Jeremy Rifkin President of the Foundation on Economic Trends

An interview with Jeremy Rifkin President of the Foundation on Economic Trends

Transform to the power of digital Jeremy Rifkin

In the 20th century, there was another A New Communication convergence of communications and energy. Centralized electricity - the and Energy Matrix telephone, and later radio and television - became the communication media What’s interesting about the IT to manage the complexity of the oil revolution, especially the personal powered automotive culture, a suburban computer and the Internet, is that infrastructure and a mass consumer it communicates in a very different society. fashion from the 20th century centralized media that were top-down The energies used – coal, oil, natural (such as radio and television). With the gas, other fossil fuels, uranium - are Internet, communication is distributed now mature and their prices keep and collaborative. It scales laterally. Jeremy Rifkin increasing.The infrastructure and the Today, 2.3 billion people are able to send their video and audio documents President of the Foundation on technologies based on those energies, to the other 2.3 billion people at the Economic Trends such as the internal combustion engine, have exhausted their productive speed of light. This distributed and potential. Today, the second industrial collaborative internet communications Capgemini Consulting: Can you revolution is clearly on life support, so technology, which is far more expansive explain the concept of the third a new economic narrative is needed than all the centralized television and industrial revolution? that will bring us to a post-carbon era radio networks of the 20th century, is and create hundreds of millions of jobs now merging with the new renewable Jeremy Rifkin: We’re in the first stage and thousands of new businesses. That energies, which are also distributive in of a paradigm shift that is reshaping new paradigm is emerging just now in nature and organized collaboratively. not only the economy, but also society Europe, especially in Germany which at large, and even how we think and is leading the way. A new convergence perceive our world. The great economic To understand the new energy regime, of communication technology and and social revolutions in history occur you have to think about today’s leading energy is giving rise to a Third Industrial when two things happen. The first is energies. Fossil energies and uranium Revolution (TIR). the emergence of a new energy regime are only found in a few places on that opens the path to a more complex Earth. They require huge geopolitical civilization: the new energy flows can investments to manage them, extensive bring more people together, integrate military investments to keep them bigger commercial and social units, secure, and massive capital to finance etc. To emerge successfully, this new the infrastructure that goes with them. paradigm requires a communications These elite energies have given us the revolution powerful enough to manage A new convergence most centralized, top-down economic the new energy regime. The first and structure in history. second industrial revolutions help us to of communication understand this phenomenon. technology and energy By comparison, what we call distributed energies are found literally everywhere: In the 19th century, print technology is giving rise to a Third the sun shines all over the world every became cheap with the move from Industrial Revolution. day, the wind blows across the planet, manual presses to steam powered there is geothermal heat below the presses. Large print runs became ground and ocean waves and tides possible thanks to low transaction everywhere. We produce garbage that costs. Editors published school books can be converted back to biomass. in America and Europe creating a print In rural areas, agricultural waste can literate workforce. This print literacy was be transformed back into energy. necessary for managing the complexity These renewable energies are found of the steam-powered first industrial everywhere in some frequency or revolution. proportion. This new energy regime is Jeremy Rifkin

