Lola Woetzel, a senior partner at McKinsey and a director of the McKinsey Global Institute, chats to Financial Times’ Asia editor, Robin Harding, and Clay Chandler, executive editor of Asia for Fortune, about what the big business news stories could be for 2024 in Asia. It is perhaps no surprise that AI features prominently in the discussion, while the guests also point to differences in approaches between Asia and the rest of the world when it comes to mindset and use of generative AI.

An edited version of the conversation follows.

Gautam Kumra: I am Gautam Kumra, Chairman of McKinsey Asia, and you’re listening to the Future of Asia Podcast Series. The Asian century has begun. The region is now the world’s largest economy. As Asia’s economies evolve further, the region has the potential to fuel and shape the next normal. In each episode, we are going to feature conversations with leaders from across the region to discuss what Asia’s rise means for businesses across the globe. Join us.

Lola Woetzel: I am pleased to usher in 2024 with two important guests. Robin Harding, to whom we talked to last year about the business news for 2023, is the Asia editor of the Financial Times (FT), based in Hong Kong and responsible for the FT’s reporting from Australia to Afghanistan. We also welcome Clay Chandler, executive editor of Asia for Fortune, who joins us for the first time. He, too, is based in Hong Kong, oversees Fortune’s editorial operations throughout the region (including the Chinese language edition), and regularly contributes features, commentary, and news analysis to both the English language magazine and Fortune.com. Welcome, Clay and Robin, to the podcast.

Robin Harding: Thanks for having us.

Clay Chandler: Thanks so much. I’m honored to be here.

Lola Woetzel: Let’s take a quick look back at 2023 to see how we did. What were some of the things that really struck you about 2023? Robin, maybe we can start with you.

Robin Harding: There were obviously some geopolitical surprises in 2023. I don’t think anyone anticipated the horrible events in Israel and Gaza—things like those are the bread and butter of the news business, and inherently not very predictable. On the economic side, I looked a lot at China. I think the consensus, in general, was people’s disappointment in how slow and encumbered China’s economic recovery was. Globally, in 2023, we saw inflation come down pretty meaningfully across the developed world; I think that was largely anticipated. But certainly, this time last year, there was a fair bit of debate about how high rates were going to have to go and how much inflation would come down. I think that has largely been resolved in favor of a reasonably soft landing for inflation.

Lola Woetzel: Clay, what stood out for you?

Clay Chandler: I would raise almost the same thing. I think one of the things you pointed out last year, Robin, was that no one had Ukraine in their crystal ball two years ago. And, in 2023, the word that was missing from all of our crystal balls was Gaza, and maybe, going into 2024, you could add what’s going on in the Red Sea.

None of those things is directly related, but they have a similar dynamic: a tendency to disrupt global supply chains, slightly push up prices in a way that people haven’t anticipated, and remain fairly unresolved. I think there are two things that did not happen in 2023: one was the sharp resurgence of the Chinese economy—global investors were expecting it and had wagered a lot of money on it, but it didn’t materialize. The other was the bogeyman of a recession and not being able to tame inflation—that seems a lot less timid and more manageable right now.

Lola Woetzel: Those were the dogs that didn’t bark, I guess. I’m wondering, What about technology? Do you think last year was the turning point in AI in some ways or is that still to come?

Robin Harding: My conclusion last year was that it wasn’t a turning point. In the first half of 2023, we were talking about generative AI (gen AI); it was a huge thing. What’s become clear is that, while the developments in gen AI are spectacular and enormously significant, they’re also an incremental step in a technology that has been emerging for a while. We previously referred to big data when we talked about data science and analytics, and that the next evolution of those technologies was to generate content. But there hasn’t been a deep fundamental breakthrough that’s transformed the capability of these things overnight. Instead, we are seeing very significant technologies that are advancing year by year and moving into more and more domains. Certainly for gen AI, I don’t think we’ve yet seen a transformative
use case that actually makes this a technology that’s going to transform a whole swath of industries.

