Thanks very much. I'm very honored to be able to speak to you in this important event, though. I told Mr. Spago tradition at EIC, all so as you just told today, I like to start my talk by drawing attention to industrial revolutions. We have had three in the past and we are now in the fourth. All of these industrial revolutions share two characteristics. There are new increasing return technology, new reality and scalable funding method for capital investment. In the case of the force industrial revolution, there were technologies like steam engine, automated room and standardized screws and money creation by commercial banks, right? UK invented fractional resolve based Fiat currency. At the time in the context of industrial revolution, we often talk about one, but two is equally important. This will be evident when we look at a simplified production function on the left hand side is the output. That is the sum of the consumption investment and export F here is the production function that takes capital K labor L and other input J such as cotton as input.
What the industrial revolution brought us is the changing F before it was decreasing return, but now it became increasing return. That means if you can get more K or L or J than other people, you will win. J was often brought in from colonies. L was brought in by organization. That was the same in the leading European countries though. Technology also spread it quite quickly at the time. Yet we, we compare UK to other countries such as Netherland, which had a lot of colonies, like Britain had trouble in catching up with British. My understanding is that it it's because they couldn't create capital as fast as British. They didn't have fair money and fractional reserve based lending. You can also see how important capital was from these figures as well. In this third column, you see capital attribution of the growth and GDP as a result, British empire flourished. This situation continued into 20th century. Despite UK industry failed to capitalize on the second industry revolution. Why introduction of the gold standard British promoted gold standard after 1820, which limited the money creation capability quite severely. I don't think they did it knowingly, but it had effect of stabilizing the capital investment gap and prolonged the British ha this was finally broke in 1914. The first world war prompted the nations to get out of the gold standard system that they now had the capability to create money as far as, as they needed.
There's another decisive factor for the fault of flourish. During industry revolutions
There's attitude toward adoption of new technologies. There are two approaches, retrofit and transform. This was pointed out by a Chinese politician. Can you weigh at the end of 19th century retrofit approach is to apply new technology to the old way of life and business. That was the approach that king dynasty took between 1865 and 95. The other approach was a transform approach that is to adapt the way of life and the business to soothe the new reality. This approach is a very heavy lift off and takes many years to get the fruit off. But once it does, it pays off nicely. This approach was taken by Japanese during the same period. Since I don't have time, I'm not going to the details on the external change that Japan went through at the time. But I will just mention that they started from building primary schools everywhere to teach unified language called Japanese, you know, before that people from different regions, they were called countries. By the way, at the time, couldn't communicate to each other. Tokyo, Japanese and Okinawa. Japanese is farther apart than English and German. Also legal system was also changed ground up. It indeed was a transformation.
Now let's turn out eyes to the fourth industrial revolution that we are in new increasing return technology is cyberspace. I often call it the eighth continent to emphasize that it is a space that we migrate to and living the fact that we are living this continent can be supported by figures. This chart depicts the time and location of people in their twenties, in Japan, back in 2018, they are directly spending 15% of the time in the internet and good proportion work hours as well in the internet. The ratio has been steadily increasing, but recently we have seen huge acceleration to the trend. COVID 19 forced us to migrate so that it would probably look like this. Now we have indeed migrated to the eighth continent. It that's a new reality to which we have to adapt our way of living and walking in Japan. We still use seal a lot. It's called hunger. Unlike Western seals, it looks like this it's been criticized that it's lowering Japanese business down. Most recently it has been criticized that it is the reason why people have to commute during this COVID 19 crisis. Since these are not allowed to be removed from their office
To ease the pain, a company came up with this very cool technology called robotics, seal automation, RSA. It's a real robots that are using AI to align the documents and find the right spot to put the seal on and does it for you. It's so cool as a technology, I put the link to the YouTube so you can see it in action. And it's very, COVID 19 century obviously, but it's a perfect example of retrofit. It's indeed preserving the current business process and applying new technologies such as robotics and AI to it. What would you do if you want to transform use digital signature? Certainly that is way better, but I would also have to ask really putting digital signature on a PDF document. Does it count as transform? I'm not sure. I feel like it should further go toward signature of a machine readable structure document that makes automation reliable and easy rather than PDF. Maybe signing over PDF is just an intermediary solution like RPA robotics, process automation. I count RPA as a typical example of retrofit as well. It does make the current process more automated and efficient, but that's not where we should be heading to. It could be okay in the short run, but it also potentially removes the current pain causing the fundamental shift to get delayed. If that happens, it's harmful. I argue to couple RPA projects and a like with the real transformation project.
