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The digital forces reshaping business and society

April 2014

The ‘second machine age’ will surpass the Industrial Revolution in its impact on our lives and economies, says MIT’s Erik Brynjolfsson. And we’re only beginning to understand the dynamics propelling its early stages.

For a video with English subtitles, please click on CC above or the appropriate subtitle icon during play.

Over the sweep of history, the human race has never been short on invention. But something very different happened in the late 1700s and early 1800s, when the Industrial Revolution created an extraordinary inflection point of growth and economic prosperity that largely continues to this day.

But there is a second act to that dramatic shift in human social development. According to Erik Brynjolfsson, director of MIT Center for Digital Business, a new industrial revolution, one that could have even more profound effects is unfolding right in front of our eyes, with digital technology as the catalyst.

“The first Industrial Revolution — when humans first harnessed the steam engine — effectively removed many of the limitations on our own muscles and those of animals,” he outlines in our exclusive video. “We’re now at the cusp of the second machine age, where new digital technologies — from cloud computing and big data to artificial intelligence and mass connectivity — are removing limitations not so much of our muscles but on our cognitive capacity, the ability to use our brains to understand and shape our environments.”

Three forces

Though we are just at the base of that new inflection point, the signs of dramatic change are there, he says. In just the past few years, technology has been evolving at such a pace that we’re seeing a shift in the perception of the tasks and roles that can be taken on by digital machines, from self-driving cars and 3D printing to the use of robotics in healthcare and city management.

Brynjolfsson’s new book,The Second Machine Age, co-authored with Andrew McAfee, principal research scientist at MIT Center for Digital Business, highlights how three forces are driving this new revolution:

Exponential  Everyone in the IT industry has come to accept that under Moore’s Law the basic power of processing doubles every 18 to 24 months. But what we all struggle to appreciate is the power of exponential growth – how this digital power is doubling on a larger and larger base, he says. Looked at another way, the chances of a computer being able to address a task or problem are cut in half at least every two years — and not just with processing power, but in data storage, networking, and all the applications they drive — with ever more profound implications.

Digital  While digital technologies have been around for half a century, it is only now that they have become the core of almost every industry, from banking and retail to media and travel, Brynjolfsson argues. “That core is changing the fundamental economics of industries. When [activities] become digitized they can be replicated at almost zero cost and each copy is a perfect replica. And not only that, they can be transmitted anywhere almost instantaneously. ‘Free, perfect and instant’ are three characteristics that we haven't had for most goods and services in human history,” he says.

Combinatorial  In the digital world, each innovation makes it easier for an entrepreneur to combine and recombine existing technologies. That building and refinement was certainly a facet of the first industrial revolution, when an initially modest 3% gain in efficiency introduced by James Watt’s steam engine was followed by a doubling of efficiency every 70 years. Compare that to Moore’s law doubling every 18 to 24 months, and Brynjolfsson’s conclusion is we are just at the start of “a much faster trajectory.”

“The technologies are here and we’re only beginning to glimmer and understand what the implications are.”

In the Industrial Revolution, he points out that it took many decades for entrepreneurs and managers to truly figure out how to use the emerging technologies effectively to transform work, industry and society. “We are going through a similar transformation now that will take decades. The technologies are here and we’re only beginning to glimmer and understand what the implications are for how we organize work, how we organize markets and the new kinds of inventions that entrepreneurs have for business models.”

As Brynjolfsson highlights, we’re only in the initial stages of the second machine age, an axis-changing period in which intelligent machines take over in many areas of human labor (see ‘The evolution of the thinking machine’). But he warns that that has as much potential to only create huge wealth as huge inequality.

The Second Machine Age: Work, progress, and prosperity in a time of brilliant technologies by Erik Brynjolfsson and Andrew McAfee is out now.

First published
April 2014
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About: Erik Brynjolfsson
MIT Sloan School of Management professor and director of MIT’s Center for Digital Business, Erik Brynjolfsson focuses on the economic impact of IT. He is co-author of The Second Machine Age.

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