The 4th Industrial Revolution

Sanjeev Gordhan, Ventures Director at Newable reviews the impact of the three previous industrial revolutions, and explores the emerging trends of the current 4th revolution.

The 4th Industrial Revolution is a unique phase of human economic progress and as the name suggests, is the fourth industrial revolution that the world has experienced. So, what was the impact of the three previous industrial revolutions, and what are the emerging trends of this revolution?

The Previous Revolutions

The word revolution denotes an abrupt and radical change in the way societies’ economic systems and social structures operate as a result of new technologies. The world experienced one previous revolution before the industrial revolutions, the agrarian revolution 10,000 years ago. During this revolution, food producing tribes learnt to domesticate and rear animals for food production. Being the first revolution, it was naturally the longest of all the world’s revolutions, and set the foundations for the three industrial revolutions that would proceed it.

The first industrial revolution spanned from around 1760 to 1840, and saw the creation of mechanical production, brought about by an ability to gather natural resources in large quantities, such as coal, timber and food. These powered the first factories, and saw the creation of transport infrastructure and basic machinery.

The second industrial revolution created mass production and capitalised on the discovery of natural resources to create electricity, and therefore the first assembly lines and factories. It was no coincidence that in the late 19th century and early 20th century, through this new-found economic might, we saw the early forms of globalisation.

The third industrial revolution began in the 1960s, and is better known as the computer or digital revolution because it was the catalyst for the development of semiconductors, computers and most revolutionary, the internet. It was the first example of the global economy becoming truly interconnected through supply chains, and the ability to freely exchange assets and information remotely.

The 4th Industrial Revolution

The 4th industrial revolution started at the turn of this century, or as some investors will remember, when the dot com bubble burst. What makes the 4th industrial revolution different to previous revolutions is the breadth and depth of digitisation, and the systemic integration of technologies in society. Take the internet. Commerce used to use the internet as an additional extra to having a physical presence on the High street. Thanks to the internet, E-Commerce is projected to account for 30% of all retail sales in 2020 (a figure that will likely grow post pandemic and become irreversible) and is now starting to make the physical presence of commerce an added extra, in a societal change that represents the depth of digitisation in society today. Amazon, a textbook example of the breadth of the 4th industrial revolution, sought to disrupt one particular sector (books) in the late 1990s, and has now become so operationally important in our lives, that for the first time this year, prescription drugs were sold by the company to American consumers this year.

But as Klaus Schwab, founder of the World Economic forum points out, “digitisation means automation as well”. As digitisation becomes so engrained in our daily lives, so we have seen the rise of digital automation through Artificial Intelligence (AI). With ever increasing volumes of data being created by our digital footprint AI, which requires data to train its self through a process called machine learning, it is becoming increasingly adept at working alongside humans, and in some cases replacing them. Supply chains, once heavily dependent upon humans, are increasingly dependent upon robots who use AI. Take Ocado, the online supermarket whose warehouses are predominantly run and monitored by robots. Financial markets, once the arena for millions of human investors to trade assets, is now largely done by algorithmic software which buys and sells assets with limited human oversight. Well over 75% of trades on FOREX markets in 2019 were done using algorithms.

Internet of Things (IoT) devices are also thriving from increased digitisation. Billions of sensors are expected to be installed in the coming years, helping IoT devices, with AI capabilities, not only collect data, but actively make decisions on behalf of humans. Take Formula 1, which has been using sensors installed in cars to monitor the gearbox, power unit and clutch, while actively adjusting their characteristics during races to maximise performance. Increasingly a whole range of IoT devices are being created for human health, such as the Apple Watch, which may soon start feeding data to our GPs, alerting them when we need prescription medication or drugs.

The 4th Industrial Revolution Future

There are concerns that humans may become inferior to the digitisation and automation that we create. This is unlikely to happen. Humans will instead co-exsist alongside technology because the reality is, the choice that society has is not between no human input and some imaginary technology that is devoid from errors, but instead one where technology plays a key role alongside humans, performing tasks that we naturally struggle at, such as deciphering large volumes of data. Technology does not build itself, it is built by humans, so by its very nature contains errors. As Hannah Fry, author of “Hello World” points out, “the best algorithms are, and will be, the ones that take humans into account every step of the way”.

Furthermore, humans will continue to harness the power of digitisation and automation for better or worse. It will be a world where every human interaction is recorded in some form of data, where nearly 100% of the global population uses the internet (it was around 65% in 2019), where all of us will have some form of implantable mobile phone to monitor our health and wellbeing, where the blurring between war and peace becomes irreversible thanks to cyber-attacks and the ability for armies using robots, to invade territory at little or no human cost, and finally, where driverless cars become the norm.

The 4th Industrial Revolution Future

Some may feel that the 4th industrial revolution is creating more questions than answers. Others may feel that the scope of the revolution is undefined, so therefore its potential impact is difficult to measure. Investors however should bear in mind one particular law. “Amara’s Law”, created by American researcher Roy Amara that states, “Humans tend to overestimate the effect of technology in the short run and underestimate the effect in the long term”. It is through this lens that the 4th industrial revolution, and its impact upon society, should be viewed.