Klaus Schwab recently suggested that we are on the cusp of a Fourth Industrial Revolution. That is probably true and quite remarkable in itself. But the phenomenon that is unfolding in front of our eyes may actually be much more extraordinary than just “another” industrial revolution. After the Agricultural (Neolithic) Revolution and the Industrial Revolution, we may now actually be living through the third major economic revolution of humankind: the Information Revolution.
Although the term has been around for a few decades, the Information Revolution has really only started to play itself out in full force in the past few years, powered primarily by the digitalization of everything and ubiquitous and permanent access to the internet.
It can be characterized as the moment when humanity reaches a point when in principle everyone can have access to perfect economic information about everything, everywhere and all the time. It is largely the result of the incessant progress of information and communication technologies, which have advanced over the past half a century from number crunching, through information processing, to data production and analysis at a truly sophisticated and massive scale.
Its impact on the world is further amplified by the arrival of technologies that can translate information into actual outcomes in the physical world – technologies such as distributed manufacturing and 3D printing, driverless cars, or advanced gene editing.
Why is this important and how is it different from the Industrial Revolution? The Industrial Revolution was fundamentally about the efficiency of economic production by individual economic agents. Like the Agricultural Revolution, it was driven by new technology, in the broad sense of the word. In the case of the Agricultural Revolution, that new technology was the agricultural knowledge combined with new tools, such as the plough. The Industrial Revolution was primarily driven by machines powered by external sources of energy other than humans or animals, such as the steam engine. These machines made individual manufacturers vastly more productive.
However, the Information Revolution goes one level higher. It is no longer about the efficiency of individual economic agents but about how they interact with each other. Rather than improving production processes, it makes the real functioning of the market dramatically more efficient.
As every economics student knows, imperfect information is one of the main barriers holding back economic activity. It is a major type of friction slowing everything down, just like air and road surfaces cause friction that slows down cars. For example, without perfect information, producers can never identify and sell to all their potential customers or have the components of their products manufactured by the most efficient supplier. As a result, they produce and sell less and at higher costs and retail prices than they would if they had the perfect information.
Until now, having access to perfect information was as unimaginable as instantly communicating with a person on the other side of the world before the arrival of the telegraph. But not anymore. Today, if I am a company, no matter what I produce and where I am based, I can take out my smartphone and have perfect information about all my potential suppliers: using services like Alibaba, I instantly find the best supplier of any component I need. Thanks to technologies like additive manufacturing, I can probably also send the digital file with all the required information and have the component produced at a click of a button. If I want to travel to a foreign town, thanks to services like Airbnb I can now instantly know all the people who have an empty local accommodation on my dates of travel and would be interested in renting it to me. In both cases, the result is fewer underutilized assets and a service that much better fits my needs.
Even more magically, if I am in a major city, using services like Google Maps on my smartphone I can now know with perfect precision the best way to get from point A to point B at any given moment and how long it will take me. As a result, I can spend my time more productively, instead of wasting it in traffic. For instance, using advanced artificial intelligence like IBM’s Watson, I can in the meantime get access to every article and piece of information that has ever been produced on a given topic and have the results synthesized into a relevant and actionable output. That is perfect information – literally.
These are only a few examples of perfect information that we can enjoy today. You can probably find new ones wherever you look. Of course, this is not to suggest that everyone actually does have perfect information about everything. Many people still don’t have access because of poverty, conflict, or a lack of basic technological skills. Similarly, some information will always elude us. However, the consequences of having in principle perfect access to any information that is relevant from an economic point of view will be revolutionary. Its consequences a 100 years from now would probably shock us just as much as a mobile phone would surprise our 19th-century ancestor who had just seen a steam engine for the first time.
Author: Martin Bruncko is deep tech entrepreneur and investor, as well as a former Slovak junior minister for innovations and former Head of Europe at the World Economic Forum. He is also a Young Global Leader (2012).
Image: Head of an electrical testing laboratory Oleg Trifonov makes preparations before simulating sunlight by means of forty 1000-watt lamps while working on a Gonets-M low-orbital communication space satellite inside an assembly workshop of the Reshetnev Information Satellite Systems company in the Siberian town of Zheleznogorsk, some 50 km (31 miles) northeast of Krasnoyarsk, April 2, 2014.REUTERS/Ilya Naymushin