Today, we are at the beginning of a Fourth Industrial Revolution. Developments in genetics, artificial intelligence, robotics, nanotechnology, 3D printing and biotechnology, to name just a few, are all building on and amplifying one another. This will lay the foundation for a revolution more comprehensive and all-encompassing than anything we have ever seen.
— “The Future of Jobs,” 2016 World Economic Forum report
The current investment sector model is a historical artifact of the mid–20th century’s manufacturing-based economy. Created in the 1990s but based on an economic structure rooted in the ’50s, it has not kept pace with economic changes as the marketplace has evolved to become more fluid and interconnected. Twenty-first century sectors — such as artificial intelligence, genetic engineering, the Internet of Things, renewable energy, robotics, smart transportation, space, 3-D printing and virtual reality — are ushering in an era of new economies by disrupting established industries and forging new ones. Although these technologies might sound futuristic, their rise to economic importance is already well under way. And the pace at which they are doing so is staggering.
Telecommunications, industrials and materials are clearly still important industries, but they likely won’t be what drives the majority of the growth in the new economies in the years to come. The pivotal question is, How do we identify trends in these new economy industries — which aren’t captured by the traditional sector model — and find the purest ways to access them?
To this end, Kensho has released the Kensho New Economy indexes. To create them, we use Kensho’s proprietary natural-language-processing (NLP) technology to analyze millions of pages of financial statements and systematically identify and categorize the companies driving the innovation behind each of the 21st century sectors — and the ecosystems supporting them. This rules-based, systematic process captures the most comprehensive and objective view of these sectors.
Some of the players that drive these upstart industries are obvious, but others are less so. It is these less evident companies for which the Kensho New Economy indexes provide unique insights that were previously impractical to surface manually. This allows the index to represent the full ecosystem of businesses involved in the new economy.
Take, for example, the global space market, which has risen to a total value of $330 billion in 2014, according to the Space Report from the Colorado Springs–based Space Foundation. Traditional sectors, which were established decades ago, do not track this new economy industry as a whole. Because today’s space industry encompasses more than just the companies that build the rockets (for example, Orbital ATK), it also includes the ones that design the propulsion systems (Aerojet Rocketdyne) or manufacture the thrust vector controls for spacecraft (Moog).
Whereas the technologies underpinning each new economy sector differ, they all share a similar trajectory, from initial innovation through to established industries, which means that the roster of companies playing in each is evolving significantly over time. The Kensho New Economy indexes’ dynamic selection method accommodates this continual evolution, keeping up with the furious pace of change that is the hallmark of the new economies into which the world is rapidly transitioning. Although we don’t quite yet have Isaac Asimov’s positronic robots or Ray Kurzweil’s singularity, it is clear that the future is now and that the new economies are here to stay.
The New Economy indexes currently include Space, 3-D Printing, Cybersecurity, Drones, Robotics, Wearables and Autonomous Vehicles. More indexes will be added over time.