Humankind Revolutions | The Fourth Revolution Blog

Why would “profits without production” be bad?

In a column in the International Herald Tribune “Profits without Production“, Paul Krugman explains how the world is changing and how corporations like Apple is the highest valued company in America and employs only 0.05% of the workforce, to be compared with GM in the 1960’s – also the most valued company in America but employing 1% of the workforce and thus spreading wealth much more through society. And that it is a problem for economic growth because of less redistribution of value throughout the economy.

Indeed as we defend in this blog, with the Fourth Revolution the value is moving from manufacturing into creativity. For Apple, manufacturing is a (low cost) commodity. The value lies in the creativity, the design and the service; in summary, in the experience. Marketing then takes care of selling us that experience at the right price – the price we are deady to pay for it.

Yes, we have a problem now of large corporations not reinvesting in the economy their huge profits; yes, we have a problem of the share of employee compensation shrinking compared to executives’ and shareholders compensation, thus slowing down consumption and growth. Yes, we have a problem of monopolies being created in new economic arenas that will need to be tackled.

However it serves nothing to complain that value is moving from tangible manufacturing into intangible creation. It is the sense of history. What we need to do is to find solutions so that this shift is accompanied by an appropriate balance in the distribution of value throughout society. We have not found the recipe yet but let’s continue to experiment and observe!

What happens when we are submitted to information overload

When submitted to information overload, “We focus on those signals that tell a story about the world as we would like it to be, not how it really is.” – Nate Silver (in his excellent book ‘The Signal and the Noise‘). Nate is an expert statistician, successful at forecasting various things from baseball to other sports to elections (he is the founder of a famous think tank called Five-Thirty-Eight which specializes in elections prediction (apparently it gave the best prediction of the last US presidential elections)).

Nate Silver explains that information overload might foster extremism and people retreating to their communities, hence sectarianism and possibly, fights between partisans. It is his interpretation of what happened when printing released information in the 15th century – great fights happened around Protestantism and numerous communities formed that tended to avoid contact with this new information coming rushing at them.

Following this thought, it might very well be a risk of modern life that the excess of available information would only create stronger beliefs in ‘right’ or ‘wrong’ and that we would be psychologically tempted to reject the bulk of it as a natural, defensive reflex. That could explain the increasing defensive communities that can be observed across the world.

We need to limit the amount of information we submit ourselves to – and at the same time find a way to keep an open mind. Be wary that many strange things we observe today might be due to information overload – and people picking and choosing only what aligns with their beliefs. That might be the key to understanding many behaviors.

How 3D Printing Technology Shakes Consumer Protection Institutions

3-D printing is already shaking our institutions. The recent issue of a 3D printed gun – and the availability of the drawings for free on the web – has scared many. Governments are already considering how they should change the regulations around weapon acquisition and export; on the other side hackers defend the freedom of internet.

Cory Doctorow, an expert on the internet regulation (and generally, a proponent of a large freedom), fears that these events will lead to inappropriate regulations of internet content, due to the fact that judges and societies will be scared by the object.

For guns, regulations might change to address ammunition rather than guns (nobody has yet managed to 3-D print live ammunition and it will take a long time before anybody can do that), but in any case, drastic changes will necessarily happen.

Guns are a very polarizing issue. But what about more conventional liability for hurting someone with a 3D printed object, or damage to property? How liable would be the person who put the design on internet, in a 3D enthusiast forum and who lives at the other end of the planet? How would the entire sets of regulations developed to protect the consumer from defects in products need to change?

All these questions are in the air. Because the institution of manufacturing changes, so needs also the entire set of regulation, or regulatory authorities. It is just the start of a drastic revolution. Watch how it unfolds over the next few months!

Why “Crisis” is a Subjective Concept You Need to Overcome

A crisis is “any event that is, or expected to lead to, an unstable and dangerous situation affecting an individual, group, community, or whole society” (Wikipedia).

cannons fortress — Preparing for the crisis

Actually a crisis is often felt as such for people who have something to lose. For people that have something to gain from the situation, it is often called “opportunity”. It is the same event though. It’s just the way we look at it.

