the better. Or how about power-generating wind propellers, attached to turbines, incorporated into structural or curtainwall elements?

Last fall’s Paris Agreement was hailed by environmentalists as a crowning achievement for uniting nearly 200 countries in a shared commitment to fighting climate change.

Except preceding point (9) does create a speedbump. Depending on how long the global price of oil stays low, one of the cornerstones of sustainability may potentially crumble. On a strictly dollars and cents basis, the incentive to curb carbon-emitting fossil fuel usage − with the price of oil falling from over $100 USD per barrel to $40 − has taken a blow.

(12) Genetic engineering: For our children and grandchildren to be able to handle, plus live longer to experience, all the foregoing highlighted transitions, there’s the quickly growing field of genetic engineering.

While major changes (1) through (11) may well be underway, as human beings we’re all still the same old collection of carbon mass and H2O that we’ve always been.

But, hey, there now appears to be a solution for that. Through such scientific advances as DNA mapping and stem cell research, we’re about to embark on a totally new era, outside any realm ever visited by human beings before.

Goodness knows where it will lead, but the hope is that it will foster wonderful progress in defeating dreaded diseases. It wouldn’t be so bad if it also boosted our collective ability to cope.

Meanwhile, good luck with all those efforts you’re making to stop your brain from frying.



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