on 19 February 2014
`The Second Machine Age' co-written by two authors Erik Brynjolfsson and Andrew McAfee, is a fascinating work that shows how the advancement of digital technologies already has and will have an enormous impact on the economy; the authors managed to show how such exponential growth will result with redistribution of world income, present to which effects will it lead on the issues of employment and education, and generally on the future of human race.
Brynjolfsson and McAfee have called their book "The Second Machine Age" due to some parallels that could be drawn between Industrial Revolution, time of extraordinary change in the past, with times in which we currently live; last few years and present days they consider as the beginning of period with significant changes that only from a time distance would be possible to well assess. What is great is that although their book is full of economic indicators, figures and case studies the book presentation prevents reader to feel bored or tired even for a moment.
As starting point for their conclusions they took the simple and well-known general principle of Moore's law that tells about the doubling of computer power every year and a half, claiming that everything we see around us is just the product of such nonlinear development. Thus it can be concluded, although it is difficult to imagine, what kind of exponential growth in science and technology is ahead of us, its consequences are difficult to conceive even today, let alone it was difficult to imagine a few years ago.
The authors goes a step ahead by giving their own advices how to make transition to the Second Age in the best and least painful way in order to avoid the difficulties that those misfits will soon encounter. Though in some places their book discusses things that have possible connotation of something bad or sinister, Brynjolfsson and McAfee managed to maintain a fun and optimistic tone through their work, though their book is anything but superficial, entering deeply in essence making the book interesting both for those interested in economics and those who are interested in technology.
So `The Second Machine Age' can be considered as an excellent preparation for not completely certain though tempting future, a kind of a tranquillizer for surviving age of digital technology with unlimited potential that inevitably comes.
And given all those reasons, this book should definitely be read because Erik Brynjolfsson and Andrew McAfee with `The Second Machine Age' made an equally entertaining and informative work.
on 24 March 2014
The thesis of the book is simple but profound, the documentation impeccable with a wealth of data, statistics, graphs, and figures while the writing is clear, concise, informal, smoothly flowing, inviting, and well structured.
The focus of the book concerns our impressive technological progress and explains why the scale and pace of digital technologies is bound to accelerate in the future. The centrality of the book relates to the two economic consequences of this progress namely bounty and spread. Bounty is the increase in volume, variety, and quality and the decrease in cost of the many offerings brought by modern digital technologies. Spread, the negative and troubling aspect of this progress is increasing wealth inequality, progressive unemployment, and reduction in social mobility. Spread has been demonstrated to increase in recent years. It is destined to accelerate in the second machine age unless we intervene. The book stresses that the economic goals should be to maximize the bounty while mitigating the negative effects of the spread. The choices we make will determine the world we are going to live in.
In order to understand why digital technologies are presently unfolding we have to obtain an insight into the nature of technological progress in the era of digital hardware, software, and networks. Its three key characteristics are exponential, digital, and combinatorial.
Exponential growth eventually leads to staggeringly big numbers which defy our intuition and imagination. The critical building blocks of computing - microchip density, processing speed, storage capacity, energy efficiency, download speed etc. have been improving at exponential rates for a long time and they presently are at an inflection point.
The digitization of just about everything. The unique economic properties of digital information: such information is non-rival, and it has close to zero marginal cost of reproduction. In plain English we might say that digital information is not 'used up' when it gets used, and it is extremely cheap to make another copy of a digital resource. - Making things free, perfect, and instant might seem like unreasonable expectations for most products, but as more information is digitized, more products will fall into these categories.
Digital technologies are general purpose technologies for they are pervasive, improve over time, and able to spawn new innovations; additionally digital innovation is recombinant information in its purest form.
Unlike the steam engine or electricity, second machine age technologies continue to improve at remarkably exponential pace, replicating their power with digital perfection and creating even more opportunity for combinatorial information.
