THE DIGITAL ECONOMY
2020/6/4
Dr. Len Mei

WHAT IS THE DIGITAL ECONOMY?
 Digital economy derives a large percentage
of economic activities from digital
technologies.
 Digital technologies include internet, cloud
computing, e-commerce, mobile payment,
and increasingly AI, digital currency, etc.
 As the digital technology progresses rapidly,
so is the digital economy.
 In the digital economy, data is commodity.

IN THE AGE OF DIGITAL ECONOMY, THINGS ARE
DONE DIGITALLY
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Old way New way
•Local
•Not searchable
•Not interactive
•Worldwide
•Searchable
•Interactive

GOOGLE REVENUE
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A representation of the digital economy.

THE POWER OF TECHNOLOGY DRIVEN
COMPANIES
 It took Uber only 5 ½ years to surpass
valuation of 107 year old General Motor.
 In 9 years, WeWork became a $47 b
company.
 Apple became the first trillion dollar
company, followed by Amazon.
 Amazon challenges Walmart.
 Cambridge Analytica influenced elections
in India, Kenya, Malta, Mexico, UK, US
and many other countries.
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TOP MOST VALUABLE GLOBAL BRANDS
https://brandz.com/Global
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All these technology companies are in digital technology.

CRITICAL COMPONENTS OF DIGITAL
ECONOMY

COMPONENTS OF THE DIGITAL TECHNOLOGY
Internet, 5G & HPC
Blockchain
Fintech
Big Data/
cloud & edge
computing
Artificial
intelligence
IoT/
automation
Industrie 4.0
Semiconductor
Applications
Enabling
Technology
Foundation
DIGITAL ECONOMY

TOP LAYER - APPS
 Apps can make things happen. For example,
 Automated health assessments can be done
electronically and virtually through digital diagnostics.
 Digital payment is realized by using the digital form of
value, which can be processed electronically.
 Additive manufacturing, using 3D printing, is a
transformative approach to industrial production that
makes parts faster and better.
 E-commerce allows small merchants to reach worldwide.
 Digital currency can eventually replace paper currency.
 This layer is mostly software, algorithm.

SECOND LAYER –ENABLING TECHNOLOGIES
 All apps are built upon a layer of enabling digital
technologies, such as blockchain, Big Data/ cloud
computing.
 This layer integrates algorithms with hardware technologies
(IoT’s, sensors, robots, etc) -- the interface between the
digital and real worlds.
 This layer collects data from the real world and converts
data into digital form for transmission and processing. It also
allow the digital instructions to act upon the real world.
 The brain to process such data is the cloud computing,
which makes powerful computing resources available and
affordable to build applications.

THIRD LAYER - FUNDAMENTAL TECHNOLOGIES
 The underlying technologies that make all
the enabling technologies possible are
internet, 5G telecommunication, high
performance computer and many others.
 This layer is mostly hardware. It is the
infrastructure of the digital economy.
 The most important component of these
hardware technologies are made of
semiconductors.

THREE BRANCHES OF THE DIGITAL ECONOMY
 Industry – (Industrie 4.0) the next generation
manufacturing
 Financial service – (Fintech) the automation
of financial services
 AI – the automation of everything else

DIGITAL MANUFACUTRING

4TH INDUSTRIAL REVOLUTION
 The 4th industrial revolution, or Industrie 4.0, is
the manufacturing using digital technology.
 Worldwide industry output is roughly 30% of
total world GDP.
 When the 4th industrial revolution is complete,
30% of the world GDP will be part of the digital
economy.
 It is estimated that by 2050, more than 50% of
the world industry output will be from Industrie
4.0 factories.

HOW DIGITAL TECHNOLOGY DRIVES INDUSTRIE
4.0
 Digital technology will revolutionize all aspects of the
manufacturing industry.
 Inside of the factory, there will be equipment automation,
factory automation and data automation.
 Equipment automation enables the collection of process
and equipment data from equipment and to operate the
equipment by remote command or artificial intelligence.
 Factory automation enables the execution of production
flow without human intervention. Lights-out factory will be
a reality.
 Data automation serves as the brain of factory. It serves
every aspect of operation, such as optimization of
process, production flow, maintenance and many others.

INTEGRATION OF MANUFACTURING THROUGH
SUPPLY CHAIN
 A factory is a part of the supply chain. When all the factories in
the supply chain are automated, the entire supply chain can be
easily integrated into one huge manufacturing cluster.
 Furthermore, manufacturing will be integrated with design,
product development, market and customers.
 For example, the designers can take customer inputs and design
the products accordingly and factories can tailor manufacturing
process to make the specific products that customers want.
 In a fully developed industrie 4.0 factory, robots will replace many
factory workers, and data automation driven by artificial
intelligence can replace many factory managers and supervisors.
 There are already human-less factories, also known as dark
factories, which operate 24/7, with the lights-out.

DIGITAL FINANCIAL SERVICE

FINTECH
 Financial service industry also represents
30% of world GDP.
 When financial service is fully transformed
digitally, another 30% of world GDP will join
the digital economy.
 Fintech applications can deliver and provide
financial services automatically, which
require human intervention today.

FINTECH
 Blockchain builds “trust” into data and therefore
transforms the internet of information into internet of
value.
 These applications include money transfers,
depositing a check remotely using smart phone,
applying for credit online, or managing your
investments.
 Fintech service is much more secure than today’s
financial service.
 It also breaks down national boundaries.
 Fintech is the financial technology that uses
blockchain as its basic construction element.

 For example, today’s credit card payment requires to
disclose user’s card information, which is prone to fraud.
Fintech payment system does not require to disclose user’s
payment information. It is inherently safer.

