The Industries of the Future - Softcover

Alec Ross is one of America's leading experts on innovation. He served for four years as Senior Advisor for Innovation to the Secretary of State Hillary Clinton, a role created for him by Senator Clinton, which earned him a Distinguished Honor Award from the State Department. He is currently a Senior Fellow at Columbia University's School of International & Public Affairs and serves as an advisor to investors, corporations and government leaders. Ross lives in Baltimore with his wife and their three young children.

The Industries of the Future INTRODUCTION

Adapt or perish, now as ever, is nature’s inexorable imperative.

—H. G. Wells, A Short History of the World (1922)
THE WRONG SIDE OF GLOBALIZATION

It’s 3:00 a.m., and I’m mopping up whisky-smelling puke after a country music concert in Charleston, West Virginia.

It’s the summer of 1991, just after my freshman year of college. While most of my friends from Northwestern University are off doing fancy internships at law firms, congressional offices, and investment banks in New York or Washington, I am one of six guys on the after-concert janitorial crew at the Charleston Civic Center, which seats 13,000 people.

Working the midnight shift is worse than jet lag. You have to decide if you want your work to be the beginning of your day or the end of your day. I would wake up at 10:00 p.m., eat “breakfast,” work from midnight to 8:00 a.m., and then go to bed around 3:00 p.m.

The other five guys on the crew were a tough bunch. They were good guys but beaten down. One carried a pint bottle of vodka in his back pocket, which was done by “lunch” at 3:00 a.m. A scraggly redhead from the hollows, the valleys that run between West Virginia’s hills, was sort of near my age. The others were in their 40s and 50s, at what should have been the peak of their wage-earning potential.

The way country music concerts work in West Virginia is people drink way too much. Our job was to clean up the result. The six of us canvassed the arena with enormous jugs of fluorescent-blue chemicals, which, when poured on the concrete floor, would just sizzle.

The last wave of innovation and globalization produced winners and losers. One group of winners were the investors, entrepreneurs, and high-skilled laborers that congregated around fast-growing markets and new inventions. Another class of winners were the more than 1 billion people who moved from poverty into the middle class in developing countries because their relatively low-cost labor was an advantage once their countries opened up and became part of a global economy. The losers were people who lived in high-cost labor markets like the United States and Europe whose skills could not keep up with the pace of technological change and globalizing markets. The guys I mopped with on the midnight shift were the losers in large part because the job they could have gotten in a coal mine years before had been replaced by a machine, and whatever job they could have gotten in a factory from the 1940s to the 1980s had moved to Mexico or India. For these men, being a midnight janitor was just not the summer job it was to me; it was one of the only options left.

Growing up, I thought that life in West Virginia was representative of life everywhere. You were doing your best to manage a slow descent. But the phenomenon I was witnessing in West Virginia really made sense to me only as I traveled the world and saw other regions rising as West Virginia was falling.

Twenty years after pushing a mop on the midnight shift, I’ve now seen the world and been exposed to the highest levels of leadership in the biggest technology companies and governments around the world. I’ve served as Secretary of State Hillary Clinton’s senior advisor for innovation, a position she created for me just as she became known as Madame Secretary. Before going to work for Clinton, I served as the convener for technology and media policy on the Obama campaign that beat her in the 2008 presidential primary and had spent eight years helping run a successful, technology-based social venture that I cofounded. My job at the State Department was to modernize the practice of diplomacy and bring new tools and approaches to addressing foreign policy challenges. Clinton recruited me to bring a little innovation mojo to the tradition-bound State Department. We had a lot of success, and at the time that she and I left in 2013, we were ranked as having the most innovation-friendly culture of any cabinet-level department in the federal government. We developed successful programs to address nasty challenges in places as varied as the Congo, Haiti, and the cartel-controlled border towns in northern Mexico. In the background of all this was the role I played building a bridge between America’s innovators and America’s diplomatic agenda.

In this time, I spent much of my life on the road. I saw a lot of the world before and after my time in government, but the 1,435 days I spent working for Hillary Clinton gave me a particularly intense, close-up view of the forces shaping the world. I traveled to dozens and dozens of countries, logging more than half a million miles, the equivalent of a round trip to the moon with a side trip to Australia.

