1 00:00:03,450 --> 00:00:07,190 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. As we 2 00:00:07,190 --> 00:00:09,059 Sean Aylmer: near the end of the year, it's a good time 3 00:00:09,060 --> 00:00:11,570 Sean Aylmer: to look at some of the major trends changing the 4 00:00:11,570 --> 00:00:14,540 Sean Aylmer: way we work and the way we invest. In particular 5 00:00:14,540 --> 00:00:18,380 Sean Aylmer: technology continues to disrupt the services sector. And after a 6 00:00:18,380 --> 00:00:21,739 Sean Aylmer: couple of decades of relative stability, services are now on 7 00:00:21,739 --> 00:00:25,070 Sean Aylmer: the cusp of a major disruption. The new Megatrends report 8 00:00:25,070 --> 00:00:28,960 Sean Aylmer: from PGIM looks at the investment impact of technological disruption 9 00:00:28,960 --> 00:00:32,120 Sean Aylmer: in the sector. PGIM is one of the top 10 largest asset 10 00:00:32,120 --> 00:00:35,710 Sean Aylmer: managers in the world, with more than 1. 5 trillion 11 00:00:35,870 --> 00:00:40,370 Sean Aylmer: US dollars, in assets under management. Shehriyar Antia is Vice 12 00:00:40,370 --> 00:00:43,050 Sean Aylmer: President, Head of Thematic Research at PGIM and my guest 13 00:00:43,050 --> 00:00:45,870 Sean Aylmer: this morning. Shehriyar, welcome to fear and greed. 14 00:00:46,270 --> 00:00:48,010 Shehriyar Antia: Well, thank you so much for having me on Sean. 15 00:00:48,010 --> 00:00:49,580 Shehriyar Antia: It's such a pleasure to be here. 16 00:00:49,840 --> 00:00:51,479 Sean Aylmer: And you are coming all the way from New York. 17 00:00:51,479 --> 00:00:54,840 Sean Aylmer: And you can tell that because that great traffic noise 18 00:00:54,840 --> 00:00:57,970 Sean Aylmer: of New York, you may not even hear it anymore, 19 00:00:57,970 --> 00:01:00,010 Sean Aylmer: but just very faintly we can hear it, which is 20 00:01:00,310 --> 00:01:03,770 Sean Aylmer: exciting to think that we're starting to share the world 21 00:01:03,770 --> 00:01:04,500 Sean Aylmer: together again. 22 00:01:04,940 --> 00:01:08,880 Shehriyar Antia: Indeed. Sean, coming at you live from New York city. 23 00:01:09,310 --> 00:01:12,229 Sean Aylmer: Right. Now, let's make it clear what we are talking 24 00:01:12,230 --> 00:01:16,279 Sean Aylmer: about when we refer to services. I know it's a 25 00:01:16,280 --> 00:01:19,330 Sean Aylmer: huge part of the workforce in developed markets and a 26 00:01:19,330 --> 00:01:21,610 Sean Aylmer: huge part of global GDP, but can you define it 27 00:01:21,610 --> 00:01:22,080 Sean Aylmer: for us. 28 00:01:22,730 --> 00:01:27,819 Shehriyar Antia: Services are a really major part of the global economy, 29 00:01:28,190 --> 00:01:30,319 Shehriyar Antia: as you talked about. They make up roughly three quarters 30 00:01:30,319 --> 00:01:33,860 Shehriyar Antia: of the labor in places like US and Europe and 31 00:01:33,870 --> 00:01:38,180 Shehriyar Antia: almost half of employment in major emerging markets as well. 32 00:01:38,180 --> 00:01:41,470 Shehriyar Antia: And what's important for investors here, we think is that 33 00:01:41,470 --> 00:01:44,640 Shehriyar Antia: the deck is about to be reshuffled. That is a 34 00:01:44,640 --> 00:01:48,430 Shehriyar Antia: major segment of the global economy is on the cusp 35 00:01:48,710 --> 00:01:51,760 Shehriyar Antia: of this tech disruption leading to a whole new set 36 00:01:51,760 --> 00:01:55,100 Shehriyar Antia: of winners and losers, and we really think investors are 37 