The big buzz at the World Economic Forum (WEF) in Davos this year is about the ‘Fourth Industrial Revolution’, described by the founder and executive chairman of WEF, Klaus Schwab, as a “technological revolution that will fundamentally alter the way we live, work and relate to one another”.
The first Industrial Revolution began in Britain in the last quarter of the 18th century with the mechanisation of the textile industry, harnessing of steam power, and birth of the modern factory. The second revolution began roughly a century after the first and peaked at the beginning of the 20th century, embodied in Henry Ford’s creation of the moving assembly line that ushered in mass production. Factories could produce countless numbers of identical products quickly and cheaply — Ford’s famous line was about being able to sell customers cars of any colour they liked, so long as it was black.
The third industrial revolution, beginning c. 1970, was digital — and applied electronics and information technology to processes of production. Mass customisation and additive manufacturing — the so-called ‘3D printing’ — are its key concepts, and its applications, yet to be imagined fully, are quite mind-boggling.
The fourth industrial revolution is conceptualised as an upgrade on the third revolution — and is marked by a fusion of technologies straddling the physical, digital and biological worlds. In a paper on The Fourth Industrial Revolution: what it means, how to respond, Schwab says that three things about the ongoing transformation mark it out as a new phase rather than a prolongation of the current revolution — velocity, scope, and systems impact. The speed of change is utterly unprecedented, it is disrupting almost every industry in every country, and it heralds “the transformation of entire systems of production, management, and governance”.
A WEF paper by Nicholas Davis, head of Society and Innovation at the Forum, describes the new revolution as the advent of cyber-physical systems which, while being “reliant on the technologies and infrastructure of the third industrial revolution…, represent entirely new ways in which technology becomes embedded within societies and even our human bodies”. Examples, Davis says, include genome editing, new forms of machine intelligence, and breakthrough approaches to governance that rely on cryptographic methods such as blockchain.
What’s in store?
There are both opportunities and challenges. Like the earlier industrial revolutions, the fourth, says Schwab, can lift global incomes and improve lives worldwide, and the supply-side miracle due to technological innovation will lead to long-term gains in efficiency and productivity. At the same time, all revolutions have large groups of losers as well — so, says Schwab, “There has never been a time of greater promise, or one of greater potential peril”.
MIT Sloan School of Management economists Erik Brynjolfsson and Andrew McAfee, quoted by Schwab, have warned the revolution could increase inequality in the world as the spread of machines increases unemployment and disrupts labour markets. Already, Oxfam estimates, just 62 individuals own as much as the poorer half of the world’s population, and that the wealth of the poorest 50 per cent fell by 41 per cent since 2010. A report by the Swiss bank UBS this week said the spread of artificial intelligence and robots will harm economies like India and some Latin American countries by cutting their cheap labour advantage. Earlier, researchers at Oxford estimated that 35 per cent of workers in the UK and 47 per cent in the US could lose their jobs to technology over the next two decades.
Indeed, an increase in inequality remains the biggest social concern about the fourth industrial revolution. Schwab says that irrespective of the net outcome of the revolution, he is convinced “that in the future, talent, more than capital, will represent the critical factor of production”, giving rise to a job market “increasingly segregated into low-skill/low-pay and high-skill/high-pay segments, which in turn will lead to an increase in social tensions”. India, with a very large low-skilled or unskilled youth population, will likely face major challenges.
When will it happen?
The fourth industrial revolution builds upon the third, which is primarily digital in nature. This also exposes it to the unpredictabilities and instabilities of the digital era. There were no bubbles during the first two industrial revolutions, but there have been far too many in the third. A lot of the models are just not sustainable — or are waiting for a big disruptor to come along. For instance, the music industry turned on its head with the Apple iPod, and the chances are the smartphone industry could be wiped away by the next big thing in tech, which could be just about anything.
With device and product cycles being so short, it is becoming increasingly difficult to predict anything which has anything to do with technology. For all you know, the currently buzzy ‘fourth industrial revolution’ could be a very short interlude before the fifth one comes along. The current expectation is that driverless cars will be the disruptor that will put millions of drivers out of work and change everything from the taxi sector to the automobile industry. But what if technology makes the daily commute itself redundant?