just beginning to merge with the new are we only thinking about collecting etc. We like them all, but in the EU, we internet communications technology. them in just a few places? We’re using put much of the focus on hydrogen 20th century thinking around centralized as the storage carrier for intermittent energy and centralized communications. energies just like digital is the storage carrier for information. Let’s say you Five pillars for the third have a solar roof on the top of your Pillar two is buildings. The EU is home home and you’re collecting energy. If industrial revolution to 191 million buildings: houses, offices, you have an electricity surplus, you factories, farms, etc. The number one can put it in a water tank and let the The European Union has formally users of energy in our economy and the hydrogen percolate out of the tank into committed itself to a five-pillar single greatest cause of climate change a second tank. So when the sun isn’t infrastructure for the third industrial are buildings. The goal is to convert shining, you can convert that hydrogen revolution based on this communication- every single possible building in the back to green electricity with only a very energy matrix of the Internet and European Union to a personal green small thermodynamic loss. distributed energy. It was endorsed by micro-power plant over the next 40 the European Parliament in 2007. The years to capture the sun on the roofs, the plan is now working its way through wind on the building walls, geothermal Pillar four is where the renewable energy the European Commission and the heat underneath the building, biomass converges with the Internet. We take European member states. with the garbage, etc. Some of the new off-the-shelf Internet technology and buildings in Europe are already positive transform the power grid in Europe to an power. They provide for all of their own energy Internet. Now you have millions Pillar one is the shift to distributive needs and send the excess power back and millions of buildings collecting their energy. The EU has committed to 20% to the grid. Germany is leading in pillars own green energy on-site and storing renewable energy by 2020. That means one and two; it has reached the goal it in hydrogen. If they have a surplus a third of the electricity in Europe has to of 20% green electricity and is heading at any given moment, their software be green. It’s mandatory. toward 35% within nine years. Germany technology will direct them to sell that has also converted one million buildings surplus electricity across the energy How do we collect these energies? Our over the past four years to micro power Internet from Ireland to Russia. first approach seemed quite logical. plants that are now producing energy on Italy, Spain and Greece enjoy a lot of site. The process has created hundreds Here again, Germany is leading the Sun. We could build large solar plants of thousands of jobs. way by testing this energy Internet in and ship the electricity out to the rest of six major regions. Every appliance is Europe. The Irish have wind: centralize it The Internet has democratized connected with software to the grid and ship it. No one opposes this model, information. Now, energy is being so that we know in that region what but it won’t be enough. Then we asked democratized. Several million buildings every washing machine, every toaster is ourselves: if renewable energies are in Europe are currently collecting their doing. If there’s too much demand for distributed and found everywhere, why own green electricity on site. Within ten electricity and not enough supply, the years, it’s going to be tens of millions, energy Internet can direct your washing and within 30 years, virtually every machine to forget the extra rinse cycle! building will be a green micro-power If you sign up for the electricity savings plant. program you get a credit on your bill The goal is to convert from the power and utility company at the end of the month. It means everyone every single possible Pillar three is storage. Storage is becomes an entrepreneur. Everyone is essential because the sun isn’t always his own producer of energy just like building in the European shining when you need the electricity. today everyone is his own producer of The wind doesn’t always blow when Union to a personal information. you most need it. These are intermittent green micro-power energies. We’re going to have to store them so they’re reliable. Many different plant over the next technologies are possible: batteries, 40 years. capacitors, flywheels, water pumping, Jeremy Rifkin

Pillar five is transport and logistics. to the grid. This has been so successful Making the shift creates new businesses Electric vehicles are out this year that thousands of outlets are now trying and jobs from day one. in mass production. With the third to get their green electricity back to industrial revolution, we’ll be able to plug the grid. The problem is the grid can’t Capgemini Consulting: What sort in our vehicles anywhere there’s a green take it because it’s 60 years old, not of governance do we need to building: offices, factories, homes… digitalized and unidirectional. So Europe implement the five pillars? and get green electricity on-site. You understood it had to upgrade the grid, can power up from the grid or, if the and make it multidirectional to be able to Jeremy Rifkin: My global CEO group electricity price is high, your software accept green electricity from thousands did the plan for Rome, Utrecht, Monaco can direct your car to sell its green of micro-power plants. and some other places. What we have electricity back to the grid. If 25 percent found is this: as soon as a city or region of all cars at any given time are selling starts to create its Third Industrial Moreover, the premium was so back to the grid, you eliminate all of a Revolution node, it automatically wants successful that some regions in Europe country’s centralized power plants. to connect to the next node, and then are at 20, 30, 50, 70% green electricity. the next node, just like WiFi. Let’s say The two Spanish regions, Navarre and Rome has a surplus of electricity, they Aragon, are at 70% green electricity. then want to sell it to Florence or Venice. But we’re losing 75% of the kilowatts And when they have a deficit of green because there’s no storage! electricity, they want to buy from one of the other nodes. In this way, it goes With the third There was also a problem with pillar city to city, region to region. There are two, the buildings. Big companies were no borders. industrial revolution, getting all the premiums because they could invest in the technology. But how we’ll be able to plug in This means that we need political does a home owner or a small business governance at the local, state, and invest� €30,000 to build a micro power our vehicles anywhere continental levels to lead the revolution. At plant? In Germany and Italy, the banks the local and state level, the government there’s a green building. have now realized there’s money to be authority sets the regulations, the made in handing out green loans so that codes, standards, incentives, etc. The millions of players can invest in these local business community comes in technologies. The banks look at your with the technology and leverages the electricity bill and they know exactly how infrastructure. Finally, civil society has much money you’re going to save once to buy in because the paradigm shift you start producing your own green affects everybody’s life. The Five Pillars are electricity. They know that they can’t all Linked lose.

