In 1989, almost 30 years ago, as an entrant into a large German enterprise my working environment comprised of office workplaces with mainframe terminals and analog landline telephones, a rabbit system for the transfer of paper documents within the premises, paper archives for filing of records, the good old paper mail for the distribution of letters and packets across locations and Telex, Fax and Teletex machines in case we had to react quickly.
Effective 1989 enterprises just started leveraging the Internet for commercial use cases and cellular phones at that time still broadcasted in the analog B- or C-Network – which brought the characteristic „campfire feeling“ to the user (if the user was able to connect the chunky cellular phone with the patchy radio network at all).
Since then, both our economy, as well as our society, have noticeably been changed by the advancing digitalization, integration and automation – a lot became faster, louder, more colorful and more flexible and without smartphones and 24/7 reachability nothing goes forward in the global competition of enterprises and economies. This transformation process is currently gaining momentum catalyzed e.g. by key technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Virtual Reality (VR), Augmented Reality (AR), Robots, Drones, Blockchains or 3D-Printing (compare: http://www.pwc.com/gx/en/issues/technology/tech-breakthroughs-megatrend.html).
Subsequent I would like to provide on the basis of generic considerations and logical deductions an outlook, which socio-economic consequences (i.e. consequences for our society and our economy) could result or even will result from these developments with a certain likelihood. The outlook does not aim to be complete and intends to provide the interested reader with a basis for own considerations and continuative discussions.
- Consequence: From a user’s perspective socio-economic transactions are shifting more and more from the real world to the digital word. This effect can today already be observed, e.g. with regard to shopping, civil service affairs, advanced trainings, entertainment (YouTube instead of cinema) or social interactions (Facebook instead of regular’s table) and its importance will increase in the upcoming years.
- Consequence: From a supplier’s perspective digitalization and integration allow the global disposal of local resources (e.g gourmet food or handicraft) or the global utilization of local expert knowledge. Without any doubt it will be possible in the future, that a heart specialist located in New York performs „online“ difficult heart surgeries in Singapore. Today highly specialized service technicians are already able to bring their skills and knowledge „remote“ into the elimination of faults of complex systems – independently from distance and time. Virtual Reality and Augmented Reality will significantly increase the potential for expanding these kind of use cases.
- Consequence: Cyber-physical Systems with powerful sensors will in combination with Big Data Analytics and Artificial Intelligence allow the provision of new, innovative services – from smart home, over autonomous driving to „remote cyber-sex“.
- Consequence: The importance of „Shared Economy“, i.e. the temporary utilization of economic goods, such as automobiles, special equipment and machines or homes, by various users, will increase depending on the degree of integration of the economic goods. It will be interesting to observe, which resources, that are fully or partially still unutilized today, will be made available for the utilization by broader user groups through this advancing integration – and what the social impact of this development will be (think of solutions for the gridlock or the housing shortage in many large metropolitan areas).
- Consequence: Middlemen, such as agents/brokers/realtors, banks or retail dealers will lose importance through the Blockchain technology or will even be completely eliminated, since the suppliers of a product or service can get directly in touch with the buyers/users of the respective product or service including the closing of legally binding contracts. This causes dramatic changes in the value creation chains and the subsequent value flows between suppliers and users. Entire branches/sectors (e.g. taxi offices) or billion dollar enterprises are medium- to long-term threatened by extinction.
- Consequence: For the exchange of physical goods (e.g. products) a powerful and cost-efficient logistics will still be needed and those enterprises or logistic companies, which are able, to ship goods around the globe from A to B most rapidly, most cost-effective and most reliable (including tracking and tracing in real-time) will take over a central role in the digital economy. Important: The application of drones and robots in storehouses and for the delivery of goods will ensure, that these companies will in the future need much less human manpower than today.
- Consequence: Analog to the logistics, (intelligent) robots will take over as well in other socio-economic areas step by step hard, awkward or labor intensive tasks from human beings – at a certain point of time as well in fields of activity, which require interpersonal interactions between human beings, such as in medical and health care or geriatric care. One of the most important consequences with hardly foreseeable impact could be the sneaky cannibalization of human couple relationships by intelligent robots. To put it provocatively: Who still wants to perform stressful „relationship work“ with his/her human partner, if „Robot Redford“ and „Julia Robots“ are always available in their best shape only having the well-being of their master in their digital mind? Who already gets horrified by this imagination, should make him-/herself aware, that this kind of developments could potentially have as well positive impact, e.g. with regard to the suppression of prostitution, human trafficking or wage dumping.
