Over the past 15 years, the global economy has operated under two different growth models. Between 1999 and 2007, the growth model operated through ever larger trade imbalances between emerging market and commodity exporting countries – who ran larger and larger surpluses – and a group of rich countries – first and foremost the U.S. – who ran larger and larger trade deficits. Global imbalances were then seen as a problem by some, but they were really a symptom of the global geographic distribution of aggregate supply and demand, with excess supply in the high-saving emerging market countries and excess demand in some low-saving rich countries (and with energy exporting countries doing quite well as they exported to both). These supply-demand and saving-investment imbalances generated huge international capital flows that were sufficient to bring global demand into line with abundant global supply of goods at something approximating the full employment of global resources. ... That growth model obviously broke down in the global financial crisis years of 2007–2009 as global imbalances shrunk in line with global aggregate demand. From 2009–2014, the global economy has operated under stimulus from “nontraditional” monetary policies that pushed policy rates to zero and ballooned central bank balance sheets through massive “chunks” of quantitative easing. Also, the global policymakers “went Keynesian” for a couple of years during and following the crisis by delivering a large dose of fiscal stimulus. The good news is that, as a result, the global economy avoided depression and deflation. But that’s all they did or could reasonably do. The reality is that now, five years after the global financial crisis, average growth in the global economy is modest and the level of global GDP remains below potential. The global economy has not as of today found a growth model that can generate and distribute global aggregate demand sufficient to absorb bountiful global aggregate supply. Unless and until it does, we will be operating in a multi-speed world with countries converging to historically modest trend rates of potential growth with low inflation. 0% neutral real policy rates for many developed and some developing countries will likely be the investment outcome.

Why shrinking populations may be no bad thing ... FATHER, mother and two children: surely the perfect family size. For those concerned, it is neither too big nor too small. For the national economy, it ensures that two new workers will replace the parents in the labour force. And eventually the children will have children of their own and keep the population stable. ... For that happy state to be achieved, the “total fertility rate” (a measure used by demographers for the number of children a woman is likely to have during her childbearing years) needs to be above two: around 2.1 in the rich world and more in poorer countries, because some children, particularly in the developing world, die before adulthood. For many years the United Nations’ population forecasts—the gold standard in the demography business—have assumed that, in the long run, fertility the world over would converge on the replacement level and populations would stabilise. But fertility rates everywhere have been declining for decades. Even in Africa, where large families are still the norm, the number of children per woman in 2010-15 is forecast to fall to 4.7, compared with 5.7 in 1990-95. Global average fertility is already down to about 2.5.

The demographic and macroeconomic backdrop in sub-Saharan Africa resembles that of East Asia in the early 1980s, says Arnold Dubin-Green. How many astute investors among us would love to say they invested in Asia when the Tigers were cubs? … “The hopeless continent.” This was the Economist’s front-page reference to Africa in May 2000. Hopeless Africa; asphyxiated by civil war, corruption and political instability. … Investors ran a mile at the mere mention of Ghana, Kenya or Rwanda. Today, returns in more expensive developed markets threaten to be low for years to come. Slow global growth and low yields are the norm. Jumping off the US fiscal cliff and euro crisis, these headlines motivate investors to seek markets with higher yields and stronger fundamentals. … Fundamentals are better placed than in many developed markets. Africa is now the continent on their lips; a market that is a significant and growing part of the global economy with plenty of room for productivity gains, favourable demographics, commodity richness and recent history of fiscal and monetary reforms.

Far from the nuclear negotiations, a new tech-savvy Iranian generation takes shape. ... I asked one woman how she best prepares for the rigor of building a company. “By doing!” she smirks at me. She pauses, and adds, “Oh, and I read all the top Silicon Valley blogs and take a few classes from Stanford, Wharton and other colleges around the world for free on Coursera.” Several at the lunch put down their forks and show me their smart phones, each open on Wifi to courses like “Introduction to Marketing, “International Leadership and Organizational Behavior” and “Better Leader, Richer Life.” ... Politics, power, mistrust: This is one version of how the media frames discussion of Iran. It’s very real, and it has much caution and evidence to support it. ... But there’s another tale, one I saw repeatedly in my trip there last month. It was my second visit within the year, traveling with a group of senior global business executives to explore this remarkable and controversial nation. ... This tale focuses on Iran’s next generation, an entirely new generation that came of age well after the Islamic Revolution, and on human capital, the greatest asset a country can have. It’s about technology as the driver for breaking down barriers even despite internal controls and external sanctions. People under age 35 represent nearly two-thirds of Iran’s population at this point: Many were engaged in the Green Movement protests against the Iranian presidential election in 2009. Most are utterly wired and see the world outside of Iran every day—often in the form of global news, TV shows, movies, music, blogs, and startups—on their mobile phones.