Lola Woetzel: Clay, what do you think?

Clay Chandler: I think it has been fascinating to watch AI and people’s awareness of it unfold. In late 2022, we had a technology that magically appeared and seemed completely novel to most of us. We saw millions of users sign up for this right away; it was the shiny new object that everyone loved.

My sense now, from talking to CEOs and technology officers, is that they’re still wrestling with it. They know it’s important, but when you get into the nitty-gritty of how they are using it and where it connects with their customers, they’re a lot more cautious. I think that’s partly because they don’t fully understand it yet, but also because this technology isn’t free. It’s expensive to be able to fully roll it out. Also, it still has a lot of bugs and is not very reliable on many things. It still has a long way to go.

There are also a lot of ripple effects to this technology. It’s interesting to think through what the implications might be now that you can do searches on ChatGPT 4.0 that are more or less up to date. If suddenly people are using AI to generate a large percentage of what AI is scraping off the web, does this content have the potential to poison itself by not being original anymore? I think there are a lot of interesting questions that we’re beginning to grapple with. And, for firms, the liabilities that go along with that are significant.

Lola Woetzel: Yes, every effort creates its own set of legacies, I suppose. We’ve certainly seen that. So, if I sum up our current look back: at the moment, there was always a geopolitical crisis of some sort in 2023, which did not disappoint. The rebound from global growth slowed a bit due to slightly less than expected growth in China growth. And, on the other hand, that inflation maybe came down a bit faster than was otherwise expected, which might be a bit of a tribute to the resiliency of our supply chain. Do you think your colleagues in Washington D.C. or London would have the same takeaways looking back at 2023? How many of these takeaways are Asian and how many are global?

Clay Chandler: As somebody who has spent a large part of my career in Washington D.C., I can definitely tell you that the perspective in Asia is totally different from the United States. That is overwhelmingly evident when it comes to talking about China—it has a way more complicated range of issues and capabilities than I think a lot of American political leaders don’t understand or perceive. I have been quite impressed by the resiliency of the global supply chain to work its way around China into countries like Bangladesh and Vietnam—and lately even India with some success. I think that trend is just beginning but it’s fascinating to see.

The other issue that is ignored in Washington D.C. is that supply chains don’t only go from east to west anymore. Sitting here in Asia, we notice that there is all kinds of traffic back and forth between rapidly developing markets, reflecting their own wealth. They’re buying things from each other, not just making things to sell to rich consumers in the West.

Lola Woetzel: What do you think, Robin? Do your colleagues and the rest of the world see things the same?

Robin Harding: I’ll try to give a global answer. I think there are big differences between regional perspectives on some of these issues. It’s interesting, for example, how much gen AI is an English language phenomenon—or was an English language phenomenon. Initially, there were significant gen-AI language models in China, but the corpus of training data available in languages other than English is much, much smaller. And, once you move beyond English and Chinese languages to other Asian markets, it has been quite difficult to come up with gen AI as impressive as the type of ChatGPT phenomenon that sprung on everybody in English. I think that, generally, there has been less excitement about those technologies across Asia than there has been in the United States.

In Europe, it has been a fairly gloomy period for a while economically and 2023 was no different. Due to the war in Ukraine, the picture on growth in Europe has not been too happy for the last few years. If you ask European businesses about their domestic economic outlook, it’s still a world away from the general backdrop of growth across most of Asia—such as Bangladesh, China, India, Indonesia, and Vietnam. Asia still has a very different environment in which to run a business.

The point on technology is an interesting one—it’s not just language that gives the potential of these new technologies a different feel in Asia, it’s also the different regulatory cultures. For example, if you talk to the big tech platform companies in China, all of them are racing to develop their own gen AI programs, but they’re rolling them out in a more cautious way. They’re not just releasing them into the wild in the way that we have done in the United States so that consumers immediately get their hands on them, experiment with them, and force regulators and creators to somehow then rein them in.

