“The value of information does not survive the moment in which it was new. It lives only at that moment; it has to surrender to it completely and explain itself to it without losing any time.” “A story is different. It does not expend itself. It preserves and concentrates its strength and is capable of releasing it even after a long time.” — Walter Benjamin Vice Documentary Films IMPACT PRESENT THE THIRD INDUSTRIAL REVOLUTION A RADICAL NEW SHARING ECONOMY The global economy is in crisis. Economists warn that we face another 20 years of declining productivity, slow growth, steep unemployment and increasing inequality. The economic downturn is fueling growing discontent toward governing institutions and spawning extreme political movements around the world. And now, after 200 years of industrial activity, scientists report that climate change is ravaging the planet, taking us into the sixth mass extinction of life on Earth. Where do we go from here? Jeremy Rifkin is an economic and social theorist and the author of over 20 books including “The Zero Marginal Cast Society,” “The Third Industrial Revolution,” and “The Empathic Civilization.” He is an advisor to the European Union and The People’s Republic of China, and a principal architect of their Third Industrial Revolution plans.
Let me start on a very somber note. I hope it will end up being a liberating reflection. You’ll have to judge. GDP is slowing all over the world everywhere. And the reason is productivity has been declining for twenty years all over the world. The result: Unemployment is very high everywhere. And nowhere is it more pronounced than among the Millennial Generation coming into the workforce. Our economists tell us that we can look forward to slow productivity and slow growth for the next 20 years. And let me do the math for you: At the end of two industrial revolutions in the 19th and 20th century, here’s the equation: We have to admit that half the human race is far better off today than our ancestors were before we began this industrial experiment. Granted? Also we need to acknowledge that 40% of the human race are making $2 a day or less. And arguably they are worse off than their ancestors were before the Industrial experiment. And the final equation: The industrial era, while it’s benefited half the human race in detriment to the other half of the human race, the well-off, the very wealthy have done quite well.
Today, the 62 wealthiest human beings in the world —we could put them in this little section of the room. The 62 wealthiest human beings in the world today their combined wealth equals the accumulated wealth of one half the human population living on Earth. Three and a half billion people. There’s something really dysfunctional about the way the human family is organizing its economic relationships on this Earth. It’s clear we’re in a long-term structural economic crisis at the end of the 2nd Industrial Revolution. But now this industrial air has given rise to a much more profound crisis —an environmental crisis. We have spewed massive amounts of CO₂ and methane and nitrous oxide into the atmosphere of this planet to create this industrial way of life.
And now we have so much CO₂, methane and nitrous oxide in the atmosphere that is blocking the sun’s heat from getting off the Earth. We are in real time climate change. This is no longer a theory. This is no longer looming on the horizon. This is no longer imminent. Climate change is now at the house, in the door. What’s terrifying about climate change —and unfortunately it’s never explained, because if it were explained, our human family would be justifiably terrified and motivated and driven to begin to transform this planet.
Climate change changes the water cycles of the Earth. That’s what this is all about. It’s never explained. We’re the watery planet. Our satellite probes go to other planets and what’s the first thing we look for? Water. No water? Not interested! Recently they discovered what they think is dirty water on Mars and everybody is thrilled. Our ecosystems on Earth have developed over millions of years based on the water cycles, the cloud cycles that traverse them across the Earth. For every one degree that the temperature of the planet goes up because of industrial induced CO₂ emissions— For every one degree that the temperature goes up on this planet, the atmosphere is actually sucking up 7% more precipitation from the ground.
The heat is forcing the precipitation into the clouds, so we’re getting more concentrated precipitation, more violent water events, but they’re more infrequent, throwing the entire water cycle of the Earth off kilter. More blockbuster winter snows. Eight feet in Boston at last season? My gosh! More dramatic spring floods —that flood in the Carolinas, remember? They said this flood only will occur once every thousand years. It’s the new normal. More prolonged summer droughts. My wife and I were in British Columbia and we’re coming into Vancouver. The pilot says, “We have some smoke coming in.” I turned to my wife and I said, “You mean smog?” No, he meant smoke. Wildfires from British Columbia to California. Summer droughts and wildfire. We have Category 3, 4, and 5 hurricanes now —so dramatic that they’re destroying infrastructure and killing people all over the world. That hurricane that hit the Philippines— This was the most powerful hurricane ever recorded. This is the new normal. What I’m saying here is that climate change is dramatically changing the water cycles.
They’re out an exponential curve. This is absolutely frightening. It’s terrifying. And, if you are a young millennial about to start a family— If you’re a parent here or a grandparent. I want you to listen to this. Our scientists now tell us that we are in the sixth extinction event of life on Earth. It doesn’t even make the headlines. This is the most dramatic story a human family has ever faced. There have been five mass extinction events on Earth in 450 million years. And each time the chemistry of the planet shifts very quickly —there’s what we call a turning point— and massive die out. And after the massive die out of life, it takes upwards of 10 million years to get new life back on Earth. Our scientists now tell us we are in the sixth extinction event This is not a model— we’re chronicling it in real time.
And what they’re saying is that over the next seven decades —and many of you will be around for a lot of that, and your children will —in the next seven decades we could lose over half the species of life that now inhabits this little oasis in the universe. As my wife says, we just are not grasping the enormity of this moment. We might acknowledge climate change, but we’re going on as business as usual, with a little green washing. 99.5% of all the species that ever been on this planet have come and gone. Those are not good odds. And what’s interesting is, human beings— We’re the actual youngest species, we’re the babies. Anatomically modern humans have only been here about 200,000 years. There’s no guarantee we’re gonna make this. And the new studies that have just come out they’re even more terrifying because they’re seeing the freshwater melts in the Arctic, now in Greenland and now in Antarctica much quicker than we expected changing the ocean currents. And they’re talking about storms that are beyond anything we can imagine, that we’ve ever seen in human history by the end of this century.
Talking about the major coastal cities, where much of our urban population is, underwater. This is not a century from now. This is in the lifetime of many young people who are four and five now and will be my age when we’re in full steam into this new era, this abyss. So what do we do? We need a new economic vision for the world. It has to be compelling. We needed a game plan to deploy that vision and it needs to be quick. It needs to move as quickly in the developing countries as in the industrialized nations. If we have any chance of arresting the worst of this climate change we’re gonna have to be off carbon in four decades everywhere. This is beyond anything we’re talking about at global conferences.
How do we begin to tackle something of this magnitude? We need to step back and reflect on how the great economic paradigm shifts in history occur. If we know how they occur, we’re gonna get a road map here in this room and around the world, and we’re gonna get a compass that allow us to navigate a new journey to completely transform the way we handle life on Earth. CHAPTER ONE: The Great Economic Revolutions in History There have been at least seven major economic paradigm shifts in history, and they’re very interesting anthropologically because they share a common denominator. And that is at a certain moment of time three technologies emerge and converge to create what we call in engineering a general-purpose technology platform. That’s a fancy way of saying “a new infrastructure.” It fundamentally changes the way we manage power and move economic life.
What are those three technologies? First, new communication technologies to allow us to more efficiently manage our economic activity. Second, new sources of energy to allow us to more efficiently power our economic activity. And third, new modes of mobility —transportation logistics— to allow us to more efficiently move the economic activity. So when communication revolutions join with new energy regimes, and new modes of transportation it does change the way we manage power and move economic life. It changes temporal spatial orientation. It changes our habitats. It allows us to integrate in larger units. It actually even changes consciousness and governance. Let me give you two examples: First Industrial Revolution, 19th century. Second Industrial Revolution, 20th century. The Brits took us into the first Industrial Revolution. And first there was a communication revolution. They invented steam-powered printing.
No more manual print presses. Steam power printing was a big leap forward, because it allowed us to mass produce very cheap print quickly. Then, in the second half of the 19th century, the Brits lay out a telegraph system across the British Isles. Steam power printing and the telegraph: those communication technologies then converged with a completely new source of energy in Britain called coal. But how are they gonna take that coal and harvest it? They invented the steam engine. Then this is ingenious: They figured out that they should put the steam engine on rails, for locomotives, national transport and logistics. Urban life, the Industrial Revolution, steam power.
Second Industrial Revolution: the United States. Centralized electricity and especially the telephone. I know we think the Internet’s a big deal, but a telephone was a really big deal. All of a sudden, people could communicate at vast distances at the speed of light. Later, radio and television. These communication technologies converge in the United States with a completely new energy source. Cheap Texas oil. Then, Henry Ford put everybody on the road with cars, buses, and trucks. Second Industrial Revolution changed the way we manage power and move economic life. That second Industrial Revolution took us through the 20th century. It took the whole world through the 20th century. And it peaked in July 2008. Hi! Welcome back to the show here: Oil! Oil! Oil! To $147 we went— Remember that month? In that month, Brent crude oil had a record price of $147 dollars on world markets and, when it hit that record price, the whole global economy shut down. Silence. Completely gone. That was the economic earthquake. The collapse of the financial markets 60 days later was the aftershock. Mayhem, carnage, and bloodbath.
