Erik Brynjolfsson and Andrew Mcafee MIT Center for Digital Business

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An interview with Erik Brynjolfsson and Andrew McAfee MIT Center for Digital Business

The Second Machine Age: An Industrial Revolution Powered by Digital Technologies

Transform to the power of digital Erik Brynjolfsson and Andrew McAfee

The third characteristic is the combinatorial nature of innovation. The Second Machine Digital innovations can be combined and recombined to create even more Age is the time when value. And that’s a very encouraging machines are now able thing; a larger base of inventions means an even larger set of raw materials for to take over a lot of the next wave of innovations. This is very unlike traditional inputs that yield cognitive tasks that diminishing returns. humans can do. New Digital Erik Andrew Technologies, the Capgemini Consulting: What are Brynjolfsson McAfee the defining characteristics of this Industry and the Second Machine Age? Director of the Principal Research Neglect of Operations MIT Center for Scientist at MIT Erik Brynjolfsson and Andrew Digital Business Center for Digital McAfee: We see three defining trends Capgemini Consulting: From Business in the Second Machine Age. an industry perspective, what are the key technologies that The first is an exponential improvement in organizations should keep a close computational power,communications eye on? technologies, data storage and even Technology in software. Some technologies are even Erik Brynjolfsson and Andrew Top Gear improving faster than Moore’s law McAfee: We believe companies should (Moore’s law is the observation that, pay close attention to two areas when over the history of computing hardware, it comes to technology development Capgemini Consulting: What is the the number of transistors on integrated – machine intelligence and the global core premise of the “The Second circuits doubles approximately every network of people and machines. Machine Age”? two years). Machine intelligence is the idea that Erik Brynjolfsson and Andrew by including different combinations of McAfee: There have been two big The second characteristic of this age is digital technologies, we can now allow turning points in human history. The the digital nature of core technologies. machines to do cognitive tasks that first was the industrial revolution, where Digital technologies have unusual they could never have done before. machines replaced muscle power. The economics compared to the economics Take language and voice recognition. Second Machine Age is the time when of atoms – they can be copied at For the very first time in history, we machines are now able to take over a lot virtually zero cost, transmitted almost can talk to our machines and have of cognitive tasks that humans can do. instantaneously and resultant copies them understand what we are saying It started roughly around the time IBM’s are perfect, identical copies of the and carry out our instructions. People Deep Blue computer in 1997 beat Gary original. The idea that you can perfectly have been working on language, Kasparov in a chess match. That year replicate goods for free, obviously motor control and problem solving for also witnessed median incomes peak leads to some very unusual economics decades. However, very little progress in the United States, and a subsequent compared to the “textbook” perception. had been made until just the past 5 or rise in productivity. The Second Machine An increasing number of industries have 10 years, which is when things started Age will be a bigger transformation and software at their core and, therefore, are picking up very rapidly. And part of that have greater impact than even the first characterized by these economics of is due to the exponential improvement industrial revolution. digitization. in technologies, in particular the power of Big Data. Erik Brynjolfsson and Andrew McAfee

