Self-Driving Cars. Quantum Computing. Synthetic biology. Youth Unemployment & the Lost Generation. Stagnant Wages. The Skills Gap. Billion dollar Start-Ups. Mass Layoffs. The Sharing Economy. Gig Economy. Untold opportunity or economic collapse. It’s enough to make your head spin!
We are living in a time of unparalleled change and contradictions. At the same time we have amazing changes technology and business models that are providing opportunities and riches for some and leaving others behind, frustrated, confused and angry.
Not since the mid-1800s have we seen such a radical change in labor markets, business models and political systems. During that period Charles Dickens famously captured the dichotomy of the times that seems to fit just as well today.
It was the best of times, it was the worst of times . . . it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us . . . ~ Charles Dickens, A Tale of Two Cities
Looking back it is relatively easy to see the effects of the Industrial Revolution playing out. The entrepreneurial craftsmen, farmers and laborers being displaced by machines and rote, repeatable processes. People losing their livelihoods, for some a lifetime in the making. Others making a fortune adapting as they adapted their skills to work with the new and unknown technologies and business models. While some were the capitalists who would build massive fortunes, others were ordinary workers who could adapt, see and take advantage of new opportunities they saw.
Today we are in the early stages of what Klaus Schwab, Founder and Executive Chairman, World Economic Forum, has termed the Fourth Industrial Revolution. While the term is not without controversy it is, nonetheless, a useful framework to look at what is happening in the economy so that we can develop a framework that our financial future will depend on. The four Industrial Revolutions he defines are shown in this chart(1):
What is a “Revolution?”
A “Revolution” is a disruptive shift in the way people live and the way businesses function. A revolution touches virtually every sector of the economy. A revolution is the result of innovations that ripple through and impact other business sectors. Some people and businesses adapt, others fail. New, previously unimaginable, businesses are created. Along with these changes entire job classes are created and destroyed.
These changes happen slowly, not overnight. It takes decades of inventions and time to spread across industries. Little by little the innovations occur; transforming industries and jobs and the products and services we buy as consumers. While the revolution is happening there is little overall economic and wage growth but a lot of activity with winners and losers. Once the dust settles it is full speed ahead in the new paradigm. (2)
Lessons From The First Industrial Revolution
The Industrial Revolution was a 60-80 year economic transform from about 1760-1820. New technologies from precision machinery (interchangeable parts) to power sources (steam engine) to transportation and raw materials extraction and refining are some of the changes that occurred. Any one of these innovations by itself was significant. However, in concert they catapulted development. This period saw the transition from human labor to machine labor. Highly skilled, artisan labor was replaced by low skilled labor. For two or three generations of workers there was uncertainty and disruption while the revolution evolved and worked its way through the economy.
The entire labor market was turned upside down. The career path from apprentice to master was destroyed. Many small businesses could no longer compete with the economies of scale offered by mass production. For those who could find work there was an increase in the standard of living. For the majority of the population, however, living standards dropped – until the revolution was well on the way to completion and workers adapted to the new economic reality.
The Industrial Revolution saw the rise of the Luddites who violently fought for the status quo and against the machines that were taking their jobs away. While the movement was supposed inspired by Englishman Ned Ludd’s smashing of textile stocking frames in 1779 it did take on a life of its own. Protests and clashes between workers, capitalists and the government occurred sporadically through the early 1800s in England across industries. The British Parliament even made “machine breaking” a capital offense (3).
The Fourth Industrial Revolution Emerges
What we can start to see now is the emergence of new technologies, processes and business models that are in their infancy of creating disruption. The Internet of Things, autonomous vehicles, 3-D printing, new materials and the Sharing Economy. We don’t yet know how these new technologies will ultimately be used and what new opportunities they well open up. We also know that existing technologies are also rapidly evolving – artificial intelligence, quantum computing, and genetics and so on. As all of this information and technology comes together they will form building blocks for new products and technologies that combine them. We saw this evolution happen in the previous Industrial Revolutions and there is every reason to believe the same will happen again. In will only be in hindsight that it will all be clear. What we do know is that during this process those working at the leading edge have opportunities ahead while those who hold on to current technologies and practices are often left behind.
In a November 12, 2015 speech, Andy Haldane, the Bank of England’s Chief Economist, indicated that 15 million jobs in the UK and about 80 million jobs in the US are at risk of being replaced by robots and (4). The chart below shows the estimated likelihood that a job in a particular industry will be replaced by automation (robots, automation, AI, algorithms, etc.).
Many others are starting to raise the alarm about this problem as well. Martin Ford, author of Rise of the Robots: Technology and the Threat of a Jobless Future recently wrote about it in a LinkedIn post “This isn’t crying wolf: Machines will take white-collar jobs during the next administration” .
Where Do We Go From Here?
Ultimately the Luddites could not stop the technological revolution that was occurring. Similarly, today there are many who resist or turn a blind eye to the changes that are occurring right around us. Driverless cars and trucks are on the roads around the world today and their commercial use will only increase. In some locations you can go to a restaurant, order your meal on a tablet computer and someone will bring it out. Soon it may be a robot. Professional workers too are being replaced. Work that may have taken a team of 10 to do a few years ago can now be done by a single person.
Beyond that, large businesses are under attack from alternative, disruptive business models in the sharing economy. How long before a hotel chain goes bankrupt (and thousands lose their jobs) because of people sharing their homes? Those who learn the technology and adapt can benefit. Others will lose out.
“The key to successfully navigating this transition is more than simply learning new skills. It is knowing yourself and the unique value you have to offer any potential customer or employer. “ ~ Larry Boyer
Success through this transition is the essence of deep personal branding combined with business skills and discipline. This combination will enable you to develop a career management strategy that will help you navigate these changes and secure your financial future.
(1) “The Fourth Industrial Revolution: what it means, how to respond” Klaus Schwab, Founder and Executive Chairman, World Economic Forum, 14 January 2016.
(2) “The Analytics Revolution Is Here. Is Your Career Ready?” Larry Boyer, President and Founder, Success Rockets, 3 November 2014.
(3) Luddite: https://en.wikipedia.org/wiki/Luddite , Wikipedia.
(4) “Labour’s Share” speech by Andy Haldane, Chief Economist, Bank of England, 12 November 2015.