[Korea, Prepare for the Next Wave]
The Vortex of Change – Fourth Industrial Revolution (Part 1)
Tongilbi Column, 4th Industrial Revolution by Sang Bum Lee. 2017. 01. 05
2016 Davos Forum was held under the theme of ‘Mastering the Fourth Industrial Revolution’. At this forum, the president of the World Economic Forum, Klaus Schwab remarked, “We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before,” and announced the beginning of the Fourth Industrial Revolution.
It is undeniable that this speech has greatly inspired many people. But how would you answer this question – “Do you think the Fourth Industrial Revolution changed your life fundamentally?” Would Klaus Schwab’s words still have the same impact for you? Of course, there may be a various responses depending on one’s occupation or interest, but a considerable number of people might say, “I do not see a fundamental change, yet.”
Despite many news articles that address ‘Fourth Industrial Revolution’ and the constant increase in public interest, why are changes not evident? Analysis on the Fourth Industrial Revolution of South Korea gives clues to this question.
According to 2016 research on the availability of Fourth Industrial Revolution-based technology among OECD countries, South Korea scored 5.6 points out of 10, falling short of the overall average of 5.9 points. Developed nations such as Finland, the United States, Norway, Sweden, and the United Kingdom were ranked at the top, followed by Hong Kong, Norway, Denmark, and New Zealand. Japan ranked 12th with 6.2 points and Taiwan ranked 16th, respectively. On top of that, South Korea ranked 25th out of 139 countries in the ‘*Countries most capable of adapting to the Fourth Industrial Revolution’ surveyed by Union Bank of Switzerland(UBS). In the past, South Korea once took pride of being an IT powerhouse and was known worldwide for advanced technology such as semiconductors and smartphones. It spearheaded the era of manual and mass production (secondary industries) based on manufacturing industries, and the era of information service industries (tertiary industries). Despite this history, South Korea is lagging behind in the era of the Fourth Industrial Revolution, where various boundaries are blurred based on cyber-physical systems. What have gone wrong? To explain this, I will first give out the general overview of every industry and point out in two parts on the direction we should strive towards in the Fourth Industrial Revolution.
* Countries most capable of adapting to the Fourth Industrial Revolution: UBS calculated points by weighted average on five elements – skills level, education system, social overhead capital (SOC), legal protection, and labor market flexibility. South Korea ranked 23rd on skills level, 19th on education system, 20th on SOC, and 83rd on labor market flexibility.
South Korea has yet to make clear policies and preparations for the Fourth Industrial Revolution. On top of this, it should prepare for a unified Korean peninsula. This is because there is a possibility of the unification amid the unpredictable situations of North Korea and Northeast Asia. If South Korea is not ready, it may have no choice but to face unification just like the arrival of the Fourth Industrial Revolution. If this is the case, can the unified Korea increase its national competitiveness by combining North Korea’s abundant natural resources and low-waged labor with South Korea’s technological capital? Can the unified Korean peninsula overcome the difficulties of Fourth Industrial Revolution and become the leader in the future? In my opinion, above-mentioned idea is just a temporary solution. I will explain my own perspective on this issue by examining the process of the industrial revolution and the problems that arise during the industrial revolutions. In this column series, I will cover the overall explanation and process of industrial development from the 1st industry to the 4th industry. Additionally, the future direction will be discussed in preparation for the Fourth Industrial Revolution and unification.
Blessing and Curse of the First Industrial Revolution
The keyword for the First Industrial Revolution is the ‘steam engine’. Around the 17th century, main source of fuel was switched from wood to coal. During that time, deeper mines were flooded with underground water from time-to-time. To solve the problem of ventilation and drainage of groundwater, steam engine was developed to be used as a pump for coal mines. In the late 18th century, the steam engine was used in mills, smelters, spinning plants, and others. In the 19th century, steam locomotives were also produced by means of transportation. The invention of these steam engines played as an essential driver for industrialization and transportation, paving the way for the mass production system by replacing human labor with machinery. The invention of these steam engines made us anticipate prosperity on the grounds of mass production, but the reality was not what we had expected. Two of the most prominent problems were labor exploitation* and unemployment.
