by Klaus Schwab
Aside from speed and breadth, the fourth industrial revolution is unique because of the growing harmonization and integration of so many different disciplines and discoveries. Tangible innovations that result from interdependencies among different technologies are no longer science fiction. Today, for example, digital fabrication technologies can interact with the biological world. Some designers and architects are already mixing computational design, additive manufacturing, materials engineering and synthetic biology to pioneer systems that involve the interaction among micro-organisms, our bodies, the products we consume, 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 and animal kingdoms).4
In The Second Machine Age, Brynjolfsson and McAfee argue that computers are so dexterous that it is virtually impossible to predict what applications they may be used for in just a few years. Artificial intelligence (AI) is all around us, from self-driving cars and drones to virtual assistants and translation software. This is transforming our lives. AI has made impressive progress, 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 that 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 “machine learning” and automated discovery that enables “intelligent” robots and computers to self-programme and find optimal solutions from first principles.
Applications such as Apple’s Siri provide a glimpse of the power of one subset of the rapidly advancing AI field – so-called intelligent assistants. Only two years ago, intelligent personal assistants were starting to emerge. Today, voice recognition and artificial intelligence are progressing so quickly that talking to computers will soon become the norm, creating what some technologists call ambient computing, in which robotic personal assistants are constantly available to take notes and respond to user queries. Our devices will become an increasing part of our personal ecosystem, listening to us, anticipating our needs, and helping us when required – even if not asked.
Inequality as a systemic challenge
The fourth industrial revolution will generate great benefits and big challenges in equal measure. A particular concern is exacerbated inequality. The challenges posed by rising inequality are hard to quantify as a great majority of us are consumers and producers, so innovation and disruption will both positively and negatively affect our living standards and welfare.
The consumer seems to be gaining the most. The fourth industrial revolution has made possible new products and services that increase at virtually no cost the efficiency of our personal lives as consumers. Ordering a cab, finding a flight, buying a product, making a payment, listening to music or watching a film – any of these tasks can now be done remotely. The benefits of technology for all of us who consume are incontrovertible. The internet, the smart phone and the thousands of apps are making our lives easier, and – on the 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 desktop computers 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 to more than $10,000 20 years ago).
The challenges created by the fourth industrial revolution appear to be mostly on the supply side – in the world of work and production. Over the past few years, an overwhelming majority of the most developed countries and also some fast-growing economies such as China have experienced a significant decline in the share of labour as a percentage of GDP. Half of this drop is due to the fall in the relative price of investment goods,5 itself driven by the progress of innovation (which compels companies to substitute labour for capital).
As a result, the great beneficiaries of the fourth industrial revolution are the providers of intellectual or physical capital – the innovators, the investors, and the shareholders, which explains the rising gap in wealth between those who depend on their labour and those who own capital. It also accounts for the disillusionment among so many workers, convinced that their real income may not increase over their lifetime and that their children may not have a better life than theirs.
Rising inequality and growing concerns about unfairness present such a significant challenge that I will devote a section to this in Chapter Three. The concentration of benefits and value in just a small percentage of people is also exacerbated by the so-called platform effect, in which digitally-driven organizations create networks that match buyers and sellers of 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 which dominate 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 the concentration of value and power in just a few hands, we have to find ways to balance the benefits and risks of digital platforms (including industry platforms) by ensuring openness and opportunities for collaborative innovation.
These are all fundamental changes affecting our economic, social and political systems which are 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 to be disrupted?” but “When is disruption coming, what form will it take and how will it affect me and my organization?”
The reality of disruption and the inevitability of the impact it will have on us does not mean that we are powerless in face of it. It is our responsibility to ensure that we establish a set of common values to drive policy choices and to enact the changes that will make the fourth industrial revolution an opportunity for all.
2. Drivers
Countless organizations have produced lists ranking the various technologies that will drive the fourth industrial revolution. The scientific breakthroughs and the new technologies they generate seem limitless, unfolding on so many different fronts and in so many different places. My selection of the key technologies to watch is based on research done by the World Economic Forum and the work of several of the Forum’s Global Agenda Councils.
2.1 Megatrends
All new developments and technologies have one key feature in common: they leverage the pervasive power of digitization and information technology. All of the innovations described in this chapter are made possible and are enhanced through digital power. Gene sequencing, for example, could not happen without progress in computing power and data analytics. Similarly, advanced robots would not exist without artificial intelligence, which itself, largely depends on computing power.
