 Thank you all for coming and taking time out of your busy day to come and have be part of this Composition We think we're actually living in a very interesting time. I think for many many years now I think most people have been looking at what's happening around us if mostly pointed to two things It's kind of driving a big part of the change you're seeing one is the power of technology Shaping everything and then the others been globalization I think if you look at most commentators They will usually bring it down to those two things as being some of the things that are transforming our economic World in a fairly profound ways. So today, you know, we we've spent a fair amount of time of the last Several years looking at different aspects of these questions. You may have seen some of the work We've done on disruptive technologies. You may have seen some of the work We've done for example on jobs and automation We may have seen some of the things we've done for example in productivity and growth So we've been spending a lot of time on these questions But I think what we try to do today is to bring at least two of them together around two related topics based on some of our most recent Work that we've done the first is what we call in digital globalization and what this is is a Couple years ago. We did some work where we tried to take an integrated view on what we call global flows This is an attempt to try and put together a view on But on all the things of economic value that flow around the world. So goods commodities Services financial flows people flows And including data and digital flows. So we tried to put that together about two years ago So part of what you're going to hear today is I think we've gone back to it I think we think that a lot has already changed and there's some things that we hadn't actually quite fully Anticipated about that that have actually changed and so we're going to go into that quite a bit I think what you generally hear in that is that, you know, the world continues to be more and more connected In a way that mostly beneficial we're getting some of the debates about how we think about those benefits And who they accrue to and so forth, but the world has become a lot more Connected but the the other thing that we found that's been quite important about is how digital those global flows and global connections have become and the effect of digitization on Globalization in fact in the report that you you can get copies of that we're releasing today We actually talk about the fact that this is not quite You know your father's digitization Globalization that is a great enough has changed about how we should think about globalization driven by these forces So my colleague Susan London will take us through at least a quick Overview of some of the insights from that work. The second topic. We're going to look at is Digitization of economies and specifically of the US economy and what we've tried to do there to really understand Not so much the technologies But just if you look at the how our economy is made up economies consist of companies and people and sectors If we look across us how digitized of those things in the economy become and we think that it's quite interesting to take a sexual view because quite often These things are taken looked at at a national level without really fully understanding the nuances at the sector level and also at the Company level and looking at the implications for companies for workers for individuals and for the economy as a whole And what that means for growth and productivity So my colleagues free Rama swamis will take us through some of the learnings and insights From that work, but I think what one of things you'll find as you look across these two bodies of work We're going to go through. I think you're going to find some common threads both on the globalization front as well as on the Digitization of the US economy front. I think you'll find that there's a lot more opportunities for participation At every level for individuals for companies, but also for sectors. That is I think quite unprecedented versus Previous periods. I think you also find that some of the debates have actually changed So I think the debates we used to have about globalization If you're looking backwards in the last round We think there's some new debates to be had as we think about the benefits and the impacts for globalization So you'll see that I think you'll also see that we would like to change the narrative around What what we previously describes as digital divides or globalization divides within the haves and have nots I mean the question in our minds is it's a bit it's become a bit of a the haves and the have more's Meaning most people seem to be able to participate But some whether that's individuals or companies or sectors seem to be participating a lot more and getting bigger Benefits and I think if I bring it back down to I think where Anne-Marie kind of ended in their opening I think it's easy. It's probably best to personalize these at some level Which is how do we how should we think about these forces and changes almost at the individual level and at least our sense Is what depends what kind of you know what aspect of the individual you're talking about? Because on the one hand, we you know if you think about individuals as consumers We think that for the most part. It's mostly positive in terms of the things that we now have access to They were you know the way we leverage these technologies if you look at it from the point of view of the individuals as a worker We think it's a little bit more mixed. There's some challenges as you think about You know scaling transitioning some of the job automations. It's a little bit more of a mixed story If you think about these questions as citizens I think they're also interesting because in some level there's questions about the kind of rights that Anne-Marie was raising But also we now have probably more Transparency as active citizens in a polity think about how we participate and get information about how our politics work If you think about these things as investors So I think the point is I think we find that they're now a much more nuanced conversation to be had if we bring it down to the individual level about what these changes and Technologies mean for us without further ado, let me introduce my colleague