The Second Machine Age

1. 1
The Second
Machine Age
Erik Brynjolfsson
MIT Sloan School
Director, MIT Initiative on the Digital Economy
@erikbryn
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The Second Machine Age
Changing the world requires two things:
• Physical Power: move or transform things
• Mental Power: 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?
2
MIT Initiative on the Digital Economy

2. 2
State of Understanding, 2004
Uniquely
Human
Abili5es
-­‐ Autonomous
mobility
and
fine
motor
control
-­‐ Language
and
complex
communica5on
-­‐ PaCern
matching
and
unstructured
problem
solving
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3. 3
Machine Intelligence
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Interacting with physical world
• Fine and gross motor control
• Vision and other senses
Language
• Voice recognition
• Natural language processing
• Creating narratives
Problem Solving
• Answering unstructured questions
• Rule based analysis
• Pattern recognition and classification
ØW e’re in the midst of the greatest “one-time” event in history!
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4. 4
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Machine Intelligence
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Interacting with physical world
• Fine and gross motor control
• Vision and other senses
Language
• Voice recognition
• Natural language processing
• Creating narratives
Problem Solving
• Answering unstructured questions
• Rule based analysis
• Pattern recognition and classification

5. 5
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Siri
Voice recognition
Lionbridge
Transla/on
Narra/ve
Science
Authoring
News
Stories
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6. 6
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Machine Intelligence
Interacting with physical world
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• Fine and gross motor control
• Vision and other senses
Language
• Voice recognition
• Natural language processing
• Creating narratives
Problem Solving
• Answering unstructured questions
• Rule based analysis
• Pattern recognition and classification

7. 7
The Digital Frontier
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Accuracy and Questions Answered on Jeopardy!
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0% 20% 30% 40% 50% 60% 70% 80% 90% 100%
10%
Percent Answered
Accuracy
11/2010
04/2010
10/2009
05/2009
12/2008
08/2008
05/2008
12/2007
12/2006

8. 8
The Digital Frontier
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The Digital Frontier
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9. 9
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10. 10
What does this mean for the
economy?
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The Bounty

11. 11
$300 BILLION PER YEAR
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GDP, Profits, Investment, and Employment
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12. 12
GDP, Profits, Investment, and Employment
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WHAT’S GOING ON?
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13. 13
“Digital technologies change
rapidly, but organizations and
skills aren’t keeping pace.
As a result, millions of people
are being left behind.”
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Our View
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14. 14
The Great Decoupling
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The Hard Truth
Digital progress makes the
economic pie bigger.
But there is no economic
law that everyone, or even
most people, will benefit.

15. 15
Three Sets of Winners and Losers
1. High Skilled vs. Low & Mid Skilled Workers
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Skill Disparities

16. 16
Polarization of the Labor Market
Mid-­‐wage
workers
have
been
hit
hardest
in
both
employment
and
wages
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Three Sets of Winners and Losers
1. High Skilled vs. Low & Mid Skilled Workers
2. Capital vs. Labor
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17. 17
120
117
114
111
108
105
102
99
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Capital vs. Labor
Corporate
Profit
as
%
of
GDP
Labor
Share
of
GDP
96
10
8
6
4
2
0
1947
1958
1969
1980
1991
2002
2013
Labor
Share
(2009
=
100)
Corproate
Profits
as
%
of
GDP
Corporate
Profits
AKer
Tax
as
%
of
GDP
&
Non-­‐Farm
Labor
Share,
1947-­‐2013
Source:
research.stlouisfed.org
Three Sets of Winners and Losers
1. High Skilled vs. Low & Mid Skilled Workers
2. Capital vs. Labor
3. Superstars vs. Everyone Else
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18. 18
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Superstars
WHAT IS TO BE DONE?
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19. 19
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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.
ØW e need to reinvent our economy
and society to keep up with
accelerating technology
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20. 20
The Initiative on the Digital Economy
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The New Landscape
• What challenges and opportunities do you
see?
• What are your concerns and questions?
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21. 21
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To learn more, visit:
http://digital.mit.edu/erik
http://digital.mit.edu/ide
http://secondmachineage.com