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Planes, Brains and Automobiles: The Future of Innovation

2015-05-05

Hugo Scott-Gall, head of Thematic Research at Goldman Sachs, discusses the disruptive innovations that dominated discussion at the Goldman Sachs Innovation Symposium.

This podcast was recorded on March 18, 2015.

This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.

Copyright 2015 Goldman Sachs. All rights reserved.

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This is exchanges Goldman Sachs, where people from our firm share their insights, undeveloped, currently shaping markets? Industries in the global economy, objects Jake's, globalized of corporate communications. Here at the firm on March, Seventeen Goldman Sachs hosting global investment, research, innovation, symposium at the firms headquarters in New York. We altogether entrepreneurs and fingers from a wide variety of fields. To talk about all that's happening right now, at the intersection of technology in industry, Hugo Scott Gall who runs Timatic Research woman is here to share some of the key themes that emerged from that conference. Hugo welcome to the programme like Iraq, you go why hope this symposium here Goldman Sachs. What was the point of it who's in the audience who came to speak and what did we all are?
That was why why now so, why do we think we should do him? Innovations The answer is there are more and more industry is being affected by disruptive change. Come out of innovation. you could all you ten years ago. It was easy to see it is easy to spot. He was limited, just maybe a smaller. Now we can. This is broadening up, I think, was particularly important for even the gold and silver outlines, was that the lesson, learn from one industry can be applied for another industry into another industry of investors. I have to think more broadly about ok. What is this measures in industry and what are the threats that industry not recall, maybe a greater lastest, you thought than it did previously terms a who So we had why one ounce of the who we had a real makes. I think this was the case, fashion. When we were able to get the Hudson Bay becomes, there has a smaller companies there we had Private companies, the stars outcome- is there we have regular.
so that we have academics. We had a really interesting bland them. I think when you have appeared, require rapid change and at times discontinue strange hearing from From people around them inside, an industry becomes much more important than maybe just hearing from the standard source of information. You go to talk about some those threats. What were some of the common themes? You heard the connect some of these desperate developments across industries are, they know for common themes that stood out across the panels. For us, the first and most consistent on, I think, is the idea of greater personalization. some opposition treaty printing would be a good example, but even in our discussion on connected cause, our partners agree that acts and solutions that allow for greater personalization were the ones to watch out for another. On thread was that many of the innovative solutions seen in industries are emerging as a result of a conference of other technologies So let me explain what I mean by that. The cost of genomics, for example, is crashing. The cost of genetic testing is crashing duty.
Advances in Moscow, computing power. They I see them The thing is becoming a reality juice at these. The net and car technology treaty, printing, come more viable due to progress. Immaterial technology It goes to show that, even though many these coal technologies have existed for some time, it is advances in sex reset noise, that a push them maturation. Third common thread will be the sum These new technologies are not being adopted as fast as they could be. There are some things hindering the perfect connected causes. The existing car fleet and road infrastructure for three printing is traditional manufacturing plants The fourth and final point to make here is a little more somber. Labour came on the losing side a most these topics, whether it is eighty enable remote monitoring one thousand one hundred and eighty four supervisors, whether it is 3d printing, mudding. Twenty components into one requiring to opossums face is whether the struggle has caused Monday, seeing, as the name implies to add drivers, or even also make it tonight for voice recording.
Investment and vices overall whistle labour than that loser we're just stay a few, a lucky for you with the right skills being beneficiaries, but worrisome for the rest of the label. You talked about the development of our time is driving technology. People heard about this- maybe a lot if they listened to my conversation with George Lebeck, we're we right now with that technology bozrah. Your question when we get asked a lot, so is worth pointing out that Ashley, a lot of semi autonomous capability exists today. Why things like adaptive cruise control, highway, lane assist blind spot cetacean valid parking these early this today, but are there, are still some import
technical legal virus, particular registry Salida middle. So they have a. I guess the ever present issue customer acceptance, but if you think back over the last ten years, a lot of the things that drive it does have already been seated to technology. So we don't think that will be a big fine moment. The more gradual progression has its sensors cameras, radar, get cheaper and also official intelligence has used to develop faster planning decision making. We might be heading for a situation with driverless cars similar to what happened when we explored space and Tom Wolf Road, I'd stuff. He explained the clash between the astronauts were former fighter pilots who wanted to feel like they were, and control and the engineers in Houston, who thought they could do a better job of driving the craft and the compromise by giving astronauts joystick, which gave them some ability to to drive the aircraft so getting the balance right between the drivers who want to
