Tag Archives: #2MA

Top Ten Highlights from the 2014 MIT Sloan CIO Symposium

Registration for the 2015 MIT Sloan CIO Symposium opened last week. As with last year, I’m a member of the organizing team. One of my roles is to write content, such as the text below, for our newsletter. We sent similar content via e-mail in yesterday’s edition.

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2014 MIT Sloan CIO Symposium -- Innovation Showcase

2014 MIT Sloan CIO Symposium — Innovation Showcase

The 2015 MIT Sloan CIO Symposium is just around the corner: May 20, 2015 at the MIT Kresge Auditorium, Cambridge MA. This global event helps CIOs and senior IT executives become better business leaders.

Last year, Lindsey Anderson, event chair, told us in his opening remarks that we should all be thinking about the digital revolution because of two concepts: exponential growth of technology and convergence of global markets. Here are ten highlights from the 2014 Symposium (download the program pdf) to remember:

  1. Thaddeus Arroyo, Chief Information Officer of AT&T Services, received the MIT Sloan CIO Leadership Award.
  2. During the morning’s academic panel, Erik Brynjolfsson, co-author of The Second Machine Age, set the scene for the day saying that, “We are at an inflection point where technology continues its ever rapid pace . . . and as a result is having a profound impact on society.” See the video.
  3. All day networking was highlighted by the 2014 Innovation Showcase and Evening Reception. Dell’s Karaboutis said, “Data is the new currency in the digital world,” a sentiment that Jeff Boehm observed as he visited vendors such as CloudPhysics, Cambridge Semantics, Luminoso, and RapidMiner that were showing new ways to gain insights from data.
  4. “Every company is now a software company,” says Mendix CEO Derek Roos while summarizing the digital disruption. The issue facing every business is that the world is becoming programmable, so software is critical for customer satisfaction and brand differentiation.
  5. To cope with this second machine age, “culture, laws, ethics, and economics all matter.” CIOs can no longer focus on technology alone; they must work closely with business owners.
  6. “Fear vs. fear” has replaced “hope vs. fear.” Narinder Singh, chief strategy officer for Appirio, says, “It’s now fear of disruption versus fear that we can’t screw something up because I don’t want to get fired.”
  7. Collective intelligence is the new frontier. Professor Thomas Malone tells us that the team’s strength depends on team members having high social intelligence, as well as a willingness to have everyone participate. Andrew McAfee explained how collective intelligence is expanding to include combinations of humans and machines.
  8. “IT doesn’t support the business; it is the business,” this is one of many great quotes from Adriana Karaboutis, the Dell CIO. Another was when she explained how she ditched the company’s IT steering committee, “I’m not a ship; I don’t need to be steered.”
  9. After the event, Sheila Lahar’s take away from the event was that modern CIOs are agile, customer-focused, visible, and innovative. Laura Aberle’s take away was that CIOs need to help enterprises stay ahead of the customer empowerment curve.
  10. Matt Haney identified the one overarching theme to sum up the Symposium: “evolve or perish.” This was the theme of the afternoon’s general session about becoming the CIO of the future.

Are you looking forward to the 2015 MIT Sloan CIO Symposium?

(Click here for the 2015 Registration Page)

New blue collar jobs and an unconditional basic income experiment in India

WBUR’s recent On Point radio show, “The New Blue Collar Jobs Of Tomorrow,” discussed a USA Today study, “Where the jobs are: The new blue collar,” that was cautiously optimistic about new blue collar jobs between now and 2017:

By 2017, an estimated 2.5 million new, middle-skill jobs . . . are expected to be added to the workforce, accounting for nearly 40% of all job growth, according to a USA TODAY analysis of local data from Economic Modeling Specialists Intl. and CareerBuilder.

One of the guests on the show was Eirk Brynjolfsson. Earlier this year, I reviewed his book, The Second Machine Age. In this review, as well as an earlier post, I discussed the concept of a basic income as a possible policy to help cope with the projected impact that technology will have on the economy in the long-term. I felt before, and feel today, that this idea needs more study. In the comments section of the WBUR report, I found an encouraging video that discussed the results of a study in India. Here’s the introduction:

What if everybody received every month enough money to live by? Will society collapse? Will we all become slackers? Myths and facts about Unconditional Basic Income, with analysis from a real world experiment conducted in India between 2011-2013. Keynote speech by Federico Pistono at the Future of Work Summit, NASA Ames Research Park, California, June 30, 2014.

Eirk Brynjolfsson was in the audience and spoke to Federico Pistono during the question and answer session. Brynjolfsson suggested that results in developed nations, such as the U.S., might be very different from India. He’s right. Nevertheless, this is a very interesting video and I fully support repeating the experiment in other countries. As Pistono concluded at the end, this is not a panacea. Nevertheless, it could be one element of a future solution. Enjoy the video.

The Clearest Trend in the American Workforce Is Not an Encouraging One

Allan:

To answer Andrew McAfee’s question (at the end of his post), no I don’t see the labor participation rate rising anytime soon. McAfee argues here that “progress in all things digital” is contributing to the decline in the labor force participation rate. Why should we care? The Wonkblog post that McAfee references answers this question:

To put this in perspective: If the same percentage of adults were in the workforce today as when Barack Obama took office, the unemployment rate would be 10.8 percent.

