Prof. Klaus Martin Schwab has done an excellent job. He has made the “fourth industrial revolution” phrase quite known. From the media personalities to political leaders, everybody has become quite conversant with this phrase. Subsequently, 4IR has become part of our vocabulary. Thanks to the World Economic Forum to keep arranging events and making publications on it. However, the unfolding Fourth Industrial Revolution causes job loss fear. Mainly, the job loss issue is a growing concern.
Contrary to it, some people believe that, like in the past, there will be an increasing number of jobs. The debate appears to be non-conclusive. Will history repeat itself? For sure, tomorrow will be the next step of today. That does not necessarily mean that it will be an exact reproduction of today. In fact, the unfolding fourth industrial revolution will experience waves of Creative Destruction. Of course, they will not be powered by the same technology core. Consequently, unfolding implications will be significantly different. Moreover, many of the creative waves will have a disruptive effect on existing jobs, firms, and industries.
Of course, we are aware and concerned about the fourth industrial revolution. Nonetheless, there appears to be a lack of clarity. Consequentially, it has led to incomplete as well as varying understanding. Due to likely high consequences, it may be wise for us to dig down to basics for developing further clarity. Moreover, we should develop a shared common understanding. So that we can collectively work together to maximize benefit while minimizing transformational pains.
The genesis of the fourth industrial revolution
Often, we attempt to pay tribute to some individuals and countries for the fourth industrial revolution. Indeed, it would be unfair to do so. The 4IR is the outcome of the collective efforts of the human race. Unlike all other creatures, human beings have an inherent urge to generate ideas to recreate existing products and create new ones. In ancient philosophical writings, observation of human beings’ such natural characteristics reoccurred many times. But why are people after it? Often, this urge of creation is for economic incentives. They would like to get their jobs done better at less cost. To do so, they need better products increasingly at decreasing costs. On the other hand, producers need to make an increasing profit.
Therefore, the role of ideas came into address this conflicting issue. The role of ideas kept progressing for creating improved means of producing economic outputs. In fact, it has been progressing since the very origin of human presence on this planet. Consequentially, it has formed the dynamics of the industrial revolutions.
Waves of creative destruction
There have been major flows of ideas for improving the ability to produce higher quality products at decreasing costs. Each of these flows is called Breakthrough or disruptive technology. For example, a stream of ideas has created an internal combustion engine-driven automobile technology. Similarly, the Flow of Ideas around the Transistor has created information technology. Upon inventing a breakthrough or disruptive technology, human beings keep generating ideas for refining that technology. Consequentially, this refinement leads to incremental innovations. Subsequently, each of these technologies matures. Consequently, progression slows down and comes to and. For overcoming this limitation, human beings invent alternative technology cores.
For example, the transistor is an alternative to the vacuum tube. Similarly, the internal combustion engine-based automobile is an alternative to a horse wagon. The progression of the next-generation technology core keeps fueling the next wave of Innovation. Finally, the next wave grows to offer a better alternative at less cost to previous means of getting our job done. For example, the automobile became a better alternative to the horse wagon.
Similarly, the digital camera became a better alternative to film cameras. Invariably, the growth of the next wave leads to the destruction of the demand for the products produced around the previous technology core. Consequentially, firms, jobs, and industries involved in producing and distributing those products suffer damage. Hence, Prof. Schumpeter termed this dynamic as creative destruction.
In fact, the Market Economy offers the freedom to profit from ideas for benefiting from creative destruction. The emergence of one after another wave of creative destruction is at the core of creating industrial revolutions. To make it happen, a set of technologies keeps forming for growing waves of creative destruction.
First industrial revolution
In the 18th century, the steam engine was the primary technology in forming waves of creative destruction. As opposed to wind power, the steam engine started powering ships. Similarly, as a replacement of the water wheel, the steam engine began rotating machinery and operating textile looms. Steam engines started forming waves of creative destruction in all major industries. Subsequently, the steam engine-powered rail network was developed. With the uprising of steam engine-powered technologies, many products and industries started suffering from creative destruction. For example, India’s labor-based textile industry suffered from the uprising of England’s steam-powered textile industry. The formation of steam engine-powered productive capacity is termed the first industrial revolution. Of course, it caused destructions to jobs, firms, and industries, primarily relying on animal energy, human labor, wind power, and water wheels. But it offered better quality products at less cost to get our jobs done better.
