The Dilemma of Disruption: some opening thoughts
St. Gallen, 04.05.2017 - Federal Councillor Johann Schneider-Ammann St. Gallen Symposium, 4.5.2017
Life is change. And change begins in everyday life.
There was a time when a telephone was a telephone and nothing more. Black, heavy, and tied. Today the phone is light, slim and elegant. Wherever we go, it comes along. And modern mobile phones have unlimited functions. We can use them to surf, write and shop, to take pictures, watch TV, find our way and pay our bills. And even – every now and then – to call someone.
From Alexander Graham Bell’s monster to the smartphone of today: it’s been an incredible development in a fairly short time. But is it a disruption, a break from all that was before?
Human beings have an amazing ability to cope with change. But there are still some leaps in development that push us all to our limits. This is what we call disruption. So to open our symposium today, I would like to ask four basic questions:- When does an innovation become a disruption?
- How can we tame the power of the possible?
- What exactly are we dealing with?
- What do we need to do?
1. When does an innovation become a disruption?
Evolution is a natural development of what exists already. Renovation renews it. Reform redesigns it. Revolution turns it on its head.
But how can we know what is a true disruption and what is just an improvement? Was the wheel a disruption? Or the beginning of language a hundred thousand years ago? Is digitization one today? And does disruption have to be an industrial affair?
It seems not. The biggest changes to our world have been driven by wars, diseases and disasters. And by all the “isms”: communism, capitalism, fascism, fundamentalism…
So there are many different turning points that change our world, for the worse or for the better. But almost none of them are all good or all bad. The outcome depends on a lot of different factors. So if we talk of disruption here today, we should not forget that every stone we throw into the pool will make waves in the waters.
2. How can we tame the power of the possible?
Whether good or evil, every disruption is the child of a power – the power of the possible. But is this power limitless? Or are there ways to avoid its excesses?
In politics it’s democracy that limits the power, wherever such limits are needed. The people have the final say. In genetic engineering, it’s legal restrictions. Governance knows the checks and balances. And our ethics and values help us to distinguish what is doable in theory and what is reasonable to do. But morality is as limited as any other restriction. Some people will always do whatever is possible. So technological bans will not have much impact in the longer term.
There’s a well-known saying: “People who say it cannot be done should not interrupt those who are doing it”. That’s probably true. So when it comes to industrial disruption, we must brace ourselves for the unimaginable. We must foster its positive potential. And we must not be blocked in advance by fears.
3. What exactly are we dealing with?
We already have one foot firmly in the Fourth Industrial Revolution. But the other foot has not been planted there yet. Just like the first three Industrial Revolutions – mechanization, mass production and computerization – there’s a lot of fear of the new. But let’s not allow this to paralyze us.
Our theme for today is “The Dilemma of Disruption”. And a dilemma, by definition, has as much upside as down. But a dilemma also means that we are caught between two things: between the pressure to continue our research and the fear of where it may lead us.
When we talk today of the Fourth Industrial Revolution, we don’t only mean the Internet of Things. Not just robotics and big data. And not just the combination of physical and virtual processes. We also mean artificial intelligence and memory extraction. In other words: changes to humanity itself. Waves in very deep waters...
So the same magical word – digitization – covers a giant range of issues. And we must tackle all of them: in political, in social, in scientific and in ethical terms.
4. What do we need to do?
Digitization offers opportunities and carries risks. We need to take the opportunities and limit the risks. But we don’t yet know enough about what exactly will affect people, places and jobs – or when, or how. So the first thing we need to do is: find out more!
The other thing we need to do is: give ourselves more scope.
Digitization is revolutionizing more and more processes all along the value chain. Success will depend on how fast we develop our digital competencies. However much we know today, the next development step will already be under way. So what we need here is not just research and development. It’s start-ups, too. And agile SMEs that work like laboratories at the cutting edge of these trends, and may sometimes fail. Only if we allow all this to happen, and if we refrain from imposing overhasty regulations: only then will we fully benefit from digitization’s positive potential.
We can also create the scope we need by deregulating. Many of our existing laws were created before today’s technologies arrived. That’s why it’s so vital to allow new business models to be tested, and that politics helps this to happen.
Let me give you an example from the fintech sector. What the Swiss government is proposing here is a “sandbox” with lower hurdles for fintech companies with innovative technological solutions that are not actively involved in banking. These companies should be able to accept, under simplified conditions, deposits from the public up to 100 million Swiss francs. In doing this, we are creating a “testing zone” which can be easily monitored, and which should help to improve the competitiveness of many vital sectors.
One of the propositions at today’s symposium is: For any change to happen, a receptive environment plays a vital role. This is a key point for me. The possibilities we have of stopping the future are pretty close to zero. And this is why we have such a duty to prepare as many people as possible for the disruptive changes ahead.
I am talking here as Secretary of Economics, not as a scientist. And I am talking as an enabler, not as a regulator. Our goal must be to integrate as many people as we can into the digital world. This is the only way to maintain full employment. We must find ways to ensure that the Fourth Industrial Revolution leaves as few people as possible behind. And this begins with sensitizing everyone to the fact that we live in an age today that knows only one speed: fast.
So what has our Swiss Federal Council done here to date? We have established a broad-based “Digital Switzerland Strategy”. As far as my Department is concerned, this is mainly about education and research, about the employment market, and about financing start-ups.
On the education and research front, our Swiss system interlinks basic schooling, vocational training and universities, with each element building on the ones before. So here the curricula need to be coordinated and aligned to our Digital Switzerland Strategy. This also means expanding our university research capacities all the way to cyber-ethics, and closing competency gaps – with new FIT institutes, or with interdisciplinary institutes that are jointly run by several universities.
On the employment market, digitization is changing occupations, careers and work itself. More and more people are trading fixed employment for independent working platforms. Digital nomads, instead of office employees. We are currently analyzing the impact of these trends on the present distinction between being an employee or being self-employed. And on workers’ rights and social security issues. We don’t want to block new forms of working. But we also don’t want to end up with a kind of “Wild West” employment market.
For our start-ups, we’re thinking about a kind of “future fund”. Not every risk needs to be carried by the state. Switzerland has a lot of private capital that start-ups could make use of. But risk capital investors are not common here, compared to countries such as Israel or the USA. And some 87 per cent of the risk capital investors that we do have are from abroad.
There’s a lot of potential here. And what the Federal Council is looking to create, to support Swiss start-ups, is not a state fund but a “future fund” based on private-sector initiatives. This is what I am also supporting personally. In addition, our innovation promotion tools such as the KTI (which will become “Innosuisse” next year) are becoming an ever-more-important interface between innovation and the working world.
As you can see, ladies and gentlemen, the Federal Council has various digitization initiatives up and running. The key thing will be whether they can all keep pace with the speed of reality. I believe that they can. And I will be doing my utmost to ensure that they do. After all, as Mikhail Gorbachev apparently said: “Those who come late are punished by life.” And that is exactly what we cannot allow to happen.
Thank you.
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