like they're in control in the engineers who may be able to design a safer and better car is going to be critical to the industry, describe how those trends might affect the competitive landscape in the automotive industry. the key cable, her software, the rising importance of software, has opened the door to new participants in the space. But so far not the destruction has been less capital intensive pass the industry, but there is a fascinating debate here. I think whether route, where the real value is it going to be in software as it becomes increasingly important, though it will stay odd, when we think it is software that is gonna Trump hardware has caused become connected just like another device. Drivers with a will then expects the content experience. We see this with the rest of that knowledge ecosystem. How that battle between sovereign hardware and falls on the cap? Intensive different parts of the comic process on board will be fascinating to wash there's a shifting attitudes prickly,
younger people around car ownership and how could the emergence of autonomous driving technology accelerate that shift in views towards car ownership DC, unnatural compatibility with the emergence of the so called sharing economy absolutely is is not so much autonomous draw as more, I would say, the emergence and much more credible alternatives to car ownership. We think about disruption and in terms of shifted, epaulets cost capability communion somewhat. Some of their cost sharing The small offer is a meaningful and greater convenience and there was a virtuous circle of more users, be getting more supply, another deepened network and therefore lower cost. This means that Sesar caused now much more attractive relative. Turning a car. It is easier to access and use a car than it was previously and if we don't necessary
Own cars, and so as with other aspects of the german economy, it is technology that is a naming. This creating market places the didn't exist before allowing for price discoveries. That is a good step. The average american calicoes around thirty one thousand. U S dollars it. Depreciate eleven percent measured and pushes and sits idle. Ninety five percent of the time that I would argue, is an obvious recipe, the disruption, and so, if you increase the level of utilization of the existing car fleet than all else, we equal demand for new, cautious, full of Hugo. Given the inefficiency you described in our current method of using cars and financing cars in paying for cars, will self driving cars become the dominant mode of personal transportation in the near future? Or will traditional cars continue to play a significant role in the way we live? There is no doubt that the benefits from self driving.
ass, a great a significant reduction in traffic des less co2 emissions from air congestion. But, as I said earlier, it is likely that will be gradual, not least because people are son capital into that cars that are not just. and the men, but an urban areas. Absolutely rather, infrastructures are grateful. Thomas vehicles, adoption will be faster so to take leave you. Sitting in a jam and the autonomous lane it's free flowing. That's gonna, make you stop and think our power of experts who thought it worth over by twenty twenty. There will be pockets of autonomous caused, particularly in urban areas, and by turns twenty five will be much much greater penetration, not least because they will be by then. The proliferation of models is the happen, but it's not gonna total shift here comment. We ve been focused for a while now on the internet of things that the ILO Tee and that refers to the connection of billions are devices to the internet that allows them to communicate with each other in real time and with operators and manufacturers
but the innovation symposium focused, particularly one area where the out he could have a profound effect manufacturing. You got tallow listeners a little bit about how manufacturing could be reshape by the proliferation of the eighty Shovel Cisco seo is on record as saying that forty percent of fourteen one thousand cometh may not exist in five or ten years time that danger dancer there Ain t the inside of things that are the dramatic statement. That is, we think particularly true for manufacturing. Variety is clear:
part of the next industrial revolution and manufacturing sits right in the middle of that, given just how data intensive it is, and the complacent devices on the factory floor, the justifies the opportunity for you look a little bit. Rockwell estimates that only fifteen percent devices in the factory today are connected by our estimates. Two trillion of recital seven trillion. I see opportunities in twenty twenty will relate directly to industrial and which manufacturers is the lion's share, the. How exactly do we see the manufacturing landscape changing three key ways? The first is to satisfy the constant and persistent try to improve efficiency and cut costs. Icy has the potential to identify problems on the manufacturing floor before they happen. That is a big change, a big shift that reduces costs and it cuts downtime. Secondly, the idea of drawing a shift-
the smallest towards software, away from traditional conquers equipment, accurate, higher quality, recurring remedies, dreams and greater costs mistaken, as this is key, if you can't just make things anymore, you can't just make a bit of equipment and sell it. You have to have yourself as close to the customers possible, not happens by integrated software data, plus analytics. And thirdly, we believe that the icy will change rule definition that will enable companies from outside traditionally defined Hundreds of an industry so why you thought over in she- probably a journey more there again to coming from outside of that space into because they have the skills. But only in value and again that walls around software is data plus analysing when technologies added to any process. There's a heightened concern about security. How manufactures thinking about cyber security? They build out this internet of things, capabilities inside their plants,
or to link them with the customer. Absolutely no doubt security is front and sends a clearly one of the biggest challenges facing the icy today. Increased connectivity means that hackers cafe. the way to shot of equipment, remotely still data or sabotage part delivery on the costs of incidents that this can be huge. They can we really damaging both costs and also reputation. So, if you're not able to detect that MR get the impact of potential Cyprus Rachel Day, Sir, your ip manufacturing post these are all a risk securities, especially seven, given the rising number of partnerships and multiple networks have been developed within more more j in this area, so that, as an actual a risk. To this end, I think you're, seeing many companies in the space turns traditional. Cyber security is upon issues or even actually using emanate, acquire security capabilities. They don't have Another technology mentioned earlier that would benefit greatly from the