problems. In the past, only a relatively to ignore. However, we cannot brush small share of humanity was engaged in it under the carpet anymore. When a The Second Machine Age problem solving. In the coming decades, technology increases wealth, there is almost all of humanity can be partners no guarantee that this abundance will will have greater impact in this problem-solving enterprise. And be shared evenly (or even that people than even the first that will multiply the opportunities for will secure any share of it). It’s possible invention and innovation and creativity, that some people would be made worse industrial revolution. disproportionately, and will also lead to a off, not just in relative terms, but even big acceleration in the rate of inventions. in absolute terms. And, unfortunately, Organizations need to tap into this since about the late 1990s, that’s what’s massive source of brainpower. happened, not just in the United States, Similarly, robotics has greatly improved in but in almost every OECD country: To summarize, we believe organizations recent times and robots today are good in France, in Japan, even in Sweden. should focus on leveraging technologies with both gross and fine motor control. Inequality has grown significantly and around machine intelligence, big data Take the example of Baxter – a two- the median worker has not kept up, and connected networks. armed robot that operates at an hourly and in many cases has fallen behind. rate of just $4! Or consider Google’s Capgemini Consulting: From While there are many causes, three of self-driven car. A few years ago, it our research, we found very the most important ones are the way would have been impossible to imagine few companies are exploiting technology creates winners and losers, that machines could even accomplish new digital technologies in their between high skill vs. low skill workers, operations. What is your take on something like this. But today, we have between capital and labor, and between this? crossed that threshold. And finally, superstars and everyone else. Increased machines have become remarkably Erik Brynjolfsson and Andrew inequality is not an inevitable outcome good at solving unstructured problems. McAfee: Indeed, we think that is the of technology, but a combination of An example of that is what IBM’s Watson most important challenge before us technology and the state of our current did with the TV show “Jeopardy”. The – despite technology rushing ahead, institutions. The challenge ahead of us supercomputer defeated two of the our organizations, societies and is to rethink our institutions so that we show’s greatest champions. Watson is governments are not adapting rapidly. get more people participating. We’re now being applied at call centers, for One of the key issues is that CXOs optimistic that this can be done, but it’s legal advice, investment advice, medical don’t fully appreciate and understand not going to happen automatically. diagnosis, and many other kinds of the power of these new technologies. unstructured problems. Many don’t even realize that they are in the midst of this tidal wave of change. There are some who realize it though. However, they don’t know what to do CXOs don’t fully We believe next. And finally, for those that initiate change, the big challenge is in making appreciate and organizations should that change. So, for all those reasons, we’re faced with lagging organizations understand the power of focus on leveraging and institutions. these new technologies. technologies around Many don’t even realize machine intelligence, Jobs, Skills and that they are in the big data and connected Wealth in the Second Machine Age midst of this tidal wave networks. of change. Capgemini Consulting: Looking forward, what is your view on the The other key area that we believe holds impact of digital technology on great potential for both organizations the economy? and the society at large is the networking of all people on the globe. Erik Brynjolfsson and Andrew For the first time in history, we are McAfee: If you look at society as networking together billions of brains, a whole, there is a secret about all the humans on the planet, to solve economics that people used to prefer Erik Brynjolfsson and Andrew McAfee

We cannot stop technology from destroying jobs. The solution is to harness technology to simultaneously create new and different jobs.

about the example of Chess and how Capgemini Consulting: In “Race Deep Blue defeated Gary Kasparov in Against the Machine”, you argued The education industry the World Chess Championship. The that digital technologies were World Chess Champion today is not destroying a sizeable chunk of has been one of the a machine. And it’s not a human. The jobs. Do you still share this view? slowest ones to best chess player is a team of humans Erik Brynjolfsson and Andrew and computers working together. A McAfee: As we’ve said, and shown, incorporate technology. team of humans and computers can in our first book, digital technologies defeat any computer or any human are going to automate and eliminate working alone. And that underscores millions of jobs, even as digital creates Capgemini Consulting: How can the point that humans and computers other jobs. And this trend will continue. individual and organizational skills have complementary and distinct skills be upgraded to compete in the In fact, technology has always been and capabilities that, when they work Second Machine Age? destroying jobs and has always been together, can be more powerful than creating jobs. The solution is not to try Erik Brynjolfsson and Andrew they are individually. to stop technology from destroying jobs. McAfee: We have to transform our skills as we always did in the past, but we have The solution is to harness technology to Capgemini Consulting: What are simultaneously create new and different to do it even faster. We have to start with some areas where technology can jobs. In the year 1800, over 90% of education. You can think of humans be used to improve education? Americans worked in agriculture, as being engaged in a race between Erik Brynjolfsson and Andrew on farms; by 1900, it was 42%; and education and technology for much McAfee: In this context, Massive Open today, it’s less than 2%. All those jobs of the past two centuries. Sadly, the Online Courses (MOOCs) have a major in agriculture have been eliminated, education industry has been one of the role to play. MOOCs can do two big but those people didn’t become slowest ones to incorporate technology. things. First, they can replicate the best unemployed. Instead, they found work We are optimists, so we actually see that teachers, methods, course materials to in new industries, from automobile as good news – it means we have a lot thousands or even millions of people, production to software creation. of potential for improvement. The future just as we saw in media, entertainment, Unfortunately, in the past 15 years, the looks bright because we are nowhere software and other industries. Second, job destruction has continued, but we close to harnessing the true potential of and more importantly, the digitization of have not created new jobs and new technology in education. education creates opportunities to apply industries equally fast. Big Data analytics to better measure Capgemini Consulting: What is the student patterns and behavior online. best way to resolve the growing Key insights obtained from such analysis concern over loss of jobs and the can be used to enhance the quality of We need to invent economic divide? education. (For more information on how ways of racing with the Erik Brynjolfsson and Andrew MOOCs are transforming education, machine, not against it. McAfee: We need to fix this. We please refer to our interview with Anant need to invent ways of racing with the Agarwal, President of edX – a not-for- machine, not against it. Earlier we talked profit organization founded by Harvard and the MIT.) Erik Brynjolfsson and Andrew McAfee

