We are witnessing astonishing progress in digital technologies that will bring profound economic benefits — and some thorny challenges — for humanity.
For many thousands of years, humanity was a very gradual upward trajectory. Progress was achingly slow, almost invisible. Animals and farms, wars and empires, philosophies and religions all failed to exert much influence. But just over two hundred years ago, something sudden and profound arrived and bent the curve of human history — of population and social development— almost ninety degrees…
The sudden change in the graph in the late eighteenth century corresponds to… the Industrial Revolution, which was the sum of several nearly simultaneous developments in mechanical engineering, chemistry, metallurgy, and other disciplines… These technological developments underlie the sudden, sharp, and sustained jump in human progress…
We can be even more precise about which technology was most important. It was the steam engine or, to be more precise, one developed and improved by James Watt and his colleagues in the second half of the eighteenth century.
Prior to Watt, steam engines were highly inefficient, harnessing only about one percent of the energy released by burning coal. Watt’s brilliant tinkering between 1765 and 1776 increased this more than threefold. As [anthropologist Ian Morris writes in his book Why the West Rules — For Now, this made all the difference: ”Even though [the steam] revolution took several decades to unfold . . . it was nonetheless the biggest and fastest transformation in the entire history of the world.”
The Industrial Revolution, of course, is not only the story of steam power, but steam started it all. More than anything else, it allowed us to overcome the limitations of muscle power, human and animal, and generate massive amounts of useful energy at will. This led to factories and mass production, to railways and mass transportation. It led, in other words, to modern life. The Industrial Revolution ushered in humanity’s first machine age — the first time our progress was driven primarily by technological innovation — and it was the most profound time of transformation our world has ever seen. The ability to generate massive amounts of mechanical power was so important that, in Morris’s words, it ”made mockery of all the drama of the world’s earlier history.”
Now comes the second machine age. Computers and other digital advances are doing for mental power — the ability to use our brains to understand and shape our environments — what the steam engine and its descendants did for muscle power. They’re allowing us to blow past previous limitations and taking us into new territory. How exactly this transition will play out remains unknown, but whether or not the new machine age bends the curve as dramatically as Watt’s steam engine, it is a very big deal indeed. This book explains how and why.
For now, a very short and simple answer: mental power is at least as important for progress and development — for mastering our physical and intellectual environment to get things done — as physical power. So a vast and unprecedented boost to mental power should be a great boost to humanity, just as the earlier boost to physical power so clearly was.
We wrote this book because we got confused. For years we have studied the impact of digital technologies like computers, software, and communications networks, and we thought we had a decent understanding of their capabilities and limitations. But over the past few years, they started surprising us. Computers started diagnosing diseases, listening and speaking to us, and writing high-quality prose, while robots started scurrying around warehouses and driving cars with minimal or no guidance. Digital technologies had been laughably bad at a lot of these things for a long time — then they suddenly got very good. How did this happen? And what were the implications of this progress, which was astonishing and yet came to be considered a matter of course?
We decided to team up and see if we could answer these questions. We did the normal things business academics do: read lots of papers and books, looked at many different kinds of data, and batted around ideas and hypotheses with each other. This was necessary and valuable, but the real learning, and the real fun, started when we went out into the world. We spoke with inventors, investors, entrepreneurs, engineers, scientists, and many others who make technology and put it to work.
Thanks to their openness and generosity, we had some futuristic experiences in today’s incredible environment of digital innovation. We’ve ridden in a driverless car, watched a computer beat teams of Harvard and MIT students in a game of Jeopardy!, trained an industrial robot by grabbing its wrist and guiding it through a series of steps, handled a beautiful metal bowl that was made in a 3D printer, and had countless other mind-melting encounters with technology.
This work led us to three broad conclusions.
The first is that we’re living in a time of astonishing progress with digital technologies — those that have computer hardware, software, and networks at their core. These technologies are not brand-new; businesses have been buying computers for more than half a century, and Time magazine declared the personal computer its ”Machine of the Year” in 1982. But just as it took generations to improve the steam engine to the point that it could power the Industrial Revolution, it’s also taken time to refine our digital engines.
