![Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy by [Brynjolfsson, Erik, McAfee, Andrew]](https://images-na.ssl-images-amazon.com/images/I/51%2BW2ergLuL._SY346_.jpg)
First self-published as an e-book in 2011, this is an excellent abstract of the authors’ expanded full size nonfiction book, “The Second Machine Age”, that the authors will publish three years later in 2014. Indeed, most of the foundation of “The Second Machine Age” is contained in this much shorter book.
Within “The Second Machine Age” the authors will expand on a few concepts.
They will bring in more historical context to their research by studying the Industrial Revolution that they describe as the first tipping point in human history (circa 1800). Indeed, any time series graph of worldwide economic growth, GDP per capita, population growth will typically show the exact same pattern. The curve will look nearly flat for a millennium and abruptly rise upward at an inflection point close to 1800. The authors indicate that this first inflection point in history was caused by the advent of James Watt steam engine introduced in 1775 at the onset of the Industrial Revolution. It led to innovative and technological improvements including mass production, railways, and mass transportation. Additionally, they will redefine the Present as the second tipping point. They will also refer to the first tipping point and its aftermath as the First Machine Age, and the second tipping point as the Second Machine Age.
Additionally, within “The Second Machine Age” the authors will repackage their ideas so that all the benefits of technology will be encapsulated in a single word: “bounty.” Meanwhile, all the associated concerns with technological unemployment and rising inequality will be captured in the word “spread.” This will allow them to use effective shorthand description of their objectives. For instance, going forward how can we increase the bounty and reduce the spread? And, they will offer many recommendations on how to do so.
Besides the mentioned expansion within “The Second Machine Age”, “Race Against The Machine” very well captures the essence of their theory.
The authors were among the first to recognize that the Great Recession recovery was different. Even though many economic metrics had recovered quickly including Real GDP, Real GDP per capita, corporate profits, business investments in equipment and software; other measures of economic health did not recover so well. All employment figures recovered a lot more slowly as job creation remained anemic for a long time. And, Real median household income remained flat.
How can Real GDP per capita increase rapidly meanwhile Real median household income remained flat? The answer is simple. It is the difference between the Median and the Average. The Average is skewed upward by very large figures. Meanwhile, the Median is not. Thus, technological progress has contributed to a rapid rise in income for the technologically savvy, entrepreneurs in high-tech fields, stars able to resell their talent digitally worldwide. Thus, technology-benefitting elite has seen its income and wealth grow very rapidly. Their income/revenue growth contributes to GDP growth and it distorts upward average Real GDP per capita. Meanwhile, the majority that did not reap the benefits from technology has experienced stagnant income as some of their respective demand for their labor has been increasingly displaced by technology. The advent of computers, software, robots, artificial intelligence, and web based software platforms has affected just about every field (blue and white collar service industries included). And, this decoupling effect goes further back than the Great Recession. It can be observed since 1975 (near the onset of mass computerization).
So, going back to the race between brains and technology, is there any hope for humans?
The authors indicate the issue on an individual level is very interesting.
They take the example of chess. IBM Deep Blue handily beat Kasparov in chess in 1997. Nowadays, even mid-tier software computer programs on cheap laptop computers can beat the best human chess player. So, what can human beings contribute to this most demanding cognitive challenge (playing chess)? Surprisingly, a whole lot!
With the advent of freestyle chess, humans have regained a leading role in this discipline. Freestyle chess entails a tournament between completely different set of team players. A team can consist of a supercomputer (successor of IBM Deep Blue), or a supercomputer plus a human, or various combination of computers and human players cooperating on the same team. And, the outcome of such tournaments is counterintuitive. The winners are not the teams made up of grandmaster chess players and supercomputers. They are instead teams made of amateur chess players and mathematicians with expertise at analyzing freestyle chess games and guiding several laptop computers with Machine Learning and other algorithms.
In freestyle chess, the grandmasters are at a marked disadvantage. This is because they are overconfident in their expertise just like any expert typically is (as captured within Phillip Tetlock’s work on the subject) and they typically do not trust the machines and have little ability in using them.
Supercomputers on a stand-alone basis have little chance in such tournaments. They can’t match the creativity of human-computer teams. In the near future of freestyle chess, we can anticipate that grandmaster chess players and stand-alone supercomputers will quit this league. Humans who understand machines and machines make for the winning combination. And, this may be the case regardless of the field. As with chess, it is anticipated that IBM Watson specializing in healthcare will be much more effective when combined with the judgment of doctors than without (or probably the judgment of specialists able to better interpret IBM Watson diagnostics rather than expert doctors who are overconfident in their expertise).