00:01:55,140 --> 00:01:59,200 Shehriyar Antia: overlooking this. What I mean by services, I'm talking about 38 00:01:59,200 --> 00:02:02,960 Shehriyar Antia: financial services, I'm talking about healthcare, I'm talking about transportation, 39 00:02:02,960 --> 00:02:06,440 Shehriyar Antia: logistic, I'm talking about media and entertainment. And I'm really 40 00:02:06,690 --> 00:02:09,590 Shehriyar Antia: glad to be here today to talk about it with you. 41 00:02:10,450 --> 00:02:14,369 Sean Aylmer: When you talk about disruption, the major disruption that's coming, where 42 00:02:14,370 --> 00:02:15,300 Sean Aylmer: is it coming from? 43 00:02:16,030 --> 00:02:20,340 Shehriyar Antia: We're talking about technology disruption and it's not really new 44 00:02:20,340 --> 00:02:25,950 Shehriyar Antia: at all, and earlier wave saw mechanization of labor intensive 45 00:02:25,950 --> 00:02:30,859 Shehriyar Antia: processes and so forth. And these earlier waves of technology 46 00:02:30,860 --> 00:02:35,900 Shehriyar Antia: disruption really transformed agriculture, manufacturing, and retail. And one common 47 00:02:35,900 --> 00:02:40,010 Shehriyar Antia: feature of these earlier waves was well established firms in 48 00:02:40,010 --> 00:02:45,070 Shehriyar Antia: these industries like Nokia, Harris Scarfe in Australia were roundly 49 00:02:45,070 --> 00:02:49,670 Shehriyar Antia: vanquished by tech savvy upstarts like Apple and Amazon. But, 50 00:02:50,430 --> 00:02:54,160 Shehriyar Antia: Sean, history more often rhymes than repeats, and our research 51 00:02:54,160 --> 00:02:58,510 Shehriyar Antia: strongly indicates that this current wave of technological disruption around 52 00:02:58,510 --> 00:03:01,260 Shehriyar Antia: services could look quite different for several reasons. 53 00:03:01,889 --> 00:03:03,980 Sean Aylmer: If I go on, what are those reasons that it's 54 00:03:03,980 --> 00:03:04,760 Sean Aylmer: going to look a bit different? 55 00:03:06,450 --> 00:03:10,669 Shehriyar Antia: Three reasons really. First, services are often heavily regulated. It's 56 00:03:10,669 --> 00:03:14,100 Shehriyar Antia: really hard to think of industries with more government involvement 57 00:03:14,100 --> 00:03:18,970 Shehriyar Antia: globally than financial services and healthcare. Second, clients in service 58 00:03:18,970 --> 00:03:22,889 Shehriyar Antia: industries tend to be stickier, and client acquisition costs are 59 00:03:22,889 --> 00:03:26,330 Shehriyar Antia: higher. I'm much more likely to change grocery stores for 60 00:03:26,330 --> 00:03:28,880 Shehriyar Antia: example, than I am my bank or my doctor. Right? 61 00:03:30,100 --> 00:03:33,550 Shehriyar Antia: And third, service firms have seen this tech disruption horror 62 00:03:33,550 --> 00:03:37,650 Shehriyar Antia: movie before, they've witnessed leaders in manufacturing and retail really 63 00:03:37,920 --> 00:03:42,500 Shehriyar Antia: resist technology and get driven to extinction. And now, they 64 00:03:42,500 --> 00:03:45,690 Shehriyar Antia: will not be caught flatfooted. So yes, this wave of 65 00:03:45,690 --> 00:03:49,750 Shehriyar Antia: disruption will absolutely transform services, but it's likely to do 66 00:03:49,750 --> 00:03:51,670 Shehriyar Antia: so in somewhat different ways we think. 