The digital revolution is not (only) the fourth industrial revolution

In 2016, Klaus Schwab of the World Economic Forum wrote a seminal article called The Fourth Industrial Revolution, where he stated that what [he] consider[s] to be the fourth industrial revolution is unlike anything humankind has experienced before and that there is an ongoing digital revolution [that] combines multiple technologies that are leading to unprecedented paradigm shifts in the economy, business, society, and individually. It is not only changing the “what” and the “how” of doing things but also “who” we are.

I mostly agree not only with Schwab’s former statements, but in what he presents in his work in general. The problem is with its title and the bias that the title itself and people later have put on the concept: that the digital revolution is about the industry, about firms, about productivity, about jobs, about the GDP.

There have been two major revolutions in the history of humankind: the Neolithic Revolution or Agricultural Revolution, and the Industrial Revolution. The latter has been divided into three (sub)industrial revolutions. Calling the Digital Revolution not the third major revolution in humankind, but the fourth phase of the Industrial Revolution is, to me, misleading.

Let us see, in Table 1, a summary of some characteristics of the Industrial Revolution and its four sub-revolutions. It does not aim at being a perfect or an unquestionable description, just a general approach to the phenomenon:

Topic / Stage First Second Third Fourth
Working system Factory Division of labour Ford system Kanban Robotics, artificial intelligence
Production Mechanization Mass production, assembly line Electronics, PC, Internet, ICTs Cyber physical systems, nanotechnology,
Energy Water, steam and coal Oil, hydroelectric, electricity Renewables and smart grid Renewables and smart grid
Transportation Steam engine, railroads Internal combustion engine, roads Electric transportation and logistics Autonomous transportation, drones
Communication Steam printing Telephone Communications andcomputing Internet of things

Table 1. The four industrial revolutions.
Adapted by several sources by Ismael Peña-López.

This is not exactly what Schwab describes in The Fourth Industrial Revolution, but it is definitely what most people have in mind when speaking about the also called Industrial Revolution 4.0. Even Schwab’s World Economic Forum’s Center for the Fourth Industrial Revolution itself falls into the bias for the industry. Out of the nine areas of focus of the Center (Accelerating Innovation in Production for Small and Medium Enterprises, Artificial Intelligence and Machine Learning, Autonomous Vehicles, Blockchain, Digital Trade and Cross-Border Data Flows, The Future of Drones and Tomorrow’s Airspace, Internet of Things and Connected Devices, A New Vision for the Ocean, Precision Medicine) only the later two are slightly society-centered and not mainly economy-centered.

It is only shocking to speak about a revolution that is going to change “everything” and then only point at issues that, although of the direst importance, only affect a part of our lives. Complementing that approach, we could have a more comprehensive look at what the digital revolution is already changing or has a lot of potential of changing. To do such exercise, we can look at what changed in the former two biggest revolutions: the Agricultural Revolution and the first two Industrial Revolutions. In the table that follows (Table 2) four stages are characterized: the Paleolithic, taken as a starting point for humankind; the Neolithic, as the outcome of the Agricultural Revolution; the Industrial Age, as the outcome of the Scientific Revolution, the Enlightenment and the Industrial Revolution(s); and the Information Age, as the outcome of the Digital Revolution. Of course these are just approximate definitions whose purpose is to highlight the importance of the Digital Revolution beyond the boundaries of the industry or even the Economy.

Topic / Age Paleolithic Neolithic Industrial Age Information Age
Relationships of production Recollection Submission of nature Submission of energy Network
Relationships of experience “Biological” Public sphere Institutionalized / intermediated Liquid
Relationships of power Brute force Hierarchies & Nobility Bourgeoisie Digerati
Economy Nature Land Capital Relationships / knowledge
Who supports Diffuse Central knowledge Scientific knowledge Digital commons, AI
Living Nomadic Settlements Cities Ubiquity / No spaces
Culture “Utilitarian” Art Entertainment Artivism / Hacktivism
Work Generic Division, specialization Substitution physical labor Substitution intellectual labor
Learning Informal Centralized Industrialized Self-directed, heutagogic

Table 2. The three main human revolutions.
Source: Ismael Peña-López.

It is obvious that the use of some concepts is far from “correct” (for instance, the row that depicts Culture is more than arguable, among many others). The aim of Table 2 is to move away from the instrumental changes of our society (e.g. whether we will drive our own cars or they will have a high degree of autonomy) and put the focus instead in the changes of paradigm that may come with the Digital Revolution (e.g. will spaces matter at all?). It is, thus, a material for reflection. And a call to put under the spotlight societal changes, not only economic, industrial or production changes.

