Every January, some of the most powerful and influential leaders in the world descend upon the Alpine resort town of Davos, Switzerland, not to ski the steep, powdery slopes, but to discuss the most urgent, challenging and important issues facing the world today.
In 2016, this World Economic Forum, as it’s called, managed to do something which I think is remarkable—they gave a formal name to the monumental scientific, technological and work-life upheaval that we’re all experiencing now, and which has only begun to disrupt our lives.
They call it The Fourth Industrial Revolution.
And the conclusions they’ve reached remind me of Joe Pantoliano’s character “Cypher” in the movie, The Matrix, when he says:
“Buckle your seat belt Dorothy cause Kansas is going bye-bye.”
In fact, because this is such a momentous change in human history, that will have such a profound impact on all our lives, I think we all need to dig deeper to understand what’s happening, and how we can reap the benefits (and avoid the pain) that this will inevitably cause.
But I thought there had only been one industrial revolution?
Personally, I was surprised to learn that the industrial “revolution” wasn’t one enormous (and gradual) societal upheaval that lasted a century and a half. Rather, it was three distinct revolutions that dominated human affairs over the course of three centuries, having finally ushered mankind in the present millennium, and the beginning of the 4th installment of the story.
Of course, there is a healthy dose of historical re-evaluation going on here, and that’s ok. The Fourth Industrial Revolution may be a term of convenience—an artificial categorization that attempts to make sense of mankind’s unique relationship with technology and the world of work—but it’s a darned useful one as we try to understand the context of what is about to come our way.
The First Revolution: The Rise of Machines
It all began with the British Agricultural Revolution, which was the precursor of the Industrial Revolution and facilitated the migration of people from farms to cities.
Starting early in the 18th century, the use of innovations such as crop rotation and the creation of compact, fenced-in farms, as well as the development of machines such as the seed drill, Rotherham plow and threshing machines, resulted in unprecedented levels of agricultural productivity in England.
Work that had previously been done by human hands was increasingly being done much faster by simple machines operated by human laborers. This jump in productivity displaced many workers who looked for a way to make a living elsewhere.
Industry took hold and gained a big boost by the substitution of coke for charcoal, which made the production of iron cheaper, more efficient and plentiful. As the steam engine was perfected, they became more powerful and efficient, were adapted to rotary motion for industrial use and could be employed in transportation.
Lastly, innovations such as the power loom and cotton gin catapulted the productivity of textile workers ever higher, by a factor of 40X or more.
The foundation was laid for the rise of the modern world.
The Second Revolution: Dawn of the Modern World
The second industrial revolution was characterized by the continued growth of technology, industrial productivity and better transportation. Steam power was more widely utilized, and increasingly heavier and more complex machinery continued to grow the productivity of factories. The development of the Bessemer process allowed for the cost-effective mass-production of steel, which in turn allowed for the wide expansion of railway systems.
This period also witnessed the invention and mass production of the automobile which, with the advent of the vulcanization of rubber and Ford’s assembly line process, transformed how people lived and worked.
A revolution in the scientific understanding of the physical world allowed the development of electrification, telecommunications and a myriad of other innovations.
Furthermore, as organizations grew more complex, new management systems, like Taylorism, emerged to ensure the high productivity of workers as they struggled to do work that was highly structured and repetitive.
In general terms, the second revolution escalated the unprecedented socioeconomic change of the first industrial revolution and resulted in lots of winners and losers. Even as the period gave rise to better living standards for millions, the continued march of progress meant that machines continued to displace workers at alarming rates. This in turn led to many economic and industrial upheavals, including cyclical periods of robust economic growth followed by temporary declines.
The Third Revolution: The Digital Dimension
This is the change we are most familiar with since it occurred largely in our lifetime—the rise of computers. Starting in the 1950’s with the advent of the transistor and integrated circuits, this period led to the rise of modern electronics and the move from the analog and mechanical, to the electronic and digital.
As the miniaturization and processing power of integrated circuits grew exponentially, as computers could be connected with other computers, and as the size of these network connections exploded, work was once again transformed and led to the rise of the information or knowledge worker.
With advancements in the production of digital goods and services, telecommunications, computer software, automation, robotics, energy, transportation and more—productivity once again skyrocketed.
And as advanced economies matured and became more service-oriented, manufacturing jobs were offshored to developing nations in Asia and Latin America, a process that has created socioeconomic friction and contributed to the displacement of many workers.
The Fourth Industrial Revolution
Today, the 4th chapter of the story is well underway. As Klaus Schwab, founder of the World Economic Forum and author of The Fourth Industrial Revolution notes, “All new developments and technologies have one key feature in common: they leverage the pervasive power of digitization and information technology.”
The developments he’s referring to include:
- autonomous vehicles
- 3D printing
- advanced robotics
- new materials
- the Internet of Things (IoT)
- the spread of connected devices
- digital currencies (such as Bitcoin)
- digital platforms of the on-demand or sharing economy (e.g. Uber)
- genetic engineering
- synthetic biology
- embeddable biodevices
These will be profound and systemic changes that may dwarf the upheaval we’ve already witnessed in the digital revolution. But now, something’s different. Many experts and economists suspect that these changes are already transforming the basic dynamics between capital and labor observed in previous periods of change.
“There has never been a time of greater promise, or greater peril”—Klaus Schwab
As we might imagine, all this innovation has the potential to dramatically improve our lives. On the other hand, however, how we live and work in the next 10 years will be dramatically disrupted in ways that may be detrimental to millions of people around the globe.
A key concern is the capital and labor equation.
In previous industrial revolutions, plenty of laborers were displaced as individual workers aided by machines could become dramatically more productive, or as machines took up the most onerous tasks of industrial production. As productivity rose, new labor opportunities usually emerged. A farmer could migrate to the city to find gainful employment, for example, or a low skilled laborer could be trained to acquire more highly valued skills and earn more.
Capital could never truly substitute for labor, until now.
Today, technology allows capital to remove the laborer completely from the equation, on both the high skilled and low skilled ends of the spectrum. Through advanced robotics, sophisticated algorithms and spectacular computing power, both simple and complex tasks that required human involvement are now quickly disappearing. The worker is left completely out of the picture.
It will get worse.
What will happen to truck drivers when trucks drive themselves? Or to delivery people when your Amazon package is delivered by robot or drone (or printed in your home’s multipurpose 3D printer)?
Furthermore, digital technologies allow enterprises to scale-up production with zero marginal cost, which means additional production is essentially free, requiring no additional labor to produce.
On this point, Schwab makes a crucial observation:
In 1990, the three biggest companies in Detroit had a combined market capitalization of $36 billion, revenues of $250 billion, and 1.2 million employees. In 2014, the three biggest companies in Silicon Valley had a considerably higher market capitalization ($1.09 trillion), generated roughly the same revenues ($247 billion), but with 10 times fewer employees (137,000).
As you can imagine, this means there will be fewer, well-paying jobs and beyond the employment implications, this has the potential to exacerbate already alarming levels of inequality and the extreme concentration of wealth we now see around the globe.
What does this mean for you and me?
I’m not trying to suggest that all is doom and gloom. It isn’t. As consumers, we stand to benefit greatly from the marvelous technological innovation of the 4th industrial revolution.
However, it would be foolish to ignore the great risks that accompany this change.
In my next post, I will unpack what all this means for us with a specific focus on work and what we need to do to get ready for the dramatic change that’s just around the corner.
photo courtesy of smoothgroover22