Irving Wladawsky-Berger

Man, Machine, and Work

The June, 2015 issue of the Harvard Business Review includes a spotlight on Man and Machine: Knowledge Work in the Age of the Algorithm.  Another example that, as a recent article observed, “Artificial intelligence is suddenly everywhere…”

People have long worried about the impact of technology on society, whether discussing railroads, electricity, and cars in the Industrial Age, or the Internet, mobile devices and smart connected products now permeating just about all aspect of our lives.  But the concerns surrounding AI may well be in a class by themselves.  Like no other technology, AI forces us to explore the very boundaries between machines and humans.

Some experts fear that at some future time, sentient, superintelligent AI machines might pose an “existential risk” that “could spell the end of the human race.”  Others are dismissive of such dire concerns while agreeing that we must work hard to ensure that our complex AI systems do what we want them to do. 

Whether right or wrong, these long term worries are still decades into the future.  Much more immediate is the impact of our smart machines on jobs and the economy.  Will AI turn out like other major innovations, - e.g., steam power, electricity, cars, - highly disruptive in the near term, but ultimately beneficial to society?  Or, will our smart machines take over not just low-skilled tasks but high-skilled ones too?  What will life be like in such an AI future, when highly intelligent machines, - many far surpassing human cognitive capabilities, - are all around us?

The Future of Financial Services

In 2010, the BBC and the British Museum collaborated in a project called A History of the World, based on one hundred objects from the collection of the British Museum, around which you can tell the history of humanity over the past two million years.  The history was also presented in a series of fifteen minute podcast about each of the objects, written and narrated by British Museum Director Neil MacGregor and broadcast over the BBC. 

Money was one of the themes in the exhibit, represented by four different objects: one of the world’s first gold coins produced over 2500 years ago; a 1375 banknote from the Ming Dynasty; a silver coin minted in Bolivia in the late 16th Century; and a plastic credit card exemplifying the changing role of money in the modern world.  Why include money in such an exhibit?  Because, as one of the podcasts noted, money, - along with sex and war, - has been one of the great constants in human affairs. 

Transaction records actually pre-dated the advent of money.  By analyzing the earliest recorded transactions, researchers believe that writing evolved in ancient Mesopotamia thousands of years ago, as an innovation to keep track of financial records.  Money was later invented as a store of value and a medium of exchange to make commerce more efficient.  For a long time, money was embodied in precious metals like gold and silver, but with the introduction of banknotes, money started to decouple from physical objects with intrinsic value. 

“Today… we remain more or less content with paper money - not to mention coins that are literally made from junk,” wrote Harvard historian Niall Ferguson in The Ascent of Money: a Financial History of the World.  “[W]e are happy with money we cannot even see.  Today’s electronic money can be moved from our employer, to our bank account, to our favorite retail outlets without ever physically materializing.  It is this virtual money that now dominates what economists call the money supply… The intangible character of most money is perhaps the best evidence of its true nature.”

Open Letter on the Digital Economy

A few days ago I received an e-mail from MIT professor Erik Brynjolfsson inviting me to consider supporting an Open Letter on the Digital Economy that a small group had recently drafted.  As he explained in the e-mail: 

“We met out in Silicon Valley to discuss how technology was driving an economic transformation.  We concluded that the effects on wealth and income are already significant, and emerging technologies promise greater effects in the coming decade.  While the economic pie is bigger than ever, wages for the median worker in America and other advanced nations have stagnated, increasing inequality.  With more powerful technologies available than ever before, the challenge before us is to create a better society than ever before.  We decided to draft an open letter expressing some of our ideas.” 

Since the steam engine in the late 18th century, we’ve had major waves of innovation every 50-60 years, including railroads, steel, electricity and heavy engineering in the 19th century; and automobiles, airplanes and telecommunications in the 20th century.  

Each such wave was accompanied by periods of creative destruction, when older industries and jobs where displaced by the new technology-based innovations.  Over time, these innovations transformed the economy, re-shaped the institutions of society, and ultimately led to the creation of all kinds of new, more productive industries and many new kinds of jobs.  

“Previous technological innovation has always delivered more long-run employment, not less.  But things can change,” is the tag line of an article on the future of jobs published in January of 2014 in The Economist.  “Nowadays, the majority of economists confidently wave such worries away.  By raising productivity, they argue, any automation which economises on the use of labour will increase incomes.  That will generate demand for new products and services, which will in turn create new jobs for displaced workers…”

“For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate…  Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently.  They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant.”

The Datafication of Business and Society

I first encountered the term datafication in The Rise of Big Data: How It’s Changing the Way We Think About the World, by Kenneth Cukier and Viktor Mayer-Schönberger.  Their 2013 Foreign Affairs article does a very good job of articulating why “big data marks the moment when the information society finally fulfills the promise implied by its name.”  Datafication is the term they give to our newfound ability to capture as data many aspects of the world and our lives that have never been quantified before.

Datafication is a fairly new concept associated with our recent data revolution.  But digitalization, - its companion concept which captures the impact of the digital revolution on the economy and society, - has been in use since computers were widely adopted around 60 years ago.  Its ensuing digital products have been generating all that data and its drastically lower technology costs have made it possible to store and analyze those oceans of information.

The Impact of Datafication on Strategic Landscapes, - a report published in April, 2014 by Ericsson in collaboration with the Imperial College Business School and the UK’s Sustainable Society Network, - nicely explains the differences and interrelationship between datafication and digitalization. 

“In contrast to digitalisation, which enabled productivity improvements and efficiency gains on already existing processes, datafication promises to completely redefine nearly every aspect of our existence as humans on this planet.  Significantly beyond digitalisation, this trend challenges the very foundations of our established methods of measurement and provides the opportunity to recreate societal frameworks, many of which have dictated human existence for over 250 years.”

Game-Changing Basic Research: Benefits and Challenges

In April, MIT released The Future Postponed: Why Declining Investment in Basic Research Threatens a U.S. Innovation Deficit, - a report on both the long term benefits of basic research and the impact on those benefits of declining federal investments.

“2014 was a year of notable scientific highlights,” notes the report in its introduction, “including: the first landing on a comet, which has already shed important light on the formation of the Earth; the discovery of a new fundamental particle, which provides critical information on the origin of the universe; development of the world’s fastest supercomputer; a surge in research on plant biology that is uncovering new and better ways to meet global food requirements.” 

“None of these, however, were U.S.-led achievements,” it then adds.  “The first two reflected 10-year, European-led efforts; the second two are Chinese accomplishments, reflecting that nation’s emergence as a science and technology power.  Hence the widespread concern over a growing U.S. innovation deficit, attributable in part to declining public investment in research.” 

According to the American Association for the Advancement of Science (AAAS), the percentage of the federal annual budget devoted to R&D has fallen from 9.1%, ($16.2 billion), in 1968 to 3.4%, ($131.0 billion), in 2015.  As it has for many decades, the US continues to lead the world in total R&D outlays, which includes all the R&D carried out in companies, universities, research institutes, government labs and so on.  But other countries, China in particular, are catching up. 

In 2014, says R&D magazine, the US spent $465 billion in R&D, while China was second at $284 billion.  But, it estimates that given the current rate of growth and investments, China will be spending $600 billion in R&D and surpass the US around 2022 due to its faster growing economy.