* Exploitation : The term ‘exploitation’ is used here because in most human history, there were classes in society, and those who owned the means of production (such as land, resources, technology, etc.) obtained the outcomes of the labor from the producers (the lower classes or laborers) at no cost or at a small compensation.
Machine production enabled even unskilled children to work. Many children started to work in factories, instead of studying at school. Factory owners forced children to earn money. Children at the workplace were put in unsafe environments and living conditions. Factory owners demanded children long working hours equivalent to adults with lower wages in return. British author Charles Dickens sharply criticized the evils of class inequality and industrialization in his novel, “Oliver Twist”. In addition, mass production caused the fall of production cost. This led to lower wages and decrease of employment in the labor market once dominated by manual and skilled labor. This eventually deprived workers of jobs in cotton and steel industries. The livelihood crisis of these workers has laid the foundation of the “Luddite Movement,” a campaign to destroy machinery, in the central and northern parts of the UK. Laborers saw the cause of unemployment and income decline as a problem and therefore destroyed the factory machines. The machine-destroying campaign has been gradually subsided by the government’s crackdown and laborers’ awareness that the problem lies in the capitalists – the owners of the means of production, not the machines. However, this mechanistic movement resulted in the abolition of Combinations Act which prevented unions and collective action and, union gained the same legal status as capitalists. In addition, the British government implemented policies such as compulsory education, publicly raising issues caused by the Industrial Revolution such as medical care, education, and unemployment.
Second Industrial Revolution: Loss of Humanity
The Second Industrial Revolution began in 1870 with the advent of an electric powered assembly line and the popularization of automobiles. Electricity provided full-scale mass production system across industries, unlike steam engines from the First Industrial Revolution. Particularly in the late 1913, Ford revolutionized mass production by developing and introducing the world’s first conveyor belt system. Due to these innovations in production systems, Ford dramatically reduced the time it takes to assemble a car from 5 hours 50 minutes to 1 hour 33 minutes. The conveyor belt system replaced human labor with reduced cost and improved productivity. This change in industrial landscape has had a major impact on the expansion of social infrastructure and promoted popularization of automobiles at the same time. Furthermore, during the World War I and II, the rapid development of heavy and chemical industries, such as electronics, chemicals, steel, and machinery, resulted in mass production and increased jobs. On that account, the Second Industrial Revolution enriched mankind through the two main energy sources – electricity and oil. However, the Modern Times* and the main character Charlie depicts another side of industrialization, as the inescapable machinery completely overwhelms him and turns him into one of the mechanical parts of a huge factory.
* Modern Times : This comedy film was written and directed by Charlie Chaplin and was produced in 1936. Charlie Chaplin was the main character in this film.
Third Industrial Revolution and the Spread of Individualism
It is no exaggeration to say that the Third Industrial Revolution began with the advent of large computers called ‘mainframe’. The computer we are using now was originally designed to quickly calculate the trajectory of artillery shells in the military. The Electronic Numerical Integrator and Calculator (ENIAC) , the origin of today’s computers, was also made for this purpose. The British codebreakers also developed a computer decryption called Colossus to solve the cryptograph invented by the German cryptograph during World War II. Although the main use of computers was for military purposes, they were later installed in computer rooms/data processing department in enterprises, banks, and research institutes and applied for various fields. Nevertheless, expensive prices and large hardware were not suitable for public usage. However, after the personal computers(PCs) were developed in 1970s, there was a drastic change in human life. Steve Jobs and Bill Gates, both of whom we know very well, played significant roles for this change. The PC was later combined with the Internet to enable horizontal information flow regardless of time and place, opening the door to the Information Age, also known as digital age.
