Cadmus

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

Erik Brynjolfsson and Andrew McAfee (both MIT Center for Digital Business).

NY: W. W. Norton, Jan 2014, 306p, $26.95. (www.secondmachineage.com)

On the surface, this is a very important book about present and future technologies, jobs, and growing inequality. It is clearly written, plausible, and well-documented. Although oriented to American audiences, it has global import in our globalizing age. It is not directly about security and sustainability (neither term is in the index), although the book could illuminate both concerns, as technology continues its inexorable advance, for better and worse.

The first machine age brought the Industrial Revolution: the sum of several near simultaneous developments in mechanical engineering, chemistry, metallurgy, etc. The most important technology was the steam engine, which overcame limitations of human and animal muscle power, leading to factories, mass production, railways, and mass transport.

“Now comes the second machine age. Computers and other digital advances are doing for mental power—the ability to use our brains to understand and shape our environment—what the steam engine and its descendants did for muscle power” (pp.7-8). How this transition will play out is unknown, but it is “a very big deal,” for mental power is at least as important for progress and development as physical power.

1. Three Broad Observations
Rapid Progress Ahead.“We’re living in a time of astonishing progress with digital technologies”— those that have computer hardware, software, and networks at their core. Just as it took generations to improve the steam engine, it has also taken time to refine our digital engines. The full force of these technologies has only recently been achieved, yet computers will continue to improve and do new and unprecedented things. “Full force” simply means that key building blocks are now in place. In short, “we’re at an inflection point” where the curve starts to bend a lot.

Profound Benefit.“The transformations brought about by digital technology will be profoundly beneficial ones.” The new era will be better because we’ll be able to increase the variety and the volume of our consumption. “Technology can bring us more choice and even freedom,” and technical progress is improving exponentially.

Tough Challenges.Digitization will bring with it some thorny challenges, notably economic disruption, because, as computers get more powerful, employers will have less need for some kinds of workers. “Technological progress is going to leave behind some people, perhaps even a lot of people, as it races ahead.” (p.11, italics added). The challenges of the digital revolution can be met, but we first have to be clear on what they are, and to discuss the likely negative consequences. They’re not insurmountable, but they won’t fix themselves.

2. Recent Technological Progress
Six chapters enthusiastically discuss the skills of the new machines (self-driving cars from Google’s Chauffeur project, instantaneous translation from IBM’s GeoFluent and Google Translate, acceleration in robotics, 3D printing used by many companies to make prototypes and model parts), why Moore’s Law has held up for so long (brilliant tinkering leading to constant modification), the digitization of just about everything, the fundamental impor­tance of innovation for growth and prosperity, why innovation and productivity will continue to grow at healthy rates in the future, the life-changing potential of Artificial Intelligence (bring­ing key aspects of sight to the visually impaired, restoring hearing to the deaf, AI-aided diagnoses in some medical specialties).

Echoing the optimism of the late Julian Simon, the authors exclaim that “there is no better resource for improving the world and bettering the state of humanity than the world’s humans… Our good ideas and innovations will address the challenges that arise, improve the quality of our lives, allow us to live more lightly on the planet, and help us take better care of one another. It is a remarkable and unmistakable fact that, with the exception of climate change, virtually all environmental, social, and individual indicators of health have improved over time, even as human population has increased” (p.93). But the main impediment to more progress has been that, until quite recently, many people had no effective way to access the world’s knowledge. This situation is rapidly changing with the advent of mobile phones, bringing billions of people into the community of potential knowledge creators, innovators, and problem-solvers.

3. Bounty and Spread
The next five chapters explore the two economic consequences of this progress: bounty (the increase in volume, variety, and quality and the decrease in cost of the many offerings of modern technology) and spread (the ever-bigger differences among people in income and wealth, likely to accelerate unless we intervene). Topics include marked increases in productivity growth, zero-price products and services not reflected in GDP (e.g. over one million apps on smartphones, Wikipedia, free classifieds on Craigslist, free phone calls on Skype), the ubiquitous bounty of digital photographs, intangibles as a growing share of capital assets (intellectual property, organizational capital, user-generated content, and especially human capital), and the need for “new metrics” other than GDP in the second machine age.

But growing inequality or spread is a major problem. The authors discuss decoupling of median wages from productivity (the bottom 80% of the US income distribution saw a net decrease in their wealth since 1983), increased earnings of the top 1% by 278% between 1979 and 2007 while overall median income has fallen since 1999, economic winners and losers (“digital technologies increase the economic payoff to winners while others become less essential and hence less well rewarded”), the evolving skill set affected by computerization, stars and superstars as the biggest winners due to “winner-take-all” markets (the top 0.01% saw their share of national income double from 3% to 6% between 1995 and 2007), why winner-take-all markets are more common now (digital goods have enormous economies of scale), the questionable “strong bounty” argument that it will overwhelm the spread and thus no need to worry (“we wish that were the case, but it’s not”), technological unemployment despite a growing economy (but most mainstream economists still argue that technology creates more jobs than it destroys), and globalization. “In the long run, the biggest effect of automation is likely to be on workers not in America and other developed nations, but rather in developing nations that currently rely on low-cost labor for their competitive advantage”(p.184). The advantage of low wages largely disappears by installing robots and other types of automation; “offshoring is often only a way station on the road to automation.”


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