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

by Erik Brynjolfsson

Whether or not we want to eat more, we’d like to eat better or different meals. Whether or not we want to burn more fossil fuels, we’d like to visit more places with less hassle. Computers are helping accomplish these goals, and many others.

Rapid and accelerating digitization is likely to bring economic rather than environmental disruption, stemming from the fact that as computers get more powerful, companies 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.

there’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value. However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.

“The main lesson of thirty-five years of AI research is that the hard problems are easy and the easy problems are hard. .

Kodak’s first digital single-lens reflex camera, the DCS 100, cost about $13,000 when it was introduced in 1991; it had a maximum resolution of 1.3 megapixels and stored its images in a separate, ten-pound hard drive that users slung over their shoulders.

in some countries mobile telephony is more widespread than electricity or clean water.

The journalist A. J. Liebling famously remarked that, “Freedom of the press is limited to those who own one.”

No matter how rich or poor we are, each of us gets twenty-four hours in a day. In order to consume YouTube, Facebook, or e-mail, we must ‘pay’ attention.

stock keeping units (SKUs)

Effective uses of the new technologies of the second machine age almost invariably require changes in the organization of work.

The top 1 percent increased their earnings by 278 percent between 1979 and 2007, compared to an increase of just 35 percent for those in the middle of the income distribution.

How is this possible? Consider a simple example. Ten bank tellers are drinking beers at a bar. Each of them makes $30,000 a year, so both the mean and median income of this group is $30,000. In walks the CEO and orders a beer. Now the average income of the group has skyrocketed, but the median hasn’t changed at all. In general, the more skewed the incomes, the more the mean tends to diverge from the median. This is what has happened not only in our hypothetical bar but also in America as a whole.

In particular, if their work complements the technology, then demand for their services will increase.

“One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man.” —Elbert Hubbard

Only 4 percent of software developers in the burgeoning app economy have made over a million dollars.7

Three-quarters of them made

Even top executives have started earning rock-star compensation. The ratio of CEO pay to average worker pay increased from seventy in 1990 to three hundred in 2005.

As economists Robert Frank and Philip Cook note in their book, The Winner-Take-All Society, “When a sergeant makes a mistake only the platoon suffers, but when a general makes a mistake the whole army suffers.”10

By contrast, a software programmer who writes a slightly better mapping application—one that loads a little faster, has slightly more complete data, or prettier icons—might completely dominate a market. There would likely be little, if any, demand for the tenth-best mapping application, even it got the job done almost as well. This is relative performance. People will not spend time or effort on the tenth-best product when they have access to the best. And this is not a case where quantity can make up for quality: ten mediocre mapping tools are no substitute for one good one.

There were a lot of traffic apps in the marketplace in 2013, but Google only judged one, Waze, worth buying for over one billion dollars.12

While the marginal costs of digital goods do not quite approach zero, they are close enough to create some pretty strange economics.

For example, companies can readily cull all the candidates that don’t have a college degree as a simple expedient even if the job does not actually require a college

Adjusted for inflation, the combined net worth on Forbes’ billionaire list has more than quintupled since 2000, but the income of the median household in America has fallen.1

“The goal of the future is full unemployment, so we can play.”24

Dutch grandmaster Jan Hein Donner summed up the current attitude of human chess masters. When asked how he would prepare for a match against a computer, he replied, “I would bring a hammer.”2

We probably shouldn’t be too surprised by this; SOLEs have been around for a while, and have produced many people who have excelled at racing with machines. In the early years of the twentieth century, the Italian physician and researcher Maria Montessori developed the primary educational system that still bears her name. Montessori classrooms emphasize 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

Our recommendations about how people can remain valuable knowledge workers in the new machine age are straightforward: work to improve the skills of ideation, large-frame pattern recognition, and complex communication instead of just the three Rs. And whenever possible, take advantage of self-organizing learning environments, which have a track record of developing these skills in people.

Arum, Roksa, and their colleagues tracked more than 2,300 students enrolled full-time in four-year degree programs at a range of American colleges and universities. Their findings are alarming: 45 percent of students demonstrate no significant improvement on the CLA after two years of college, and 36 percent did not improve at all even after four years. The average improvement on the test after four years was quite small. Consider a student who scored at the fiftieth percentile as a freshman. If he experienced average improvement over four years of college, then went back and took the test again with another group of incoming freshmen, he would score only in the sixty-eighth percentile. The CLA is so new that we don’t know if these gains would have been bigger in the past, but previous research using other tests indicates that they were, and that only a few decades ago the average college student learned a great deal between freshman and senior years.

Over 160,000 students signed up for the course. Tens of thousands of them completed all exercises, exams, and other requirements, and some of them did quite well. The top performer in the course at Stanford, in fact, was only the 411th best among all the online students. As Thrun put it, “We just found over 400 people in the world who outperformed the top Stanford student.”16

seek to be an indispensable complement to something that’s getting cheap and plentiful.

By the end of 2011, in fact, student loan debt in America was greater than either total outstanding car loans or credit card debt.20

Maybe we’ll see a program that can scan the business landscape, spot an opportunity, and write up a business plan so good it’ll have venture capitalists ready to invest.

“In math, the average U.S. student by age 15 was at least a full year behind the average student in six countries, including Canada, Japan, and the Netherlands. Students in six additional countries, including Australia, Belgium, Estonia, and Germany, outperformed U.S. students by more than half a year.”4

The head of MITx, Anant Agarwal, says that he was surprised when the data revealed that half of his students started working on their homework assignments before watching the video lectures. Students were more motivated to really understand the content of the lecture once they saw the specific challenges that they would learn how to overcome.

As old tasks get automated away, along with demand for their corresponding skills, the economy must invent new jobs and industries.

This iss the roblem with the currennt dmmnistrratiiom

Thomas Edison, Henry Ford, Bill Gates, and many others created new industries that more than replaced the work that was eliminated as farming jobs vanished over the decades. The current transformation of the economy creates an equally large opportunity.

Since 2007, it appears that net illegal immigration to the United States is approximately zero, or actually negative.30 And a study by the Brookings Institution found that highly educated immigrants now outnumber less educated ones; in 2010, 30 percent had at least a college education, while only 28 percent lacked the equivalent of a high school degree.31

Many economists on both the left and the right have agreed with King. Liberals including James Tobin, Paul Samuelson, and John Kenneth Galbraith and conservatives like Milton Friedman and Friedrich Hayek have all advocated income guarantees in one form or another, and in 1968 more than 1,200 economists signed a letter in support of the concept addressed to the U.S. Congress.4

In his book Drive, Daniel Pink summarizes the three key motivations from the research literature: mastery, autonomy, and purpose.