A few weeks ago, The Economist published “The World Ahead 2025,” its 39th annual issue that examines the trends and events that will likely shape the coming year. Last year, the overriding message from “The World Ahead 2024” was the mind-boggling speed at which life was changing, from the Middle East turmoil and economic uncertainty to the redrawing of the global energy-resources map and the rapid progress in artificial intelligence (AI).
“It seems appropriate that 2025 has been designated the year of quantum science and technology by the United Nations,” wrote World Ahead editor Tom Sandage in his introduction to this year’s issue. “Because like Schrödinger’s cat, which (in a quantum thought-experiment) was both alive and dead at the same time inside a closed box, 2025 has hovered in a superposition of two very different states, defined by the outcome of America’s election. Now the ballot boxes have been opened, the world knows which 2025 to expect: the one where Donald Trump returns to the White House. With that uncertainty resolved, here are ten themes to watch in the coming year.”
- America's choice — The repercussions of Mr Trump's sweeping victory will affect everything from immigration and defence to economics and trade. His "America First" policy will have friends and foes alike questioning the solidity of America's alliances.
- Voters expect change — More generally, incumbent parties did badly in 2024's unprecedented wave of elections. Some were chucked out (as in America and Britain); others were forced into coalition (as in India and South Africa); others were pushed into cohabitation (as in Taiwan and France). So 2025 will be a year of expectations.
- Broader disorder — Mr Trump may push Ukraine to do a deal with Russia and give Israel a free hand in its conflicts in Gaza and Lebanon. But it is unclear whether America would stand up to China in a conflict over Taiwan or in the South China Sea.
- Tariffying prospects — For now, America's rivalry with China will manifest itself as a trade war, as Mr Trump imposes restrictions and ramps up tariffs — including on America's allies. As protectionism intensifies, Chinese firms are expanding abroad, both to get around trade barriers and to tap new markets in the global south.
- Clean-tech boom — China's government has encouraged booming exports of solar panels, batteries and electric vehicles to offset a weak domestic economy. The result is a Chinese-led cleantech boom, with adoption of solar panels and grid storage outstripping forecasts. And the world will soon learn whether global emissions have peaked.
- After inflation — The rich world's central bankers have celebrated the defeat of inflation. Now Western economies face a new challenge: reducing deficits, by increasing taxes, cutting spending or boosting growth. Many may also have to increase defence budgets. Painful economic choices loom.
- Age-old questions America has just picked its oldest-ever president-elect. World leaders are greying, along with their populations. Expect more discussion of age limits for political leaders. China, meanwhile, is looking for economic opportunities in an ageing world.
- Crunch time for AI — It's the biggest gamble in business history: more than $1trn is being spent on data centres for artificial intelligence (AI), even though companies are still not sure how to use it and adoption rates are low (though many workers may simply be using it in secret). Will investors lose their nerve?
- Travel troubles — The global movement of people, not just goods, faces increasing friction. Conflict is disrupting global aviation. Europe is adding new border checks, and its borderless Schengen system is fraying.
- Life of surprises — With assassination attempts, exploding walkie-talkies and giant rockets being captured by chopsticks, one lesson of 2024 was to expect the unbelievable. What implausible-sounding things could happen in 2025?
Let me briefly discuss three of these major trends.
Clean-tech boom: It all depends on the latest figures from China, the world’s largest emitter
“Have global emissions of greenhouse gases passed their peak?”, asked The Economist. “This year is likely to be the year of peak energy emissions,” said a recent article by the World Economic Forum. “Since the coke-fired blast furnaces of the Industrial Revolution, energy emissions have been on an upward trend. Yet the build-out of renewables has reached such a level that emissions are peaking. Energy-related emissions are on the cusp of a prolonged period of decline for the first time since the Industrial Revolution. It is a historic moment.”
Industrialization helped advanced economies grow wealthy over the past two centuries. But with the rise of computers, the internet, and other digital technologies, they started moving away from their reliance on heavy industries while increasingly becoming service economies over the past several decades.
