Why intellectual capitalism will save financial planners

According to Dr Michio Kaku, the employment future for financial planners is looking safe. For low level accountants, low level brokers, tellers and agents, however, the future is not so bright.

Kaku, who will deliver the opening plenary at theFPAconvention, says the effect technology will have on industries with high or low levels of ‘intellectual capitalism’ will differ greatly, thus sealing the fate of those employed within.

Exploring his theory, Kaku says the impact of technology on financial markets has to be viewed from a historical perspective.

“When the train made its first impact in the 1840s, it created a stock bubble, with more than 100 rail companies on the London Stock Exchange. It could not last, and the market crashed in the 1850s.

“Similarly, the impact of the automobile contributed to a similar bubble in the 1920s, helping to lead to the crash of 1929. Ironically, the railing of Europe and America took place after the 1850s, and the paving of Europe and America took place after 1929,” Kaku says.

Kaku believes that similarly, the “wiring of the world” is taking place after the crash of 2000-01.

“Right now, there is overcapacity in the market, which is only a temporary phenomenon. For financial planners, one must realise that the real boom in computers and the Internet is yet to come; the Earth is only beginning to be wired and networked.”

Kaku says the impact of the growth in technology, and computers in particular, will have a huge impact on society in terms of jobs and wealth resulting in two camps — winners and losers. And the effects are already starting to show.

“The biggest losers will be the middlemen, the ‘friction of capitalism’,” Kaku says.

“Those involved in inventory, ‘bean-counting’, low level accounting, low level brokers, tellers and agents.”

In Kaku’s view, the ‘middlemen’ who will survive will be those involved in higher level analysis and consulting, and those in jobs that robots and computers can’t replace. Kaku says given the rather primitive state of robotics, jobs involving human skills, common sense, eye-sight and pattern recognition will continue to flourish for many decades.

In his session, Kaku will also examine the way capitalism itself is changing because of technology. Kaku says while the capitalism described by economist Adam Smith was based on commodities, commodity prices over the past 120 years have been steadily dropping, especially in food. He attributes the drop to factors such as better mass production, containerisation, cheaper shipping, increased competition and mechanisation.

Kaku says commodity-based capitalism will gradually be replaced by ‘intellectual capitalism’, which cannot be mass produced.

“Great Britain derives more wealth from rock music than it does from the coal industry, once the symbol of British capitalism,” he says.

Following this rationale of intellectual capitalism, which is high in the financial planning industry, Kaku says financial planners can look forward to continuing the profession in the future.

“Those national economies that will flourish will be those that increasingly place emphasis on intellectual capitalism, rather than commodities. Unfortunately, most nations of the world do not understand this.”