The Second Wave of the Second Machine Age Erik Brynjolfsson Professor, MIT @erikbryn 1 The Second Machine Age Changing the world requires two things: Power system: move or transform things Control system: decide where and how Industrial RevoluIon = Physical Power Steam engine (and Internal combusion engine, Electricity) Mostly a complement to humans Second Machine Age = Mental Power Computers, SoPware, Big Data, Machine Intelligence Complement or subsitute? 2 circulate 1
The First Wave of the Second Machine Age Teaching machines what we know Coding = codifying knowledge Big wins: rouine informaion processing Examples: ArithmeIc and simple logic Well understood algorithms and processes RepeIIve, precise physical work Mantra: Codify, Digi;ze, Replicate! Economics: High fixed costs, low marginal costs ApplicaIons: Payroll processing Assembly lines machines Tax preparaion sopware 3 The Bounty 4 circulate 2
8/31/16 The Limits of the First Wave: Polanyi s Paradox We can know more than we can tell - Michael Polanyi, The Tacit Dimension (1964) Take an example. We know a person's face, and can recognize it among a thousand, indeed among a million. Yet we usually cannot tell how we recognize a face we know. So most of this knowledge cannot be put into words. - Polanyi, The Tacit Dimension 5 6 circulate 3
Improvements in Vision 7 The Second Wave: Machines that learn Artificial Intelligence A set of techniques used to try to imitate human intelligence Machine Learning Using large amounts of data, machines learn without being explicitly programmed Deep Learning A type of machine learning that uses deep neural networks 8 circulate 4
Deep Learning: How Neural Nets Work w 1 w 2 w 3 b 9 Tagged Data Trains the System 10 circulate 5
ApplicaIons of the Second Wave InteracIng with physical world Vision and other senses Fine and gross motor control Language Voice recogniion Natural language processing CreaIng narraives Problem Solving Answering unstructured quesions Pa0ern recogniion and classificaion 11 12 circulate 6
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Robots 15 16 circulate 8
8/31/16 Siri/Google Now/Echo Voice recogniion Skype RealIme TranslaIon Automated Insights Authoring News Stories 17 WriIng ArIcles 18 circulate 9
8/31/16 The Digital FronIer Photo Here Initiative on the Digital Economy Massachusetts Institute of Technology MIT Sloan School of Management 19 Accuracy and QuesIons Answered on Jeopardy! 100% 90% 80% Human champions Accuracy 70% 60% 50% 11/2010 04/2010 10/2009 05/2009 12/2008 08/2008 05/2008 40% 30% 12/2007 20% 12/2006 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent Answered Copyright Erik Brynjolfsson Do not copy or circulate 20 10
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screen capture 23 What does this mean for the economy? 24 circulate 12
Good News, but Also Challenges Digital progress makes the economic pie bigger. But there is no economic law that everyone, or even most people, will benefit. 25 The Great Decoupling 26 circulate 13
Median Income in Finland 27 Three Sets of Winners and Losers 1. High Skilled vs. Low & Mid Skilled Workers 2. Capital vs. Labor 3. Superstars vs. Everyone Else 28 circulate 14
High Skilled vs. Low & Mid Skilled Workers 29 Skill DispariIes 30 Source: Acemoglu and Autor circulate 15
GDP, Profits, Investment Mid-wage workers have been hit hardest in both employment and wages Source: Autor and Dorn, MIT Working paper, 2013 31 Capital vs. Labor 32 circulate 16
When there's no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. -- Travis Kalanick CEO, Uber 33 Capital vs. Labor Corproate Profits as % of GDP 10 8 6 4 Corporate Profits APer Tax as % of GDP & Non-Farm Labor Share Corporate Profit as % of GDP 102 2 0 Labor Share of GDP 99 96 1947 1958 1969 1980 1991 2002 2013 120 117 114 111 108 105 Labor Share (2009 = 100) Erik Brynjolfsson Source: research.stlouisfed.org h0p://digital.mit.edu/erik 34 circulate 17
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Superstars vs. Everyone Else 37 Superstars 38 Source: PikeIy, 2014 circulate 19
Will the second wave be an extrapolaion of the first wave? 39 Our View Our View Digital technologies change rapidly, but organizaions and skills aren t keeping pace. As a result, millions of people are being lep behind. 40 circulate 20
41 The New Grand Challenge Digital technologies will coninue to accelerate. Our skills, organizaions and insituions are lagging. Business as usual won t solve this problem. Ø We need to reinvent our economy and society to keep up with accelera;ng technology 42 circulate 21
8/31/16 Some Open QuesIons 1. What tasks, occupaions and industries will be most affected in the second wave? What are the ulimate limits of this approach? 2. What are implicaions for the economy and society? ProducIvity, growth, inequality, work and leisure 3. What policies should we consider? Maximize the benefits and opportunity Minimize the harm and risks 4. What kind of society do we ul;mately want? 43 INCLUSIVE INNOVATION COMPETITION CelebraIng organizaions that create economic opportunity in the digital era. The MIT IniIaIve on the Digital Economy (IDE) is proud to present the Inclusive InnovaIon CompeIIon (IIC), an awards program idenifying and celebraing organizaions that are invening a more inclusive, producive, and sustainable future for all. The IIC grants one million dollars in prizes to organizaions that are reshaping the future of work for people at the middle and base of our economy. JUN REGISTRATION DEADLINE JUN 1 15 MIT IDE EXECUTIVE COMMITTEE APPLICATION DEADLINE AND COMPETITION CLOSE 44 SEP 27 We are pleased to welcome the following IIC applicant organizaions to our Showcase during the IDE conference Economic Includers, HourVoice, Mission Asset Fund, Tispr, BraveNew, LaunchCode, Querium WINNERS ANNOUNCED AND CELEBRATED IN PARTNERSHIP WITH MIT SOLVE AT BOSTON S HUBweek. circulate 22
8/31/16 To learn more, visit: h0p://digital.mit.edu/erik h0p://digital.mit.edu/ide h0p://secondmachineage.com Copyright Erik Brynjolfsson Do not copy or circulate 45 23