Production in the second machine age depends less on physical equipment and structures and more on four categories of intangible assets: intellectual property, organizational capital, user generated content, and human capital. Digital technologies have very wide application e.g in photography, music, the media, in finance and publishing, in retailing, distribution, services, and manufacturing.
Both theory and data, however, suggest that the combination of bounty and spread is not a coincidence. Advances in technology, especially digital technologies, are driving an unprecedented reallocation of wealth and income. Digital technologies can replicate valuable ideas, insights, and innovation at very low cost. This creates bounty for society and wealth for investors, but diminishes the demand for previously important types of labor, which can leave many people with reduced incomes and progressive unemployment.
For about two hundred years, wages did increase alongside productivity. This created a sense of inevitability that technology helped (almost) everyone. But more recently, median wages have stopped tracking productivity, underscoring the fact that the decoupling of productivity and employment is not only a theoretical possibility but also an empirical fact in our current economy. The median income fell by by 10% from 1999 to 2011 even as overall GDP hit a record high while the distribution of wealth is skewed towards the wealthy: for the first time since before the Great Depression, over half of the total income in the United States went to the top 10 percent of Americans in 2012. The top 1 percent earned over 22 percent of income, more than doubling their share since the early 1980s. The share of income going to the top hundredth of one percent of Americans, a few thousand people with incomes over $11 million, is now at 5.5 percent, after increasing more between 2011 and 2012 than at any year since 1927-1928.
I shall conclude the review by drawing from the book of two other eminent authors cited in the book under review instead of delving in the correct but rather sketchy remedial measures suggested by the authors:
In 2012 economist Daron Acemoglu and political scientist James Robinson published 'Why Nations Fail', an account of hundreds of years of history aimed at uncovering, as the book subtitle puts it, 'the origins of power, prosperity, and poverty,'
According to Acemoglu and Robinson, the true origins are not geography, natural resources, or culture. Instead they are institutions like democracy, property rights, and the rule of law; inclusive ones bring prosperity, and extractive ones - ones that bend the economy and the rules of the game to the service of entrenched elite - bring poverty. Something like this we witness presently taking place in the United States.
I join Acemoglu and Robinson, Brynjolfsson and MaAffee in their plea that not only in USA but globally we strive for inclusive and not extractive societies.
on 10 February 2014
*A full executive summary of this book is available at newbooksinbrief dot com.
The main argument: In the first machine age--otherwise known as the Industrial Revolution--we humans managed to build technologies that allowed us to overcome the limitations of muscle power like never before. The result, which has reverberated these past 200 years, has been an increase in economic productivity unprecedented in human history. And the corollary of this increase in productive power has been an increase in material standard of living and social development equally as unprecedented.
In the past 30 years, with the rise of computers and other digital technologies, we have moved from overcoming our physical limitations, to overcoming our mental ones. This is the second machine age. Though we are still at the dawn of the second machine age, it already shows at least as much promise in boosting productivity (and quality of life) as the first. Indeed, by various measures--including the standard ones of GDP and corporate profits--we can see that the past 30 years has witnessed an impressive steepening in productivity.
And this is just the beginning. For digital technology continues to advance at an exponential pace; more digital information is being produced (and kept) all the time (all of which has enormous economic potential); and new ways of combining existing (and new) ideas into newer and better ones are ever being found.
Still, what is equally apparent is that the benefits of this steepening in productivity have gone to the few, rather than the many. Indeed, while the top 20% of earners have seen their pay increase since the early 1980s (and the closer you are to the top the more dramatically your pay has increased), the bottom 80% has actually seen their wealth decrease. And the spread is widening ever more as we go.
This is no random, or merely temporary outcome. Indeed, as Brynjolfsson and McAfee demonstrate, the unequal distribution of wealth in the second machine age is a natural corollary of how digital technology works and is used. Specifically, computer technology produces an economy that favors capital over labor; skilled labor over unskilled labor; and superstars (who are able to reach and corner entire global markets) over local players.
