The world of the future will be fully digitalized. Driven by Moore’s Law which stipulates that computer power doubles every 18 months, computer chips and the Internet will capture and control every facet of life, according to physicist and futurologist Michio Kaku.
“In 2020, computer chips will cost a penny, that’s the cost of scrap paper. Computer power will therefore be everywhere and nowhere, like electricity,” he told delegates at the Cayman Captive Forum on Wednesday.
“Chips by the billions will be in the floor, in the ceilings, the walls, carrying out your wishes silently in the cloud. The internet will be everywhere and nowhere.”
Mr. Kaku argued that in the past two centuries, wealth was generated by waves of technological innovation, which in turn caused massive bubbles of wealth that burst in boom and bust cycles.
The first wave of innovation around thermodynamics and the steam engine powered the industrial revolution. The accompanying wealth bubble burst in the crash of the London stock exchange in 1850.
The second wave of innovation, which saw the use of electricity, magnetism and the internal combustion engine, created a speculative wealth bubble that ended in the Great Depression of 1928.
And again, 80 years later, wealth created by the invention of computers, tablets, smartphones, GPS and other high tech innovations crashed in the global economic crisis of 2008.
“The fourth wave will be molecular science, artificial intelligence, biotechnology and nanotechnology, all held together by computers and telecommunications,” Mr. Kaku said.
This development will be significant for the insurance industry, he said, because the most important impact will be on medicine. About one third of Cayman’s self insurers are healthcare captives.
“The baby boomers are getting old and they want the best medical insurance at the cheapest rates, but the medical industry is a holdover from the 1800s. Medical records are kept like [they were] 100 years ago,” he said.
Mr. Kaku presented a future in which “the word tumor will become obsolete” because nanoparticles can be used to target individual cancer cells; colonoscopy is replaced by computer chips; and cameras the size of an aspirin tablet and personal MRI scanners will fit into a bathroom cabinet.
The digitalization of diagnosis tools will lead to much earlier recognition of diseases, and damaged organs or body parts will simply be replaced. It is already possible to grow body parts like ears, bone or bladders from a patient’s own cells, he explained. The brain is the next organ to be digitalized so that it can be connected to an exoskeleton and control artificial limbs.
The digitalization of medicine and other aspects of life will benefit the insurance industry by helping to much better quantify risks. But it will also change the business world. Digitalization has disrupted the music industry and is now affecting the media industry. Other industries such as transportation, education, insurance or retail will follow.
“The lesson here is that technology is unstoppable. Whether you like it or not, it’s coming,” Mr. Kaku argued. “Don’t go against the tidal wave of Moore’s Law.”
Capitalism itself is making a transition to what Mr. Kaku calls “perfect capitalism.”
“Supply and demand is imperfect. You don’t know what things really cost. You don’t know what the profit margin is, who is cheating you,” he said. In a digitalized economy, this will more become transparent and consumers will emerge as the winners by getting the best products at the lowest price.
Producers will have to respond by mining the data on their customers and through targeted marketing and branding.
But the biggest losers, Mr. Kaku said, will be the middlemen who used to channel supply and demand to set prices. Their role will become obsolete and they can survive only if they add value by providing intellectual capital, such as brokers for instance, which are now selling market analysis tools and insight rather than stocks.
The Cayman Captive Forum set a new attendance record this week. Rob Leadbetter, chairman of the Insurance Managers Association of Cayman, which hosted the event, said the 1,451 registered delegates make it the largest captive conference in the world.
The three-day event at the Ritz-Carlton, Grand Cayman featured 34 sessions and 93 speakers and is the largest conference in Cayman.
The growth of Cayman’s captive industry continued this year. In the third quarter of 2014, the Cayman Islands Monetary Authority had 765 international insurance companies under supervision – an increase of 10 over the last year.
“As of this morning, there were 20 new licenses granted in 2014 and there are five to eight new ones in the pipeline that should be licensed before the end of the year,” Mr. Leadbetter said.
The industry reported total premiums of US$12.4 billion and total assets of US$55.1 billion.
“In comparison to some of our peer group, it was absolutely another great year for the Cayman Islands,” he said.
There were significant, positive regulatory changes during the past 24 months, including the new insurance law introduced late in 2012, which was a boost to the insurance industry in Cayman, Mr. Leadbetter said.
Speaking on behalf of the government, Deputy Premier Moses Kirkconnell reaffirmed the commitment to supporting and building the captive sector and “ensuring that Cayman remains highly efficient and sensitive to the requirements of business.”
“The ministry of financial services is very aware of the current challenges that the captive sector faces. It understands that the way to maintain and grow the captives business is to maintain and grow the relationships among key stakeholders.”