Insights
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Living through the fourth Industrial Revolution
There are two notable aspects that differentiate the Fourth Industrial Revolution, Industry 4.0, or 4IR, as it’s known, from the industrial revolutions that preceded it.
The first is that it’s characterised by a fusion of general purpose technologies (GPTs), ranging from the arrival of next generation robotics, the internet of things (IoT), the data analytics encompassed by big data, the cloud, advances in manufacturing (both here and in orbit), augmented and virtual reality, quantum computing, cyber-security, blockchain and, since the arrival of ChatGPT in 2022, the rise and rise of artificial intelligence (AI), all interacting at the same time.
The result is a pervasive global revolution encompassing every business sector in the world that continues to blur the lines between the physical, virtual and biological worlds.
The second is the speed with which it’s occurring. While the previous industrial revolutions took generations, 4IR is happening at break-neck pace, changing the way we live our lives with every day that passes.
Like nothing that’s been before
Unlike its forebears, which were driven by new energy sources or the arrival of consumer electronics, computing and the rise of the internet, the distinguishing characteristics of 4IR include hyper-connectivity, automation, data-driven decision-making and the seamless integration of an ever-rising number of new technologies into everyday life.
It’s a data-driven revolution based upon armies of connected smart devices communing via ever faster via wireless internet.
Statista estimates that 2025 will see some 20 billion connected devices on Earth with this doubling to c40 billion within a decade. Meanwhile, the European Patent Office currently estimates that devices communicating autonomously to share data in real-time, through the internet of things (IoT), will account for a quarter of all internet traffic by 2025.
In the meantime, humans themselves are creating ever greater mountains of data: in 2024, we sent 361 billion emails every day, and 16 million texts every minute.
Ever rising levels of connectivity are creating an explosion in complexity and vast oceans of data that are far beyond anything that existed even a decade ago.
History lessons
The first Industrial Revolution arose from the use of first water power, and then steam power, to mechanise production, initially in the textile industry. It led to the first mass production of goods while revolutionising mining and transport, creating global networks of steam-powered trains and ships.
The second, or ‘Technical Revolution’, was based on the adoption of electricity, oil and gas and the roll-out of the internal combustion engine. It led to assembly-line manufacturing, the lightbulb, the first telephones, and airplanes.
The third, or ‘Digital Revolution’, got underway in the late 1960s with the arrival of consumer electronics and the widespread introduction of computers. It led to factory automation, and digital technologies such as the mobile phone and later, the smartphone, which turned the internet into a global phenomenon.
By contrast, 4IR is coming from all directions at the same time; it’s effectively the convergence of all three previous revolutions with the aim of creating a ‘hyperconnected’ society. As such, the speed of innovation has been exponential.
In recent years, the arrival of AI has turbo-charged every strata of the 4IR eco-system – both in terms of the colossal investment that’s now going into the AI buildout and the greater efficiencies, cost savings and breakthroughs in virtually every field that’s engendered by the adoption of generative AI.
AI supercharges progress
The great strides made in machine learning and the arrival of OpenAI’s ready-to-use AI chatbot in late 2022 have electrified numerous sectors. Despite still being in its adolescence AI has already become a key battlefront for corporations as its deployment could spell the difference between success and failure. Companies of all kinds are rushing to embrace AI in their efforts to slash costs, boost efficiency and future-proof themselves.
Like any new technology, AI implementation is expected to have three phases. We’re currently in phase one, namely the buildout stage with staggering levels of investment being made into AI's infrastructure needs – the enormous data centres and the huge energy and water resources they require.
Leading industry estimates point to an estimated total enterprise and government investment into AI technology and use cases, that’s likely to hit $2 trillion between 2025 and 2027.
It’s a gold rush with the US hyperscalers leading the charge to acquire the enormous computational power required for the next phase of AI proliferation, which Meta describes as the “superintelligence” – namely ‘superclusters’ that out-think even the best humans. Its investing billions in two multi-gigawatt data centres, Prometheus and Hyperion, to make this a reality.
Such developments are part of the AI global arms race being led by the likes of Amazon, Microsoft, Alphabet and Meta. Running alongside are the likes of OpenAI’s ‘Stargate’ project and Elon Musk’s ‘Colossus’ AI project.
Phase two will be widespread adoption. Although companies are already making their first forays into AI with the rise of ‘agentistic’ AI operatives and other adaptations which remove human costs from the equation, widespread adoption will see AI being packaged into a whole spectrum of apps and software.
Phase three will be the transformation that follows AI adoption. Potentially it could supercharge productivity levels, innovation and research, creating new business models and industry sectors as it goes.
Looming concerns
Although AI is already transforming sectors from agriculture, healthcare and finance to manufacturing, utilities, transport and insurance, at the same time, AI-enabled tools are already increasing the volume and effectiveness of cyberattacks around the world.
Munich Re, the reinsurer, warned in its 2025 cybercrime report that, “The emergence and application of multi-agent AI systems for good and evil will evolve”.
In the US, the government has lent its support to accelerating energy production of all kinds in order to meet AI’s burgeoning power needs, suggesting that AI is both likely to re-shape US energy and infrastructure policy, and that the computational power that results becomes a key US strategic security asset in the same way as its nuclear arsenal.
One small step…
Thanks to a massive decline in the cost of transporting materials into space – with the Financial Times estimating that in the last 15 years, launch costs have dropped from $50,000 per kg to closer to $2,000 and that, thanks to the SpaceX ‘Starship’ they’re set to fall closer to $200 per kg – space has become the next emerging frontier of 4IR.
Companies are already making use of the huge private investments made so far, to explore the production of semiconductors in orbit, which could usher in new standards of quality performance. The orbital production of pharmaceuticals and drug research offers similar potential. Others are targeting orbiting data centres, with constant solar energy, while the World Economic Forum points to a company called Agnikul, which is 3D-printing rockets and another, called Astroforge, which is building spacecraft to mine asteroids for critical minerals.
Meanwhile, armadas of earth-observation satellites are expected to produce petabytes of data daily by the mid-2030s, data which is already being used to train AI for everything from commodity trading and retail footfall predictions, to forecasting supply-chain disruptions and underwriting life insurance.
Playing the 4IR investment theme…
The Fourth Industrial Revolution isn’t confined to a single sector, it’s everywhere you look, changing the fundamentals of today’s world and how we live our lives.
Our fund is strategically aligned with the transformational forces driving 4IR. We focus on selecting the best-in-class, most innovative companies that are leading this global shift, with a weighting of around 35% in stocks exposed directly to these themes.
Here we own Microsoft, the current leader in AI-related revenues, which has the cloud at its core and a huge commercial opportunity to digitalise enterprises around the globe. Alongside we also own Alphabet (Google’s parent) and Amazon; both are global leaders in cloud services with Amazon’s AWS already the world’s largest cloud and infrastructure provider.
Elsewhere, we own ASML, the Netherlands-based monopoly producer of the ultra-violet lithography machines that are essential to the production of higher-performance semiconductors. Its years of investment into research and development have created a unique business whose unrivalled track record for innovation is now powering 4IR.
Similarly, we own Cadence Design Systems, a leading electronic systems design business whose services and software offerings allow chip makers to design and verify ever-more efficient chips and systems.
We also own Amphenol, one of the world’s most established suppliers of the fibre-optic, cabling and connectors that are at the heart of the 4IR data revolution.