Second industrial revolution
The invention of electricity, internal combustion engines, electric motors, and job division & specialization techniques, among others, started to fuel a series of innovation waves, causing creative destruction. For example, the internal combustion engine destroyed the demand for steam engines. Similarly, job division and specialization destroyed artisan jobs while creating low-skilled labor demand. On the other hand, electric light bulbs destroyed the oil lamp industry. There has been an uprising of endless innovation waves causing destructions to a series of products, firms, and industries. However, like the past one, this second industrial revolution made existing products better as well as cheaper. It also offered new products through this transformation.
Third industrial revolution
The invention of the transistor and wireless communication started to form a new set of technology cores. It all started in the 1930s and 1940s. With the uprising of creative waves of transistor-powered innovations, radio and television diffused in every segment. Sensors, electronics, and software kept powering automation and robotics, forming Creative waves of destruction in the manufacturing industry. On the other hand, Sony grew from the ash of the 2nd World War to create the business of digital cameras, TV, and Radios by causing creative destruction to American and European firms. Similarly, the wave of mobile phones has been growing while destroying many products and industries. This 3rd industrial revolution is full of creative waves of destruction.
Waves of creative destructions underpinning unfolding fourth industrial revolution
The first and second industrial revolutions focused on technologies for offering us a better source of energy, and on job division and specialization. The 3rd industrial evolution created Waves of Innovation out of information, communication, and micromanipulation technologies. The progression of sensing, computing, communication, and software has led to the formation of a new set of technology cores. This technology core is powering us to develop human-like intelligence in machines. Products and processes having human-like intelligence will be able to offer better products increasingly at decreasing costs. Consequentially, we will be seeing the uprising of innovation waves destroying many products, firms, jobs, and industries.
For example, we will likely witness the uprising of the autonomous vehicle. Similarly, the uprising of autonomous health diagnostics will power a wave of creative destruction. Products and processes having human-like intelligence will likely be fueling the uprising of a series of waves, causing creative destruction over the next 50 years. This era is known as the fourth industrial revolution. Of course, this transformation will improve our quality of living standards further. Due to creative destructions, the unfolding fourth industrial revolution will not be painless. Like in the past, some incumbent firms and industries will fail to make the switch to the next wave at the appropriate time. Consequently, it will lead to the disruptive effects of unfolding innovation waves. Similarly, some countries will make mistakes in predicting, preparing, and responding to unfolding waves.
Human role and economic outputs
In the process of producing economic outputs, human beings provide serval inputs. Notable ones are (i) energy, (ii) data, information, and knowledge, (iii) micro-manipulation, (iv) sensing, (v) perception, (vi) decision, and (vii) ideas. The first industrial revolution delegated humans’ energy providing role to machines. The second industrial revolution reduced the role of data, information, and knowledge due to job division and specialization. Consequentially, demand for artisans decreased, while opening the opportunity of low-skilled labor to contribute to economic value creation. Subsequently, the third industrial revolution focused on the automation of the human role in providing data, information, and knowledge. Due to this reason, we have been witnessing high-level job loss in the middle layer since the 1990s.
The fourth industrial revolution has been focusing on developing sensing, perception, and decision-making capabilities in machines. In addition, there has been steady progress in developing human-like micro-manipulation ability in the machine too. Therefore, the unfolding fourth industrial revolution will keep reducing human roles further. Consequentially, due to cognitive role delegation, many products and processes will require no human role for operation.
In the end, the only idea is left for the human being to provide for productive activities. These ideas are for adding new features, improving existing ones, innovating new products and processes, and inventing as well as advancing technologies. In fact, for this very nature, human beings are different from other living creatures. Hence, ideas, as opposed to labor or natural resources, will increasingly dominate economic prosperity in the age of the fourth industrial revolution.
Sustainable development leverages the fourth industrial revolution for facing conflicting forces
On one hand, we have depleting stock of natural resources. On the other hand, we have a demand for growing consumption. Such reality leaves us to face the challenge of producing more economic value from depleting resources. In fact, during the first three industrial revolutions, technology cores powering waves of creative destruction made significant progress to meet this challenge. But the situation demands us to make further progress. Truly, in many productive activities, the human role is a limiting factor. For example, error in human judgment is a significant cause of road accidents. Similarly, inaccuracy in human judgment and manipulation is causing high wastage of agricultural inputs. They are many such examples. Therefore, we need to develop human-like intelligence in machines for precision operation. Subsequently, we will be able to make further progress in our mission of producing more from less.
Therefore, the fourth industrial revolution is vital for attaining sustainable development goals. On the other hand, the unfolding fourth industrial revolution will cause pain due to creative destruction. However, many of the innovation waves will require a series of successive waves, which will often cause confusion and inappropriate actions. For example, eLearning has been struggling to grow as a wave of creative destruction. Therefore, we should draw lessons, monitor, predict, and respond accordingly.
