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“ The best way to predict the future is to create it.
Abraham Lincoln

Since the industrial revolution of the nineteenth century, there have been a string of
disruptive technologies that have altered the path of economic development globally.
This continual innovation was coined ‘creative destruction’ by Joseph Schumpeter in the
1900s, and describes cycles of development from the steam engine to automobiles to
information technologies and finally to the current age of renewable energy and smart
grids. These cycles do not happen by chance; they are a product of large private and
public investment, government policies and, of course, entrepreneurial and innovative
expertise. Countries and entrepreneurs take huge risks to create new technologies and
see them through to mainstream production and a new era of development.

Figure 6 Creative Destruction, Rolling 10-year returns on the S&P 500 since 1814
1

Source: Datastream; Illustration: Allianz Global Investors Capital Market Analysis PROVINCIAL OUTLOOK NATIONAL OUTLOOK GLOBAL OUTLOOK GAP HOUSING INVESTOR NARRATIVE SPOT THE OPPORTUNITY PORTFOLIO INSIGHTS KHULISA NEWSLETTER ELECTRIC VEHICLES ENERGY SECURITY LOOKING AT GDP

These disruptive technologies quickly filter through to the rest of the world as they
become commercially viable. Some countries seizing the opportunity to become a
part of the value chain, while others who do not are forced to import the innovations in
order to keep up. Those who seize the opportunities often see vast development benefits
– South Korea and Japan automobile markets are not, as cases in point. However, this
often requires significant risk and coordinated government policy and support.

The clues to tomorrow’s revolution are often found at the fringe of society where
entrepreneurs are seeing ‘crazy’ ideas turn into reality and hit mainstream markets.
These entrepreneurs are the kind of people who envision fundamental equilibrium
changes and address the critical challenges in which traditional markets fail. One
such entrepreneur is South African born Elon Musk, who has managed to make wide-
scale Electric Vehicle (EV) use commercially viable in less than six years since starting

1 The S&P 500 is an American stock market index based on the market capitalisation of 500 large companies. It
is considered one of the best representations of US economic activity.

QUARTERLY ECONOMIC BULLETIN 2016 25