67 00:03:52,860 --> 00:03:56,240 Sean Aylmer: Just before we get into that. Is that actually the 68 00:03:56,240 --> 00:03:59,760 Sean Aylmer: technology that's going to make such a difference to services 69 00:04:00,180 --> 00:04:03,040 Sean Aylmer: as opposed to the technologies that made a difference to 70 00:04:03,040 --> 00:04:05,790 Sean Aylmer: retail and manufacturing, those types of things. I'm trying to 71 00:04:05,790 --> 00:04:09,190 Sean Aylmer: get to the bottom of what's the big technology push 72 00:04:09,190 --> 00:04:12,830 Sean Aylmer: forward that does make the difference to services? 73 00:04:12,830 --> 00:04:16,279 Shehriyar Antia: You're absolutely right. It's this move to cloud computing that 74 00:04:16,279 --> 00:04:20,620 Shehriyar Antia: enables so much more mobile computing, it enables a AI 75 00:04:20,910 --> 00:04:24,770 Shehriyar Antia: and so much more powerful computing power. It really democratizes 76 00:04:27,339 --> 00:04:30,080 Shehriyar Antia: a lot of the computing power. And it's this evolution 77 00:04:30,080 --> 00:04:32,730 Shehriyar Antia: of cloud computing, and just so how cheap and ubiquitous 78 00:04:32,730 --> 00:04:38,109 Shehriyar Antia: that it has become really this next step of technology 79 00:04:38,110 --> 00:04:40,000 Shehriyar Antia: disruption here. You're absolutely right. 80 00:04:40,890 --> 00:04:43,419 Sean Aylmer: Let's take financial services because it's something that we all 81 00:04:43,420 --> 00:04:47,330 Sean Aylmer: use. How much change will there be in that sector? 82 00:04:47,360 --> 00:04:49,560 Sean Aylmer: I mean, what do you think the role or the 83 00:04:49,589 --> 00:04:53,270 Sean Aylmer: influence of fintechs and neobanks will have going forward? 84 00:04:54,400 --> 00:04:57,300 Shehriyar Antia: First, let me say that overall financial services are a 85 00:04:57,300 --> 00:05:01,410 Shehriyar Antia: tough sector for upstart disruptors to crack. And are really good 86 00:05:01,410 --> 00:05:05,910 Shehriyar Antia: example of this are robo- advisors. Sean, I'm old enough 87 00:05:06,000 --> 00:05:10,760 Shehriyar Antia: to remember the breathless hype on Bloomberg and OSBiz around robo- 88 00:05:10,760 --> 00:05:13,559 Shehriyar Antia: advisor, six and seven years ago and how they were 89 00:05:13,730 --> 00:05:16,070 Shehriyar Antia: going to first take over wealth management and then come 90 00:05:16,070 --> 00:05:20,950 Shehriyar Antia: after institutional asset managers. Well, last I checked Macquarie and 91 00:05:20,950 --> 00:05:23,560 Shehriyar Antia: BlackRock are doing just fine. Thank you. They're bigger and 92 00:05:23,560 --> 00:05:26,600 Shehriyar Antia: better than ever before. And what started out as a 93 00:05:27,100 --> 00:05:31,740 Shehriyar Antia: revolution really fizzled out as many robo- advisors found it 94 00:05:32,040 --> 00:05:36,020 Shehriyar Antia: almost impossible to scale up. Either those client acquisition costs 95 00:05:36,020 --> 00:05:39,730 Shehriyar Antia: were where high or they lacked access to client. Now 96 00:05:39,730 --> 00:05:43,770 Shehriyar Antia: to answer your question around fintech and neobanks, there's a 97 00:05:43,770 --> 00:05:46,340 Shehriyar Antia: bit of a different story there. For the most part, 98 00:05:46,350 --> 00:05:50,160 Shehriyar Antia: neobanks are not competing directly with major banks for top 99 00:05:50,160 --> 00:05:55,740 Shehriyar Antia: tier, prime, consumer and business clients. Instead the neobanks target 100 00:05:55,760 --> 00:06:00,470 Shehriyar Antia: underbanked or disengaged consumers or small businesses. That is customers, the 101 00:06:00,470 --> 00:06:03,730 Shehriyar Antia: large commercial banks don't really go after. And in doing 102 00:06:03,730 --> 00:06:06,900 Shehriyar Antia: so, the neobanks have been able to build viable businesses 103 00:06:06,900 --> 00:06:10,240 Shehriyar Antia: that have grown, especially in emerging markets where the underbanked 104 00:06:10,240 --> 00:06:14,520 Shehriyar Antia: population can be quite large. However, this business model limits 105 00:06:14,520 --> 00:06:17,390 Shehriyar Antia: their growth potential. And if they want on to continue to 106 00:06:17,390 --> 00:06:21,120 Shehriyar Antia: grow rapidly, especially in places like Australia and Europe and 107 00:06:21,180 --> 00:06:24,650 Shehriyar Antia: the US, they will have to compete for those prime 108 00:06:24,650 --> 00:06:28,200 Shehriyar Antia: clients. And when they do, it'll be really interesting to 109 00:06:28,410 --> 00:06:30,809 Shehriyar Antia: see just how successful they may be. 110 00:06:31,140 --> 00:06:33,360 Sean Aylmer: Stay with me Shehriyar, we'll be back in a minute. 111 00:06:38,650 --> 00:06:42,969 Sean Aylmer: I'm speaking to Shehriyar Antia, Vice President, Head of Thematic Research 112 00:06:43,060 --> 00:06:45,450 Sean Aylmer: at PGIM. Another sector I want to talk to you 113 00:06:45,450 --> 00:06:49,670 Sean Aylmer: about is healthcare. Now, obviously things like telehealth and virtual 114 00:06:49,670 --> 00:06:53,029 Sean Aylmer: services have been fast tracked by COVID, certainly in Australia they 115 00:06:53,029 --> 00:06:55,609 Sean Aylmer: have. But there's always... I mean, when I talk to 116 00:06:55,750 --> 00:06:59,810 Sean Aylmer: fund managers, what are the sectors of the future and 117 00:06:59,810 --> 00:07:03,469 Sean Aylmer: health tech always gets a run. Well, how do you 118 00:07:03,470 --> 00:07:07,900 Sean Aylmer: think healthcare is going to change in the next few years, because 119 00:07:07,900 --> 00:07:08,920 Sean Aylmer: of technology? 120 00:07:09,720 --> 00:07:14,110 Shehriyar Antia: Well, telehealth and virtual services are really great examples of 121 00:07:14,110 --> 00:07:18,110 Shehriyar Antia: the virtualization of healthcare that is happening, and that's absolutely 122 00:07:18,460 --> 00:07:23,780 Shehriyar Antia: here to stay. The technologies around telemedicine existed before COVID 123 00:07:23,780 --> 00:07:28,260 Shehriyar Antia: of course and the pandemic really boosted consumer adoption. Just 124 00:07:28,260 --> 00:07:30,700 Shehriyar Antia: the sheer convenience of not having to take time off 125 00:07:30,700 --> 00:07:34,010 Shehriyar Antia: from school or work to visit with adopter for routine 126 00:07:34,010 --> 00:07:36,630 Shehriyar Antia: matters is something households are just not going to give 127 00:07:36,630 --> 00:07:40,040 Shehriyar Antia: up easily. But telemedicine is just the tip of the 128 00:07:40,040 --> 00:07:43,640 Shehriyar Antia: iceberg here, Sean. When it comes to virtualization of healthcare, 129 00:07:43,640 --> 00:07:47,010 Shehriyar Antia: we believe there's a whole constellation of apps out there 130 00:07:47,010 --> 00:07:52,210 Shehriyar Antia: that connect with wearable devices like Fitbits and Apple watches or 131 00:07:52,530 --> 00:07:57,470 Shehriyar Antia: implanted devices to track and monitor chronic conditions like asthma, 132 00:07:57,700 --> 00:08:02,290 Shehriyar Antia: heart conditions, or even diabetes. And these apps enable monitoring 133 00:08:02,290 --> 00:08:05,900 Shehriyar Antia: and care of these