The Second Machine Age – A Review – Part II

Let’s continue to discuss the book  “The Second Machine Age” by Erik Brynjolfsson and Andrew McAfee. Having left the book at page 25 already with the first part of my review (please see: part I at http://wp.me/p4fsS9-7e), here are my thoughts on the remaining 222 enlightening pages:

Having discussed “Moore’s law” and with that, the effects of constant doubling of available computing power, the authors find strong evidence, that we are at a so called “infection point“of technological capabilities and capacities. The unthinkable becomes possible. A simple comparion between a 1985 Cray-2 supercomputer (valued $35 milllion Dollars in 2011 Dollars) and an iPad 2 tablet (for less than $1.000)  gives us an idea on what has happened already and about what is yet to come.

From there, Brynjolfsson and McAfee drill down into the “economics of bits” or in my words, the huge implications, the digital transformation has on traditional goods and business models . Since digitalized assets can be replicated for almost zero costs without any degradation in quality, anytime, anywhere, -physcial dollars often become digital pennies. The example of Kodak-Eastman and the impact the digitalization on the traditional photo industry, peaking with the introduction of the  combination of Facebook and Instagram, gives just one example to the reader, on how the second machine age effectively destroys hundreds of thousands of traditional jobs.

However, the book doesn’t turn into being a pessimistic horror-scenario. In fact, the authors have thought a lot about the dynamics of innovation and they introduce the term of “recombinant innovation” which defines innovation as  a constant process of finding something new and valuable in something that already exists. A good example here is the Word Wide Web which was nothing more than the clever combination of three technologies which previously did exist already: TCP/IP, HTML and a simple PC application, called a Browser. Facebook then just ” built on the web infrastructure and allowed people to digitize their social network and put media online without having to learn HTML.” Simple, eh?

Recombinant growth seems to have a major limitation and that is the question of which new combinations of existing technologies and services ultimately add real value to economies, businesses and consumers. This is a point I have thought a lot about recently as well. It occurs to me, that vendors or service providers these days often don’t have compelling value-add with their new products and services. It appears that things are getting done, because they can be done – and not because they are needed or being asked for. For example, I always wonder whether all the “connected” services now available in cars, are really making our life easier or getting used at all – or whether they are more driven out of an eagernesss of the vendors to differentiate by all means… Anyway. The book gives a simple answer: Just try a lot and use social channels, co-innovation models and idea marketplaces as effective forums to validate the business value of your actual innovation.

Next, the authors offer a very compelling assessment of  the huge implications of the digitization on the economy. They talk about a number of impacts, the summarize as “the spread” and “the bounty”. The spread can be summarized as losing more and more jobs that can be automated (have a close look here…), the poorer getting poorer, the richer getting richer and a few superstar winners are taking it all. To address the negative effects of the growing spread, Brynjolfsson and McAfee are even not afraid to think about decoupling labour from income, by thinking for example about the concept of a basic income for everybody.

Last, the book offers concepts on how to evolve our education and training systems in order to allow as many humans and possible, to get into the position to work with computers effectively. This, since there seems to be one thing computers can’t do: Having IDEAS. We haven’t seen and won’t see a “truly creative machine, or an entrepreneurial one, or an inovative one“, and this is where humans will always make a difference.

In summary, “The Second Machine Age” is a must read for everybody who really wants to understand the positive and negative effects of the digitization to the way we live, we work and how we do business. It offers an almost infinite number of new perspectives and food for thought and finds a fine balance between technological-, social- and economical perceptions. Not hiding the risks and downsides, the book is always a call to embrace the opportunities of the evolving technology. A good strategy in fact, since we won’t stop it anyway.

The Second Machine Age, Erik Brynjolfsson /Andrew McAfee, ISBN 978-0-393-23935-5

 

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