According to most experts in industrial development, we are at the beginning of what has been called Industry 4.0, which, as defined by Wikipedia, is a hypothetical fourth mega-stage of technical-economic evolution of mankind, starting from the First Industrial Revolution:
Industry 4.0 and its synonym Fourth Industrial Revolution are expressions that name a hypothetical fourth mega-stage of the technical-economic evolution of mankind, counting from the First Industrial Revolution. It would have started recently and its development would be projected towards the second decade of the 21st century. Artificial intelligence is pointed out as a central element of this transformation, intimately related to the growing accumulation of large amounts of data (big data), the use of algorithms to process them and the massive interconnection of systems and digital devices.
Due to the situation in which the world economy finds itself, going through this pandemic created by Covid-19, and whether the economic flow accelerates more or less quickly when we start to return to normality, companies around the world are going to try to continue producing the same as they did a few months ago so as not to lose capital or the market share they own or had until a few months ago. But, with far fewer consumers participating in the consumer ecosystem (when there is a recession and a slowdown in the economy, families and individuals tend to cut back on non-essential spending, encourage savings and stagnate their purchases until “better times” come along), the turnover of products on the shelves slows down or stagnates substantially, Most businesses will therefore have to look for extra ways to stay afloat and at the same “level” as in the past, or, on the contrary, simply change their way of working substantially.
A strong need to restructure and adapt
Faced with this situation, only those companies that have the ability to restructure their internal models and processes quickly to adapt to the downturn in the global market will be able to respond quickly to the situation we are going through, either by the digitization of the economy towards the use of decentralized systems based on cryptocurrencies, or by the adjustment towards production models based on the circular economy or recycling, as well as by the imperative need to face the global drop in consumption that occurs with every financial recession such as the current one, and with it the obligation to reduce costs, minimize processes or simplify structures.
Those who find it easiest to adapt to the new economic models of the so-called Industry 4.0 are the thousands of start-ups or emerging companies that are created every year in every country on the planet. They are, in general, small companies created by entrepreneurs with ideas and dreams of transforming the world and the society in which they live with the new “idea” that will change civilization (and survive future crises). Many of these young entrepreneurs end up closing down, because that new “idea” is very difficult to find or carry out, but, if the company endures an average of two or three years and survives the voracious competition that the market imposes and the public’s sifting of new products and services, then it can begin a phase of growth that leads them to consolidate as a stable company and from there start new creations, productions or services already within a more stable business ecosystem than that of the small start-ups.
In any case, these small start-ups do have in their favor the fact that they are based almost exclusively on new technologies, something necessary and of obligatory implementation at this time. Rarely are companies created that do not have, today, something to do with the use and exploitation of computer systems and disruptive technologies that have appeared and accelerated their use in recent years, and practically no new “cutting-edge” business is opened that no longer has an app to connect with its potential clientele or does not use e-commerce, not to mention AI, chatbots on its customer service pages, or blockchain technology for its computer processes, the most advanced ones.
A rapid transformation of the ecosystem
It is this type of innovation that is forcing, under pressure from those “coming from behind”, large companies in many sectors to quickly transform and adopt these same technologies so as not to fall behind, especially when the world is adopting teleworking models and online management of all its processes by leaps and bounds. However, the way to make this transformation for large companies is not so much by innovating on their own, but by absorbing these same start-ups into their huge business structures to get the know-how first-hand and incorporate the transformative mindsets and initiatives into themselves before a competitor does.
In fact, it is the dream of most entrepreneurs who are born with a new service or product idea in mind, and who develop it enough until a larger company comes along and buys it, generally integrating the whole team and “eating” the start-up structure, whose promoters must decide whether to continue in the new “mother” company or abandon it along with their idea or product and start another one hoping that then again someone bigger will find it attractive and buy it once more.
This type of initiative is not per se a bad growth model. Small companies are the ones that have the easiest time causing all kinds of disruption in the industrial and technological ecosystem and, therefore, can do all or much of what large multinational corporations cannot do, leaving aside a few that have among their “ideals” to maintain the philosophy of a start-up to be able to launch anything as quickly as possible and as agile as possible, even if you have a global presence and thousands of employees on your payroll. But there are not so many of these, and that is why a large number of the planet’s large corporations search everywhere in small business ecosystems, incubators and technology hubs for those that stand out and whose products or launches can be absorbed and used in larger ecosystems.