conditions outside of a hospital, outside 134 00:08:05,900 --> 00:08:09,130 Shehriyar Antia: of a medical office. And the pandemic is really boosted 135 00:08:09,130 --> 00:08:12,770 Shehriyar Antia: the adoption of those apps and services as well. No 136 00:08:12,770 --> 00:08:17,390 Shehriyar Antia: question, these aspects of virtualized healthcare are definitely going to 137 00:08:17,390 --> 00:08:19,720 Shehriyar Antia: be a part of our lives going forward here. 138 00:08:20,070 --> 00:08:22,450 Sean Aylmer: When we talk about this, I keep thinking there must be 139 00:08:22,450 --> 00:08:27,140 Sean Aylmer: a lot of opportunity then for businesses or businesses that 140 00:08:27,140 --> 00:08:30,300 Sean Aylmer: haven't opened their doors yet to actually get into some 141 00:08:30,300 --> 00:08:34,240 Sean Aylmer: of these sectors, which previously were difficult to enter. Now, 142 00:08:34,240 --> 00:08:36,660 Sean Aylmer: we talked about financial services having lots of barriers to 143 00:08:36,660 --> 00:08:40,100 Sean Aylmer: entry, but there would be other areas, maybe it's health, 144 00:08:40,150 --> 00:08:44,140 Sean Aylmer: maybe it's e- commerce, maybe it's transport and logistics. There 145 00:08:44,140 --> 00:08:46,440 Sean Aylmer: must be a lot of opportunities arising out of this. 146 00:08:47,350 --> 00:08:50,870 Shehriyar Antia: When we talk about opportunities and we talk about disruptive 147 00:08:51,140 --> 00:08:55,790 Shehriyar Antia: upstarts, right? Because services are so different from retail and 148 00:08:55,820 --> 00:08:59,890 Shehriyar Antia: manufacturing. Upstarts are faced with some new challenges. And the 149 00:08:59,890 --> 00:09:03,220 Shehriyar Antia: disruptive upstarts we think that are going to thrive, are 150 00:09:03,220 --> 00:09:05,960 Shehriyar Antia: going to have a couple of characteristics wherever they are. 151 00:09:06,250 --> 00:09:09,520 Shehriyar Antia: Whether they're in financial services or healthcare one, they are 152 00:09:09,520 --> 00:09:12,839 Shehriyar Antia: going to be able to navigate the regulatory landscape of 153 00:09:12,840 --> 00:09:15,590 Shehriyar Antia: the industry that they're in and of the country that 154 00:09:15,590 --> 00:09:18,980 Shehriyar Antia: they're in, because they can differ so much. And two, 155 00:09:19,460 --> 00:09:22,709 Shehriyar Antia: they will have a clear path to new customers so 156 00:09:22,710 --> 00:09:26,530 Shehriyar Antia: that they can scale up and grow easily. And upstart 157 00:09:26,530 --> 00:09:30,439 Shehriyar Antia: companies, new innovative firms that can navigate both of those 158 00:09:30,460 --> 00:09:33,210 Shehriyar Antia: should do well and really thrive, no matter what sector. 159 00:09:33,910 --> 00:09:36,750 Sean Aylmer: Just another thing, which the report mentions is blockchain technology. 160 00:09:37,690 --> 00:09:40,059 Sean Aylmer: Now. I would love to say I understand blockchain technology, 161 00:09:40,960 --> 00:09:44,679 Sean Aylmer: but I don't. But even critics of cryptocurrencies and things 162 00:09:44,679 --> 00:09:48,689 Sean Aylmer: like particularly Ethereum, they like the technology behind it. What 163 00:09:48,960 --> 00:09:51,920 Sean Aylmer: impact is that having on services? And I suppose particularly 164 00:09:51,920 --> 00:09:52,969 Sean Aylmer: financial services. 