An event that is felt as a crisis leads to all sorts of defensive measures. It is important to isolate oneself and one’s belongings and entitlements from a threat that is sometimes difficult to understand. One hides behind walls and prepares cannons to respond to the enemy. It is a very sedentary reaction.

Nomads with a light luggage will be more on the side of the opportunity. They will see a crisis as a possibility for change, for the better or worst.

Crisis is a subjective word. It all depends how you feel threatened and how you respond to the situation. Be on the side of those that take changes for opportunities!

Stop talking about ‘Crisis’, it’s in reality a Transformation!

I am really starting to get fed up with the usage of the word ‘crisis’ to describe what is currently happening. It looks as if I had always lived in the midst of a continuous economic ‘crisis’ since the early 1990’s with a few short exceptions.

Joblessness for youth is a constant of the ‘crisis’… since 30 years. The decline of manufacturing and middle class is also a ‘crisis’… since the 1980’s

No, it’s not a ‘crisis’, it’s a transformation! It’s just the Fourth Revolution in action, changing our lives, our institutions, our economy, our world! Yes, there is a deep tsunami of changes in our environment, and our Industrial Age social and life model is now obsolete.

It’s only a crisis for those that want to remain where they were. It’s only a crisis for the settled. For many others, it is a once in a lifetime opportunity – in developing countries as well as for some in developed countries. New companies had appeared that have a presence in our daily lives which we could not even imagine ten years ago. They have been incredibly successful at the same time as the ‘crisis’.

Please, ban the word ‘crisis’ from your vocabulary. It’s a transformation, and it is time you surf on its wave.

Why our Current Political System is Reaching its Limits

Political systems (autocracy, representative democracy, etc) including the way they are implemented, have a limit: a given political system can only manage up to a certain level of complexity.

Are our current democratic institutions reaching the limits of the complexity they can manage?

When that maximum level is reached, fragility becomes a key property of the system, and the system will one day break apart. Suddenly. Completely. The Soviet political system was unable to bear the complexity driven by the Western world in the 1980’s; and to manage the inherent complexity of the modern world (as shown by the Tchernobyl accident investigation). The French political system in the 1700’s became unable to manage the increasing complexity and globalization of the world. The French Revolution and decades of instability ensued.

Sometimes (rarely), political institutions succeed in reforming themselves before reaching a critical level of fragility.

Our current representative democracies are probably the most elaborate political system, and can manage a far higher level of complexity than any of the previous political institutions. We can see everyday that autocratic regimes are overwhelmed by much lower levels of complexity. Still, the question is now, whether it can manage the level of complexity we are reaching globally?

I fear that it is not the case and that currently, we are reaching uncomfortable levels of institutional fragility. Representative democracy might need to be replaced by (or, evolve in) a new political system that will be better to deal with the current level of complexity – by choice or by default if we reach the limits before we can change. That new system needs to leverage better on networks and direct democracy. It needs to be much more global.

Let’s start now to build this new political system, before the increasing fragility of the previous one creates dramatic consequences.

Must Read: “AntiFragile” by Nassim Taleb

The latest book of Nassim Taleb, Antifragile, is an absolute must-read. It puts a lot of common wisdom on its head and provides an interesting picture of the mistakes of the society surrounding us.

The book is thick and takes some effort to read through, but it’s worthwhile to take the time. Taleb is a very unconventional thinker; his approach to complexity and predictability is absolutely brilliant.

What is Antifragile? According to Taleb it is the property to thrive in situations that are highly uncertain and volatile.

Most of the things we produce are fragile. The Industrial Age civilization, through its manufacturing standardization and search for efficiency, tends to be fragile. And actually it would seem, according to Taleb, that modern civilization is much more fragile than before. Look at how single freak events like 9/11 or other terrorist attempts fundamentally change the life of travelers and how we are ever more deeply intolerant to unexpected events.

