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1 MIT Initiative on the Digital Economy
The Second
Machine Age Erik Brynjolfsson
MIT Sloan School
Director, MIT Initiative on the Digital Economy
@erikbryn
2 MIT Initiative on the Digital Economy
The Second Machine Age
2
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?
3 MIT Initiative on the Digital Economy
State of Understanding, 2004 Uniquely Human Abilities - Autonomous mobility and fine motor
control - Language and complex communication - Pattern matching and unstructured
problem solving
4 MIT Initiative on the Digital Economy
5 MIT Initiative on the Digital Economy
Machine Intelligence
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
We’re in the midst of the greatest “one-time” event in history!
6 MIT Initiative on the Digital Economy
7 MIT Initiative on the Digital Economy
8 MIT Initiative on the Digital Economy
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
Machine Intelligence
9 MIT Initiative on the Digital Economy
Siri
Voice recognition
Lionbridge Translation
Narrative Science Authoring News Stories
10 MIT Initiative on the Digital Economy
11 MIT Initiative on the Digital Economy
12 MIT Initiative on the Digital Economy
Machine Intelligence 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
13 MIT Initiative on the Digital Economy
The Digital Frontier
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
Acc
ura
cy
11/2010 04/2010
10/2009
05/2009 12/2008 08/2008
05/2008
12/2007
12/2006
15 MIT Initiative on the Digital Economy
The Digital Frontier
16 MIT Initiative on the Digital Economy
The Digital Frontier
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19 MIT Initiative on the Digital Economy
Analytics is transforming
Sports Underwriting Politics
20 MIT Initiative on the Digital Economy
What does this mean for the
economy?
21 MIT Initiative on the Digital Economy
The Bounty
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23 MIT Initiative on the Digital Economy
$300 BILLION PER YEAR
24 MIT Initiative on the Digital Economy
GDP, Profits, Investment, and Employment
Leve
l o
f G
DP
, P
rofi
ts, a
nd
In
ve
stm
en
t (J
an
-95 =
100
)
Trends in US GDP, Profits and Investment
25 MIT Initiative on the Digital Economy
GDP, Profits, Investment, and Employment
Em
plo
ym
en
t-P
op
ula
tio
n R
ati
o
Leve
l o
f G
DP
, P
rofi
ts, a
nd
In
ve
stm
en
t (J
an
-95 =
100
)
Trends in US GDP, Profits, Investment, and Employment
26 MIT Initiative on the Digital Economy
WHAT’S GOING ON?
27 MIT Initiative on the Digital Economy
“Digital technologies change
rapidly, but organizations and
skills aren’t keeping pace.
As a result, millions of people
are being left behind.”
Our View
28 MIT Initiative on the Digital Economy
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30 MIT Initiative on the Digital Economy
The Great Decoupling
31 MIT Initiative on the Digital Economy
The Hard Truth
Digital progress makes the
economic pie bigger.
But there is no economic
law that everyone, or even
most people, will benefit.
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The Spread: Individuals
18%28%
35%43%
65%
278%
0%
50%
100%
150%
200%
250%
300%
Lowest Quintile Second Quintile Middle Quintile Fourth Quintile 81st-99thPercentiles
Top 1 Percent
Percent Change
Growth in Real After-Tax Income, 1979-2007
33 MIT Initiative on the Digital Economy
Three Sets of Winners and Losers
1. High Skilled vs. Low & Mid Skilled Workers
34 MIT Initiative on the Digital Economy
Skill Disparities
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Polarization of the Labor Market Mid-wage workers have been hit hardest in both
employment and wages
36 MIT Initiative on the Digital Economy
Three Sets of Winners and Losers 1. High Skilled vs. Low & Mid Skilled Workers
2. Capital vs. Labor
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Capital vs. Labor
Corporate Profit as % of GDP
Labor Share of GDP 96
99
102
105
108
111
114
117
120
0
2
4
6
8
10
1947 1958 1969 1980 1991 2002 2013
Lab
or
Shar
e (
20
09
= 1
00
)
Co
rpro
ate
Pro
fits
as
% o
f G
DP
Corporate Profits After Tax as % of GDP & Non-Farm Labor Share, 1947-2013
Source: research.stlouisfed.org
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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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Superstars
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WHAT IS TO BE DONE?
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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.
We need to reinvent our economy and society to keep up with accelerating technology
42 MIT Initiative on the Digital Economy
The New Landscape
• What challenges and opportunities do you see?
• What are your concerns and questions?
43 MIT Initiative on the Digital Economy
The Initiative on the Digital Economy
44 MIT Initiative on the Digital Economy
To learn more, visit:
http://digital.mit.edu/erik
http://digital.mit.edu/ide
http://secondmachineage.com
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