165 00:09:53,240 --> 00:09:58,699 Shehriyar Antia: Sure. Well, blockchain, Sean, I thought you'd never ask. Two 166 00:09:59,070 --> 00:10:02,350 Shehriyar Antia: quick thoughts around blockchain. First, blockchain is really in its 167 00:10:02,350 --> 00:10:06,490 Shehriyar Antia: infancy. And right now these are really early days for 168 00:10:06,490 --> 00:10:10,850 Shehriyar Antia: blockchain and distributed ledger technology more broadly. And what I 169 00:10:10,850 --> 00:10:14,020 Shehriyar Antia: mean by this is there are many basic issues out 170 00:10:14,020 --> 00:10:16,850 Shehriyar Antia: there that have yet to be resolved. There's many issues 171 00:10:16,850 --> 00:10:20,640 Shehriyar Antia: on the legal front, tax treatment regulatory issues that are 172 00:10:20,660 --> 00:10:25,260 Shehriyar Antia: big open- ended questions yet to be resolved. Even operationally, 173 00:10:25,460 --> 00:10:29,520 Shehriyar Antia: the pipes and plumbing of the blockchain, the ecosystem are 174 00:10:29,520 --> 00:10:33,600 Shehriyar Antia: still really developing. They're still really emerging. They're still ramping 175 00:10:33,600 --> 00:10:37,359 Shehriyar Antia: up. And the second thought around blockchain is that, blockchain's 176 00:10:37,360 --> 00:10:40,949 Shehriyar Antia: transformative impact is some time off in the future. And 177 00:10:40,950 --> 00:10:45,069 Shehriyar Antia: the current applications of public blockchain that are out there 178 00:10:45,070 --> 00:10:48,700 Shehriyar Antia: now, things like Bitcoin and some of the cryptocurrencies will 179 00:10:48,700 --> 00:10:52,469 Shehriyar Antia: not prove to be the most transformative elements. Sean, in 180 00:10:52,470 --> 00:10:55,580 Shehriyar Antia: many ways, blockchain today feels like the early internet days 181 00:10:55,580 --> 00:11:00,400 Shehriyar Antia: in the late nineties, where ISPs and browsers like Netscape 182 00:11:00,400 --> 00:11:03,620 Shehriyar Antia: and search engines were all the rage. Now it took 183 00:11:03,620 --> 00:11:06,280 Shehriyar Antia: five or six years to figure out how the internet 184 00:11:06,280 --> 00:11:08,559 Shehriyar Antia: was actually going to change the world. And it turns 185 00:11:08,559 --> 00:11:12,790 Shehriyar Antia: out that it wasn't, askjeeves.com that actually changed the world. 186 00:11:13,630 --> 00:11:15,780 Shehriyar Antia: I think the world will figure out how to unlock 187 00:11:15,780 --> 00:11:20,090 Shehriyar Antia: the potential of distributed ledgers, public ones, private ones. But 188 00:11:20,090 --> 00:11:23,130 Shehriyar Antia: I don't think the current applications will be the ones 189 00:11:23,130 --> 00:11:23,969 Shehriyar Antia: that actually do it. 190 00:11:24,679 --> 00:11:26,650 Sean Aylmer: Good. That means I won't have to go away and study them up. 191 00:11:26,650 --> 00:11:29,610 Sean Aylmer: I've still got a few years on my side. Shehriyar, 192 00:11:29,850 --> 00:11:31,710 Sean Aylmer: thank you very much for talking to Fear and Greed. 193 00:11:31,980 --> 00:11:34,920 Shehriyar Antia: Thank you very much for having me, Sean. Appreciate your time. 194 00:11:35,350 --> 00:11:39,270 Sean Aylmer: That was Shehriyar Antia, Vice President, Head of Thematic Research 195 00:11:39,270 --> 00:11:42,010 Sean Aylmer: at PGIM. This is the Fear and Greed Daily Interview. 196 00:11:42,010 --> 00:11:44,730 Sean Aylmer: Join me every morning for the full Fear and Greed podcast, 197 00:11:44,730 --> 00:11:46,980 Sean Aylmer: with all the business news you need to know. I'm Sean 198 00:11:47,250 --> 00:11:48,630 Sean Aylmer: Aylmer, enjoy your day.