I saw next-generation robotics in South Korea, banking tools being developed in parts of Africa where there were no banks, laser technology used to increase agricultural yields in New Zealand, and university students in Ukraine turning sign language into the spoken word.

I have had the chance to see many of the technologies that await us in the coming years, but I still often think back to that stint as a midnight janitor and the men I met there. The time I spent gaining a global perspective on the forces shaping our world helped me understand exactly why life had grown so rough in my home in the hills and why life was getting so much better for most of the rest of the world.

The world in which I grew up, the old industrial economy, was radically transformed by the last wave of innovation. The story is by now well worn: technology, automation, globalization.

While I was in college in the early 1990s, the process of globalization accelerated further, bringing to an end many of the political and economic systems that defined yesterday’s economies. The Soviet Union and its satellite states failed. India began a series of economic reforms to liberalize its economy, eventually bringing more than a billion people onto the global economic playing field. China reversed its economic model, creating a new form of hybrid capitalism and pulling more than half a billion people out of poverty.

The European Union was created. The North American Free Trade Agreement (NAFTA) came into effect, integrating the United States, Canada, and Mexico into what is now the world’s largest free trade zone. Apartheid ended and Nelson Mandela was elected president of South Africa.

While I was in college, the world was also newly coming online. The World Wide Web was launched to the public, along with the web browser, the search engine, and e-commerce. Amazon was incorporated while I was driving to a training site for my first job out of college.

At the time, these political and technological shifts did not seem as important to me as they do now, but the changes that took place while I was growing up in West Virginia and that accelerated with the rise of the Internet have made the lives we lived even just 20 years ago seem like distant history.

Those people in my hometown with worse job security than their parents are still living a better life when you measure it up against what their money can buy today that it could not decades ago, including more and better communications and entertainment, healthier food, and safer cars and medical advances that keep them alive longer. Yet they’ve been through a raft of changes, both positive and negative. And all this change will pale in comparison to what is going to come in the next wave of innovation as it hits all 196 countries on the planet.

The coming era of globalization will unleash a wave of technological, economic, and sociological change as consequential as the changes that shook my hometown in the 20th century and the changes brought on by the Internet and digitization as I was leaving college 20 years ago.

In business areas as far afield as life sciences, finance, warfare, and agriculture, if you can imagine an advance, somebody is already working on how to develop and commercialize it.

The places where innovation gets commercialized are expanding too. In the United States, breakthroughs are coming not only from Silicon Valley, from the Route 128 corridor around Boston, or from North Carolina’s research triangle. They are beginning to come out of Utah, Minnesota, and the Washington, D.C., suburbs in Virginia and Maryland. The breakthroughs will not be exclusively American, either.

After years of growth rooted in low-cost labor, there are promising signs of innovation coming from the 3 billion people who live in Indonesia, Brazil, India, and China. Latin American countries with a face to the Pacific, including Chile, Peru, Colombia, and Mexico, appear to have figured out how to position themselves in the global economy. The highest-skilled labor markets in Europe are producing start-ups that make Silicon Valley green with envy, and in tiny Estonia, “the little country that could,” the entire economy seems to be an e-economy.

Innovation is likewise transforming Africa, where even in the refugee camps of the Congo, technologies as simple as the cell phone are connecting people to information and each other as never before. Africa’s entrepreneurs are now changing the face of the continent, fueling development and creating a new class of globally competitive businesses.

Everywhere, newly empowered citizens and networks of citizens are challenging the established order in ways never before imaginable—from building new business models to challenging old autocracies.

The near future will see robot suits that allow paraplegics to walk, designer drugs that melt away certain forms of cancer, and computer code being used as both an international currency and a weapon to destroy physical infrastructure halfway around the world.

This book examines these breakthroughs, but it is not simply a hosanna to the benefits of innovation. Advances and wealth creation will not accrue evenly. Many people will gain. Some people will gain hugely. But many will also be displaced. Unlike the previous wave of digital-led globalization and innovation, which drew enormous numbers of people out of poverty in low-cost labor markets, the next wave will challenge middle classes across the globe, threatening to return many to poverty. The previous wave saw entire countries and societies lifted up economically. The next wave will take frontier economies and bring them into the economic mainstream while challenging the middle classes in the most developed economies.

Across large swaths of the globe, people feel newly under siege by rising inequality and unwelcome disruption. A pervasive sense that it is becoming harder to find your place in the world or get ahead is rattling many societies.

Innovation brings both promise and peril. The same forces that are unleashing unparalleled advances in wealth and welfare may also allow a hacker to steal your identity or hack your home. A computer that can speed up analysis of legal documents can also shrink the number of lawyers in the workforce. Social networks can open doors to form new connections or create new forms of social anxiety. The digitization of payments can facilitate commerce or allow for new forms of fraud.

When I was a college student at the dawn of the Internet revolution, I did not have the slightest inkling of the future that lay ahead. I wish I had been able to read a book back then that took a good stab at what was next. Certainly no one is omniscient, but I have been fortunate enough to gain a glimpse of what lies around the next corner.

This book is about the next economy. It is written for everyone who wants to know how the next wave of innovation and globalization will affect our countries, our societies, and ourselves.
GROWING UP IN THE OLD ECONOMY

To understand where globalization is going in the future, you have to understand where it’s coming from. I grew up in Charleston, West Virginia, a city whose history reflects America’s centuries-long rise as an economic powerhouse from the grime-covered mines that helped fuel its growth. West Virginia was built on coal, much the same way that Pittsburgh was built on steel and Detroit was built on cars. Indeed, it was West Virginia’s connections through coal to the industrial North that led it to secede from Virginia and the more agricultural South when the American Civil War broke out.

West Virginia’s position mirrored that of other mining centers connected to the Industrial Revolution’s first manufacturing bases. In the United Kingdom, Midlands cities like Manchester and Leeds became the industrial base. London provided the finance. Coal came from Wales. In Germany, the Ruhr region near the Rhine River valley became a manufacturing center. Coal came from eastern Germany and Poland.

Today coastal China, particularly the areas around Shenzhen and Shanghai, has become the world’s factory. Its coal comes from western China and Australia. Similarly, mining regions in India’s northeastern peninsular belt, Turkey’s Anatolia region, and Brazil’s Santa Catarina region supply the industrial bases of their emerging economies and other economies around the world. In each region, mining offers a stepping-stone toward greater economic ties and opportunities—at least for a time.

Building on its coal boom, West Virginia developed complementary industries that cemented its position as an industrial supply center and eventually presaged its decline. In the early 20th century, Charleston underwent its second boom: chemicals. The Union Carbide Corporation established the world’s first petrochemical plant in West Virginia in 1920.

With America’s entry into World War II, massive amounts of synthetic rubber were needed to meet wartime demands. Union Carbide, which became the largest employer in West Virginia and one of the top ten chemical companies in the world, launched a period of growth that continued well after the war. Between 1946 and 1982, its revenues increased from about $415 million to more than $10 billion. During that time, it employed as many as 80,000 people globally, roughly 12,000 of them in West Virginia. And as the company continued to grow, so did Charleston. By 1960, its population had grown to 86,000 from 68,000 before the war.

When I was in school, a big percentage of my classmates were children of chemical company engineers. Their families were often the most worldly, arriving from top universities around the country and the globe. And for over a century, the old-economy industrial fields of West Virginia—coal, chemicals, and plastics—were stable, reliable career choices.

My family came to West Virginia when my grandfather, Ray DePaulo, moved from the coal camps of Colorado during the Great Depression. His high school had closed down due to lack of funds, so they just handed out diplomas to everyone, including my then 13-year-old grandfather. Luckily for him, that was still a time when you could make a living with just a high school diploma.

Once in West Virginia, my grandfather became what we’d now glowingly call an entrepreneur. He went door-to-door selling telephones at a time when people were getting phones in their homes for the first time. He ran a garage, a golf course, a restaurant, a bakery, a parking lot, and a house-cleaning business, much of it out of a stall used by car salesmen.

My grandfather understood one of the curious conundrums of globalization: exposure creates not only opportunity but competition, and it can make us question and eventually lose our standing in the world. West Virginia, like so many other industrial cent...