The world is about to experience an unprecedented consumption boom, which presents both challenges and opportunities for investors everywhere. Animal protein consumption, energy, air travel, health care, and education are some of the most relevant sectors involved as the upcoming changes in population and income collide. ... The world in general—and India in particular— is in the midst of a fascinating transition right now. Taking a step back from our day-to-day focus to view the bigger picture can offer a different perspective on the dynamics of various countries in a volatile and uncertain world. Envision a map that is drawn to represent how economists view the world. Imagine a map on which the area occupied by a country as a percentage of total area is equivalent to its percentage of global GDP. Compared with traditional maps, in which country sizes are based on land area, the United States, Europe, and definitely Japan would appear bloated. Other regions would look smaller—for example, Africa or India. Africa especially is quite difficult to see on the economists’ map. ... Now, imagine another map on which land area is proportionate to the country’s percentage of the global population. If the United States is viewed this way, it will be much smaller than on the economists’ map. In the population map, Africa would become relevant and uncertainties about the importance of India and China would disappear. Focusing on the differences in these maps may permit us to realize our biases in viewing the world.

So the Fed has chosen to hold off on their goal of normalizing interest rates and the ECB has countered with the threat of extending their scheduled QE with more checks and more negative interest rates and the investment community wonders how long can this keep goin’ on. For a long time I suppose, as evidenced by history at least. ... zero bound interest rates destroy the savings function of capitalism, which is a necessary and in fact synchronous component of investment. Why that is true is not immediately apparent. If companies can borrow close to zero, why wouldn’t they invest the proceeds in the real economy? The evidence of recent years is that they have not. Instead they have plowed trillions into the financial economy as they buy back their own stock with a seemingly safe tax advantaged arbitrage. But more importantly, zero destroys existing business models such as life insurance company balance sheets and pension funds, which in turn are expected to use the proceeds to pay benefits for an aging boomer society. These assumed liabilities were based on the assumption that a balanced portfolio of stocks and bonds would return 7-8% over the long term. Now with corporate bonds at 2-3%, it is obvious that to pay for future health, retirement and insurance related benefits, stocks must appreciate by 10% a year to meet the targeted assumption. That, of course, is a stretch of some accountant’s or actuary’s imagination.

How will negative interest rates change the rules of the game for investors and policymakers? ... Traditional economic theory says that a com - bination of massive deficit spending and histori - cally low (not to mention negative) interest rates should produce a rip-roaring boom in which work - ers get generous raises, prices spike, and interest rates follow. Theory also says that, even in the rare case of nominal interest rates turning neg - ative, the rates can’t stay there because beyond this “zero bound,” savers and investors will with - draw their cash and store it themselves, emp - tying banks and crashing the financial system. ... Multiple factors provide possible explanations for this curious situation. Three in particular stand out: demographic changes, the impact of debt burdens, and uncertain implications of monetary policy (especially quantitative easing). ... In a June 2015 report, the Bank for Interna - tional Settlements echoed this sentiment by con - cluding that a policy of persistently low interest rates “runs the risk of entrenching instability and chronic weakness.” Such an environment makes several extreme—and, sometimes, mutu - ally exclusive—scenarios at least conceivable.

The race is on to breed better birds as chicken emerges as the protein of the masses ... Unlike the roughly 60 billion chickens world-wide now slaughtered for meat each year, these birds are raised for their DNA. Paul Siegel, professor emeritus of animal and poultry sciences, studies how their genes influence the way they pack on pounds and fight off disease. The research helps companies seeking to breed chickens that will grow faster on less feed and require fewer drugs to stay healthy. ... Food producers face a monumental task. At current consumption rates, the world would need to generate 455 million metric tons of meat annually by 2050, when the global population is expected to reach 9.7 billion, from 7.3 billion today. Given today’s agricultural productivity, growing the crops to feed all of that poultry, beef and other livestock would require every acre of the planet’s cropland, according to research firm FarmEcon LLC—leaving no room for raising the grains, fruits and vegetables that humans also need. ... Chicken’s rise already is changing time-honored habits. In Argentina, where grass-fed beef has long been central to daily life, per-capita poultry consumption is projected to climb 7.5% this year to a record level, while beef consumption is expected to decline 6.3%. Even in pork-loving China, the government has subsidized large-scale poultry farms and breeding operations over the past decade to increase output.

