The meaning of the fourth industrial revolution (4IR) starts with the technology possibilities for fuelling creative waves. To comprehend the likely future scenarios, we should envision and predict the unfolding of new products and substitutions of existing ones, having destructive effects. Their destructive effects will span from jobs, firms, to industries. Moreover, 4IR is a blessing for a few, and a curse for the rest. Hence, we need to carefully look into multi-dimensional meaning for preparing to cope up and leverage the unfolding reality.
At the dawn of the 21st century, we have many questions about an unfolding transformation. We are curious to get to know the fourth industrial revolution meaning. We are often bewildered in defining 4IR and anticipating likely implications. Like many other revolutions, 4IR also means destroying the present and creating a better alternative. Unlike military power, technologies underpin 4IR for unfolding creative waves of destruction. These waves offer us substitutions to incumbent products and existing means of getting our jobs done. In addition to creating new opportunities, it is likely to destroy existing jobs, firms, and industries. The fourth industrial revolution is likely to restructure value addition capacity out of labor and natural resources. It’s will also shape the competition space by opening the opportunity of acquiring monopolistic market power.
Intangible assets and software will fuel the fourth industrial revolutions
Unlike the past three industrial revolutions, 4IR will use intangible assets like software to imitate humans’ cognitive capability in machines. The need for high R&D costs for software-centric intelligence development will show a slow response at the beginning. But once they cross the threshold, zero cost of copying software machines will lead to rapid scale-up—giving now time to followers to respond. On the other hand, the high-scale effect will create a situation of winners taking all. On the other hand, 4IR has the potential of offering us the means for producing more with less—a vital necessity for attaining sustainable development goals. Lets’s look into multi-facets of the fourth industrial revolution meaning.
Industrial revolutions in perspective
Under the leadership of Prof. Klaus Schwab, World Economic Forum has done a wonderful job in making the world aware of the emergence of the next industrial revolutions. Often, we ask the question, who invented 4IR and which individual, firms, or countries are driving it? In fact, no single individual, firm, or country is fueling the 4IR. The human urge continues to get jobs done better by finding better means by leveraging technology ideas. The journey of inventing technologies and innovating products to serve our purposes better, at less cost, has a long history. It’s as long as human beings’ existence on this planet. We have an inherent urge to gather knowledge and develop ideas for innovating new products or improving existing ones to recreate the world around us to improve our quality of living standards.
However, in certain cases, we encounter technology inventions that fuel waves of innovations, transforming our society as a whole. We call each of those major transformations as the industrial revolution.
The invention of the steam engine in the 18th century led to a series of innovations. These innovations affected most of our productive activities, starting from weaving to shipping. It brought a transformation in producing and utilizing energy. Instead of energy given by wind or water, we started burning coal and producing steam for the propelling wheel. Consequentially, speed and productivity increased. We created many more jobs than lost in this age of this transformation.
At the fag end of the 19th century, the invention of the internal combustion engine and electric power fueled major innovations, and it transformed existing products and production methodologies. These two major inventions fueled a series of creative waves, often destroying existing products, jobs, and firms. The invention of the transistor in 1947 started the 3rd industrial revolution.
Waves of creative destructions for driving the fourth industrial revolution
For unfolding the fourth industrial revolution, like the past, waves of creative destruction should emerge for offering better substitutes to existing ones. For fueling those creative waves, we must need a set of technology cores. Do we foresee those waves and underlying technology cores? Among them, renewable energy is one of them. The first industrial revolution replaced the role of wind and water with the steam engine to provide us with energy. Subsequently, the 2nd industrial revolution brought transformations in the way we produce, distribute, and utilize energy. The internal combustion engine and electric power are notable ones.
Although we did not experience much change in energy in the 3rd industrial revolution, we anticipate that 4IR will replace fossil fuel with renewable energy sources. As opposed to burning gasoline, we will be using electric energy to power automobiles. Hence, we expect the uprising of creative waves out of renewable energy and electric vehicles for causing destruction to the energy industry.
We are also expecting a transformation in the way we use industrial products. The possibility of transferring humans’ cognitive capability to the machine is unfolding. The replacement of humans in the machine’s control loop with artificial intelligence is expected to offer us higher safety, reduced wastage, and less pollution. The leveraging of this potential will cause a significant transformation in the job market and society as a whole. For example, driverless cars is the possibility of reducing death and property damage from road accidents. On the other hand, the job loss of millions of drivers will be a significant issue. Furthermore, it will also affect car ownership and business model.
Scope, Scale, and Speed effects of the fourth industrial revolution
It appears that software will be at the core technology set for fueling creative waves. Due to the zero cost of copying and network effect, the economies of scale of software-centric innovations, driving 4IR, will be extremely high. As more or less, all economic activities require the human role, the transfer of humans’ cognitive role to the machine will have an extremely high scope effect. On the other hand, due to high R&D barriers, most of the innovations will have a very large gestation period, requiring very high R&D costs at the beginning.
