Make way for the Third Industrial Revolution

The third industrial revolution is upon us, and if you ask economist Jeremy Rifkin, it’s a good thing. Not only might it help us get rid of carbon energy in time to save the planet, but in a near future 80 percent of today’s vehicles may be eliminated and electricity become virtually free.

The Vice Documentary ‘The Third Industrial Revolution’ is a one hour 45 minutes documentary with Jeremy Rifkin. Copyright: Vice (YouTube).

American economist and social theorist Jeremy Rifkin has worked with energy issues since 1973. He is a university lecturer, author of 20 books and advisor to world leaders such as Angela Merkel, the German Chancellor. He has helped the European Union design a road map for the future, called Digital Europe, and was the main architect behind China’s information superhighway, called China Internet Plus. Both projects aim to build a digital infrastructure to connect vast regions with each other, thereby laying the foundation for a whole new economic system.

Jeremy Rifkin in the Vice documentary (YouTube). Copyright Vice.

“If we look at the great economic paradigm shifts in history, they share a common denominator”, Mr Rifkin says in an interview with Business Insider. “At a moment of time, three defining technologies emerge and converge to create what we call in engineering a ‘general-purpose technology’ that forms an infrastructure that fundamentally changes the way we manage power and move economic activity across the value chain”.

The fundamental change of our time, according to Mr Rifkin, is the convergence of three internets. It began 25 years ago with the communications internet, which is now converging with a second internet, the one for renewable energy.

“In the end everyone is going to produce their own green electricity”, Jeremy Rifkin says in a Vice documentary released earlier this year. “In 1978 it cost 78 dollars to generate one watt of solar energy in the US. Today it costs 50 cents, and it is going to be 35 cents 18 months from now. It’s going to continue in this exponential way, and once you’ve paid your fixed costs for installing your solar panels or wind turbines, the cost is zero. The energy is free. It’s over for fossil fuel and nuclear energy. The next big bubble is going to be the hundred trillion dollars in stranded assets in the fossil fuel industry”.

The third internet, which is going to converge with the other two, is the automated transportation logistics internet. These three internets ride on top of a platform called the Internet of Things (IoT), which is built up of all the sensors that are gradually being embedded into all our machines and devices, allowing them to monitor real-life activity and communicate with one another and with us.

“The new platform is really radical, because it is designed to be distributed, not centralised”, Rifkin says in the Vice documentary. “It works best when it is collaborative, open and transparent, rather than closed and proprietary. 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.”

According to Mr Rifkin, there are huge environmental and climate benefits to be made here, but in order to explain those, we must first dig into one of his favourite phrases: aggregate efficiency.

Aggregate efficiency and zero marginal cost

The higher the aggregate efficiency of a good or service, the less waste is produced in every single conversion in its journey across the value chain.

During the second industrial revolution no country has been able to reach higher than 20 percent (Japan) aggregate efficiency. That number is usually seen as the limit. When we shift to the third industrial revolution infrastructure however, the old laws will no longer apply.

“In a network neutral world, you’re going to be able to go out on the Internet of Things platform and cut your big data out of the noise”, Jeremy Rifkin tells the audience in the Vice video. “Then you can create algorithms and apps that will allow you to dramatically increase your aggregate efficiency in every step of the conversation of your value chain. And as you do that, you dramatically increase your productivity and dramatically decrease your ecological footprint. Increasing your aggregate efficiency means using less of the Earth and getting more out of it. It also means you dramatically plunge your marginal cost. Some of those marginal costs are going to get so low that they hit near zero marginal cost. And when they do that it gives rise to a completely new economic system.”

The Sharing Economy

That new system is called the sharing economy. In the digital world this isn’t new at all. Billions of people are on the internet every day, producing and sharing virtual goods beyond the market, thereby disrupting entire industries. Few experts though that this revolution would be able to make the leap from the digital to the physical world, but the Internet of Things has broken down that barrier.

“Already, millions of people use car-sharing networks as their primary mode of transportation”, Jeremy Rifkin says to Strategy + Business. “Millennials don’t want to own automobiles. They want access to mobility in car-sharing networks. Meanwhile, the marginal costs of autonomous, self-driving electric vehicles operating with near-zero marginal cost renewable energy will plummet. Today, there are about a billion cars, buses, and trucks, and they are the third major cause of global warming emissions, after buildings and beef production. We’ll likely eliminate 80 percent of vehicles in the world in the next two generations as we shift to car and truck sharing via provider–user networks.”

Threats of Big Data management

It should be noted that — just like many others — Jeremy Rifkin is worried about the potential threats of a big data system connecting us all. How do we deal with network neutrality, for example? How do we make sure governments don’t purloin the data for their own political purposes? How do we ensure privacy and data security when everyone’s connected? How do we prevent cyber crimes and cyber terrorism that could take the whole system down when everyone’s connected?

”This is a political struggle that starts with the millennials and continues with their children and grandchildren”, says Jeremy Rifkin.

Facts about Jeremy Rifkin

Jeremy Rifkin is president of the Foundation on Economic Trends (FOET),a non-profit organisation established in 1977.

He is also the president of the TIR Consulting Group, which is comprised of consulting organisations in the fields of energy efficiency, renewable energy technologies, construction, advanced fabrication manufacturing, engineering, urban planning, architecture, real estate, information and communication technologies, power and utilities, and transport and logistics.

Jeremy Rifkin has been an advisor to the leadership of the European Union since 2000. He has advised three presidents of the European Commission — Romano Prodi, Jose Manuel Barroso, and the current President, Jean-Claude Juncker — as well as the European Commission, the People’s Republic of China, and numerous EU heads of state, including Germany’s Angela Merkel, along with many companies.

Mr Rifkin is the author of 20 books, including “The zero marginal cost society”, “The third industrial revolution” and “The empathic civilization”.

Jeremy Rifkin, 72, is also a lecturer on the executive education programme at the University of Pennsylvania’s Wharton School of Finance.

He argues that both capitalism and the fossil fuel industries are hitting limits that stem from the laws of thermodynamics, and that investor-based capitalism will inevitably be replaced by a more distributed and streamlined network-based capitalism, alongside a sharing economy governed by a high-tech global commons.

Web site: www.foet.com

Written by: Markus Lutteman

Proof reading by: Jane Davies


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