Backgrounds (From the back cover of the paperback edition): Erik Brynjolfsson is the director of the MIT Initiative on the Digital Economy and one of the most cited scholars in information systems and economics. Andrew McAfee is a principal research scientist at the Initiative on the Digital Economy and the author of Enterprise 2.0.
Length and Readability
257 pages of text, plus copious footnotes, an introduction and acknowledgements
The whole book is highly readable, and the first six chapters absolutely shine in their clarity and focus. The authors pull together a range of disparate topics and deliver a very clear description of why technology is about to change many aspects of human existence.
This is a “Must read” book. The debate over the future direction of technology and its role in society is complex, but the authors make short work of clearly explaining the core concepts.
What is the “Big Idea” in this book?
Information technology is at a tipping point in terms of its effect on human society. The authors cite three fundamental reasons why:
- “Moore’s Law”, which in 1965 famously predicted that computing speed/dollar would double every year for a decade, has actually continued far longer than that and across more disciplines than just chip design. No other invention in human history has regularly doubled its productivity for +50 years.
- The compounding effect of those advances puts us at the dawn of a new age of what computers can do. Moreover, Moore’s Law is still in full force across many areas of technology. Applications that require huge amounts of processing power may be impractical now but easily executed in just a few years. That wasn’t the case a decade ago, but 50 years of consistent doubling in computing power means the next 10 years will see epic advances in technology.
- Thanks to the Internet and broadband-enabled mobile telephony, much of the physical world is now digitized and instantly accessible to billions of people around the world.
Put those three things together and you get everything from self-driving cars to artificial intelligence, plus factory automation, virtual reality and every other advanced technology you can imagine. There is simply no historical precedent for such advances, and as a result there is no playbook for what may come next. The authors dedicate several chapters to how this may play out in terms of employment levels, social priorities, and economic policy. If you ever wondered why some tech billionaires favor giving every American a “Universal Basic Income”, this book makes it clear. Technology may advance far more quickly than society can adapt to cope with those changes.
For public market investors, this is an important book for three reasons:
- It gives you a framework to understand technology-based industrial disruption. We all know Amazon went from online bookseller to retail giant in less than a generation, and that seems pretty impressive. But imagine when they can process your media consumption (Prime Video), food shopping (Whole Foods), and other purchases (online sales) through an algorithm to predict your consumption patterns?
- Technology does not advance evenly on all fronts. Writing the code to beat a human chess champion is now old hat. Making a robot that can clean hotel rooms or your apartment as quickly as a professional housekeeper may not happen for a decade or more. The problem: linking highly advanced visual systems with fine motor skills while mimicking human judgment about what gets tossed and what gets stacked neatly on the coffee table.
- The technologies of the “Second Machine Age” often create a winner-take-all industry structure with wildly skewed risk-reward profiles. You know network effects help Facebook succeed, of course. But consider that online reviews make sub-par businesses in any industry essentially irrelevant. Moreover, since companies need to leverage technology to survive the Second Machine Age, they need to hire truly excellent programming talent to meet that challenge. That talent comes at a high – and rising – price.
Anything Wrong With It?
Futurists tend to be glass-half-full kinds of people, calling out surmountable challenges rather than highlighting truly dreadful problems. This myopia is on full display in Chapter One, which describes tremendous human advances since the invention of Watt’s steam engine. Fair enough, but there is no mention of the dark side of industrialization: two World Wars, the Holocaust, and other events that would have been impossible without the mass mechanization of human conflict and genocide.
This intellectual blind spot ripples through the rest of the book, which is important because this work is something of a bible in the tech community. For example, it assumes that governments will not (or can not) coopt the Second Machine Age to further non-democratic agendas or sow the seeds of conflict. The old adage that “Information wants to be free” presupposes freedom. Many aspects of the new tech-enabled world, from personal digital phone/data records to facial recognition and predictive Big Data algorithms could easily be turned on populations to suppress dissent or artificially sway public opinion. Yes, the book is intended as a playbook for understanding the economic effects of a new “Age”. But these larger topics are important enough to merit a chapter, if only for the sake of completeness.
Andrew McAfee’s website: http://andrewmcafee.org
Erik Brynjolfssen’s website: http://ebusiness.mit.edu/erik/
Amazon Link to Purchase the Book:
Other Reviews of this Book:
Goodreads (4 out of 5 stars): https://www.goodreads.com/book/show/23316526-the-second-machine-age
From the Washington Post:
From the London Review of Books: