The Fourth Industrial Revolution: Core Technologies and Business

Thank you. Greetings to all the professors and to alumni of every generation. Speaking here feels a bit different — well, it does — but thank you for giving me this chance to say a few words and share my thoughts on the Industrial Revolution. Together with everyone here, back in 2017, at the World Economic Forum, the term "the Fourth Industrial Revolution" started being used for the first time. As for why this process is being called the fourth revolution — I understand it this way: it's seen as similar to one of the great, sudden, tectonic-scale changes that have occurred throughout human history before, and that's why it's been given this name.

As for me, yes. I'd like to briefly talk with you about how these core technologies are affecting our businesses. I recently finished a master's degree in Public Policy at Oxford. There too, among people making decisions — business people, government people — there's a lot of concern about the impact of this thing called technology: how to avoid it, how to get through it. Since this is being called the Industrial Revolution, the first and biggest, most fundamental factor is, of course, technological progress, and on top of that there are also very major changes happening within business management.

Connected to this technology, what emerges are the products and the services that come out of it. And that in turn carries major social consequences behind it. For example, if we look at what happened in the period before this Fourth Industrial Revolution — the first thing was that the emergence of the basic textile machine gave humanity, for the first time, the division of labor. Then we started using mechanical energy, which again created new professions. Later, with the use of electric power — when Henry Ford's assembly line was introduced into production — the foundations of modern automated factories were laid. Compare that with a hundred years ago in the US, when half the population worked in agriculture; today only about three percent do.

All of these changes are simply the effect of technology accumulating — and I think everyone already knows that. So, since we don't have much time today, let's just talk about the core underlying factors and how they're affecting business. Behind that lies an even bigger consequence that falls on society as a whole. We usually think of technology, at the ordinary, non-revolutionary level, as something that mainly raises productivity — something that just makes business operations more efficient. But behind what's being called a revolution this time, business models themselves are changing. So it's clear that this will have a very deep impact on business.

There's also a reason tied to why this is being called a revolution in the first place. Let me start purely on the technology side — what changes are happening in these core technologies. Then, how are core technology and business connected? Of course, once core technologies emerge, they shift into applied technologies. So there's one thing policymakers now acknowledge: that it's simply not possible to regulate technological progress over the long term by passing a single law.

So it's fair to say that the society we live in used to mostly set out clear rules and live within them, whereas now we stand before a wave too large to be contained by any set of rules — that's roughly how it can be understood. On top of that, if we look carefully back over the past, these technological changes have also reshaped social structures before. For example, from feudal society, through the Renaissance, and onward — those new technologies became a core factor in building the societies we live in today, ones that uphold rule of law and human rights. So it's clear that the technologies coming next will also have a certain effect on our society, on our social structures.

So, essentially, there are four core technologies. The first is energy technology — I'll go into that one in a little more detail; the rest you probably all already know. Information technology — I'll touch on that briefly — and materials technology, and geo-technology. These four core technologies are considered to lie at the heart of this Fourth Industrial Revolution. As for energy technology, why is it advancing this way? The first factor is, of course, climate change, which has become an enormous modern political issue. And of course natural resources, on the other hand, are being depleted.

So these two factors are what's driving the change in energy-sector technology — the investments being made in energy technology are happening for these reasons. Second, because of recent technological developments in the energy sector, energy geopolitics is essentially undergoing a fairly major shift. If you look at 20th-century geopolitics, it was, at its core, a history of energy wars — whether it's the internal conflicts among Arab countries, or the industrial expansion of the US and European countries, all of it is inseparably tied to energy, so the effects of geopolitics will strongly affect the energy sector. Within energy technology, three things are being discussed: first, energy production; second, something that's never come up before — the idea of storing energy; and third, transmission. Technology is changing across these three areas. Of course, our energy production today is what's called fossil-fuel based.

The era when we mined coal and uranium from natural resources and used them to generate electricity is now coming to an end. Around the world, electricity generation is in the middle of shifting from coal to natural gas. Just last year, a major coal power plant project in Japan was halted and converted into a gas-fired plant instead. Over the next ten years, it's becoming clear that we'll shift from natural gas to renewable energy. Why? Because among renewable sources, solar energy is considered to have the most promising future. The technology already available today — the photovoltaic technology, the panels we currently use to capture sunlight — has only been capturing around 17 percent of the total energy arriving from the sun.

Now, new technologies capturing a different part of the light spectrum have emerged as well — core technologies that haven't yet been rolled out into full production. So it turns out we have the potential to produce far more energy from the sun than we currently use. Second, on the transmission-network side, there's been a huge technological leap in the energy sector. What does that mean? First, an energy consumer and an energy producer can now be one and the same entity. Why? Because the old transmission network used to distribute energy from a single source only, but now smart grids have emerged that supply from many sources and feed energy back for use — so the entire energy sector is becoming one system, with a great many producers and a great many consumers, where every entity connected to it can be both producer and consumer. That's how things now stand. Third, energy is now being stored — and that's a very big deal.

The electric cars we're all so impressed by today are, in other words, all devices that store energy — with large, insured batteries. So this is having a huge impact on production as well. That, in essence, is the kind of technological change taking place in energy. Within information technology, among the changes emerging, the two technologies with the biggest impact are, first, artificial intelligence, and second, robotics. Behind robotics — we used to just think of a robot as some small machine that performs a task. But now, with AI and robotics combining, what's happening is that machines are being run by artificial intelligence, and that artificial intelligence is learning on its own. So essentially, this is happening at the intersection of these two technologies — artificial intelligence and robotics.

