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Technological Change & How Our Community Can Seize the Future

Picture Birmingham’s future. Will it more closely resemble Detroit or Palo Alto? Our destiny is not in the hands of fate; it’s in our hands as we accurately assess changes in our world and take the strategic steps to ensure success.

Before looking ahead, let’s take a quick step back in history. The First Industrial Revolution flipped the world on its head by using water and steam to power machines. Both Detroit and Birmingham rode high during the Second Industrial Revolution utilizing electricity and the division of labor to make possible the mass production of materials and products. The Third Industrial Revolution has transpired in our lifetime as computers moved out of universities and onto desktops. Now Palo Alto is abuzz with the Fourth Industrial Revolution—the creation of a Cyber-­Physical world.

Let’s consider four technologies that represent a seismic shift globally—and how we in Alabama and specifically Birmingham must respond and capitalize on these advances.

1. Blockchain
Ever heard of Bitcoin? It’s a cyber currency that gives the owner the ability to buy and sell things online anonymously—with no fees. (Each Bitcoin is currently valued at around $900.) These transactions are possible using software called Blockchain. Think of Blockchain as a distributed, shared ledger that records transactions on every participating computer, with automatic updates occurring every 5-­10 minutes. So when a Bitcoin change hands, the transfer is recorded on every computer that is part of the Blockchain. By recording that transfer on thousands of computers you virtually eliminate the potential for fraud.

If you think about a bank and its most basic services, it holds your money and keeps it safe, then ensures that funds go to the proper recipient and keeps that money safe in transit till it arrives at the recipient’s bank or wallet.

Your bank charges a fee for those services but Blockchain can perform them for free. In a real sense, you become the bank. This technology will apply to any slice of life that requires an intermediary to verify facts like recording deeds for land, gun safety checks and academic records.

2. 3D printing
Today 3D printing is greatly increasing the speed of building plastic prototypes. But, in the near future, metallurgical manufacturing will see 3D printing supplant the old methods.

Traditional manufacturing is a subtraction process—taking pieces, cutting them to size, putting them together and then tossing the scraps. Alternately, the nature of 3D printing is an additive process, building things layer by layer with far less waste -‐in our resource-­constrained world.

With 3D printing, complexity is free. You can create impossible geometries and completely custom products with no additional effort or cost. That’s a huge amount of value without the expense and ardor of conventional productions steps.

Let’s say you’ve been a widget builder for 25 years, heavily invested in all the machinery required to make widgets. Along comes a customer need for a new custom widget. Before you’ve even finalized your production specs, a 3D upstart down the road can fill the order. While you face a high barrier of entry, she’s delivered the product for less money with higher customization capacity.

3. The Internet of Things (IOT)
The Internet of Things is the widespread use of cyber-­physical items. Cyber physical things are any physical item, be it a chair, a lamp or a switch that has a connected sensor relaying information back to another device. Factory floors are seeing these devices proliferate. Soon, connected sensors will be in every piece of equipment, saying things like: “my temperature has been 2 degrees above normal, please investigate the cause”. Or “I am going break down next Tuesday so I’ve started printing my new parts on the 3D printer and scheduled the installation with a service provider.” That provider, by the way, just might be a robot.

Food will be grown by closed IOT systems, like the tomato garden at MIT. In this garden, robots read plant-­based sensors that relay when the plant is thirsty, and tells the robot minder to give it more water. The robot understands what weeds look like and removes them. It even can spot a ripe tomato and will pick the fruit at the perfect time.

Right now billions of these devices are connected to the Internet and according to Sysco, that number will reach 50 billion by 2020‐that’s 6.5 devices per person. The Internet of things will make systems so efficient, fast and reliable that Sysco predicts 40% of Fortune 1000 companies won’t exist in 5-­10 years if they don’t adapt.

4. Self-­Driving Cars
I believe that the technology behind Self-­‐Driving cars will decimate our automobile manufacturing base in Alabama and we’ll be lucky to still have 3 factories open in 15 years.

Keep in mind that the automotive industry hasn’t seen radical change in 130 years. For the most part, it’s been a battle of the brands as each carmaker tries to keep its updates at the front of the pack. But that pack is coming under siege.

