Seizing the opportunities presented by change

The world is being turned upside down by rapid technological change and demographic shifts. But while change presents challenges, it also offers opportunities if workers, companies and governments are prepared to be flexible and open minded.

The pace of technological change seems ever faster. In the 10 years since the iPhone was introduced, the 2 billion people who own a smartphone have become accustomed to having more power at their fingertips than a supercomputer of the 1980s. We navigate with our phones, ask digital assistants questions that would have previously taken weeks to find out in a library and buy goods from the other side of the world with just a swipe of the finger.

The coming years are likely to see similar levels of upheaval: uptake of self-driving cars could be rapid, for example. Other areas producing new wonders seemingly on a weekly basis include artificial intelligence (AI), biotechnology, energy storage, the internet of things (which includes smart home devices such as thermostats and wearables such as fitness trackers), materials science, nanotechnology, robotics, quantum computing and 3D printing.

“When compared with previous industrial revolutions, the fourth is evolving at an exponential rather than a linear pace. ”

Taken together, these innovations constitute a fourth industrial revolution - the first being driven by water and steam power, the second by electricity and the third by electronics and information technology - according to Klaus Martin Schwab, the founder of the World Economic Forum, which organises the Davos meeting of political and business leaders. “When compared with previous industrial revolutions, the fourth is evolving at an exponential rather than a linear pace,” he says.

Acquisition and partnership

Technological advances will have significant repercussions for individuals and society but it is at company level that the innovation revolution is being felt first. New business models are emerging that have the potential to undermine existing market leaders. The effects of so-called Uberisation are dramatic and rapid: in San Francisco, taxi use fell by 65% when Uber and other ride-sharing services were introduced, according to a report by the World Bank.

New technologies are impacting almost every sector. Until recently, the auto industry - while consolidating - had remained largely unchanged since it began over a hundred years ago. Now new entrants, such as electric car pioneer Tesla and tech giant Google, are using autonomous driving, electrification, and connectivity rather than mechanical engineering, to differentiate vehicles and challenge existing industry leaders.

How should established companies respond? In many industries, they are trying to harness emerging technologies through acquisitions. For example, in 2016 General Motors acquired Cruise Automation for more than $1 billion while Pfizer bought biotech company Medivation for $14 billion. One alternative is partnerships. Ivar Wiersma, head of innovation at ING Wholesale Banking, says that “in the financial sector, ING and some other banks are rapidly embracing collaboration with fintech companies to leverage the benefits of new technology for clients”.

The impact on workers

Necessarily, large scale disruption in many industries will have knock-on effects for workers. Put simply, many people’s jobs could disappear: World Bank estimates suggest 57% of jobs in rich countries could be affected by automation.Developing countries, which in recent years have gained manufacturing jobs from the West, could lose over three-quarters of all jobs, as production is re-shored to the West: one early sign of this trend is the decision by sportswear company Adidas to build a factory in Germany to make shoes using robots.

Historically, technology - while eliminating particular types of jobs - has always resulted in an increase in employment overall. But some observers fear the fourth industrial revolution will be different because of the type of tasks being replaced. Martin Ford, author of Rise of the Robots, says that the new jobs market will be split between a handful of elite jobs (such as designing AI or performing complex surgery) and low skill ‘gig economy’ jobs such as retail or logistics that offer no job security: middle class jobs could be ‘hollowed-out’.

“Individuals rarely perform a single task. As a result, increases in automation will be slow and gradual, giving people time to retrain. ”

However, others are less pessimistic: a recent OECD report suggested just 9% of jobs could be automated in rich countries.Moreover, according to Marieke Blom, chief economist at ING, it is likely to be specific tasks rather than entire jobs that will be automated, making large scale unemployment less likely. “Individuals rarely perform a single task and we are still some way from being able to produce cost effective multi-tasking machines,” she notes. “As a result, increases in automation will be slow and gradual, giving people time to retrain.”

Blom says that many studies also often focus on job destruction and underestimate how technology will create new jobs. “Employment in IT and on help desks will increase, for example, and there will be other opportunities that have yet to be imagined,” she says. “Also, as we become richer, demand for services such as restaurants will grow, increasing employment in those sectors.”

Demographic shifts

At the same time as the world must cope with technological upheaval, almost every country in the world is experiencing growth in the number and proportion of older people in their population, according to the UN. By 2030, one in six of the global population will be over 60: a 56% increase from 2015.

It is tempting to think that technology will simply replace workers who are retiring, meaning that overall job losses will be minimal. However, that is unlikely to be the case: the kinds of jobs replaced by technology are expected to be distributed across the age spectrum. ”The biggest challenge will be to retrain everyone,” says Blom. “An ageing workforce will compound this problem as our learning speed declines after 40.”

Making choices

The future is impossible to predict accurately a year in advance - never mind decades ahead. However, we can be certain that new technologies such as AI and automation will have profound implications for how we live our lives and the kind of work people do. Clearly, there is potential for mass unemployment, greater inequality and potential social disruption as companies change how they operate.

However, rather than taking a passive approach, society can instead choose to prepare for these challenges by starting a debate about how to cope with the consequences of technology, demographic and other changes. Properly managed, new innovations have the potential to create value for businesses and free individuals to pursue more creative, meaningful work lives and enjoy more leisure time.

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The View is the online magazine of ING Wholesale Banking