The fourth industrial revolution is upon us

The term ‘fourth industrial revolution’ is still largely unknown to the average South African, and yet it has the potential to change the way everyone learns, works and lives. The most significant point about the fourth industrial revolution is the rapid pace of its progress; the future is not 50 years away, but already on our doorstep. Unsurprisingly, the fourth industrial revolution was the main topic of discussion at the World Economic Forum at Davos this year.

To put the fourth industrial revolution into context, let’s recap the three that preceded it. The first industrial revolution, roughly dated to the 1780s, involved the introduction of water and steam power to mechanise production. The second industrial revolution, in the 1870s, harnessed electric power to facilitate mass production, leading to the development of the internal combustion engine, the aeroplane and moving pictures. The third industrial revolution, in the 1960s, used electronics and information technology to automate the same production, giving rise to digital technologies, PCs and the internet.

The fourth industrial revolution refers to the digital revolution, in which technologies merge together the physical, digital and biological worlds. The scope and speed of the breakthroughs are astounding. Whereas the previous revolutions were linear in progression, this one has been called “exponential” in nature. This means that it has the potential to disrupt almost every sphere of life much sooner than we think.

At the core of the fourth industrial revolution lies the concept of billions of people connected together by mobile devices such as cellphones, with large processing power and storage capacity. Amplified by developments in artificial intelligence (AI), robotics, the Internet of Things, drones, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, clean energy and quantum computing, among others, almost anything is possible. Many new ideas are already being tested and implemented.

For instance, Amazon uses drones for delivering packages, while personal assistants like iPhone’s Siri and other chatbots can answer more and more complex questions. eBay is testing virtual reality shopping in Australia and self-driving cars are being tested in countries such as the USA and Singapore. Impressive progress has also been made in AI in recent years, driven by exponential increases in computing power and by the availability of algorithms that can use vast amounts of data to teach themselves. Diagnostic software is being tested to read x-rays and to diagnose diseases such as various forms of cancers. Digital currencies like Bitcoin have already entered the lexicon. Virtual reality is accessible through gaming formats. In future, nanotechnology could be used to inject nano-bots into your bloodstream to deliver cures for a variety of illnesses, 3D printing may be used to create artificial limbs and new organs from live cells as the raw printing material, and blockchains and smart contracts could revolutionise the operations of the financial services industry.

Like the revolutions that preceded it, the fourth industrial revolution has the potential to increase the standard of living for all. At the same time it will undoubtedly eliminate many manufacturing and manual jobs. In one estimate, 47% of all US job types are at risk from automation. Optimists think that new, not-yet-envisaged service-oriented jobs will be created to take their place. Pessimists see a jobless future for low-skill workers and an increase in social tensions. The truth is likely to be somewhere in the middle.

The downside of all this is that it will invariably infringe on our rights to privacy, affect our ownership rights and change our consumption patterns. On the other hand, there is a high probability that work and leisure will become more balanced and that many domains of the wealthy, such as good education and access to quality healthcare, will become more democratised.

In the short term the largest beneficiaries of all the change will be the providers of intellectual and physical capital, the innovators and investors. Shades of Ayn Rand’s Atlas Shrugged, perhaps? This already explains the rising gap in wealth between those dependent on capital versus those dependent on labour. This is also one of the reasons that the middle classes are experiencing a strong sense of dissatisfaction and injustice, despite general improvement in standards of living.

The subject of the appropriate regulatory response is a separate topic, but it is true is that the existing policy decision-making frameworks are woefully inadequate for dealing with exponential change. Our education system is equally inadequate and should already be preparing our children for a different world.

We can think of the future as something that happens to us, or make a decision now to have a say in that future. At Sygnia we always opt for the latter. We are thus launching a new unit trust, the Sygnia fourth industrial revolution Global Equity Fund, which will invest in companies that have exposure to developing and using the technologies mentioned above. It is a small step towards becoming a part of the new economy.

Sygnia Collective Investments RF (Pty) Ltd is incorporated and registered under the laws of South Africa and is registered under the Collective Investment Schemes Control Act, 2002 (Act No 45 of 2002). Sygnia Asset Management (Proprietary) Limited, an authorised financial services provider, is the appointed investment manager of the Fund.

ADDITIONAL NOTES

MAGDA WIERZYCKA
CEO, SYGNIA GROUP

Magda qualified as a Fellow of the Faculty of Actuaries (Edinburgh) in 1994. She has over 20 years’ experience in the South African asset management industry and has published widely in the field. She has also served as a board member of the Actuarial Society of South Africa.

She started her career as a product development and investments actuary at Southern Life in 1993, where she designed and managed index-tracking funds, followed by two years at Alexander Forbes as an investment consultant. In 1997 she joined Coronation Fund Managers as Head of Institutional Business and a director. While at Coronation she was responsible for growing the institutional assets under management of the company fivefold. Magda left Coronation in 2003 to start IQvest, a fund of hedge funds company. Later that year, after selling IQvest to the African Harvest group, she was appointed to the position of CEO of African Harvest. Under her stewardship the assets under management of the company grew from R10 billion in 2003 to R35 billion in 2006. After negotiating the sale of African Harvest Fund Managers to Cadiz Financial Services in 2006, she led the management buy-out of the remainder of the African Harvest group which resulted in the formation of Sygnia. Since 2006 she has headed Sygnia as its CEO.