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