These pillars alone are only components. And finally, we realized that pillar five It’s when we start connecting them that – transport - is in trouble. Daimler As long as we’re in we create the synergies that allow for and General Motors are in my Third a new technology mega platform. If Industrial Revolution Global CEO the dying economic one pillar gets ahead of the others, it all Business Roundtable group and they’re paradigm of the second collapses. Here are some lessons we worried. They launched electric vehicles learned in the EU. very recently. But if the other four pillars industrial revolution, don’t phase in, they’re not going to sell their cars. The whole plan requires that there’s no growth European states have encouraged early each city and region establishes the five potential. adopters to convert their buildings to pillars so they make the transition to the power plants. In return, they receive a third industrial revolution infrastructure. premium for selling their electricity back Jeremy Rifkin

Then there’s the continental level. The Continental Today, the economy in Europe and the first and second industrial revolutions US is collapsing. The second industrial came with an economic model that Governance revolution is embroiled in a long torturous relied on national governments. The endgame with rising energy prices. third industrial revolution scales laterally. Other continents are moving the same Make no mistake: the real collapse of the It likes to run across land and borders way. The Association of South-East global economy occurred in July 2008 until it reaches the ocean. You try to be Asian Nations is forming very quickly when oil hit $147 a barrel on the world self-sufficient locally but you have to and is starting to deploy the third market. The whole economy stopped. collaborate and share green electricity industrial revolution infrastructure to That was the economic earthquake. across continents. It’s only when you create a continental market. The African The collapse of the financial markets, 60 have the entire continent connected that Union was stumbling until the EU put in days later, was the aftershock. In 2009, you can manage the energy surges and almost one billion euros for new energy oil went back down to $30 a barrel and deficits. infrastructure. Now they’re talking the economy started growing again. about establishing regional groupings Recently, oil has shot up to $115 a barrel of nations in Africa to start creating a forcing a rise in prices across the supply Europe’s Growth continental market. The South American chain, precipitating another slowdown Union was created 24 months ago. of the economy. This means that every Project These continental political unions can’t time we try to restart the economy, with be governed top-down. They’re too big. China, India, and much of the developed world, in the game, there’s just too much The European Union is ideally suited You have to govern them like a network. demand for crude oil and not enough if it can move to the next stage of That requires a common set of formulas supply. We’re experiencing restart- integration. Currently everyone is talking for regulations to make sure the energy collapse episodes one after another. about austerity. But even if the EU makes internet is universally accessible and spending cuts and creates new banking that the communication and transport mechanisms and reforms, that won’t networks are seamless. Capgemini Consulting: What does be enough to grow Europe! As long as the third industrial revolution mean we’re in the dying economic paradigm of for companies? the second industrial revolution, there’s Our Crisis is an no growth potential. Jeremy Rifkin: The first and second Energy Crisis industrial revolutions scaled top-down. Because of the capital needs, we had So Europe’s plan is the third industrial to create huge centralized factories, When an industrial revolution occurs, revolution. The continent has 500 million centralized supply chains, centralized you create businesses and jobs inhabitants and there are another 500 logistics and transport. That’s why three during the first 40 years to deploy the million people in its partner regions: out of the five largest companies in the infrastructure. Then you live off that the Mediterranean North Africa, and world today are energy companies. infrastructure for the next 40 years. beyond. This is by far the richest About 500 huge companies depend on That’s what happened with the first potential market in the world. Now we materials made out of carbon energies. industrial revolution. The infrastructure need to integrate it into a seamless Those 500 companies create nearly a in Europe and America was laid down market space. This means we have to third of global GDP! Communications move The Third Industrial Revolution between 1830 and 1890. And we infrastructure across all those regions. lived off it for another 30 years. The Then we establish a single continental same thing happened with the second energy internet and a seamless industrial revolution. The infrastructure The third industrial communications and transport network was built up between 1900 and 1929. so that a billion people can engage in Between 1929 and 1945 everything revolution favors commerce and trade in the largest went on hold and took off again after the internal market in the world. This War. We lived under this paradigm until lateral power. represents the next stage of European the early 1990s. integration. Jeremy Rifkin

