The Coming Wave of Disruption

ocean-waves-wallpapers_36746_1920x1200In a recent keynote address at South by Southwest, Steve Case, the founder of AOL, predicted that we are on the brink of what he calls the third wave of changes that have come as a result of the Internet. The first wave took place from 1985 to 2000 and consisted of the rollout of ISPs like AOL, which convinced people to use the Internet. The second wave consisted of entrepreneurs like Google, Amazon, Facebook, Twitter and many others using the Internet as a platform to create new businesses and to bring new features and online products to customers.

The first two waves have been disruptive and we have seen major changes in industries like communications, media, and commerce. We’ve seen whole industries transform, such as the music industry that first shifted to download music rather than from hard media and then morphed again with the advent of streaming media. We’ve seen the newspaper business change drastically due to online news and information that no longer requires a printed page and is not tied to a fixed publication schedule. And we have seen every major corporation change the way they operate due to the Internet and cellphones.

Case thinks we are now poised for the third wave of disruption. And he thinks this will be the biggest wave of all, bringing with it major disruptions to almost every segment of our economy including healthcare, education, transportation, energy, food – you name it.

He noted that the pace of change is accelerating. For example, it took AOL a decade to reach 10 million users. It took Facebook only ten months to do the same thing. And now new apps sometimes reach their first million users within a few weeks after launch.

Case sees four trends that he thinks will shape the next wave of innovation: crowdsourcing, strategic partnerships, impact investing (online companies that focus on a purpose and not just on profits), and a globalization of startups.

You can look at any major field and easily foresee the coming changes. Take higher education. In the US, traditional college education is quickly becoming too expensive for the average student. But we see an increasing number of courses online and it’s not hard to imagine people getting their entire education online. There are already numerous master’s degree programs that are entirely online and it probably won’t be long until most higher education takes that path.

I’ve taken several electrical engineering courses from MIT online and these offer the same course materials that are taught on campus. As the Internet reaches worldwide we are also going to see advanced education reach billions of people who never would have had the opportunity before for advanced training. This change will likely transform campuses into enclaves for the rich who can afford to pay for the college ‘experience’. But most people, including many from faraway places, are going to learn the same information as those on a campus, cheaper and on their own schedule. And this will lead to Case’s expectation that startups will come from anywhere in the world.

Look at almost every other industry and you can see the same kinds of disruption coming. Robots are soon going to be taking over huge numbers of mundane jobs since they can do it faster, cheaper, and more accurately. But robots are also going to take over a lot of white collar jobs, including any that involve repetitive paperwork tasks. Companies that take advantage of robots will have a huge cost advantage over those who do not. In the recent wave of innovation we have seen jobs flee to places where the work can be done cheaper. But the jobs are going to leave those places and be replaced by steel collar workers. This might bring manufacturing back to the US again, but not a ton of jobs with it.

We are spending a lot of effort in this country right now trying to figure out how to pay for our medical needs. But one can look out twenty years and foresee computers and robots transforming this industry as well. People will largely be able to get properly diagnosed by computers without even needing a live doctor as part of the process. In the next wave we are not going to see computers doing open heart surgery, but that is something that might be following in the fourth wave of innovation.

Interestingly, all of these changes are due to the improvement in computer chips and in the communication offered by the Internet. Those two things, and all of the innovations that follow from taking full advantage of those two things, are the drivers that are going to transform our world, transform our businesses and economies, and transform how we live our lives.