In China, these things are being rolled out mostly on an enterprise level, because it’s much easier to control. That creates a different level of awareness among the general population in China about what these technologies can do. I would say Japan is at a midpoint somewhere in between Europe and the United States in terms of how eagerly gen AI is being embraced, and Europe is probably at a midpoint somewhere between Japan and China in doing that.

Lola Woetzel: Let’s talk about what you think will happen this year. You mentioned transformative use cases, Robin. Will we ultimately start to see tipping points in industries or sectors as all CEOs wrestle with this? What do you see for 2024?

Robin Harding: I think that we’ll start to see transformative uses of AI technologies. But again, I would route it more in a pattern of change that’s been going on for a while, rather than a sudden, “Oh, gen AI has been invented.” I think there is a clear potential for transformative change, for example, for medical applications—such as diagnoses, where gen AI has been trained on millions of prior cases. And, in law, where a huge number of documents and duplicative work tasks could be automated.

I think it’s better to look more broadly at the type of AI application. One that we were all talking about well before we started talking about gen AI was autonomous driving, which is simply an AI application, an analysis of a huge amount of data and images. From that, you can generate the feedback loops that you need to provide an autonomous driving solution. As we know, this hasn’t come to pass yet, but people are working hard on it. I think it’s still something that’s plausible within a decade.

I also see a tendency among businesses that I talk to where executives have seen what’s happening and say, “Oh, it’s gen AI. We need a gen AI strategy. We’ve hired 20 people through gen AI.” The question they ask is: “What are we going to do with gen AI?” People are trying to come up with a solution in that manner, but that is not the way you achieve transformative business change. It’s far more about the question, “Here’s our problem and what technical solutions can we devise now to engineer an answer to our problem?”

Lola Woetzel: Clay, what are your thoughts on technology?

Clay Chandler: There definitely have been holy grail-like cases in the past where we have waited for AI to be a magic solution, but where it has constantly eluded us and disappointed us. Certainly, autonomous vehicles are the most notable example, and I think people in financial markets are discovering that you can’t necessarily program an algorithm to beat the markets. On the converse, I have seen several cases that are like a punctuated equilibrium, where people stumble across what gen AI can do. It’s like, “Aha!” and then it makes all the difference in the world when they put it into fast forward.

I’ll give you an example: We have an event at Fortune that is about business and design. One of the speakers we had in our design program in December was an architect who has a large firm with offices throughout Asia and the Middle East and that employs about 1,000 people. He said: “I’ve been drawing sketches for office buildings for some of the largest projects in Asia. I’ve been doing this for years and just a few months ago I started using a platform called XKool, developed in Shenzhen. It’s an algorithm for architects.” We brought him on stage to demonstrate what he could do with just a few simple sketches, feeding the copy of a sketch—done by hand using a marker—into a scanner, running it through an algorithm on a basic laptop. Within 30 seconds, he was cranking out fully rendered drawings of very large, amazing office buildings, ski resorts, and so on.

He did half a dozen of them in the space of about five minutes and they were all remarkable. He said, “The way we used to work to get these rendered drawings to show to a client used to take me a week with four architects having to work around the clock. Then we’d design a model and send it out to the renderer. Only then could I have a discussion with the client.” He described the process as torture but added, “Now, with this tech, I can generate ideas faster than my clients can demand changes.” I think right now technology is cutting through architecture, totally transforming the way the whole field works.

Lola Woetzel: Will this be the year where we see more or fewer architects?

Clay Chandler: It may not be that we see fewer architects, but we may see that architectural companies will be able to do a lot more things with the people they have. Maybe not everybody needs to be a draftsperson; maybe there just needs to be a lot of people good at figuring out how to use text and visual prompts to get the AI to do what they want it to do. I think about the irony of all the kids who have been told, ”If you really want job security in the digital, visually transforming age, you need to be computer programmers and learn to code.” But with AI, you don’t necessarily need to know how to code to get good results using an algorithm.