Call it what you want, but what we saw on global stock markets today was ill-disguised panic. Good evening. This was the day after what may someday be called Black Monday on Wall Street because it was perhaps the worst financial collapse since the Great Depression. Our policy leaders are still dealing with the aftershock, not the Earthquake. Why was it the Earthquake? Because the entire Industrial Revolution that we’ve gone through is all dependent on the carbon deposits of a previous period in history. You know, if we look back let’s say that we make it through this next period of history.
I always wonder what will future generations think of us, maybe in a hundred thousand years from now. They’ll say, “Oh, yes, we remember them.” “There was the Bronze Age, the Iron Age.” “These were the fossil fuel people.” “They dug up the burial grounds of the Carboniferous era and created a short-lived dramatic and very dangerous civilization.” It’s all about fossil fuels. Our fertilizers and pesticides are made out of fossil fuels. Our construction materials are made out of fossil fuels. Most of our pharmaceutical products are made out of fossil fuels. Our synthetic fiber, our power, our transport, our heating lights— all made out of, moved by fossil fuels. When the price of oil goes over around $95 a barrel, all the other prices go up. When we get into the zone of around $115 a barrel, prices become so high, the purchasing power slows.
This is the sunset of a great industrial era. Now you remember in 2009 oil went down to 50 a barrel, because the economy had shut down. There was no activity. In 2010, we tried to regrow inventories, so oil prices started to go up all the other prices go up. In 2014 we hit a new peak of $114 or $115 a barrel. Purchasing power slowed down again. This is a convulsion of growth-shutdown, growth-shutdown. And the only reason oil went down in the last few years to $30 a barrel is now the fossil fuel industry is fighting among themselves. In the sunset. OPEC said, “We’re gonna keep the oil spigot open.” “We’re gonna flood the world with oil.” “And that’s gonna take the price down the $30 a barrel and wipe out our new competitors, the more exotic fossil fuels: shale gas in the US, tar sands in Canada.” Guess what? They wiped them out —only took a year and a half.
Bankruptcies across the USA in the shale gas industry. And now tar sands in Canada. The pipeline’s not happening. And do you hear anybody talking about energy independent right now? It’s over! And, as soon as the bankruptcies complete themselves, the oil prices are now starting to go back up. But now we have failed states where there’s oil production. We have failed States. So this is a volatile, convulsive sunset over the next 40 to 50 years —an unstable world. Where do we head from here? Let me share an anecdote. 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. Now, remember: In terms of per capita Germany’s the most robust capitalist market economy in the world. When I got to Berlin, the first question I asked the new chancellor— I said, “Madam Chancellor how are you gonna 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? CHAPTER TWO: The Science of Productivity.
Let me talk about productivity. This is crucial. Our economists are lamenting. They’re asking, “Why’s productivity been declining for 20 years?” “We have all these new killer products coming out of Silicon Valley.” “Why is productivity declining?” I’m gonna share with you a dirty little secret in economics that economists don’t like to talk about. We used to believe that there are two factors that drive productivity in standard economic theory: Better machines and better performing workers. But when Robert Solow won the Nobel Prize for economic growth theory in the mid-1980s, he actually let the little secret out. He said, “We’ve got a problem here.” When we trace every single year of the Industrial Revolution these two factors —better machines, better workers— it only accounts for about 14% of the productivity.
So Robert Solow asked the big question: “Where does the other 86% of productivity come from?” Don’t know. Moses Abramowitz, the former head of the American Economic Association said, “This is a measure of our ignorance.” Now wouldn’t you think economists would know where productivity comes from, because that’s the basis of the discipline? Here’s why they don’t know. When classical economic theory was penned in the late seventeen hundreds, the Vogue was Newton’s physics. Newton was the big guy in town. Everybody wanted to use Newton’s metaphor so they could be more scientific because he had discovered the laws that run the universe—supposedly. The economists also fell in line. For example, you know Newton’s law: “For every action there’s an equal and opposite reaction.” Adam Smith borrowed that metaphor for his invisible hand of supply and demand. “For every action on the supply side there’s an equal and opposite reaction on the demand side.” Newton’s law: “A body in motion stays in motion unless disrupted.” Baptiste Say borrowed that metaphor —the French economist. And he suggested that, “Well supply will stimulate demand, which will generate supply, which will stimulate demand —unless disrupted.” All of our economic theory, if you go back and take a look at it— it’s all based on Newton’s metaphors in physics.
There’s only one problem with this: Newton’s physics has absolutely nothing to do with economics. Nothing. Nothing. economics is governed by the same laws that govern the universe, the solar system, the biosphere on Earth, and every single thing you and I do in our economic life while we’re here on this planet. Here are the two laws that govern everything in the universe, including our economy. The first law of Energy says: “All the energy in the universe is constant.” “Since the Big Bang, no new energy has been created.” “No energy has been destroyed since the Big Bang.” That’s the conservation law. The second law of energy says that’s true that the energy isn’t created or destroyed, but it always changes form, but only in one direction. From concentrated—the Big Bang— to dispersed through the galaxies. From hot to cooled off through the galaxies. From order to disorder. From available to unavailable. Entropy is a measure of the energy that’s still there, but not available to do useful work.
There are three systems that we can talk about in thermodynamics: an open system that exchanges matter and energy with the outside world; a closed system, which exchanges energy with the outside world, but does an exchange matter; and an isolated system, which doesn’t exchange matter or energy with the outside world. The Earth in relation to the solar system and Sun is B. We get plenty of energy from the Sun, we don’t have to worry about this for billions of years. But in terms of the fixed matter on this planet we don’t have a lot of additional matter coming down here. We get a few meteorites, a little cosmic dust, but whatever we have in terms of fixed matter —which is a form of energy—has been here since we blew off the Sun and cooled off.
All of you have smartphones on you right now and there are little granules of rare Earths in those phones. They’ve been here since the Earth has been here. That’s a form of energy as a material form. So here’s what economics is all about: We extract low entropy, available energy in nature —a rare Earth, a metallic ore, a fossil fuel— we extract it and then, through our value chains, we store it, we ship it, we produce goods and services from it, we consume it, we recycle it back to nature. Those are value chains. At every step of conversion, —when we take nature’s resources and move it through society— at every step of conversion we have to embed energy into that good or service to get it to the next stage of what it becomes. But we lose some energy in the process of that conversion. This is called “aggregate efficiency” in economics. Aggregate efficiency is the ratio of the potential work versus the actual useful work you actually embed in the good or service. Let me give you an example. Nature has the same economic conditions that we have in our human economy.
If a lion chases down an antelope in the wild, then kills it, about 10-20% of the total energy that’s in that antelope gets embedded into the lion. The rest is heat lost in the conversion. That’s the aggregate efficiency. What does this have to do with my conversation with the Chancellor of Germany? She’s a physicist, you know, by background. So here’s what I said to her. We started the 2nd Industrial Revolution in 1905 in the USA with 3% aggregate efficiency. At every conversion of nature’s resources through the value chain, we lost about 97%—it didn’t get into the product or service.
By 1990, the US got up to about 14% aggregate efficiency. That was our ceiling —nothing’s changed since then. And I reported to the Chancellor that Germany got up to about 18.5% aggregate efficiency. That was their ceiling. Nothing’s changed. Anybody wanna guess which country led the world in aggregate efficiency? —China? —Japan? Japan! 20% aggregate efficiency, 1990s, reached its ceiling. What I’m saying to the Chancellor is this: 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 a 2nd Industrial Revolution infrastructure you can’t get above the ceiling of 20% aggregate efficiency anywhere in the world. Why is this important? A new generation of economists who happen to study physics have gone back and looked at the industrial record and they added a third factor to productivity: better machines, better workers, aggregate efficiency. The ratio—yes, it’s so obvious! The ratio of potential to useful work.
When they put in that third factor, it accounts for much of the rest of productivity. Henry Ford could have told you this. In fact every engineer could have told you this. Every architect could have told you this. Every biologist could have told you this. Every chemist could have told you this. They all have to start their training in school by learning these two laws of energy that govern the universe. I teach in the oldest Business School in the world. I taught the advanced management program at the Wharton School for 15 years. Not a single business school in the world today, right now, requires that you learn about the 1st and 2nd laws of thermodynamics that govern economic activity. How shameful is this? 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 3rd Industrial Revolution here in Germany. CHAPTER THREE: A New Smart Infrastructure The communication internet is now mature. It’s been 25 years since the World Wide Web. We have digitalized communication. Now this communication internet is converging with a nascent, digitalized, renewable-energy internet. And now both those Internets are converging with a fledgling, automated, GPS, and very soon driverless road, rail, water, and air transport internet to create three Internets: communication internet, renewable energy internet, automated transportation-logistic internet. One super internet to manage, power, and move economic life. These three internets ride on top of a platform called the “Internet of Things.” We’re embedding sensors in all of our devices, as you know, so they can monitor real-time activity and then talk to other machines and talk to us.