Fundamental mistakes of our scientific approaches are denounced in the book, in particular our custom to observe averages when volatility might be an even more influential parameter; and the limits of conventional financial statistical analysis.

In summary, take the time to read AntiFragile. It gives also an insight on how our world might become when we overcome some psychological hurdles from the Industrial Age. Several posts will be posted here that will inspire themselves from the book in the next few weeks.

Must Read: “Makers” the Manufacturing Revolution

Chris Anderson, the author of “Free” and “The Long Tail“, and editor at Wired, has produced another great book to help us understand what is happening today: “Makers“. A must read for your holidays!

“The past ten years have been about discovering new ways to create, invent and work together on the Web. The next ten years will be about applying those lessons to the real world”

Chris Anderson makes the case of manufacturing coming into the age of collaboration with 3D printing and other manufacturing techniques allowing to produce economically small series of objects (a few to a few thousands). This will change the face of manufacturing. Exactly like ‘Print on Demand’ is changing the publishing industry, ‘Produce on Demand’ starts to change manufacturing.

Chris Anderson makes the case that because the logic of large commodities production is becoming less prevalent, manufacturing will return closed to where the consumer are. In any case, distances are abolished as your 3D plans can be sent to any suppliers to be produced in any quantities. Design is important, manufacturing in any quantity becomes a commodity.

Welcome to the Collaborative Age of tangible things. Read this book to understand the seismic wave that is changing manufacturing forever, right now under our eyes. It might take a decade to bring our industry upside down, but it will certainly transform it completely. The old Industrial Age manufacturing is obsolete.

Video of the quarter: Don Tapscott on the Collaborative, Open world

Revise your knowledge of the Fourth Revolution by watching this entertaining video by Don Tapscott that covers most of the basics (Don Tapscott is the author of Wikinomics: How Mass Collaboration Changes Everything and Macrowikinomics: New Solutions for a Connected Planet). It even speaks of the transition between Agricultural, Industrial and Collaborative Age!

I like how he considers the younger generation to be ‘natives’ of the collaborative Age while he is only an explorer!

The Exponential and the Black Swan: The Counter-Intuitive World of the Fourth Revolution

Following our posts on the Fourth Revolution being the realm of the exponential, this nice blog by Paul Graham (a famous Venture Capitalist investor), “Black Swan Farming”, brings closer the related issue of the fact that today, success is extremely rare – and extremely successful. And that as much as the exponential is not intuitive to us, this situation also escapes our common sense. It makes it in particular difficult to take action and put our stakes on the right candidates.

In the case of startups this expresses itself by the fact that only a very, very, very small handful of startups will make it really, really, really big (1,000x the initial investment or more); and they dwarf almost every other investment – they dwarf hundreds of other investments which either outright fail, or just live on with a nice but limited growth.

This is difficult enough to apprehend; where to invest in is equally counter-intuitive: it is mainly in ideas that seem at first view utterly pointless, and that are not popular.

The important idea in this blog is the fact that the situation is so counter-intuitive that we would need in fact to suspend all kind of intuition about whether a startup could be successful to increase our chances of final success – by taking more risk and capturing more of these freak Black Swans.

We already live in a world which is counter-intuitive through exponential and freak events – we absolutely need to change our frames of mind to thrive in the Fourth Revolution. What are you doing to change from the linear vision of the Industrial Age?

Why the Fourth Revolution is the Era of the Exponential, and How this Changes Everything

The Fourth Revolution is the era of the exponential – whereas the Industrial Age was the era of linearity. And that changes everything in the way we live our life:

Moore's Law 1971-2011 — Moore’s Law 1971-2011 (from Wikipedia)

the complexity of the products we use every day increases exponentially. For example the Moore’s law states that microprocessors density on chips doubles every 2 years; and that’s the case for many other products we use every day without realizing it;
Successful companies and services grow exponentially, soon dwarfing existing players (the revenue of Apple was multiplied by 11 in 10 years… not to mention the even more exponential growth of the Facebooks of the world)

In the Industrial Age, things were more linear. It was easier to extrapolate the future from the past. Of course a factor is that things go faster today so that it is easier to watch exponential change in action. Yet the Moore’s law rate did not change in the past 40 years or so. Microprocessors’s density still double in the same number of years. So speed of change is not the discriminant. The fact that things grow visibly exponentially and have higher ceilings than before makes the Fourth Revolution different.

story of rice on chessboard — Are you sure you want to get to the end of the chessboard?

The problem is that we are not geared to feel intuitively the power of the exponential. It is very difficult to seize how fast it can grow. Do you remember the tale of the wise man that told the King who wanted to thank him: “only put a grain of rice on the first square of a chess board, then on the next square put two, then on the next square put four, then double for each square until the end of the chess board…” The King never realized that at the end of the 64 squares the quantity of rice needed would vastly exceed his available supply – and the world’s supply and even more!

This explains why so many people today have difficulty understanding what happens in the world. In their linear Industrial Age mindset, they can’t grab how the exponential is changing our lives faster and deeper than ever before.

Are you ready for a world full of exponential change?

Thanks to Mitch Joel and his post on “The Era of Exponential Marketing” – a specific area where most people also don’t realize we are in for exponential growth of product sales- for the inspiration.

The great picture of the rice on the checkboard is by Paul Starkey on Flickr.

Old Industrial Age Cliches Die Hard. Kill them Faster to Transform the Economy!

As I was travelling in France a few weeks ago I was repeatedly struck by how Old Industrial Age cliches die hard – and in particular in ‘developed’ countries.

Lets' Reindustrialize France (2012 Union poster) — Lets’ Reindustrialize France (2012 French trade union poster)

Trade unions claim that the country should be re-industrialized (poster on the right I saw on a building). That would be fine if they did not mean rebuilt large manufacturing complexes.

Authorities and traffic forecasters still believe that people take their leave all together when the factories close (which is of course, less and less true – no wonder traffic predictions are less and less accurate!).

In the midst of the crisis, the government plays with the idea of creating large manufacturing giants, the key to wealth and prosperity. Is it really?

I have two main objections to this:

First, in the Fourth Revolution, as argued repeatedly in this blog, a nation wealth and prosperity will not come from its manufacturing proficiency, but from its creativity, networking and knowledge enhancement capabilities. There will always be cheaper places to manufacture. There won’t be so many places to create value.
Second, frankly after I spent as a student a one-month experience in a car manufacturing plant, I don’t see working in a manufacturing environment as the dream of my life where I would encounter the development opportunities I dream of! So I don’t necessarily wish this to be the future of the entire next generation.

Diving into the Fourth Revolution is not easy. It is not easy at a personal level because instead of waiting for someone to give instructions we need to find out how to create value for others. It requires to change one’s mindset.

Durations of bankruptcy by country (the Economist)

But it is not by dreaming of rebuilding smoking stacks of large manufacturing plants that the economy of developed countries will be saved. It is by releasing the creativity potential of the people!

One of the best papers I read on that lately was from the Economist, “les Miserables“, or how Europe consistently discourages entrepreneurs (published July 2012).

Do you really release the potential of your people when they get a life sentence when they fail (see the graphic on the average duration of bankruptcy)? Do you think they will take the risk to fail – a risk inherent to any creation?

Stop dreaming about going back in time to the Industrial Age. Step forward into the Fourth Revolution or you’re doomed.

Allow people to fail. Allow people to be flexible with their life. Create the infrastructures and institutions that will free people while giving them a guaranteed minimum safety net at a reasonable price.

The opportunity is now. Crisis are time where things can change, where things will shift. The current crisis might be the one opportunity for developed country to do the transition. Don’t miss it.

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