Erik Brynjolfsson: The key to growth? Race with the machines

Growth is Not Dead

The Second Industrial Revolution and Productivity

• The speaker begins by discussing the electrification of American factories 120 years ago, marking the start of the Second Industrial Revolution. Despite this advancement, productivity did not increase for 30 years as managers merely replaced steam engines with electric motors without redesigning factory processes.

• It was only after a new generation of managers innovated work processes that productivity surged, often doubling or tripling. This highlights the importance of adapting to new technologies rather than just implementing them.

General Purpose Technologies

• Electricity is identified as a general purpose technology that drives economic growth through complementary innovations like lightbulbs and factory redesign. The speaker posits that computers are today's equivalent general purpose technology.

• However, he emphasizes that technology alone does not determine our future; we must reinvent organizations and economic systems to fully leverage these advancements.

Current Economic Landscape

• While productivity appears stable, it has become disconnected from job creation and worker income stagnation. This situation is misinterpreted by some as an end to innovation but is actually part of what the speaker calls "the new machine age."

• Data shows GDP per person in America has steadily increased over time, with current productivity at an all-time high despite past recessions.

Global Growth Trends

• Worldwide incomes have grown faster in the last decade than ever before, suggesting significant global progress beyond just U.S. metrics.

• The speaker argues that traditional metrics understate progress because they fail to account for free digital goods and services available online, such as Wikipedia and Google.

Future Predictions on Growth

• Some experts claim we've reached the end of growth; however, the speaker remains optimistic due to three key characteristics of the new machine age: digital nature, exponential growth rates, and combinatorial innovation.

• Digital goods can be replicated at nearly zero cost and delivered instantly—ushering in an era characterized by abundance rather than scarcity.

Characteristics of New Machine Age

• Measurement capabilities have vastly improved due to big data analytics, allowing us to understand our world better than ever before.

• Exponential growth means technological advancements occur faster than anticipated; for example, modern gaming consoles surpass older military supercomputers in power.

Innovation Dynamics

• Each innovation serves as a building block for further developments; this combinatorial aspect leads to rapid advancements across various fields.

• A notable example includes an undergraduate student creating a widely-used app quickly by leveraging existing platforms like Facebook and the Internet's infrastructure.

Breakthrough Technologies

The Impact of Intelligent Machines on Employment

The Rise of Intelligent Machines

• Watson, an AI system, is rapidly advancing and being tested for various jobs in sectors like call centers, legal, banking, and medical fields.

• Despite the growth of intelligent machines, some argue that innovation is stagnating; however, the implications of this new machine age will take time to fully understand.

The Great Decoupling

• There is a significant disconnect between productivity and employment; while productivity has reached all-time highs, job availability has decreased.

• A personal anecdote illustrates how software like TurboTax can outperform human tax preparers in speed and cost-effectiveness, leading to job losses among tax professionals.

Industries Affected by Automation

• This trend isn't limited to one sector; it spans across media, music, finance, manufacturing, retailing—essentially every industry faces challenges from automation.

• The chess match between Garry Kasparov and Deep Blue symbolizes the shift towards collaboration with machines rather than competition against them.

Adapting to Technological Change