The digital economy

1. THE DIGITAL ECONOMY 2020/6/4 Dr. Len Mei

2. WHAT IS THE DIGITAL ECONOMY?  Digital economy derives a large percentage of economic activities from digital technologies.  Digital technologies include internet, cloud computing, e-commerce, mobile payment, and increasingly AI, digital currency, etc.  As the digital technology progresses rapidly, so is the digital economy.  In the digital economy, data is commodity.

3. IN THE AGE OF DIGITAL ECONOMY, THINGS ARE DONE DIGITALLY Old way New way •Local •Not searchable •Not interactive •Worldwide •Searchable •Interactive 3

4. GOOGLE REVENUE A representation of the digital economy. 4

5. THE POWER OF TECHNOLOGY DRIVEN COMPANIES  It took Uber only 5 ½ years to surpass valuation of 107 year old General Motor.  In 9 years, WeWork became a $47 b company.  Apple became the first trillion dollar company, followed by Amazon.  Amazon challenges Walmart.  Cambridge Analytica influenced elections in India, Kenya, Malta, Mexico, UK, US and many other countries. 5

6. TOP MOST VALUABLE GLOBAL BRANDS https://brandz.com/Global All these technology companies are in digital technology. 6

7. CRITICAL COMPONENTS OF DIGITAL ECONOMY

8. COMPONENTS OF THE DIGITAL TECHNOLOGY DIGITAL ECONOMY Artificial intelligence Fintech Industrie 4.0 Applications Big Data/ cloud & edge computing IoT/ Blockchain Enabling Technology automation Internet, 5G & HPC Foundation Semiconductor

9. TOP LAYER - APPS  Apps can make things happen. For example,  Automated health assessments can be done electronically and virtually through digital diagnostics.  Digital payment is realized by using the digital form of value, which can be processed electronically.  Additive manufacturing, using 3D printing, is a transformative approach to industrial production that makes parts faster and better.  E-commerce allows small merchants to reach worldwide.  Digital currency can eventually replace paper currency.  This layer is mostly software, algorithm.

10. SECOND LAYER –ENABLING TECHNOLOGIES  All apps are built upon a layer of enabling digital technologies, such as blockchain, Big Data/ cloud computing.  This layer integrates algorithms with hardware technologies (IoT’s, sensors, robots, etc) -- the interface between the digital and real worlds.  This layer collects data from the real world and converts data into digital form for transmission and processing. It also allow the digital instructions to act upon the real world.  The brain to process such data is the cloud computing, which makes powerful computing resources available and affordable to build applications.

11. THIRD LAYER - FUNDAMENTAL TECHNOLOGIES  The underlying technologies that make all the enabling technologies possible are internet, 5G telecommunication, high performance computer and many others.  This layer is mostly hardware. It is the infrastructure of the digital economy.  The most important component of these hardware technologies are made of semiconductors.

12. THREE BRANCHES OF THE DIGITAL ECONOMY  Industry – (Industrie 4.0) the next generation manufacturing  Financial service – (Fintech) the automation of financial services  AI – the automation of everything else

13. DIGITAL MANUFACUTRING

14. 4TH INDUSTRIAL REVOLUTION  The 4th industrial revolution, or Industrie 4.0, is the manufacturing using digital technology.  Worldwide industry output is roughly 30% of total world GDP.  When the 4th industrial revolution is complete, 30% of the world GDP will be part of the digital economy.  It is estimated that by 2050, more than 50% of the world industry output will be from Industrie 4.0 factories.

15. HOW DIGITAL TECHNOLOGY DRIVES INDUSTRIE 4.0  Digital technology will revolutionize all aspects of the manufacturing industry.  Inside of the factory, there will be equipment automation, factory automation and data automation.  Equipment automation enables the collection of process and equipment data from equipment and to operate the equipment by remote command or artificial intelligence.  Factory automation enables the execution of production flow without human intervention. Lights-out factory will be a reality.  Data automation serves as the brain of factory. It serves every aspect of operation, such as optimization of process, production flow, maintenance and many others.

16. INTEGRATION OF MANUFACTURING THROUGH SUPPLY CHAIN  A factory is a part of the supply chain. When all the factories in the supply chain are automated, the entire supply chain can be easily integrated into one huge manufacturing cluster.  Furthermore, manufacturing will be integrated with design, product development, market and customers.  For example, the designers can take customer inputs and design the products accordingly and factories can tailor manufacturing process to make the specific products that customers want.  In a fully developed industrie 4.0 factory, robots will replace many factory workers, and data automation driven by artificial intelligence can replace many factory managers and supervisors.  There are already human-less factories, also known as dark factories, which operate 24/7, with the lights-out.

17. DIGITAL FINANCIAL SERVICE

18. FINTECH  Financial service industry also represents 30% of world GDP.  When financial service is fully transformed digitally, another 30% of world GDP will join the digital economy.  Fintech applications can deliver and provide financial services automatically, which require human intervention today.

19. FINTECH  Blockchain builds “trust” into data and therefore transforms the internet of information into internet of value.  These applications include money transfers, depositing a check remotely using smart phone, applying for credit online, or managing your investments.  Fintech service is much more secure than today’s financial service.  It also breaks down national boundaries.  Fintech is the financial technology that uses blockchain as its basic construction element.

20.  For example, today’s credit card payment requires to disclose user’s card information, which is prone to fraud. Fintech payment system does not require to disclose user’s payment information. It is inherently safer.