However, what is true for an elite few freestyle chess quants may have little relevance for the masses. Today’s information technologies do contribute to inequality and technological unemployment because:
1) They favor more skilled and educated workers over lesser skilled and educated ones;
2) They increase the return to capital owners over labor;
3) They increase the advantages of stars over everybody else.
Nevertheless, the authors still describe themselves as technology-optimists. And, they come up with a series of 19 specific recommendations so that society at large better adapts and learns how to race with the machine instead of against the machine. Their recommendations are associated with improving K-12 education, improving national infrastructure, reducing regulations affecting start-ups, rationalizing immigration policy so we can attract smart emigrants to fill crucial vacant jobs in engineering and science, reform the patent system to stimulate innovation instead of stifling it, reform the tax code to eliminate market distorting subsidies (in housing in particular), increase Government funding in basic research, and many other sensible recommendations.
Although the authors’ recommendations make good sense, many of them are likely to run into a political wall of polarization. And, even if politically feasible you still have to wonder on a nationwide basis how effective these recommendations would be in materially bending the curve so that more individuals can metamorphose themselves from victim of technology (holding jobs that race against the machine) into beneficiary of technology (quantitative jobs that race with the machine). This issue may be a formidable worldwide challenge in the present and coming decades. And, Keynes had exactly figured that out back in 1930:
“We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come-namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labour outrunning the pace at which we can find new uses for labour.”
To their credit, the authors do give full credit to this astonishingly prescient prediction of Keynes in both their books.
Review
"We're entering unknown territory in the quest to reduce labor costs. The AI revolution is doing to white collar jobs what robotics did to blue collar jobs. Race Against the Machine is a bold effort to make sense of the future of work. No one else is doing serious thinking about a force that will lead to a restructuring of the economy that is more profound and far-reaching than the transition from the agricultural to the industrial age. Brynjolfsson and McAfee have hit the ball out of the park on this one. It's a book anyone concerned with either business, or more broadly, the future of our society, simply must read." - Tim O'Reilly
"This is, quite simply, the best book yet written on the interaction of digital technology, employment and organization. Race Against the Machine is meticulously researched, sobering, practical and, ultimately, hopeful. It is an extremely important contribution to the debate about how we ensure that every human being benefits from the digital revolution that is still gathering speed. If you read only one book on technology in the next 12 months, it should be this one." -Gary Hamel
"In social science inquiry, we badly need the right people asking, and answering, the right questions. That's precisely what Brynjolfsson and McAfee do in this important treatise on the intersection of technology and the economy. Moreover, they're tackling the most important question of the present and the future: where are the new jobs going to come from?" - Jared Bernstein
"Race Against the Machine is a portrait of the digital world - a world where competition, labor and leadership are less important than collaboration, creativity and networks." - Nicholas Negroponte
"This is, quite simply, the best book yet written on the interaction of digital technology, employment and organization. Race Against the Machine is meticulously researched, sobering, practical and, ultimately, hopeful. It is an extremely important contribution to the debate about how we ensure that every human being benefits from the digital revolution that is still gathering speed. If you read only one book on technology in the next 12 months, it should be this one." -Gary Hamel
"In social science inquiry, we badly need the right people asking, and answering, the right questions. That's precisely what Brynjolfsson and McAfee do in this important treatise on the intersection of technology and the economy. Moreover, they're tackling the most important question of the present and the future: where are the new jobs going to come from?" - Jared Bernstein
"Race Against the Machine is a portrait of the digital world - a world where competition, labor and leadership are less important than collaboration, creativity and networks." - Nicholas Negroponte
About the Author
Erik Brynjolfsson is a professor at the MIT Sloan School of Management, Director of the MIT Center for Digital Business, Chairman of the Sloan Management Review, a research associate at the National Bureau of Economic Research, and co-author of Wired for Innovation: How IT Is Reshaping the Economy. He graduated from Harvard University and MIT.
Andrew McAfee is a principal research scientist and associate director at the MIT Center for Digital Business at the Sloan School of Management. He is the author of Enterprise 2.0: New Collaborative Tools for Your Organization's Toughest Challenges. He graduated from MIT and Harvard University.