So we have sensors now in the agricultural fields and they’re actually monitoring the growth of crops the soil salinity, the moisture in the crops, etc. They’re sending that data. We have sensors now in the factories that are monitoring our economic data. We have sensors in smart homes monitoring how the energy is used in our buildings. We have sensors in smart vehicles, warehouses, smart roads. All of them collecting data. But where does that big data go? It goes to communication, energy, and transport Internets to manage, power, and move economic life. As this new system comes in it’s gonna be ubiquitous by 2030, connecting everything with everything with everyone. We are essentially creating an external prosthesis —a distributed nervous system— that’s gonna allow everyone on this planet, at very low cost, to begin directly engaging each other on a global Internet of Things and bypassing a lot of the vertical integrated organization and middlemen that kept us away from each other.
We can have direct engagement now. This is the revolution. This evens the playing field. There’s been a long discussion among the Millennials— You started this: Occupy movements. Saying, “What about the 1%? The 99%?” Now we have a new platform. The Internet of Things platform is of a different nature than the platforms in the 1st and 2nd Industrial Revolution. The new platform is really radical, because this 3rd Industrial Revolution platform is designed to be distributed, not centralized. It works best when it’s collaborative, and open and transparent, rather than closed and proprietary. And the benefits come when more and more people join the network and each of us contributes our talents, which benefits the network and then benefits us. It’s designed to be laterally scaled, not vertically integrated. And this is what moves us from the 1% of the 99% to a vast, vast expansion of social entrepreneurialism and global networks.
That’s the upside. On the other hand, how do we deal with network neutrality? How do we ensure that everyone has equal access to this new Internet of Things platform, this 3rd Industrial Revolution? How do we make sure governments don’t purloin this platform for political purposes —it’s already beginning. How do we make sure that giant monopoly companies, some of them on the Internet, don’t use that data for their own commercial purposes at our expense? How do we ensure privacy when everyone’s connected? How do we ensure data security when everyone’s connected? How do we prevent cyber crime and cyber terrorism that could disrupt the system and take it down when everyone’s connected? This is the DarkNet, and what I’m saying to you today is that the DarkNet is as impressive as the opportunity of the BrightNet.
And I would say that the next three generations, beginning with you and your children and grandchildren— You’re gonna be heavily engaged in a new political movement. And that movement is going to be to ensure against the DarkNet prevailing, and making sure that we all have equal access, so the human family can engage in a distributed nervous system and begin to have a vast expansion of social entrepreneurialism. This is the political struggle that starts with the Millennials, your children and grandchildren. This is an uphill battle. This is not a cakewalk. I’m not a technological determinist and I’m not a utopian. Technology just enables, then the question is, How will that journey end? It’s a big question mark right now. But let’s assume, for the sake of this afternoon, that we’re gonna be able to deal with all the complexities of the DarkNet —and it’s a big challenge.
Here’s what this Internet of Things platform provides. Let’s say here at Brooklyn you’re a SME —small and medium-sized enterprise, or cooperative, or nonprofit. You can go up on this nascent Internet of Things platform that’s already emerging. It’s not theoretical. And you can have a transparent picture of all the economic data flowing through the world —if it stays network neutral. The power here is enormous. We think Snowden was a big deal? Now all the economic data is gonna be open to everyone, not just a few government secrets.
But in a network neutral world you’re gonna be able to go up on this platform and have a completely transparent picture of all the data. You can go up on the platform and cut your big data on your value chain out from the noise. Then, you can mine your big data with analytics. Then you can create your own algorithms and apps. They’ll allow you to dramatically increase your aggregate efficiency at every step of conversion on your value chain.
And, as you do that, dramatically increase your productivity, dramatically reduce your ecological footprint, and dramatically plunge your marginal cost. Some of those marginal costs are gonna get so low —they head to zero marginal cost. And when they hit near zero marginal cost, it gives rise to a completely new economic system. CHAPTER FOUR: Zero Marginal Cost and the Rise of the Sharing Economy. In economic theory, the optimum market is where you sell at marginal cost. Marginal cost is after fixed costs. Once you pay for whatever the technology is. The marginal cost is what it costs to produce a unit. Classical economic theory, we’ve always said that the most optimum market is where you sell at marginal cost. Here’s the problem we never expected a technology revolution —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. This sharing economy didn’t come out of the blue. Capitalism gave birth to the sharing economy. Let me be clear: As muddy as the sharing economy is, it’s the first new economic system to enter onto the world stage since capitalism and socialism in the 19th century. It’s a remarkable historical event. This is already happening. Zero marginal cost phenomena is not theoretical. It’s been how many years since Napster—the file-sharing service? About 17 years? 17 years! Well, this little file-sharing service started a revolution. We have 3 billion people right now on the internet —and now the Internet of Things— who are actually producing and sharing virtual goods at near zero marginal cost beyond the market, disrupting entire industries.
We have young people that are producing their own music. And what does it cost to have a little technology, a little machine that allows you studio-quality music when you wanna record in your home? And then, whether you send that music to one person on the web or a billion— It’s zero marginal costs. You just need a service provider to keep your power up. I was surprised when that Korean performance artist a couple years ago— A billion people went to his website! Zero marginal cost.
We have millions of young people, any given day, who are producing their own YouTube videos. Take a little video, put it up on the web, a billion people can see it. Zero marginal cost. We have people producing their own news blogs and social media. Near zero marginal cost. We have millions of people contributing to Wikipedia and constructing the knowledge of the world on a non-profit website for free. This is the most improbable experiment I could ever imagine. I don’t know how Jimmy Wales came up with this. I would have said, “This cannot succeed!” Adam Smith said, “Each individual pursues their own self-interest and never cares about the public good.” But in pursuing their self-interest and not giving a damn about the public good— By pursuing their self-interest, the society is better off. I always thought it was a little dubious, but that’s how we grew up. But apparently, none of the Millennials have read Adam Smith. Because, for example, in Wikipedia you’re all freely giving your talent, putting things up on Wikipedia, constructing the knowledge of the world.
You’ve democratized knowledge in less than 15 years and the accuracy is… Now: Book publishing. What’s happening? People are creating their own free eBooks. My new book came out on the Pirate Bays before we could publish in our languages and —God bless them— they were ranking it before Amazon could even touch it. We have 6 million college students taking massive open online college courses taught by the best professors at the best universities. They’re getting college credits. It’s free! You can’t win here. You Millennials have won. Unless we outlaw all the technology, we’ve got to find a way to live with it and find value with it.
Entire industries have been disrupted in the 17 years since Napster. The music industry has shrunk. Television has declined ’cause everyone’s producing their own YouTube videos. You’re all producers sharing with each other. Newspapers and magazines have gone out of business with social blogs. But thousands of new enterprises have emerged. Not just Google, Facebook, and Twitter—all of these are new. But thousands of startup enterprises —profit and nonprofit— they’re creating the platforms, they’re creating the apps, they’re creating the connectivity, they’re using the analytics and the data. It’s a revolution! Well, we thought there’d be a firewall here. And certainly we could understand how zero marginal cost brought on by digitalization would affect the virtual world, but we didn’t think it would move over the firewall to the physical world. What I’m saying, with the zero marginal cost society is that firewall is broken now —it’s called the Internet of Things— completely gone. We have millions of people now producing their own renewable energy, right now, at near zero marginal cost.
Free! And now, as we move to car sharing, and as we move to driverless transportation, we’re gonna see the marginal cost plunge toward near zero in transport logistics in the next 20 years. Let’s go back to Germany. What’s happened in the 10 years since that first conversation with the Chancellor? We are now in Germany at 32% of all the electricity power in Germany now is solar and wind, right now. In ten years. And this is a northern country —doesn’t have a lot of Sun. We’re gonna be 35% of the electricity, solar and wind, by 2020— We’re gonna be 100% renewable energy by 2040. Absolutely! And what’s interesting is the fixed cost of introducing the solar technology and the wind turbines and the geothermal heat pumps— Solar and wind are on an exponential curve, just like computers! When I was a kid in the 1940s and 50s, there’s only a few computers. They cost millions of dollars. And the chairman of IBM at the time said, “We probably will need a total of seven computers.” “Maybe seven!” It was just an optimistic forecast.
We did not anticipate exponential curves in computer chips. Moore’s law. So all of a sudden, Intel figures out that their engineers are doubling the capacity on that chip every two years. This is still going on. So, even if you’re making $2 dollars a day, everyone’s going to be connected to the Internet of Things within less than 15 to 20 years. And the cost—the fixed costs are gonna be as cheap as your cell phones in 20 years. Everyone’s gonna produce their own green electricity. These exponential curves are not going away. 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. And this is what you’re not told here in the United States by the energy companies. We have power and utility companies —some of them in my group, Global Group— and they’re quietly, right now, buying long-term 20-year contracts for solar and wind electricity in Europe and America, quietly right now, for 4 cents a kilowatt hour.
And the Berkeley National Labs, government labs just announced they’re generating wind and solar— I think it’s somewhere between and cents a kilowatt hour. It’s over actually for fossil fuel and nuclear. And the next big bubble —I will tell you now— 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. Because we’re moving toward parity and then solar and wind are getting cheaper and cheaper. That’s what’s going on behind the scenes, right now. But 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? It’s 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! So what happens when German businesses can plug in to a communication internet that then converges with an energy internet and we digitalize the electricity grid, so everyone can produce their own solar and wind, and either use it off-grid or sell it back to the grid? What happens when companies plug in to an energy internet where the cost of the energy is near zero marginal cost. Think about when they have to move across their value chain, and at each step of conversion on their value chain, their energy cost is near zero.