If you watched the video that Martin Ford shared on his blog, then you should also read McAfee’s post.

Originally posted on: Andrew McAfee’s Blog | The Clearest Trend in the American Workforce Is Not an Encouraging One

It’s been a while since I posted data on US employment trends, so here’s a chart created with FRED’s snazzy new graphing interface. It shows the employment rate (in other words, 100 – the standard unemployment rate) in blue, the employment-to-population ratio (the % of working-age people with work) in green, and the labor force participation rate (the percent of working-age people who have work or are actively looking for it) in red.

View Original (about 450 more words)

Preparing for the next digital revolution at the MIT Sloan CIO Symposium

Lindsey Anderson, Chair, MIT Sloan CIO Symposium, opens the event in Cambridge, MA

Lindsey Anderson, Chair, MIT Sloan CIO Symposium, opens the event in Cambridge, MA

This past Wednesday, May 21, I attended the MIT Sloan CIO Symposium for the first time. The theme was “Are you ready for the next digital revolution?” Lindsey Anderson, event chair, told us in his opening remarks that we should all be thinking about the digital revolution because of two concepts: exponential growth of technology and convergence of global markets. Although the event was directed at chief information officers (CIOs), the topics attracted a broader audience of over 700 people, who were all connected with, or excited about, this emerging digital technology. Anyone, in almost any role, who is interested in building a successful business over the next few years would have benefited from being at this event.

The issue facing every business is that the world is becoming programmable, so software is critical for customer satisfaction and brand differentiation. Professor Erik Brynjolfsson, during the academic panel, compared the first machine age, which augmented power systems during the industrial revolution, with the second machine age, which is augmenting control systems during this digital revolution. Due to the rapid pace of technological change, many businesses will be disrupted and will have difficulty keeping pace. Peter Weill suggested that the best defense against disruption is to build a great business: focus on products, delivery systems, and customer experience. Over and over speakers made the point that business success will depend on engaging customers and providing an outstanding experience. This is not easy in a world that is becoming ever more complex. By 2020, just to quote one statistic, we were told that 57,000 new “things” will be added to the internet every second. Brook Colangelo, in a later session, made a remark that summarized the discussion, “There is no business without IT right now . . . we don’t support business: we are part of the business.”

Topics at the symposium included, but went beyond, cloud, analytics, mobile, social and security. While these topics remain important, the future of digital business includes nanobots, wearables and ingestibles. Today, the health of farm animals can be monitored by having each animal ingest a tiny device. In five years, every doctor will get a second opinion from “Dr. Watson” (the IBM supercomputer). The “internet of things” will soon be a 19 trillion dollar industry with 20 billion online devices by 2020. Some say that today’s “cloud” will be replaced by tomorrow’s “fog.” Huge opportunities will emerge to develop applications, address privacy and security concerns, and help people evolve with this changing culture. Dr. Dieter Haban says that we’re at the beginning of endless possibilities.

What is a chief information officer (CIO) to do? Rebecca Rhoads suggested that they must shift from a technological focus to a business focus. As business leaders, they must align around outcomes, vision, and possibilities. That is, tell a story, capture people’s imagination, and transform the organization. Successful CIOs will excel at communication, innovation and creativity. Adriana Karaboutis says that “to succeed as a CIO, embrace change and make change happen; embrace how consumers drive digital disruption.” She says to use technology and data to create meaningful connections, with the customer at the center. Drive growth in the digital enterprise by empowering the customer: engage with customers in the way that they live their lives.

Some amount of fear always accompanies new technologies, due to concerns about security, privacy or business continuity. Nevertheless, the hope that technology will bring increased value and competitive advantage traditionally balanced this fear. Narinder Singh suggests that for many “fear vs. hope” has been replaced by “fear vs. fear.” That is, many now balance the fear of making a mistake with technology against the fear that the digital disruption will leave their company behind. One coping strategy is to embrace change and innovate. Chip Gliedman warns that a common complaint about information technology (IT) is that everything takes too long; moving forward, agility will be the key indicator of value. Adriana Karaboutis says, “IT is not a ship,” and replaced her IT steering committee with a business architecture team. IT does not support the business, IT is the business. F. Thaddeus Arroyo, the 2014 MIT CIO Leadership Award Winner, says that AT&T set the goal that by 2020 80% of all interactions would be digital. To support this, he expects 90% of all his IT professionals to evolve into new roles to cope with this changing landscape. Instead of limiting themselves to technology concerns, CIOs in the future will need to be focused on business outcomes as well.

