Unno School materials

1. Swingby Corporation
March 10th 2018
New Technology and the Future of Japan
By Ed Kuiters

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Jeremy Rifkin: Third Industrial Revolution https://youtu.kbe/QX3M8Ka9vUA
● Industrialization has led to large income gaps
● Environmental crisis, real time climate change, extreme weather patterns,
extinction
● Need a new economic vision, a game plan and quick implementation globally. A
transformation, revolution
Where were we?

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Revolutions; 3 technologies emergere & converge
https://youtu.be/QX3M8Ka9vUA?t=12m40s
Paradigm shifts in history
Emergence of new technology in Communication (Manage), Sources of energy
(Power), Modes of transportation (Move). A new infrastructure
1. First industrial revolution: steam power printing, coal & rail, ship transport
2. Second industrial revolution: centralized electricity, telephone, radio, television and
oil & transport & mass production.
.. so what was the significance of these technological revolutions?

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Economic History

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The Great Divergence - new technology drives income

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One can see an unprecedented and dramatic upturn in the global standard of living that
was initially catalyzed by the First Industrial Revolution, greatly magnified by the
Second Industrial Revolution, and further heightened in the recent age of information
and computer technology.
So.. with IOT, AI, Biotech, etc.. We must be heading for a new period of raising
productivity, economic growth and prosperity.. Right!?
Right?..
Economic History

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Divergence
Between the end of World War II and the mid-1970s, U.S. households fully benefited
from steadily increasing productivity. However, while productivity increases have
continued apace over the last four decades, median household income has been
relatively stagnant and labor’s share of income has declined. The benefits of invention
have not been evenly distributed in the U.S.

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Increasing share for capital

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Productivity growth is slow..

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From 2011 through 2015, the government’s labor productivity measure shows only 0.4
percent annual growth in output per hour of work. That’s the lowest for a five-year span
since the 1977-to-1982 period, and far below the 2.3 percent average since the 1950s.
Paradox: We are awash in transformative technologies — smartphones, tablets, big
data — and yet the growth in labor productivity, which should benefit from all the
technology, is dismal. This matters. If productivity lags, so will wages and incomes.
WHY is productivity growth so low?
About productivity

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● Innovation has slowed, resulting in weak business (productivity growing)
investment.
● The Great Recession “clobbered the economy,” also weakening investment.
● Venture capital has retreated, making it harder for start-up firms to obtain
financing.
● The productivity slowdown is a statistical mirage, because the value of “free”
Internet services (Google, Facebook and the like) is underestimated. (Is it? Ads?)
Hmm.. not so convincing
How can all the new technologies, with countless industries being “disrupted” and
forced to change, coexist with such poor productivity performance?
The answer may be; The cost of transition. The coexistence of old & new brings a “cost
of overlap”
What economists suggest

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Traditional retailers face relentless competition from e-commerce. They can’t abandon
their stores, which often remain the largest source of their sales and profits. (online
sales in 2015 represented only 7.3 percent of total retail sales.) But if they don’t invest
heavily in digital technology, they will lose to Amazon and others. Even powerful
Walmart its same-store U.S. sales, including e-commerce, were essentially flat. Yet, it
made significant investments in its Web operations to defend against e-competition.
Other industries straddle two technological eras. Newspapers publish print and digital
editions. Phone service is split between expanding cell phone networks and receding
landlines.
For the economy as a whole, this represents massive duplication. Businesses are
splintering between wildly profitable firms and those that aren’t. Some companies,
presumably including many digital firms, are hugely productive. Many others are in the
dumps, burdened by parallel technologies. It is the mediocre performance of this
second group that drags down the economy’s overall productivity growth ~ economic
growth. (Samuelson)
Cost of overlap

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And then there is OIL to put the breaks on further
https://youtu.be/QX3M8Ka9vUA?t=16m15s
As world GDP rises.. The demand for oil rises exponentially..
Three key features are
● the low price elasticity of demand,
● the strong growth in demand from China, the Middle East, and other newly
industrialized economies,
● the failure of global production to increase.
These facts explain the initial strong pressure on prices that may have triggered
commodity speculation in the first place. And the strong demand may have moved us
into a regime in which scarcity rents, while negligible in 1997, became perceived to be
an important permanent factor in the price of petroleum.

