The Greatest Innovation for an Emerging Economy

What innovation has the most potential to help emerging countries dominate growth in the global economy in the coming decades? (We are already rich, so we don’t count.)

Those who live in the richer, more developed countries live in an age of technology, information and social networking — Innovation is the norm.

But have you ever stopped and asked yourself: What has been the greatest innovation of the last century that will serve well for an emerging economy?

For every person you ask, you’ll probably hear a different answer, especially as related to their personal experiences.

As for me, I think our greatest innovation — the one that gives the developing world the most power, and will provide growth for emerging countries — is…

Air conditioning!

While computers, the Internrnet, cars and airplanes are all central to my business of research and communication — and I value each innovation that made them available to us — the most valuable innovation for me is plumbing and electricity. I’d take a flush toilet and a hot shower over an iPad any day.

But air conditioning has had, and will continue to have, the greatest effect on emerging countries.

Take Singapore for instance.

The country sits almost exactly on the equator. It’s hot and humid there all year round. And such environmental conditions are NOT conducive to a high work ethic.

I know you may be thinking: “Oh, come on, Harry! That’s asinine.”

Not for an Emerging Economy, Think About It

When you’re in such a hot and humid (year round) environment — for all the beauty and tropical wonders — does the desire to work come easy to you?

If you’re sitting in an air-conditioned office, it probably does. Not so much if you’re sitting outside, at a coffee table… where you feel the oppressive heat and humidity and you can see the beautiful landscape.

Personally, I can hardly get an email off in such places. I’m just not motivated to work. That’s why I go to such places on vacation, for a change of state and for relaxation, and keep my work there to a minimum.

You see, emerging countries have lagged in part because the environment was warmer than the more northernrn countries that now dominate the world. In colder climates, life is harder… there are more challenges… and more challenges lead to greater innovation. In warmer climes, life is more laid-back… innovation slower.

But thanks to air conditioning, high temperatures are no longer a deterrent. It has empowered countries like Singapore to explode onto the scene. They can become as rich as the best developed countries, which is exactly what Singapore did.

Now Latin America, the Middle East, Southeast Asia, India and Africa will make increasing strides toward development thanks to air conditioning and the strongest populations and future demographic trends.

However, by my urbanization versus per capita GDP projections, most emerging countries will not be as rich as the West, or as Singapore. That said, they can still be two to four times richer than they are today.

In fact, countries in these regions will benefit most from all infrastructural innovations, including electricity, clean water, roads, cell phones, Internrnet, and yes, air-conditioning.

That means they are the places where you should look for the best investments after the great crash ahead.

The affluent countries will see sideways to declining demographic trends over the next decades as their populations age. Explosive investment opportunities will be hard to come by.

After the next crash, likely into 2016 or so, invest in companies that invest in countries not tied to the commodity cycle but in need of infrastructure development, like India, Southeast Asia, Mexico and Turkey.

After my commodity cycle bottoms in the early 2020s, look to invest in companies that build infrastructures and sell products in Latin America, the Middle East and Africa.



Follow me on Twitter @HarryDentjr

Harry Dent

Bestselling author and founder of Dent Research, an affiliate of Charles Street Research. Dent developed a radical new approach to forecasting the economy; one that revolved around demographics and innovation cycles.