SOLUTION: The Fourth Industrial Revolution | My Assignment Tutor

1. The Fourth Industrial Revolution1.1 Historical ContextThe word “revolution” denotes abrupt and radical change. Revolutions have occurredthroughout history when new technologies and novel ways of perceiving the world trigger aprofound change in economic systems and social structures. Given that history is used as aframe of reference, the abruptness of these changes may take years to unfold.The first profound shift in our way of living—the transition from foraging to farming—happened around 10,000 years ago and was made possible by the domestication ofanimals. The agrarian revolution combined the efforts of animals with those of humans forthe purpose of production, transportation and communication. Little by little, food productionimproved, spurring population growth and enabling larger human settlements. Thiseventually led to urbanization and the rise of cities.The agrarian revolution was followed by a series of industrial revolutions that began in thesecond half of the 18th century. These marked the transition from muscle power tomechanical power, evolving to where today, with the fourth industrial revolution, enhancedcognitive power is augmenting human production.The first industrial revolution spanned from about 1760 to around 1840. Triggered by theconstruction of railroads and the invention of the steam engine, it ushered in mechanicalproduction. The second industrial revolution, which started in the late 19th century and intothe early 20th century, made mass production possible, fostered by the advent of electricityand the assembly line. The third industrial revolution began in the 1960s. It is usually calledthe computer or digital revolution because it was catalyzed by the development ofsemiconductors, mainframe computing (1960s), personal computing (1970s and ’80s) andthe internet (1990s).Mindful of the various definitions and academic arguments used to describe the first threeindustrial revolutions, I believe that today we are at the beginning of a fourth industrialrevolution. It began at the turn of this century and builds on the digital revolution. It ischaracterized by a much more ubiquitous and mobile internet, by smaller and more powerfulsensors that have become cheaper, and by artificial intelligence and machine learning.Digital technologies that have computer hardware, software and networks at their core arenot new, but in a break with the third industrial revolution, they are becoming moresophisticated and integrated and are, as a result, transforming societies and the globaleconomy. This is the reason why Massachusetts Institute of Technology (MIT) professorsErik Brynjolfsson and Andrew McAfee have famously referred to this period as “the secondmachine age,”2 the title of their 2014 book, stating that the world is at an inflection pointwhere the effect of these digital technologies will manifest with “full force” throughautomation and and the making of “unprecedented things.”In Germany, there are discussions about “Industry 4.0,” a term coined at the Hannover Fairin 2011 to describe how this will revolutionize the organization of global value chains. Byenabling “smart factories,” the fourth industrial revolution creates a world in which virtual andphysical systems of manufacturing globally cooperate with each other in a flexible way. Thisenables the absolute customization of products and the creation of new operating models.The fourth industrial revolution, however, is not only about smart and connected machinesand systems. Its scope is much wider. Occurring simultaneously are waves of furtherbreakthroughs in areas ranging from gene sequencing to nanotechnology, from renewablesto quantum computing. It is the fusion of these technologies and their interaction across thephysical, digital and biological domains that make the fourth industrial revolutionfundamentally different from previous revolutions.In this revolution, emerging technologies and broad-based innovation are diffusing muchfaster and more widely than in previous ones, which continue to unfold in some parts of theworld. This second industrial revolution has yet to be fully experienced by 17% of world, asnearly 1.3 billion people still lack access to electricity. This is also true for the third industrialrevolution, with more than half of the world’s population, 4 billion people, most of whom livein the developing world, lacking internet access. The spindle (the hallmark of the firstindustrial revolution) took almost 120 years to spread outside of Europe. By contrast, theinternet permeated across the globe in less than a decade.Still valid today is the lesson from the first industrial revolution—that the extent to whichsociety embraces technological innovation is a major determinant of progress. Thegovernment and public institutions, as well as the private sector, need to do their part, but itis also essential that citizens see the long-term benefits.I am convinced that the fourth industrial revolution will be every bit as powerful, impactfuland historically important as the previous three. However, I have two primary concerns aboutfactors that may limit the potential of the fourth industrial revolution to be effectively andcohesively realized.First, I feel that the required levels of leadership and understanding of the changes underway, across all sectors, are low when contrasted with the need