We are on the verge of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humanity has ever experienced before. We do not yet know exactly how it will unfold, but one thing is clear: the response must be comprehensive and comprehensive, involving all global policy stakeholders, from the public and private sectors to academia and civil society.
The First Industrial Revolution used water and steam to mechanize production. The second used electrical energy to create mass production. The Third used electronics and information technology to automate production. Now, a Fourth Industrial Revolution builds on the Third, the digital revolution that has been going on since the middle of the last century. It is characterized by a fusion of technologies that blurs the lines between the physical, digital and biological spheres.
There are three reasons why today’s transformations represent not only an extension of the Third Industrial Revolution, but rather the arrival of a Fourth and different: speed, scope, and impact on systems. The speed of current advances is historically unprecedented. Compared to previous industrial revolutions, the Fourth is evolving at an exponential rather than linear rate. Moreover, it is affecting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.
The possibilities for billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are limitless. And these possibilities will be multiplied by emerging technological advances in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.
Artificial intelligence is already all around us, from autonomous cars and drones to virtual assistants and software that translates or invests. Impressive progress has been made in AI in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data, from software used to discover new drugs to algorithms used to predict our cultural interests. Meanwhile, digital manufacturing technologies are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between microorganisms, our bodies, the products we consume, and even the buildings we inhabit.
Challenges and opportunities
Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. To date, those who have benefited the most from it have been consumers able to pay and access the digital world; Technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. Ordering a taxi, booking a flight, buying a product, making a payment, listening to music, watching a movie, or playing a game, all of this can now be done remotely.
In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will decrease, global logistics and supply chains will be more effective, and the cost of trade will decrease, all of which will open up new markets and boost economic growth.
At the same time, as economists Erik Brynjolfsson and Andrew McAfee have pointed out, the revolution could lead to greater inequality, particularly in its potential to disrupt labor markets. As automation replaces labor across the economy, the net displacement of workers by machines could exacerbate the gap between returns to capital and returns to labor. On the other hand, it is also possible that the displacement of workers by technology, taken together, will result in a net increase in secure and rewarding jobs.
We can’t foresee at this point which scenario is likely to emerge, and history suggests that the outcome is likely to be a combination of the two. However, I am convinced of one thing: that in the future, talent, rather than capital, will represent the critical factor of production. This will result in a labour market increasingly segregated into “low-skilled/low-paying” and “high-skilled/high-paying” segments, which in turn will lead to increased social tensions.
In addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution. The biggest beneficiaries of innovation tend to be providers of intellectual and physical capital (innovators, shareholders, and investors), which explains the growing gap in wealth between those who rely on capital versus labor. Thus, technology is one of the main reasons why incomes have stagnated, or even declined, for the majority of the population in high-income countries: the demand for high-skilled workers has increased, while the demand for workers with less education and fewer skills has declined. The result is a labor market with strong demand at the high and low ends, but a void in the middle.
This helps explain why so many workers are disillusioned and fearful that their own and their children’s real incomes will continue to stagnate. It also helps explain why middle classes around the world are increasingly experiencing a pervasive sense of dissatisfaction and injustice. A winner-take-all economy that offers only limited access to the middle class is a recipe for democratic unrest and neglect.
Discontent can also be fueled by the pervasiveness of digital technologies and the dynamics of information sharing characterized by social media. More than 30 percent of the world’s population now uses social media platforms to connect, learn, and share information. In an ideal world, these interactions would provide an opportunity for cross-cultural understanding and cohesion. However, they can also create and propagate unrealistic expectations about what constitutes success for an individual or a group, as well as provide opportunities for extreme ideas and ideologies to spread.
The impact on business
An underlying theme in my conversations with global CEOs and senior business executives is that the acceleration of innovation and the speed of disruption are difficult to comprehend or anticipate, and that these drivers are a source of constant surprise, even for the best connected and most informed. . In fact, across industries, there is clear evidence that the technologies underpinning the Fourth Industrial Revolution are having a major impact on businesses.
On the supply side, many industries are seeing the introduction of new technologies that create entirely new ways to meet existing needs and significantly disrupt existing industry value chains. The disruption also comes from nimble and innovative competitors who, thanks to access to global digital platforms for research, development, marketing, sales and distribution, can drive out established operators faster than ever before by improving the quality, speed or price at which value is delivered.
Major changes are also taking place on the demand side, as increasing transparency, consumer engagement, and new patterns of consumer behavior (increasingly based on access to mobile networks and data) force companies to adapt the way they design, market, and deliver products and services. .
A key trend is the development of technology platforms that combine both demand and supply to disrupt existing industrial structures, such as those we see within the “sharing” or “on-demand” economy. These technology platforms, easy to use by smartphone, bring together people, assets, and data, thus creating entirely new ways to consume goods and services in the process. In addition, they reduce barriers for companies and individuals to create wealth, altering workers’ personal and professional environments. These new platform companies are rapidly multiplying into many new services, ranging from laundry to shopping, from housework to parking, from massages to travel.