Susan Lund who's a partner at the McKinsey Global Institute Was one of the lead authors for the work we've just done on the digital globalization Thank you Globalization has always been a very politically contentious issue Especially in an election year, but it's amazing when you look at the debate today. How much of it is about Relitigating the past Rather than talking about how to compete in the future So the discussion today is a still about tariffs trade deficits currency wars While what we see in front of us is a globalization that has morphed into a very different and more digital direction So the image that many of us still have in our minds of what is globalization? It's that picture of the huge cargo Containerships floating around the world taking boatloads of manufactured goods from factories and far flung places and Delivering it to markets around the world In fact global goods trade as I'm going to show you has flattened And instead what we're seeing is a far more intricate deeper web of connections between Countries and to be sure we're still at the very early stages of this We are in uncharted territory and we aren't sure what all the implications are going to be But what is clear to us now is that we're entering a very different era That's going to be interesting This chart shows you the way we traditionally measure globalization It's the cross-border flows of good services and finance and you see that starting back in 1980 It grew at roughly twice the pace of global GDP for a good 20 25 years, and then we hit a peak in 2007 and Since then it's flattened of course we had a sharp downturn in 2009 But what's happened since then is a flattening Now to be sure the trade in global goods is still important But it has stopped growing at the rates it had and we think that this is not just a cyclical phenomenon Clearly weak demand in Europe Japan and in countries around the world contributes But there's something more fundamental when we work with companies we can see that global Value chains are shifting and reconfiguring labor costs are no longer the driving Consideration for most types of manufacturing instead. It's about speed to market. It's about energy costs It's about infrastructure the quality of labor and many other dimensions and all of these things are pushing More production closer to where goods are consumed and so we don't foresee we think it's unlikely that global goods trade will in fact Anytime soon res resume a very rapid upward pace So does this mean that globalization has stalled and that it's a thing of the past We'd argue know that instead globalization has not gone into reverse. It's just gone digital This picture shows you a map of the world of the cross-border data flows between different regions back in 2005 That was only 10 years ago Here's what it looks like today 45 times the volume of cross-border bits crossing borders and We project that in the next five years it could increase nine times further So we have an entirely new type of trade going on We're calling it the digital trade and it sees cross-border data flows now This is comprised of many different things some of it in fact supports global trade in goods and services and finance It's hard to think of any global trade transaction today that doesn't Involve an email at some point in the chain or sensors on ships of goods transmitting data on where that is Today global services trade half of it is digitally delivered even in goods trade we find that Cross-border e-commerce is already worth 12 percent of global goods trade so part of this data is supporting other flows But a good portion of it is actually a new flow and its own right. It's communication It's data. It's information at search. So every day there are 207 billion email sent I know I feel like sometimes I get a large share of those and I'm sure you do too There are 4.2 billion Google searches every day. There are 152 million Skype calls computer to computer And there are 36 million purchases every day from Amazon alone. Now a large share of these transactions involve cross-border Interactions and that's part of the data flow. There's also a corporate portion to this data flow companies are communicating within branches Within their own organization. They're communicating with suppliers with customers They're centralizing back office operations and hubs around the world and communicating within their companies the internet of things is is Starting to explode across the industrial world where companies are embedding sensors in machines and different equipment that's sending little bursts of Data back to be monitored and tracked around the world So a good portion of this data flow is in fact a new connection in and of itself So digital technologies are transforming globalization through at least three key means the first and probably most important is a creation of what we call digital platforms and in plain English That's just the websites like eBay or Amazon or Facebook that enable anyone to join on that platform and connect across Borders the second way that globalization is trans being transformed is through the creation of purely digital goods So back in the day when I was a child books were physical things Newspapers were printed on paper Movies were something that you went to a store to rent Today all those things are now digital and streamed and of course this enables them to flow across borders instantaneously and at very low cost and then finally we have a concept that we call digital wrappers It's trade in physical goods or interactions that have a digital component that now make it more valuable So a great example would be the radio frequency ID tags that now a company cartons of goods as they move Around the world so that companies can track them this enables more valuable Goods to be shipped and it's greatly reduced losses in shipping This going back to the digital platforms You can see that the size of some of them are just enormous Facebook now has nearly 1.6 billion users if it were a country it would be larger than China or India YouTube WhatsApp Instagram WeChat and Alibaba are all larger than the US economy You can go down the line, you know Twitter Skype Amazon are larger than Brazil These are giant communities growing very rapidly connecting people around the world It's not just for individuals today small companies can actually