- Consequence: Since intelligent robots will increasingly suppress human manpower, a lot of people (who already get older due to medical progress, more healthy nutrition and better hygiene) will not have a regular income any more at their disposal, but much more leisure time instead. This development bears significant social disturbance potential, if the governments are not able to find adequate occupation opportunities for these people. To avert the danger, that these people turn towards radical political parties, will require significant creative efforts. A high quality education – in form of schooling for kids as well as in form of livelong advanced training for adults – is from my point of view the key element, to canalize the social consequences of this development into the right direction. One will see, if proposals, such as the „unconditional basic income“ are able to contribute to the resolution of this problem.
- Consequence: The increasing power of Artificial Intelligence and Big Data Analytics will lead to a personalization and individualization of (digital) services – think of fitness, health or lifestyle. The flip side of the coin can already be observed today, e.g. with regard to purchasing decisions or political opinion making, which are influenced as well by this development. When I perform an internet inquiry for a product in Google, I see a short time span later as by a wonder numerous advertisements for this product at all possible news web pages I am visiting, to lead me into temptation for purchasing the product. However, this is just the beginning. Companies, such as „Cambridge Analytica“ today already contend, they were able to draw substantiated conclusions about the character or personality of a human being on the basis of a manageable number of parameters from publicly accessible sources, which can be utilized to effectively influence purchasing decisions or political opinion making of this human being in a certain direction. According to a study provided by scientists of the Indiana University and the University of Southern California the famous „Social Bots“ represent today already up to 15 percent of all Twitter accounts. In the near future these Social Bots will without any doubt be able to flood the Social Networks and their users with manipulative messages.
- Consequence: This directly leads to the question, how we will be able in the digital world of tomorrow at all, to differentiate the truth from the untruth or the reality from the fiction? In the early innocent times of the internet, it provided an unusual degree of transparency: prices became comparable and users were able to take better purchasing decisions, responsible citizens were able to utilize various (national and international) news sources to gather balanced and differentiated information. But what will be the impact, if we as customers or decision makers in enterprises are not able any more to assess the quality of the information provided – particularly if the majority of this information is biased on purpose to manipulate the users?
- Consequence: Similar to the quality of factual information in the internet or internet of things the protection of a user’s identity and authenticity, e.g. by biometrical procedures, is of fundamental importance. Our entire economic and legal system is based on the capability to recognize and authenticate human beings as distinctive individuals. When cyber criminals or secret services (if you still want to make a difference between both groups) are able to perform identity theft or identity manipulation in a comprehensive magnitude (and they certainly are able to do so!), our economy and society will be lacking a basic principle. One may think this through up to George Orwell’s „1984“ horror vision or even beyond.
- Consequence: Digitalization, integration and automation already in the past lead to a simple and flexible modification or shifting of global value creation chains – today the Czech Republic, tomorrow Belarus, the day after tomorrow India. By doing this, workers from high-wage countries in the „first“ world suddenly had to compete with workers from low-wage countries in the „third“ world – which lead in course of the last decades to the dislocation of entire industry branches (e.g. electronics, clothes, toys) from high-wage to low-wage countries. After the introduction of the Euro in 1999/2000 the average actual wages in Germany did not increase for thirteen years. But what will happen, if automation and „roboterization“ do once again change the rules of the game, so that labor-cost is not a deciding factor any more? An obvious effect, which already can be observed today, are massive migration movements from poor countries to rich countries. As privileged resident of a „first“ world country you may denigrate this as „economic migration“, however if the aforementioned development becomes reality, the magnitude of this migration movements from the „third“ to the „first“ world will be multiplied in the upcoming years and decades – boosted as well by the demographic developments in Africa and Asia.
Most of the mentioned consequences in this article are obvious. In order not to overload the (already pretty long ) article, I abstained from mentioning possible consequences for the provision of our planet with energy and food or for environmental protection.
I would be happy, if you shared your thoughts regarding the socio-economic consequences of digitalization in form of a comment to this article or gave me a feedback to my thoughts.
P.S.:
„The Chief Information Officer’s ultimate reading list“ published on May 18, 2018, provides an overview on my most important blogs, which are not only relevant for IT people: https://kubraconsult.blog/2018/05/18/the-chief-information-officers-ultimate-reading-list/ (German version see: https://kubraconsult.blog/2018/05/18/die-ultimative-leseliste-fuer-chief-information-officer/).
KuBra Consult 
10 Kommentare zu „The socio-economic consequences of digitalization“