Rana Foroohar

Conventional wisdom tells us the technology boom is over. The collapse of Silicon Valley Bank has sent a chill through the investment community, and the tech sector has seen a correction as interest rates have risen. But I’d argue we may be about to enter a new golden age of technological innovation and investment. The difference is that this time around, it won’t be about consumers, but industry.

Three-quarters of the world’s $100tn in gross domestic product is made up of traditional legacy industries — such as manufacturing, transportation, logistics and healthcare — that have yet to be deeply transformed by technology. That’s now changing, as part of what venture capitalist Greg Reichow, a partner at Eclipse Ventures, a Palo Alto firm that has $3.8bn invested in the digital transformation of physical industries, calls “industrial evolution”.

Two weeks ago, I visited one of Eclipse’s 70 portfolio companies outside Boston. VulcanForms, an additive manufacturing firm, takes Henry Ford’s River Rouge factory model, in which steel went into one end of a production line and finished cars came out the other, and replicates it across multiple industries by 3D printing with metals to create parts.

VulcanForms can produce tens of thousands of parts for a jet engine one day, then switch to doing medical implants or consumer electronic components within a matter of hours. “The knowledge of how to make the part lives in the software,” says Reichow. This allows a digital manufacturer like VulcanForms to become a River Rouge for multiple industries. Large industrial customers can focus on their core R&D, sales and marketing, rather than production, which could theoretically now be outsourced not to hundreds of suppliers in dozens of countries, but to individual factories located anywhere customers are.

It’s a big shift, and manufacturing is just one part of it. The desire of most companies to increase resilience in their supply chains, coupled with the digitisation of industry, has increased local production capacity in strategic sectors. A legislative push to deal with climate change may well create a new tech boom in the industrial sector. Numerous investment funds are being raised to support the growth of high-tech start-ups in advanced manufacturing, mobility, energy and other areas associated with re-industrialisation.

“Everything we see around us, with the exception of ourselves and the food we grow, is manufactured,” notes MIT Professor John Hart, a co-founder of VulcanForms. “Now, post-pandemic, several forces are aligning to reshape how we make things. We understand the need for agile supply chains. We realise how important production is for our economic and national security. And third, we need to decarbonise, which will require the growth of new manufacturing systems at scale.” 

Since areas like industry, power and transport are responsible for 70 per cent of carbon emissions, changing the way we make things will be crucial to achieving climate change goals. Printing layers of metal, for example, requires a fraction of the energy and carbon load of cutting parts out of a block of solid material.

Technology investors see huge opportunities in the shift. Former White House supply chain policy adviser Elizabeth Reynolds — who spent much of the past two years sorting out port backups and baby food formula shortages — has left the Biden administration to join Unless, an investment fund that plans to plough up to $100mn a year into start-ups focused on industrial transformation. This includes things like additive manufacturing and materials science, but also sensors, robotics, AI and software that will help digitise America’s vast number of small and medium-sized industrial companies.

Right now, those firms tend to be highly siloed. But in the world that people like Hart, Reynolds and Reichow envision, they would be connected just as consumers are on the internet, able to share resources and information seamlessly in a new industrial smart grid. The productivity and growth opportunities are obvious. “This isn’t about filters that let you turn cats into dogs,” says Reynolds. “Technology innovation around re-industrialisation is very different, and we are on the cusp of a real revolution in that area.”

Indeed, I think we may be at a pivot point rather like 2007. Back then, the introduction of the iPhone led to huge growth in consumer technology. The “app-economy” evolved and changed the entire way we communicate, work, play and shop. Business is about to go through something similar, a long-anticipated shift sped up by decoupling, the pandemic and war in Ukraine. It’s a transformation that will change the nature of our economy. It’s also a big reason I’m still long the Nasdaq, even though there may yet be a bigger short-term correction.