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Oil is the “break” on economic growth
US GDP growth & World Oil Price

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What is happening with Shale today?
A sharp recovery in drilling — following a drop in activity after the 2014 oil price
collapse. U.S. oil production has surged to an all-time high, above 10 million barrels a
day, driven by growth from America's shale fields.
Despite the achievement, investors still worry about the prospects for shale drillers,
who use expensive advanced technology to produce oil. Frackers remain dependent on
debt, equity and other types of outside capital to replenish rapidly depleting wells.

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How further?
https://youtu.be/QX3M8Ka9vUA?t=20m1s
Germany
The second law of thermodynamics: https://goo.gl/jZQiiU
Simply put in every step of the production process we lose energy..
When increase production we lose energy through energy efficiency.
US at their peak were only 14% energy efficient
What is the most energy efficient nation? Exactly, Japan.. 20%..
So economic growth (more production) is associated with energy loss.. In times of
economic growth energy demand rises quickly..
Oil is a finite energy resource, our technology platform depends on it. We to change the
platform.

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Starting with Physics

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Internet of Things, Blockchain
IOT: https://www.youtube.com/watch?v=QSIPNhOiMoE
Blockchain: https://www.youtube.com/watch?v=SSo_EIwHSd4
Blockchain.. So what? https://www.youtube.com/watch?v=G3psxs3gyf8

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Third Industrial Revolution
Third industrial revolution: digital infrastructure across the world and renewable
energies network & transport & logistics network powered by decentralized renewable
energy.

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The productivity slowdown is not not going away.
Earlier waves of innovation in technology (a computer on every office worker’s desk, for
example) and management strategies (like outsourcing non-core functions) have been
fully put into place and are no longer increasing productivity. Add a slowdown in capital
spending by businesses since the 2008 recession, which means workers aren’t getting
better equipment or software that might help them do their jobs more efficiently. Our
standards of living are just going to grow more slowly in the future, and there’s not
much we can do about it.
Gloomy scenario

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Maybe we just aren’t counting things right. Entire industries are being transformed in
ways hard to account for in data on gross domestic product, particularly in technology
and services. Having a high-powered computer in our pockets and social networks that
let us stay in touch with friends may make us better off than the narrow math of gross
domestic product — which counts only what we pay for — would suggest.
Medium scenario

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Maybe we are just preparing for a new period of growth? Think about a business that is
investing for the future. It hires a bunch of people and opens new offices and builds
new factories. But while it is doing all that stuff, its actual productivity is quite low. It has
a lot of people working a lot of hours, but very low economic output until its operations
are fully up to speed.
In the late 1990s, the stock market was booming and companies were making huge
investments in staff, equipment and information technology. But reported productivity
growth was actually below the long-term trend — only about 1.7 percent a year from
1993 to 1998. Then it began soaring in the years that followed, particularly in the early
2000s. But this time, business investment spending on equipment, intellectual property
and structures is low relative to the size of the economy. However, for example,
engineers at several companies are hard at work trying to perfect driverless cars. At
present, they are a sap on productivity — they put in many thousands of hours of work
with no economic output to show for it. But if successful, their work could radically
increase the nation’s productivity in the decades ahead.
Optimistic scenario

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● Employment
● Income distribution
● Impacts on Society
Issues

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How can we be successful AND do things BETTER
Doughnut Economy:
Critique of economic theory: https://youtu.be/MeknuJWVsTk
Animation: https://youtu.be/2_AMEAnWyRk
VPRO bit.ly/dedonuteconomie.
At Cambridge: https://youtu.be/TQCuBGTHwFo?t=5m01s
(TED: https://youtu.be/1BHOflzxPjI)
How?

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Third Industrial Revolution
The global economy is in crisis.
We will face another 20 years of declining productivity

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Doughnut

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Doughnut

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Globalization is a means to an end.
The end is to create a sustainable self-reinforcing cycle of profit and value, access to a
richer asset and talent pool, and a more compelling value proposition for consumers
employees and investors.
How to get globalized
Getting there will be difficult. Japanese society as a whole and many Japanese
companies must make big changes, but most will start the journey with strong assets:
scale, relative strength in the home market, formidable quality standards and service,
and experience working with an aging and digitally sophisticated population.
Conclusion

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The challenge
The path forward will seem difficult for most senior Japanese executives, figuratively
standing on the shore and looking across the ocean to a world whose language many
of them don’t speak and whose habits and successful behavior seem radically different
from their own.
The transformation
Even if they have concluded that some things in their companies must change, it may
be difficult to imagine how to move the organization in a new direction. The most
expedient path, is “getting the boat pushed out into the current” by ensuring that faster
globalization becomes a leading priority.
Conclusion