How does any 2nd Industrial Revolution country compete with that? And it’s not big Germany only —little Denmark’s done this. Anybody can do this. Who’s producing all the new energy? In Germany, there are four major power companies: MBW, RWE, E.On and Vattenfall —these giant, global, vertically integrated companies. And, frankly, we thought they were invincible. What’s happened to them in 10 years is what happened to the music industry, television, newspapers, magazine, and book publishing.
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 —these electricity cooperatives— and every bank was completely fine about giving them the loans. Why? Because they knew that the energy they generated would get a premium price when they sell it back to the market. Nobody was turned down. They’re creating all the new energy. This is power to the people —literally and figuratively— power to the people.
What happened to the big 4 power companies? They’re producing less than 7% of the new power. And they acknowledge they’re out of the game. Why? To their credit, they were the most efficient means to produce and distribute centralized power —fossil fuel and nuclear power, vertical integration. But the new energies— They require millions of small players connecting where they are in collecting. You have to collect the Sun everywhere in little amounts. And the wind everywhere where you are. And the geothermal heat everywhere where it is. And you—We reward cooperatives who laterally scale and join together in networks. Big companies can’t put all these players together. The players come together in their own regions of cooperation, and they join together. It is power to the people.
Does this mean this is the end of the energy companies? Not necessarily. Many will go out of business. Some will not. About seven years ago, the EON—one of the giant four companies— they asked if I would debate their Chairman, Mr. Tyson, but in a neutral country, the Netherlands. We had a three-hour debate. you’re not leaving the 2nd Industrial Revolution And I said to him, “Look, tomorrow morning. But you also have to be in the 3rd Industrial Revolution tomorrow morning, because you have a 25, 30-year transition to get from the 2nd to the 3rd and find new value. And I said in the new system, it operates quite differently than the old system. In the new 3rd Industrial Revolution you make more money by selling less and less and less electricity. I said, what you do is, you 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.” We’re now doing it, and guess what? Last year, the chairman of Eon —took him 7 years— they’re moving to renewable energies and they want to help manage parts of the energy internet with energy services. EDF, the great nuclear power, in France has joined our group. We’re doing the whole build-out of the 3rd Industrial Revolution in parts of Europe: in northern France, the Netherlands, Luxemburg… And EDF said, “We’re with you.” They’re on the ground helping lay this out. They’re not leaving nuclear tomorrow, but they see that the handwriting is on the wall. So the companies that don’t go there; we don’t need them. It’s not just Europe; now China. When President Xi came in to power with Premier Li— Premier Li announced that he —and I was pleased— he announced he’d read my book, The Third Industrial Revolution.
He put out a public announcement. I’d never met him. I never even been to China. And he instructed the central government of China to begin looking at these themes that I’m laying out to you to move China to a 3rd Industrial Revolution. There mindful in China. They lost the whole 1st Industrial Revolution. They missed almost all the 2nd Industrial Revolution and came it in the tail in the last 10 years. And they said, “We’re not gonna lose the 3rd Industrial Revolution.” “We wanna collaborate with the 3rd Industrial Revolution.” And they said, “Be among the leaders.” To show you how fast they move, I’ve been shuttling back and forth, but after the first visit —it was about eleven weeks later.
The chairman of the state grid, which is the largest electricity grid in the world, announced an $82 billion dollar, four-year commitment to digitalize the Chinese grid so the millions of Chinese people could produce their own solar and wind in their local communities and share it back on an energy internet. That started this year, yeah. Watch Europe. Watch China. The coming together of the communication internet, with the renewable energy internet gives rise to the automated, GPS, driverless, transportation logistics internet.
We built the whole global economy in the 2nd Industrial Revolution around car ownership. That’s what this was all about. You’ve thrown us a curve. You really have. Apparently you don’t wanna own cars anymore. This is Grandma and Grandpa. They got two cars sitting in the driveway cleaning and waxing them every few weeks, and they’re never used. Or they’re at the office 90% of the day never used. You don’t wanna own cars. You want access to mobility and car sharing networks, not ownership of cars in markets, correct? So there’s a problem here. The problem is for every car shared in car sharing in the sharing economy, we’re eliminating 15 cars. This is both the problem and the opportunity. Larry burns was the former Vice President of General Motors until a few years ago, now he’s a professor at the University of Michigan. So Larry just did a study —very revealing. He studied Ann Arbor, Michigan. We can eliminate 80% of vehicles with better mobility, cheaper.
Now let’s extrapolate Larry’s study. We’ve got a billion cars, buses, and trucks choking us in traffic around the world. They’re the 3rd major cause of global warming emissions. 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. We have billion cows. They take up about 23% of the land mass of the Earth. I love cows, but the methane they produce is a major contributor to global warming, —much more powerful than CO₂— and then, when we pasture those animals, we have the fertilizers that emit nitrous oxide. And it goes on and on. And I should say that, without mentioning names, even some of the prophetic voices in the climate change debate will never mention this. Because they do not want to antagonize people and even suggest that we may wanna change our diet and move down the food chain so that we can live healthy, respect our fellow creatures, and at the same time mitigate climate change.
So, you never hear this in the debate. Never! Number 3 is transport. So, if Larry’s right —Larry Burns— we’re gonna eliminate probably 80% of the vehicles in the world in the next two generations because the Millennials, your children, and grandchildren are never going to own cars again. This I know. And the remaining 200 million vehicles— They’re gonna be electric. They’re gonna be fuel-cell driven. They’re gonna be operated by near zero marginal cost renewable energy. This is already happening. They’re gonna be 3D printed, with composite recycled materials at low marginal cost. They’re gonna be driverless. This is already happening. This gets to the question of, “Is this the end of the world for transportation companies?” Not necessarily. But they have to change their business model while they’re still in the 2nd Industrial Revolution, selling cars, buses, and trucks. They have to move to the 3rd Industrial Revolution, where they help manage vast networks along with all the other players.
This is a very cool thing that happened about six weeks ago. Daimler asked me to join them— Daimler invented the internal combustion engine. So I’m always mindful they’re a step ahead. And the chairman of Daimler Trucks brought together 350 journalists from around the world in Germany asked me to come in— I laid out the same story we’re talking about here. And then the chairman of Daimler Trucks —he’s one of the eight board of directors— He announced that Daimler is in a new business. And that is logistics, on the transportation internet. And he announced that Daimler had equipped, in the last three years, 300,000 trucks full of sensors.
—300,000 vehicles, and they’re on the roads now. These are what I call “big data,” “mobile big data centers.” And these trucks are collecting data all across the transport corridors of Europe, on traffic flows, weather conditions, availability of warehouses… All of the data you would need if you’re a small business, a large business, or just a home owner, to be able to increase your aggregate efficiencies and productivity, reduce your ecological footprint, and anytime you’re involved in moving shipments from A to B. Then this is what’s really interesting. He dimed the lights and they went to a helicopter feed, live on the German Expressway.
And the helicopter zooms in on these three trucks on the German Expressway, and then they went right into the cab of the trucks and the drivers are waving and talking to everybody in the room. And the chairman of Daimler Trucks said, “Okay, gentlemen. Take your hands off the wheel. Take your feet off the pedals.” All of a sudden, the drivers became software analysts. No longer drivers. They were software analysts monitoring the data. The trucks then started to platoon together, automated, into a mobile data, almost a train going down the highways, collecting data.
So they’re providing the data, and then the analytics, so that you will have apps, so that you can find ways to increase your aggregate efficiency and be a player in the system. Smart! How do we finance this? How do we pay for this? CHAPTER FIVE: Financing the Transition We are laying out a plan in Europe called “Digital Europe,” “Smart Europe.” And working with the European Commission, we’re building this out over the next 10 years. But the big question is, “How do we pay for this infrastructure, region after region, across all of Europe to connect us in a digital world, where we can begin to enjoy the new opportunities?” So the question came up in Brussels and I said, “We’ve got all the money we need.” Problem’s not the money; it’s what we’re doing with the money. I’ll give you an example— in America is the same situation. In Europe, we spent 741 billion equivalent US dollars on infrastructure in 2012. One year alone. That’s just a bad recession year, typical.
The problem is what we spent it on. We spent the money on an old 2nd Industrial Revolution platform. Remember what I said to Chancellor Merkel? and we peaked in the productivity 20 years ago at 20% ceiling, and we can’t get anything more out of it. We’re stalled, which stalls the economy, stalls the smart startups, stalls the entrepreneurial expansion. So I said, if we simply reprioritize our investments, spend some of it patching up the old infrastructure —we don’t want it to collapse— but we prioritize, so part of those funds each year go to each region, so that they can begin to build out and scale up a 3rd Industrial Revolution infrastructure. With an Internet of Things platform, we will be there in 30 years. This year, we reprioritized our funding at the EU and, beginning in January of next year, regions across the EU will secure EU funding, leverage against private equity, and each region will customize and build out, like Wi-Fi, their plan and then connect up region to region to region. We call it “Digital Europe.” We have a similar plan called “China Internet Plus” across the regions of China.
