Is America Ready for the ‘Fourth Industrial Revolution’?

I just finished Klaus Schwab’s new book, The Fourth Industrial Revolution, and it is worth reading. Schwab is the founder of the World Economic Forum, which meets every January in Davos, Switzerland. He has built a global network, and he and the WEF have privileged relations with politicians, top academics, business leaders, innovators, and others. I have been active in some of the Forum’s work, participating in a working group that attempts to put together a bipartisan foreign policy for the next U.S. president (a discussion for another time). Schwab sits at the center of an intellectual “Times Square.” This book should be read in conjunction with Alec Ross’ new book, The Industries of the Future, and Moises Naim’s recent book, The End of Power.

Schwab hopes the book will be a primer on this revolution. The book is short — less than 150 pages — and can be read on a long(ish) airplane flight. He began to put the book together in October 2015, following the annual meeting of the 60 or so WEF working groups, and released it at Davos just over two months ago — quite a feat. He wants The Fourth Industrial Revolution to be “positive…and hope filled…enabling all parts of the world to participate in, and benefit from, the ongoing transformations.” He believes there is a lack of a positive narrative about the future and his book he forwards a positive narrative.

Schwab’s main point is that we are undergoing a technological revolution that is changing how we work, how we live, and how we relate to one another; in his estimation, this revolution is unlike any we have experienced before. He argues that this is not an extension of the so-called Third Industrial Revolution because of: a) its velocity, b) its breadth and depth, and c) its systemic impact.

Schwab is not a west coast technology evangelist; rather, he is a humanist trying to make emerging technologies work for people. He wants to ensure that people make explicit choices about technology and ensure that technology is harnessed by human beings. His book is a call to shape the use of these emerging technologies. Schwab cites smart and connected machines and systems, nanotechnology, gene sequencing, renewable energy, and quantum computing. He says that the fusion of all these breakthroughs makes the Fourth Industrial Revolution different. He cites 3D printing, driverless cars, new forms of money (e.g. bitcoin), robotics, drones, and biological breakthroughs. He also cites the sharing economy (e.g., AirBnB and Uber) and the emergence of cyber warfare.

His second interesting point, which is reflective of WEF’s view of its own role, is the need for “multisectoral cooperation.” His point here is that the private sector, civil society, and government, will have to work together because no sector can confront these challenges alone. Multisectoral cooperation will increase in importance because the Fourth Industrial Revolution will disrupt the current political, economic, and social models. This revolution will require a new dynamic between people and governments, companies and employees, and superpowers and smaller countries. In short, power will be more diffuse and more distributed. Governments in this new world, even authoritarian regimes, are going to be increasingly judged on their ability to deliver services. The U.N. calls this “accountable governance.” This new revolution will require new forms of government and corporate organization — these forms are yet to be organized.

Should one be optimistic about the Fourth Industrial Revolution? Schwab posits that it offers the chance to “integrate the unmet needs of two billion people into the global economy.” If one looks at the expansion of the use of cell phone technology in the last 20 years in the developing world, and if new technologies expand in a similar way, then Schwab is correct. Another reason he suggests we should be optimistic: this revolution will help confront negative externalities related to the environment.

What are the dangers? Like previous industrial revolutions, there have been major economic disruptions. This implies rethinking education, training, and workforce development, not only in the United States, but also in the developing world. The nature of work is going to change and it is unclear how automation will replace human labor, and how quickly. Another danger is that future connectivity means future vulnerability to cyber attacks. Yet another worry stems from ethical questions about designer babies and what sorts of privacy one can hope for in this new world.

How is the United States positioned? We are very well positioned. Schwab suggests that companies and countries will have to be at the frontier of innovation rather than follow least-cost strategies. That is good news for the United States, as many of the revolutions he cites emanate from here. The U.S. system of research universities and investments in research and development, basic and life sciences, and new energy technologies, are all strategic assets. U.S. capital markets, and the venture capital system that supports innovation and economic dynamism, also are great advantages. We have a lead that we must maintain.

The United States should seek to remain a “norm setter” (think VHS versus DVD technology standards) instead of a “norm taker.” One reason trade deals such as TPP and TTIP make sense is that they help the United States and its allies remain norm setters because of the size of economies involved. Also, this new world is going to require new approaches to government regulation, because technology is outpacing the 20th-century system of regulation, not only in the United States, but around the world. However, the United States cannot rest on its laurels; its lead is not guaranteed, as China is making significant progress on any measures that will matter in the future.

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