In our view, successfully divining the trajectory of markets today has a great deal to do with properly separating the bountiful amounts of information and data we have access to into that which is genuinely useful and that which serves to distract. As a case in point, while we have indeed weighed in on this debate ourselves, the endless discussions about the precise timing of Federal Reserve policy rate lift-off receive far too much attention from investors and the media. Indeed, we think less of a focus on transitory issue like this, and more attention paid to longer-term market influences such as demographic trends and technological change can go some distance toward improving an investment process longer-term. To that end, in this edition of our market outlook we briefly examine a set of influences on markets that we think hold meaningful importance longer-term (demographics, technology, policy evolution and risk, liquidity, and valuation), while at the same time dispelling a set of assertions that we believe are either over-emphasized or mistaken. ... The days of a simple risk-on/risk-off dynamic, depending on whether policy stimulus was waxing or waning, are likely behind us. ... the time may finally have come when carry-focused investments may now be priced as attractively as beta (or down-the-capital-stack) instruments, so investors can selectively search for opportunities there. As described above, though, there are some tail risks in markets, so care is still required. And, perhaps most importantly, investors would do well to tune out the endless streams of noise generated by financial market commentators and focus on the secular themes likely to both endure and help create long-term value.

Famous German soccer coach Sepp Herberger once said, “After the match is before the match.” The same can be said for financial markets: After the crisis is before the crisis. The complication, of course, is that while soccer players usually know exactly when the next match will kick off, the timing of the next crisis is always uncertain for financial players. All we know is that, eventually, there will be another one. ... What’s perhaps less obvious is that the global savings glut also helps to explain the occurrence of financial bubbles and subsequent crises of the past few decades. ... the global savings glut plays an important role in explaining this evidence. How? Excess savings not only pushed down r* and actual interest rates but also drove up asset prices and caused serial asset bubbles in equities, emerging markets, housing, credit, eurozone peripheral bonds and commodities. Whenever a bubble burst, it sparked financial distress and crisis. ... there is a feedback loop between financial crises and the savings glut. This is because a financial crisis and the related destruction of wealth leads to even higher desired saving (or deleveraging), and because the depressing impact on growth reduces investment and thus the demand for savings. ... now that exhaustion has set in almost everywhere for many unconventional policy tools, such as quantitative easing, there is a significant risk that central banks may not be able to deal effectively with the next crisis. ... It’s likely the only viable way out would be a joint effort by the major countries to raise public spending on infrastructure, education, and more in order to absorb excess savings and raise r*.

Alibaba is the hottest e-commerce company of the past five years, a fusion of eBay and Amazon whose 386 million active users accounted for $394 billion in sales in fiscal 2015—six times the sales volume of its biggest Chinese competitor. The company created a huge marketplace and a sophisticated distribution network just in time to serve a generation of Chinese consumers attaining middle-class prosperity. “We are seeing Chinese consumers adopt new retail formats and online shopping faster than any of their global counterparts,” says Jasmine Xu, president of e-commerce for Procter & Gamble Greater China. Those trends fueled a rise so impressive that even the mighty Amazon became an Alibaba partner ... Today, however, Alibaba looks mortal. Its growth has slowed, hampered by China’s ebbing economy and by competition from a growing crop of rivals like JD.com. Its stock has fallen 26% from its post-IPO highs, from $115 to the mid $80s. To reignite its growth, chairman and founder Jack Ma and CEO Daniel Zhang plan to lean on U.S. companies—brands that hold enormous appeal in China. “This is an incredibly important strategy for the future of Alibaba,” Ma says. ... Alibaba is pitching itself as a shortcut to the world’s most populous market. Alibaba is helping foreign companies with marketing, data analytics, and shipping. And more recently it has sweetened the pot with a newer service, Tmall Global, that lets U.S. brands sidestep many of the taxes, regulatory hurdles, and logistics hassles that trip up foreign companies in China. ... Tmall, went live in 2008 with a business model sharply distinct from Taobao’s. Tmall is Zhang’s brainchild. He positioned it as a marketplace for higher-quality clothing, food, and electronics, with a focus on luxury brands. ... Tmall owes its growth to China’s rapidly expanding, brand-conscious middle class. Currently there are 109 million Chinese people with a net worth between $50,000 and $500,000, according to Credit Suisse, which estimates that those ranks could surpass 500 million by 2022. It’s a demographic that’s very comfortable with e-commerce: 40% of Chinese consumers buy groceries online, for example, compared with only 10% of Americans.

