It is easy to be wowed by the technological advancements of our age – cars that can drive themselves, smartphones that listen to your voice and (sometimes) give you what you want, super computers that can diagnose illnesses. But as Andrew McAfee, principal research scientist at MIT’s Center for Digital Business at the Sloan School of Management, says, “These are not the crowning achievements of our time. These are just the warmup acts.”
McAfee and Erik Brynjolfsson describe, in their new book The Second Machine Age, how new technologies obviate the need for human labor. As co-founders of The Initiative on the Digital Economy at MIT, McAfee and Brynjolfsson argue for an urgent consideration for future planning as digital technologies rapidly replace cognitive tasks in the workforce.
If contentment in labor is key to securing societal stability, what will be the government’s role in managing how the digital revolution affects our everyday lives? McAfee and Brynjolfsson discuss the need for tax reform, a revolutionized education system, and a guaranteed basic income for every American.
What is the second machine age?
AM: It’s an era of astonishing progress in the capabilities of digital technologies like artificial intelligence, robots, network computer systems, and drones – all the stuff we read about in the papers everyday.
In the book you talk about the Industrial Revolution as being in service to the labor economy. What is different about the second machine age?
EB: During the first machine age, which was triggered by the Industrial Revolution, new technologies automated a lot of the physical work. In contrast, the second machine age is automating and augmenting our cognitive tasks.
The first machine age not only boosted human living standards, but was also complementary to human labor. In the second machine age, we expect another boost in living standards but it’s unclear whether the new technologies are going to be complements or substitutes to human labor.
Paint me a picture of what this wide-sweeping automation looks like. What jobs are being taken over?
EB: The first wave of automation is hitting routine information processing tasks, for instance tax preparation. Software programs like Turbo Tax can do your taxes cheaper and quicker than most human tax preparers. As a result we have fewer human tax preparers than we used to. But it’s not just the routine information processing tasks that are being affected.
AM: Most of us wouldn’t think of diagnosing an illness as an example of routine information. But what we’re seeing now is that a lot of new technologies are getting really good at diagnosing different kinds of illnesses.
Watson, the supercomputer that is now the world Jeopardy champion, basically went to med school after it won Jeopardy. I’m convinced that if it’s not already the world’s best diagnostician, it will be soon.
How do these massive shifts in the labor economy play out? Where do people in these rapidly changing industries look for work?
AM: Historically that question has been answered by the innovators and entrepreneurs in different economies. In other words, it’s not been the case that smart people in Washington and Cambridge will redirect the workers into new and productive lines of work. Innovators and entrepreneurs start up new industries and need the labor that was just replaced by previous waves of technologies.
A lot of our recommendations are focused on trying to create environments where this can happen again. Making sure we’ve got the best business climate for new business formation, start-ups and entrepreneurship.
EB: Jobs involving creativity, motivation, interpersonal relations, caring for other people, those are areas that machines haven’t made nearly the kind of inroads that they have in routine, physical and cognitive work. We see those, at least in the short-run, as being categories where there will be growth.
What does this mean for our civic and social lives?
EB: We describe two big economic effects. The first one we call “bounty.” That’s this incredible increase in living standards that doesn’t show up in the GDP statistics – free goods and services that we didn’t have before.
A second effect has been the growing gap between the rich and poor. Growing inequality and decreased income mobility. The top one percent have gained a majority of the income gains in the past decade. Meanwhile, median incomes have stagnated.
Give me a sense of more places in our society where this is playing out. What’s the extent of this change? How quickly are things changing?
AM: Another great example is the comparison between Kodak and Instagram. Kodak is an American icon and a world-famous brand but it’s gone bankrupt. The company was hugely influential, it employed tens of thousands of people, and George Eastman became a very wealthy man. For a long time Kodak kept a lot of customers happy and created a lot of jobs.
Compare that to Instagram, a company set up to assist people with digital photography. When it was acquired by Facebook it employed fewer than 15 people. The acquisition price was about a billion dollars. With Instagram we see a huge amount of wealth being created and a lot of value to consumers. What we don’t see are a jobs being created.
EB: What we saw with Instagram and Turbo Tax is a microcosm of what’s happening in more and more industries – whether it’s manufacturing, finance, media, music, or even education. As industries become more digitized they become subject to these kinds of winner-take-all economics.
You quote Voltaire in the book: “Work saves a man from three great evils: boredom, vice and need.” How do we reconcile these disruptions to the labor economy?
AM: We love that Voltaire quote. Between “boredom, vice and need,” the need is the easiest to take care of. We’re creating a future of abundance and bounty – we’re not worried about there not being enough to go around.
What we are worried about are Voltaire’s other two evils: boredom and vice. Jobs are an essential thing for a person in the community. A lot of our recommendations are around how we can keep work in the economy – even as technology continues to do amazing things.
We have a set of pretty straightforward short-term recommendations about economic growth. For the long-term, we point out that the oldest lesson of economics is to tax the stuff you want to see less of. We are taxing labor via income and payroll taxes. So our long-term recommendations are about rethinking and subsidizing labor.
Whether you look at the work of conservative or liberal sociologists, you find the same thing. When jobs disappear from a community, crime and incarceration rates go way up. You see many more children raised in one-person families and higher rates of divorce. All these bad outcomes indicate how right Voltaire was.
These alarm calls and warnings sound very similar to the ones heard during and post the Industrial Revolution. What’s different about the second machine age?
AM: Look at the entire post-war history of the American economy. For several decades after World War II the economy was growing, productivity was growing, jobs were growing, and wages were growing – all at about the same rate. That’s a wonderful phenomenon.
Since the early 1980s the overall economic and productivity growth has stayed on a pretty healthy trajectory, but the median income first dropped off and is now actually heading south. Recently job growth has started to stagnate as well.
Let’s get back to some of the solutions you propose – for example a guaranteed minimum income.
AM: If we grow the economy faster, we’ll add more jobs every month. So we talk about immigration, infrastructure, entrepreneurship and education. These are all things we can and should be doing differently right now.
If this technological acceleration continues – and we think it will – we’ve got to think about some bigger policy changes and interventions for the long-term. First and foremost, let’s subsidize work instead of taxing it.
The negative income tax, which is very close to the earned income tax credit we have right now, rewards you more than a dollar for every dollar that you earn via work. We think that’s a great idea.
In 2011, Jeopardy! introduced Watson to the world, an IBM supercomputer custom made for the game show – and Watson won. The second runner up Ken Jennings said at the end of the game, “I for one welcome our new computer overlords.” Do you share his sentiment? You sound optimistic but the data suggests that things are going quite badly.
AM: Not everything is going badly. Productivity growth was higher in the 2000s than the 1990s. We’ve rebounded from the great recession. Our economy is bigger than it’s ever been. So it’s primarily the data around workers, employment and median income that is troubling.
EB: We’re not technological determinists. The first machine age had an enormous effect on society. But individuals, businesses and governments responded. The American government put in place what has been called the best idea America has ever had: compulsory universal education. Ninety percent of Americans who used to work on farms (now it’s down to two percent) had many of their jobs mechanized, but they didn’t simply become unemployed. Instead, they were re-skilled. Entrepreneurs like Henry Ford and later Steve Jobs and Bill Gates invented entirely new industries and used these new cognitive skills in productive ways.
We call ourselves mindful optimists because we believe that if we take the right actions, including reinventing education, fostering entrepreneurship, and readjusting the tax code, we can harness the benefits of this second machine age and mitigate many – perhaps all – of the negatives, such as the stagnation of median income and the growth in inequality.
Photo: Evgenia Eliseeva
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