The Agenda 2020 series asks experts to discuss what business leaders should be doing now to prepare their organizations to be healthy, efficient and growing by 2020. Read more at tgam.ca/agenda2020.
As robots and automated software take hold in the workplace, will they leave companies and consumers richer or poorer? For Erik Brynjolfsson, Schussel Family Professor of Management Science and professor of information technology at the Massachusetts Institute of Technology’s Sloan School of Management, there’s no simple answer. But he and Joshua Gans, Jeffrey S. Skoll Chair in Technical Innovation and Entrepreneurship and professor of strategic management at the University of Toronto’s Rotman School of Management, are clear that automation will deliver ever-speedier change.
Dr. Brynjolfsson, who also directs the MIT Center for Digital Business, co-authored the recent book The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies with Andrew McAfee, the centre’s associate director. Here, he and Dr. Gans discuss how businesses can prepare for the next half-decade.
Will the rise of automation mean fewer jobs and fewer people buying things? What will the business world look like in 2020?
Erik Brynjolfsson: The economic disruption that we saw in the past decade will be even bigger and the technological change will be even faster, partly as a function of the power of exponential change as well as the increased digitization at the core of more and more industries. It’s going to have two broad economic effects, I think. One is bounty, which is a lot more wealth and productivity, although not all of it will be measured in the official statistics. So we’ll have a lot more very cheap and free goods, and that will make us better off in many ways.
But there’s also this concern about jobs and I would also say inequality, which is related. For 200 years, the Luddites have been wrong in that technology, contrary to their fears, has not led to any fewer jobs. But there’s no economic law that says everyone is going to benefit from technology.
It’s a genuinely open question whether we will have job creation continue at the pace it has historically or whether we’re going to see more and more difficulty, especially for certain classes of jobs – routine information-processing kinds of jobs. Even as [technology] makes the [wealth] pie much bigger, it’s possible for some people – even a majority – to be made worse off, and for people to have a much harder time finding employment. Since the 1990s in the United States and in most OECD countries, median income has stagnated.
What will be the effect on consumers? There’s this classic, perhaps apocryphal, anecdote about Henry Ford II and Walter Reuther, who was head of the United Auto Workers. Henry Ford was pointing to a lot of automation he’d put in place in one of their factories, and he said, “How are you going to get these machines to pay union dues, Walter?” And without missing a beat, Reuther responded, “And how are you going to get them to buy cars, Henry?”
There is a real fear that as jobs disappear, it will be more difficult to maintain GDP and consumer spending if there aren’t people who are earning that income, and if the remaining income is concentrated in a relatively small group of people who don’t have the propensity to spend.
Joshua Gans: I definitely agree with the notion of accelerated technological change. We’re six years away from 2020. Look at what has happened in the last six years: They made millions upon millions of people walking supermen in terms of their ability to access knowledge anywhere, especially on their mobile phones.
What are the prospects for technological unemployment? It’s very easy to see a robot doing tasks that one or 10 or 100 people could do, and doing it with less complaint. So when you look at those details, you say, “How could it not be that these things can’t come in and cause unemployment?”
But I’ve also read Erik’s excellent book on the causes of the stagnation and increasing inequality we’ve seen over the past couple of decades. And I wonder if technology is at the heart of it, or is it really the case that the rich have taken off [in building their wealth] and, in contrast to previous periods, not taken a group of people with them?
What new industries or job categories might we see in the second machine age? What are the opportunities for humans?
EB: I find this question a lot harder than where the technology is going or even which existing jobs it’s affecting. The new jobs that it’s creating are hard to predict, and I think that 150 years ago, many people would have had difficulty predicting the new industries and jobs that ultimately arose.
The way we historically have solved it is we’ve crowdsourced it. We’ve asked hundreds of thousands of entrepreneurs to answer that question, and they’ve come up with a lot of different answers. Some of them are very silly, and some of them are very successful. Henry Ford and Steve Jobs and Bill Gates and many others have come up with entirely new industries that employed a lot of people.
I will make an effort to describe some of the categories. There are some creative tasks and inventing new things – ideation, some people call it – that machines aren’t very good at, at least not currently.
There’s also a set of categories involving interpersonal relationships: motivating people, comforting people, caring for people. These are things that machines have not proven very good at.
A third category is routine motor skills, fine motor control – the kinds of things that a barber or a gardener or a cook or a janitor does. You don’t necessarily think of them as very high-paid or prestigious jobs, but they involve manipulating the world, and machines are still incredibly bad at those kinds of tasks.
So all three of those are categories where we’ll continue to see some job growth. Now, will they continue forever? By 2020, I think [job growth in those categories] will probably be pretty good, but you can imagine machines getting better and better in all three as well.
From a strategic point of view, how can companies get ready for what’s coming, and to what extent must they reinvent themselves?
JG: To yield productivity from any of these new innovations, it can never really be done piecemeal. It requires sweeping changes, so much so that sometimes existing companies just don’t have a chance, and completely new ones built from the ground up end up taking over. This is certainly the case in retail. No bricks-and-mortar retailer has successfully transitioned to an online mode. It had to come from elsewhere – Amazon and others, for instance.
The message for companies is this is going to be a rocky road. It’s not clear that these technologies can be exploited in the ways that people forecast by grafting them onto existing firms.
EB: Technology is changing much faster than the skills we just talked about, and organizational structures are changing. Companies need to learn how to be increasingly data-driven, and I’m seeing the big data revolution affecting more and more ways that people make decisions. We did some research where we found that the companies that were embracing this more data-driven approach on average appear to be about 5 per cent more productive and more competitive than the other firms in their industries.
What are some common misconceptions about robotics and other forms of automation?
JG: My guess is that the same mistakes that have been made in the past will be made again. Despite everybody understanding that there’s such a thing as disruption and Moore’s Law [of exponential computing growth] and exponential change, there’s still a tendency to disbelieve the rate of improvement in technology that can occur. There’s still an underestimation of how quickly those barriers can fall, and all of a sudden you face very low-cost competitors and you don’t know where they came from.
EB: Too many people fall into one or the other kind of technological determinism. There are those who point to some of the problems we have with inequality and employment, and they become very pessimistic. They say that we just have to get used to it, that the future’s going to be one where average people don’t have anything they can contribute. And then there are others who try to counter that by saying, “No, no, no, technology always creates more wealth and abundance, and everything’s going to be fine because technology is so powerful.”
Ironically, both of those groups make the same mistake: They assume that there’s this predetermined future we have to sit back and let unfold. The last line of our book is, “Technology is not destiny. We shape our destiny.”
When we had relative success with the economic effects of the first machine age, that was in large part because of some enormous structural changes we’d made in the economy – things like universal mass education and a complete reinvention of the tax code, and of course the creation of entirely new industries and ways of organizing work. Without those complementary changes, the technology would not necessarily have been beneficial for the mass of people.
It’s very important to be active in thinking about how to adapt to the technology. Otherwise there’s not a preset positive outcome.
JG: No company lost out betting on Moore’s Law in the Internet age. Companies that say, “I should explore these opportunities for automation and start experimenting with them sooner rather than later” are probably going to be the ones that come out on top. The sooner you start thinking about an automated solution for work, the better off you’re likely to be.
This interview has been condensed and edited.
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