In pulling back the curtains, Amazon, one of the most private public companies in the world, revealed how it is racing to piece together an immensely complex puzzle—much of which it is having to build from scratch, at giant expense and with painstaking attention to the minutiae, as it tosses out assumptions that American customers have taken for granted for decades. In doing so, the company, an upstart here, has thrown itself into a knife fight with two privately owned and much more established Indian competitors—Flipkart Internet Pvt. and Snapdeal, owned by Jasper Infotech Pvt.—as well as a clutch of smaller Indian startups that are nipping at all of their heels. ... It is a fight that Amazon is far from certain of winning, yet one it cannot afford to sit out. The company predicts that India will be its biggest market after the U.S. within a decade and that the Indian e-commerce market as a whole will ultimately be gigantic. ... It is not hard to see why the battle for India is this fierce, nor why Bezos, famously obsessed with analytics, would see it as essential for Amazon’s future. The numbers alone are dizzying. India’s population of 1.25 billion is four times as big as the U.S.’s and more than double Europe’s. And since the median age is 27—a full decade younger than Americans’—the trajectory will be steep. India will overtake China as the world’s most populous country in just seven years, according to the UN. It is now the world’s fastest-growing major economy, and the IMF projects 7.5% growth next year. The roads and railways might be creaking under the strain. Many laws governing business are a confounding tangle, including a law forbidding foreign companies from selling products directly to Indians. That law effectively renders Amazon India a platform for vendors—akin to its “fulfillment by Amazon” program in the U.S. ... Barely one-quarter of India’s population has access to the Internet at home, whether on a smartphone or computer, and only a small fraction of those have ever shopped online. ... By some estimates the company is spending nearly $25 million a month in India already.

The developed world’s workforce will start to decline next year, threatening future global growth ... Ever since the global financial crisis, economists have groped for reasons to explain why growth in the U.S. and abroad has repeatedly disappointed, citing everything from fiscal austerity to the euro meltdown. They are now coming to realize that one of the stiffest headwinds is also one of the hardest to overcome: demographics. ... For the first time since 1950, their combined working-age population will decline, according to United Nations projections, and by 2050 it will shrink 5%. The ranks of workers will also fall in key emerging markets, such as China and Russia. At the same time the share of these countries’ population over 65 will skyrocket. ... reflects two long-established trends: lengthening lifespans and declining fertility. Yet many of the economic consequences are only now apparent. Simply put, companies are running out of workers, customers or both. In either case, economic growth suffers. As a population ages, what people buy also changes, shifting more demand toward services such as health care and away from durable goods such as cars. ... Demographic forces are assumed to be slow-moving and predictable. By historical standards, though, these aren’t ... it took 80 years for the U.S. median age to rise seven years, to 30, by 1980, and just 34 more to climb another eight, to 38. ... There is no simple answer for how business and government should cope with these changes, since each country is aging at different rates, for different reasons and with different degrees of preparedness.

June Gloom, the fog and clouds that often linger here over the Southern California coast this time of year, appears to have spread to the Federal Reserve. ... We agree that QE must end. It has distorted incentives and inflated asset prices to artificial levels. But we think the Fed’s plan may be too hasty. ... Fog may be obscuring the Fed’s view of the economy – in particular, the structural impediments that will inhibit its ability to achieve higher growth and inflation. Mr. Bernanke said the Fed expects the unemployment rate to fall to about 7% by the middle of next year. However, we think this is a long shot. ... Mr. Bernanke’s remarks indicated that the Fed is taking a cyclical view of the economy. ... Our view of the economy places greater emphasis on structural factors. Wages continue to be dampened by globalization. Demographic trends, notably the aging of our society and the retirement of the Baby Boomers, will lead to a lower level of consumer demand. And then there’s the race against the machine; technology continues to eliminate jobs as opposed to provide them. ... It’s reasonable, of course, for Mr. Bernanke to try to prepare markets for the inevitable and necessary wind down of QE. But if he has to wave a white flag three months from now and say, “Sorry, we miscalculated,” the trust of markets and dampened volatility that has driven markets over the past two or three years could probably never be fully regained. It would take even longer for the fog over the economy to lift.

