Things have been happening exponentially fast over the past several years, and at the dawn of 2015, lets take a deep breath and embrace the myriad of unexpected things to come. Whenever a major game changing technology comes about, whether it be the invention of the steam engine, electricity, or the computer, there are always pessimists and optimists. Over the past few years there has been talk about the prospect of stagnation in innovation and the economy. Demographics have shown slow growth in productivity and income and some believe us to be stuck there.
Alas! A more optimistic view comes from MIT’s Erik Brynjolfsson and Andrew McAfee’s book titled “The Second Machine Age” that argues the global economy is on the cusp of a dramatic growth spurt driven by smart machines. Today, these machines are able to take full advantage of advances in computer processing, artificial intelligence, networked communication, and the digitization of pretty much everything. The difference between this machine age, and other major technological shifts of the past, is that this one is going to propel us exponentially and our linear wired brains will be surprised at the things to come. The idea of exponential growth propels this spirit of optimism for Brynjolfsson and McAfee.
Today, the staggering amount of digital information being created and the number of relatively cheap devices that are continually talking to each other, the realm of possibility is much more impressive than it was in the first computer revolution. Computers today are able to do things that were once (not too long ago) only in the realm of science fiction. Because computers are now combined with thousands of cheap sensors and huge databases, they can do things we once didn’t believe possible for them, like driving a car or translating languages.
What allows these breakthroughs is not just the amount of data and speed, but also the ease with which these new capabilities and new ideas can be combinded and recombined. In the past, breakthrough technologies like the steam engine or electricity took a while before people could really utilize it’s flexibility and full potential.
These technologies are about to take off.
In the new era, consumers will be able to buy a wider range of higher quality goods and services at lower prices. In the first machine age, productivity employment and median income all rose in tandem. However, the second machine age has seen growth in productivity and ideas but this has been separated from jobs and income. This, Brynjolfsson and McAfee argue, is the nature of the digital economy. Where goods and services can be provided to an infinite number of customers at the same time at an almost zero cost. The authors consider this to be “growing pains” that always occur as the demand shifts to different kinds of work. They are pioneering a fundamentally new economics, one based not on the old reality of scarcity but on a new reality of abundance that we are only just beginning to comprehend.