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

by Erik Brynjolfsson

even larger—category of intangibles is organizational capital like new business processes, techniques of production, organizational forms, and business models. Effective uses of the new technologies of the second machine age almost invariably require changes in the organization of work. For instance, when companies spend millions of dollars on computer hardware and software for a new enterprise resource planning system, they typically also include process changes that are three to five times as costly as the original investments in hardware and software. Yet, while the hardware and software spending generally shows up as additions to the nation’s capital stock, the new business processes, which often outlast the hardware, are generally not counted as capital. Our research suggests that a correct accounting for computer-related intangible assets would add over $2 trillion to the official estimates of the capital assets in the United States economy.