the formation of the internet of things are the penetration of the things in the manufacturing sector. Three different ah, like self driving cars, we need printing is new and used to seem like something out of science fiction. But it's here, it's real. You coming down and it looks like the technologies poised to have major commercial impact. What makes three printings such a potentially powerful disruptive technology and how might have change the way we think about industrial, manifest. Well. I guess if the first thing to say is this: actually in itself is not a particular new technology has been around for thirty years or so, but what's changed at the speed and reliable machines is improved dramatically and broadcasting massively in the process. There is no longer just prototyping technology. This is let from the anti lapse into the mainstream.
The way we think about it is that there are three main benefits. Attractions of treaty printing enjoys versa, traditional manufacturing, but will, we think, have quite severe implications for traditional ways of making things so number one I'm a manufacturing build a poet from the ground up layer by letter that is different from the traditional way of making things or subtraction manufacturing. So in a sense, this can create less wasted. A process that clearly is valuable in a resource constrained world? The second thing is complexity is free, so almost
first time you can make click customize, Pulitzer, individual users, the geometry that can be formed using three printing just want possible under traditional manufacturing slamming. Basically, you can make much funky things in all sorts of different shapes and sizes that is different, and that adds a lot to users and third, the reports that have been created, the lighter and more complex than traditional manufacturing. So what is the matter that matters? A loss in fossil fuel, intensive industry? So it is no surprise that one of the early adoption of this is the aerospace industry. Making important joints that our lighter, stronger
and also quicker to making quicker to improve upon, and so that change manufacturing, we think is really got a seismic one. It isn't happening everywhere and everywhere that it could happen, but is happening key industries and expect it to two percolate outwards across more industries, so as it moves from from other industries what other constraints are or what needs to happen for three pointing to become a dominant methods of industrial manufacturing in the future within the main thing is on my knees. Cheaper unease? Vienna bigness become faster. The mass production techniques like injection, Building, still have an advantage for large volume manufacturing The second thing is the need to be investment in the material side. The treaty print uses different materials that have different properties, and they are at the moment, relatively quite expensive, so then he's reinvestment ass though they become cheaper and more readily available.
Also highlighted. There is probably an education element. Have what she's, actually both in terms of existing workforce needs education around 3d, printing, but also started uses that I should what is it take ability? Is it safe? Is it reliable? one of the benefits, and maybe the last thing I think this is ongoing and has not been resolved, wishes IP protection now approach. It needs to be more stringent. Rules are unlikely protection, as comes begins, open up the treaty printing. This can be called an open source technology, so protecting patent design etc. Still still me for fear for quite a lot of come, So you think about everything you heard the invasion symposium in you project forward in the years ahead. What what sectors do you think can be the next to see more disruptive, innovation. That's a good question as one we think about a lot and ask ourselves. a number of different ways to think about this. Firstly, and wish engine
Do we see a large proportion of customers dissatisfied with the current provisional products and services at argue, education and health care could come to under that both so far been quoted, means disruption, but this could annoying We should change the both another way behind. This would be to seek out the large profit pulls the new entrants, and so when we think about anxious that goods could be vulnerable to attack in this way from new engine disrupts as we think about they luxury goods experiences pharmaceuticals. All of these, I think, could be could be wandering.
I'm a phoney. Where do we see where do if we look at the world while the world's constraints, and why do we see solutions to them? So I would like, in the world has constraints around aging how'd. You solve aging process. How do you deal specifically in the west with aging populations? Clearly, innovation is needed around less everything. Robotics, for example, is pretty interesting. How'd you do with a skill mismatch. It ought already about labour, but how'd you risk population how'd, you get the right skills in the right places. That's an opportunity, links back to education, cyber security and privacy as to other areas where we think there are. There are clearly big challenges and providing solutions to both of those should be rewarded. We like to say this is sort of paraphrasing Winston Churchill that never have so few with so little capital done so much damage to so many industries has really saying that has never been a better time to be disrupted, because you don't need many people, you don't need a lot of capital because, because the technology, thank you, you got
you ve covered a lot of territory for us. We appreciate your being here today. That concludes this episode of exchange. The Goldman Sachs I'm Jake Seaward thanks for lists. The spot gassed was recorded on March Eighteenth, two thousand fifty despots cash should not be copied distributed, published or rape. used in whole or in part. The information contained in this package does not constitute research or recommendation from any Goldman Sachs Entity to the listener, neither Goldman Sachs. nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the statements or any information contained in this podcast in any liability, therefore, including in respect of direct indirect or consequential loss or damage, is expressly disclaimed, Views expressed in this pod- castor, not necessarily those of Goldman Sachs and governments
she's, not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs too. That listener, nor to constitute such person a client of any Goldman Sachs Entity
Transcript generated on 2021-10-15.