A highlight of the symposium for me was when a large cardboard box was wheeled on to the stage and we were asked to imagine a future world where artificial intelligence could match human intelligence well enough to do all forms of labor. For many people in the room, this was no longer a question of “if,” it was only a question of “when.” Professor Thomas W. Malone said that he does not expect such machines to emerge in his lifetime. Nevertheless, the experts on stage urged us to grapple with the new ethical and legal challenges that will accompany machine intelligence. Imagine a machine that sends you a speeding ticket before you can even touch the brake. Professor Alex (Sandy) Pentland is concerned that laws could become digital and automatic, challenging human judgment. The implications of such developments need to be carefully considered. Isaac Asimov was thinking about these issues long ago, and perhaps the time has come to dust off his three laws of robotics. In the near future, as a practical matter, each machine will need to be associated with a human that will take responsibility for its actions. Artificial intelligence is evolving, and it will be up to us to guarantee that machines uphold human values and ethics.

The truth is that no one knows how fast these changes will come. What we do know is that technological innovation will outpace government policies and laws. As the pace accelerates, our society will struggle to adapt and keep up. Rebecca Rhoads urged us to carry out change respectfully and thoughtfully.

Despite all that was discussed, there was a sense of optimism that our future could be bright. Speakers urged us to embrace change and drive innovation to grow professionally. Creative life-long learners will always be in demand. Our youth will need to be computer literate and become the “captain of their own ship.” In brief, have fun with the emerging technology because we are living in an exciting time.

Although machines have emerged that can beat the best humans at chess or Jeopardy, researchers have discovered that a well-formed team can beat the best solo human or machine. Such a team can be all humans or a combination of humans and machines; either way, we are stronger collectively. Further, a team’s strength is not determined by the raw intelligence of its members. Instead, Professor Thomas Malone tells us that the team’s strength depends on team members having high social intelligence, as well as a willingness to have everyone participate. As a side note, teams with a high proportion of women tend to do well, likely because the average social intelligence is higher for that gender.

Andrew McAfee gave the closing keynote. He talked about how teams of the future will combine humans and machines. He chose computer chess as an example. We all know that the best computer can now beat the best human. In “freestyle chess,” however, mixed teams of humans and computers produce new and surprising results. A team of good (not outstanding) players, aided by software running on a personal computer, can beat the best solo human or machine. Collective intelligence is the new frontier.

A painting made by Harold Cohen’s computer program, AARON. Photo by Conall O’Brien

A painting made by Harold Cohen’s computer program, AARON. Photo by Conall O’Brien

McAfee is reluctant to put any limits on artificial intelligence; when it comes to computer ability, his mantra has become “never say never.” New capabilities are emerging. For example, emotion sensing software is available that works as well as the “average guy.” Improvements are needed, but that’s not bad for a machine. He also showed examples of paintings that were completely machine generated; artificial intelligence is moving beyond routine tasks and beginning to emulate creativity. Nevertheless, humans, he believes, will still have roles to play as we learn to work with intelligent machines. Although economic theory and government policy are lagging behind the technological curve, he believes that we will adapt and enjoy great benefits. While there will be difficulties, such as coping with employment concerns, we have the opportunity to build an economy of abundance. McAfee cautioned us that protectionism is not the answer. He said that we should not attempt to protect the status quo, nor should we expect egalitarianism. Instead, our guiding principles should be innovation and inclusiveness. Personally, I would add one more: integrity.

The event ended with a reception at the innovation showcase where ten cutting edge companies displayed their products for Enterprise IT. Four books were on display:

  • The Second Machine Age, by Erik Brynjolfsson and Andrew McAfee
  • Social Physics, by Alex Pentland
  • Big Data @ Work, by Thomas H. Davenport
  • The Innovators Path, by Madge M. Meyer

In addition, many others have written about this event. Below is a partial list of articles (there is also a list on MIT Sloan CIO Symposium Site News and Press Coverage page):

Happy reading and be sure to let me know your thoughts on the next digital revolution. Are you ready?

 

 

Considering “The Second Machine Age”

At the end of my five-part series “Working to 2025,” I said that I would follow-up after The Second Machine Age, by Erik Brynjolfsson and Andrew McAfee, hit the shelves.  The book is out, I have read it, and, as promised, here are my comments. This book is worth reading, especially for anyone who does not work in the field of information technology.

The authors document in detail why we may be living through a period of history that, more than any other before, marks changes to human civilization. Only future generations will be able to look back in time and know if this is true, but there is enough evidence that everyone should sit up, take notice, and take part in shaping our future. While technology will evolve at a mind-boggling pace, and the benefits to society promise to be immense, the transition period will be extremely difficult, especially due to technology’s impact on the dynamics of our economic system. While coping with these changes, it will be up to us to shape the future.

If you read my earlier posts on this theme, you’ll know that this is the first of a few planned follow ups. The second will be after the 2014 MIT CIO Symposium. What has changed is that I have learned that Brynjolfsson will moderate the academic panel and McAfee will give the closing keynote. This new information has inspired me to change my approach to this post in a few ways.

First, I plan to write in the spirit of recombinant innovation: a theory that holds that people, “play the vital role of filtering and improving the innovations of others.” The authors give clear examples of where participation of people, working outside their field of expertise, provides benefits. Second, the authors explicitly ask for feedback on ideas for the future economy, so I’m taking that request as an opportunity to express my views. The book made the New York Times bestseller list for hardcover non-fiction, and the authors are giving talks around the country. I am one voice among many, but one voice all the same. Third, and finally, I will pose questions and will search for answers at the Symposium.