Somewhere between a fifth to a third of the million students graduating out of India's engineering colleges run the risk of being unemployed. Others will take jobs well below their technical qualifications in a market where there are few jobs for India's overflowing technical talent pool. Beset by a flood of institutes (offering a varying degree of education) and a shrinking market for their skills, India's engineers are struggling to subsist in an extremely challenging market. … According to multiple estimates, India trains around 1.5 million engineers, which is more than the US and China combined.

Economists are always right, even when they are not, aren’t they? Fat chance. The reality is very different. Writing these letters is akin to being constantly exposed, and – at times - looking rather silly. But I still enjoy it, so allow me to stick my neck out again and go against the consensus, because that is, at the end of the day, how you make money in this industry. ... The broad consensus is that DM countries are finally returning to some sort of normality (often called the New Normal), following years of Zombie-like conditions. There is, admittedly, a growing recognition that GDP growth is likely to disappoint for quite a while to come, but I believe that ‘quite a while’ should be measured in decades and not, as most seem to believe, in years ... In the following, I will argue that GDP growth will disappoint for a very long time to come, and that will obviously have an effect on corporate earnings growth as well. As I see things, most investors are still way too optimistic on GDP growth and corporate earnings growth for the next many years. ... There are in reality not one but at least four reasons why returns on financial assets will1 disappoint in the years to come, and they are (in no particular order):
1. Regulatory changes.
2. The end of the debt super-cycle.
3. Wealth-to-GDP to normalise.
4. A deteriorating demographic outlook.

Since 1960, tens of millions of people have migrated toward the Pacific, settling in Las Vegas and Tempe and Boulder. Denver has tripled in size. Phoenix, having added some 3.6 million people, has more than quintupled. Today, one in eight Americans depends on water from the Colorado River system, and about 15 percent of the nation’s crops are grown with it. ... the demands on the river were never sustainable. In 1922, the seven states in the Colorado River watershed signed a compact dividing its water. With little historical data, they calculated the river’s capacity after a decade of unusually wet conditions. ... Since the current drought began, in 2000, that shortfall has averaged 25 percent. Instead of adjusting their allotments, states have drawn down the nation’s largest reservoirs, which are quickly draining. Even this winter’s El Niño weather pattern won’t bring enough rain to restore the region’s supply ... To determine who gets water and who doesn’t, states rely on a system that originated more than 150 years ago—when water was plentiful and people were scarce. ... “prior appropriation,” which promised rights to use a share of water based on who got there first. ... Prior appropriation became the foundation of western water law, and it established order in the West. Today, though, state water laws are largely to blame for the crippling shortages. Because water rights were divvied up at a time when few cities existed west of the Mississippi, some 80 percent of the region’s water goes to farmers, leaving insufficient supplies for growing cities and industries. And farmers must put all their water to “beneficial use” or risk losing their allotment—a rule that was originally intended to prevent hoarding but that today can encourage waste. Many farmers have not adopted modern technology that can cut water use by up to 50 percent, in part because they need to protect their water rights. ... Allowing people to buy and sell water rights is a more expedient way to redistribute the West’s water, he argues. Waste would be discouraged, water would shift to where it’s needed most, and farmers would be compensated. ... The West would have plenty of water if people used it more wisely: Most of the region’s supply goes to growing low-value, water-intensive crops such as hay and alfalfa—in many cases in the desert.

Somewhere in the haze of the last generation, funky Old Austin disappeared and was replaced by something sleek, fast, and unbelievably popular. Suddenly everyone wants to be in Austin, from tech twentysomethings to middle-aged corporate hot shots. Austin is the fastest-growing big city in the country, at the top of lists for things that can be measured (real estate and jobs) and things that can’t (cool and kicks). It has become the City of the Eternal Festival, from South by Southwest and the Austin City Limits Music Festival to Pachanga, Reggae, and Formula 1. Where else can you eat the best barbecue in the world, watch more than a million hungry bats ascend into the gloaming above the Ann W. Richards Congress Avenue Bridge, hear amazing music every night of the week, and behold Lady Gaga covered in vomit as part of a SXSW show? Two months ago Forbes called Austin the next boomtown, apparently forgetting that Bloomberg ranked us the country’s number one boomtown back in 2013. As of October, the greater metropolitan area had grown to an astonishing 2 million people, which is 1.4 million more than we had in 1980, when I was slacking my life away.