Almost all the technology innovators have become players in the automotive world. Google has a head start with vehicles that have already logged 1.6 million miles of Level 4, fully autonomous driving on public roads–not on a test course. Last winter Uber hired 40 robotics researchers from Carnegie Mellon University, decimating its robotics department. Apple’s Project Titan has been tuning up its self-­‐driving car for four years. Faraday Future, backed by Chinese investors, secured $335 million in incentives from the State of Nevada to build a billion-­dollar manufacturing facility where 4,500 people will produce self-­driving cars.

Legacy manufacturers are trying to get a handle on this radical change in the industry. There are no best-­practices, accepted technologies or preferred engineering platforms. There isn’t even an agreed-­upon way to develop the car; it’s like a decentralized space race.

One school of thought, embraced by Tesla, Ford and other legacy automakers, asserts that you start with a regular car and add features until you end up with a fully autonomous vehicle. The other camp tosses out convention and designs from scratch with the emphasis on applying technology that results in a self-­driving car.

We’re not talking about a far-­in-­the-­future introduction. The Wall Street Journal reports that Apple will unveil its entry in 2019. Google is aiming for 2020 with Nissan expecting them in showrooms by 2021.

Goldman Sachs anticipates that, by 2020, there will be pockets of autonomous vehicles operating in the United States and, by 2025, usage will be relatively widespread with multiple models available.

This technology alone won’t affect the overall level of demand for automobiles in the United States. Last year 15.6 million vehicles were sold; around one million of those cars in Alabama. Good for us but what about our future?

What if the tech companies become the major players and leave Alabama’s automakers in the dust? We could survive the loss of one company but what if they are all replaced by tech companies? It forces us to begin recruiting efforts all over again. But what if a disruption occurs among the buying public?

It’s not just possible—it’s logical. The average auto owner uses his or her vehicle a mere 4% of the time. Yet it’s the second largest capital expenditure for an American family and is their second biggest operating expense each year. It depreciates 20% the first year and 15% for every year after that. Plus, where you take your car, the landlord had to spend $5,000-35,000 for a place to park it. All that expense to use it only 4% of the time‐it’s a scenario begging for disruption.

A turn in the road
Consider a very realistic alternative: You start with a fleet of fully autonomous cars, add a driving service like Uber or Lyft, make these vehicles ubiquitous and integrate their app into your smart phone.

In this scenario, you step out of your home where a pre-­scheduled car is waiting to take you to your destination. And when you are done there, another car is waiting to take you to the next place. As a consumer, you get the same level of mobility at 10-­‐20% of what you currently pay to own your car.

Those vehicles are now are utilized 80% of the time instead of 4% so one car can do the work of ten. Consider the impact: vehicle demand decreases, vehicle pollution is decreased and fewer vehicles on the road eliminate the need for governments to spend money on adding lanes. Those HOV lanes of the ‘90s will likely become Autonomous Vehicle lanes.

Concerned about safety? It turns out the least safe component of an automobile is the human driving it. Every year 33,000 people in the US die from car crashes. This innovation also solves the escalating problem of distracted drivers—they can text all they want en route because they’re no longer driving.

Consider the ripple effect on jobs when self-­driving cars take over. Fewer cars, fewer people to build them, fewer auto maintenance providers, and fewer insurance providers. It’s a win for consumers but it spells serious trouble for our current automobile industry.

John Zimmer, former executive at BMW and Tesla said in September that car ownership would “all but end” in cities by 2025.

Hundreds of technologies to come
With these four technologies, customers get better outcomes for less money. The owner is able to squeeze out massive amounts of excess capacity.

The Internet of things and 3D printing will greatly reduce the number of people needed in the manufacturing process. Blockchain will radically restructure the financial world. Autonomous vehicles will cause the greatest upheaval in transportation we’ve ever witnessed. Yet these are only four technologies out of hundreds that will emerge and disrupt a host of industries.

Now here’s a little secret for surviving the Fourth Industrial Revolution: the further up the chain of disruption you are, the safer your job or your company is.