Overview

This book, perhaps more than any other, makes the impact of digital technology on the economy a mainstream discussion. Not long ago, anyone bringing up the subject would be accused of being a “Luddite,” and not understanding economics. Conventional wisdom says that nothing is new, and concerns about technological progress are unfounded, because more jobs are created than destroyed. Counterarguments are no longer limited to a fringe group, mainly technologists: a wide spectrum of people now understands that the rise of digital technology will have a broad impact on our economy.

Brynjolfsson and McAfee transform dry economic language to meaningful prose, calling the second machine age, “an inflection point in the history of our economies” and go on to say, “Rapid advances in our digital tools are creating unprecedented wealth, but there is no economic law that says that all workers, or even a majority of workers, will benefit from these advances.” They acknowledge that, in our current economy, it is now an empirical fact that wages no longer increase with productivity, which is a break from the last two hundred years of history.

The authors articulate why the current situation differs from the past. First, truly general purpose technologies, ones that have broad impact across all industries, such as James Watt’s steam engine, are rare. Few would disagree that digital technology is such a rare innovation. Second they describe three unique characteristics of modern technological progress, “it is exponential, digital, and combinatorial.”

Let me elaborate these terms. By “exponential,” they mean the doubling in compute power every couple of years. By “digital,” they mean that products have “close to zero marginal cost of reproduction,” and, unlike physical products, multiple people can share a digital product at the same time. By “combinatorial,” they mean that the nature of innovation is changing due to the interconnectedness of the world, which increases the pace at which people recombine ideas to create value.

In brief, our economic models need to be adjusted for the future digital world. Netting this out, the authors say that:

The second machine age will be characterized by countless instances of machine intelligence and billions of interconnected brains working together to better understand and improve our world. It will make a mockery out of all that came before.

None of the examples of technological marvels are news; many were described in their previous book. What is more important than the examples themselves is the story of how their thinking evolved such that they no longer underestimate technological possibilities. A decade ago, they believed Levy and Murnane, two well-respected researchers who, in 2004, wrote The New Division of Labor that attempted to distinguish between work that could be automated from work that could be done only by humans.  The short story is that almost every limitation in machine ability has been shattered in the past decade.

They go so far as to talk about the “technological singularity.” This term was first coined in 1983 by science fiction writer Vernor Vinge, who predicted that, “we will soon create intelligences greater than our own.” Ray Kurzweil who, in 2005, wrote the book The Singularity is Near, has done the most to advance this argument and has predicted that we will transition into such a world by 2045. Regarding the plausibility of this happening, Brynjolfsson and McAfee say, “we honestly don’t know.”

By shigeru23 [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Moores’law (Major CPU’S 1970-2011 Transistor number’s trend chart)
By shigeru23 via Wikimedia Commons

It is good to be open-minded, but let me elaborate on the plausibility. Reaching such a singularity depends upon the continued exponential growth of compute power according to Moore’s law. Although I have great confidence in scientists and engineers, the new technologies necessary to make this happen, such as quantum computing, are still in the lab. The future is hard to predict, and lots of work remains to be done. Before claiming that there’s no end in sight, I suggest that we mark our calendars and return to this conversation in 2020.

One of the biggest contributions made by this book is clearly explaining how digitization is changing the dynamics of the world’s economies. Exponential growth in processing power, “gives us a world where supercomputer power becomes available in toys.” The idea that “science fiction keeps becoming reality,” resonates: we all have smart phones and we all see these topics explored on Monday night TV.

For me, the more interesting, and perhaps more subtle, ideas describe the impact of digitizing everything in an interconnected world. The authors tell us that there are two “well understood and unique economic properties of digital information: such information is non-rival, and it has close to zero marginal cost of reproduction.” Unlike a physical product, an unlimited number of people can freely share and consume a digital product. We all observed how these properties disrupted the music industry. Now, Brynjolfsson and McAfee make it clear that digital information is a fundamental force shaping the second machine age.

I spend a lot of time networking in local technical communities. Many young people intuitively understand this emerging economy and the entrepreneurial energy is palpable. At the same time, I’m keenly aware of people looking for work. Do you feel the energy or are you struggling?

We live in a world where small groups of people are able to leverage extensive digital resources, recombine ideas in new ways, and create value that is easily distributed to a worldwide audience. As the technologies to store, transfer, and analyze huge amounts of data mature, the pace of innovation will increase, and the “volume, velocity, and variety” of products will explode. The authors offer a clear and concise counter argument to those economists who say that innovation is slowing, thus causing economic growth to wane.

The issue is not lack of innovation, or lack of economic growth. The authors are optimistic that growth in productivity will continue, saying that, “the fundamentals are in place for a bounty that vastly exceeds anything we’ve seen before.” They define the term, “bounty,” not with dry economic language, but by explaining how we will get “more choice, greater variety, and higher quality in many areas of our lives.” They wax poetic about better surgeries, improved and personalized education, hearing for the deaf, sight for the blind, and eliminating boring, repetitive tasks. They talk about the GDP and quote Robert F. Kennedy, who said:

The Gross National Product does not include the beauty of our poetry or the intelligence of our public debate. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion. It measures everything, in short, except that which makes life worthwhile.