To identify the megatrends and convey the broad landscape of technological drivers of the fourth industrial revolution, I have organized the list into three clusters: physical, digital and biological. All three are deeply interrelated and the various technologies benefit from each other based on the discoveries and progress each makes.
2.1.1 Physical
There are four main physical manifestations of the technological megatrends, which are the easiest to see because of their tangible nature:
– autonomous vehicles
– 3D printing
– advanced robotics
– new materials
Autonomous vehicles
The driverless car dominates the news but there are now many other autonomous vehicles including trucks, drones, aircrafts and boats. As technologies such as sensors and artificial intelligence progress, the capabilities of all these autonomous machines improve at a rapid pace. It is only a question of a few years before low-cost, commercially available drones, together with submersibles, are used in different applications.
As drones become capable of sensing and responding to their environment (altering their flight pat
h to avoid collisions), they will be able to do tasks such as checking electric power lines or delivering medical supplies in war zones. In agriculture, the use of drones – combined with data analytics – will enable more precise and efficient use of fertilizer and water, for example.
3D printing
Also called additive manufacturing, 3D printing consists of creating a physical object by printing layer upon layer from a digital 3D drawing or model. This is the opposite of subtractive manufacturing, which is how things have been made until now, with layers being removed from a piece of material until the desired shape is obtained. By contrast, 3D printing starts with loose material and then builds an object into a three-dimensional shape using a digital template.
The technology is being used in a broad range of applications, from large (wind turbines) to small (medical implants). For the moment, it is primarily limited to applications in the automotive, aerospace and medical industries. Unlike mass-produced manufactured goods, 3D-printed products can be easily customized. As current size, cost and speed constraints are progressively overcome, 3D printing will become more pervasive to include integrated electronic components such as circuit boards and even human cells and organs. Researchers are already working on 4D, a process that would create a new generation of self-altering products capable of responding to environmental changes such as heat and humidity. This technology could be used in clothing or footwear, as well as in health-related products such as implants designed to adapt to the human body.
Advanced robotics
Until recently, the use of robots was confined to tightly controlled tasks in specific industries such as automotive. Today, however, robots are increasingly used across all sectors and for a wide range of tasks from precision agriculture to nursing. Rapid progress in robotics will soon make collaboration between humans and machines an everyday reality. Moreover, because of other technological advances, robots are becoming more adaptive and flexible, with their structural and functional design inspired by complex biological structures (an extension of a process called biomimicry, whereby nature’s patterns and strategies are imitated).
Advances in sensors are enabling robots to understand and respond better to their environment and to engage in a broader variety of tasks such as household chores. Contrary to the past when they had to be programmed through an autonomous unit, robots can now access information remotely via the cloud and thus connect with a network of other robots. When the next generation of robots emerges, they will likely reflect an increasing emphasis on human-machine collaboration. In Chapter Three, I will explore the ethical and psychological questions raised by human-machine relations.
New materials
With attributes that seemed unimaginable a few years ago, new materials are coming to market. On the whole, they are lighter, stronger, recyclable and adaptive. There are now applications for smart materials that are self-healing or self-cleaning, metals with memory that revert to their original shapes, ceramics and crystals that turn pressure into energy, and so on.
Like many innovations of the fourth industrial revolution, it is hard to know where developments in new materials will lead. Take advanced nanomaterials such as graphene, which is about 200-times stronger than steel, a million-times thinner than a human hair, and an efficient conductor of heat and electricity.6 When graphene becomes price competitive (gram for gram, it is one of the most expensive materials on earth, with a micrometer-sized flake costing more than $1,000), it could significantly disrupt the manufacturing and infrastructure industries.7 It could also profoundly affect countries that are heavily reliant on a particular commodity.
Other new materials could play a major role in mitigating the global risks we face. New innovations in thermoset plastics, for example, could make reusable materials that have been considered nearly impossible to recycle but are used in everything from mobile phones and circuit boards to aerospace industry parts. The recent discovery of new classes of recyclable thermosetting polymers called polyhexahydrotriazines (PHTs) is a major step towards the circular economy, which is regenerative by design and works by decoupling growth and resource needs.8
2.1.2 Digital
One of the main bridges between the physical and digital applications enabled by the fourth industrial revolution is the internet of things (IoT) – sometimes called the “internet of all things”. In its simplest form, it can be described as a relationship between things (products, services, places, etc.) and people that is made possible by connected technologies and various platforms.
