Inside the New Industrial Revolution

The mobile internet, automation and AI will have profound implications. Here’s a closer look at how the old and new economies compare.

The first three industrial revolutions were driven by coal and steam, then electricity and the automobile, then computing. Now we may be witnessing the rise of the fourth: an economy powered by the mobile internet, automation and artificial intelligence.

That was the assessment of Klaus Schwab, founder of the World Economic Forum, who made the fourth industrial revolution the theme of his annual meeting in 2016.

Each of these earlier revolutions is easy to measure in hindsight—tons of steel produced, number of automobiles on the road, the proportion of homes with a PC. Since we’re just at the start of this latest transformation, we can only try to find clues to the future by looking at the trends of the past decade, with the rise of the smartphone, the Internet of Things and cloud computing.

In the two years since Prof. Schwab’s talk, those trends have gone into overdrive. The sudden ramp-up of technologies ranging from phone components to wireless networks to data centers points to a new kind of automation, more pervasive and smarter than ever before seen. It affects every industry, not just manufacturing, logistics or transportation, and is unique in the degree to which it is affecting white-collar as well as blue-collar workers.
We’re either witnessing the end of work as we know it or “merely” a profound transformation of what jobs humans do. Either way, the economic and political ramifications are likely to be on par with the impact of the past 50 years of outsourcing and globalization.

These charts and graphs help us understand this by examining trade-offs between the new and old economy, as well as highlighting the infrastructure, industries and jobs that are expanding global gross domestic product. Some trends are taking off in ways few have realized, like the population of industrial robots, while others are stalling in ways that suggest barriers to development and opportunities for more investment, like the leveling-off of manufacturing productivity in recent years after a surge in the preceding years.

The explosion of smartphones has created a need for the development of new software (from apps to artificial intelligence), new platforms (such as cloud computing and blockchain), new networks (first 4G and soon its successor, 5G), and not least, an array of components that were once prohibitively expensive (all manner of sensors and cameras). (Fig. 1)

The growth in the smartphone and cloud economy has brought automation to a sector that has traditionally been shielded from its effects: knowledge work. Here, though, it is less about replacing workers than enhancing their abilities by automating tasks such as sifting through large amounts of data and giving them access to tools such as predictive analysis, while also inventing new jobs such as data scientist and drone operator.

As we think about what jobs we must prepare our children for, we can’t forget that the fastest-growing employment sectors and the biggest skill gaps are currently in technology, and that this will probably remain the case for the foreseeable future. (Fig. 2)

The new economy doesn’t just require warm bodies—it also requires a great deal of infrastructure, even if it tends to be invisible in our everyday lives. In the U.S., that means thousands of miles of fiber-optic cable and hundreds of thousands of cell towers. Globally, it means an explosion of internet traffic. (Figs. 3, 4)

Combine mobile, the cloud and automation with commerce, and you get a transformation of how we distribute goods of every kind, both consumer and industrial. The headline-grabbing dimension of this transformation is its effect on physical retail and the transfer of those jobs into warehouses. (Fig. 5)

While warehouses are seeing a surge in employment, jobs in factories continue to see a decline due to automation. While much of the manufacturing in the developed world has been outsourced rather than automated, even the countries where those jobs went, like Bangladesh, are now seeing the automation of previously un-automatable industries like sewing. Globally, 381,000 industrial robots were shipped in 2017. (Fig. 6)

The most visible impact of the rise of ever-more-capable automation is that employment in manufacturing and the skilled trades has dropped even as total productivity in the U.S. (and nearly every other developed country) has increased. (Fig. 7)

This growing population of industrial robots doesn’t even count what could be the biggest automation accelerant of all: autonomous vehicles. Today, the number of truly autonomous vehicles on the road numbers in the hundreds, and all of them are still in the testing stage. But a leading indicator of where this space is going—investment in autonomous-vehicle research—shows hockey-stick growth. (Fig. 8)

Autonomy as a broad technology—giving robots the ability to navigate on their own, safely, in the presence of humans—will be even bigger, and could have a multiplier effect on the number of robots engaged in tasks both mundane, like delivering groceries, and extraordinary, like helping the growing population of aging humans live fulfilling lives by making them more mobile.

Critical to the newfound abilities of all this automation is artificial intelligence. AI isn’t as dangerous as dystopians like to argue, nor is it as smart. Current AI doesn’t think like people do; it just takes data and finds patterns in it. Even so, machine learning—essentially, a very advanced version of pattern matching—has set the bar in a number of fields, and is now arguably the hottest trend in all of AI research. (Fig. 9)

We can’t consider future drivers of the fourth industrial revolution without talking about the fundamental research that fuels these transformations, as well as the race to keep on top of it. It is notable that 2018 is projected to be the first year in which China eclipses the U.S. in total R&D spending. (Fig. 10)

China has vowed to become a powerhouse in AI within 15 years and launch a “robot revolution” to remain competitive in manufacturing even as wages rise. it is also leveraging Big Data to create a form of surveillance capitalism—in which economic value is created and controlled through the harvesting of data about every aspect of people’s daily activities—the likes of which the world has never seen.

The fourth industrial revolution is gathering steam, but unless the U.S. can continue to attract the best talent from overseas while also educating a domestic workforce suited to the jobs to come, this time it might not be an American revolution.

Source: The Wall Street Journal

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