directly participate in globalization If you're a small business anywhere, you can join a digital platform and then find customers funding suppliers abroad Today Facebook has 50 million small businesses and they have fans not friends 30% of their fans are Cross-border so this is now a new way for a small business anywhere in the world to reach out and find a global audience Alibaba has 10 million small companies Amazon has 2 million There are many other examples that we could show up here So suddenly a small globalization is no longer just for the largest multinational companies around the world small guys can go and find their own global markets and Indeed even the smallest newest companies can find global markets. We say that startups today are born global We did a survey of startups around the world in collaboration with 1776 and you'll hear from one of the co-founders Donna Harris later and we found that 86 percent of startups today Say that they are already global. They have some sort of cross-border connection Whether it's customers funders suppliers or mentors abroad an example would be an Estonian startup that we profile in the report called Comodule it creates sensors to put on electric bikes and scooters basically to make it like the Internet of Things and It's create a startup created in Estonia. They got their seed funding from Germany They unveiled the first prototype of this in Barcelona They get their parts from China and they're gonna market to consumers across Europe and Asia They were global from day one Individuals are also participating in this era of globalization This is as much about you and me connecting across borders as it is about the large companies So we've taken an estimate of how much individuals Participate in globalization and the ways they do it. We estimate that there are 914 million people Around the world that have at least one cross-border connection on a social media platform There are 429 unique Million individuals each year that go travel to another country. You've got 360 million of us We'll go online this year and buy a product from a different country through cross-border e-commerce and the list goes on Now this is exciting as individuals for entertainment for connecting for keep making contacts It also has real business implications I like the example of an Indonesian kebab seller With a company called Baba Rafi. That's actually his name Started out with one stall in Jakarta and then made terrific kebabs and took off like wildfire on social media He then developed a franchise model that spread across Indonesia and indeed across Southeast Asia They now have a franchise in the Netherlands and he's moved into selling frozen kebabs through e-commerce It's now a multi-million dollar company with 1,500 employees around the world and it started out through social media So we did a lot of econometrics for months And tortured the data tortured ourselves in the process and then boiled it down to three numbers for you to remember One is that global flows participating in them does raise global GDP We we think that it accounts very conservatively for at least 10 percent of global GDP That's worth 7.8 trillion dollars in 2014 compared to a world in which there were no flows 2.8 trillion of that is related to these cross-border data flows That's actually a bigger impact than the global trading goods Which is astounding given that Cross-border data flows were you know minute and almost non-existent just 15 years ago And then finally we find that count that depending on where you are in this network of global flows does determine the impact When you look at trading goods in the old world It was good to be at the center of the network and countries that were at the center of the network got 40 percent More benefit to GDP growth than countries at the periphery But in the next era of data flows we find that actually it's just the reverse the countries at the Periphery who are just being exposed to cross-border data flows get a much bigger more valuable impact on GDP So countries around the world are participating more virtually every country is connected to some degree in our report in the appendix you can see Countries ranking in what we call our connectedness index That measures connectivity across five different flows good services finance data and people For 139 countries the US is very connected. We're number three Singapore is a powerhouse a very small economy But has had a very active and deliberate strategy about being a hub in goods trade being a regional financial center being a hub for Business services in Southeast Asia and is the number one destination followed by Netherlands and then the US But you can see that in general Advanced economies tend to be more connected than emerging markets And indeed if there's one thing that keeps me up at night It is what happens to emerging markets in this new world low-income countries that didn't really fully Participate in the old form of globalization now need to build an entirely new digital Infrastructure and the potential to leapfrog ahead and find global markets is huge But there's also a potential that they get left even further behind But despite everyone being more connected the world is still not flat a few countries are highly connected While most of the rest of the world Has a lot of opportunity to participate more so here are nine countries ranked vertically on their connectedness score and you'll see that they're very high and Virtually the rest of the world is very has very little connectivity. It's an opportunity But it's also a challenge for getting left further behind So even though the US is very high up on this scale one of the top countries as we're going to see from my colleagues Sri Rama Swami even within the US though digitization and level of Across industries and companies is very different. Thanks So as Susan said and as James said Before that there is this this idea of digital opportunity and unevenness You see this playing out within the US economy as well and it takes the form of a digital divide But it's not the digital divide that we've all been used to hearing for the last 25 years So we've we've often heard about this notion of a digital divide between the haves and the have-nots But what we do right now we live in a in a country where two-thirds of us carry smartphones three quarters of Americans