The Fourth Industrial Revolution is here

If the term 4IR doesn't mean anything to you, it soon will.  4IR denotes The Fourth Industrial Revolution that is on our doorstep with the promise of significant technological advances and the potential for great civil unrest.

The Fourth Industrial Revolution advances elements of the first three industrial revolutions into the world of automation, machine learning, robotics, 3D printing, artificial intelligence, IoT (Internet of Things), and self-driving cars.  Opponents of 4IR contend that jobs will disappear, and new ones will be of greater complexity, which will raise the bar for entry into the workforce, resulting in unemployment and widening income disparities.  Proponents of 4IR say that the emergence of these new technologies can create many new products, service segments, entrepreneurship, and entire industries that we can't possibly predict.

Ultimately, I believe that both will be proven correct.  In the short term, 4IR will likely cause considerable disruption to existing industries and jobs, but ultimately, a new world will emerge from the chaos in the same way it always has in the face of unending technological advances.

Here's a glance at the first three Industrial Revolutions:

The First Industrial Revolution (1IR) occurred between roughly 1760 and 1840.  It was a time that marked the transition from hand production methods to mechanized and chemical processes and the increased use of steam and water power.  Steam engines powered factory machines and trains that led to increased production and faster delivery to markets.

The Second Industrial Revolution (2IR) unfolded between the early 1870s and 1915, highlighting the building of the enormous railroad and telegraph networks and telephones that allowed for greater mobility of people and the ability to communicate immediately over great distances.  Economic growth and productivity exploded from greater connectivity and electrification of assembly lines and other manufacturing processes.

The Third Industrial Revolution (3IR) was born in the 1960s and marked the beginning of the information age.  Most adults today grew up in the 3IR, also known as the "digital revolution."  This period produced the supercomputer, the personal computer, and the internet on which you're reading this article presently.  Also central to 3IR are other familiar items such as the microprocessor, integrated circuits, and mobile phones.

The Fourth Industrial Revolution (4IR) is a term coined in 2016 by Klaus Schwab, founder and executive chairman of the World Economic Forum (WEF).  4IR is characterized by the convergence and combining of emerging technologies, including nanotechnology, biotechnology, new materials, advanced digital production (ADP) technologies, 3D printing, and artificial intelligence.  These technologies are already transforming the global industrial landscape.  They have given rise to the concept called Industry 4.0, also known as the Smart Factory — one that utilizes artificial intelligence (A.I.) and machine learning (M.L.).  Smart factories are self-monitoring and use sensors to detect failing parts in the system, so repairs can be made before components fail and disrupt production.

Data are constantly sent to the cloud to inform and automatically adjust distribution and supply chains.  This automation results in substantial productivity gains and much lower labor costs.

The field of A.I. focuses on developing computer systems that attempt to mimic human intelligence and thought but at far faster speeds with a tremendous amount of processing power.  Machine learning works by continuously adapting and optimizing its processes accordingly without the need for new lines of code.  M.L. and Machine to Machine learning (M2M) automate many manual tasks while augmenting and surpassing the ability of humans to distill massive amounts of information and predict outcomes in nearly every field from finance to manufacturing.  Machine learning is central to 4IR because it allows computers to do what comes naturally to humans and animals, which is learning from experience.  This "learning" is accomplished by algorithms and other computational methods that "learn" information directly from data without predetermined models or equations.

3D printing is a significant component of the Smart Factory and 4IR in general.  This technology is disrupting the economics of production.  Assembly lines in factories are typically built to perform the same task over and over.  Customizing or building a new product in the traditional assembly line requires intensive reconfiguring of equipment, expensive new hardware, and substantial human labor to install, operate, and maintain.  3D printing eliminates the need for massive alterations by allowing a company to manufacture a variety of products through a software program that sends a design to the printer.  The flexibility and multitasking ability of the 3D printer shrinks the size of factories.  3D printing is in its infancy but is already being inserted into assembly lines and other aspects of the manufacturing process.  Each new generation of these printers is showcasing incredible gains in capability.

Emerging technologies giving rise to the Fourth Industrial Revolution are blurring the line between the digital and physical world and permeating every industry.  There are many implications of this burgeoning reality, both positive and negative.  Opportunities abound for investors who recognize this technological revolution and position their portfolios accordingly.  Advances in medicine, transportation, connectivity, and many other areas that touch our daily lives will be transformative.  However, there will likely be political and social upheaval as many jobs are lost to automation, and the need for new and advanced skillsets accelerates.  Similarly, the first three industrial revolutions displaced many workers, but the new technologies of those timeframes opened doors to new jobs and opportunities that ultimately increased employment and the standard of living.

Hopefully, the story of the Fourth Industrial Revolution will follow the same arc and deliver humanity to greater prosperity.

Graphic credit: Public Domain Pictures.

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