Until the turn of this century, population growth generated more than half of all global consumption. But between 2015 and 2030, three-quarters of global consumption growth will be driven by individuals spending more. This shift has profound implications for companies. What’s now important are emerging demographics: the latest report from the McKinsey Global Institute (MGI) finds that nine groups will generate three-quarters of global urban consumption growth to 2030, and just three of these will generate half of consumption growth and have the power to reshape global consumer markets over the next 15 years.
1. The retiring and elderly in developed economies
2. China’s working-age population
3. North America’s working-age population
Tracking consumer attitudes and behavior is not sufficient if companies are going to capture key consumer markets. They need to understand the core drivers of consumption such as income and age, characteristics such as ethnic mix and education, and the timing of key decisions such as getting married, having children, and buying a house.

Like the population, the business sector of the U.S. economy is aging. Our research shows a secular increase in the share of economic activity occurring in older firms—a trend that has occurred in every state and metropolitan area, in every firm size category, and in each broad industrial sector. ... The share of firms aged 16 years or more was 23 percent in 1992, but leaped to 34 percent by 2011—an increase of 50 percent in two decades. The share of private-sector workers employed in these mature firms increased from 60 percent to 72 percent during the same period. ... Perhaps most startling, we find that employment and firm shares declined for every other firm age group during this period. We explore three potential contributing factors driving the increasing share of economic activity occurring in older firms, and find that a secular decline in entrepreneurship is playing a major role. We also believe that increasing early-stage firm failure rates might be a growing factor. ... We are unable to find strong evidence of a direct link between business consolidation and an aging firm structure. Though we document a clear rise in consolidation during the last few decades, it doesn’t appear to be a major contributor to business aging directly—which has been occurring across all firm size classes, and the most in the smallest of businesses. ...This leaves some questions unanswered, but it clearly establishes that whatever the reason, it has become increasingly advantageous to be an incumbent, particularly an entrenched one, and less advantageous to be a new entrant. ... The trends described here raise some cause for concern in our view. Holding all factors constant, we’d expect an economy with greater concentration in older firms and less in younger firms to exhibit lower productivity, potentially less innovation, and possibly fewer new jobs created than would otherwise be the case.

As we have observed in the past, financial markets appear to solely focus on one major risk/return catalyst at any given time, before, like a bored teenager, turning attention to the “next new thing.” Over the past year and a half, we have seen primary market focus transition from the dramatic decline in oil prices, to economic stresses in China, and most recently to the forthcoming referendum in the United Kingdom and the possibility of “Brexit.” We are not for a moment suggesting that these factors are unimportant, as indeed they are all critical parts to a broader puzzle, but we would suggest that stepping back to apprehend the full image on the puzzle is vital when too many market participants are overly focused on one part of it. In fact, we think that such an overly limited focus in a world of complex market crosscurrents may be part of what leads many to underperform. To that end, we seek to take a broader view with our market outlook. ... In this edition of the outlook we begin by sorting through and evaluating some partial market myths that have recently been promulgated to explain market volatility. These include exaggerated concerns that the volatility is due to bond market illiquidity, or overdone assertions that markets are being driven higher and lower primarily on the back of oil price movements. Rather, we think that secular structural changes involving demographic trends and profound technological innovations are much more important considerations when judging those forces that are truly impacting economic and asset valuation dispersions. Further, we believe these secular challenges should also be the focus of the risk factors that represent the major fault lines in markets today, or the locations of potentially serious left tail risks.

The need for good money managers has never been greater. Total investable assets are continuously rising. High-net-worth individuals are now influential sources of capital in both established and emerging markets. Baby boomers are living longer in retirement, and as they stop working they'll need their assets to last longer. Yet for investors too few good options exist. ... Many of our colleagues don't believe that disruption is imminent. After all, asset management is one of the world's most profitable and exciting businesses. Why should we even worry about disrupters? The challenge, according to innovation expert Clayton Christensen, is that incumbents have a blind spot toward disruption. It is difficult to see because it goes against a set of ingrained assumptions that most likely have led to success so far. As a result, the profitable big players have a hard time seeing threats, especially when these are coming from smaller and more innovative players or outside their traditional set of competitors. ... We expect that asset management is about to go through a particularly dynamic period of disruption, for three reasons: high profits, new technologies and a new set of client demands resulting from global social changes. ... Roughly half of the world's $270 trillion-plus of investable assets are in real estate and cash, which were also the most popular investment areas in the 1800s. ... Our research suggests the power base will eventually shift from the money managers to the money holders.