* ENIAC : It was the first large electronic digital computer invented by Professor J.W. Mauchil and Professor J.P. Eckert at the University of Pennsylvania in 1946
Just like computer development, the Internet was invented for military purposes. ARPANET is the origin of the Internet, established in 1969 by the Advanced Research Projects Agency under the U.S. Department of Defense. ARPANET was intended to share information among universities and research institutions scattered across the United States. Over the years, participating agencies increased, and usage diversified which led to Arpanet’s separation from MILNET (Military Network). ARPANET converted into public usage in 1983, laying the foundation for the current Internet environment. In addition, the development of operating systems and software led to electronic automation, as well as the deployment of quality management systems by numerous companies, which greatly improved quality and productivity. Moreover, the miniaturization of electronic devices and the advent of smartphones ended the analogue age and opened the beginning of the digital age.
The Third Industrial Revolution spread along with postmodernism and liberal culture. It became a catalyst for presenting different lifestyles to mankind. It has also helped mankind to recognize ‘differences and distinction’ by easily sharing knowledge and information beyond space(region) and time. The information was no longer monopolized by a small number of people, in libraries, schools, and national institutions. This allowed mankind to reject the existing order and forced people to look at the world from a relative perspective, rather than absolute perspective. In addition, in basic studies and semiconductor technology, people are discovering and proving the principles of the new physical world – the area once thought which only ‘god’ can handle – and putting a continuous effort in artificially altering things for convenience.
In addition, the popularization of smartphone made people to become more individualistic. For example, in the past when families got together to order food, children discussed whether to eat burger or pizza, or order something else with their parents. However, today children order food in their rooms with their smartphone applications. So, when the food is delivered, parents pay the price without knowing what the children have ordered, and children immediately go to their own rooms to eat. The process became simple and convenient but deteriorated the face-to-face interaction between the parents and children.
Fourth Industrial Revolution and the Future of Mankind
The World Economic Forum(WEF) defined the Fourth Industrial Revolution as a “technological revolution that combines the boundaries of digital, bio-industry, and physics based on the Third Industrial Revolution”. The following sentence helps us to understand the concept better: “AI, IoT, robots, big data, platforms, unmanned vehicles, and 3D printing are the representative technologies of the Fourth Industrial Revolution”. Just a few years ago, companies had to produce and sell products, therefore, possessing advanced technology and securing a stable distribution network were important policies for companies. However, in the Fourth Industrial era, the success or failure of a company will depend on how well one creates newly added value by combining manufacturing, IoT, and big data. In other words, the Fourth Industrial era involves not only selling products, but also providing or selling products and generating new revenue through data collection and management. Thus, the price of the product will be lowered, and the revenue-generating structure using services will change the entire business model.
We should pay close attention to artificial intelligence (AI) robots. This is because AI robots will bring sweeping changes to mankind in the future, just like the First Industrial Revolution. Since the match between AlphaGo and Lee Se-dol, people have expressed their fears and doubts over whether AI robots will replace human labor in all areas. On the other hand, people have recognized the convenient life which AI robots can bring. They are becoming conscious of how those changes will affect the life. Relationship between AI and humans is an ongoing discussion topic. However, by the end of 2017 and 2018, humans will have to confront a serious topic on “whether AI will dominate or coexist with humans”. Moreover, people will be discussing the issue of enacting a full implementation of Kill Switch* (Kill Switch) for all AI robots.
* Kill Switch : Braking equipment that momentarily stops the AI robot from functioning, when it moves out of human control.
As you may already know, neighboring country Japan is the world’s leading ‘robot nation’. In Japan, AI robots, which can replace human labor, are now available at hotel front desks, amusement parks, restaurants, and ticket offices. Japanese companies assert their preference of using AI robots in businesses over humans because AI robots bring “efficiency, labor cost reduction, and more entertainment to people”. For example, a robot that recognizes the face of a customer who has visited in a long time, calls the person’s name, remembers what that person ate and drank, and greets the person in a friendly manner. This surprises and delights the customer living amidst a heartless society. Hence, stores with AI robots are experiencing a significant increase in sales. Meanwhile, the number of people who work in stores is rapidly decreasing. If this trend continues, it will be no surprise how people will react in the near future. As you may know, Pandora’s box is often seen as the last ‘hope’ for mankind. Perhaps the last hope inside Pandora’s box has already vanished as humanity is going toward the age of AI robots, as Elon Musk claimed, “We are summoning the demon with artificial intelligence,”.
