The key to growth Race with the machines Erik Brynjolfsson

growth is not dead let’s let’s start the

story a hundred and twenty years ago

when American factories began to

electrify their operations igniting the

Second Industrial Revolution the amazing

thing is the productivity not increase

in those factories for thirty years

thirty years that’s long enough for a

generation of managers to retire you see

the first wave of managers simply

replace their steam engines with

electric motors but they didn’t redesign

the factories to take advantage of an

electricity’s flexibility it fell to the

next generation to invent new work

processes and then productivity soared

often doubling or even tripling in those

factories electricity is an example of a

general purpose technology like the

steam engine before it general-purpose

technologies drive most economic growth

because they unleash cascades of

complementary innovations like

lightbulbs and yes factory redesign is

there a general purpose technology of

our era sure it’s the computer but

technology alone is not enough

technology is not destiny we shape our

destiny and just as the earlier

generation of managers needed to

redesign their factories we’re going to

need to reinvent our organizations and

even our whole economic system we’re not

doing as well at that job as we should

be as we’ll see in a moment productivity

is actually doing all right but it has

become decoupled from jobs and the

income of the typical worker is

stagnating these troubles are sometimes

misdiagnosed as the end of innovation

but they are actually the growing pains

of what Andrew McAfee and I call the new

machine age let’s look at some data

so here’s GDP per person in America

there’s some bumps along the way but the

big story

is you could practically fit a ruler to

it this is a log scale

so it looks like steady growth is

actually an acceleration in real terms

and here’s productivity you can see a

little bit of a slowdown there in the

mid 70s but it matches up pretty well

with the Second Industrial Revolution

when factories were learning how to

electrify their operations after a lag

productivity accelerated again so maybe

history doesn’t repeat itself but

sometimes it rhymes

today productivity is at an all-time

high

and despite the Great Recession it grew

faster in the 2000s than it did in the

1990s the roaring 1990s and that was

faster than that 70s or 80s is growing

faster than it did during the Second

Industrial Revolution and that’s just

the United States the global news is

even better worldwide incomes have grown

at a faster rate in the past decade than

ever in history if anything all these

numbers actually understate our progress

because the new machine age is more

about knowledge creation than just

physical production it’s mind not matter

brain not brawn ideas not things that

creates a problem for standard metrics

because we’re getting more and more

stuff for free like Wikipedia Google

Skype and if they post on the web even

this TED talk now getting stuff for free

is a good thing right

sure of course it is but that’s not how

economists measure GDP zero price means

zero weight in the GDP statistics

according to the numbers the music

industry is half the size that it was

ten years ago but I’m listening to more

and better music than ever you know I

bet you are too in total my research

estimates that the GDP numbers Mis over

300 billion dollars per year

in free goods and services on the

internet now let’s look to the future

there are some super smart people who

are arguing that we’ve reached the end

of growth but to understand the future

of growth we need to make predictions

about the underlying drivers

growth I’m optimistic because the new

machine age is digital exponential and

combinatorial when goods are digital

they can be replicated with perfect

quality at nearly zero cost and they

could be delivered almost

instantaneously

welcome to the economics of abundance

but there’s a subtler benefit to the

digitization of the world measurement is

the lifeblood of science and progress in

the age of big data we can measure the

world in ways we never could before

secondly the new machine age is

exponential computers get better faster

than anything else ever a child’s

PlayStation today is more powerful than

a military supercomputer from 1996 but

our brains are wired for a linear world

as a result exponential trends take us

by surprise

I used to teach my students that there

are some things you know computers just

aren’t good at like driving a car

through traffic

that’s right here’s Andy and me grinning

like Mad Men because we just rode down

route 101 in yes a driverless car

thirdly the new machine age is

combinatorial the stagnation missed you

is that ideas get used up like

low-hanging fruit but the reality is

that each innovation creates building

blocks for even more innovations here’s

an example in just a matter of a few

weeks an undergraduate student of mine

built an app that it ultimately reached

1.3 million users he was able to do that

so easily because he built it on top of

Facebook and Facebook was built on top

of the web and that was built on top of

the Internet and so on and so forth

now individually digital exponential and

combinatorial would each be game

changers put them together and we’re

seeing a wave of astonishing

breakthroughs like robots that do

factory work or run as fast as a cheetah

or leap tall buildings in a single bound

you know robots are even revolutionising

cat transportation

but perhaps the most important invention

the most important invention is machine

learning

consider one project ibm’s watson these

little dots here those are all the

champions on the quiz show Jeopardy

at first Watson wasn’t very good but it

improved at a rate faster than any human

could and shortly after Dave Ferrucci

showed this chart to my class at MIT

Watson beat the world jeopardy champion

at age 7

Watson is still kind of in its childhood

recently its teachers let it surf the

internet unsupervised the next day it

started answering questions with

profanities damage but you know Watson

is growing up fast it’s being tested for

jobs in call centers and it’s getting

them it’s applying for legal banking and

medical jobs and getting some of them

isn’t ironic that at the very moment we

are building intelligent machines

perhaps the most important invention in

human history some people arguing that

innovation is stagnating like the first

two industrial revolutions the full

implications of the new machine age are

going to take at least a century to

fully play out but they are staggering

so does that mean we have nothing to

worry about

no technology is not destiny

productivity is at an all-time high

but fewer people now have jobs we have

created more wealth in the past decade

than ever but for a majority of

Americans their income has fallen this

is the great decoupling of productivity

from employment of wealth from work you

know it’s not surprising that millions

of people have become disillusioned by

the great decoupling but like too many

others they misunderstand its basic

causes technology is racing ahead but

it’s leaving more and more people behind

today we can take a routine

job codified in a set of machine

readable instructions and then

replicated a million times you know I

recently overheard a conversation that

epitomizes these new economics this

guy’s says nah I don’t use H&R block

anymore

TurboTax does everything that my tax

preparer did but it’s faster cheaper and

more accurate

how can a skilled worker compete with a

thirty nine dollar piece of software she

can’t today millions of Americans do

have faster cheaper more accurate tax

preparation and the founders of Intuit

have done very well for themselves but

seventeen percent of tax preparers no

longer have jobs that is a microcosm of

what’s happening not just in software

and services but in media and music in

finance and manufacturing in retailing

and trade in short in every industry

people are racing against the Machine

and many of them are losing that race

what can we do to create shared

prosperity the answer is not to try to

slow down technology instead of racing

against the machine we need to learn to

race with the machine that is our Grand

Challenge the new machine age can be

dated to a day 15 years ago when Garry

Kasparov the World Chess Champion played

deep blue a supercomputer the machine

won that day and today a chess program

running on a cell phone can beat a human

Grandmaster it got so bad that when he

was asked what strategy he would use

against a computer yond honor the Dutch

Grandmaster replied I’d bring a hammer

but today a computer is no longer the

world chess champion neither is a human

because Kasparov organized a freestyle

tournament where teams of humans and

computers could work together and the

winning team had no grandmaster and it

had no supercomputer what they had was

better teamwork and they showed that a

team of humans and computers working

together could beat any computer or any

human working alone racing with the

machine

beats racing against the machine

technology is not destiny we shape our

destiny thank you