The global power of development is concentrated in a few hands
The problem that this type of operation entails, however, is that “macro” power continues to remain in the hands of very few companies, which buy and obtain all the permits and licenses from a huge network of micro, small and medium-sized businesses, in order to continue growing themselves, leaving a large part of those who participated in this growth in the gutter and behind over time. This is the other side of the coin. The entrepreneur who is offered millions for his new application or system can have a huge turnaround in his life, but, in the long run, what we see from a more general point of view is that it is always the same 100 or 200 “giant” companies that buy and keep all the patents, ideas, applications and innovative systems that these tens of thousands of small companies generate. With such a system, it is difficult to reverse the power that “the same as always” have over the economy and over the set of structures that govern our society, since all of them are designed to supply the economic flow that keeps humanity running, whether in education, health, culture or history, justice, research, sports or literature. And the fact is that, always, at the apex of the pyramid of any business sector, there are the companies that control 90% of the world’s economy, and that simply feed the dreams of millions of entrepreneurs so that, through multiple support programs, they can continue to develop the technology and obtain the knowledge that will keep them in their dominant position and in control of the share of market power they have achieved.
This will not change in the medium or long term, as there is no interest in allowing access to the “professional industrial league” to new companies or corporations, so that the existing ones will continue to absorb those that intend to grow in power and market share, as it is already well studied and distributed, The major boards of directors around the world have already decided who is going to manage what share and in what way, and how they are going to help each other in some areas, companies which, in the eyes of public opinion, appear to be competitors, but which, on the other hand, collaborate if they need to in order to stop those who might try to take away the share of the cake they have already won.
The hands that rock the cradle
An analysis combining mathematics and data, carried out by scientists at the ETH Zurich a few years ago, has revealed that there is a set of 1,300 out of the 43,000 transnational corporations (TCs) analyzed, almost all of them financial institutions, which dominate the global economy, thanks to their strong interrelationships, a number that is shrinking even further, as these 1,300 and a few macro companies continue to acquire the rest of the competitors at a high rate. This organization of corporations poses a serious risk to the general economic network, the instability of which is fostered and, above all, controlled and managed as it suits the major multinationals. The solution would be, if possible and according to the authors of the analysis, to control the links between the most powerful through international regulatory standards.
According to James Glattfelder, one of the authors of the study: “The reality is so complex that we had to move beyond dogma and free market conspiracy theories to generate an analysis based on the reality that the world is controlled by a very few.
We believe that, in general, part of the population knows that a few economic power groups control the whole of society, and previous studies have been published that have found that a few companies manipulate a large part of the world economy, but these had included only a limited number of corporations and had omitted indirect holdings (of shares or stakes in other organizations), so they were unable to establish how the network of corporations affected the global economy, for example, its degree of stability. What the Zurich team of researchers did is to use Orbis 2007, a database of thirty-seven million organizations and investors worldwide, and extract from it the top 43,060 transnational corporations and their linked holdings.
A model of inter-company control
From this information, they elaborated a model on the control of some corporations over others, through share purchase networks. In this way, a map of the structure of economic power in the world was generated. The result revealed that there is a core of 1,318 corporations (rising or falling according to new purchases, acquisitions or mergers) that interconnect general holdings around the world. Each of these organizations has ties to two or more other corporations, although on average they are connected to a total of twenty. Moreover, although these 1,318 organizations gather twenty percent of global operating revenues, they actually collectively own, through their holdings, most of the planet’s stocks and factories – the “real” economy – with which they accumulate more than sixty percent of global revenues.
Delving deeper into the network of global holdings, the researchers also found that there is a “super-entity”, made up of only one hundred and forty-seven corporations that are closely linked to each other and control the rest or have control over them through their shareholdings. The holdings of each of them are held by the rest of the members of this super-entity, which controls forty percent of the total wealth of the network, leading the authors of the study to point out that “in effect, less than one percent of the world’s corporations can control forty percent of the entire economic network”. And, coincidentally, most of these corporations, unsurprisingly, are financial institutions.
If at some point they lose control of the world economy because humanity itself moves to new business models that emerge from the current situation, and large corporations lose control of the flow that keeps the world moving, it is obvious that all of them will always maintain or try to maintain their power at all costs despite the transformation that this will require them to undertake. Another scenario that can also be glimpsed after this pandemic is that, quite simply, control of the economy will cease to be in the hands of banks and will be consolidated in large technology companies that take control of the digital economy to the detriment of the traditional banking system, something that Facebook is already trying to do with the creation and introduction of its digital currency called Libra, although it is now a project on pause and with less chance of going ahead after the withdrawal of several of the companies that supported it.
Thus, all these indicators warn of profound changes in the structure of society in its very pillars and control bodies, and perhaps a power struggle to see who retains the largest share of it and what kind of emerging system we are left with when the entire world economy returns to normal, depending on how many macro companies resist the economic decline we are experiencing and if any of the current emerging companies manages to make its way into the industrial ecosystem and change some of the rules of the game without being absorbed by another that takes its potential and integrates it into its structures to strengthen its dominant position again. There are many unknowns in these times of uncertainty, but many possibilities for change in the global economic structure in sight, and opportunities that, had it not been for this pandemic, would not be present now to undertake a profound reform and transformation of the way in which the planet’s industrial ecosystem moves.