We’ll show why and how the full force of these technologies has recently been achieved and give examples of its power. ”Full,” though, doesn’t mean ”mature.” Computers are going to continue to improve and to do new and unprecedented things. By ”full force,” we mean simply that the key building blocks are already in place for digital technologies to be as important and transformational to society and the economy as the steam engine. In short, we’re at an inflection point — a point where the curve starts to bend a lot — because of computers. We are entering a second machine age.
Our second conclusion is that the transformations brought about by digital technology will be profoundly beneficial ones. We’re heading into an era that won’t just be different; it will be better, because we’ll be able to increase both the variety and the volume of our consumption. When we phrase it that way — in the dry vocabulary of economics — it almost sounds unappealing. Who wants to consume more and more all the time? But we don’t just consume calories and gasoline. We also consume information from books and friends, entertainment from superstars and amateurs, expertise from teachers and doctors, and countless other things that are not made of atoms. Technology can bring us more choice and even freedom.
Computers and other digital advances are doing for mental power what the steam engine and its descendants did for muscle power.
When these things are digitized — when they’re converted into bits that can be stored on a computer and sent over a network — they acquire some weird and wonderful properties. They’re subject to different economics, where abundance is the norm rather than scarcity. As we’ll show, digital goods are not like physical ones, and these differences matter.
Of course, physical goods are still essential, and most of us would like them to have greater volume, variety, and quality. Whether or not we want to eat more, we’d like to eat better or different meals. Whether or not we want to burn more fossil fuels, we’d like to visit more places with less hassle. Computers are helping accomplish these goals, and many others. Digitization is improving the physical world, and these improvements are only going to become more important. Among economic historians there’s wide agreement that, as Martin -Weitzman puts it, ”the long-term growth of an advanced economy is dominated by the behavior of technical progress.” As we’ll show, technical progress is improving exponentially.
Our third conclusion is less optimistic: digitization is going to bring with it some thorny challenges. This in itself should not be too surprising or alarming; even the most beneficial developments have unpleasant consequences that must be managed. The Industrial Revolution was accompanied by soot-filled London skies and horrific exploitation of child labor. What will be their modern equivalents? Rapid and accelerating digitization is likely to bring economic rather than environmental disruption, stemming from the fact that as computers get more powerful, companies have less need for some kinds of workers. Technological progress is going to leave behind some people, perhaps even a lot of people, as it races ahead. As we’ll demonstrate, there’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value. However, there’s never been a worse time to be a worker with only ”ordinary” skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.
Over time, the people of England and other countries concluded that some aspects of the Industrial Revolution were unacceptable and took steps to end them (democratic government and technological progress both helped with this). Child labor no longer exists in the UK, and London air contains less smoke and sulfur dioxide now than at any time since at least the late 1500s. The challenges of the digital revolution can also be met, but first we have to be clear on what they are. It’s important to discuss the likely negative consequences of the second machine age and start a dialogue about how to mitigate them — we are confident that they’re not insurmountable. But they won’t fix themselves, either.
So this is a book about the second machine age unfolding right now — an inflection point in the history of our economies and societies because of digitization. It’s an inflection point in the right direction — bounty instead of scarcity, freedom instead of constraint — but one that will bring with it some difficult challenges and choices.
This book is divided into three sections. The first…describes the fundamental characteristics of the second machine age. These chapters give many examples of recent technological progress that seem like the stuff of science fiction, explain why they’re happening now (after all, we’ve had computers for decades), and reveal why we should be confident that the scale and pace of innovation in computers, robots, and other digital gear is only going to accelerate in the future.
The second part… explores bounty and spread, the two economic consequences of this progress. Bounty is the increase in volume, variety, and quality and the decrease in cost of the many offerings brought on by modern technological progress. It’s the best economic news in the world today. Spread, however, is not so great; it’s ever-bigger differences among people in economic success — in wealth, income, mobility, and other important measures. Spread has been increasing in recent years. This is a troubling development for many reasons, and one that will accelerate in the second machine age unless we intervene.
The final section… discusses what interventions will be appropriate and effective for this age. Our economic goals should be to maximize the bounty while mitigating the negative effects of the spread… The choices we make from now on will determine what kind of world that is.