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

by Erik Brynjolfsson

“Technology is a gift of God. After the gift of life it is perhaps the greatest of God’s gifts. It is the mother

DARPA, the Defense Advanced Research Projects Agency, was founded in 1958 (in response to the Soviet Union’s launch of the Sputnik satellite) and tasked with spurring technological progress that might have military applications. In 2002 the agency announced its first Grand Challenge, which was to build a completely autonomous vehicle that could complete a 150-mile course through California’s Mojave Desert. Fifteen entrants performed well enough in a qualifying run to compete in the main event, which was held on March 13, 2004.

Improvement in autonomous vehicles reminds us of Hemingway’s quote about how a man goes broke: “Gradually and then suddenly.”5 And self-driving cars are not an anomaly; they’re part of a broad, fascinating pattern. Progress on some of the oldest and toughest challenges associated with computers, robots, and other digital gear was gradual for a long time. Then in the past few years it became sudden; digital gear started racing ahead, accomplishing tasks it had always been lousy at and displaying skills it was not supposed to acquire anytime soon. Let’s look at a few more examples of surprising recent technological progress. Good Listeners

“I for one welcome our new computer overlords.” He later elaborated, “Just as factory jobs were eliminated in the twentieth century by new assembly-line robots, Brad

Isaac Asimov coined the term robotics in 1941 and provided ground rules for the young discipline the following year with his famous Three Laws of Robotics: 1. A robot may not injure a human being or, through inaction, allow a human being to come to harm. 2. A robot must obey the orders given to it by human beings, except where such orders would conflict with the First Law. 3. A robot must protect its own existence as long as such protection does not conflict with the First or Second Laws.25

This situation has come to be known as Moravec’s paradox, nicely summarized by Wikipedia as “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.”

the pixels per dollar available from digital cameras doubled about every year (a phenomenon known as “Hendy’s Law” after

you want to have good ideas you must have many ideas.”

run it is almost everything.” Why? Because, he explains, “A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker”—in

rule, not the exception. As he summarizes in his book The Nature of Technology, “To invent something is to find it in what previously exists.”14 Economist Paul Romer has argued forcefully in favor of this view, the so-called ‘new growth theory’ within economics, in order to distinguish it from perspectives like Gordon’s. Romer’s inherently optimistic theory stresses the importance of recombinant innovation. As he writes:

Economic growth occurs whenever people take resources and rearrange them in ways that make them more valuable. . . . Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new . . . ideas were discovered. And every generation has underestimated the potential for finding new . . . ideas. We consistently fail to grasp how many ideas remain

“Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.”

When a business traveler calls home to talk to her children via Skype, that may add zero to GDP, but it’s hardly worthless. Even the wealthiest robber baron would have been unable to buy this service. How do we measure the benefits of free goods or services that were unavailable at any price in previous eras?

But this decrease in costs lowers GDP even as our personal well-being increases, leaving GDP to travel in the opposite direction of our true well-being. A simple

this case, consumer surplus would be a better measure of our economic well-being. Yet as appealing as consumer surplus is as a concept, it is also extremely difficult to measure.

Nineteenth-century economists like Karl Marx and David Ricardo predicted that the mechanization of the economy would worsen the fate of workers, ultimately driving them to a subsistence wage.

If productivity is growing and labor as a whole isn’t capturing the value, who is? Owners of physical capital, to a large extent.

Meanwhile, real spending on capital equipment and software has soared by 26 percent while payrolls have remained essentially flat, as noted by Kathleen Madigan.39

Albert Einstein once said that black holes are where God divided by zero, and that created some strange physics. While the marginal costs of digital goods do not quite approach zero, they are close enough to create some pretty strange economics. As discussed in chapter 3, digital goods have much lower marginal costs of production than physical goods. Bits are cheaper than atoms, not to mention human labor.

For some goods and services, such as automobile tires or household lighting, demand has been relatively inelastic and thus insensitive to price declines.

These activities have one thing in common: ideation, or coming up with new ideas or concepts. To be more precise, we should probably say good new ideas or concepts, since computers can easily be programmed to generate new combinations of preexisting elements like words. This however, is not recombinant innovation in any meaningful sense. It’s closer to the digital equivalent of a hypothetical room full of monkeys banging away randomly on typewriters for a million years and still not reproducing a single play of Shakespeare’s.