The $3.5 trillion infrastructure and spending bill pending in Congress is touted as “the biggest economic transformation since the Industrial Revolution.” Perhaps no one is watching more keenly than legacy companies in the Heartland. Anticipating both unprecedented technological advancement and unprecedented federal investment in industrial regions, Midwest manufacturers, builders, and developers are preparing to adapt.
As a firm that invests in emerging technologies meant for those Midwest businesses, Heartland Ventures believes it is important to maintain a historical perspective on how innovation can transform an economy. What would it mean if we are on the precipice of an economic revolution?
The First Industrial Revolution began in the late 1700s when the British economy exploded upon achieving international dominance in industry. Agricultural improvements made it possible for workers to begin professionalizing trades and consolidating production into factories. The cornerstone innovation of this time was in harnessing the power of steam and coal to mine and make bessemer steel and weave textiles on a massive scale.
As the pace of innovation again plateaued in the mid-1800s, however, recessions plagued the global economy until the Second Industrial Revolution began around 1870. This Technological Revolution brought to the world electricity, the telegraph, petroleum, and the internal combustion engine. Both urbanization and the pace of work itself increased drastically, public transit and cheaper goods became more available, and commercial farming fed a growing urban middle class.
The Third Industrial Revolution, or the Digital Revolution, began around 1980, marked by the shift from mechanical electronics to computers and other digital devices. In the last 40 years, the world wide web, the first cell phones, social media companies, and cryptocurrencies have emerged from our ability to transfer data on transistors and semiconductor chips. The Digital Revolution changed how individuals and companies interact, making the practice of outsourcing feasible, agglomerating massive multinational media giants, and providing on-demand services at progressively lower costs to farther reaches of the globe.
While the three previous industrial revolutions were accompanied by massive population growth and increasing globalization, this fourth epoch presents new challenges for Midwest industry. Departing from a multi-century trend of escalating global connectivity and corporate agglomeration, economists and political theorists predict we may be on track to revert more towards industrial independence and disaggregation. The Fourth Industrial Revolution marks a blurring of lines between the physical, digital, and biological worlds, associated with the internet of things, augmented and virtual reality, and quantum computing. Breakthroughs in areas such as materials sciences, 3D printing, automation, and 5G have made the possibility of re-shoring advanced manufacturing more likely.
There are, however, growing pains. Magnified by the impacts of the COVID-19 pandemic, shortages and disruptions in supply chains have forced Midwest manufacturers to reevaluate how they source and move materials and manage their inventory and networks. Global supply chain disruptions have cost large companies, on average, $184 million in 2021. International tariffs, pandemic uncertainty, and unprecedented material and labor shortages require more investment and development in innovative solutions.
In the face of this uncertainty, there are high hopes for the businesses that have traditionally served as the backbone of the American economy. The invention of both light and flight developed in the Heartland. During World War II, the Midwest was “the most productive and most important region in the world.” Now, the federal government looks to this same region to generate 500,000 new manufacturing jobs and reshore our supply chains over the coming years.
While it is important to reflect on history and historical trends, the primary lesson about what to expect in an industrial revolution is that the future will be more foreign than any one of us could possibly imagine.
Several years ago, Dell predicted that 85% of the jobs that will exist by 2030 haven’t been invented yet. Now, more than ever, it is critical for industrial leaders and technologists to work together to build a better future and harness the productive potential of this revolution together.