In conclusion, each industrial revolution had presented a prosperous life by liberating people from doing unnecessary work. Despite the utopian expectation of prosperity and comfort, the process of industrial revolutions brought mankind to experience a serious loss of humanity. It has led mankind to value the individual comfort over the community. Moreover, the Fourth Industrial Revolution signals that machine will eventually replace humans in a variety of areas faster than previous industrial revolutions. Because most of the Korean industrial structure still remains in the secondary and tertiary industries, Koreans do not realize the severity of the upcoming event. To prepare for the approaching era, integrated management and policies need to be implemented at the private, public, and academic level.
In my opinion, Korean companies now have sufficient technology for the Fourth Industrial Revolution. Fourth Industrial Revolution does not require new technologies; it merely involves incorporating Information and Communication Technology* (ICT) into existing manufacturing industries and merging them across the boundaries of technology and science.
* Information & Communication Technology (ICT) : A combination of information technology (IT) and communication technology (CT) means the software technology needed to manage the operation and information of the information devices and all methods of collecting, producing, processing, preserving, transmitting and utilizing information. [Source : Geo-Spatial Information System Dictionary]
However, if you compare South Korea’s Fourth Industrial Revolution technical skills with ‘convergence’ and ‘consilience’ – the two keywords of the Fourth Industrial Revolution – South Korea lags behind compared to other developed countries. This is due to the current Korean education system, the tendency to neglect basic studies, the economic structure centered on large corporations, and the hierarchical organizational culture within companies. These are becoming obstacles to creativity which requires knowledge and skills in combining arts, humanities, engineering, and business.
As a result, there will be limitations in enhancing the capacity for leaders of the Fourth Industrial Revolution, and it will be difficult to continuously raise future leaders. In addition, the Fourth Industrial Revolution will have a huge impact not only on individuals or countries, but also on the whole world. The countries with flexible economic structures and unfettered regulations will benefit greatly. This will widen the gap between developed and developing countries. Thus, if the government pursues only temporary policies as in the past within the framework of prevailing neo-liberalism* in the political and business circles in South Korea, the national community will be in grave danger both politically and economically. That may be the result when South Korea blindly considers deploying AI robots in the workplace as an efficient and essential solution, adhering to the principle of rapid layoffs or growth-oriented principle without re-education to equip labor flexibility.
*Neo-liberalism : Neo-liberalism denies market intervention by the state and argues policies that emphasize deregulation of companies (such as workers’ dismissal, corporate shutdown, etc.), free markets and property rights.
In May, we saw Korean presidential candidates’ pledges regarding the fourth industry. The candidates pledged to carry out government-initiated or corporate-led policies by investing a considerable amount of taxpayers’ money into the business. However, I was disappointed when I saw the pledges because they presented a policy that did not apply the learned lessons from previous industrial revolutions. Moreover, they presented pledges without an alternative for South Korea’s status in the Fourth Industrial Revolution. Of course, I am not an expert, so I should be careful in expressing such an opinion. However, the fact that even non-experts can find the weaknesses in the candidates’ policy is quite saddening. The experts leading in political and business sectors must have the ability to more clearly direct the candidates for better policy. In other words, the experts should have advised better alternatives of the new era by actively raising the policy agenda for the candidates to make a clearer commitment. They should have stated that the pledge for just investing money and fostering early coding education and startups is not an adequate policy.
Against this backdrop, the next column will highlight the fourth industry in South Korean and other developed countries, the definitions of AI robots and platforms, and the cyber-physical system which is important across industry. In this rapidly changing industrial environment, the next column will continue to discuss how South Korea should respond and prepare the next steps along with the possibility of Korean unification.