So in eighth continent, what transformation do we need to undergo transformation to the identity centric architecture? Why is that so important? Because without it, you are a dog over the network. Any human thing process cannot be reliably identified without good identity system. In the old world, we were physically identified implicitly. So we were not forced to think about it. And that was sort of okay, but that's not true in cyberspace. We cannot have physical form in the cyberspace. We have to be transformed to digital being and all communications and access control. And production happens with that without being able to identify and authenticate these digital identity, we are screwed by community. Identities is defined a set of attributes or claims rated to an entity. This is based on identity entity identity model. We don't perceive an entity directly, but in directly by recognizing its attributes in the cyberspace, we need to be able to trust that we are communicating with the intended entity through these set of attributes. Thus, we need to have reliable authentication server that authenticates the entity using its identity register. Once that was successful, authenticated identity is created. And that is what we will be communicating with.
This notion is also fundamental in understanding privacy protection. Not that the notion of attributes or claims increase how you behave and so on a human being constantly selectively disclosure, its attributes to other parties to adjust the Delta between selfless and ness. That is how you perceive yourself and how you perceive from others. Identity technology must support this selective disclosure. The architecture that I and my friends like Kim Cameron young Grazer have in mind to achieve is this I'm at the center in zero. Me using authenticated to authenticate against your IDP. It could be self hosted on your phone, or it could be provided as a service. That is your choice. The IDP then coordinates with other claims providers and provides just strictly necessary set of claims to the drawing parties, by the way, those claims can be signed so that it can be verified easily. There also will be an identity that access an entity that access consular to me who assesses the trustworthiness of the Marine parties and advise it to me, whether I should actually be communicating with them. Switching gear, there are practical reasons for identity centric architecture as well. It's important to business when you think about
The deployments and new applications. So without it, your system is either tied to monolith or cows and bound to be decreasing return. That is fatal industrial revolution, monolith, architecture, states, any changes in world functionality in one of the app to force rebuilding, retesting, redeploying, everything. This is not scalable at all. In contrast Microsoft's architecture allows you to deal only with a specific app, as others are insulated by APIs, unless you have an independent identity system and put it in the center. You cannot move from monolith architecture to Microsoft architecture by connecting loosely couples services with APIs, rebuilding and retesting are only needed to the particular app instead of the whole system resulting in dramatic reduction time and cost, freedom, time and choice for the revision of our service is also merit, but don't build your own protocol. I see them every now and then it's very, very hard to make a good and secure one use what is available. So I explained that the fourth industry relations look like this, is there evidence? Yes. Land graph in the eighth continent by GAFA Google, apple, Facebook, Amazon, Microsoft. These are the companies that transformed themselves to identity centric architecture in the mid two thousands. As far as I have heard, Amazon was the first of the flock to transform from monolith to microservice. And whenever you check out at Amazon, you are actually using open 92.0.
Facebook was born to be identity centric. Google took such a painful journey to transform it, but completed it. So did Microsoft. Apple was the last of the fog, but sign in with apple that you see now on your iOS apps is now openly connect. They are all big. The biggest is the Facebook Facebook kingdom followed by Google Republic and Microsoft empire, apple Papai, which is supported by believers. Follow them anyone below 0.2 billion doesn't count EU was wise in this sense to form Alliance, which has 0.3, 5 billion population. This forms a digital single market for Europe, the data economy in which electric identification and electric trust service are key enablers for secure cross border electric, trans transactions, and central building blocks of the digital single market. Of course, the usual CBI that we need to continuously check if the solution is not turning to a retrofit model applies, but it's a great start. Anyways. Now I have covered the technology portion of the fourth industrial revolution. What about the other, have we found a scheme that can compete to Silicon valley instead of giving you solution? I just want to draw your attention to the similarity in the effect of gold standard in the fast industry revolution and the combination basil capital and the balance budget in the fourth identity revolution.
Part of the problem seems to be getting addressed due to the war against COVID 19, just like first world war addressed the problem of the gold standard, but we still have a long way to go to capitalize. On the fourth industrial revolution, we have to transform ourselves to fit with the new space cyberspace retrofitting the new technologies to the existing space of conducting business will only gain the short-term result and disadvantage you in the long term in the fourth industrial revolution and post COVID 19 world, everything goes digital and processed efficiently in the cyberspace. We have to minimize the physical processing or that shifting to identity centric. Architecture is imperative, no ID, no DX start designing the system that way right away demand the architecture. It may sound daunting, but there's no other ways before the first industry revolution high quality cotton textile primarily came from Indian labor. Indian labor were proud and capable yet. They didn't have access to the new technology, social structure and capital creation methods. As a result, many people suffered from starvation, which will not repeat it. Start the change. Now we are at the crossroad between the road to flourish or to the Japanese nation.
I trust you will. Thank you very much.
