The term “Roaring Twenties” is synonymous with the exuberant 1920s, characterised by a fusion of music and fashion. Since the turn of this decade, it has been picked up as a reference from time to time. The allure of the 1920s isn’t new. References like “The Great Gatsby” (2013) and Netflix’s “Babylon Berlin” (since 2017) have been popular since the early 2000s. This era witnessed a period of relative economic prosperity, imbued with a distinct cultural vibrancy in the Americas and Europe, notably in major urban hubs like Berlin, Buenos Aires, Chicago, London, Los Angeles, Mexico City, New York City, Paris, and Sydney. But don’t forget, post-war challenges persisted in rural areas, while regions like Eastern Europe, Russia, and China were in civil turmoil, Africa and Asia remained under colonial dominance. The European optimism was tempered by scepticism and disillusionment in many parts of society, mirroring today’s looming issues and sentiments.
In the context of Germany, the “Golden 20s” encompassed the years from 1924 to 1929. The introduction of the Rentenmark in 1924 successfully curbed hyperinflation and marked a phase of relative, not absolute, economic stabilisation. In 1918, a cup of coffee cost just 1 mark, but hyperinflation in 1924 led to prices skyrocketing to several million marks. True economic success was confined to the narrow window of 1926 to 1928 – a short phase of prosperity in between phases of far-reaching change. Many among us closely monitor political and economic developments of the past to extrapolate trends that shape the trajectory of our global landscape. With this year closing in, we are once again caught in developments radically reshaping our world, but while 1924 marked the start of a short-lived economic success, the signs for 2024 point downwards for now.
Fast-forward to the 2020s, and the world has once again undergone rapid transformations.
Even as we brace for a predicted recession in 2024, it is noteworthy that tech spending has consistently outpaced GDP growth in this decade, as the latest Forrester report highlights. The investment landscape is marked by the emergence of new technologies, the rapid expansion of industries, and the introduction of new sectors. Especially, the digital economy is outpacing traditional sectors in growth, a trend expected to persist into 2024. Consequently, investment prospects in digital economy domains like Digital Health, AI and Cybersecurity are poised for strength.
Forrester also anticipates that two-thirds of all companies will realign their manufacturing operations due to geopolitical pressures. In 2023, a substantial 72% of corporate filings cited geopolitics or export controls as crucial factors influencing their long-term business strategies. This shift suggests an increase in domestic sourcing for US- and European-based companies, particularly if they are reliant on resources from and production in China, the Middle East, and Eastern Europe. The exposure to countries whose trade relations to the west are rapidly deteriorating, regions that experience civil unrest and areas grappling with escalating economic instability have become major liabilities. Especially industries who have been hit hard by covid-related restrictions, such as bicycle parts manufacturers are rapidly moving production closer to their main markets.
In reaction to climate challenges, the world is undergoing a shift toward clean energy solutions, ushering in investment opportunities in renewable energy, clean technology, and energy efficiency. Emerging markets, comprising rapidly advancing economies, are outpacing their developed counterparts. This growth offers investment potential in emerging markets, notably in Asia, Latin America, and Africa.
Rapid change opens opportunities for new players and thus investors. These are six areas that will grow in 2024 despite the continued economic downturn.
- AI’s Influence: The field of AI will offer numerous investment opportunities, with AI algorithms becoming increasingly integrated into our daily routines. AI’s societal impact will be profound, emphasising the need to understand the synergy between humans and computers. From large language models such as ChatGPT to diagnostic tools in the medical sector, the path AI will take within the next decade is yet to be determined.
- Cybersecurity Evolution: Cyberscurity will continue to be a top concern for businesses in 2024, with rising geopolitical tensions, the demand soaring. Especially the renewable energy sector in Europe has been targeted since Russia’s full-scale attack on Ukraine. Norwegian energy companies have recorded a spike in attacks, while the fear of malware such as the Triton virus that shut down a Saudi petrochemical plant in 2017 are growing. The consumerisation of AI-enabled fraud will additionally reshape the landscape, leading to increased outsourcing of enterprise trust and a heightened focus on security education and awareness.
- Renewable Energy Growth: The renewable energy sector will continue to grow, presenting investment opportunities in sustainable energy solutions. To achieve net-zero emissions by 2050, an estimated $4 trillion per year must be invested in renewables until 2030. Essential technologies like battery storage systems will enable renewable energy to meet demand efficiently. Policy changes are crucial to reduce market risks and encourage investment.
- Digital Health Revolution: The healthcare sector will continue to expand in 2024, offering promising investment prospects as digitalisation and AI continue to reshape diagnostics. A recent AI-model combining imaging information with clinical patient data to improve diagnostic performance on chest X-rays, according to medical journal Radiology by the Radiological Society of North America. Digital health solutions will empower patients by reducing costs and time constraints, improving accessibility, and encouraging proactive healthcare management. Collaborations among start-ups, government, and stakeholders will drive innovation in digital healthcare products and services.
- Education Transformation: Education is a dynamic industry with substantial investment potential. Hands-on and remote learning are shaping the future, driven by AI, and changed living routines. Questions about the role of AI in education and who decides its terms will need to be answered quickly. Empowering learners and recognizing the human agency in technology will be pivotal.
- Infrastructure Advancements: Infrastructure development will remain vital to economies, necessitating investments in projects like roads, bridges, and airports. Public-private partnerships (P3s) will play a significant role in bridging the investment gap, but infrastructure companies need to address past performance issues. Sustainable infrastructure solutions, IoT-enabled sensors, and AI algorithms will drive efficiency, cost savings, and longevity in infrastructure projects.
When making investment decisions as a VC, it’s crucial to consider various factors, including your risk tolerance, investment objectives, and time horizon. Given the ongoing structural shifts and high interest rates, encompassing climate and digital transformations, investments are essential to fortify resilience and fostering innovation. This entails the elimination of impediments to entering markets and engaging in cross-border trade, fostering healthy competition, aligning competition policies with the digital age, and elevating the development of skills.
I am confident, the end of the 2020s will not replicate the severe economic downturn of the early 1930s, offering a more optimistic outlook for the future. For investors in the upcoming year, wisdom lies in diversification and long-term vision, coupled with a focus on environmental sustainability and social responsibility. Avoid impulsive moves; instead, prioritize stability amidst uncertainty.