But a new generation of owners like Ballmer, with fortunes made in technology, private equity, and venture capital, are accustomed to being intimately involved with their investments. They’re not just looking to win championships and trophies. They’re looking to build a great business. ... More than that, these tech-enabled owners have helped turn the NBA into North America’s most forward-thinking sports league. Other leagues struggle with aging fans and restrictive views on intellectual property; the NBA has the youngest TV audience of any US league and lets its content flow through the wilds of the Internet. While the other US leagues struggle to build international interest in their games, the NBA has leveraged social media and new technology to build a huge global following. If the league has its way, the Golden State Warriors’ three-point-shooting machine Stephen Curry won’t be merely an ambassador for America’s most exportable sport. He’ll be the biggest star of the biggest league on the planet. ... the overall composition of NBA ownership groups has radically changed. Today roughly half of NBA teams have controlling owners with backgrounds in tech and investment management. ... These owners don’t talk to each other about on-the-court matters, but they’re all in touch regularly on issues of how to run their businesses and reach fans. ... The NBA began this past season with 100 players from 37 countries and territories, 22 percent of the league. That adds up to a huge international audience. ... The biggest potential prize here is China. By some estimates, almost as many people play basketball in China as there are people in the United States—300 million. The NBA dreams of turning the massive Chinese market into the engine that propels the league into the global economic stratosphere.

For years, the conventional wisdom has been that millennials prefer urban living and the culture and excitement of the big, dense cities, want to be flexible and avoid owning a home, and if given a choice, would rent an apartment in a development like Taxi in a heartbeat. But as millennials age, and more marry and consider starting families, the numbers tell a different story. ... It’s true that homeownership among this age group has traditionally been lower than in previous generations. But that may be more a function of delayed purchases due to millennials’ new financial reality: historically high student debt, recession, rising real estate costs, a challenging and stratified job market. ... Last year, millennials, the largest generation in American history, purchased 35 percent of homes sold in the U.S. Consider that the median age of the millennial generation is 25, and the average age of a first-time home buyer is 31, and it’s fair to say there’s a sizable wave of millennial homebuyers on its way. Realtors, urban planners, and home builders, not to mention city and local governments, have a lot riding on when, and where, this generation settles down. Predictions that this generation will permanently rent, or, if they do buy, will stay in cities forever, may have been premature.

Let us say it plainly: Monsanto is almost surely the most vilified company on the planet. To its diehard critics it embodies all that is wrong with big, industrial agriculture—the corporatization of farming, the decline of smallholders, the excessive use of chemicals, a lack of transparency, and, of course, the big one: the entry of genetically modified organisms into our food supply. The tri-letter acronym GMO has become a four-letter word to millions of people, from earnest middle-schoolers to purist Whole Foods shoppers. ... The United Nations’ Food and Agriculture Organization estimates that we must double the current level of food production to adequately feed a population predicted to hit 9.7 billion by 2050—and we’ll have to do it on less land (much of it scarce of water), using fewer resources. ... Historically, Monsanto has tried to increase farm yields through advancements in seed technology alone. Grant calls this “hubris”: “Twenty years ago,” he says, “we thought biotech was going to be the panacea.” In the past half-decade the company has begun to look beyond seed for answers. ... Breeding better seed has contributed to a more than 1% annual increase in corn yields, experts say. Biologists, for instance, have created corn plants that can be clustered closer together, meaning there can be more stalks per acre. Still, that yearly growth rate would leave the U.S. average below 200 bushels by the end of the decade—far from Hula’s corn bonanza and nowhere near enough to feed the planet. ... Combined, those seeds now fill some 400 million acres around the globe. That’s a fraction of the nearly 4 billion acres of land the UN estimates is being cultivated. Climate Corp.’s chief technology officer Mark Young doubts that that Monsanto could ever get to a billion-acre footprint just by being a seed company, “but as a decision-based company, it seems to have a really good shot.” Monsanto, for example, doesn’t sell grape seeds, but it could some day advise grape growers on how to increase their yields.