21. BLOCKCHAIN TRANSFORMS INTERNET OF INFORMATION INTO INTERNET OF VALUE • Can be copied • Transferrable • Unique • Trustworthy Blockchain 21

22. FINTECH USING BLOCKCHAIN  Fintech gets a boost from blockchain technology.  Secure  Fast  Built-in trust  Indestructible  Immutable  Private  Low transaction cost  New applications 22

23. VARIATIONS OF BLOCKCHAIN  Different applications of blockchain require different characteristics Decentralized vs. centralized Permissionless vs. permissioned Different levels of permission 23

24. BLOCKCHAIN APPLICATIONS  Smart contract (Ethereum, Microsoft)  Land registration (Japan, Sweden, Ukraine, Ghana, Georgia, etc)  Commodity trading (Mercuria, Gunvor, Trafigura, Cargill, Dreyfus, Olam etc)  Asset digitization (ACC)  Banking and payment (HSBC, Citi, Barclays, ING, Standard Chartered, etc)  Supply chain management (IBM, Alibaba etc)  Cloud data storage (Storj, Sia)  5G (Huawei) 24

25. BLOCKCHAIN APPLICATIONS  Digital currency (Bitcoin)  Smart contract (Ethereum, Microsoft)  Land registration (Japan, Sweden, Ukraine, Ghana, Georgia, etc)  Commodity trading (Mercuria, Gunvor, Trafigura, Cargill, Dreyfus, Olam etc)  Asset digitization (ACC)  Banking and payment (HSBC, Citi, Barclays, ING, Standard Chartered, etc)  Supply chain management (IBM, Alibaba etc)  Cloud data storage (Storj, Sia)  5G (Huawei) 25

26. AI, BIG DATA, CLOUDING COMPUTING

27. DIGITALIZATION OF EVERYTHING ELES  Besides manufacturing and financial services, many other economic activities will also be digitized through AI, Big Data, Cloud Computing.  These activities include medical services, e- commerce, smart cities, legal services, e- governance, digital argriculture etc.

28. ARTIFICIAL INTELLIGENCE AND BIG DATA  Artificial intelligence is the brain of digital economy.  AI is created by AI capable computers and deep learning algorithm digesting collected big data to form action plans.  The action plan can either be executed through human or through IoT’s.  The more the data, and the more powerful the AI computers and deep learning algorithm, the higher is the intelligence of AI.

29. HOW AI IS CREATED? The central piece of AI is the AI machine, which acquires intelligence by deep learning of Big Data. AI machine Hardware Algorithm Memory Deep or machine learning Neural Processor Data storage Big Data Outside world

30. AI ECOSYSTEM Hardware Algorithm Memory E d g e c o m p u t i n g w i t h l i m i t e d A I Cloud Data center AI machine INTERNET sensor robot IoT Comunication network Compare AI to human intelligence.

31. TWO PARALLEL PATHS OF ECONOMIC ACTIVITY  There are 50 billion IoT’s installed worldwide by 2020, 6.4 IoT’s for each human being.  IoT growth rate is much faster than human.  As AI becomes more intelligent, it will take over more sophisticated work from human, including many decision making process.

32. A.I. research takes off 6. AI 32

33. EDGE VS. CLOUD BASED AUTOMATION CLOUD Edge computing/ control system Edge computing/ control system IIoT/sensors control data Edge computing/ Equipment/ machine data IIoT/sensors control system control Edge computing/ control system Equipment/ machine IIoT/sensors control data Global (factory wide) optimization and control Equipment/ machine Real time control IIoT/sensors data Equipment/ machine

34.  When edge computing acquires deep learning capability, it allows local device to act upon new data without requiring sending data to remote server.  The device can discern between data to be uploaded or processed locally.  Edge computing lessens the need for long- distance data transfer, therefore, provides fast response to the ambient.  Autonomous driving is an example of edge computing.

35. HIGH PERFORMANCE COMPUTER (HPC)  HPC is the brain of AI.  HPC’s are evolving in three directions: Supercomputer – using the existing technology AI computer – providing training and inference based on machine/deep learning. Quantum computer – a radically different computing mechanisms based on quantum physics.

36. IOT (THE BRICKS OF DIGITAL ECONOMY) IoT and IIoT are small devices attached to any object to be connected to the internet. IoT can report data in real-time, improving efficiency. The data becomes a part of the Big Data, which feeds into AI machine to make intelligent decisions and take actions accordingly all without human intervention. 36

37. 5G TELECOMMUNICATION 1 G 1980 1990 2000 2010 2020

38. HOW SOCIETY WILL BE TRANSFORMED..

39. TRANSFORMATION OF SOCIETY BY DIGITAL ECONOMY  Productivity will increase.  Many services will be automated.  By augmenting human intelligence, many research can be accelerated, such as new drugs.  Improve healthcare system – life span can be prolonged.  Enhanced cyber security  More efficient use of nature resources to improve environment  Better economic planning

40. DOWNSIDE OF THE DIGITAL ECONOMY  Wealth will be more concentrated in the hands of those who have the resources to engage in the digital economy. A large number of white-collar workers may be replaced by automation.  Large work force will be displaced, creating social problem.  Concentration of wealth will accelerate.  Few countries dominating the technology will dominate the world.  Privacy will be greatly reduced. Nothing can escape the surveillance.  Social credit system will be prevalent.