use social media And 98 percent have access to high-speed wireless internet So that all digital divide the one between the haves and have-nots is closing very quickly But in its place what we find is a new digital divide and it's very large and it's very persistent And that divide is what we call the gap between the haves and the have more There are some parts of the US economy. There are some Workers some consumers some companies some industries that just do a whole lot more with digital than everybody else and That matters because those have more those folks that are on the digital frontier are seeing extraordinary gains So if you look back over the last 20 years the Companies that are on that digital frontier are seeing much faster revenue growth than everybody else It applies to workers to Workers that are on the digital frontier. So the most digitized workforces are seeing wage growth That's twice the national average This is at a time when overall wage growth as we all know is pretty weak And the same thing applies to industries too. So industries that are on that digital frontier The profit growth that they're seeing is three times the national average Which is sort of a big deal because if you look at the average US company profit margins have grown by 60 percent So we're sitting on sort of a record profit Profit pile, but the most digitized industries are running away with most of them So the point of this research was to figure out why this is happening. Who are these folks that are on the digital frontier? How do they get there? How is that frontier itself evolving and what does that mean for the rest of us? So that's the point of this research and As we started to go down this research we very quickly run into a wall and The first wall is what does it mean to be digitized? And it turns out that despite all of the stuff that's been written about digital There isn't really a definition out there, right? And you ask people what it means to be digitized the most common answer we heard was well, it's not just IT Which is great, but from a researcher standpoint, that's not a very helpful answer right so we set about creating a definition and using a bunch of metrics to measure digitization in the US economy according to that definition and So that definition takes the form of three dimensions So the first of those is assets so an organization a company or industry is Digitized to the extent to which it has developed digital assets now some of that is IT assets But increasingly it's not just about IT. It's about physical assets That are getting digitized so it's about the buildings that are smart or the cars that are connected Right or the highways that are intelligent or the factories and the robots that are intelligent But that's clearly not enough Right, so you may be an oil and gas company for instance that's sitting on 30,000 sensors In its oil fields and less than 1% of the data coming from those sensors is actually being used by the company For any kind of effort to improve its operations Right so that idea of usage. What are you doing with your digital assets? That's the second dimension and That includes both how an organization engages externally With its customers and its suppliers and its partners and also internally so it measures how well a bank monitors It's different branches or how well a retailer is organizing its different retail stores But so all of that is what we is what we capture in usage And then there's a third dimension which to me is is the most exciting and where you've seen the most growth in the last decade or so and that's on labor and Where what you see is that the most digitized organizations are really out there on the frontier in terms of digitizing their workforce They're changing their task descriptions. They're reorienting their business processes. They're creating new sorts of digital jobs They didn't even exist a decade ago and So what we did in this research was to come up with hard metrics 27 different variables All of them hard metrics that you can actually measure and you can measure them across different sectors of the US economy And you can measure them going back in time And to our knowledge, this is the first time that that this that we've been able to do this And when you take this snapshot view across these 27 variables across all 22 sectors of the US economy You can really see how digitization is unfolding across the economy and what you see is How uneven this has turned out to be So despite the fact that digitization has been going on for about 30 or 40 years You still see a lot of disparity across sectors So here's a chart that shows you across these three buckets the three broad buckets of assets users and workers And then we also combine them into a single composite digitization index that you see on the left And you can see for instance that financial services companies Who were early movers back in the 70s when they started digitizing they've remained at the frontier So they're constantly reinventing how they digitize and over the last decade is how they've really taken the lead on how they digitize their workforces And you compare that to some of the the big asset heavy industries in the US economy So oil and gas mining Manufacturing that are now starting to digitize their assets, but they still have a ways to go in terms of usage We are in DC. So I do have to call out the government Which has a lot of room to grow But the thing that we found is that there's a lot of variation There are some cities there are some states there are some agencies that are doing extraordinary things very innovative things in terms of how they engage Either in terms of procurement or in citizen engagement But you do see you see a lot of variability across the country and that tends to bring down the average and That's kind of the story with retail too And we think of retail we often think of Walmart and Amazon But in reality there's a very long tale of small retailers that haven't done much beyond basic digital capabilities Keep in mind that this is not about haves and have nots, right? This is the haves and have mores. So the red cells are the ones that have basic digital capabilities They may have a website. They may be accepting digital payments But the have mores are doing much much more than just those basic capabilities and then down here at the bottom