Salman Shahid

The Third Industrial Revolution - A Radical New Sharing Economy

Blog Post created by Salman Shahid Partner on 14-Apr-2018

      Jeremy Rifkin is an economic & social theorist, principal architect of Third Industrial Revolution and adviser to the EU and China. In a feature-length documentary on VICE The Third Industrial Revolution: A Radical New Sharing Economy, he lays out a road map to usher in a new economic system. 

 

     Mr. Rifkin begins with uttering that the global economy is in crisis, and after 200 years of industrial activity, scientists report that climate change is ravaging the planet, taking us into sixth mass extinction of life on Earth." Then he demonstrated about how climate change is changing the water cycle of the Earth. Floods, Droughts, Hurricanes and Wild fires are increasingly happening. "THIS IS THE NEW NORMAL". To counter this abyss, a new economic vision and a game plan to deploy it quickly on synced pace in developed as well as developing countries is required. To do that, we need to reflect on previous industrial revolutions.

 

CH1 - The Great Economic Revolutions in History

      The two economic revolutions share a common denominator constituting 3 core pillars of economic activity i.e. new communication technology, new energy sources and new modes of mobility. The 1st industrial revolution in 19th century benefited us in communication through steam power printing (for bulk newspaper printing), telegraph and coal as energy source transported through steam engine locomotives. The 2nd industrial revolution in 20th century centralized electricity as bulk energy source, brought telephone, radio and television as communication tools and is converged with a new mobility energy source i.e. cheap fossil fuel oil.

 

     The 2nd industrial revolution peaked at July 2008, when oil price inflated to 147$ and the whole global economy hampered. With high oil prices, the purchasing power of government and the common man ironically drops down. In 2009, oil prices dropped down to 50$/barrel as the economy had to regain momentum. The prices went up again to 115$/barrel in 2014. This volatile convulsive nature knocked out shale gas from competition and also left some failed state (remember Venezuela)

 

An anecdote here by Mr. Rifkin

      "When Angela Merkel became Chancellor of Germany, she asked me to come to Berlin in the first couple of weeks of her new government to help her address the question of how to grow the German economy on her watch. When I got to Berlin, the first question I asked the new chancellor "Madam Chancellor how are you going to grow the German economy when your businesses are plugged in to a platform, an infrastructure of centralized telecommunication, fossil fuel nuclear power, internal combustion, road rail water, and air transport and that infrastructure peaked in its productivity, in Germany, years ago. You can have market reforms, labor reforms, monetary reforms. You can create incentives for killer new products. You can try to create a million Steve Jobs. It won't make a damn bit of difference. If your businesses are still plugged in to 2nd Industrial Revolution infrastructure, you can't get above the ceiling of 20% aggregate efficiency anywhere in the world. Why is this important? So, in that first day with the Chancellor we discussed a 3rd Industrial Revolution: a new convergence of communication, energy and transportation to manage power and move Germany. At the end of the day, in a private session, the Chancellor said, "Mr. Rifkin, we will have this start here in Germany"..."

 

Do Digital Europe and China Internet Plus ring any bell to you??

 

CH2 - The Science of Productivity

 

CH3 - A New Smart Infrastructure

 

CH4 - Zero Marginal Cost and the Rise of the Sharing Economy

      In classical economic theory, the optimum market is where you sell at marginal cost. But we never expected a digital revolution that would be so powerful in its potential productivity that it could actually reduce the marginal cost for some goods and services to near zero. Meaning there's no longer a profit margin and you can produce goods and services for each other beyond the market in the sharing economy for nearly free.

 

      We have 3 billion people right now on the internet who are actually producing and sharing virtual goods at near zero marginal cost beyond the market. We have young people that are producing their own music, their own videos, their own live feeds, blogs and microblogs. And what does it cost to have a little technology, a little machine that assists in content creation at your place and then, whether you send that music to one person on the web or a billion— It's zero marginal costs. People are creating their own free eBooks. Jeremy Rifkin's new book came out on Pirate Bay before it was published and translated, and they were ranking it before Amazon could even touch it. 

 

      In the field of energy; millions of people are now producing their own renewable energy, right now, at near zero marginal cost. What's interesting in Germany, once you pay the fixed cost for your solar panel and wind turbine— The marginal cost of producing the energy in Germany today is zero. The Sun has not sent us a bill in Germany. The wind hasn't invoiced us. The geothermal heat has not come to us with a bill. It's free! Thousands of small players have come together in electricity cooperatives. Farmers, small businesses, neighborhood associations. All of them went to the banks and got loans and every bank was completely fine about giving them the loans. 

 

      Then where did the energy generation company go??  About seven years ago, E- ON - one of the giant four companies asked if Mr. Rifkin would debate their Chairman Mr. Tyson. I said to him, "Look, you're not leaving the 2nd industrial revolution tomorrow morning. But you also have to be in the 3rd Industrial Revolution tomorrow morning, because you have a to get from the 2nd to the 3rd and find new value. What you should do is to set up partnerships with thousands of enterprises. And you help manage the energy flow through their value chains. You help them with their big data. You help them mine that big data with the analytics. You help them with their algorithms and apps. Dramatically increase their productivity. In return, those thousands of enterprises will share their gains back with the power companies. It's called "performance contracts". Last year, the chairman of E-ON, it took him 7 years to announce that they're moving to renewable energies and they want to help manage parts of the energy internet with energy services.

 

      You know how much a solar watt used to cost? $78 dollars to generate one watt solar in 1978. You know how much it costs to generate one watt solar today? Not $78 dollars; 50 cents. It's gonna be 35 cents in 18 months from now. This is really moving quick. It's over actually for fossil fuel and nuclear. "And the next big bubble is gonna be the 100 trillion dollars in stranded assets in the fossil fuel industry. This is gonna make the subprime mortgage look like the small-time game".

 

      Apparently you don't wanna own cars anymore. You want access to mobility and car sharing networks, not ownership of cars in markets. The problem is for every car shared in sharing economy, we're eliminating 15 cars. The number 1 cause of global warming emissions is buildings. But in Europe, we're now retrofitting those buildings, transforming into micro power plants and big data centers off carbon. Anybody know what the number 2 cause of climate change, global warming emissions are by industrial activity? Number 1 is buildings —we always talk about it. Number 3 is transport. What's number 2? —Consumption of meat —meat, meat, meat (Check this video about details of No. 2 Meathooked & End of Water - VICE on HBO: Season 4, Episode 5). So back to transport. We're gonna eliminate those 15 cars probably in the next two generations, and the remaining will be electric. They're gonna be fuel-cell driven. They're gonna be operated by near zero marginal cost renewable energy. They're gonna be 3D printed, with composite recycled materials at low marginal cost. They're gonna be driver less. 

 

CH5 - Financing the Transition   

 

CH6 - TWO GENERATIONS OF MASS EMPLOYMENT   

 

CH7 - A New Consciousness for a New Era        

 

I am intentionally leaving the other 5 chapters blank so the craving of knowing more will let you watch the full documentary. The best missed parts are the co-relation of laws of thermodynamics in economic theory (CH2) and the opportunity of mass employment (CH6).

 

Once again, here is the link of the feature length documentary.

 

The Third Industrial Revolution: A Radical New Sharing Economy

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