PROSPECTS FOR GROWTH IN THE SECOND MACHINE AGE. Erik Brynjolfsson DECEMBER 4, MIT Initiative on the Digital Economy

Transcription

1 PROSPECTS FOR GROWTH IN THE SECOND MACHINE AGE Erik Brynjolfsson MIT Initiative on the Digital Economy DECEMBER 4, 25 Copyright Erik Brynjolfsson.

2 Agenda GDP, Profits, Investment. What can we learn from past trends? 2. Why am I optimistic? 3. Why am I concerned?

3 Productivity Growth in Recent Business Cycles

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5 The End of Growth? We are passing, so to speak, over a divide which separates the great era of growth and expansion of the [last] century - Alvin Hansen, 938 AEA Presidential address on Secular Stagnation The basic changes going on since the beginning of the century are not only important in explaining the unprecedented severity and persistence of the Great [Recession] but also in appraising the outlook for the future. The reduced rate of growth, with respect to both population and territory, is likely to be permanent.. This is the basis on which the stagnation school predicts a long-run deficiency of investing opportunity. - Harris, 943 Technical advance has not since early in the century produced anything to equal in scope the development of the railroad, the telephone, electric power or the automobile. - Alvin Hansen, 94

6 Labor Productivity in Two Eras Productivity Based on Data from Chad Syverson and US Bureau of Labor Statistics

7 Labor Productivity in Two Eras Productivity Productivity Based on Data from Chad Syverson and US Bureau of Labor Statistics

8 A Measure of Our Ignorance 5 Year Avg. Labor Productivity Year Avg. Labor Productivity Subsequent 5 Years First 5 Year Period Subsequen t Years First Year Period Labor Productivity

9 A Measure of Our Ignorance 5 Year Avg. TFP Year Avg. TFP Subsequent 5 Years First 5 Year Period Subsequent Years First Year Period TFP

10 A Measure of Our Ignorance 5 Year Avg. TFP (util. adj.) Year Avg. TFP (util. adj.) Subsequent 5 Years 2.5 Subsequent Years First 5 Year Period First Year Period Utilization-adjusted TFP

11 I am humble about GDP, Profits, Investment making predictions It s difficult to make predictions, especially about the future - Neils Bohr

12 What about looking directly at innovations already in the pipeline? Economist aren t always great at assessing new technologies: By 25 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine s - Economics Nobel Prize winner (998)

13 Growth in The Second Machine Age Growth requires change Changing the world requires two things: Power system: move or transform things Control system: decide where and how Industrial Revolution = Physical Power Steam engine (and Internal combustion engine, Electricity) Mostly a complement to humans Second Machine Age = Mental Power Computers, Software, Big Data, Machine Intelligence Complement or substitute? My assessment: Machine intelligence may be our ultimate invention 3

14 Computations per kwh Exponential (with impressive exponents) Feynman s limit.e+2.e+5.e+.e+5.e Source: Jonathan Koomey

15 Digital

16 Combinatorial Innovations don t get used up, they multiply Every time we invent something, we make it easier to invent something else More brains connected to global network more innovation Not just accessing world s knowledge, but adding to it Not just more brains, more building blocks to work with More and more of them are free, perfect and instant

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18 Machine GDP, Intelligence Profits, Investment Humans vs. Machines in 25 to 25: 3 Big Changes:. Interacting with physical world Fine and gross motor control Vision and other senses 2. Language Voice recognition Natural language processing Creating narratives 3. Problem Solving Answering unstructured questions Rule based analysis Pattern recognition and classification

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20 Copyright (c) Erik Brynjolfsson and Andrew McAfee

21 Copyright (c) Erik Brynjolfsson and Andrew McAfee

22 The Robot Revolution has Barely Begun

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25 Machine GDP, Intelligence Profits, Investment Humans vs. Machines in 25 to 25: 3 Big Changes:. Interacting with physical world Fine and gross motor control Vision and other senses 2. Language Voice recognition Natural language processing Creating narratives 3. Problem Solving Answering unstructured questions Rule based analysis Pattern recognition and classification

26 Siri Voice recognition Skype Real time Translation Automated Insights Authoring News Stories

27 Writing Articles

28 Machine GDP, Intelligence Profits, Investment Humans vs. Machines in 25 to 25: 3 Big Changes:. Interacting with physical world Fine and gross motor control Vision and other senses 2. Language Voice recognition Natural language processing Creating narratives 3. Problem Solving Answering unstructured questions Rule based analysis Pattern recognition and classification

29 Accuracy Accuracy and Questions Answered on Jeopardy! % 9% 8% 7% 6% 5% Human champions /2 4/2 /29 5/29 2/28 8/28 5/28 4% 3% 2/27 2% % 2/26 % % % 2% 3% 4% 5% 6% 7% 8% 9% % Percent Answered

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32 Improvements in Vision

33 Enlitic Detects Cancer

34 I m concerned about whether our organizations and institutions can keep up

35 Computerization > Computers IT Capital (%) Technological Complements (5%) Organizational Complements (75%) Intangible Assets are more important in the Information Economy Image by Ralph Clevenger 35

36 There is a very wide spread of the adoption of management best practices in the US 27.3% of establishments scores <.5 8.3% of establishments scores >.75 Source: Bloom, Brynjolfsson et al. Management In America, 23

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38 The Hard GDP, Truth Profits, Investment Digital progress makes the economic pie bigger. But there is no economic law that everyone, or even most people, will benefit.

39 Productivity isn t everything Source: BLS, CPS

40 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 organization and institutions to keep up with accelerating technology