are sectors where Much much more can be done And there's a lot of opportunity to grow their digitization and get some of these gains and there for instance in hospitality Despite the presence of Airbnb, which we've all heard about right the sector remains very localized very fragmented And for the most part with minimal digital capabilities So there's a couple of other interesting things that come out from this one is that When you look at the sectors that that are the largest ones in the US economy It's largest measured in terms of GDP or an employment or an assets They unfortunately tend to be in the bottom half of the heat map Now what that means is that From a US from an overall economy standpoint This means that we have a long way to go to realize the full potential of digitization That potential as you would think represented by the by the cells in the green Right and we can actually put a number on that number that number is 18% Which means that the US economy despite all the digital upheaval that we're all familiar with over the last 10 20 years We're still only operating at a fifth of our potential So it's striking to imagine what that would be like if we could if we could double that or triple that Right, it would be interesting to imagine that as a thought experiment The other interesting thing is that number The overall digitization of the US economy or the or the digitization of the of the leading sectors versus everybody else That number hasn't really changed in the last decade so what we did was to go back in time and and track those metrics going back 20 years and What you see is in the mid 90s the rest of the US economy relative to those digital leaders The rest of the US economy was only about 8% as digitized and They have they have made gains they have started to Expand their digital capabilities, but as they've been doing that the guys on the frontier have outpaced them So that digital frontier the frontier of what is capable from a digitization standpoint the gains that you can get in terms of Efficiencies or market growth or profit growth or wage growth the frontier of what's possible has expanded four times In the last 20 years Well, the rest of the US economy is barely keeping up So there's just a long long way to go for us in terms of realizing our full potential Yes as the work of a bricklayer How do you digitize the work of a bricklayer or a hotel made? I mean construction and hospitality have very low digitization rates that seems quite unsurprising Finance has a very high rate of digitization. That seems quite unsurprising We're what do we really have the potential to to? Change what a bricklayer does a whole lot so Yes, there are fundamental differences between a person who works in the finance industry and a person who works as a bricklayer But you could make the same argument for workers in the oil and gas industry Who are actually quite digitized from a labor force standpoint or? Workers in some of the advanced manufacturing companies who are also actually quite digitized from a worker standpoint So we do adjust for these differences in the industry, right? And it still turns out that you can actually measure how digitized the workforce is or how digitized the assets are Given the type of industry that it is right, so it wouldn't be surprising I agree with you wouldn't be surprising that an asset light industry for instance may be more digitized Right compared to an asset heavy industry, but that's not what you see You actually see some asset-eyed industries that are very digitized and some that are not and you see the same thing in the workforce too so In terms of what this means for the overall economy consumers as James said are the big winners We may be on the cusp of a potential acceleration and productivity growth as you see some of these big asset heavy industries Starting to digitize their assets and their usage You may start to see an acceleration and productivity growth and Then there's the labor market which affects all of us where you see a very mixed picture There are some workers who are on that frontier who see extraordinary gains and income and For the rest the discussion I think is not so much about machines versus humans It's not about machines coming to take our jobs when you think about digitization and how it affects the workplace It's more helpful to think in terms of tasks There are some tasks that get digitized and some that get augmented with digital technologies And so about 45% of today's tasks Can technically be automated using currently available digital technologies But that only that only amounts to about 5% of all the jobs in the US economy Which means that what's more likely to happen is a wholesale redefinition of occupations as we go forward And the challenge for the US economy which is already from a labor market standpoint struggling to keep up with these changes The challenge is that those changes are likely to accelerate What we see for instance is that the pace of change this this talks about middle-skill jobs But we could you could say the same thing for high-skill jobs and low-skill jobs, too That the pace of change is likely to significantly accelerate over the next decade So let me stop there and hand off to our panel I would love to get some reactions from them for the research and for the implications on jobs Before we do that I'm sure there probably this sparked a whole host of questions What I'd like to suggest is we tackle the questions as part of the panel discussion So what we're going to do now is to introduce our panel, but first before I do that want to introduce Rana Farrar Rana is a columnist and is also the assistant managing editor for Time magazine One of the actually exciting things about Rana is that she has a forthcoming book actually Which is great. It's actually called Makers and Takers Which I think very appropriate some of the questions on people's minds about what happens to individuals and people in this economy But Rana is going to moderate our When's the book coming out? May 17th, but Rana is going to moderate our panel Let's come up on stage and also just introduce our panelists Well, we've tried to do that He's getting a cross-section of people from the private sector from government and from policy But also others who are also students and researchers on these same issues that we've been looking at