to rethink our economic,social and political systems to respond to the fourth industrial revolution. As a result, both atthe national and global levels, the requisite institutional framework to govern the diffusion ofinnovation and mitigate the disruption is inadequate at best and, at worst, absent altogether.Second, the world lacks a consistent, positive and common narrative that outlines theopportunities and challenges of the fourth industrial revolution, a narrative that is essential ifwe are to empower a diverse set of individuals and communities and avoid a popularbacklash against the fundamental changes under way.1.2 Profound and Systemic ChangeThe premise of this book is that technology and digitization will revolutionize everything,making the overused and often ill-used adage “this time is different” apt. Simply put, majortechnological innovations are on the brink of fueling momentous change throughout theworld—inevitably so.The scale and scope of change explain why disruption and innovation feel so acute today.The speed of innovation in terms of both its development and diffusion is faster than ever.Today’s disruptors (Airbnb, Uber, Alibaba and the like—now household names) wererelatively unknown just a few years ago. The ubiquitous iPhone was first launched in 2007.Yet there will be as many as 2 billion smartphones by the end of 2015. In 2010 Googleannounced its first fully autonomous car. Such vehicles could soon become a widespreadreality on the road.One could go on. But it is not only speed; returns to scale are equally staggering. Digitizationmeans automation, which in turn means that companies do not incur diminishing returns toscale (or less of them, at least). To give a sense of what this means at the aggregate level,compare Detroit in 1990 (then a major center of traditional industries) with Silicon Valley in2014. In 1990, the three biggest companies in Detroit had a combined market capitalizationof $36 billion, revenues of $250 billion, and 1.2 million employees. In 2014, the three biggestcompanies in Silicon Valley had a considerably higher market capitalization ($1.09 trillion),generated roughly the same revenues ($247 billion), but with about 10 times feweremployees (137,000).3The fact that a unit of wealth is created today with much fewer workers compared with 10 or15 years ago is possible because digital businesses have marginal costs that tend towardszero. Additionally, the reality of the digital age is that many new businesses provide“information goods” with storage, transportation and replication costs that are virtually nil.Some disruptive tech companies seem to require little capital to prosper. Businesses suchas Instagram or WhatsApp, for example, did not require much funding to start up, changingthe role of capital and scaling business in the context of the fourth industrial revolution.Overall, this shows how returns to scale further encourage scale and influence changeacross entire systems.Aside from speed and breadth, the fourth industrial revolution is unique because of thegrowing harmonization and integration of so many different disciplines and discoveries.Tangible innovations that result from interdependencies among different technologies are nolonger science fiction. Today, for example, digital fabrication technologies can interact withthe biological world. Some designers and architects are already mixing computationaldesign, additive manufacturing, materials engineering and synthetic biology to pioneersystems that involve the interaction among micro-organisms, our bodies, the products weconsume, and even the buildings we inhabit. In doing so, they are making (and even“growing”) objects that are continuously mutable and adaptable (hallmarks of the plant andanimal kingdoms).4In The Second Machine Age, Brynjolfsson and McAfee argue that computers are sodexterous that it is virtually impossible to predict what applications they may be used for injust a few years. Artificial intelligence (AI) is all around us, from self-driving cars and dronesto virtual assistants and translation software. This is transforming our lives. AI has madeimpressive progress, driven by exponential increases in computing power and by theavailability of vast amounts of data, from software used to discover new drugs to algorithmsthat predict our cultural interests. Many of these algorithms learn from the “bread crumb”trails of data that we leave in the digital world. This results in new types of “machinelearning” and automated discovery that enable “intelligent” robots and computers to selfprogram and find optimal solutions from first principles.Applications such as Apple’s Siri provide a glimpse of the power of one subset of the rapidlyadvancing AI field—so-called intelligent assistants. Only two years ago, intelligent personalassistants were starting to emerge. Today, voice recognition and artificial intelligence areprogressing so quickly that talking to computers will soon become the norm, creating whatsome technologists call ambient computing, in which robotic personal assistants areconstantly available to take notes and respond to user queries. Our devices will become anincreasing part of our personal ecosystem, listening to us, anticipating our needs, andhelping us when required—even if not asked.Inequality as a systemic challengeThe fourth industrial revolution will generate great benefits and big challenges in equalmeasure. A