Erik Brynjolfsson on Digital Economy Pros and Cons

I had the opportunity to hear Erik Brynjolfsson speak at a business conference this past week. Brynjolfsson is the Director of the MIT Center for Digital Business. His recent books include Race Against the Machine and the more recent The Second Machine Age, both of which he co-authored with fellow MIT professor Andrew McAfee.

The Second Machine AgeBrynjolfsson (let’s call him Prof. B from now on, and hope that he won’t take offense) used his allotted thirty minutes to present the basic thesis of his recent book. The world is becoming increasingly digitized. Machine learning technologies have advanced rapidly in the past several years and will continue to increase exponentially in the next decade. I’ve written in this blog about many examples of how voice recognition, natural language processing, and search technologies have matured to provide consumers and businesses with a new level of virtual agent capabilities.

Prof. B showed in his presentation that machine intelligence is growing increasingly adept in three key areas:

  • Interacting with the world
  • Language
  • Problem Solving

He used three examples of products and companies that are leveraging the advancement in machine language capability.

  • Siri – voice recognition
  • Lionbridge – Translation
  • Narrative Science – Authoring news stories

Prof. B also talked about IBM Watson. What was of most interest to Prof. B was not so much that Watson resoundingly defeated the best human jeopardy champions, but that Watson started out with relatively poor performance and in just a few years, by perfecting its underlying algorithms, was able to improve its abilities at an astonishing rate. In fact, IBM Watson far surpasses humans in its ability to learn and improve its performance.

The increasing intelligence and overall prowess of machines is a double-edged sword, according to Prof. B. We now have access to more computing power in our smart phones than astronauts had in their capsules when landing on the moon. We’ll benefit from the ability of machines to detect diseases early and to recommend the best treatment options. We’ll be able to stay connected to our loved ones, no matter where we are, and enjoy the many benefits of a massively connected world.

On the other hand, the increasing digitization of society and commerce means that income may decline for many, while profits increase exponentially for a select few.

Prof B. showed data that indicates that U.S. workers remain as productive as ever, but that their incomes are decreasing. Low skilled workers, in particular, are not sharing in the increasing economic pie. In fact, many lower skilled, routine tasks are being automated by machines and may soon displace low skilled workers altogether.

The big winners in a fully digitized economy are those individuals or companies who create digital goods (such as software, music, and film) that is easy to distribute broadly across the globe. Prof. B uses the example of Turbo Tax software. Once the software is made, it’s easy to sell and distribute it to millions of people. A tax preparer can’t possibly prepare millions of tax returns, so the preparer loses out on lots of business. Eventually, the tax preparer may be completely displaced by the software program. The people who own the software company get really, really rich, while the unfortunate tax preparer goes hungry. This observation mirrors Jaron Lanier’s description of what he calls Siren Servers in his book Who Owns the Future?

Prof. B was available for questions after giving his talk. Somehow asked him if he’d seen the movie Her, and he said that he had. He’d found that some of it seemed to ring true, in terms of how we might interact with smart machines in the future. He thought it was certainly plausible that humans could become so emotionally attached to their intelligent machines. He’s seen research and evidence that supports the hypothesis that humans tend to anthropomorphize machines that they can talk to and that appear to be listening to them (I’m paraphrasing).

The talk was certainly interesting and leads to lots of further thinking about how virtual agents and personal assistants will impact our lives, both positively and perhaps negatively, going forward. You can download a pdf of Prof. Brynjolfsson’s talk if you’re interested in seeing the slides.

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