The Second Machine Age

Before the age of dot com, in 1996, the United States government wanted to create the world’s most powerful supercomputer: the “ASCI Red”. This gigantic computer costed $55 million to develop and needed 1,600 square feet of floor space. In terms of computing power, it had 1.8 teraflops. Nine years later another computer hit 1.8 teraflops: the Sony Playstation 3.

It’s daunting to think about the exponential increase of computing power and data and how it will fundamentally affect society. In the book “The Second Machine Age”, Erik Brynjolfsson and Andrew McAfee attempt to do so. The two authors shed light on our present and future technology-driven realities.

So what is this so-called Second Machine Age?

The First Machine Age was started by the innovation of Watt’s steam engine in the 18th century — the cusp of the Industrial Revolution. The steam engine and similar innovations at the time were built around automating arduous human tasks and replacing them with sheer muscle power.

The Second Machine Age, the two writers argue, is our present and our imminent future, where thanks to digital advances, we are now increasingly automating mentalpower — the ability to use our brains to understand and to shape our environments. Computers can now diagnose diseases, listen when we speak and write high-quality texts.

As the First Age caused a flood of new advances and changes to society, what will the dawn of the Second Age mean?

Demand will fall for routine jobs
In the middle of the nineteenth century, automatic threshing machines replaced 30 percent of the agricultural labor force. Similarly as during the First Machine Age, the Second causes disruption in the job market.

Daron Acemoglu and David Autor from MIT published an article where the main thesis was that routine jobs would see less demand in our not-so-distant future. As computers will progressively automate tasks, jobs such as mail clerks, machine operators, bank tellers are in the danger zone. On the flip side, jobs that are of a non-routine nature, such as cooks, gardeners (manual) and financial analysts (cognitive) will be in the clear.

This will increase polarization in the job market and what the authors coin “a Superstar Economy”. In America, the income of the median worker is lower in real dollars than it was in 1999. However, wages and profits are soaring for the so-called “superstars”.

A Superstar Economy

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

Who are the superstars? They are the individuals and companies who are benefitting from advances in technology. An example used is Instagram. 15 months after its funding, the company was sold to Facebook for $1 billion. To develop the product, Instagram only employed a little bit more than a handful of people.

A very different story and company, Kodak, employed 145,300 people at one point. 132 years later, a few months before Instagram was sold to Facebook, Kodak filed for bankruptcy. Facebook has a market value several times greater than Kodak ever did.

Why was Instagram so successful? The authors explain three main factors, none of which Kodak had the ability to leverage.

The network effect
The value of a resource for each of its users increases with each additional user.

Non-rival goods
Non-rival goods are digital assets such as Kindle ebooks. It’s a product that doesn’t get used up when another person consumes it. Rival goods, on the other hand, are consumed by one person or one thing at a time, for example airplane seats.

Zero marginal cost of reproduction
The cost of sending a copy to a friend is easy and extremely cheap.

Machines complementing humans
A key argument that the authors make to decrease the polarization in the labor market, is to enable machines to complement humans abilities.

The writers point to the example of “freestyle chess” as a terrific example of machines complementing humans. In this type of chess game, computers are paired up with humans to play more powerful supercomputers. At a 2005 competition, when paired together, computers and humans dominated even the strongest supercomputer. The key insight from freestyle chess is that people and computers don’t approach the same task in the same way.

Harness the power of creativity and innovation
Another case for how we can adapt to the automation of our jobs is to focus on where the computers lack in ability.

“We’ve never seen a truly creative machine, or an entrepreneurial one, or innovative one.”

Computers are programmed in a set paradigm, as humans we can think outside of the proverbial box. We are more equipped to push boundaries and to innovate. And as Voltaire said: “Judge a man by his questions, not his answers”.

Our creative abilities could also be applied to solve the problems within the labor market and in society as a whole.

“We aren’t being creative enough about solving the problems we have using the freed-up time and energy of the people whose old jobs were automated away. We can do more to invent technologies and business models that augment and amplify the unique capabilities of humans to create new sources of value…”

That’s a lovely quote. Technology can enable us to focus more on our innate skills of creativity and innovation, rather than mundane tasks. This newly found time on our hands could make us do extraordinary things and hopefully make the Second Machine Age prosperous for us all. That’s quite a beautiful vision.