demand-side economies of scale. We are going to see the Those tend to favor big companies like Google and Apple and other companies rise of many new types that have global reach. There will be many different types of winners in the of organizations; one Second Machine Age. example is what we call Capgemini Consulting: What is ‘micro-multi-nationals’. the key takeaway that you want organizations and individuals to bear in mind as they prepare themselves for the Second Machine Age? Visualizing the Digital Erik Brynjolfsson and Andrew Future McAfee: The pace of technology development is going to continue to Capgemini Consulting: Does accelerate exponentially. More cognitive growing machine intelligence tasks will be automated and done by and the fact that everybody is machines. The last ten years were pretty networked lead to a new type of rough. The next ten years will be even digital organization? more disruptive. Erik Brynjolfsson and Andrew McAfee: Yes, we are going to see the If organizations and individuals just go rise of many new types of organizations. on autopilot and don’t pay attention, One example is what we call ‘micro-multi- we could easily end up with a society The last ten years were nationals’. Today, half a dozen people with a tremendous concentration of can market and distribute their products wealth and income. Then, it will not be pretty rough. The next and services to the entire world through the 1%, but the 1% of the 1%, the one- the Internet instantaneously. That is hundredth of one percent, that ends up ten years will be even something we’ve never seen before in with superstar incomes; but the majority more disruptive. history. And they will network together of people will not participate in that with other micro-multi-nationals, with global abundance, A ‘digital elite’ will medium-sized companies and with big thrive in the Second Machine Age. The companies to coordinate production. rest would be left behind unless they You can have what we call ‘scale are quick to learn new technologies and without mass’ –basically companies work “with” the machines. that reach globally, but have relatively The continuing advances in technology few employees. Facebook or Instagram are in some ways easy to predict. are examples of such companies. But the way our organizations and But that is only one part of future individuals respond – that is a choice, organizational evolution. For instance, not a predetermined outcome. As the digitization of the economy that we we say in our book, technology is not talked about earlier is leading to much destiny; we shape our destiny. We can lower marginal costs, and that inherently make the choices based on our values. creates enormous economies of scale. We need to make the right ones. There are also tremendous network effects, which also would create Erik Brynjolfsson and Andrew McAfee

References

1 http://www.amazon.com/The-Second-Machine-Age-Technologies/dp/0393239357 Erik Brynjolfsson and Andrew McAfee

Erik Brynjolfsson and Andrew McAfee MIT Center for Digital Business Erik Brynjolfsson is the Director of the MIT Center for Digital Business and Andrew McAfee is a Principal Research Scientist at the Center. Erik and Andrew are widely-acknowledged thought leaders on technology evolution and co-authors of the 2011 book, “Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy”. They have now written a new book, “The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies”, which is scheduled for release in early 20141. We spoke with Erik and Andrew to understand their thinking on digital technologies, how they are likely to evolve, and what this means for individuals, society and organizations.

About Capgemini

Capgemini Consulting is the global strategy and transformation With around 120,000 people in 40 countries, Capgemini is one consulting organization of the Capgemini Group, specializing of the world’s foremost providers of consulting, technology in advising and supporting enterprises in significant and outsourcing services. The Group reported 2011 global transformation, from innovative strategy to execution and with revenues of EUR 9.7 billion. Together with its clients, Capgemini an unstinting focus on results. With the new digital economy creates and delivers business and technology solutions that creating significant disruptions and opportunities, our global fit their needs and drive the results they want. A deeply team of over 3,600 talented individuals work with leading multicultural organization, Capgemini has developed its own companies and governments to master Digital Transformation, way of working, the Collaborative Business ExperienceTM, and drawing on our understanding of the digital economy and draws on Rightshore®, its worldwide delivery model. our leadership in business transformation and organizational change. Learn more about us at www.capgemini.com. Find out more at: http://www.capgemini-consulting.com/

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Contacts Didier Bonnet, [email protected] Jerome Buvat, [email protected]