The book makes the case that much of the value created in the second machine age will be hidden from current economic metrics. The issue is that while the digital economy will drive a growing “bounty,” it is also driving a destructive “spread” (economic inequality) that will get worse unless we adapt to the coming changes. Looking forward, Brynjolfsson and McAfee tell us that:

Our generation will likely have the good fortune to experience two of the most amazing events in history: the creation of true machine intelligence and the connection of all humans via a common digital network, transforming the planet’s economies.

They argue that “exponential, digital, and combinatorial change in the technology that undergirds our economic system” is the primary driver of growing inequality, not “tax policy, greater overseas competition, ongoing government waste, and Wall Street shenanigans.” This is a point of debate with other economists.

Brynjolfsson and McAfee describe how these forces create a “winner-take-all” economy. The digitization of almost everything, coupled with a completely interconnected world, means individuals or tiny organizations can reach a vast audience. All consumers have access to all digital products, and they tend to select only the best.

Digital technologies are not a rising tide that lifts all boats equally. These technologies, “favor more-skilled workers over less-skilled workers, increase the return of capital owners over labor, and increase the advantages that superstars have over everyone else.” The facts are that median worker income has declined since 1999, many people are falling behind, and upward mobility is greatly diminished as compared to earlier generations. The authors quote Plutarch, a Greek historian, who said, “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” This as the central challenge we face as we enter the second machine age.

The book divides the future into three periods:

  1. Near Term: Now until the foreseeable future, subject to immediate policy recommendations.
  2. Long Term: The 2020s and beyond where, “people have skills and abilities that are not yet automated,” but nevertheless machines have substituted for much of human labor.
  3. Future: A period that we are only beginning to imagine, best described by Arthur C. Clark, who the authors quote as saying, “sufficiently advanced technology can be indistinguishable from magic.”

Why three periods? Imagine two economists traveling the world asking technologists what the long-term future will be like. One group is dystopian, and tells them that the machines will rise up and burn the earth to smoldering cinder. The authors themselves say, “Terminator and Matrix movies . . . seem more and more plausible as technology continues to advance.” The other group is utopian, and tells them that humans and machines will merge, and we will evolve into a higher form of intelligence beyond our current understanding. The authors themselves say, “in the utopian version . . . we don’t fight with machines; we join them, uploading our brains into the cloud.” Either way, the results are highly unpredictable, so we can’t really expect them to make economic recommendations for these scenarios.

Even if we put these extreme versions of the future to the side, we must consider the risks that we will face in the coming years. We’ve talked about economic injustice, what the authors call “the spread,” but that’s not the only thing we’ll need to worry about. Brynjolfsson and McAfee warn us that:

We will be increasingly concerned with questions about catastrophic events, genuine existential risks, freedom vs. tyranny, and other ways that technology can have unintended or unexpected side effects.

Specifically, people worry about self-replicating entities, created using nanotechnology, genetics, or artificial intelligence. As the authors say, the problem with self-replicating technologies is that “someone working in a basement laboratory might use one of these technologies to unleash destructive forces that affect the entire planet.”

Brynjolfsson and McAfee set aside these extreme scenarios.  Instead, they focus on the near term, with some discussion about the long-term (2020s and beyond). I’m going to follow their lead here.

Policy Recommendations

What are their policy recommendations? In a nutshell, they tell us to look in any Economics 101 textbook: we should focus on growing the economy, improving education, reforming immigration, updating infrastructure, and so forth. They take this approach, I believe, to avoid risk; after all, the uncertainty looms over the economy of the future.

Although the recommendations are generally good, I felt that the approach was too tactical. I agree that they’re mostly right for now, but I’m not sure that they will be correct once the second machine age is in full swing. If recommendations based on “Economics 101” are good now, and have been good for hundreds of years, why should we believe that this will change in the future? The answer, I believe, is that we are encountering limits and need to begin asking ourselves some questions.

  • At what point do we consider the world to be a single closed economic system?
  • How will we cope with limited resources, including agricultural, energy, water and land?
  • How will capitalism work when growth becomes constrained?
  • At what point does the world economy transition from growth to steady-state?

Brynjolfsson and McAfee call for policies to encourage economic growth in the short them, but can growth go on forever? I don’t think we can talk about short-term recommendations without first understanding how these boundaries change the dynamics of our economy.

CAPITALISM: To begin, I agree that capitalism will continue to be the basis of our economy. The authors say that, despite some issues, capitalism works well because it “allocates resources, generates innovation, rewards effort, and builds affluence with high efficiency.” They are right, but they also warn of a failure mode. Capitalism, as we understand it today, cannot work without a healthy labor market. Brynjolfsson and McAfee describe the situation this way:

As digital labor becomes more pervasive, capable, and powerful, companies will become increasingly unwilling to pay people wages that they’ll accept and that will allow them to maintain the standard of living to which they’re accustomed. When this happens, they remain unemployed. This is bad news for the economy, since unemployed people don’t create much demand for goods and overall growth slows down. Weak demand can lead to further deterioration in wages and unemployment as well as less investment in human capital and equipment, and a vicious cycle can take hold.