If you look at the changes taking place in manufacturing, essentially, when it comes to imagining the next product — our vision of the future — Khaliunaa also made this point clearly earlier. We used to think that when we picture the future, things change along one clear, identifiable trend, but now we simply can't predict it that way anymore. Personally, I think we've stopped being surprised by anything. We're living in an age where something new keeps appearing all the time.

We've essentially stopped being amazed at all, haven't we? Because subconsciously we've already accepted that anything is possible. Even where the technology itself hasn't been built yet — if you look at the deep-learning systems emerging within artificial intelligence, they are themselves generating new knowledge and then producing new outputs from it, so we're reaching a point where we simply can't imagine what comes next. In general, when it comes to what's called 5G — the next generation of internet and network technology — with this generation of technology, we used to connect a single device to the internet and use it that way; now systems are emerging where devices connect to each other over the internet and monitor and control one another.

So we can at least picture this part — either way, it's already become technologically possible. Going forward, when we picture manufacturing, we generally imagine that production built on the strengths of information technology will simply operate within the technology we already know. But the fact that these technologies are themselves now capable of generating new knowledge means we're facing a completely different kind of growth than before. As for biotechnology, this field has advanced to the point where it may no longer be something that can be restrained purely by humanity's ethical norms — there's a growing sense, especially among policymakers, that it's gone too far, too deep. Because, in the end, this is something we can only limit through our own ethics — if we choose to limit it, we will; if not, we won't.

One of the most alarming experiments recently was mentioned already — an American company that combined a human gene with a pig embryo, grew tissue from it, and terminated the experiment after 47 days. So what do we make of that? There's a person involved; from the health sector's point of view, this is a huge technology — most of us will need a replacement organ of some kind at some point, and it may become possible to grow one. But at the same time, when two genomes are combined and what results is something part-human, part-pig, can we accept that at the level of our own ethics or not? That raises other questions too, which is why the limits on this technology come down, in the end, to an ethical issue. So what now? Just to give an example of what people — especially people in philosophy — are saying: in today's world, business people are, so to speak, one side of it, and on the other side, technology has combined with them to build the world as we know it. But because the world we've built runs on increasing efficiency in order to increase profit, it keeps circling back, in the end, to the question of the human being — which is why, over the next 20 years, we may well need to go back and read the philosophy of ethics.

Because there's a general sense that we may be making this world dangerous for ourselves. On materials, I'll just say one thing — I think we all basically already know this. Among the newest materials, flexible materials are attracting a lot of interest — materials that change shape in response to some physical force or some chemical effect. For example, there are now windows that let air in and then close again on their own — they close when the wind picks up. These flexible materials open up huge possibilities for completely different, low-cost approaches to manufacturing, and for lowering the cost of products.

Take just one material — graphene. The basic research on it has already been done; it's already been produced. The only remaining issue is the cost of rolling it out at large-scale production. As for material strength — there's a material that is 200 times stronger. Yes, 200 times — it exists. And yet, on its own, it's also six times lighter than steel.

So this was humanity's dream, wasn't it? Looking at these newest materials, it's become clear that the cities and settlements we built up over the 20th century relied on enormous quantities of natural resources — but future ones won't need to consume resources on that scale. Because it's becoming possible to take common, ordinary raw minerals and turn them into new materials. So, these are the main applied technologies that are emerging as a result of the core technologies just discussed. I've already covered this in general terms, so let me not repeat it and move on.

To highlight one interesting point: in manufacturing, 3D printing has arrived, and on top of that, robotic machines guided by artificial intelligence are now running production. So what does that mean? In the past, Ford brought in that huge assembly line and used it to drive down the cost of the cars it produced. Now, that advantage of the assembly line is starting to disappear. New technology is turning things around again — it's now possible to make products customized for a single person.

If we were to build a car factory here in Mongolia, it would once have seemed like a hopeless idea — but now, with these technological possibilities, why not? We could build a factory that uses robots and 3D-printing technology to make cars, and we could produce sedans, or SUVs, or anything else we want. Because this does away with the old logic where costs only came down through mass production. So, looking at the very latest developments, what changes are happening in business? Three major shifts are taking place. First: we all understand the concept of marginal cost — business models with no marginal cost are emerging. Take your own project, for instance — whether 5,000 people are connected to the Unitel network, or 5,500, there's no real cost difference between the two, is there?

And this exact same process is now moving into the manufacturing sector as well — essentially, it's dismantling the economic relationships built around marginal cost. Second, in labor relations: the concept of employment — where a labor contract is signed and a person works a set number of hours, with hours and productivity combined into that one contract — is giving way to the freelancer: people who are paid purely for their output, regardless of working hours. So this, too, is completely transforming the business model. Third, the thing having an impact is the concept of the "sharing economy."

What that means is that systems of shared, collective ownership are emerging. For example, people buying their own car is no longer all that significant. In general, owning things — having something that's personally "mine" — is becoming less significant. He said a new era like this is arriving, as a result of the Fourth Industrial Revolution.

Thank you, everyone.