Lola Woetzel: Very cool. I’m reminded of Kai-Fu’s book, AI 2041, his catchphrase is that AI makes us all more human because it takes care of all the rest. It leaves us with human problems. But let me throw it wide open. What do you think are the things to watch out for in 2024?

Robin Harding: That’s very wide open. Obviously, there are elections. The world will be watching the US election with great interest. But there are a lot more elections around the world. Just in Asia, Taiwan and Indonesia have already had an election, and India’s coming up as well, which will be very significant. There are also lots of elections in Europe.

Economically, the interest rate cycle should turn. I think it’s widely expected that we’re going to see US rate cuts at some stage this year, although exactly when and how much is up for debate. Linked to that, I think there’s still the impact of previous interest rate tightening to come through in economies. So, you can still expect to see relative economic slowdown in various places as that takes effect through the rest of the year. And then, as ever, there are a host of interesting business matters going on in different sectors that we’ll certainly be looking at for the FT.

Lola Woetzel: Clay, what are your top things to watch out for in 2024?

Clay Chandler: I think there are a lot of things that could go haywire. We could see the Federal Reserve turn too fast. You never really know with that; there are all kinds of precedents of previous Fed chairs who have led up on interest rates too early. So, inflation could get away from us.

I’m quite concerned that the situation in Ukraine seems to be slipping below the public radar. In the United States, it doesn’t dominate the newspapers and websites as it used to. Fatigue for American support for Ukraine is settling in. We might possibly have a continued, protracted stalemate regarding American and European willingness to supply military aid to Ukraine, or we might have some kind of Russian breakthrough at the frontline, which could have destabilizing implications.

I worry about the danger of a protracted slowdown in China. Growth of 4.5 percent is still much better than the rest of the world, for the most part, with maybe the exception of India. Yet, for China, it creates a lot of problems, and it’ll definitely drag down the global growth rate and force many big Fortune 500 companies to rethink their global strategies.

I think a Trump victory in the US election is a wild card that could throw sand in the gears of anything and everything. It’ll mean doubling down on the “America First” strategy, resulting in a new round of tariffs. It’ll mean putting trade pressures not only on China, but on American allies as well. I think it would mean that the climate accord again goes back to square one and that we see America exiting from the Paris talks. That could potentially instill a lot of damage depending on what happens with tax cuts and some of the other fiscal choices. The danger of what’s already a very precarious fiscal situation in the United States could spiral to an even worse place, creating all kinds of risks.

Lola Woetzel: About the future: what about the things that might go right?

Clay Chandler: I can toss one out quickly: the potential for AI to accelerate dramatic breakthroughs in biotechnology and the pharmaceutical industry. The ability of pharmaceutical companies to come up with vaccines in a short space of time during COVID-19 was amazing. I think it is possible that this is going to become the new normal, because you can use algorithms to narrow the list of candidates, both in the development and discovery stages, opening up a whole new range of possibilities.

I’m also cautiously optimistic about what’s going on in the electric vehicle market, although it could be somewhat destabilizing. I think that the market, at least in Asia and certainly in China, is developing far faster than people in the United States recognize, and I think that has a lot of potential implications—both good and bad.

Lola Woetzel: Robin?

Robin Harding: I agree with everything Clay said. I’m always an optimist about growth in Asia. One thing that has consistently been true for a couple of decades is that Asia reliably, every year, makes a large number of people considerably richer and delivers a better standard of living for them. This phenomenon has quietly spread to places such as, for example, Bangladesh, India, Indonesia, and Vietnam, where the real benefits of modern economic growth are now being widely spread. The end result is an enormous increase in human well-being. I think that process is continuing unabated.