Martin Ford, in The Lights in the Tunnel, took the view that the collective purchasing power of consumers (the market) is the ultimate public resource. Companies cause reduced demand when they fail to replenish this public resource. We’ve never worried about this in the past because replenishment was automatic: the collective purchasing power of consumers was replenished via the wages paid for labor. Ford says to imagine the collective purchasing power as a river that will run dry if the companies that share it only take water (sell goods) and never replenish water (pay wages). He says:

Imagine a fully automated factory. The only contribution such a factory would make to our purchasing power river would be by creating products at lower price. No wages would be paid. No payroll taxes would be paid. While lower prices would return some purchasing power to the river, this would simply not be enough. Over time, as all industries become less labor intensive, the river will run dry.

Ford looks back to 1860, to find an example of an economy that failed to manage this public resource: the era of slavery in the south of the United States. Beyond the moral outrage, this system concentrated wealth in the hands of plantation owners and left poor whites with few job opportunities. Ford goes on to illustrate the net result by quoting William Seward, who traveled to Virginia before becoming Lincoln’s secretary of state. He describes the resulting poverty. Seward says:

How deeply the curse of slavery is set upon this venerated and storied region of the old dominion. Of all the countries I have seen France only whose energies have for forty years been expended in war and whose population has been more decimated by the sword is as much decayed as Virginia.

Slave labor was not free labor. Plantation owners, after all, had to offer a minimum of housing and food. Slavery, of course, is no longer legal in the United States, but there are parallels in today’s economy. With unemployment high, more and more workers accept a minimum wage that is hardly enough to survive. The net result is that we allow many employers to exploit the market (that is, exploit a public resource) by not replenishing our collective purchasing power through wages. We all pay for this because such workers require public assistance, and we can all see the results when we visit dilapidated neighborhoods.

Brynjolfsson and McAfee don’t discuss the minimum wage at all. This is unfortunate because the minimum wage is a pressing policy question. The issue is generally framed as an unresolvable fight between morality (low pay is unjust) vs. economics (raising pay will hurt small businesses and cost jobs). Treating the collective purchasing power of the market as a public resource, which every business must replenish, is a way to re-frame this argument. In my view, this was an opportunity lost.

WORK: The authors believe that work must be preserved, and they summarize their argument by quoting Voltaire, “work saves a man from three great evils: boredom, vice, and need.” With all due respect to Voltaire, this is 18th century advice that, in my opinion, will be an anachronism in the 21st century. I find this line of reasoning perplexing because the authors clearly show that unmeasured economic value is increasing. They say:

There’s a huge layer of the economy unseen in official data and, for that matter, unaccounted for on the income statements and balance sheets of most companies. Free digital goods, the sharing economy, intangibles and changes in our relationships have already had big effects on our well-being. They also call for new organizational structures, new skills, new institutions, and perhaps even a reassessment of some of our values.

Yes, we need to reassess our values. Working is fine, but today those left with jobs are working longer than ever because they are afraid. Too much work can also be evil. People need time for family and community. Human activity — reading, writing, learning, sharing, caring, exploring, exercising, pondering, debating — these are the activities of human existence that save us from the great evils, not work alone.

TAXES: The authors reject fundamental alternatives to capitalism, but they do identify the reduced need for labor as a central challenge. Most of us, after all, get our money by working. Although cautious about unintended side effects of social engineering, the long-term solution involves government policy changes and taxes. Brynjolfsson and McAfee talk about the wisdom of many tax strategies. I agree with most of their recommendations, but I think they are overly optimistic about bipartisan support. For example, talking about Pigovian taxes (taxes on things we don’t like, such as pollution), they say, “taxes of this type are popular across the political spectrum.” Well, carbon tax proposals are not popular among people who earn a living selling fossil fuels, so I think the reality is that all taxes, no matter how logical, will face political opposition.

My biggest question is why would we keep the income tax in the long-term? If our goal is to encourage the exchange of money for labor, than taxing this activity seems like a fundamentally flawed strategy. Everyone dislikes payroll taxes, which fuel the anti-tax, anti-government crowd.

Instead, if we view the markets as public resources, then it makes sense to tax those who use these resources. Say that a company sells a product, but also returns money to the market via jobs and fair pay, thus restoring our collective purchasing power. We would want such a business to enjoy a low tax rate. On the other hand, consider another company that sells a similar product, but is highly capitalized and does not return much money to the market via wages. Such a company would pay a higher tax to compensate for the drain they are placing our public resource, namely the drain on our collective purchasing power.

I don’t know how to design such a tax, but perhaps Thomas Piketty’s proposed tax on capital is the place to start. This economist has become something of a sensation because of his book Capital in the Twenty-First Century. In the meantime, financial markets, where we trade stocks and bonds, are well-defined and can also be viewed as a public resource. In this case, there is a growing movement to implement a transaction tax on companies that excessively use this resource via high-speed trading. Although the Second Machine Age talks about taxes on economic rents, the idea of taxing capital is not explored in detail, and the transaction tax is not discussed at all. I think this was a missed opportunity.

