Recognizing The Technological Revolution And Preparing For The ‘Next Economy’
Wholesale shifts to economies are pretty easy to recognize when you’re looking in the rearview mirror. The beginning of one isn’t so easy to spot while it’s in progress. The global pandemic has succeeded in pointing out that we are indeed in the middle of a technological revolution. First, let’s rewind and start from the beginning. The First Industrial Revolution played out over the course of about 100 years, starting in the 1760s when the economy shifted from an agrarian to a manufacturing society. The second revolution began in the late 1800s with the introduction of gas, oil and electricity. This brought about advances in transportation, like cars and trains, and also brought advances in communication with telegraphs. We further advanced these technologies when Silicon Valley drove the third revolution, which began around the 1970s and ushered in the rise of electronics, advanced communications, manufacturing automation and space exploration. While some believe that we are still in the third revolution, it is arguable that the third revolution only lasted 30 years and ended with the commercialization of the internet — which led to the dotcom boom and bust about 10 years after the internet first became publicly available in 1991.
My university education in economics coincided with this period. So while I had the history part covered classically, I (like many others my age) had the benefit of a real-time education with a front-row seat. I graduated at the tail end of the dotcom bubble burst, and my career choices already looked very different than even my brother’s. He is just 11 years my senior. Understanding the context of the past has helped me see where things are headed. Each period above is defined by a marked shift in how innovation changed the way people lived. Many argue that what some call Industry 4.0, the Fourth Industrial Revolution, started in the 1990s. I tend to agree, although I think a better name for it would be Technology 1.0. Either way, I believe that has already given way to Technology 2.0, which is where we find ourselves today.
In 2005, the world was still two years away from the first iPhone and three years from Android — and the Blackberry World Edition was the epitome of greatness. I can rattle off a few jobs in my own company that didn’t exist in 2005. In fact, since 2010, the Council on Foreign Relations reported that nearly two in three jobs created have required medium to advanced levels of tech-savvy. I believe we will see a trend toward insourcing of sensitive parts of the collective supply chain exposed by the Covid-19 outbreak, but that will likely look very different than prior shifts as manufacturing becomes more and more technology-enabled and dependent.
The speed of change provides us with many great things and opportunities. It also creates challenges and problems at a macro level. While an individual is ultimately responsible for keeping his or her skill set relevant, the fact remains that this is easier said than done for many. In general, I believe we have a large portion of the workforce that’s lagging in innovation. In fairness, that has probably always been the case in previous economic shifts, but given the driver, things just seem to move much more quickly and have a larger impact on the day-to-day as result. That’s perhaps a topic for another day, but there are things that people can do to help. Focused private-public partnerships, along with shifts in our education systems, can help people keep up with a technology-heavy economy. Unfortunately, if people from the First Industrial Revolution were suddenly here today, a classroom would probably be the most recognizable thing to them. Hopefully, the sudden need to lean on technology will be a wake-up call.
On the other hand, the onus on businesses and business owners to remain relevant is no different, and many businesses don’t do well either. A 2018 article by McKinsey stated that in 1935, the lifespan of an S&P 500 company was 90 years. In 2010, they estimated the lifespan to be 14 years. When I was just getting out of college, the U.S. was just coming out of the dotcom recession. I ended up taking a job selling copiers for a regional dealership. My limited time there left a long-lasting impression. Shortly into my tenure, the president of the company had us all listen to a consultant as part of a companywide event. I don’t recall the name of the consultant, but his message stuck with me: “If you are successful today, that only means you know what used to work.” What also stuck with me was the irony of the lesson in that scenario. In 2002, the company’s leaders were running it like it was the 1970s, and clients had a choice between Xerox and Xerox. The president changed nothing and couldn’t understand the company’s sliding market share or how to turn it around. That company’s assets were acquired in 2013, a year shy of its 30th birthday. Remaining relevant and competitive requires constant reevaluation.
That message applies whether you are on the supply or demand side of the labor curve. If you are not growing, you are dying. This applies to well beyond your corporate or personal bottom line. Economic shifts like this create market dislocations, uncover market holes and create entirely new markets. In order to understand what this might mean to you, good or bad, and how you might take action, you must first acknowledge that the shift is happening. It has already begun. So what does that mean for you tomorrow, what threats and opportunities might present themselves and how are you going to navigate them? Adding this thought process into your general planning process will increase your odds of benefiting from the shifting economy.