particular concern is exacerbated inequality. The challenges posed by risinginequality are hard to quantify as a great majority of us are consumers and producers, soinnovation and disruption will both positively and negatively affect our living standards andwelfare.The consumer seems to be gaining the most. The fourth industrial revolution has madepossible new products and services that increase at virtually no cost the efficiency of ourpersonal lives as consumers. Ordering a cab, finding a flight, buying a product, making apayment, listening to music or watching a film—any of these tasks can now be doneremotely. The benefits of technology for all of us who consume are incontrovertible. Theinternet, the smartphone and the thousands of apps are making our lives easier, and—onthe whole—more productive. A simple device such as a tablet, which we use for reading,browsing and communicating, possesses the equivalent processing power of 5,000 desktopcomputers from 30 years ago, while the cost of storing information is approaching zero(storing 1GB costs an average of less than $0.03 a year today, compared with more than$10,000, 20 years ago).The challenges created by the fourth industrial revolution appear to be mostly on the supplyside—in the world of work and production. Over the past few years, an overwhelmingmajority of the most developed countries and also some fast-growing economies such asChina have experienced a significant decline in the share of labor as a percentage of GDP.Half of this drop is due to the fall in the relative price of investment goods,5 itself driven bythe progress of innovation (which compels companies to substitute labor for capital).As a result, the great beneficiaries of the fourth industrial revolution are the providers ofintellectual or physical capital—the innovators, the investors, and the shareholders, whichexplains the rising gap in wealth between those who depend on their labor and those whoown capital. It also accounts for the disillusionment among so many workers, convinced thattheir real income may not increase over their lifetime and that their children may not have abetter life than theirs.Rising inequality and growing concerns about unfairness present such a significantchallenge that I will devote a section to this in Chapter Three. The concentration of benefitsand value in just a small percentage of people is also exacerbated by the so-called platformeffect, in which digitally driven organizations create networks that match buyers and sellersof a wide variety of products and services and thereby enjoy increasing returns to scale.The consequence of the platform effect is a concentration of few but powerful platforms thatdominate their markets. The benefits are obvious, particularly to consumers: higher value,more convenience and lower costs. Yet so too are the societal risks. To prevent theconcentration of value and power in just a few hands, we have to find ways to balance thebenefits and risks of digital platforms (including industry platforms) by ensuring opennessand opportunities for collaborative innovation.These are all fundamental changes affecting our economic, social and political systems thatare difficult to undo, even if the process of globalization itself were to somehow be reversed.The question for all industries and companies, without exception, is no longer “Am I going tobe disrupted?” but “When is disruption coming, what form will it take and how will it affect meand my organization?”The reality of disruption and the inevitability of the impact it will have on us does not meanthat we are powerless in the face of it. It is our responsibility to ensure that we establish a setof common values to drive policy choices and to enact the changes that will make the fourthindustrial revolution an opportunity for all.2. DriversCountless organizations have produced lists ranking the various technologies that will drivethe fourth industrial revolution. The scientific breakthroughs and the new technologies theygenerate seem limitless, unfolding on so many different fronts and in so many differentplaces. My selection of the key technologies to watch is based on research done by theWorld Economic Forum and the work of several of the Forum’s Global Agenda Councils.2.1 MegatrendsAll new developments and technologies have one key feature in common: they leverage thepervasive power of digitization and information technology. All of the innovations describedin this chapter are made possible and are enhanced through digital power. Genesequencing, for example, could not happen without progress in computing power and dataanalytics. Similarly, advanced robots would not exist without artificial intelligence, which itselflargely depends on computing power.To identify the megatrends and convey the broad landscape of technological drivers of thefourth industrial revolution, I have organized the list into three clusters: physical, digital andbiological. All three are deeply interrelated and the various technologies benefit from oneanother based on the discoveries and progress each makes.Excerpted from The Fourth Industrial Revolution by Klaus Schwab. Copyright © 2017 by KlausSchwab. All rights reserved. No part of this excerpt may be reproduced or reprinted withoutpermission in writing from the publisher.The Fourth Industrial Revolution by Klaus Schwab: 9781524758868 | PenguinRandomHouse.com:Books (27/2/21)