Where’s the US here? CHAPTER SIX: TWO GENERATIONS OF MASS EMPLOYMENT The coming together of this revolution will involve every industry: telecom, cable, ICT, consumer electronics, transport, logistics, construction, and real estate —all the retrofitting— all the industries are involved. And it means work. What I’m suggesting here is that we have one last surge of massive employment involving semi-skilled, unskilled professional and conceptual labor. We have to build out this smart infrastructure. Robots aren’t gonna do this. We have to take the entire energy complex of the United States. Think of all the infrastructure and all the technology, all those stranded assets. We have to convert all of that infrastructure from fossil fuel, nuclear to distributed renewable energy. We have to retrofit every building in the USA. That’s what we’re gonna do in Europe. Because you can’t install the renewable technologies until the buildings are efficient. That means huge jobs for energy service companies and for the construction and real estate industry. Robots won’t put in the insulation, and the new windows, and the doors.
And then we have to install all the renewable energy technology. Human beings have to install that technology, and all the smart technologies that monitors the equipment, and puts in the digital advanced meters. We have to take the entire electricity grid of the USA, which is dumb, servo mechanical, embarrassing —it’s 60 years old; it barely functions. And we have to transform the entire electricity grid to smart, digital so that we can manage these three internets.
This is gonna require professional talent and unskilled and skilled labor for two generations. We have to take the entire transportation grid of the USA and turn it from dumb to smart road, rail, water and air. Who’s going to install the thousands of charging stations in all the buildings? Fuel cell outlets? Smart sensors? This requires human beings. This means two generations of work and guess what? It’s financed by the payback of the energy savings. You don’t have to have huge government involvement here. You simply have to have the enablement, so energy service companies can be set up, and we transform every building in the USA to a node. These nodes then connect, and they are the big data centers. They are the micro power plants.
They are the transport hubs with electric charging stations. The nodes connect like Wi-Fi and all those nodes, those buildings —homes, offices, factory— that’s your Internet of Things. That’s a huge job for the construction industry and you pay back by the energy savings. You can’t default on the loans. But the technology doesn’t do it alone. We have to change consciousness. I’m only guardedly hopeful. You know, I’m not naive; I’m guardedly hopeful. I think that what I’ve said is really a tough challenge. But I’m guardedly hopeful because human beings are the most social creature on this planet. When we get the story right, we move quickly. I’m always amazed when I fly and I see electricity grids across continents, and highways and urban centers. And I think, “My God! That was all done in 50, 60 years?” It’s amazing! When we get the story, we move quick. We’re a very social creature. They’re coming together, these three Internet’s —communication, energy and transport internets on top of an Internet of Things platform. It changes the way we think about life. CHAPTER SEVEN: A New Consciousness for a New Era Let me give you the best example.
We’ve got millennial parents now that are sharing toys on these millennial websites, where you go up and you pay a subscription fee, one time and you’re in the system. Then you can get a toy —any kind of toy you want— by age category, and give it to your child. This is creating the real revolution. The parent traditionally brings home a toy. And they say to the daughter, “This is not Christmas.” “Santa Claus didn’t get you this toy.” “We bought this toy at a store and we’re giving this toy to you.” “This is your property.” “This is not your brother’s toy, and this is not your sister’s toy.” “This is your toy.” “You need to take responsibility for it and take care of it.” “What did mom and dad just say to me?” The first thing I caught is, “This isn’t my brother and sister’s toy.” That’s pretty relevant.
Now, status, power, negotiability. “I’ll never let my siblings ever use this, unless they pay the price.” They’re learning possession of property and markets. There’s nothing wrong with that. But now, on these toy-sharing websites, parents are bringing home these toys —and pretty soon they’re gonna come in a driverless drone at near zero marginal cost. Now the parents are giving this toy and saying, “Another little child played with this toy, and she had a lot of fun with it and she really took good care of it ’cause she knew one day you’d want to play with the toy.” “And we hope you take good care of it ’cause one day another child will wanna play with the toy.” What the child is learning now is this toys not a possession, it’s not status, it’s not power, it’s not negotiable.
It’s simply access to an experience for a moment of time, then another child gets to use it. They’re learning how to be part of a circular economy, where we distribute things in the sharing economy over and over and over. Nothing goes to the landfill. I like a system where you have both opportunities. There’s nothing wrong with being property. There’s nothing wrong with having possessions and some status, but it’s also nice to have another option where part of her life is being able to access an experience in time, and then share it with someone else. I don’t think capitalism is gonna disappear, but I think it’s gonna find value by creating a relationship, so that it finds value with the child that gave birth through the sharing economy.
And, right here in this room, you are already in two economic systems day to day right here in Brooklyn. Part of the day, you’re in the market. You’re sellers, you’re buyers, you’re owners, you’re workers, you’re producing goods and services for each other for a profit in the marketplace, and you have property. But part of the day you’re in the sharing economy. You’re sharing virtual goods, entertainment, news, social blogs, Wikipedia. And now energy and car sharing. And, while it has capitalist parts to it, it’s also a sharing economy where you can reduce the cost. And, by 2050, we will have two mature systems: part of the day, capitalist market, with a profit margin producing and selling to each other; part of the day in the sharing economy beyond the market, freely producing goods and services for each other.
That’s already started. That is not gonna go away. Your generation is moving from ownership to access, from markets to networks, from consumerism to sustainability, from market capital to social capital. Does this all sound familiar? It’s a revolution. None of this is being taught in the schools, by the way. That’s why this is really a revolution. And there are three things that I’ve noticed that give me some guarded hope. There’s a basic change going on with you people in this room. It’s strange to older people. There’s a change in the way you define freedom. The way you define power. And the way you define community. And these changes really suggest the real revolution. For my generation, and generations before me, freedom was very simple, since the Enlightenment. To be free, in Enlightenment perspective, is to be an autonomous agent. To be self-sufficient. To be independent. To be not beholden to others. To be an island to oneself, so that one can have freedom as exclusivity. For the millennial generation that grew up on the Internet, autonomy is death. Being an island to oneself is death.
Because for your generation you ask the question, “How can I flourish to the full extent of my possibilities here on the planet?” And it’s clear that your answer to that is “I flourish to the extent that I’m embedded in network after network, after network; community after community, where I can share my talents. And those talents can benefit the network and come back to benefit myself. I’m free because I have access.” And, for you, freedom is not exclusivity. It’s not being an autonomous agent. It’s inclusivity. It’s access to others in networks. Do I have this right? This is very alien to our generation. We may have to change all the constitutions in the world. This is a completely different idea about freedom. You have a different sensibility about power, which makes the older generation very nervous. We essentially believe that power always has to be a pyramid.
It goes from the top down. That is power. There’s no other way to define power. It’s a pyramid —from the one to the many. But young people that grew up on the Internet— It’s strange because you grew up thinking that power has to do with the networks you’re engaged in. For you, power is not vertical; it’s lateral. For you, power is being a mesh in network after network where you benefit each other. Open source. This is so strange to our older generation.
We do not have this notion of power. It makes no sense to us, actually. But it makes total sense to you. And, finally, I think most importantly, we’re seeing a change in the way a younger generation perceives identity to community. I grew up in a post Westphalian world, the nation-state. We were very clear on community. That is, each individual is born to be an autonomous agent and we’re each sovereign. We are each a sovereign to ourselves. And each of us as a sovereign to ourselves— We compete with other sovereign individuals, in the marketplace, for scarce resources, in a zero-sum game. Our nations represent us because they are sovereigns. And they represent all the millions of individual citizens who are sovereigns against other nations. And each nation then competes with every other nation for scarce resources in the marketplace of the battlefield in a zero-sum game.
That’s the post Westphalia nation-state world. Here’s my question: Does anyone here believe that we’re gonna be able to address climate change and bring the human family together and take our responsibility for our fellow creatures in the Earth we live in with that worldview? Anybody? What we’re beginning to see with Millennials —and I don’t wanna overstretch this— but I’m beginning to sense a shift from geopolitics to biosphere consciousness. Just beginning to see it. I hope it doesn’t go away. I don’t think it will. The biosphere is that 19 km from the stratosphere to the ocean, where all life and all the chemicals on the planet interact to maintain the ecosystems, the biology of the Earth.
We’re getting 14-year olds coming home with biosphere consciousness. They’re becoming the biosphere police. We got young people coming home and saying to their father, “Why are you using so much water here while you’re shaving?” “Can’t we turn it off once in a while?” “We’re wasting the water.” They’re saying to their parents, “Why is the little red light on on the TV?” “We haven’t been in that room for three weeks!” Wasting electricity… They’re saying to their parents, “Why are there two cars in the driveway?” “Why can’t we at least car share one?” They’re saying to their parents, And this is the one I’m particularly fond of. It brings a smile to me. We actually have young people coming home and, at dinnertime, they’re asking their parents where the hamburger came from on the table.
