It′s the Fourth Revolution, stupid! | Business| Economy and finance news from a German perspective | DW | 22.01.2016
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It's the Fourth Revolution, stupid!

The rapid advance of digitization in all areas of life has been going on for quite a while. The way this issue is being discussed in Davos says a lot about the very nature of the World Economic Forum.

At the Hanover Fair (Hannover Messe) in Germany, the world's biggest industrial trade fair, the "Fourth Industrial Revolution" has been a topic for years. Engineers there usually call it "Industry 4.0." The term designates the merging of traditional and digital industries. In the production process, for instance, machines "know" in advance how to mill a component and change their tools accordingly - thanks to the omnipresence of semiconductors and sensors.

In Davos, of course, people think big, and a mere technical definition is not enough. Klaus Schwab, founder and chairman of the World Economic Forum (WEF), wrote a book about "The Fourth Industrial Revolution" - which is also this year's central theme in Davos.

Each one of the 2,500 participants received a copy of Schwab's book, and the event kicked off with the presentation of a scary survey: The Fourth Industrial Revolution could become a huge job killer, with "a net loss of over 5 million jobs" in 15 major countries. Got your attention? Good.

In the many discussions that followed in Davos, the definition of what Fourth Industrial Revolution actually meant was broadened to include all things digital - from cloud-based services to changes in health care to calling an Uber taxi. It goes without saying that the bosses of major companies in these fields were all present in Davos.

Revolutionary euphoria

The question was "whether the digital dividend was greater than the digital divide," said Satya Nadella, CEO of Microsoft. "I see hope. I see a Kenyan entrepreneur who is using data, the real currency of the Fourth Industrial Revolution, to create a credit rating for people living on under 2 dollars a day."

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He also mentioned researchers in Sweden detecting dyslexic students and government officials using data to use the scarce resources of the state more efficiently - all thanks to data and cloud services, of which Nadella's company is a major provider.

Anand Mahindra, chairman of Mahindra Group, an Indian conglomerate that employs 200,000 people around the globe, is even more optimistic about the Fourth Industrial Revolution. It could even stop the migration of millions of poor Indians to the big cities. "Suddenly, you can put 3D-printers out in the villages," which is where two-thirds of Indians are currently living. "You can enable all of them to become independent garage mechanics."

With all that entrepreneurial euphoria, it was up to Joe Biden, of all people, to offer a less optimistic view. The Vice President of the US spoke of stagnating wages and rising corporate profits.

"The digital revolution has the potential to further hollow out the middle class, not just in America, but around the world. Automation might mean higher-paying jobs for the managers of the trucking company with driverless trucks. But tens of thousands of truckers will be without a job."

That is why people should focus on skills, argues Microsoft CEO Nadella. "Instead of worrying too much about the jobs that are getting lost, we will have to, as a society, spend the money to educate our people - not just the children, but also people getting displaced mid-career - so they can find new jobs."

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Davos and the digital world

The importance of skills

When it comes to affordable education and-on-the-job training, Europeans are better than Americans, says Joe Biden. Highly profitable companies focus more on their share price on the stock market than on training their employees. "It's not that corporate America and international corporations are bad, they are not. But things have changed," he added. "Short termism is the order of the day."

Larry Fink knows all about short termism and the pressures of the financial markets. He is the CEO of Blackrock, the world's largest money management firm, with $4.5 trillion (4.2 trillion euros) under its management. Information travels much faster due to digital advances, he said in Davos, and "the immediacy of information is accelerating in the short term. So it's very hard to ask every CEO to focus on the long run."

Fink admits that a more long-term focus might be better, but says money managers like him are bound by law to maximize profits. "The fiduciary law in the United States says you must maximize return. You could fire 100.000 people if that maximizes return."

So, the World Economic Forum in Davos sends out a rather strange message: The Revolution is coming. The people driving it are all here. But that won't change a thing.

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