Which countries are geared to handle technological shifts?

Ending this two-part series is an in-depth discussion with Dr Marco Annunziata, chief economist and executive director of Global Market Insights at General Electric. On Monday, Look ahead spoke with Dr Annunziata about the history of the link between minds and machines and the beginnings of this current wave of innovation.

In this second of a two-part interview he shares with Look ahead his views on how countries are handling the technological shifts of the current innovation wave and how we can best prepare for the next one.

Do such resource requirements mean some countries will be left behind? And, if so, what can be done about this?

I would say that, almost by definition, some countries will be left behind — at least temporarily. There will be countries that underestimate the importance and the potential of this shift, and they won’t move fast enough. And because this technological shift is so powerful, if you accumulate delay, you pay a higher price to catch up.

There is a big debate on whether these innovations will favour advanced economies or emerging economies. Some argue that the advantage will be squarely on the side of advanced economies. I am not convinced.

Countries like the US or the UK, where there is a very open‑minded university system, research and development infrastructure, are indeed well-positioned. But I also see advanced economies that are stuck in a much more complacent frame of mind, where the thinking is “we’ve been advanced for as far as we can remember, so we will remain advanced” and the only big question for them is how to use the government budget and the central bank to make life good for the citizens.

These countries could see themselves slipping very quickly in the rankings. More dynamic and more open-minded emerging markets, by contrast, could be much quicker in reaping the benefits of the current innovation phase.

Another interesting dimension of this mind-machines interaction is that a lot of what is happening today enables the individual to bypass the lack of infrastructure or the shortfall in regulation. You might, therefore, see countries where the population as a whole is more entrepreneurial, dynamic and advancing faster — even if the government is not sufficiently forward-looking.

…this technological shift is so powerful, if you accumulate delay, you pay a higher price to catch up.

You mentioned the US as potential leader. China, with its new “Made in China 2025” plan is also going to be racing for pole position. What key strategic differences do you see in how these two countries approach the current wave of innovation? And are there any strategic insights to be gained by comparing the two approaches?

I think there are a few insights and they go back to the role of policy. When you look at the different approaches in the US and in China, the US is pretty much distributed. There is some effort at the top research labs or government organisations to go in the right direction. There are many important initiatives, but other than that, you don’t really have a full, constant government strategy that sets the pursuit of the current wave of innovation as a priority.

In the case of China, where the economic system is completely different, there is clearly a very structured and determined effort on the part of the government to make the Industrial Internet a priority for investment.

The advantage, in the case of China, is its tremendous focus on the education. If you look at the statistics on how many Chinese students graduate in science and engineering, it is over 40% compared to about 15% in the US.

We can argue about the quality of scientific and engineering education there, but a difference of such a magnitude is nevertheless quite staggering. If you believe what we were saying earlier that skills and education are at the top of the priority list, I think that is one interesting observation.

Another insight is the difference in how these countries foster innovation. In China, there is a strong effort to gradually move their resources away from the underperforming state‑run enterprises and towards companies that can innovate and advance [state-run or not]. There is also a lot of effort spent on trying to create areas where companies and individuals can experiment.

In the US, by contrast, you have the opposite tactic. It’s taken for granted that there is a lot of innovation and experimentation going on, and you spend most of the time from a policy perspective trying to figure out the right way of leveraging that and refinancing it.

I would say the most interesting insight from the comparison between the two approaches is the observation that innovation never stops. As a country, you should never think that you will be able to produce enough innovation, enough activity. You should always be thinking in terms of: “How do I foster more of this?”

Going through this new wave of innovation will require us to make choices about how we interact with machines, some of which may be difficult and/or irreversible. Which tipping points do you feel we should pay the most attention to if we are to ride this wave of innovation successfully?

When you start thinking in terms of the tipping points and the relationship of man and machines, I think the most promising and sensitive area will be healthcare. For example, as we make more progress in using new waves of technology to generate better health outcomes, we will inevitably come across new ways of augmenting human capabilities.

One tipping point here is whether or not we’ll reach a stage where concerns over artificially engineering human capacities become so strong that it forces policymakers and businesses to turn research the other way. This will be a critical moment and, in a sense, it is the other side of the blurry line (where minds become more like machines).

When you start thinking in terms of the tipping points and the relationship of man and machines, I think the most promising and sensitive area will be healthcare.

In thinking of these long‑term trends and trying to understand what is going to shape them and how to best respond to change, what are the two books that you find yourself coming back most regularly for insights and why?

I have both in front of me. The number one book I come back to is Isaac Asimov’s I, Robot. I go back to it because when discussing great innovations, I am struck by how a lot of how we react is constrained by the fact that human nature has not changed very much. I go back to that book because Mr Asimov’s stories encapsulate the interaction between unchanging human nature and these tremendous innovations. I think you need to understand both and keep both in mind if you want to understand how this interaction between minds and machines is going to play out.

The other book is Walter Isaacson’s “The Innovators, which I find fascinating. It’s a great way to remind yourself of what guides the innovation process in terms of the innovators’ mindset — what pushes them in a certain direction — and how that interacts with business creation and business models. Very helpful in thinking about the economic and business implications of all the technological innovations that we’re seeing around us today.

Once the Industrial Internet becomes the norm, where will the next disruption come from?

I think the next wave after this is where we make the jump in terms of true creativity. While the wave we are discussing now will have tremendous economic implications in a positive way, it will do very little to reduce economic tensions across or within countries.

If it succeeds, however, it will have created so much capability in terms of production and wealth creation that the focus will shift to: “How do you improve institutions in a global way? How do you create a situation where the wealth created by new technologies can be spread in a way that is more sustainable while consistent with economic incentives?”

This post first appeared on GE LookAhead. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Elie Chachoua is an expert in strategic and multidisciplinary research.

Image: A researcher uses a microscope after a laser bio- 3D printing of human cells in the laboratory Biotis at INSERM. REUTERS/Regis Duvignau.

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