Yes, I’m sure some of you have this experience. They’re saying, “Did that hamburger come from a rain forest?” “Did they have to destroy the trees for four little inches of topsoil, which only gives you three years of grazing, so that that cow could become my hamburger?” And when those trees are destroyed for the topsoil to graze the cow for the hamburger, the kids are smart enough to understand —the high school kids— that those trees harbor rare species of plant and animal life that only live in those canopies. They go extinct. And then they connect the dots. If the trees disappear for the soil to graze the cow for the hamburger, those trees are not there to absorb CO₂ from industrial emissions. And that means the temperature the planet goes up. So then, a mother cannot feed her children if she’s on the farm, because she’s getting spring floods, summer droughts, and wildfires because of the hamburger. These kids are learning ecological footprint. Junior high school. And they’re coming home. They’re beginning to understand that everything each of us does, all day long, even when we’re sleeping, intimately affects some other human being, some other creature, and the planet we live in.
This is so alien to the way your previous generations grew up. You’re beginning to connect the dots and say, “We live in an indivisible biosphere community; there’s no escape.” “This isn’t just academic: our well-being depends on the well-being of the whole system and all the creatures in it. We have young people who are beginning to extend their empathic concern to the rest of the human family, because you’re all skyping on global classrooms. Heck—a billion of you on Facebook. That’s the largest fictional family in history! And what’s promising to me is that part of this generation is also beginning to empathize with our fellow creatures. Not just the polar bears and the penguins on the poles, but all of our fellow creatures. And I gotta tell you, my wife and I are into animal rights and animal protection.
Our fellow creatures have a right to be here. We do not have a right to end existence for them. This is their planet, as well as our planet. So I think we’re beginning to see a shift the notion of freedom. How we perceive power, our sense of community. We’re heading to a biosphere frame. This is all good. Let me be clear on why I’ve been doing this work. I’m terrified about climate change. I began working on energy issues— it was in 1973. And wrote a book, “Entropy on Climate Change,” in 1980. I thought we had more time. I did not anticipate the feedback loops. We couldn’t even see them until they came, and then each feedback decreased ten more on an exponential curve. And we just didn’t see it. We thought linear. Now we’re really scared. I’m gonna tell you, we are really really scared.
‘Cause now we’re in a runaway exponential curve on the water cycles. We didn’t see it. The fortunate thing is, we now have a new infrastructure paradigm —a 3rd Industrial Revolution. That can allow us to move off carbon quickly, in three decades. We have the technology that allows us to do this, because zero marginal cost is the ultimate metric for reducing ecological footprint. If people equipped with a little technology are constantly finding new analytics and apps to increase their aggregate efficiency at whatever value chain they’re in, it means we’re using less of the Earth and getting more out of it.
In other words, more of the energy and materials gets into the product, less is lost. Then, if what we do produce is shared —share the cars, share the homes share the toys— we’re distributing a circular economy over and over. Nothing needs to go to the landfill. Every resource is always there for us. If we move to the energy internet, there’s no reason why everyone on this planet shouldn’t be producing their own green electricity, right where they are at very low cost in 25 years from now, on this exponential curve, and sharing across continental energy Internets.
And if we go to a car sharing, driverless transport grid, we can eliminate 80% of those vehicles that have taken a big hunk of the Earth to put online. This is a plan and what we’ve done— a lot of businesses are working with us around the world on this— and we say to people, “If you have another plan, step forward and tell us what it might be to address climate change and move the economy.” And I always get silence. ‘Cause the only other plan is to stay where we are and that’s taking us to an economic crisis and an environmental abyss. But here’s what I’d like to do: I’m gonna turn it over to you. Let’s think about your sensibilities and find out if we can come to some common ground on how we can begin to move this from this little room out to all the larger communities and networks are in.
Is that a deal? Who wants to start? Hello, my name is Lena. And my question will be related to technological unemployment. What is your take on that? We are moving to an automated world. There’s no doubt about it. However, as I said during the talk, we’ve got two generations of massive employment, that’s clear, to lay out this infrastructure. That’s gonna require millions and millions of jobs. We know this on the ground as we’re laying this out in Europe right now. It’s a huge amount of jobs. Robots can’t do it. AI can’t do it. This is infrastructure shift. However, as this smart digital economy and society moves in, it can be run by very small supervisory workforces with analytics, big data, algorithms and apps —that’s why we call it “smart world,” “smart society,” “smart economy.” Then, what do we do once we have the smart society in and it’s automated, running by analytics? We’re not gonna pay people just to do nothing.
We already know where the employment is going. And that is, as we continue to automate the market economy, employment is shifting to the nonprofit social economy and the sharing economy —we already know that. The nonprofit sector is the fastest growing employment sector right now in the world. It’s about 9.5, 10% of the American employment— paid employments and nonprofit. Why is it heading there? Because, in the social economy, the nonprofit economy, and large sections of the sharing economy, social capital is as important as market capital. And, in this realm —the nonprofit realm, the social economy, the sharing economy— it requires human beings engaged with other human beings.
Machines aren’t only supplemental. We will never have a robot raising a child and interacting with them in a childcare center to develop their brain. It’s never gonna happen. They may bring the lunch to the kid —the robot— but it’s gonna require human beings working with those children. And whether it’s in parts of healthcare and the knowledge industries, in cultural areas, humans with humans. The only other question is, how does this sector survive financially? Johns Hopkins University does a study of nonprofits in 40 countries every few years.
And guess what they found: Over half the income for nonprofits which are one of the biggest employers now, comes with fees for services. If you’re doing health research, you set up a health clinic. You get fees for services and then you can continue to do your nonprofit research. If we get any of this transition right, we automate the market, we move to social capital where we can use our minds much more expansively, so we can learn to live as a human family and steward each other steward our fellow creatures, steward the Earth. That’s a much more noble mission. I believe that in order to create a better tomorrow, we also need to look at rehabilitating our psychology. Yeah, I’m in agreement with you. You know, and I have to say, our academic disciplines —I’m gonna step on more toes. The academic disciplines in our school systems are so moribund. It’s dysfunctional. We have an internet generation that lives one way of life in terms of their mind outside the classroom, and another inside the classroom. In the classroom, for example, when we think about education, the first thing we realize is the classroom looks a little bit like a factory.
These big, giant institutions. And the kid comes in there in 1st grade —a little boy or girl— and they immediately realize there’s a central authority of the teacher, they have to be silent, if they share knowledge with each other it’s called cheating, and they’re expelled. And they learn that their mission is to be efficient, but only in the sense of being able to have the skills they need to follow orders and tend the machinery of the Industrial Revolution. Yet, an internet generation out of school— You’re all sharing knowledge. The whole point of the Internet is to share your talents and skills, open-source, no intellectual property and begin to crowdsource the knowledge of the world together. That is so different than what you’re getting in school. So let me say one thing about this. You know what we’re doing in northern industrial France? All 7 universities have come together and 200 high schools, and the universities are led by Catholic University of Lille.
Here’s what they’ve done: all faculty now teach interdisciplinary so that you learn various perspectives and there’s more than one way to look at things and you have to share a common language. No silence. Secondly, all the students now are put into modules, in teams, and they work with their teams and the students have to teach each other. The teacher becomes a facilitator and a guide, but the students have to teach each other. If they share knowledge, it’s good—it’s not cheating. Then they learn that knowledge is not power and something one possesses at the expense of the other. Knowledge is the shared experience you have as a social being. And the learning now is clinical. What’s the good of learning if theory isn’t brought together with practice? So their learning is clinical. They’ve taken service-learning, which you all did here, and they’ve elevated to pedagogy. So whatever you’re learning, you have to apply it with your fellow citizens in the neighborhoods where these universities are. How do you like that? Catholic University of Lille.
That’s the revolution. I believe in the Darwinian theory of humanity being more Darwinian than utopian. What would you do about basically corruption and fraud? Let me be very clear: I am an anti-utopian. If you read my books, I don’t believe in utopias. I don’t like utopias. I think utopia is are dangerous. Our human spirit, the empathic spirit, is designed to show compassion to our frailties —our precarious existence. An empathic world is never a utopian world. Utopias are worlds that are perfect. There’s no mortality, there’s no pain, there’s no suffering, and every moment is perfect.
There’s no such world. I looked through history and it says that the most civilized societies are the ones that can move empathy to larger reigns. And there’s a history of that, of empathy. So I like an empathic world where we understand each other’s frailties, we show compassion with each other’s desires to flourish, we reach out to each other —and we do this every day. And when someone that we know is in joy, or pain, or suffering— We do this with our fellow creatures that are in trouble. It’s the empathy that runs day to day life, not utopias. And I think George Frederick Hegel got it right. He wrote a little passage that I read 40 years ago. He said, “Happiness are the blank pages of history, because they are the periods of harmony.” I thought, “What does that mean?” Over and over I kept thinking of it. Well, he’s right because, when you read historians and you read their view of history, you think we’re pretty pathological creatures. because historians always chronicle the mayhem, the genocides, the wars, the redress of social grievances because those moments are extraordinary, not ordinary. They imprint a stamp on us, they move us to fright and flight because they’re so extraordinary their remembered for generations.
But when you then chronicle all of history as if it’s a series of these very very dysfunctional episodes in life, you get a pretty dire picture of the human race, correct? Happiness of the blank periods in history, where most of us, as we evolve our empathic concerns to larger social units, our day-to-day life is reaching out to each other in some ways to help, to show our concern, to provide our compassion.