I think another interesting thing that is happening is that we’re starting to see more genuinely innovative business stories come out of China. For a long time, China was the manufacturing hub of the world, the crucial part of the supply chain. It was where we went for growth but we weren’t necessarily seeing Chinese companies emerging onto the global stage. It’s a bit of a paradox now because, just as they are reaching the stage where the Chinese market is generating innovative businesses, politics is making it much harder for them to do so.

On the consumer side, one of the big stories of 2023 was the app, Temu, which had a global impact. Another globally impactful Chinese company is DJI, the drone maker. There are many more like them that are starting to bubble up and have a global effect. I think we’re going to see more of those, which is exciting for us as journalists to watch and interesting for consumers around the world. The question is: how many of these companies are going to be allowed to make the impact that they would in a free market? This is because the political restraints and tensions are only getting bigger. I’m not very optimistic about that.

Clay Chandler: A lot of leapfrogging is happening now, not just in China, but elsewhere in Asia—companies are developing things that are not just minor improvements or more efficient versions of things that were invented in the West. They are inventing entirely new business models using technology and completely new ways of organizing society and consumer culture that no one in the West would think of.

Even think about something simple but really profound, like bringing mobile payments to consumers in a country like Indonesia. In China, they have banks—in all the little villages, people have credit and bank cards. But, in Indonesia, millions of people have never even seen an ATM machine, let alone been in a bank and opened an actual bank account. Yet, there are tech platforms that are figuring out how to bring financial services to those people in an extraordinary way—not just to help them buy or sell things but to help them buy insurance and borrow money to help them with their health and other kinds of issues.

You have companies like TikTok that have created a whole new way of engaging with their audiences and a whole new model for advertising. They’re innovative but also potentially vulnerable to political objections. I think it’s a really extraordinary time.

Lola Woetzel: What I hear you guys saying is that if we’re looking for big, interesting stories, we should be looking more at the firm level. We should be looking more at places and people, and seeing how—to use your words, Clay—the tempo is accelerating as companies launch things that create new business models and accelerate the change of an entire industry.

One of the things we agree on is that this year will have more controversy about change. Do you think that controversy and scrutiny are also a story for 2024?

Robin Harding: A couple of thoughts about change. One is that a lot of people in the West don’t realize how much the world has already changed. For example, when I go back to London, there are still “certainties” that I grew up with, about, say, Britain’s place in the world. But, Britain is small now relative to places in Asia, which are enormous in terms of their economies and populations. However, people’s perceptions in the West and global systems haven’t caught up with that. I think people find this disorientation very hard to deal with.

A second thought on change is that our societies are much older than they used to be. And change is harder the older you get. So, when most of the population was under the age of 20, change was exciting, an opportunity. But now that most of society is older, change is something that upsets the existing order of things, which, even if you weren’t happy with it, you were used to it. I think that’s something that underlies a lot of the political and economic tensions that we see these days, certainly in Western societies and increasingly in advanced Asian societies, like Japan, which, frankly, have a lot of old people for whom dealing with change is hard.

Lola Woetzel: I can speak from personal experience that that is true. I just want to come back to that though, Robin, because I love what you articulated just now about the nature of what we mean by change. Because in actuality, what we’re seeing, I think, it an incremental process, with a tipping point. It’s not like we all woke up one morning and then everything was different. Nobody blew a trumpet and announced the beginning of the Renaissance. It happened little by little.

What does happen stochastically is that all of a sudden, people wake up in the morning and they have this realization that the world is not how they thought it was—that the mindset shifts. We wrote about this in No Ordinary Disruption years back. We’re basically saying that people wake up in the morning, and they also realize that the place in the world is different, something has shifted. You can decide whether you want to try to hold back the waves or not.

I’ll give one very specific example: Revenge of the Ottoman Empire. It’s a storytelling around how we are now seeing this effort to try to channel trade and channel capital into certain ways. Looking back 500 years ago, that didn’t work out so well for the Ottomans. So, are we going to wake up again in the morning and realize we’ve had to relearn this lesson 500 years later about the futility of trying to stop the change, and that we do live in a world where we’re going to have to accept it? Could this be that year?