BLOCKCHAIN TRANSFORMS INTERNET OF
INFORMATION INTO INTERNET OF VALUE
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Blockchain
• Transferrable
• Unique
• Trustworthy
• Can be copied

FINTECH USING BLOCKCHAIN
 Fintech gets a boost from blockchain
technology.
 Secure
 Fast
 Built-in trust
 Indestructible
 Immutable
 Private
 Low transaction cost
 New applications
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VARIATIONS OF BLOCKCHAIN
 Different applications of blockchain require
different characteristics
 Decentralized vs. centralized
 Permissionless vs. permissioned
 Different levels of permission
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BLOCKCHAIN APPLICATIONS
 Smart contract (Ethereum, Microsoft)
 Land registration (Japan, Sweden, Ukraine, Ghana, Georgia,
etc)
 Commodity trading (Mercuria, Gunvor, Trafigura, Cargill,
Dreyfus, Olam etc)
 Asset digitization (ACC)
 Banking and payment (HSBC, Citi, Barclays, ING, Standard
Chartered, etc)
 Supply chain management (IBM, Alibaba etc)
 Cloud data storage (Storj, Sia)
 5G (Huawei)
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BLOCKCHAIN APPLICATIONS
 Digital currency (Bitcoin)
 Smart contract (Ethereum, Microsoft)
 Land registration (Japan, Sweden, Ukraine, Ghana, Georgia,
etc)
 Commodity trading (Mercuria, Gunvor, Trafigura, Cargill,
Dreyfus, Olam etc)
 Asset digitization (ACC)
 Banking and payment (HSBC, Citi, Barclays, ING, Standard
Chartered, etc)
 Supply chain management (IBM, Alibaba etc)
 Cloud data storage (Storj, Sia)
 5G (Huawei)
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AI, BIG DATA, CLOUDING COMPUTING

DIGITALIZATION OF EVERYTHING ELES
 Besides manufacturing and financial
services, many other economic activities will
also be digitized through AI, Big Data, Cloud
Computing.
 These activities include medical services, e-
commerce, smart cities, legal services, e-
governance, digital argriculture etc.

ARTIFICIAL INTELLIGENCE AND BIG DATA
 Artificial intelligence is the brain of digital
economy.
 AI is created by AI capable computers and
deep learning algorithm digesting collected big
data to form action plans.
 The action plan can either be executed through
human or through IoT’s.
 The more the data, and the more powerful the
AI computers and deep learning algorithm, the
higher is the intelligence of AI.

HOW AI IS CREATED?
Big Data
Neural
Processor
Deep or
machine
learning
Data
storage
Outside world
Hardware Algorithm Memory
AI machine
The central piece of AI is the AI machine, which
acquires intelligence by deep learning of Big Data.

AI ECOSYSTEM
Compare AI to human intelligence.
Comunication
network
Cloud
Data center
AI machine
IoT
sensor
Hardware
Algorithm
Memory
INTERNET
Edgecomputing
withlimitedAI
robot

TWO PARALLEL PATHS OF ECONOMIC ACTIVITY
 There are 50 billion IoT’s
installed worldwide by
2020, 6.4 IoT’s for each
human being.
 IoT growth rate is much
faster than human.
 As AI becomes more
intelligent, it will take over
more sophisticated work
from human, including
many decision making
process.

6. AI
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A.I. research takes off

EDGE VS. CLOUD BASED AUTOMATION
IIoT/sensors
Edge computing/
control system
Equipment/
machine
data control
IIoT/sensors
Edge computing/
control system
Equipment/
machine
data control
IIoT/sensors
Edge computing/
control system
Equipment/
machine
data control
IIoT/sensors
Edge computing/
control system
Equipment/
machine
data
Real time
control
CLOUD
Global (factory
wide)
optimization and
control

 When edge computing acquires deep learning
capability, it allows local device to act upon new
data without requiring sending data to remote
server.
 The device can discern between data to be
uploaded or processed locally.
 Edge computing lessens the need for long-
distance data transfer, therefore, provides fast
response to the ambient.
 Autonomous driving is an example of edge
computing.

HIGH PERFORMANCE COMPUTER (HPC)
 HPC is the brain of AI.
 HPC’s are evolving in three directions:
 Supercomputer – using the existing technology
 AI computer – providing training and inference
based on machine/deep learning.
 Quantum computer – a radically different
computing mechanisms based on quantum
physics.

 IoT and IIoT are small devices attached to any
object to be connected to the internet.
 IoT can report data in real-time, improving
efficiency.
 The data becomes a part of the Big Data, which
feeds into AI machine to make intelligent
decisions and take actions accordingly all
without human intervention.
IOT (THE BRICKS OF DIGITAL ECONOMY)
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5G TELECOMMUNICATION
1980 1990 2000 2010 2020
1
G

HOW SOCIETY WILL BE TRANSFORMED..

TRANSFORMATION OF SOCIETY BY DIGITAL
ECONOMY
 Productivity will increase.
 Many services will be automated.
 By augmenting human intelligence, many research
can be accelerated, such as new drugs.
 Improve healthcare system – life span can be
prolonged.
 Enhanced cyber security
 More efficient use of nature resources to improve
environment
 Better economic planning

DOWNSIDE OF THE DIGITAL ECONOMY
 Wealth will be more concentrated in the hands of
those who have the resources to engage in the digital
economy. A large number of white-collar workers may
be replaced by automation.
 Large work force will be displaced, creating social
problem.
 Concentration of wealth will accelerate.
 Few countries dominating the technology will
dominate the world.
 Privacy will be greatly reduced. Nothing can escape
the surveillance.
 Social credit system will be prevalent.