Race Talk Against Title the Machine Name Title Andrew McAfee Erik Brynjolfsson CDB Annual Conference CDB May Annual 23, 2012 Conference May 23, 2012 1
The Problem Ten years ago we had Steve Jobs, Bob Hope, and Johnny Cash http://www.reddit.com/r/reddit.com/related/l2y30/10_years _ago_we_had_steve_jobs_bob_hope_and/ 2
The Problem Ten years ago we had Steve Jobs, Bob Hope, and Johnny Cash Now we have no jobs, no hope, and no cash. - LiamMyers, Reddit.com http://www.reddit.com/r/reddit.com/related/l2y30/10_years _ago_we_had_steve_jobs_bob_hope_and/ 3
Productivity, Wealth Creation, Wages, and Jobs: Good News and Bad News 4
Productivity Growth 5
GDP Growth 190 180 Index of Growth in US Real GDP per Capita and Real Median Household Income, 1975-2009 Real GDP per Capita 170 160 Index (1975 = 100) 150 140 130 120 110 100 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 6
GDP per capita vs median Income 190 180 Index of Growth in US Real GDP per Capita and Real Median Household Income, 1975-2009 Real GDP per Capita 170 160 Index (1975 = 100) 150 140 130 120 110 Real Median Household Income 100 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 7
Copyright 2012 Andrew McAfee 8
Copyright 2012 Andrew McAfee 9
Median Income 11 Source: BLS
Job Creation 12 Source: BLS
Duration of Unemployment Copyright 2011 BLS Erik Brynjolfsson and Andrew McAfee 13
What s Going On?
Business Cycle All the facts suggest that high unemployment in America is the result of inadequate demand full stop 15
Stagnation We have been living off low-hanging fruit for at least three hundred years.... Yet during the last forty years, that low-hanging fruit started disappearing we are at a technological plateau That s it. That is what has gone wrong. 16
Our View Digital technologies change rapidly, but organizations and skills aren t keeping pace. As a result, millions of people are being left behind. Their incomes and jobs are being destroyed, leaving them worse off than before the digital revolution. While the foundation of our economic system presumes a strong link between value creation and job creation, the Great Recession reveals the weakening or breakage of that link.. 17
The Digitization of the Economy 18
IT Investment Over Time 19
IT Investment Over Time 20
IT Investment Over Time 21
What are the Economic Consequences of this Rapid Digitization of the Economy?
Three Sets of Winners and Losers 1. High Skilled vs. Low Skilled workers 23
Three Sets of Winners and Losers 1. High Skilled vs. Low Skilled workers 24
Skill Disparities 25
Three Sets of Winners and Losers 1. High Skilled vs. Low Skilled workers 2. Superstars vs. Everyone Else 26
Superstars Source: Piketty and Saez 27
Superstars 28
Three Sets of Winners and Losers 1. High Skilled vs. Low Skilled workers 2. Superstars vs. Everyone Else 3. Capital vs. Labor 29
Capital 30
vs. Labor 31
We Ain t Seen Nothing Yet 32
Our View Computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off. 33
Our View Computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off. 34
Our View Computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off. 35
Our View Computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off. 36
Recent Technological Progress
State of Understanding, 2004 Human Abilities - Pattern Matching - Complex Communication 38
State of Understanding, 2004 The bakery truck driver is processing a constant stream of [visual, aural, and tactile] information from his environment to program this behavior we could begin with a video camera and other sensors to capture the sensory input. But executing a left turn against oncoming traffic involves so many factors that it is hard to imagine discovering the set of rules that can replicate a driver s behavior. 39
State of Understanding, 2004 The bakery truck driver is processing a constant stream of [visual, aural, and tactile] information from his environment to program this behavior we could begin with a video camera and other sensors to capture the sensory input. But executing a left turn against oncoming traffic involves so many factors that it is hard to imagine discovering the set of rules that can replicate a driver s behavior. 40
State of Understanding, 2010 41
Complex Communication Source: http://www.nytimes.com/2010/03/09/technology/09translate.html 42
Complex Communication Human Evaluation Scale 5 Excellent The information was presented clearly and with appropriate grammar, vocabulary, and style and can take action on it. 4 Very Good There may be minor errors in the text, but I am very confident that I understand the meaning and can take action on it. 3 Actionable There are errors in the text, but I am reasonably confident that I understand the meaning and can take action on it. 2 Unclear Errors in grammar, vocabulary and style make it difficult to understand the meaning, but I can guess it. 1 Poor Fundamental errors in grammar and vocabulary make it very difficult to understand the meaning. 0 Exceptionally poor No useful information is conveyed at all. 43 Source: Lionbridge