Take a look at Goldman Sachs, for example. Most people think it is a financial services company but, according to their CEO, that’s wrong. Lloyd Bankfein says Goldman Sachs is a technology company. Of its 33,000 full-­time employees, 9,000 of them are engineers and programmers. That’s probably twice the number of programmers and engineers at Facebook. They fully understand that as they move further up the chain of disruption, the more money they can make. That’s what makes it one of the smartest companies in the world.

Back to Birmingham
How will Birmingham and its economy perform in this rapidly transitioning world? Cities like Palo Alto were practically built on this change. Some cities will easily adapt to this type of change and some simply won’t. I think we’re somewhere in the middle so the way we respond will determine if our future is bright or fading.

Legacy automakers like GM or Ford could have anticipated changes and hired those 40 robotics engineers from Carnegie Mellon‐especially since they’ve been working on driverless cars far longer than Uber­‐but they didn’t.

Larry Burns, a former GM executive and University of Michigan professor, speculates, “I don’t think auto companies had a bone-­‐deep belief that it was possible. I don’t think they had that belief because they weren’t developing the state-­‐of the-­‐art [technologies]. The only people who really know what’s possible with driverless vehicles are the ones working in that frontier of knowledge.

There’s our key to the future: knowledge. It won’t fall in our laps and, if we get it secondhand, someone is already ahead of us. To remain competitive, we need to acquire our fair share of knowledge by increasing our people and pathways to that information.

Let’s think strategically about our current assets as an region: a thriving research institution with UAB, the largest urban center in the state, a base to internationalize our population, an excellent cost-­of-­living and a medical hub for the state.

To succeed, we must overcome three key obstacles: a fragmented government, a deficit in workforce training and our inclination to be slow to embrace change. These may sound intimidating—until you consider the alternative.

Let’s brainstorm with a focus on five key initiatives:

  1. Turn UAB into the very best STEM undergrad program in the country.
  2. Work closely with Huntsville based companies to solicit relocations and open doors for other opportunities in the tech sector. Alabama columnist Steve Flowers writes: “Huntsville is the crown jewel of the state. It is as though it really does not belong in Alabama. It is like the Silicon Valley of California or the Research Triangle of North Carolina was placed in North Alabama. Huntsville has more PhDs per capita than any city in the southeast.
  3. Solve the “flip” city issue by identifying local capital ready to buy local tech companies to keep them here.
  4. Mobilize a governor-­appointed task force on the future and draft the most progressive, research and tech-­‐friendly laws in the country.
  5. Create a corridor ready for autonomous cars between Birmingham and Huntsville as an innovation zone, linking our medical research and their military/tech research.

This can be done. Birmingham exists because a group of capitalists were on the front end of the Second Industrial Revolution. Seizing opportunities and looking ahead is in our DNA.

I want my five children to graduate from college and find the jobs they want here—not Nashville or Atlanta. A united business community truly can’t be stopped. If you need a little inspiration, consider what Hatton Smith, Steve DeMedicis, Justin Craft et al. did to bring back UAB football.

What’s your role in our future? Be active. Be vocal. Put your money where your mouth is. Here are three starting points:

  1. Don’t let government hurt our chances. The fact that we were the 192nd city in the United States to get Uber is unacceptable. If you think a politician is standing in the way of jobs and a job-­‐creating environment, don’t complain. Instead, commit to taking action. If you don’t live their district, help support other candidates running or even recruit better candidates. The fact that we have fragmented government means that we, as a people, must be more united.
  2. Treat UAB like our crown jewel. Former Mayor Richard Arrington regarded his support of UAB as one of his proudest actions. Whenever they asked for something, they got it. We need to offer it the same deference and support.
  3. Come up with your own solutions.

Detroit or Palo Alto? The decisions we make, the dreams we pursue, the initiatives we support, the government officials we elect and the actions we take will determine our future. Let’s come together to be at the forefront of the Fourth Industrial Revolution.

 

Watch a video of Derek’s presentation on our Facebook page.

Let’s consider four technologies that represent a seismic shift globally—and how we in Alabama and specifically Birmingham must respond and capitalize on these advances.

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by Derek Waltchack
03.15.2017