Summary: The first signs of the robot revolution have appeared, a trend that will reshape our world — automation moving from manufacturing into the service industries. Economists see the evidence but are blinded by their biases. This post provides excerpts from a new book about the revolution, and some interesting observations. This post is the fifth in a series; links to other chapters appear at the end.
A new book about one of the major trends of the early 21st century:
Race Against The Machine – How the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy
— By Erik Brynjolfsson and Andrew McAfee. Director and principal research scientist, respectively, of the Center for Digital Business at MIT’s Sloan School of Management.
Contents
Excerpt from the introduction
What’s next in the revolution?
Simple economics explains the challenge to our society
We wrote this book because we believe that digital technologies are one of the most important driving forces in the economy today. They’re transforming the world of work and are key drivers of productivity and growth. Yet their impact on employment is not well understood, and definitely not fully appreciated. When people talk about jobs in America today, they talk about cyclicality, outsourcing and off-shoring, taxes and regulation, and the wisdom and efficacy of different kinds of stimulus. We don’t doubt the importance of all these factors. The economy is a complex, multifaceted entity.
But there has been relatively little talk about role of acceleration of technology. It may seem paradoxical that faster progress can hurt wages and jobs for millions of people, but we argue that’s what’s been happening. As we’ll show, computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off.
And computers (hardware, software, and networks) are only going to get more powerful and capable in the future, and have an ever-bigger impact on jobs, skills, and the economy. The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring. Our technologies are racing ahead but many of our skills and organizations are lagging behind. So it’s urgent that we understand these phenomena, discuss their implications, and come up with strategies that allow human workers to race ahead with machines instead of racing against them.
Humanity and Technology on the Second Half of the Chessboard
Why are computers racing ahead of workers now? And what, if anything, can be done about it? Chapter 2 discusses digital technology, giving examples of just how astonishing recent developments have been and showing how they have upset well-established ideas about what computers are and aren’t good at. What’s more, the progress we’ve experienced augurs even larger advances in coming years. We explain the sources of this progress, and also its limitations.
Creative Destruction: The Economics of Accelerating Technology and Disappearing Jobs
Chapter 3 explores the economic implications of these rapid technological advances and the growing mismatches that create both economic winners and losers. It concentrates on three theories that explain how such progress can leave some people behind, even as it benefits society as a whole. There are divergences between higher-skilled and lower-skilled workers, between superstars and everyone else, and between capital and labor. We present evidence that all three divergences are taking place.
What Is to Be Done? Prescriptions and Recommendations
Once technical trends and economic principles are clear, Chapter 4 considers what we can and should do to meet the challenges of high unemployment and other negative consequences of our current race against the machine. We can’t win that race, especially as computers continue to become more powerful and capable. But we can learn to better race with machines, using them as allies rather than adversaries. We discuss ways to put this principle into practice, concentrating on ways to accelerate organizational innovation and enhance human capital.
Conclusion: The Digital Frontier
We conclude in Chapter 5 on an upbeat note. This might seem odd in a book about jobs and the economy written during a time of high unemployment, stagnant wages, and anemic GDP growth. But this is fundamentally a book about digital technology, and when we look at the full impact of computers and networks, now and in the future, we are very optimistic indeed. These tools are greatly improving our world and our lives, and will continue to do so. We are strong digital optimists, and we want to convince you to be one, too.
(2) What’s next in the revolution?
(a) Conclusions from “Seeing Robots Everywhere“, Julia Kirby, Harvard Business Review, 4 November 2011 (red emphasis added):
I heard about other applications — the use of robots to inspect sewers for damage, to automate warehouse operations, to harvest crops in fields. The list goes on. In response to one would-be entrepreneur’s question, “How do you come up with a good idea to turn into a business?” a panel of CEOs had no end of answers.
Charles Grinnell, who leads Harvest Automation, said simply: look at places where there is still a lot of manual labor. When his team did that, he says they narrowed things down to 15 very viable product ideas. Deborah Theobald, CEO of Vecna Technologies, put it this way: “In whatever field you work in—ours is healthcare—you see what the issues are. If as you look around, robots are on your mind, you see the applications everywhere.”
She’s hot but not real
(b) Perhaps no job is safe from automation. Even fashion models.
Visiting the H&M website is not the only virtual experience to be had by H&M customers who choose to order the company’s clothes online instead of inside one of their 2,300 global retail stores.
Also “completely virtual” are the models at the center of H&M’s swimsuit and lingerie online campaigns, the Swedish-based retailer confirmed. “It’s not a real body; it is completely virtual and made by the computer,” H&M press officer Hacan Andersson told Swedish newspaper Aftonbladet in an article questioning the company’s picture-perfect online models.
(3) Simple economics explains the challenge to our society
Automation increases the return to capital, and decreases the return to labor. It will become a major driver of increased inequality. Only slowly does this realization spread, as in the conclusion from this review in the Financial Times by James Crabtree (red emphasis added):
Yet the author’s more basic conclusion – that technological progress is sufficiently rapid that “many present-day organisations, institutions, policies, and mindsets are not keeping up” – is surely right. The result is a conundrum that shares much in common with trade policy. Technology is essential for creating value and raising productivity, but it creates losers as well as winners. These losers are recognised in theory, but too rarely compensated in practice.
This brings the argument back to a more basic problem: fair distribution. Machines work for free, but their benefits end up in someone’s pocket. If technology is indeed speeding up, more of that benefit must be returned to those it affects, especially in the form of investment in human capital. If not, the march of the machines will overtake us sooner than we think.
“Tectonic Shifts in Employment“, David Talbot, MIT Technology Review, January/February 2012 — “Information technology is reducing the need for certain jobs faster than new ones are being created.”
(5) For more information about the robot revolution
(a) Economists and others grapple with these issues (this section will be updated):