Clay Chandler: Robin and I both work in an industry that has seen more than its share of change. I remember joking when I was a cub reporter at the Washington Post and the internet was starting to grind its gears. I thought, “How strange it’s going to seem to explain to my grandkids what I did for a living.” They’re going to say: “Let’s get this straight, Grandpa. You wrote for this thing that they would go out and smash up a bunch of trees, then they would put them on this big roller, and they would push it out into paper. Then they would have to load it up into trucks and take it one-by-one to people’s houses. And it would sit on your doorstep, even if it was raining and cold and wet, and then you would have to stack them. How silly is that?”

If you think about it, it is kind of silly. As much as I love physical newspapers, they are gone. So, in this business, the lesson of modern capitalism is “adapt or die.” If you want to stick around, if you want your firm to stay on the Fortune 500-list, you’ve got to figure out how to adjust to change.

Two things about AI are interesting to me. One is that AI now weaves together technologies that have been percolating for the past ten to 15 years. Whether it’s big data or the Internet of Things, all these kinds of miniaturized devices—combined with the undersea cables—now work together to create entirely new ecosystems of products. Technology is accelerating and changing at a faster pace than we’ve ever had to get used to before. I think that’s something to track: the new challenge of figuring out how to constantly adapt.

Robin Harding: A natural human psychological response to change and disruption is to seek control. Change triggers your survival instincts and responses. I think we see a lot of that now and that we’ll see more of it in 2024. The trouble, of course, is that the response to control things—which often manifests itself as wanting to keep a situation as it is—often makes things worse in the long term, because it hampers exactly what Clay was talking about: the need to adapt.

Lola Woetzel: I’m phrasing it this for myself, personally, as a year of restructuring. Last year was a year of commitment, but the commitment is to change. And I’m thinking of the words homeostasis and allostasis, which I read about recently. Homeostasis is mainly the instinctive desire to try to keep things in balance and feeling very uncomfortable when they’re not in balance. Allostasis is something more about being comfortable with the idea of keeping one’s balance through change. It’s akin to riding a bicycle. If anybody tries to balance on a bicycle while standing still is, it’s quite difficult. When one has momentum, then it’s largely about keeping everything balanced. To acquire that balance is my metaphor for personal growth this year.

Robin Harding: It’s a good metaphor, but I think business leaders need to be very careful about declaring every year one of restructuring, or they might encounter some reactions they don’t like.

Lola Woetzel: I wonder about that. We have some very interesting research on human capital, which basically shows that 80% of employee departures are because they want to obtain new skills in other companies, which is fascinating. So, I think we often say one thing and do quite a different thing when it comes to our own personal lives.

Clay Chandler: That’s quite a quite profound point. A challenge for business leaders is that it’s tempting to use these new technologies, particularly AI, to make business more efficient and cheaper. But my view is that businesses that are really going to succeed are those that think differently about technology. They think about how to make it additive, how to make sure they’re creating a better experience, a better product for customers. I think it’s important for business leaders to think about that, but there’s also an inherent challenge for younger people who are just starting their careers or who are currently in school: they have to prepare themselves to have a mindset that says, “I don’t know where the economy and technology is going to be in ten or three years.”

We have to cultivate a mindset where we have the skills that enable us to cope with uncertainty, but also to embrace it and figure out how to make it work. We need to say, “Change is normal and it’s going to get faster and faster, and I have to figure out how to get with the program and capitalize on it.”

Lola Woetzel: Thank you very much, both of you, for your time. I wish all of you much success, balance, and joy in this year 2024.

Gautam Kumra: You have been listening to The Future of Asia Podcast by McKinsey & Company. To learn more about McKinsey, our people, and our latest thinking, visit us at McKinsey.com/FutureOfAsia, or find us on LinkedIn, Twitter, and Facebook.

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