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The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee

April 9, 2018

The-Second-Machine-Age

According to Brynjolfsson and McAfee, the first machine age—also known as the Industrial Revolution—started with the invention of the steam engine. The ability to reliably generate high levels of power caused rapid growth in efficiency and an explosion in related innovation. In terms of human development, the first machine age supercharged human progress on par with the domestication of animals and the printing press. It sparked revolutions in manufacturing, commerce, infrastructure, geopolitics, the makeup of our communities, our health and our environment. It ushered in new types of jobs and made others obsolete. In short, the first machine age changed pretty much everything.

Now we find ourselves at the front end of the second machine age, where computers and everything they bring—network technology, mobile technology, decentralized media, automation and AI, data collection and analysis—are creating exponential changes that will again revolutionize everything.

Brynjolfsson is the director of the MIT Center for Digital Business and McAfee is a research scientist at MIT. Both have written extensively on the impact of rapid technological development on our economy and society. Here, their main thesis is that technological innovation brings both increased bounty and increased spread.

Bounty is the abundance of goods and material wealth generated by innovation. It’s a good thing. Spread, however, is the widening inequality also caused by rapid innovation. Although society tends to benefit as a whole from innovation, that wealth is not evenly distributed. The owners of the innovations can see exponential gains while the actual labor market is disrupted and many workers are displaced. Whether it’s factory workers being replaced by machines or travel agents being replaced by websites, the rich get richer and those doing the work are out of luck.

In a “fair” economy, where innovation benefits everyone, we would expect to see a standard bell curve distribution of wealth, with long tails on both sides. Instead, what we see is a developing power law distribution, where the average income rises more rapidly than the median. In other words, the curve is fat at the low end with a very long tail on the high end. There are more super-wealthy, and the majority of the population sees relatively little lift. Reflected in a recent headline, the wealthiest 1% of Americans now own 40% of the country’s wealth, the largest amount of any time in the past 50 years. This wealth distribution is common in developing nations.

There are moral implications to this. Franklin Roosevelt said, ““The test of our progress is not if we add more to the abundance of those who have much. It is whether we provide enough for those who have little.”

But beyond the moral argument, severe inequality of opportunity has several growth-stunting effects. First, it is destabilizing. It is rare, if nonexistent, that societies of abundance and widespread opportunity find themselves in states of violent political revolution. Extreme economic inequality is politically destabilizing, and we currently see the growing strands of populism on both the political right and left, in the U.S. as well as globally.

But the authors make a more insightful point: maximizing our full potential for innovation requires that opportunity be widespread. If we fail to deliver on our promise of ubiquitous opportunity and quality education for all, we shrink the pool of potential innovators. We need a full spectrum of thinkers, regardless of their backgrounds or economic circumstances. Said another way, the next Einstein may be a kid from the projects in Baltimore, but if that kid can’t get a good education, we lose that mind. Society as a whole loses. “We waste our innovative potential if we do not provide a level playing field for all.”

We see the American education system slipping as we deprioritize it. Our ability to lead the world in technological innovation will follow.

Another obvious impact of innovation is disruption of the job markets. Here again, education will play a major role. We have to educate to the future, accepting that computers will replace many of today’s jobs but create new types of jobs in the process. A “computer” was once a human job description—until we realized that machines could do computations better. Multiples better. And as computers improve by Moore’s Law (which postulates an exponential curve to the speed, capacity and decreasing cost of computers), there’s no chance that people will be able to catch up in tasks for which computers are better suited. Ken Jennings vs IBM Watson on Jeopardy or Gary Kasparov vs Deep Blue at chess are just the modern version of John Henry vs the steam hammer. Humans always lose these contests.

That said, computers are still not suited for many tasks. Pattern recognition, creativity and the most complicated forms of communication are all good bets. As is technological innovation itself. At the end of the book, the authors include a playbook, agreed upon by most economists (left, right and center), for life beyond the second machine age. It includes re-investing in our education system, incentivizing startups, supporting research grants in science and stimulating private sector investment, among others.

This book is about an important topic. It includes some star-gazing at the marvels of our time (e.g. it’s estimated that there are now more photos taken every two minutes than in the whole 19th Century), some predictions about the future á la Ray Kurzweil and Yuval Harari, but it also has a very practical side. Not just the marvels and the implications, but a roadmap for the future. For anyone concerned about technology’s future impact on the economy, this is a great primer.

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