And, when we look at how humans will relate one with each other, how humans relate with nature, how we produce things, how the balances of power may change, etc. the potential of change is astonishingly high. We may be facing a radical transformation. And we should be driving it, instead of be driven by it.

Related readings

Centralization vs. decentralization tensions in the Digital Economy

When we speak about Information and Communication Technologies, it is an almost unavoidable mantra to say that this is an era of democratization of technology, of democratization of (access to) information. Meanwhile, we witness how the major technological firms grow, acquire or bury their competitors, keep on growing and concentrate the market in a decreasing number of hands. Which is quite the opposite of the democratization of technology.

Let us simplify things a little bit for the sake of the explanation.

Two of the main reasons for the centralization of production in the Industrial Age were the cost of capital and the economies of scale. That is, the need to gather huge amounts of money to build up factories and infrastructures in general meant that only organizations with lots of money (e.g. governments) or large coalitions of people (e.g. big firms and their stakeholders) could afford huge enterprises and, thus, property of the productive tissue was concentrated in few hands. This concentration had, in its turn, a side-effect: the bigger the investment, the bigger the returns, as economies of scale are significant in mass production.

In a digital economy it does not exactly work this way. Investment costs usually are much lower than in the Industrial Age. Let us take creating a newspaper. Lots of in-house journalists have to be allocated inside a building (it is cheaper this way), and an expensive printing press and tons of paper are strictly necessary before a single issue sees the light. On the contrary, a free software installation on a cheap web server is enough for a decentralized team of freelancers to create content and automatically and very cheaply put that content online (remember this is a simplification of reality).

On the other hand, though, big returns come not with doing more with less (returns of scale), basically because we are already operating with lesser costs, both fix and per unit. Returns will come with people: the more people join your (publishing in this case) platform, the bigger the returns. These are the network economies or network effect: something is more valuable the more people use it.

Pre-industrial
Industrial
Digital
Capital cost Low High Low
Economies None Scale Network
Appropriation Distributed Concentrated Distributed
Exploitation Distributed Concentrated Concentrated

Table 1. Centralization vs. decentralization tensions in the Digital Economy

And here is where the tension appears: as investment costs decrease, appropriation of capital — or technology — can be decentralized. That, is individual people or smaller groups have it easier to have state-of-the-art technology in their hands. When there is no copyright (an non-technical added barrier to the cost of technology), such as in openly licensed information, free software or open hardware, then costs are even lower and technology distribution can spread further and broader. This is where “democratization of technology” does apply.

But it is different with the exploitation of digital capital and digital infrastructures. Unlike appropriation, it still needs a critical mass to make the best of it, to benefit from its returns. Its nature is different — from production costs and economies of scale to network effects and network economies — but the result is similar: concentration of production of goods or delivery of services to have a deep impact.

This tension can be solved in two different ways.

  1. The first one is that people can still use technology for their own particular purposes, but main corporations will still dominate production — including media and agenda setting. You can have a blog, but media rule the communication market. You can have a 3D printer, but big factories produce everything. You can sell online your used stuff, but the big digital retailers distribute everything that there is to be sold. And so on.
  2. The second one is that there is a way where individual appropriation can be combined with collective exploitation. Or, better said, communal exploitation. Just like in cooperatives.

The latter is an idea with a highly transforming potential, because it may — it may — change the economy (and society) as we know it. It represents taking the best of XIXth century cooperatives with the best of the digital revolution. On of the most interesting ideas behind this model is described in Platform Cooperativism. Challenging the Corporate Sharing Economy by Trebor Scholz.

Here come other references for reflection:

Acevedo, M., Moreno Romero, A. & Mataix, C. (2015). “ICT4D as the driver of Network Cooperation actors, connections and collaboration in the post-2015 international development landscape”. In Steyn, J. & Van Belle, J. (Eds.), Beyond development. Time for a new ICT4D paradigm?, 18-39. Proceedings of the 9th IDIA conference, IDIA2015, Nungwi, Zanzibar. Nungwi: IDIA.
Espelt, R., Peña-López, I. & Rodríguez, E. (2016). “Activismo desde el consumo cooperativo de productos agroalimentarios: ¿Economía alternativa o tecnopolítica?”. In Balcells et al. (Coords.), Building a European digital space, 560-581. Proceedings of the 12th International Conference on Internet, Law & Politics. Universitat Oberta de Catalunya, Barcelona, 7-8 July, 2016. Barcelona: UOC-Huygens Editorial.
Saveri, A., Rheingold, H. & Vian, K. (2005). Technologies of Cooperation. Palo Alto: Institute for the Future.
Scholz, T. (2016). Platform Cooperativism. Challenging the Corporate Sharing Economy. New York: Rosa Luxemburg Stiftung.