Amidst the hype of digitizing lives, we haven’t been attentive to the sacrifices that society has to make in order to step into the digital era. There are very important drawbacks of the digital revolution to consider and act upon before we completely move away from the conventional way of doing things. Certain groups of the population face more damage in a digital world than advantages and it’s important to bring along the balance. One of the most interesting recent books on the digital economy was published by HBR. Some important drawbacks worth thinking about were pointed out in the publication.
The author, Don Tapscott, presents an interesting thought, “Some signs point to a new economy in which wealth is even further concentrated, basic rights like privacy are vanishing, and a spiral of violence and repression undermine basic security and freedoms. Pervasive evidence exists that indicates the basic social fabric is beginning to disintegrate. Old laws, structures, norms, and approaches are proving to be completely inadequate for life in the new economy. While they are crumbling or being smashed, it is not completely clear what should replace them. Everywhere people are beginning to ask, “Will this smaller world our children inherit be a better one?”
Imbalanced labour market
According to the International Labour Organization, in the 20 years in which we have been going through a digital revolution, the young workforce has faced massive unemployment in all regions. The situation is quite dramatic for North Africa, where youth was unemployed at a rate of more than 30% in 2014, which is 5% higher than it was 5 years prior. But most surprisingly, digital transformation didn’t quite help youth even in the developed world. One would think that a young tech-savvy workforce is the one to benefit the most from the digital world, yet that would be a big misconception. Youth unemployment in developed economies and the European Union went from a little more than 13% in 2008 to more than 17% in 2014.
Admittedly, we can’t blame everything on digital transformation. Outsourcing has always been affecting the domestic workforce in a negative way. Cheaper services in the developing world incentivize corporations to move parts of costly operations abroad.
There are two important components to domestic structural unemployment to keep in mind – AI and cloud-computing.
The ability to perform technology development in the cloud has created a great opportunity to hire a cheaper foreign workforce without significant efficiency losses.
AI is a whole another story, but in short, advanced AI machines are already able to leave certain categories jobless almost anywhere in the world (in the developed world especially). Insurify’s Evia, Google DeepMind and IBM Watson are just three of the many ‘hazards’ to human employees worth mentioning. Smart machines will become even smarter and will be able to perform highly skilled operations with help of IoT. If a 3D printer is already able to print human organs, Watson can diagnose brain cancer and a sophisticated robot will be able to perform a surgery one day while the doctors can throw away their diplomas and decades of education.
Self-driving cars will most certainly wipe out the taxi industry as we know it now. Massive pools of people working in hospitality and the taxi trade will be out of busines looking for jobs. It is a matter of time when services like Lyft, Gett and Uber will replace human drivers with self-driving cars that Google and Tesla will build for them.
The author of the book we have mentioned earlier warns that “rather than a Schumpeterian 'creative destruction,' we’re seeing structural elimination of entire labor markets”.
Say ‘goodbye’ to personal privacy
It shouldn’t be a surprise for anyone that the term ‘privacy’ will vanish in the nearest future. What’s even worse, there is no choice about it as it is an irreversible process of destroying the personal digital space.
“Most of us believe we have the right to decide what personal information we divulge, to whom, and for what purpose. Left unchecked, the internet could render such thinking irrelevant,” says Don Tapscott. Unfortunately, the author is not too far from reality in his thinking. It would take quite a long time (and space) to list all data breaches that happened in 2015, but as a matter of fact, no industry and no personal information is protected anymore.
Leaving a digital footprint about any action taken is one of the hallmarks of a modern society. Services like Instagram, Twitter, Facebook, contain so much private and granulated information about personal lives, that nothing can be hidden anymore.
One of the steps that European society tried to take to reverse the ‘privacy catastrophe’ was the “Right to be forgotten” act that empowered people to request the deletion of the linking to any personal information in Google’s search engine. But the important thing here is not to act on the outcomes, but to give control over personal data in the first place. Any personal information provided to the companies must be irrevocable by the owner of that information.
Deep social and wealth inequality
While we have been advocates of financial inclusion fostered by FinTech, there is a certain controversy in that idea. Even though it is widely believed that, in the last decade, financial technology is actually democratizing financial services and improving the financial situation for the underprivileged and general population, in fact, the wealth inequality in the US has been deepening dramatically over the past 50 years with a significant acceleration in the last 15 years. If in 2000, the top 0.01% of the US households had consolidated around 7% of the wealth, by around 2013 the number jumped to more than 11% and demonstrates a growing trend.
It would be expected that the digital revolution plugs more people into the financial world and provides more opportunities for prosperity, but the situation is actually reversed. While we can’t directly connect those two things together, it is quite clear that digitization wasn’t actually able to fight inequality. Moreover, the growing trend of deepening wealth inequality didn’t even slow down in the digitizing world; it is more rapid between 1990 and 2015 than it was between 1960 and 1990.
Social inclusion is also quite a debatable topic when it comes to the digital revolution. Yes, digitization can plug people into the world and create a connected global society. But if someone doesn't have access to digitized information, what difference does it make?
Painful governmental and corporate transformation
Not to be too dramatic about the digital revolution, but there are wonderful outcomes when it comes to governmental services (transparency, accessibility, etc.). However, most complex systems like governments and the massive corporate sector with legacy systems in place, have been facing the changes at quite a slow pace and at high cost. It takes more than to just to plug in a laptop to digitize some governmental services. Human resources, costs related to education, equipment changes and restructuring are all extremely time and resource consuming.
Credit unions' digital transformation is one of the examples of how some of the oldest financial services systems pave their way to the new world. The traditional banking industry has just now turned to FinTech in the fight for relevance.
Even though there are positive outcomes in that, it is not clear how digitized government will be able to serve those who don't have access to the Web in the developing world. If the vast majority of the population in certain countries doesn’t have any device that could be connected to the Web, would a digitized government be able to reach them? Again, another drop in the bucket of social exclusion.
It's lso worth mentioning that in case of a failure the digitized government will have many more hazardous outcomes than the one dependent on a human. Data loss and system failure that may be irrevocable will cause higher destruction than would happen if there were a non-digital backup.
Redefinition of political systems
Even political systems are beginning to get affected by digitization. We have seen an example rolling out in Australia where blockchain is applied to build democracy 2.0. While in the developed world ,digital political systems could facilitate participation and inclusion, in the developing world it is quite debatable that digital systems can improve the situation unless there is an infrastructure built for it. Unless the whole population has access to electronic voting, democracy will have a tendency to be ruled by the part of the population that has access.
Another point here is related to the hazard of cybercriminals who will be able to tweak the digital voting results. Indeed, if they are capable of causing data breaches in the world’s largest and most reputable corporations that have almost infinite funds to protect themselves, what would protect governments?
In addition to the hazard of a manipulation, a digitized political system may face the problem of artificially caused voting imbalances. The power-holding part of the population of a certain country may be able to ‘buy’ the votes from the ones in need and significantly affect the political decisions. Not that it is not happening now, but the digital revolution may make it even easier as there will be an ability to track and control electronic votes.
Those are not the only drawbacks of the increasingly digitizing world, of course. With time, other problems may emerge and sharpen. However, it would be wrong to say that we should inhibit the transformation as there are certainly positive trends as well. The important thing to keep in mind, while sharing a post on LinkedIn for example, is that technology itself and its capacity is useless and even dangerous if it is not channeled to serve the goal of improving a human life. If the technology is deepening social and wealth inequality, erasing privacy and exposing massive populations to unemployment, is it a good cause to work for?