The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee

The Second Machine Age was written in 2014; I was worried that it'd be an outdated compilation of emerging technologies at the time. Fortunately, Brynjolfsson and McAfee offer more than that.

The first machine age refers to the technologies developed from the Industrial Revolution, which allowed human beings to harness mechanical power to overcome physical limitations. The second machine age will provoke a similar transformation for mental power.

Key to Brynjolfsson and McAfee's thesis is the assumption of continued exponential growth in computing (Moore's Law)--whether processors, memory, or sensors--which has been a continued reality thus far. Exponential growth is starting to create the conditions for technologies that could not have been imagined previously, or as Brynjolfsson and McAfee write, "sometimes a difference in degree (in other words, more of the same) becomes a difference in kind (in other words, different than anything else)" (p. 56).

The current digital economy is a particularly fruitful arena of innovation. According to certain theories of innovation, innovation is not about "coming up with something big and new, but instead recombining things that already exist" (p. 78), and for Brynjolfsson and McAfee, "digital innovation is recombinant innovation in its purest form" (p. 81). The characteristics of digital information facilitate recombinant innovation: digital information is non-rival (and not used up after consumption) and it has a close to zero marginal cost of reproduction. Digitization creates more and more permanent building blocks, and these are can be infinitely reused and recombined for innovation.

The potentially infinite number of reconfigurations and recombinations require "more eyeballs and bigger computers" (p. 83) to test them out. AI technology represents a significant development for the latter. For the former, those who have the most interesting insights are those "marginal"--or "have education, training, and experience that [are]not obviously relevant for the problem" (p. 84). This speaks to the power of crowdsourcing and open innovation approaches, which are enhanced by the power of communication technology.

The digital economy works by different rules of bounty and spread. While the the development of new technologies will bring more bounty, the spread (or distribution) of the bounty is uneven. Those who own the new technologies, the new products and services, capture all of the wealth; previous forms of production distributed the bounty by employing human labour. Only those whose labour complements technologies receive a small portion of the created value; those whose labour can be automated must participate in a race to the bottom, where their wages compete with the costs of robotics and machinery. (Of course, one must not succumb to fatalism; we can easily imagine a world where the public owns these new technologies, and where labour is not automated completely, but partially, and one can get paid the same amount or at a higher rate for doing less work instead of ending up jobless and destitute. These ideas are not discussed in the book.)

Brynjolfsson and McAfee offer an interesting discussion on "stars and superstars," who benefit the most from the new economy. Through digitization and interconnected markets, the non-rival and close to zero marginal cost of reproduction digital goods and services have access to a larger consumer base. These are winner-take-all markets (Andrew Yang must have read this book), who benefit and cement their status through network effects. In this market, some superstars benefit by proxy (e.g. lawyers who represent these large and rich superstars).

I noticed that the spread and bounty narrative that Brynjolfsson and McAfee present is strangely apolitical and very unsatisfactory (no mention of neo-liberal economic policies, for example). For example, they write on page 133 that "in the past couple of decades, we've seen changes in tax policy, greater overseas competition, ongoing government waste, and Wall Street shenanigans. But when we look at the data and research, we conclude that none of these are the primary driver of growing inequality. Instead the main driver is ... the technology that undergirds our economic system" (p. 133). To substantiate this huge claim, they compare growing inequality in Sweden, Finland, and Germany as proof. Very unsatisfactory.
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Brynjolfsson and McAfee end the book with some recommendations for individuals and policy-makers. I will not go into this in the review.

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