Complex Communication 您送来的风扇是最初随处理器一起提供的吗? Segment Ratings You sent the original fan with the processor? 5 GeoFluent You sent the first with the processor fan is provided with it? 2 Google 好的, 先生, 我会立即向您发送需要填写的系统配置表单 ( 通过电子邮件 ), 填写此表单后, 请您将其发回来, 我会立即上报您的案例 Hello, Sir, I will immediately send you a system configuration form to complete (via email), fill this form after I would request you to send it back, I will escalate you case Yes, sir, I will immediately send you a form to fill in the system configuration (by email), fill out this form, please send it back to you, I will be immediately reported to your case 3 GeoFluent 2 Google 风扇上是否有任何物理损坏? Any physical damage on the fan? 5 GeoFluent Are there any fans on the physical damage? 1 Google 我们需要您单独将此设备的购买凭证发送给我们 We need you to separate to send us the proof of purchase of the unit. 2 GeoFluent We need your proof of purchase separate devices to send this to us. 2 Google 44 Source: Lionbridge
Complex Communication Segment Ratings Nos alegramos de serle de ayuda. We are glad to be of help. 5 GeoFluent We welcome help. 1 Google Con el fin de procesar el pedido de sustitución, le pediría que me confirmara los detalles de más abajo. In order to process replacement order for you I request you to confirm the below details. 4 GeoFluent In order to process the replacement order, I would ask that I confirm the details below. 2 Google Recibirá un mensaje de correo electrónico generado automáticamente que incluirá instrucciones detalladas acerca del procedimiento de embalaje y la dirección a la que debe enviar la unidad defectuosa. You will receive an auto generated email which will contain detailed instructions regarding the packing procedure and the address to which you will have to send the faulty unit. Receive an automatically generated email that will include detailed instructions on the packing procedure and the address to which to send the defective unit. 5 GeoFluent 3 Google Tenemos muchos problemas con esta misma memoria, ya que no es compatible con el procesador. We had lots of problems with this same memory as it is not compatible with the processor. 5 GeoFluent We have many problems with this same report, it is not compatible with the processor. 2 Google 45 Source: Lionbridge
Complex Communication 5 4 3 Comprehension Rating for Actionable Content 2.8 4.1 Human evaluators ranked customized GeoFluent output 48% higher than a baseline engine 2 1 0 Baseline MT Engine GeoFluent customized MT Human Evaluation of Spanish to English Chat Translation 46 Source: Lionbridge
Complex Communication 90% of the translated segments were found to be actionable 83% of users responded that in cases where the translation was not clear, they were able to achieve a successful translation by asking for clarification 4 Source: Lionbridge
Combining Complex Communication and Pattern Matching: The Digital Frontier
The Digital Frontier 49
The Digital Frontier 50 Source: Building Watson: It s not so elementary, my dear W. Shih. HBS case #9-612-017
The Digital Frontier 51
The Digital Frontier 52
How Is This Happening?
Moore s Law 1.0 0.9 Average Transistor Price 0.8 0.7 Dollars 0.6 0.5 0.4 0.3 0.2 0.1 0.0 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 54
Moore s Law 1.E+00 1.E-01 Average Transistor Price 1.E-02 1.E-03 Dollars 1.E-04 1.E-05 1.E-06 1.E-07 1.E-08 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 55
Moore s Law 1.0E+11 Microprocessor Clock Speed 1.0E+10 1.0E+09 (Hz) 1.0E+08 Sources: Berndt et al., ITRS 1.0E+07 1.0E+06 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 56
Second Half of the Chessboard US BEA starts tracking IT 1958 + 32 * 1.5 = 2006 We enter second half of the technology chessboard? Moore s Law doubling period (years) 57
What Is To Be Done? 58
Education 1.Invest in education 2.Hold teachers accountable for performance 3.Separate student instruction from testing and certification 4.Keep K-12 students in classrooms for more hours 5.Increase the ratio of skilled workers in the United States by encouraging skilled immigrants 59
Entrepreneurship 6. Teach entrepreneurship as a skill not just in elite business schools but throughout higher education 7. Boost entrepreneurship in American by creating a category of founders visas for entrepreneurs 8. Create clearinghouses and databases to facilitate the creation and dissemination of templates for new businesses 9. Aggressively lower the governmental barriers to business creation 60
Investment 8.Invest to upgrade the country s communications and transportation infrastructure. 9.Increase funding for basic research and for our preeminent government R&D institutions 61
Law, Regulation and Taxes 12.Preserve the relative flexibility of American labor markets by resisting efforts to regulate hiring and firing. 13.Make it comparatively more attractive to hire a person than to buy more technology 14.Decouple benefits from jobs to increase flexibility and dynamism 15.Don t rush to regulate new network businesses 16.Eliminate or reduce the massive home mortgage subsidy 17. Reduce the large implicit and explicit subsidies to financial services 18.Reform the patent system 19.Shorten, rather than lengthen, copyright periods and increase the flexibility of fair use 62
The Digital Frontier 63
The Digital Frontier Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new... ideas were discovered. And every generation has underestimated the potential for finding new... ideas. We consistently fail to grasp how many ideas remain to be discovered.... Possibilities do not merely add up; they multiply. - Paul Romer 64
The Digital Frontier The material conditions of life will continue to get better for most people, in most countries, most of the time, indefinitely. - Julian Simon
The Digital Frontier look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America s best days lie ahead. - Warren Buffett, 2011 letter to shareholders