And not only does computer technology tend to play favorites, thereby increasing inequality. It also steadily erodes human employment outright. For as computer technology advances, more and more jobs that could once be carried out only by humans, becomes possible (and cheaper) for computers to accomplish. Nor is there any guarantee that new innovations and advancements will necessarily produce new jobs as fast as old ones are being lost (as was once thought inevitable). Indeed, we have already seen signs that this simply cannot be counted on.
The problem with all this is not just that extreme inequality is a political problem on its own. It's that as more and more people are driven out of the economy, the prospects for greater growth are themselves undermined.
Nevertheless, just as wise policies have helped us overcome many of the problems with the Industrial Revolution, Brynjolfsson and McAfee argue that the same can be done with the problems of the Digital Revolution. Specifically, more can be done to ensure that our education systems are geared to the realities and demands of the second machine age; more can be done to ignite and encourage entrepreneurship, which is needed to replace many of the jobs that will be lost; and more can be done to mitigate the inequality caused by the new technology, such as introducing a negative income tax--which preserves a minimal standard of living for all (and keeps people in the economy as consumers), while encouraging all who can to stay in the workforce.
The book is very well-researched, well-written and wisely argued. The authors have taken the facts and the data as they stand, without preconception or political coloring, and have delivered an honest and insightful analysis. Both the bounty and the spread of the second machine age are made apparent, and the proposed approach moving forward is well-measured and judicious. An important book for policy-makers, and the generally curious alike. A full executive summary of this book is available at newbooksinbrief dot com.
on 17 April 2015
The Second Machine Age (A Review)
Driveless cars, humanoid robots, 3D printers and the Internet of Things are just a few of the many technological developments that are increasingly converting science fiction into everyday reality. A recent book The Second Machine Age’ by Erik Brynjolfsson and Andrew McAfee argues that as extraordinary as these changes are, these are merely warm-up acts of a broader 'second machine age' that is already transforming us and is poised to sweep us off our feet in the near future!
The first machine age was characterized by muscle power epitomized by the steam engine and its descendants. In the second machine age, computers and other digital advances are increasing use of our brains, enabling us to understand and shape our environments. This is vast and unprecedented boost to mental power means that we are at an “inflection point” in the history of economies and societies. Crucially it is an inflection point in the right direction - bounty instead of scarcity, freedom instead of constraint.
Three forces that are allegedly driving this new technological leap: exponential growth in computing power; growth in digitisation ; and, rapid innovation. The authors particularly believe that increases in Artificial Inteligence (AI) and ICT is accelerating, with the consequential impact of improving our health, labour productivity, economic prosperity and giving us a greater voice in the democratic process.
However, these drastic changes will also bring its own challenges and choices for individuals and governments. In particular, there is need for greater effort to deal with the inevitable rise in income inequality associated with technological change, which has largely shifted value from labour to capital. It turns out technological change does not lift all boats because of a complex relationship between economic power and political power, coupled with the the prevalence of in elastic demand and negative aspects of globalisation.
The danger is that faced with rising inequality governments may respond with a Luddite approach. The authors believe a better solution is to actively explore ways in which governments can encourage the bounty of the second machine age while working to reduce or mitigate the harmful effects of income inequality. In the short term, it means encouraging technology to race ahead while ensuring that as few people as possible are left behind. This can be achieved by growing the economy through basic economics 101 ideas. In the long term, focus should be placed on moving towards rebalancing the tax system to deal with inequality and unemployment.
The arguments are broadly persuasive particularly in relation to the interaction between technological progress and inequality. The authors insights around the the role of network economies play in explaining many manifestations of inequality are particularly insightful. As they note, each time a market becomes digital and networked, “winner-take-all economics” become a little more compelling. For example, executive pay is increasingly higher because direct management via digital technologies makes a good manager more valuable than in earlier times when managers had diffuse control via long chains of subordinates, or when they could only affect a smaller scale of activities.
The book also provides some interesting recommendations on how individuals and governments should seek to positively harness the second machine age. Individuals are advised to “seek to be an indispensable complement to something that’s getting cheap and plentiful”. Governments are encouraged to think innovatively about policies that help maintain technological growth whilst minimising the costs of inequality, though ideas such as : implementing a negative income tax that combines a guaranteed minimum income with an incentive to work; and, raising more revenue by increasing marginal tax rates on the highest income earners, for instance by introducing new tax brackets at higher levels.
Like most books, there are several instances where loose drafting and less rigor limits its potency. The authors are particularly prone, in their exuberance, to make sweeping statements that aren't always backed up by data. For example, they claim that “billions of people will soon have a printing press, reference library, school, and computer all at their fingertips”. Except we are not told whether these billions include people in a remote village in Eastern DRC. Unfortunately, these claims highlights another general weakness : this is a very American-centric offering that seems to pay little attention to a wider global evidence. There is little discussion on how technological change would impact cross country inequality and possible geopolitical relationship and global security, apart from the passing mention of the possibility of increased automation in the developing world. Quite ironic for a book that is heralding global change!
Despite these weaknesses, the book is certainly well worth a read. There are plenty of important issues discussed, and though many of recommendations are common sense, experience teaches us that sense isn't always so common, especially within governments.
The authors of this book had a runaway success with its predecessor, the 76 page "Race Against the Machine." What they've done here is "put some flesh on the bones," really.
The summary is simple. The digital revolution is every bit as important as the previous industrial revolution, the one that was all to do with the steam engine and electricity. Those who deny this must consider the evidence. Technology is at the moment truly racing ahead and has started to do things that a short ten years ago genuine friends of the digital revolution considered impossible. The three buzzwords are "exponential," "digital" and "combinatorial."
I did not totally buy this line of argumentation when I read the "Race Against the Machine," but here it's argued a lot better and I must say I was convinced.
"Exponential" is all about how computer power doubles every 18 months. For the last 30 years it has seemed like Moore's Law only has ten years left in it based on what we know about physics, materials etc. and yet human ingenuity has found a way to carry on. Presented with evidence of the above, I've had to concede that the authors have a point and it's silly to bet against exponential growth of computer power. Just when it looks like we've hit some hard limit in the laws of Physics or the science of materials we've always found a way to carry on calculating faster. Which of course means it's a matter of time before computers will be able to do absolutely everything to do with seeing, recognizing etc. that they can't already do. I'm sold.
"Digital" is a big deal too. The idea here is the digitally encoded information (i) ain't going anywhere and (ii) does not get used up. If I use a gallon of oil, that's a gallon of oil that's not available to you. Not so with a song that's saved in 0s and 1s or a book or a beautiful picture. We can share, and we can share it forever.
"Combinatorial" comes to the rescue of those who fear their limited physical existence cannot keep up with the exponential growth of computer power. It's alright if a computer can perform tasks better than you and keeps getting even better because there's one thing that can be faster than exponential growth and that's combinatorial growth. So people who can combine things and can command computer power can combine it all to keep up with the machine. So for example a bunch of OK chess players who have very strong computers at their disposal will beat the world's best computer or the world's best chessmaster. More to the point, there are tons of technologies out there, the value these days is in using more than one at once. The example of a traffic app is given that not only uses good maps and the GPS infrastructure, but leverages the power of the network established by its users' mobile phones (another technology), "network" being the key word here.
So it's fascinating and convincing stuff.
From there the book moves on to the bit that I found to be the true contribution of "Race Against the Machine." New fancy words have been unleashed upon us here: "Bounty" and "Spread"
"Bounty" is the massive benefit of machines allowing us to do more with less, like for example sharing billions of pictures almost for free, or keeping in touch with all of our friends for absolutely free, or taking an MIT class from the comfort of your bedroom in Cameroon without paying MIT tuition, or keeping track of where your daughter's hanging out at three in the morning for a fiver a month--not sure at all about this one! "Spread" refers to the fact that if you were employed in a routine job you're either unemployed or you won't be employed for long, because your job will be taken over by a machine.
