The Second
Machine Age
Erik Brynjolfsson
MIT Sloan School
Director, MIT Initiative on the Digital Economy
@erikbryn
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MIT Initiative on the Digital Economy
The Second Machine Age
Changing the world requires two things:
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Physical Power: move or transform things
Mental Power: decide where and how
Industrial Revolution = Physical Power
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Steam engine (and Internal combustion engine, Electricity)
Mostly a complement to humans
Second Machine Age = Mental Power
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Computers, Software, Big Data, Machine Intelligence
Complement or substitute?
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MIT Initiative on the Digital Economy
State of Understanding, 2004
Uniquely Human Abilities
- Autonomous mobility and fine motor
control
- Language and complex communication
- Pattern matching and unstructured
problem solving
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
Machine Intelligence
Interacting with physical world
• Fine and gross motor control
• Vision and other senses
Language
• Voice recognition
• Natural language processing
• Creating narratives
Problem Solving
• Answering unstructured questions
• Rule based analysis
• Pattern recognition and classification
We’re in the midst of the greatest “one-time” event in history
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!
MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
Machine Intelligence
Interacting with physical world
• Fine and gross motor control
• Vision and other senses
Language
• Voice recognition
• Natural language processing
• Creating narratives
Problem Solving
• Answering unstructured questions
• Rule based analysis
• Pattern recognition and classification
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MIT Initiative on the Digital Economy
Siri
Voice recognition
Lionbridge
Translation
Narrative Science
Authoring News Stories
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
Machine Intelligence
Interacting with physical world
• Fine and gross motor control
• Vision and other senses
Language
• Voice recognition
• Natural language processing
• Creating narratives
Problem Solving
• Answering unstructured questions
• Rule based analysis
• Pattern recognition and classification
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MIT Initiative on the Digital Economy
The Digital Frontier
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MIT Initiative on the Digital Economy
Accuracy and Questions Answered on Jeopardy!
100%
90%
80%
11/2010
04/2010
10/2009
05/2009
12/2008
08/2008
05/2008
Accuracy
70%
60%
50%
40%
30%
12/2007
20%
12/2006
10%
0%
0%
10%
20%
30%
40%
50%
60%
Percent Answered
70%
80%
90%
100%
The Digital Frontier
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MIT Initiative on the Digital Economy
The Digital Frontier
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
What does this mean for the
economy?
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MIT Initiative on the Digital Economy
The Bounty
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
$300 BILLION PER YEAR
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MIT Initiative on the Digital Economy
GDP, Profits, Investment, and Employment
Level of GDP, Profits, and Investment (Jan-95 = 100)
Trends in US GDP, Profits and Investment
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MIT Initiative on the Digital Economy
GDP, Profits, Investment, and Employment
Employment-Population Ratio
Level of GDP, Profits, and Investment (Jan-95 = 100)
Trends in US GDP, Profits, Investment, and
Employment
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MIT Initiative on the Digital Economy
WHAT’S GOING ON?
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MIT Initiative on the Digital Economy
Our View
“Digital technologies change
rapidly, but organizations and
skills aren’t keeping pace.
As a result, millions of people
are being left behind.”
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
The Great Decoupling
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MIT Initiative on the Digital Economy
The Hard Truth
Digital progress makes the
economic pie bigger.
But there is no economic
law that everyone, or even
most people, will benefit.
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MIT Initiative on the Digital Economy
Three Sets of Winners and Losers
1. High
Skilled vs. Low & Mid Skilled Workers
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MIT Initiative on the Digital Economy
Skill Disparities
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MIT Initiative on the Digital Economy
Polarization of the Labor Market
Mid-wage workers have been hit hardest in both
employment and wages
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MIT Initiative on the Digital Economy
Three Sets of Winners and Losers
1. High Skilled vs. Low & Mid Skilled Workers
2. Capital vs. Labor
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MIT Initiative on the Digital Economy
Capital vs. Labor
120
Corporate Profit as %
of GDP
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117
114
8
111
6
108
105
4
102
2
0
1947
99
Labor Share
of GDP
1958
1969
1980
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1991
2002
Labor Share (2009 = 100)
Corproate Profits as % of GDP
Corporate Profits After Tax as % of GDP & Non-Farm Labor Share,
1947-2013
96
2013
MIT Initiative on the Digital Economy
Source: research.stlouisfed.org
Three Sets of Winners and Losers
1. High Skilled vs. Low & Mid Skilled Workers
2. Capital vs. Labor
3. Superstars vs. Everyone Else
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MIT Initiative on the Digital Economy
Superstars
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MIT Initiative on the Digital Economy
WHAT IS TO BE DONE?
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MIT Initiative on the Digital Economy
The New Grand Challenge
• Digital technologies will continue
to accelerate.
• Our skills, organizations and
institutions are lagging.
• Business as usual won’t solve
this problem.
We need to reinvent our economy
and society to keep up with
accelerating technology
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MIT Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
The New Landscape
• What challenges and opportunities do you
see?
• What are your concerns and questions?
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MIT Initiative on the Digital Economy
The Initiative on the Digital Economy
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MIT Initiative on the Digital Economy
To learn more, visit:
http://digital.mit.edu/erik
http://digital.mit.edu/ide
http://secondmachineage.com
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MIT Initiative on the Digital Economy