One unresolved question is whether the new industrial revolution will be a jobless one. Tech talent is starting to migrate away from consumer software and into industry. But AI, along with the dramatically reduced human labour needs of high-tech factories, has reduced the number of people needed to do this work. Still, it’s worth noting that the app economy created job categories that hadn’t existed before. If we are lucky, a new industrial revolution will do the same in ways that have yet to be imagined.

rana.foroohar@ft.com

What if the only thing you could truly trust was something or someone close enough to physically touch? That may be the world into which AI is taking us. A group of Harvard academics and artificial intelligence experts has just launched a report aimed at putting ethical guardrails around the development of potentially dystopian technologies such Microsoft-backed OpenAI’s seemingly sentient chatbot, which debuted in a new and “improved” (depending on your point of view) version, GPT-4, last week.

The group, which includes Glen Weyl, a Microsoft economist and researcher, Danielle Allen, a Harvard philosopher and director of the Safra Center for Ethics, and many other industry notables, is sounding alarm bells about “the plethora of experiments with decentralised social technologies”. These include the development of “highly persuasive machine-generated content (eg ChatGPT)” that threatens to disrupt the structure of our economy, politics and society.

They believe we’ve reached a “constitutional moment” of change that requires an entirely new regulatory framework for such technologies.

Some of the risks of AI, such as a Terminator-style future in which the machines decide humans have had their day, are well-trodden territory in science fiction — which, it should be noted, has had a pretty good record of predicting where science itself will go in the past 100 years or so. But there are others that are less well understood. If, for example, AI can now generate a perfectly undetectable fake ID, what good are the legal and governance frameworks that rely on such documents to allow us to drive, travel or pay taxes?

One thing we already know is that AI could allow bad actors to pose as anyone, anywhere, anytime. “You have to assume that deception will become far cheaper and more prevalent in this new era,” says Weyl, who has published an online book with Taiwan’s digital minister, Audrey Tang. This lays out the risks that AI and other advanced information technologies pose to democracy, most notably that they put the problem of disinformation on steroids.

The potential ramifications span every aspect of society and the economy. How will we know that digital fund transfers are secure or even authentic? Will online notaries and contracts be reliable? Will fake news, already a huge problem, become essentially undetectable? And what about the political ramifications of the incalculable number of job disruptions, a topic that academics Daron Acemoglu and Simon Johnson will explore in a very important book later this year.

One can easily imagine a world in which governments struggle to keep up with these changes and, as the Harvard report puts it, “existing, highly imperfect democratic processes prove impotent . . . and are thus abandoned by increasingly cynical citizens”.

We’ve already seen inklings of this. The private Texas town being built by Elon Musk to house his SpaceX, Tesla, and Boring Company employees is just the latest iteration of the Silicon Valley libertarian fantasy in which the rich take refuge in private compounds in New Zealand, or move their wealth and businesses into extragovernmental jurisdictions and “special economic zones”. Wellesley historian Quinn Slobodian tackles the rise of such zones in his new book, Crack-Up Capitalism.

In this scenario, tax revenues fall, the labour share is eroded and the resulting zero-sum world exacerbates an “exitocracy” of the privileged.

Of course, the future could also be much brighter. AI has incredible potential for increasing productivity and innovation, and might even allow us to redistribute digital wealth in new ways. But what’s already clear is that companies aren’t going to pull back on developing cutting-edge Web3 technologies, from AI to blockchain, as fast as they can. They view themselves as being in an existential race with each other and China for the future.

As such, they are looking for ways to sell not only AI, but the security solutions for it. For example, in a world in which trust cannot be digitally authenticated, AI developers at Microsoft and other firms are thinking about whether there might be a method of creating more advanced versions of “shared secrets” (or things that only you and another close individual might know about) digitally and at scale.

That, however, sounds a bit like solving the problem of technology with more technology. In fact, the best solution to the AI conundrum, to the extent that there is one, may be analogue.

“What we need is a framework for more prudent vigilance,” says Allen, citing the 2010 presidential commission report on bioethics, which was put out in response to the rise of genomics. It created guidelines for responsible experimentation, which allowed for safer technological development (though one could point to new information about the possible lab leak in the Covid-19 pandemic, and say that no framework is internationally foolproof).

For now, in lieu of either outlawing AI or having some perfect method of regulation, we might start by forcing companies to reveal what experiments they are doing, what’s worked, what hasn’t and where unintended consequences might be emerging. Transparency is the first step towards ensuring that AI doesn’t get the better of its makers.

rana.foroohar@ft.com