It’s not the few —we do this as the multitudes. I’ll give you an example: Cooperatives. You never hear about cooperatives in business school. There are banking cooperatives, and housing cooperatives, and agricultural cooperatives instruction cooperatives. In some countries they’re the largest banks. They’re the social housing. It’s never mentioned in business school, because it’s a different form. It’s people coming together and sharing their destiny. This is the true sharing economy: Cooperatives. And that’s why they’re the engine, the vehicle for the new sharing economy. But they’re never mentioned. Societies that are able to nurture the empathic sensitivities that are in our neural circuitry are the ones that don’t have to worry as much about the secondary drives, which are brutality, and corruption, and all the bad things that go with them. So I have a little bit better picture in my mind of the evolution of the human race. What I’m suggesting is the next stage is biosphere consciousness. As we begin to see climate change impacting our entire community, and there’s nowhere to escape, we begin to realize we’re part of that community. And so we’re getting our younger generations beginning to empathize with our fellow human beings and our fellow creatures in one biosphere.
This is a hopeful narrative of the human race, with all the dark periods in between. So I hope you leave with that message— At least I believe that the history the human race is to overcome, and to transcend ourselves, and to empathize in larger social units until we see ourselves as part of one life force on the planet. I’m Tony. I think you might be coming up against something with these new corporate agreements that they want to force on us: TPP, TTIPS and so on. But they do seem to contain provisions that would put corporations that are at an advantage over governments —over elected governments. Well, let me give you a counter pose: There’s another kind of agreement emerging with very different politics. President Xi and Premier Li introduced an idea called “Belt One…” “Belt One Road” —the Belt and Road initiative. This is a very different initiative because here’s the US trying to isolate —if you will—China with its specific agreements; corporate led. And the belt road initiative is the idea of resurrecting the old Silk Road, from Shanghai to Rotterdam.
But it requires a different sensibility. Originally it was designed just to get a railroad across the hinterlands, crossing the stands all the way into Europe and The Mediterranean, a route around the southern edge, and Italy. But then it quickly escalated to a conversation— Wait a minute! Europe’s doing “Digital Europe,” the Internet of Things platform, 3rd Industrial Revolution, and that— It not only will be in the EU, but our partnership regions in the Mediterranean. That’s a billion people market: 500 million in the Union, 500 million in our partnership regions in the Mediterranean and North Africa. China has a similar plan that we’ve worked with with them. It’s identical, called “China Internet Plus.” So the conversation quickly went to, “Wait a minute! Europe is China’s largest trading partner. China is Europe’s second largest trading partner. How about a belt road initiative from Shanghai to Rotterdam? That’s now in deep conversation, but it requires a different sensibility. No one can control the Internet of Things platforms centrally, because it’s designed to be distributed— that’s the resiliency of the system. And so that, if anyone power or any nation across the region, you know, is going to try to control it from the top, you can’t do it because you can go off-grid.
And I think all the parties are aware of this. And in my dealings in Beijing, in Brussels, in Berlin, they’re aware that this is a new partnership. It requires collaboration. You gotta share. You gotta share best practices. You gotta share the science and technology. You gotta get over the suspicion— Everyone benefits in a network. That’s the—it’s not geopolitics. It isn’t, “We control. We close. And then we overpower you.” It doesn’t work in an Internet of Things world.
You have to have it borderless. It has to be open. It has to allow you to have a distributed ability to go off and on when you want, and have block chains. So, I think this belt Road initiative is quite interesting because it may not just be for Eurasia. This may be a vision that would be, for a millennial generation, a vision that could move from the Americas, from Canada and the United States down to Chile— then you have really a distributed biosphere infrastructure revolution, not a traditional geopolitical revolution. And, therefore, it requires everyone to be involved, because everyone’s a player.
My name is Denille. How do you see your vision and what you’ve been talking about affecting large food systems in industrialized countries, as well as developing countries? You know how much energy the agricultural system uses? About a third of their cost —our energy costs. The fertilizers; those are fossil fuels. The pesticides; those are fossil fuels. The machinery; it’s all run by fossil fuels. The packaging, the plastics; it’s made out of fossil fuels. The water that they have to bring in to irrigate, the electricity grids; run by fossil fuel and nuclear power to move the water. So, if you wanna take a look at agriculture, it is a huge player. Not only that: The fertilizers emit nitrous oxides, which are much more potent in terms of their impact than CO₂. You know that 40%—I believe it is— of the land that’s used for agriculture in the world today is to grow feed for animals? It takes at least 8 pounds of feed to create 1 pound of beef.
That makes the transport industry look like super efficient. It’s the most inefficient system we know on the food chain. If you look at pure injustice, you’d have to say the shift to a feed grain animal culture and a chemical farming culture for pasturing animals is one of the great injustices in the history of the world. Some of us live high up on the food chain; the rest are denied access to the land. We got to turn that around so, in Europe, we are interested in organic agriculture. We’re interested in moving from pesticides and chemical agriculture to ecological agriculture, where we learn to live with the surrounding flora and fauna, and we find ways to encourage the flora and fauna to be able to be compatible with what we’re growing.
In the old chemical world, if it moves, kill it. Everything surrounding your crops should be killed. So we live in a chemical wasteland across the agricultural fields with runoff poisoning our water. It sounds shameful. So we wanna move to organic agriculture. We had mechanical agriculture in the 1st Industrial Revolution. It started late 1st Industrial Revolution. We had chemical agriculture in the 2nd Industrial Revolution. We need to have smart, organic, ecological agriculture in the 3rd Industrial Revolution, and we have to bring back regional and local agriculture that supports local communities. It’s absurd to ship a tomato around the world. Ridiculous! Hi, I’m Rochelle. I was wondering if you could talk a little bit about water. And how water plays into this decentralized vision.
How the privatization of water plays out. I was just hoping you could speak to that. There’s only a small amount of water on this planet that’s available for human reuse. Less than 1%; the rest is not available. There is a deep nexus between energy and water that’s never, just never explained. You have to have energy to move water. And that is that 8% of all the energy we generate in the world —power— goes to extracting water, treating water, moving it through pipelines in water, and recycling the waste.
But you need water to move energy. This isn’t well known. And, that is, the energy industry uses— Over half of all the water we use goes to the power industries. Of all industries, over half. And this will surprise you: In France, which is 80% nuclear power, you know how much of the water they use for cooling off nuclear reactors in France? Almost 50% of all the fresh water consumed in France goes to cooling the nuclear reactors. Yeah, and when the water comes back, it’s heated. So it’s dehydrating ecosystems that are already facing drought for their agriculture. And now, sometimes the water is so hot because of climate change in the summer, they can’t even use it to cool the nuclear reactors and they have to slow down the electricity. So what’s the nexus? We have to begin to create a new plan, so that people get control over their water in a distributed system that brings water together with energy.
I’ll give you an example of why: If the electricity grid is disrupted —let’s say one of the transformers, big electricity transformers, either through cyber crimes, cyber terrorism, or natural disaster goes down and your power goes down— there’s no water. We’re dead in three weeks. That’s how vulnerable system is. That’s why we have to build in resilience by keeping it so distributed. So what do we do? I’m in Hauts-de-France a couple of weeks ago. This little startup— They’ve taken a whole social housing complex, huge housing complex. They took the whole roof and turned it into a cistern. Why did they do that? Because the water falls, and as it falls, it generates electricity in a turbine.
So they’re using for electricity, but now we’re saying, “Use it as a cistern.” So if the power grid goes out and you can’t get water, you’re dead in a couple of weeks. You have the water right built-in to your home office and factory, on the roofs or nearby, you can share it in a cooperative. And then that water can be used, potable for fresh water. And then we’re now talking with companies about… With housing, that you can take the water, use it for your toilet water, and you will be able to recycle it right back on site. So you can go distributed and decentralized when the real power grid goes out. They key to maintaining this system is it’s distributed. If anything happens in one part of the system, you can go off. Well distributed and decentralized, and share your water, share your energy. So water and energy go together, and you’ve just hit —and I’m glad you said this— something that has really come to the top of the agenda for us now: How do we create a distributed water internet to go side-by-side with the energy internet? Very cool thinking.
My name is Elizabeth and I just have a question for underdeveloped countries. How do they play a part in this whole 3rd Industrial Revolution? Can they sort of skip the gun, because they don’t have an established infrastructure? Yeah, you just answered the question I was about to answer. Very good! Well here’s what we realize, just what you said. What we finally realized is in the developing world, their liability is their key asset. Their liability is: they have no infrastructure. That’s their asset. Because, it’s easy to build virgin infrastructure, with new codes and regulations from scratch, than to take an old infrastructure with old codes and regulations and transform it. So what we’re learning in the developing world is this can move more quickly. We saw the opportunity that the developing world can leapfrog right past the 1st and 2nd Industrial Revolution into the 3rd. So the United Nations has now embraced the 3rd Industrial Revolution narrative that we’ve just talked about tonight. The biggest problem in the developing world: No electricity.