This shift toward information-based technologies and industries, have enabled advanced economies to decouple their economic growth from the emissions generated by heavy industries. And in fact, most have reported falling emission for over a decade. The UK hit its peak in 1973, Germany in 1990, the US in 2007, and Japan in 2013. “China will not promise anything before 2030; Brazil, India and Indonesia, among others, have yet to commit to a specific date.”
In addition, as The Economist points out, the link between emissions and economic development has been steadily weakening. “This is particularly true of China, which is both the largest greenhouse-gas emitter — producing 30% of the planet’s total — and the main driving force behind the expansion of renewable energy (it is building twice as much new solar and wind capacity as the rest of the world combined).”
Some analysts believe that China’s emissions may have peaked in 2023. Its emission are so large that if they have indeed peaked, it would alter the overall global trajectory. “That would be a great achievement.”
Crunch time for AI: Will the bubble burst for AI in 2025, or will it start to deliver?
“It may be the biggest gamble in business history,” said The Economist. “Today’s mania for artificial intelligence (AI) began with the launch of ChatGPT at the end of November 2022. OpenAI’s chatbot attracted 100m users within weeks, faster than any product in history. Investors also piled in. Spending on AI data centres between 2024 and 2027 is expected to exceed $1.4trn; the market value of Nvidia, the leading maker of ai chips, has increased eight-fold, to more than $3tr”
“And yet most companies are still not sure what the technology can or cannot do, or how best to use it. Across the economy, only 5% of American businesses say they are using ai in their products and services. Few AI startups are turning a profit. And the energy and data constraints on AI model-making are becoming steadily more painful. The disparity between investor enthusiasm and business reality looks untenable—which means 2025 is shaping up to be a crunch year. The race to make AI more efficient and more useful, before investors lose their enthusiasm, is on.”
A number of financial experts share these concerns. For example, a recent NYT article, “Will A.I. Be a Bust?,” wrote about the views of Jim Covello, Goldman Sachs’ Head of Global Equity Research. Earlier this year, Covello jolted markets based on an interview in a report by Goldman Sachs Research, — “Gen AI: Too Much Spend, Too Little Benefit?,” — where he challenged whether business and investors would see a sufficient return on what by some estimates would be over $1 trillion in AI spending over the next few years.
In the interview, Covello argued that to earn a reasonable return on investments (ROI), AI applications must solve highly complex and important enterprise problems given the capital investments required in specialized chips, large data centers, and electric utilities. The crucial question is: “What $1tn problem will AI solve? Replacing low-wage jobs with tremendously costly technology is basically the polar opposite of the prior technology transitions I’ve witnessed in my thirty years of closely following the tech industry.”
He added that truly life-changing inventions like the Internet enabled low-cost solutions to disrupt high-cost solutions even in their infancy, unlike costly AI tech today. While we can debate whether AI will deliver on the promise many people are excited about, “the less debatable point is that AI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn’t designed to do.”
“The AI race, then, will take many forms in 2025, wrote The Economist. “Yet the point at which investors lose their nerve is often when new technologies quietly start gaining traction. Will the bubble burst, or will the technology start to deliver? The answer in 2025 may be: a bit of both.”
Life of surprises: Ten implausible-sounding scenarios for 2025
“In the modern age, the unbelievable has become commonplace,” wrote The Economist in its final trend. “To navigate the future, it can help to anticipate the unlikely.” So, for the tenth trend, it came up with a list of ten unbelievable-sounding events that could happen in 2025.
Let me conclude by mentioning the last and, arguably, most unbelievable such event: evidence of alien life is detected.
“Searching for aliens, once regarded as a fringe activity, has become part of mainstream research, and more scientists are now engaged in it than at any time in the past. Might they find something in 2025? Any discovery, if it happens, will come without warning — and it would have a profound effect on humanity’s perception of its place in the universe.”
Comments