In the long-term, the authors advocate for a negative income tax. Essentially, the idea is that people who are paid below a break-even point would get extra income from the government. I have concerns about this idea. If I were the owner of a fast food restaurant, I would hold down wages knowing that the government will make up the difference. We already witness a similar situation today, where corporations advise employees to seek government assistance if they can’t survive on the minimum wage alone.

BASIC INCOME: Brynjolfsson and McAfee present the negative income tax as an alternative to a basic income, which is an idea that the authors explain in detail, but reject. The basic income is an old idea with a long history of proponents, from both the left and right, including Thomas Paine, Bertrand Russell, and Martin Luther King, Jr., Paul Samuelson, and Milton Friedman. In 1968, 1,200 economists signed a letter to congress in support of the concept, and in 1969 Richard Nixon even tried to get such a law passed. Despite this history, the authors discard this idea because they say that it addresses need, but not boredom and vice.

On this blog, I first introduced the notion of a basic income in the post “Working till 2025: Crossing the Bridge.” At the time, I said that “this idea is worth more study,” so I appreciate the detail provided by Brynjolfsson and McAfee. Looking back at this post, I said:

Perhaps people would be more willing to take risks, and become entrepreneurs, if we guaranteed everyone a minimum income. If people had dignity and security, perhaps they could walk away from low-end jobs unless the employer offered fair pay and good working conditions. They would not have to accept such jobs just to survive. There is conservative appeal to this idea as well: it would replace many government programs, especially if it was simple and had no needs testing. If people had basic income (for security and dignity), had access to health insurance (regardless of their employment situation), and could get any level of education (without going into debt), then we would curb poverty and enable the workforce to thrive in the twenty-first century. People, if standing on a solid foundation, might be able to take part in “free, voluntary exchange to mutual benefit” (Ayn Rand) as libertarians and others so want.

I’m not ready to discard this idea so quickly, especially since I’m not convinced that the negative income tax will work. Let’s see if a variation to the theme addresses the objections raised by the authors. Let’s substitute the word “activity” for the term “work” in Voltaire’s quote. If we want people to feel “self-worth, community, engagement, healthy values, structure, and dignity,” then why not guarantee that every citizen can earn a minimum income through activities that build citizenship?

A variation on the basic income theme would be to pay people for performing specific activities. Brynjolfsson and McAfee briefly mention this in a section called “Wild Ideas Welcomed,” so here we go. Instead of the Swiss proposal, where people are paid with no strings attached, guarantee that everyone can earn a minimum income for desired activities. If we paid people for up to 10 hours a week, then everyone would be entitled to earn $20,000 per year even if they were out of a job (500 hours of paid time at $40.00 per hour). Consider a world where:

  • Young adults are paid for time spent educating themselves.
  • Middle aged people are paid for working at a food pantry, performing jury duty or attending town hall meetings.
  • Elderly people are paid to educate themselves via online classes or even for reading books.

This is not a rehash of workfare, because this is not a reward for labor, it is a reward for citizenship. Everyone, regardless of the employment situation, would be entitled to minimum pay for community building or educational activity. You might worry about fraud, but I think that issue can be solved. For example, future computers will be able to administer an oral test to confirm that someone has taken a class or read a book.

Brynjolfsson and McAfee advocate for the government to create jobs by building infrastructure. This is another type of work that people could select to earn their guaranteed minimum income. The authors say, “It’s almost universally agreed among economists that the government should be involved in building and maintaining infrastructure.” This is true, but unfortunately good economic policies are counterintuitive to many people. Paul Krugman makes this point abundantly clear when he describes how we ignored basic economics, as well as the lessons of history, when we failed to restore demand during the recovery. Building infrastructure would have done just this.

PROSPERITY: The authors quote Why Nations Fail, the Origins of Power, Prosperity, and Poverty, written by Daron Acemoglu and James Robertson, to argue that inclusive policies, those that benefit most people and not just the entrenched elite, bring prosperity. Acemoglu and Robertson say:

Prosperity depends on innovation, and we waste our innovative potential if we do not provide a level playing field for all: we don’t know where the next Microsoft, Google, or Facebook will come from, and if the person who will make this happen goes to a failing school and cannot get into a good university, the chances that it will become a reality are much diminished

I see two faces of capitalism. The first is a level playing field where innovators compete to bring new products and services to the market. This is the form of capitalism we celebrate. The second is an entrenched elite that exploits the market to concentrate wealth and power. This is the form of capitalism we despise. How do we foster the first while controlling the second? If the basis of our future economy is to be capitalism, which I believe to be the case, then we need government policies that promote:

  • Young adults unburdened by debt
  • People unburdened by fear of inadequate income
  • Citizens participating in democracy

For the future economy to work, we need to solve these problems:

  • Remove barriers to higher education
  • Position people to negotiate for good wages on their own
  • Foster a fluid economy where people can easily move between jobs
  • Provide health insurance for all, regardless of employment

It is counter productive to choose between debt and education, or between starvation and minimum wage. An entrepreneurial economy, driven by people who have learned to work with machines, requires empowered citizens.