But once they reach to maturity, the speed of diffusion will ramp up at an unprecedented rate. For example, for developing an autonomous vehicle, already more than $80 billion has been invested. It still has not succeeded in being a better alternative to the human driver. However, once the threshold is overtaken, it will scale up very rapidly.
Fourth industrial revolution technologies and innovation challenges
4IR technologies have very high intellectual assets. Often those assets are in software form. It requires high investment in developing those assets. However, they have large scale, scope, and externality effects. Hence, take-off time will be long, followed by a rapid ramp-up. However, unlike in the past, the threshold barrier for innovations driving the 4IR is very high. For example, unless EV is better and cheaper than ICE, it will not start taking off. On the other hand, unless autonomous cars are safer than human drivers, in all situations, this innovation will not start rolling out in the streets.
However, some of those barriers are moving targets. Particularly for taking over humans’ cognitive roles, we do not have a very clear understanding of how human beings play the intelligence role. It may take several decades to get to know the science. It seems that the current AI technology core is not even sufficiently strong to take over our known understanding of humans’ cognitive capability. For many applications, we may require several decades of basic research to acquire adequate scientific knowledge to fuel envisioned innovations.
Due to high R&D need, extremely large economies of scale, scope and externality effects, and labor replacement implications, it’s likely that 4IR will expand inequality between nations. In the form of job loss due to the transfer of human role to the machine, its destructive effect runs the risk of marginalizing less developed countries. Furthermore, its productivity effect will also be in favor of rich nations. Due to high R&D investment needs, less developed countries will also be in a disadvantageous position in leveraging the creative side of the 4IR. Hence, to understand the fourth industrial revolution’s meaning, we should also look into this important perspective.
Blessing for aging and labor shortage
Many countries like Japan or Germany are suffering from a labor shortage. One of the reasons has been the aging population. For addressing the labor shortage, companies of those countries located many of their production plants in developing countries. To address the domestic aging issue, they also opted for immigration. However, the possibility of reducing the human role with AI machines has been a blessing for them. To leverage it, countries like Japan, China, and Europe have been desperate to increase R&D investment in Robotics. Particularly, for Japan, robotics has been a ray of hope for addressing the challenge of taking care of the aging population. Hence, the meaning of the fourth industrial revolution to the elderly appears to be good news.
Job loss and curse for labor centric developments
Job loss due to the unveiling of robotics driving the fourth industrial revolution has been unnerving in developing countries. Low-cost labor is their primary input to the global value chain. The recent economic success of Bangladesh, Vietnam, or Indonesia has been due to the labor supply in export-oriented manufacturing activities. However, the uprising for robotics as a strong replacement for human labor has been a serious issue for these countries. It’s posing a serious threat to their labor-centric industrialization strategy.
Universal guaranteed income (UBI) and creating labor demand
Often, reskilling is not an option for creating employment opportunities in the age of 4IR. Hence, UBI is being touted. However, for developing countries, it does not appear to be applicable. Instead, we should look for increasing labor demand. It appears that the unfolding of the fourth industrial revolution will expand remote service delivery. Hence, developing countries should exploit such opportunities. On the other hand, they should focus on creating the idea economy. In fact, many of the underlying technologies driving 4IR offer local innovation opportunities. The exploitation of those opportunities will create high-end labor demand. Some of them will also open the opportunity of new demand for low-skilled labor. We should also focus on sharpening our innate abilities to improve productivity and slow down robot invasion.
Graceful transition or sudden change
There is no denying that software-centric innovations take very little time to unfold. However, the threshold appears to be very high for creative waves driving 4IR to unfold. For example, after 28 years of R&D at $500 million, Honda learned that it was too much hard to make ASIMO eligible for elderly caregiving jobs. Moreover, some of the innovations will also require upgrading of the infrastructure. For example, the timeline for EV to taken over ICE is moving further and further. On the other hand, there is a massive need to roll out the infrastructure for the adoption of EVs. Similarly, the mass scale rollout of autonomous vehicles has already been extended by more than a decade. On the other hand, there will likely be a requirement for purpose build infrastructure.
Sustainable development in the age of the fourth industrial revolution
In fact, the fourth industrial revolution meaning has many dimensions. One of them is its likely implications on the sustainable development agenda. For sustainable development, we badly need production process innovation for reducing wastage and emission–but that invariably demands labor replacement with robotics and automation. Does it mean that the sustainable development agenda places labor-supplying countries in a weaker position? On the other hand, on the energy front, large-scale deployment of wind turbines, photovoltaic panels, and electric vehicles will require some metals’ global production to increase at least 12-fold by 2050 compared to the output of 2015. In fact, in the age of industrial revolutions, sustainable development sounds oxymoron. We need a unified theory for demystifying innovation and empowering ordinary people to show extraordinary performance in producing more with less out-of-technology ideas for turning 4IR blessing for all.
It appears that the fourth industrial revolution meaning has many dimensions. This write-up spells out only a few of them.