by Dave Duarte
Apple, Google, Tencent, Microsoft, Samsung. The leaders of the digital revolution. They've displaced the bastions of the pre-digital economy for the top spots in the most valuable companies list, and virtualised the way we shop, play, bank, and more.
All this, and yet we are realising the limits of virtualisation. We still need to grow real food, wear real clothes, move real things around in the real world. And the way we do that hasn't changed fundamentally in the past 50 years. We're still dependent on the oil-powered logistics network of the 20th century. In other words, we have a new operating system running on old hardware.
The industries that can be easily virtualised have streaked ahead, leaving the old economy flailing. Youth unemployment is on the rise, GDP around the world is slowing, and tensions are escalating as demand for scarce resources increases faster than our current production capacity. This is why we are seeing the rise of populism again, as people become desperate to vote for leaders who promise them radical economic transformation.
According the renowned economist Jeremy Rifkin, we will only experience radical economic transformation when we have a convergence of next-generation infrastructure in three fields: 1. Communications, 2. Energy, and 3. Transport.
In other words, now is not the time to get complacent about change. It is upgrade or die.
The Three Industrial Revolutions to Date
Let's go back in history for a moment to illustrate.
In the First Industrial Revolution of the 19th Century you have the printing press in Communications (it's been around for a couple of centuries already); but then in Energy, you have steam power so you can power this printing press to produce greater volumes of literature cheaper and faster; and then in Transportation you have locomotion, which helps transport that literature globally.
Innovation booms. And a sustainable shift happens as print technology is introduced into public schools, allowing for a workforce that was more literate than ever before, and ultimately equipped to manage the ever-growing coal and rail infrastructure.
“We couldn’t have done it with an illiterate workforce,” Rifkin states, highlighting just how important this convergence was for the success of the First industrial Revolution.
Moving to the Second Industrial Revolution, things speed up even more. This is all about bringing the advanced technologies of the day to more people.
In Communications we see the telephone network - people can coordinate production and trade across vast distances in real time. A game changer!
In Energy we witness the centralisation of electricity, thanks to the creation of an energy distribution grid. Startup costs plummet, factories pop up everywhere.
And of course, in Transport, the factory-made automobile changes everything.
Combine these major breakthroughs with radio and television and we see suburban society mass consumer culture, and an unprecedented rise in living standards. Major level up,
The third industrial revolution has transformed communications, media, and finance. This thanks largely to the upgrade in Communications infrastructure. And yet we haven't seen the same step change in the other two major infrastructures: transport and energy.
The auto-oil industrial complex of the 20th century is on its last legs. Fossil fuels are increasingly expensive and environmentally unsustainable. Expensive Infrastructure investments in coal, oil and gas are looking less like sure bets, and so the old infrastructure is crumbling.
You can have market reforms, labour reforms, fiscal reforms, new kinds of incentives for entrepreneurs, but as long as you are building on this old system, aggregate efficiency is going to remain stuck.
Time for a Systems Upgrade
Using Rifkin's model, it's plain that the key to unlocking the Fourth Industrial Revolution is in not just Renewable Energy, and Electric Vehicles, but in the infrastructure that enables those networks to function in a decentralised way.
Let's paint the picture: You have renewable energy that is already cheaper per MW than fossil fuels. You have electric vehicles that can be powered by this essentially limitless energy source; and you can connect these systems to the internet, which allows for remote coordination, automation, and machine learning to make the whole system much more efficient.
What about the Jobs?
This global network of internet connected cities, vehicles, buildings, and objects is going to require a LOT of human work to be built. We are talking new factories, new service businesses, plumbers installing sensors, electricians upgrading homes and offices.
"We are in a position fundamentally shift and revitalise the global economy," says Rifkin.
The current system cannot sustain growing demand for resources. Instability, youth unemployment, environmental change, and inequality demand a systems scale shift. This shift won't happen by itself, it requires bold, determined investment in the new infrastructure.
This is not just an opportunity for growth, it is a necessity for social inclusion, environmental sustainability and global peace.
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