July 21, 2015 | Written by: Marie Glenn
Categorized: Innovation | Pacesetters
Erik Brynjolfsson, Professor, MIT Sloan School of Management
Erik Brynjolfsson is a professor of information technology, and the director of the MIT Center for Digital Business at the MIT Sloan School of Management. His research examines the ways in which advances in information technology contribute to business performance and organizational change. Brynjolfsson co-directs the MIT Initiative on the Digital Economy with colleague, Andrew McAfee. Their book, The Second Machine Age, examines how investments in technology will alter economic growth and labor demand. The authors argue that coming generations will require fewer people to deliver more growth than ever before, a fact that should prompt people to rethink education, workforce structures and skill development to preserve social and economic stability. THINK Leaders caught up with Professor Brynjolfsson at the recent MIT CIO Symposium, and discussed how CIOs, CHROs, CEOs and other C-suite executives can prepare for continued automation in the workplace.
First things first. Is automation going to put many of us out of a job?
Two days ago, I had a hamburger made by a robot. We see machines in factories working alongside humans for the equivalent of $4 per hour. Software programs are writing newspaper articles and automated systems are capable of functioning in place of a call center rep. Those sorts of technologies will continue to have an enormous impact on our global economy. They’ll increase global wealth, but they’ll also lead to huge displacement in our workforce. In our book, The Second Machine Age, we recount that when the Dutch chess grandmaster, Jan Hein Donner, was asked how he’d prepare for a chess match against a computer, like IBM’s Deep Blue. Donner replied: “I would bring a hammer.” As tempting as it is to smash advances that threaten us, however, it’s better to adapt.
Is this just Moore’s law writ large or is something else happening?
Yes to both. It’s not only that the amount of digital information is doubling roughly every 12-15 months, it’s that digital goods can be copied for almost no cost and transmitted cheaply at the speed of light. The world is increasingly digital, but it’s also increasingly exponential and combinatorial, and that is altering traditional economic precepts in a big way. Throughout most of our industrialized history, for instance, we’ve assumed that the value of a resource diminishes the more it’s used. Think hard goods, coal, clothing, tools and so forth. But the exact opposite is true with ideas and digital goods. The more they’re used, the more value they create because of the way they gestate, combine and layer onto other innovations. What starts as one idea quickly becomes a platform for countless other value-generating concepts. One of my students, for example, created an online product that now reaches one million people. He didn’t have to create the underlying software engine. He simply built his application on top of Facebook and other open platforms. That accelerated innovation and almost overnight scale would have been impossible a decade ago.
As an economist, what are the ripple effects likely to be?
Lots of goods and services are becoming cheaper. I have a catalog from the 1990s and just about every item listed that has not been made obsolete is now available for free or at very low cost through the web, mobile aps, or GPS technology. At the MIT Center for Digital Business, one of our first research projects was to price the value of all the free goods on the Internet. The value of the ordinary web alone, no apps, totals $300 billion per year. That means for many businesses and individuals, digitization is creating a bounty.
But it’s not good news for everyone. There’s the old joke that the factory of the future will have two employees, a man and a dog. The man’s job will be to feed the dog and the dog’s job will be to ensure the man doesn’t touch any of the controls. The reality is that we’re seeing a decoupling between top line growth and medium incomes. These two elements used to be tightly linked. But, even though gross domestic product and productivity have grown markedly, the split in income inequality is widening. In fact, medium incomes have stagnated to such a degree that people today are no richer than they were 50 years ago.
Is digitization a contributing factor to income inequality in your view?
Part of the reason for the widening split is that organizations are not transforming their businesses fast enough to keep up with the pace of technological change. Businesses have a surfeit of labor in areas technology will soon make obsolete, but they have a shortage of labor in areas tied to the digital economy and it is in those areas where breakthrough innovation and profitability will be centered ultimately. Our Initiative on the Digital Economy is looking at how organizations can retool their workforce to take advantage of high value opportunities. When enough of the workforce is reskilled against the biggest growth avenues, we’ll see the income inequality gap start to close.