Fostering entrepreneurial capitalism while controlling the entrenched elite requires democracy and good government policy. Ignoring this is a major flaw in modern conservative ideology, which is exemplified by the Tea Party movement. An argument can be made that this contemporary ideology rests upon Ayn Rand’s objectivism, as argued by Guss Weiss, in Ayn Rand Nation. the Hidden Struggle for America’s Soul.

I am not going to try to discredit Ayn Rand, as many others try to do. Love her or hate her, it is undeniable that her thinking and writing has significantly influenced modern politics. Further, her philosophy, summarized as objective reality, reason, self-interest, and capitalism, makes sense within a narrow context. The idea that people deal with one another, “as traders, by free, voluntary exchange to mutual benefit,” resonates with people in the business community.

How hard is it to engage in such trade? Not that hard if you happen to be a business person working on behalf of a corporation. Not that hard if you’re an entrepreneur who is debt free, having been born into a prosperous family. It is very hard, however, for people who have no choice. In a bad job market, many people are effectively forced to work for minimum wage. They have no option to negotiate a better salary.

For the short-term, the authors make a lot of good recommendations, and I’m not going to list all of them. I’m only highlighting topics that I think need further discussion.

EDUCATION: The authors champion education, which is good, but we need to be careful not to produce a generation of book smart children that don’t know how to inspire and lead others. I worry about this when I hear talk of longer school years, longer school days and more testing. I’ve spent a lot of time as a parent, youth leader, and hiring manager. Good academic skills are relatively common, but good leadership skills are not. If we are to foster a society of ambitious entrepreneurs — people who can work with the brilliant machines of the future — then we need to give youth the opportunity to develop leadership, as well as academic, skills.

The authors favor self-directed learning, such as in the Montessori system, and tell young people to study hard, and learn to use technology, in preparing for the second machine age. Everyone agrees with this goal, but I’m skeptical about saying that “longer school hours, longer school years, and more after school activities” coupled with a “no-excuses philosophy that tests students” will be the answer. I agree with higher teacher salaries, but how about also adding more teachers and reducing class sizes?  Accountability is important, but I worry about micromanaging teachers instead of empowering them to innovate.

I do think that technology can be used to improve education, but saying that MOOCs (Massive Open Online Courses) will “enable low-cost replication of the best teachers” seems to be an overstatement. That said, I do think MOOCs have the potential to extend the reach of a good teacher, but the technology is not yet mature.

In school, some topics need to be mandatory, but we need more learning that is individualized. Some kids thrive in the structured school environment. Others, who are just as smart, struggle. For this second group, the list of reasons is endless, but the situation is always fragile. There is no solution as good as personal attention from a caring, dedicated teacher.

ENTREPRENEURSHIP: The authors champion entrepreneurship as a way of creating jobs and opportunity. This is fine, but I don’t feel that a formula for the future is adequately spelled out. In my opinion, we need policies to increase the pool of empowered and secure individuals. If more people are to practice capitalism as entrepreneurs, then they must have enough security to take risks. That is, we need to remove the fear that losing one’s job will mean losing health care, remove the fear that higher education will create a crush of debt, and remove the fear that a failed venture will lead to poverty.

The authors talk about “regulatory thickets” impeding business formation, but also say that “America’s entrepreneurial environment remains the envy of the rest of the world.” Everyone wants to remove “unnecessary, redundant, and overly burdensome regulations,” but we need to be specific. I like clean air and water, and I’m not inclined to be sympathetic to empowered Wall Street types.

Summary

In summary, the book provides an optimistic view of the future that is largely shaped by the observation that, in the long-term, humans have coped with change and improved their condition overall. The authors make a strong argument that “It is a remarkable and unmistakable fact that, with the exception of climate change, almost all environmental, social, and individual indicators of health have improved over time, even as human population has increased.” They place faith in an observation first made by Theodore Parker in 1857, and later repeated by Dr. Martin Luther King, that “The arc of the moral universe is long, but it bends toward justice.” So it will be, the authors believe, in this case. The bumpy ride, before we learn to cope with these technological changes, is to be expected. After all, the first machine age (or industrial revolution), which they say had the most profound impact on human civilization to date, also caused temporary problems, such as pollution and child labor, that society had to overcome.

If you’re wondering how to survive in this new world, the authors do offer a silver lining. Successful people will learn to work with machines, not against them. People who are self-motivated, smart, creative, and highly educated will have the best chance of prospering, especially those skilled at “idea creation.” For the foreseeable future, humans will do tasks that are creative, entrepreneurial, or innovative. No machines have gained these skills yet. For people who don’t rise to this level, they will benefit from the discovery that low-level sensorimotor tasks take much more computational power than high level reasoning tasks. Gardeners, truck drivers, and cooks are thus relatively secure.

Our economy is changing. The big question is if we will have the political will to leverage the bounty from these amazing technologies to form a just and prosperous society for all. Brynjolfsson and McAfee have made a large contribution to the discussion. I’m looking forward to hearing more from them in the future.