are centralized and so is the energy hundreds of millions. The cost curve is and increase their efficiencies and regime. This is our society. It’s the moving exactly like the cost curve when productivity. These partners will share way we think, the way we understand we moved from centralized computers their savings back with the utility. This economic activity. to personal computers and cell phones. new business model is called a “shared Over a period of 25 years, desktop savings agreement”. computers and cell phones became Today, companies are undergoing a cheaper and cheaper. Now we nearly fundamental shift. Some sectors are give them away just to sell the service. far advanced into the new paradigm. It’s the same thing with the technologies Energy Cost over For example, the music industry did not that harvest renewable energies. Within understand file-sharing technologies Labor Cost 20 years, they’re going to be so cheap, when millions and millions of kids began that virtually everyone will be able to to create software to share music with This will work because the survival of afford the technology. each other. Then they contracted or every company in the next 30 years, went out of business. Newspapers didn’t whether it is big or small, will depend on understand the distributed, collaborative Just like the democratization of their energy costs, as much as or even power of bloggers. People are blogging, information has reduced its transaction more than their labor costs. Many power creating their own news and sharing it costs, now the same process is and utility companies will not make this freely. So now newspapers are trying to happening when Internet technology shift. Already start-up companies are create blogs. And many of them won’t starts to manage the new energies. emerging that are beginning to bring make it. The energy becomes nearly free. together IT, energy, and information This is “power to the people” - the experts. They’re aggregating all the democratization of energy - and its The third industrial revolution favors new components of the Third Industrial going to force a fundamental reshaping lateral power. It sounds like an oxymoron Revolution game plan into clusters. They of the business model in the decades because we think of power as vertical. manage the energy flows and help clients ahead. Lateral power is when millions of small direct their electricity on and off the grid. players come together in vast networks So the role of the utility companies may to pool their risks and their resources. be narrowly circumscribed to manage Capgemini Consulting: So how the energy Internet. They create lateral scaling that is much do the utility companies make more powerful than vertical power. It money? requires a shift in business mentality that the business schools don’t teach Jeremy Rifkin: They’ll make money not New Opportunities yet. just by managing the energy Internet, but by selling as few electrons as they Ahead can! That’s counter-intuitive. Remember when IBM went through a crisis in the Capgemini Consulting: So this Big companies will become more like 1990s. They were selling computers means many business models are consultants. They have the technical going to change? with very little margins. The Chinese, the expertise that will allow them to facilitate Koreans, the Japanese were all making Jeremy Rifkin: Yes. Let’s take the the development of The Third Industrial cheaper computers. So IBM went into power and utility companies which Revolution business networks. But a deep retreat in search of what the are huge centralized institutions. They there is no way that centralized company has that the world needs. like to control power supply and the companies can control these distributed They decided that the company’s real transmission of electricity and sell as networks across the globe. It’s too big expertise lay not in making a physical many electrons as they can. When we a proposition. They can, however, be product, but in managing information. introduced this third industrial revolution strategically placed to help manage the model in Europe, obviously some Third Industrial revolution infrastructure energy companies weren’t very happy. It’s the same with power and utility and hone its synergies. Their mission But one by one, the power and utility companies. Their expertise is managing will be to help new businesses develop companies started to come to our side energy and electricity. Their job as a and mature. This means they must learn because we introduced a new business utility company is to set up thousands to think systemically, not in an isolated model. We explained that there are a few of partnerships with small, medium way, if they are to effectively connect million people creating their own green and large size companies. They help the potential business opportunities electricity today. Within ten years, there them manage their energy flow, so that lie along the 5 pillar Third Industrial will be tens of millions, within 25 years, that they can reduce their energy costs Revolution infrastructure. Jeremy Rifkin

Jeremy Rifkin President of the Foundation on Economic Trends

Jeremy Rifkin is president of the Foundation on Economic Trends and the bestselling author of 19 books on the impact of scientific and technological changes on the global economy, workforce and society. He has been an advisor to the European Union (EU) for the past decade and is the principal architect of the EU’s Third Industrial Revolution – which is also the title of his latest book – a long-term economic sustainability plan to address the triple challenge of the global economic crisis, energy security, and climate change. The plan was formally endorsed by the European Parliament in 2007. Mr. Rifkin is also the founder and chairperson of the Third Industrial Revolution Global CEO Business Roundtable, comprising 100 of the world’s leading companies.

About Capgemini

Capgemini Consulting is the global strategy and transformation With around 120,000 people in 40 countries, Capgemini is one consulting organization of the Capgemini Group, specializing of the world’s foremost providers of consulting, technology in advising and supporting enterprises in significant and outsourcing services. The Group reported 2011 global transformation, from innovative strategy to execution and with revenues of EUR 9.7 billion. Together with its clients, Capgemini an unstinting focus on results. With the new digital economy creates and delivers business and technology solutions that creating significant disruptions and opportunities, our global fit their needs and drive the results they want. A deeply team of over 3,600 talented individuals work with leading multicultural organization, Capgemini has developed its own companies and governments to master Digital Transformation, way of working, the Collaborative Business ExperienceTM, and drawing on our understanding of the digital economy and draws on Rightshore®, its worldwide delivery model. our leadership in business transformation and organizational change. Learn more about us at www.capgemini.com. Find out more at: http://www.capgemini-consulting.com/

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