“Machines are already undertaking tasks which were unthinkable — if not unimaginable — a decade ago.” – Andy Haldane, Chief Economist @bankofengland
What is Industry 4.0?
The fourth industrial revolution is upon us: machines integrated with intelligence. Industry 4.0 will transform how manufacturing works today. Over the past 200 years, the world had several industrial transformations, and now we embark on the fourth industrial revolution.
- Industry 1.0: Steam Power — using steam to manufacture products.
- Industry 2.0: Mass Production — using electricity to manufacture products.
- Industry 3.0: Digital Revolution — using computer processors to manufacture products.
Now sensor and analog innovations have created Industry 4.0. In a Chinese plant, the manufacturing robots of today have thousands of sensors with the ability to track thousands of variables and reduce employees from 650 to 60. Since the third industrial revolution, human labor has bridged the gap between the limitations of technology and the economy.
Now that technology and the economy are converging, the need for human labor in manufacturing and the services industry is vanishing. Major car manufacturers and large technology firms are already developing autonomous cars. We’ve seen whole industries like travel agencies and video rental stores being eliminated. Remember Blockbuster?
Up to this point, a number of technologies and processes were siloed. Now with additive manufacturing, they’re integrated — meaning a product that is manufactured has a 3-D digital model of the container, label and product to ensure quality and faster production. All of this prevents product loss.
How Will Industry 4.0 Affect My Job?
Normally when you think of automation, you think of mechanical manufacturing robots performing the same tasks repeatedly. These types of robots are called hard automation robots which are used to mass produce the same product with few alterations.
In the past 10 years, a new type of mechanical manufacturing robot has debuted as a soft automation robot that is reprogrammable and reconfigurable. The soft automation robot gives manufacturers the flexibility to produce a small quantity of parts, thus reducing overstock and improving profitability.
The soft automation robots are now being replaced with Artificial Intelligence (AI) robots. AI robots not only flexible but multidisciplinary, meaning they are coded to teach themselves to perform multiple tasks with minimal human assistance. They are often referred as “general purpose” robots. They can perform tasks such pouring a drink, folding clothes, laying bricks, etc. They can even conduct discovery for legal cases and determine the likelihood of winning, do accounting and financial analysis, serve food, transport people and goods, and much more.
Generations have fought against machines taking over people’s jobs, fearful of becoming obsolete. Years ago when cotton mills were initially introduced, there was resistance and even vandalism. However, over time people realized the benefits of the mills and viewed them as assets to society. Later, heavy machinery was introduced which allowed for greater economies of scale for the production of many items, making them affordable.
While the two examples above are tertiary, the challenge we face today is that massive technological advances are increasing exponentially; this makes it impossible for create enough new jobs to offset obsolete jobs.
In the meantime, people’s wages will be proportional to the increasing ease of automating their jobs. A recent example is the CEOs of large American fast-food restaurants stated that robots will replace fast-food employees due to their recent strikes and protests for a $15 minimum wage.
The Harvard Business Review suggests that rules-based data-intensive jobs are mostly likely to be automated to ensure regulatory compliance in the immediate future. The financial services industry is automating regulatory compliance jobs to increase accuracy and reduce expenses. Also, the food and drug industries are doing the same. As a whole, many occupations will be eliminated in the next 20 years.
Joseph Jones spent over 10 years in industry, where he was responsible variously for corporate strategy, econometric forecasting, financial analysis, and project management. He is experienced in risk management, macroeconomic advisory roles and business operations. In addition, Joseph is monitoring more than 20 economic bubbles that are brewing right now.
As the co-founder of MacroView Research, Joseph understands the dynamic markets must be met with dynamic analysis and rigorous processing. MacroView strives to understand what’s happening in markets and how it can impact investors. You can follow him on Twitter at @EconomicHedge and @Macro_View.
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