We stand on the brink 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 humankind has experienced before. We do not yet know just how
it will unfold, but one thing is clear: the response to it must be integrated
and comprehensive, involving all stakeholders of the global polity, from the
public and private sectors to academia and civil society.
The First Industrial Revolution used
water and steam power to mechanize production. The Second used electric power
to create mass production. The Third used electronics and information
technology to automate production. Now a Fourth Industrial Revolution is
building on the Third, the digital revolution that has been occurring since the
middle of the last century. It is characterized by a fusion of technologies
that is blurring the lines between the physical, digital, and biological
spheres.
There are three reasons why today’s
transformations represent not merely a prolongation of the Third Industrial
Revolution but rather the arrival of a Fourth and distinct one: velocity,
scope, and systems impact. The speed of current breakthroughs has no historical
precedent. When compared with previous industrial revolutions, the Fourth is
evolving at an exponential rather than a linear pace. Moreover, it is
disrupting 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 of billions of people connected by mobile devices, with
unprecedented processing power, storage capacity, and access to knowledge, are
unlimited. And these possibilities will be multiplied by emerging technology
breakthroughs in fields such as artificial intelligence, robotics, the Internet
of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology,
materials science, energy storage, and quantum computing.
Youtube: https://www.youtube.com/watch?v=khjY5LWF3tg
Already,
artificial intelligence is all around us, from self-driving cars and drones to
virtual assistants and software that translate or invest. 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.
Digital fabrication technologies, meanwhile, 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 gained the most from it
have been consumers able to afford 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 cab, booking a flight, buying a
product, making a payment, listening to music, watching a film, or playing a
game—any of these 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 drop, logistics and global supply chains will become
more effective, and the cost of trade will diminish, all of which will open new
markets and drive economic growth.
At the
same time, as the economists Erik Brynjolfsson and Andrew McAfee have pointed
out, the revolution could yield greater inequality, particularly in its
potential to disrupt labor markets. As automation substitutes for labor across
the entire economy, the net displacement of workers by machines might
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
will, in aggregate, result in a net increase in safe and rewarding jobs.
We cannot
foresee at this point which scenario is likely to emerge, and history suggests
that the outcome is likely to be some combination of the two. However, I am
convinced of one thing—that in the future, talent, more than capital, will
represent the critical factor of production. This will give 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.
In
addition to being a key economic concern, inequality represents the greatest
societal concern associated with the Fourth Industrial Revolution. The largest
beneficiaries of innovation tend to be the providers of intellectual and
physical capital—the innovators, shareholders, and investors—which explains the
rising gap in wealth between those dependent on capital versus labor.
Technology is therefore one of the main reasons why incomes have stagnated, or
even decreased, for a majority of the population in high-income countries: the
demand for highly skilled workers has increased while the demand for workers
with less education and lower skills has decreased. The result is a job market
with a strong demand at the high and low ends, but a hollowing out of the
middle.
This
helps explain why so many workers are disillusioned and fearful that their own
real incomes and those of their children will continue to stagnate. It also
helps explain why middle classes around the world are increasingly experiencing
a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy
that offers only limited access to the middle class is a recipe for democratic
malaise and dereliction.
Discontent
can also be fueled by the pervasiveness of digital technologies and the
dynamics of information sharing typified by social media. More than 30 percent
of the global 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 as to what constitutes
success for an individual or a group, as well as offer 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 velocity of
disruption are hard to comprehend or anticipate and that these drivers
constitute a source of constant surprise, even for the best connected and most
well informed. Indeed, across all industries, there is clear evidence that the
technologies that underpin 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 of serving existing needs and significantly
disrupt existing industry value chains. Disruption is also flowing from agile,
innovative competitors who, thanks to access to global digital platforms for
research, development, marketing, sales, and distribution, can oust
well-established incumbents faster than ever by improving the quality, speed,
or price at which value is delivered.
Major
shifts on the demand side are also occurring, as growing transparency, consumer
engagement, and new patterns of consumer behavior (increasingly built upon
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-enabled platforms that combine both
demand and supply to disrupt existing industry structures, such as those we see
within the “sharing” or “on demand” economy. These technology platforms,
rendered easy to use by the smartphone, convene people, assets, and data—thus
creating entirely new ways of consuming goods and services in the process. In
addition, they lower the barriers for businesses and individuals to create
wealth, altering the personal and professional environments of workers. These
new platform businesses are rapidly multiplying into many new services, ranging
from laundry to shopping, from chores to parking, from massages to travel.
On the
whole, there are four main effects that the Fourth Industrial Revolution has on
business—on customer expectations, on product enhancement, on collaborative
innovation, and on organizational forms. Whether consumers or businesses,
customers are increasingly at the epicenter of the economy, which is all about
improving how customers are served. Physical products and services, moreover,
can now be enhanced with digital capabilities that increase their value. New
technologies make assets more durable and resilient, while data and analytics
are transforming how they are maintained. A world of customer experiences,
data-based services, and asset performance through analytics, meanwhile,
requires new forms of collaboration, particularly given the speed at which
innovation and disruption are taking place. And the emergence of global
platforms and other new business models, finally, means that talent, culture,
and organizational forms will have to be rethought.
