Kevin Lynch is vice-chair, Bank of Montreal, and former clerk of the privy council and secretary to cabinet, government of Canada
We are in the midst of a fourth industrial revolution, driven by disruptive technological change. These technologies, such as big data, machine learning, artificial intelligence, quantum computing and blockchain are intersecting and combining in extraordinary ways to create a "technology 4.0 world." Few revolutions unfold without upheaval, uncertainty and swaths of winners and losers, however, and this one is no different. Its impact will be felt well beyond commerce – in how we communicate, interact, date, learn, gather news and govern ourselves.
An autonomous-driving truck carrying a load of beer on an interstate highway; self-driving cars; drones delivering parcels; robots reading X-rays and offering diagnoses; algorithms providing investment advice; artificial intelligence allowing computers to learn, infer and predict – the essence of many middle-class jobs. All are disruptive technologies producing gains in productivity and growth, to be sure, but also the inevitable displacement of jobs – and a looming quandary for policymakers.
Part of this quandary is the growing gap between the scale, scope and speed of these transformations and the capacity of government to implement timely and effective policy changes. Put simply, in today's dynamic world, last-generation governance and policy processes are a poor match for next-generation disruptive trends, and trust in government is an early casualty.
Let's drill down on the causes of this governance gap.
First, there is the ever-increasing pace of technical change versus the pace of policymaking, which is static at best. The game Angry Birds went from launch to 50-million customers within 35 days; Reliance Jio Infocomm Ltd., the new Indian wireless firm, acquired 100-million customers within six months; Facebook, Snapchat and Google roll out new platform services at astounding speed. Government is simply not wired today to respond at this pace.
Second, the scope of technological change is vast and shifting compared with the scope of government policymaking, which is typically compartmentalized into silos. Few technological innovations mirror departmental boundaries and regulatory powers, and few government departments were designed for the hyper-connected world of technology 4.0.
Third, disruptive innovation by its intrinsic nature is risk-taking, unlike governments, which are typically risk-averse. This clash of risk cultures exacerbates the gap between changing technology and policy making, with both needing to move more to risk-management models and behaviours.
Fourth, disruptive innovations know few borders, unlike governments, whose borders define their sovereignty and within which they are typically loath to share. The global financial crisis amply demonstrated the gap between "new" financial products traded globally and a patchwork quilt of national regulations and regulators with little cross-border co-operation.
Fifth, many of today's transformative technologies are platform-based, with non-linear scalability and near-zero marginal costs, compared with policy changes in government, which have a bias toward incrementality because it is easier to garner political and public support for tweaking the status quo than embarking on bold new policies.
Sixth, disruptive innovations evolve through trial and error, unlike governments, whose policy ability to respond is hampered by uncertainty – the known unknowns and unknown unknowns are significant in an era of disruption. Too early, policy reactions can impede innovation and competition; too late can allow systemic risks to accumulate.
And seventh, the disruption of traditional media by interactive social-media platforms with enormous scale has allowed the creation of virtual communities of interest and vast arrays of unfiltered commentary, unlike with governments, where governing and considered policy analysis are too often the casualties of the immediacy of Twitter and Facebook.
What can governments do to respond to this growing gap?
In an era of disruption, policy thinking has to move from hindsight to foresight. Governmental structures require more flexibility and fluidity. They need to use social media better, to crowd-source public insights. Policy making must become more risk-tolerant and innovative. Communications should eschew excessive short-termism, and offer a longer-term focus. To regain trust, start today to tackle the big issues that will dominate tomorrow. How do economies and societies handle disruption on this scale? What are the new jobs technological change will create and the skills they will require? What are the models to reskill and retrain the work force? How are the benefits of this technological change and costs of its adjustment going to be shared? All questions the public instinctively gets.
This governance gap poses a broader political problem as well. Workers made redundant by robots and global supply chains, aware of increasing income inequality and decreasing equality of opportunity, are embracing populist tenets ranging from nationalism to protectionism, from distrust of institutions to anger. As history teaches us, bouts of fervent populism seldom end well. So, to respond to the dual challenge of rebuilding growth through innovation and of facilitating adjustment to technological change, we have to get ahead of the disruption curve in our policy analysis and thinking.