Sensors and numerous other means of connecting things in the physical world to virtual networks are proliferating at an astounding pace. Smaller, cheaper and smarter sensors are being installed in homes, clothes and accessories, cities, transport and energy networks, as well as manufacturing processes. Today, there are billions of devices around the world such as smart phones, tablets and computers that are connected to the internet. Their numbers are expected to increase dramatically over the next few years, with estimates ranging from several billions to more than a trillion. This will radically alter the way in which we manage supply chains by enabling us to monitor and optimize assets and activities to a very granular level. In the process, it will have transformative impact across all industries, from manufacturing to infrastructure to healthcare.
Consider remote monitoring – a widespread application of the IoT. Any package, pallet or container can now be equipped with a sensor, transmitter or radio frequency identification (RFID) tag that allows a company to track where it is as it moves through the supply chain – how it is performing, how it is being used, and so on. Similarly, customers can continuously track (practically in real time) the progress of the package or document they are expecting. For companies that are in the business of operating long and complex supply chains, this is transformative. In the near future, similar monitoring systems will also be applied to the movement and tracking of people.
The digital revolution is creating radically new approaches that revolutionize the way in which individuals and institutions engage and collaborate. For example, the blockchain, often described as a “distributed ledger”, is a secure protocol where a network of computers collectively verifies a transaction before it can be recorded and approved. The technology that underpins the blockchain creates trust by enabling people who do not know each other (and thus have no underlying basis for trust) to collaborate without having to go through a neutral central authority – i.e. a custodian or central ledger. In essence, the blockchain is a shared, programmable, cryptographically secure and therefore trusted ledger which no single user controls and which can be inspected by everyone.
Bitcoin is so far the best known blockchain application but the technology will soon give rise to countless others. If, at the moment, blockchain technology records financial transactions made with digital currencies such as Bitcoin, it will in the future serve as a registrar for things as different as birth and death certificates, titles of ownership, marriage licenses, educational degrees, insurance claims, medical procedures and votes – essentially any kind of transaction that can be expressed in code. Some countries or institutions are already investigating the blockchain’s potential. The government of Honduras, for example, is using the technology to handle land titles while the Isle of Man is testing its use in company registration.
On a broader scale, technology-enabled platforms make possible what is now called the on-demand economy (referred to by some as the sharing economy). These platforms, which are easy to use on a smart phone, convene people, assets and data, creating entirely new ways of consuming goods and services. They lower barriers for businesses and individuals to create wealth, altering personal and professional environments.
The Uber model epitomizes the disruptive power of these technology platforms. These platform businesses are rapidly multiplying to offer new services ranging from laundry to shopping, from chores to parking, from home-stays to sharing long-distance rides. They have one thing i
n common: by matching supply and demand in a very accessible (low cost) way, by providing consumers with diverse goods, and by allowing both parties to interact and give feedback, these platforms therefore seed trust. This enables the effective use of under-utilized assets – namely those belonging to people who had previously never thought of themselves as suppliers (i.e. of a seat in their car, a spare bedroom in their home, a commercial link between a retailer and manufacturer, or the time and skill to provide a service like delivery, home repair or administrative tasks).
The on-demand economy raises the fundamental question: What is worth owning – the platform or the underlying asset? As media strategist Tom Goodwin wrote in a TechCrunch article in March 2015: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.”9
Digital platforms have dramatically reduced the transaction and friction costs incurred when individuals or organizations share the use of an asset or provide a service. Each transaction can now be divided into very fine increments, with economic gains for all parties involved. In addition, when using digital platforms, the marginal cost of producing each additional product, good or service tends towards zero. This has dramatic implications for business and society that I will explore in Chapter Three.
2.1.3 Biological
Innovations in the biological realm – and genetics in particular – are nothing less than breath-taking. In recent years, considerable progress has been achieved in reducing the cost and increasing the ease of genetic sequencing, and lately, in activating or editing genes. It took more than 10 years, at a cost of $2.7 billion, to complete the Human Genome Project. Today, a genome can be sequenced in a few hours and for less than a thousand dollars.10 With advances in computing power, scientists no longer go by trial and error; rather, they test the way in which specific genetic variations generate particular traits and diseases.