Overall, the Fourth Industrial Revolution has four main effects on business: on customer expectations, on product improvement, on collaborative innovation, and on organizational forms. Whether it’s consumers or businesses, customers are increasingly at the epicenter of the economy, which is about improving the way customers are served. In addition, physical products and services can now be enhanced with digital capabilities that increase their value. New technologies are making assets more durable and resilient, while data and analytics are transforming the way they are maintained. Meanwhile, a world of customer experiences, data-driven services, and asset performance through analytics requires new forms of collaboration, particularly given the speed at which innovation and disruption are occurring.
Overall, the inexorable shift from simple digitalization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to reexamine the way they do business. However, the bottom line is the same: business leaders and senior executives must understand their changing environment, challenge the assumptions of their operational teams, and innovate relentlessly and continuously.
The impact on government
As the physical, digital, and biological worlds continue to converge, new technologies and platforms will allow citizens to increasingly engage with governments, voice their opinions, coordinate their efforts, and even circumvent oversight by public authorities. Simultaneously, governments will gain new technological powers to increase their control over populations, relying on pervasive surveillance systems and the ability to control digital infrastructure. Overall, however, governments will increasingly face pressure to change their current approach to public participation and policymaking, as their central role in carrying out policy diminishes due to new sources of competition and the redistribution and decentralization of power that new technologies make possible.
Ultimately, the adaptability of government systems and public authorities will determine their survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will allow them to maintain their competitive advantage, they will resist. If they cannot evolve, they will face increasing problems.
This will be particularly true in the area of regulation. Current systems of public policy and decision-making evolved along with the Second Industrial Revolution, when decision-makers had time to study a specific issue and develop the necessary response or appropriate regulatory framework. The entire process was designed to be linear and mechanistic, following a strict “top-down” approach.
But that approach is no longer feasible. Given the rapid pace of change and the wide-ranging impacts of the Fourth Industrial Revolution, policymakers and regulators are being challenged to an unprecedented degree and are for the most part proving incapable of coping.
How, then, can they preserve the interest of consumers and the general public while continuing to support innovation and technological development? By adopting “agile” governance, as well as the private sector, it has increasingly adopted agile responses to software development and business operations more generally. This means that regulators must continually adapt to a new and rapidly changing environment, reinventing themselves so that they can truly understand what it is that they are regulating. To do so, governments and regulatory agencies will need to work closely with business and civil society.
The Fourth Industrial Revolution will also profoundly impact the nature of national and international security, affecting both the likelihood and nature of conflict. The history of war and international security is the history of technological innovation, and today is no exception. Modern conflicts involving states are increasingly “hybrid” in nature, combining traditional battlefield techniques with elements previously associated with non-state actors. The distinction between war and peace, combatant and noncombatant, and even violence and nonviolence (think cyberwarfare) is becoming uncomfortably blurred.
As this process takes place and new technologies, such as autonomous or biological weapons, become easier to use, individuals and small groups will increasingly join states in order to be able to cause massive damage. This new vulnerability will lead to new fears. But at the same time, technological advances will create the potential to reduce the scale or impact of violence, by developing new modes of protection, for example, or greater precision in targeting.
The impact on people.
The Fourth Industrial Revolution will finally change not only what we do but also who we are. It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we spend at work and leisure, and how we develop our careers, cultivate our skills, meet people, and cultivate relationships. It’s already changing our health and it’s leading us to a “quantified” self, and sooner than we think it can lead to a human increase. The list is endless because it is limited only by our imagination.
I’m a huge enthusiast and an early adopter of technology, but I sometimes wonder if the inexorable integration of technology into our lives could diminish some of our quintessential human capabilities, such as compassion and cooperation. Our relationship with our smartphones is a good example. Constant connection can deprive us of one of life’s most important assets: time to pause, reflect, and engage in meaningful conversation.
One of the biggest individual challenges posed by new information technologies is privacy. We instinctively understand why it’s so essential, but tracking and sharing information about us is a crucial part of the new connectivity. Debates about fundamental issues such as the impact on our internal lives of losing control over our data will only intensify in the coming years. Similarly, the revolutions occurring in biotechnology and AI, which are redefining what it means to be human by pushing back current thresholds of life, health, cognition, and capabilities, will force us to redefine our moral and ethical boundaries.
Shaping the future
Neither technology nor the disruption it entails is an exogenous force over which humans have no control. We are all responsible for guiding its evolution, in the decisions we make daily as citizens, consumers and investors. We must therefore seize the opportunity and power we have to shape the Fourth Industrial Revolution and steer it towards a future that reflects our common goals and values.
To do this, however, we must develop a comprehensive and globally shared view of how technology is affecting our lives and reshaping our economic, social, cultural, and human environments. There has never been a time of greater promise, or one of greater potential danger. However, today’s decision-makers are too often caught up in traditional, linear thinking, or too engrossed in the multiple crises that demand their attention, to think strategically about the forces of disruption and innovation shaping our future.
In the end, it all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic and dehumanized form, the Fourth Industrial Revolution may have the potential to “robotize” humanity and thereby deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also elevate humanity to a new collective and moral consciousness based on a shared sense of destiny. It is incumbent upon all of us to ensure that the latter prevails.
This article was first published on Foreign Affairs
Author: Klaus Schwab is founder and executive chairman of the World Economic Forum
Image: An Aeronavics drone sits in a meadow near the town of Raglan, New Zealand, July 6, 2015. REUTERS / Naomi Tajitsu