Ban Ki-moon has made this his pledge: Universal electricity. We got a billion people that have no electricity. They’re in the dark. We have 40% of the human race with infrequent, not reliable electricity. And what keeps women enslaved in this world? It’s no electricity. And what we see with these big families, in these patriarchal, brutal conditions, and male-oriented cultures? No electricity. Why? Because, with no electricity, women are the slaves, the children of the slaves, more children, more hands on deck that can actually carry the energy load. We forget the relationship between electricity and freeing women in the West. Women were the slaves at the hearth until electricity came in. Electricity freed women from that slavery, if you will, to go to school beyond the first 5 grades, and then electricity created new skills that didn’t require upper-body strength, but up here. Electricity revolution created all sorts of new skills. And, when that happened, as women became more educated and more independent, and had the new skills of the 2nd Industrial Revolution? Fewer babies. You can give out millions of condoms; it’ll make no difference, until you bring electricity into the developing world, free the women, and you have them get educated, and have them be recognized as half the human race.
And what’s interesting is the women are setting up these micro grids—a lot of it. So, you see it in rural Africa, they go into a village —it’s happening in India, too— and small startups. They come in, they lease a solar panel on each roof. They give you a lease, and then they give you a cell phone. This is happening all across rural India and now sub-Sahara Africa. But instead of a big centralized grid then you go village, to village, to village and you create micro grids that are laterally scaled.
This is going to take off very, very quickly—it already is. This is the smart social entrepreneurs of the next generation. This is why I’m really pleased to see this happen. It brings confidence that we can do better. I’m Ray, and I’ve been thinking during your whole talk about how do we overcome monopoly? We have to worry about a new kind of monopoly. Now, I’m gonna be honest with you: I love Google! It is the magic box! I’m now so lazy that anything that comes up, especially in my age, I ask the magic box.
It is a great research engine. However, when everybody needs Google, and it’s the only research engine, and it’s our window to the research we need, it starts to look like a global monopoly, and it starts to look like a public utility. What did we do with successful businesses that had a product line that was so important that everybody needed it, and it was a public good. What did we do in the 2nd Industrial Revolution with the telephone industry? We, in America— In other parts of the world, the government took over a lot of it— but in America we kept them in the private sphere, like AT&T, but we regulated them as utilities. And we did this across the electricity utilities, the many of the power utilities. We regulated them. I think it’s naive to believe that we won’t do this. The Millennials and your children— This is the new political movement. You’re gonna be asking the question: How do we get the best out of these new enterprises, but they have to be regulated as public goods, in the realm, so that we all we all ensure that we get equal access, that we have some control over our creative content and data, may be through block chains, and that we’re able to secure our privacy, etc.
Facebook? Same thing. When the whole human family has to come together on Facebook to communicate with each other, it’s a great service, but it looks like a public good, it’s a utility. And we’re gonna have to have some kind of global authorities to regulate them. Does this make sense? This is the politics of your generation. This is the politics of the new 3rd Industrial Revolution. Hi, I’m Carlin. In the words of your Wharton alumni, how do we make America great again? Let me say something to take us from another corner. President Obama wanted a green economy. He spent billions and billions of dollars of our tax money for a green economy, and we don’t have a green economy. Why did this happen? Because the mentality here in this country is all we need to do is use tax money to incentivize, ’cause we want a million Steve Jobs.
So, what happened with President Obama is he would incentivize, give some money to a solar factory here, a battery factory over there… Incentivize. But you can’t start with that. You have to start with incentivizing the infrastructure itself, which requires everybody coming together. Now, he made a very famous statement during his second presidential campaign, which got to the heart of it. You may recall that he was speaking of small businesses and he made an offhanded comment saying, “You didn’t build that.” Remember this comment? It went viral: “You didn’t build that.” And they went they went nuts. He was referring to infrastructure, and he was trying to say the infrastructure comes first. Then you can create your new businesses with it. The problem is, they went viral because the small business said, “No, we create America! It’s the entrepreneurial spirit!” We’ve actually so dummy down our country that we actually have no idea how businesses feed off the infrastructure that come from public-private partnerships: government, industry, and civil society. Who do they think created the public school systems, so that we could train the workforces? Private businesses didn’t do that.
Who laid out the interstate highways with tax money? You think private businesses will lay out an interstate highway system with no lights from coast-to-coast? Who under wrote all the pipelines that had to bring in the electricity, the gas and the telephone industry? On and on and on… In fact, let’s look at Steve Jobs! The fact is that most of the research that went into his smartphone was government-funded research; he marketed the product! But we’ve so dummy down that half the country or more doesn’t want the government to do anything— They don’t even want the government.
This is the failure of the USA. We do not have a social market economy. Europe does; other parts of the world do. But, in America, we have this whole idea that it’s just the entrepreneurial spirit. Let the companies rule, let the marketplace reign. This is our death now. Because, if we can’t work together in each county, in each state with business, civil society, and academia, to lay out this platform and create the regulations codes and standards, then the new businesses come, then the new models plug in. So what I’m saying is, look to the infrastructure. And your millennial generation, it’s up to you now to bring this sense of a social market economy back into the dialogue. We need government, we need business, we need the civil society, we need public capital, we need private capital, and we need social capital. All three equal players at the table. So, here’s what I will say in closing: I know you get frustrated and sometimes you think, “My Gosh, it’s going too slow!” But now’s the time to redouble your efforts.
We all have to really come together. We’ve got one generation —yours— to lay down this new consciousness, this biosphere for consciousness. Your responsibility to carry this on is the weight that no generations had in history. I don’t know of any period in history where one generation was called upon to save the species. And, if you believe this is really happening, and it is, this is actually the responsibility of the Millennials in this room. We now have, I think, potentially a road map and a compass. It’s gonna be up to the younger generations now. This is the digital revolution.
You are the digital revolution. It’s your turn. It seems to me, if the millennial generation is ready to create this new digitally connected world, it helps us create peace between economy and society and the balance for the planet. It should be now. And what you have to do is you have to join together in the virtual world, in the physical world, on the ground, in the communities, both in the infrastructure and the politics, and the social engagement. You got to make this happen. I’ll give you one little mission: How long is it gonna take for a millennial generation to prepare a bill of particulars for a declaration of human responsibilities and stewardship of our human race, our fellow creatures in the planet we live in? And then you have a billion young people in a cohort in Facebook, and they’re all declaring this, then you’re at the table. You’re at the table, virtually and physically, and then a billion people strong, you should be able to do this in a very short period of time.
This doesn’t take a lot of organizing. Then you’re at the table, with the new potential monopolies. You’re at the table with the governments who would purloined this for their own ends. You’re at the table with the special interests —they want to drag us back to the 2nd Industrial Revolution. Come to the table. Make it happen. Pass on this legacy, so when your grandchildren look back at you they can say you did the right thing: You helped replenish the planet, got us off carbon, helped show our proper respect to generations not yet here, including our fellow creatures. Thank you. Good night. Join us. —Hi. —Hi, I’m Kelsey. I study Design and Technology. What I wanted to say is that— —You’re at Parsons? —No, SVA. But, like, the real problem is that, a lot of people who have this passion and who, like, really do care about this stuff— We’re getting purchased out, and… —Yeah. —So, the real thing is, like, everyone doesn’t have the same enemies. Like, the people who really care, like, they’re going to be purchased, and they’re going to end up working for someone, somewhere, and they’re gonna feel like they have to compromise.
Yeah, I understand… Well, it’s a delicate game every day. You know, as you get older you have to think about what is— Life goes really quickly. And, if one doesn’t have the commitment at 25, you’re not gonna have it at 50. And, this time, we need a generation that can stay close to the mission all the way through their life, and pass it on to the kids. And I understand how difficult this is. Believe me. Hi! Thanks for coming. Thank you so much for this —very enlightening. —My pleasure. —Is there any recommendations on how to get more involved at a local level? Brooklyn’s ideal. Brooklyn should be the place. Absolutely! This is where a lot of the startups are. I 100% agree with you.
I interviewed like 30 people for the documentary I worked on, including Global Dryden, and they all are optimistic long-term. I’m only guardedly hopeful that demographics is on our side. It’s called “the Millennials.” Millennial generation is more sustainable, more ecological oriented, but I think it’s an uphill battle. As Thomas Paine said, “Every generation must recreate the world anew.” The digital generation; you’re there. Do it! You don’t need to look back at those who are our history. Look to the future of what you want for your children. —Hi! How are you? —I just wanna shake your hand. Thanks for coming. So, zero marginal cost is possible if the data centers are for free. —Yeah. —We need it! Well, you have, you know— it’s Wikipedia. They do nonprofit, they get contributions, it’s tough, but they make it because enough people believe in it.
Or you look at Blah Blah Car Etsy. They’ve done it with a little bit commissions. Look at Patagonia— they’ve become a benefit company. And they say— There are eight or nine states that passed legislation now saying, “Look, if you’re a benefit company, profits don’t have to be a first motive; therefore you won’t risk hostile takeovers. So there’s a lot of stuff moving, but it’s difficult. So are you— I encourage you to do that. Take some risk. Don’t sell out. That’s what I’m saying. .
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