18 industries that could reshape the global economy

— Arenas are a unique category of industries defined by two characteristics: high growth and dynamism. They capture an outsize share of the economy’s growth, and the market shares of players within them change to an outsize degree. — We have identified 18 potential arenas of the future that could reshape the global economy, generating $29 trillion to $48 trillion in revenues by 2040. These arenas range from AI software and services to cybersecurity, from future air mobility to drugs for obesity and related conditions, and from robotics to nonmedical biotechnology These future arenas could generate $2 trillion to $6 trillion in profit by 2040. Their collective share of global GDP could increase from 4 percent to 10 to 16 percent by 2040. — Twelve arenas of today showed outsize growth and dynamism from 2005 to 2020. These industries include e-commerce, biopharma, electric vehicles, consumer internet, and cloud services. They had a revenue compound annual growth rate (CAGR) of 10 percent and market capitalization CAGR of 16 percent, and they tripled their global GDP share from 3 to 9 percent in the period. By contrast, non-arenas had only a 4 percent revenue CAGR and a 6 percent market cap CAGR over the same period. — The many striking differences between the 12 arenas of today and non-arenas inform our understanding of the arenas of the future. Arenas earn far greater profits than other industries do, they spawn a disproportionate number of global giants, and they offer unusually strong opportunities for new entrants to become powerhouses. — Three combined ingredients in an “arena-creation potion” tend to generate the escalatory mode of competition that characterizes arenas. The telltale elements of a forming arena are business model or technological step changes, escalatory investments, and a large and/or growing addressable market. The presence of these elements can lead to escalatory competition among players, who make large investments to gain not only market share but also a product quality edge, compounding the benefits and further setting them apart from other companies in a race to the top.

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