And the usual roster of winners and losers is rolled out. So if you play for Manchester United it's fantastic if people can follow you (and pay to watch you) in East Asia, but it's less fun if you are a good but not ManU-level player out in East Asia because nobody's going to come watch. Bounty and Spread in one example here, what with everybody being able to enjoy watching ManU all while Rooney is eating all other football players' lunch. He deserves it, many will argue, but what about them?
So I got myself a comfy chair to read the chapter where the authors explain that, rather than the laundry list of explanations (like for example the overleveraging of the lower middle class or the greed of Goldman Sachs or the "global glut of savings" and so on) the current recession / depression / whatever you want to call it is caused by the machines that have replaced everybody who used to do repetitive mental work. That was surely going to be the most fascinating bit of the book.
But, in the words of Quentin Tarantino, I could not find it because it wasn't there. They took that bit out.
Pity, because it was my favourite bit of the first book. They just mention that it wasn't globalization whodunit because (i) China is losing manufacturing employment as fast as we are and (ii) the most precarious jobs on earth are probably the ones we exported (for example) to India, as the back office / documentation / call center work we sent over there is sooner rather than later going to be done by machines.
But beyond crossing out globalization as a culprit, the authors have neglected the Great Depression MKII part that I was most looking forward to. I really wanted to hear something along the lines of "well, you might be a damn fool, Athan, but your kids, if they are like other kids on the planet, are totally on top of this exponential, digital and combinatorial revolution. Here's a bunch of stuff other kids are doing with their time, you just hang in there bud, do what you can to pass on the baton and watch them little ones and everybody else thrive and kiss this depression goodbye."
But no, I looked hard and that's nowhere to be found in the book.
Instead, there's a very tired list of "long term recommendations" that you could have torn out of Blinder's book. Heck, you could have torn them out of Jeff Sachs's book. Like, for example "Teach our Children Well" and "Restart Startups" and the good-old "Rebuild Infrastructure." Tax proposals galore too, some of them genuinely outlandish. WHAT ON EARTH? Infrastructure! Everybody and his mom knows the stat about how many of our bridges are in bad shape. And please somebody tell me what the connection is between tax and technology. None of those tech companies have ever paid any tax, their IP lives in an Irish / Bermudan / Martian tax enclave, last I checked.
I think they handed over the book to a grad student halfway through. Perhaps they left it to a computer. Now, there's a thought.
But the first 100 pages were damn good, so I'll be very generous and give "The Second Machine Age" four stars...
on 11 May 2014
The first machine age was the Industrial Revolution which ran from about 1760 to the middle of the 19th century. It changed everything, disrupting the agrarian-based life of most people and hurling everyone into the world we see around us. This book, by two MiT professors, suggests that we're now in a second machine age, a second industrial revolution, driven by technological development that will change the world even more fundamentally, and much, much faster. They present an excellent argument, drawing on the knowledge of people at the cutting edge of all the disruptive changes now affecting every aspect of life - from Silicon Valley pioneers to economists and academics.
It's certainly an important book for the times, bringing together all the many strands that cause those queasy fears that many experience as comforting familiarities fall away. But why should you read it? Because as with the first industrial revolution, there will be winners and losers (in the 18th century, the losers were all those poor field workers who had to uproot to work in the dark satanic mills. The winners were those who seized control of the emerging technologies). If you're planning your future, your career, or thinking ahead for your children's sake, there is vital information contained within. Tip: don't become an accountant, a driving instructor, or do any task that involves repeating a process. And really, truly, do not give up on education - go as far as you can.
The winners will be people who have ideas, who can create, whether in business or art. They'll set up their own businesses, get hired as freelancers, and be handsomely rewarded. The losers will be anyone who offers their labour, who performs a task for the benefit of others. Read the book to find out why this is true, and what is means for society.
The authors make their case with an easy-reading style backed up with lots of solid evidence, but it loses a point, possibly unfairly, for an issue that is probably beyond their control. Two chapters are devoted to recommendations, short term and long term, that can help us get the best out of the massive change that is coming to the world in the next ten years. But they are generally far too broad brush. That's because, as the authors point out, it's so hard to predict how fast these changes are going to come: the rate of disruption is accelerating and the churn is getting wilder because one small innovation influences a great many more.
The book is not wholly comforting - the pressures on society are going to be huge - although it could be. The message is plain. We can't resist these changes. They're coming whether we like them or not, and if we try to fight them, all our energy will be wasted in a futile endeavour. But if we try to manage that change we can minimise the destructive elements and maximise the vast potential benefits for society as a whole. All we need to do is to pay attention now.
on 4 January 2015
Even though the authors are sometimes evangelical about technology, they are not denying the potential pitfalls (increased inequality and greater unemployment) that rapid technological change may bring if we are not careful. Their conclusions are optimistic, but grounded in realism.
The overall messages are argued convincingly: we are about to see technology develop at a faster rate than ever before, it won't put us all out of work for a while yet (if ever), but don't rule anything out in the potential of machines to do work more effectively than humans. Make friends with technology because the combination of computer processing power and human idea generation is unbeatable. There will be a few big winners and potentially a lot of losers, so we need policy interventions to avoid excessive inequality.
Some quibbles: The dismissal of the ideas of the ancient and pre-industrial world as being of minor importance compared to what we see in the digital age is not only wrong, but is also contradicted by the authors later in the book when they they cite the fundamental importance of democracy, free trade and the rule of law to the flowering of the digital age. Also, the analysis known as the Human Social Development Index is such a dubious post-rationalisation that it should have been left out - the book doesn't need it.
Overall I recommend it though, especially if you are new to this topic and want a deeper understanding.
This book states that the greatest known event in human history was the industrial revolution, what the authors call the first machine age, where we learned to use mechanical power to overcome our physical limitations, they believe we are now at a the start of a another revolution, a second machine age where machines gain intelligence and will start to be able to perform mental tasks like driving cars or diagnosing illness, this will cause as massive a change in how we live as the industrial revolution.
Computers are great at following rules, but not so good at pattern recognition.
"For example, a person's credit score is a good general predictor of whether they'll pay back their mortgage as promised, as is the amount of the mortgage relative to the person's wealth, income, and other debts. So the decision about whether or not to give someone a mortgage can be effectively boiled down to a rule", and computers can handle this, but unfortunately certain things that involve more complex pattern recognition cannot be broken down in to simple rules, driving for example. But even here advances are been made, Google are developing a driverless car, it cannot handle complex city traffic (yet) but shows great promise.
Another problem with computer intelligence is Moravec's paradox, "the discovery by artificial intelligence and robotics researchers that, contrary to traditional assumptions, high-level reasoning requires very little computation , but low-level sensorimotor skills require enormous computational resources." this means that although computers might be great at complex high level stuff like maths they are lousy at sensorimotor skills like walking.
"As the new generation of intelligent devices appears, it will be the stock analysts and petrochemical engineers and parole board members who are in danger of being replaced by machines. The gardeners, receptionists, and cooks are secure in their jobs for decades to come." but then again much like driving advances are been made here as well.
The chess computer Deep Blue might have beat the world's best human player a long time ago but a strong human player with help of a relatively weak laptop can beat Deep Blue, human strategic guidance combined with the tactical acuity of a computer beats a more powerful computer.
In multiple areas, from artificial intelligence to self-driving cars to robotics. things have only gradual improvement then suddenly progress becomes massive, this is how the second machine age works In particular, we need to understand its three key characteristics:
Growth doubles over a certain time period e.g Moore's Law says computer processors double in complexity every two years, at the beginning doubling does not seem very impressive but when the numbers get big doubling becomes massive, 4 to 8 to 16 might not sound much but keep going and you get 32-64-128.
Digital information is easy to reproduce and just because one person has it does not mean someone else goes without unlike say a physical object like a apple. Digital goods (like software, or mapping data) might to expensive to produce but they are cheap to reproduce. and in some cases like Wikipedia people create content for free which means they are cheap to produce and reproduce.
Very little, if anything is new, instead they are combinations of things already in existence, "The Web itself is a pretty straightforward combination of the Internet's much older TCP/ IP data transmission network; a markup language called HTML that specified how text, pictures , and so on should be laid out; and a simple PC application called a `browser' to display the results. None of these elements was particularly novel. Their combination was revolutionary."
"Today, people with connected smartphones or tablets anywhere in the world have access to many (if not most) of the same communication resources and information that we do while sitting in our offices at MIT. They can search the Web and browse Wikipedia. They can follow online courses, some of them taught by the best in the academic world. They can share their insights on blogs, Facebook, Twitter , and many other services, most of which are free. They can even conduct sophisticated data analyses using cloud resources such as Amazon Web Services and R, an open source application for statistics. In short, they can be full contributors in the work of innovation and knowledge creation, taking advantage of what Autodesk CEO Carl Bass calls "infinite computing." Until quite recently rapid communication, information acquisition, and knowledge sharing, especially over long distances, were essentially limited to the planet's elite. Now they're much more democratic and egalitarian, and getting more so all the time. The journalist A. J. Liebling famously remarked that, " Freedom of the press is limited to those who own one." It is no exaggeration to say that billions of people will soon have a printing press, reference library, school, and computer all at their fingertips."
Production in the second machine age depends less on physical equipment and structures and more on the four categories of intangible assets:
Includes patents, copyrights and R&D
Processes, techniques of production, organizational forms, and business models.
USER GENERATED CONTENT
Users of websites like YouTube and Facebook actually make the content that other users consume.
The skills of the workforce.
Gross domestic product (GDP), the standard way of measuring a economy does not measure any of the above, User-generated content, for example, involves unmeasured labor creating an unmeasured asset that is consumed in unmeasured ways to create unmeasured consumer surplus. Because of this new metrics are need to measure the second machine age.
Daron Acemoglu and David Autor suggest that work can be divided into cognitive versus manual and routine versus non-routine. They found that the demand for work has been falling most dramatically for routine tasks, regardless of whether they are cognitive or manual. This leads to job polarization: a collapse in demand for routine jobs that could be done by a machine, while non routine cognitive jobs (such as financial analysis) and non-routine manual jobs (like hairdressing) have held up relatively well.
With jobs likes hairdressing one hairdresser can only do so many haircuts a day, not matter how good they are, so they never will dominate a field and take all the work. But with things like websites it is possible for one website to dominate a field, these are winner takes all industries, even a small difference in product quality could lead to a product totally dominating. No longer can shoddy products rely on consumer ignorance when people can look up reviews on amazon, or take advantage of local monopoly when people can access goods from the entire world. Of course, large markets create opportunities for niche products as well.
Income inequality in American is increasing, but we might consider rising inequality less of a problem if people at the bottom are also seeing their lives improve thanks to technology. The data is quite clear that many people in the United States and elsewhere are losing ground over time, not just relative to others but in absolute terms. In America, the income of the median worker is lower in real dollars than it was in 1999 and the story largely repeats itself when we look at households instead of individual workers, or total wealth instead of annual income. People at the lower ranges of the spread are not doing OK. For one thing, some critical items (like housing, health care, and college) that they (and everyone else) would like to purchase are getting much more expensive over time.
This it is now combined with decreasing social mobility-- an ever lower chance that children born at the bottom end of the spread will escape their circumstances and move upward throughout their lives and careers. Recent research makes it clear that the American Dream of upward mobility, which was real in earlier generations, is greatly diminished today.
So here is the concern: economic inequality will lead to greater political inequality, and those who are further empowered politically will use this to gain greater economic advantage, stacking the cards in their favor and increasing economic inequality still further-- a quintessential vicious circle. And we may be in the midst of it.
The book has some suggestions on what to do including some very interesting opions about education:
Ideation, large-frame pattern recognition, and the most complex forms of communication are cognitive areas where people still seem to have the advantage, and also seem likely to hold on to it for some time to come. Unfortunately, though, these skills are not emphasized in most educational environments today. Instead, primary education often focuses on rote memorization of facts, and on the skills of reading, writing, and arithmetic-- the `three Rs,' Maria Montessori developed a primary educational system emphasising self-directed learning, hands-on engagement with a wide variety of materials (including plants and animals), and a largely unstructured school day. And in recent years they've produced alumni including the founders of Google (Larry Page and Sergey Brin), Amazon (Jeff Bezos), and Wikipedia (Jimmy Wales). These examples appear to be part of a broader trend. Management researchers Jeffrey Dyer and Hal Gregersen interviewed five hundred prominent innovators and found that a disproportionate number of them also went to Montessori schools, where "they learned to follow their curiosity."
There is a lot of economics in this book and economics is a controversial subject but it does try to be well balanced and is an good read.
After reading great futurist books like The Singularity is Near,Abundance: The Future Is Better Than You Think and The Human Race to the Future: What Could Happen - and What to Do I was expecting another eye-opening book on the technologies that will transform society in the coming decades. Instead, the book is merely a summary of a few selected technologies already mentioned in Abundance (like IBM's Watson supercomputer) or that anybody following tech news regularly would have read about countless times, like self-driving cars.
I was hoping for a book that explains more precisely how artificial intelligence, automations and robots will replace people in most jobs, and an in-depth analysis of what jobs will disappear soon and which ones will remain safe for the foreseeable future. I was looking forward to read about how the peer economy, 3-D printers and personal domestic robots will completely change the way we produce and consume. Unfortunately the book does not address any of these. The authors just explain, repetitively and in plain language, that machines will make consumer products cheaper while taking away people's jobs. But who doesn't already know that when it's been discussed countless times in the news?
Chapters 13 and 14 (one fifth of the book) are policy recommendations on how to make the USA more like northern Europe, by raising the standards of education, decreasing socio-economic inequalities, improving the infrastructure, taxing pollution, taxing more the rich and less the poor, or using a value added tax (VAT) system. I don't know if Erik Brynjolfsson was feeling nostalgic about his ancestral Scandinavia when he wrote that, but that is hardly relevant to the Second Machine Age. Even though the USA could benefit from that, Scandinavians will not be immune to the rise of automations regardless of how advanced they are in these regards.
As a side note, on page 241, it says that the United States is the only one of 34 OECD countries not to have a VAT. That is not true. Japan used to have VAT, but it scrapped it for a consumption tax in 1989. A Professor of Management at the MIT Sloan School of Management ought to know that. Besides, the state of Michigan does use VAT (known as "Single Business Tax" or SBT).
on 31 May 2014
The most relevant economist writing today. Given the accelerating impact of technological innovation on the economy, we are almost certainly mismeasuring inflation, output, productivity, real wages, corporate investment ... in other words, virtually everything.
Brynjolfsson has been at the forefront of research in this area for around 20years, he writes clearly and thinks originally. Most economic "opinions" which prevail are actually undermined by Brynjolfsson's analysis.
One caveat: his conclusions and speculations are hugely uncertain. One thing we know about technological innovation is that its effects are significantly unpredictable. I am least convinced by the idea that there will be fewer jobs left for humans to do. History repeatedly undermines this hypothesis. Technology and rising national incomes create jobs and "needs" that we never could have imagined. Just one example: 20yrs ago did anyone predict the job-category "you tuber"?