Overall,
the inexorable shift from simple digitization (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. The
bottom line, however, is the same: business leaders and senior executives need
to understand their changing environment, challenge the assumptions of their
operating teams, and relentlessly and continuously innovate.
The impact on government
As the
physical, digital, and biological worlds continue to converge, new technologies
and platforms will increasingly enable citizens to engage with governments,
voice their opinions, coordinate their efforts, and even circumvent the
supervision of public authorities. Simultaneously, governments will gain new
technological powers to increase their control over populations, based on
pervasive surveillance systems and the ability to control digital
infrastructure. On the whole, however, governments will increasingly face
pressure to change their current approach to public engagement and
policymaking, as their central role of conducting policy diminishes owing to
new sources of competition and the redistribution and decentralization of power
that new technologies make possible.
Ultimately,
the ability of government systems and public authorities to adapt 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 enable them to maintain their competitive edge, they
will endure. If they cannot evolve, they will face increasing trouble.
This will
be particularly true in the realm of regulation. Current systems of public
policy and decision-making evolved alongside the Second Industrial Revolution,
when decision-makers had time to study a specific issue and develop the
necessary response or appropriate regulatory framework. The whole process was
designed to be linear and mechanistic, following a strict “top down” approach.
But such
an approach is no longer feasible. Given the Fourth Industrial Revolution’s
rapid pace of change and broad impacts, legislators and regulators are being
challenged to an unprecedented degree and for the most part are proving unable
to cope.
How,
then, can they preserve the interest of the consumers and the public at large
while continuing to support innovation and technological development? By
embracing “agile” governance, just as the private sector has increasingly
adopted agile responses to software development and business operations more
generally. This means regulators must continuously adapt to a new,
fast-changing environment, reinventing themselves so they can truly understand
what it is they are regulating. To do so, governments and regulatory agencies
will need to collaborate closely with business and civil society.
The
Fourth Industrial Revolution will also profoundly impact the nature of national
and international security, affecting both the probability and the nature of
conflict. The history of warfare 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 nonstate actors. The
distinction between war and peace, combatant and noncombatant, and even
violence and nonviolence (think cyberwarfare) is becoming uncomfortably blurry.
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 being capable of causing mass harm. This new vulnerability will
lead to new fears. But at the same time, advances in technology will create the
potential to reduce the scale or impact of violence, through the development of
new modes of protection, for example, or greater precision in targeting.
The impact on people
The
Fourth Industrial Revolution, finally, will 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 devote to work and leisure, and how we develop our careers, cultivate
our skills, meet people, and nurture relationships. It is already changing our
health and leading to a “quantified” self, and sooner than we think it may lead
to human augmentation. The list is endless because it is bound only by our
imagination.
I am a
great enthusiast and early adopter of technology, but sometimes I wonder
whether the inexorable integration of technology in our lives could diminish
some of our quintessential human capacities, such as compassion and
cooperation. Our relationship with our smartphones is a case in point. Constant
connection may deprive us of one of life’s most important assets: the time to
pause, reflect, and engage in meaningful conversation.
One of
the greatest individual challenges posed by new information technologies is
privacy. We instinctively understand why it is so essential, yet the tracking
and sharing of information about us is a crucial part of the new connectivity.
Debates about fundamental issues such as the impact on our inner lives of the
loss of control over our data will only intensify in the years ahead.
Similarly, the revolutions occurring in biotechnology and AI, which are
redefining what it means to be human by pushing back the current thresholds of
life span, health, cognition, and capabilities, will compel us to redefine our
moral and ethical boundaries.
Shaping
the future
Neither
technology nor the disruption that comes with it is an exogenous force over
which humans have no control. All of us are responsible for guiding its
evolution, in the decisions we make on a daily basis as citizens, consumers,
and investors. We should thus grasp the opportunity and power we have to shape
the Fourth Industrial Revolution and direct it toward a future that reflects
our common objectives 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 peril. Today’s decision-makers, however, are too often
trapped in traditional, linear thinking, or too absorbed by the multiple crises
demanding 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, dehumanized form, the Fourth Industrial Revolution may indeed have
the potential to “robotize” humanity and thus to deprive us of our heart and
soul. But as a complement to the best parts of human nature—creativity,
empathy, stewardship—it can also lift humanity into a new collective and moral
consciousness based on a shared sense of destiny. It is incumbent on us all to
make sure the latter prevails.
This article was first published in Foreign Affairs
Author: Klaus Schwab is Founder and Executive Chairman of the World
Economic Forum
