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Erik Brynjolfsson, MIT, Is Your Business Ready For The Second Machine Age?

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MIT’s Erik Brynjolfsson reveals the forces driving transformation in the economy. Drawing on years of research and up-to-the-minute trends, he will identify the key strategies businesses need to adapt to succeed in the years ahead. These include revamping how we evaluate strategic collaborations that combine processing power with human ingenuity, and embracing strategies that make sense in a radically transformed business landscape.  

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Erik Brynjolfsson, MIT, Is Your Business Ready For The Second Machine Age?

  1. 1. The Second Machine Age Erik Brynjolfsson MIT Sloan School MIT Initiative on the Digital Economy @erikbryn 1 MIT Initiative on the Digital Economy
  2. 2. The Second Machine Age Changing the world requires two things: • Physical Power: move or transform things • Mental Power: decide where and how Industrial Revolution = Physical Power • Steam engine (and Internal combustion engine, Electricity) • Mostly a complement to humans Second Machine Age = Mental Power • Computers, Software, Big Data, Machine Intelligence • Complement or substitute? 2 MIT Initiative on the Digital Economy
  3. 3. State of Understanding, 2004 Uniquely Human Abilities - Autonomous mobility and fine motor control - Language and complex communication - Pattern matching and unstructured problem solving 3 MIT Initiative on the Digital Economy
  4. 4. 4 MIT Initiative on the Digital Economy
  5. 5. Machine Intelligence 5 MIT Initiative on the Digital Economy Interacting with physical world • Fine and gross motor control • Vision and other senses Language • Voice recognition • Natural language processing • Creating narratives Problem Solving • Answering unstructured questions • Rule based analysis • Pattern recognition and classification We’re in the midst of the greatest “one-time” event in history!
  6. 6. 6 MIT Initiative on the Digital Economy
  7. 7. 7 MIT Initiative on the Digital Economy
  8. 8. 8 MIT Initiative on the Digital Economy
  9. 9. Machine Intelligence 9 MIT Initiative on the Digital Economy Interacting with physical world • Fine and gross motor control • Vision and other senses Language • Voice recognition • Natural language processing • Creating narratives Problem Solving • Answering unstructured questions • Rule based analysis • Pattern recognition and classification
  10. 10. 10 MIT Initiative on the Digital Economy Siri Voice recognition Lionbridge Translation Narrative Science Authoring News Stories
  11. 11. 11 MIT Initiative on the Digital Economy
  12. 12. 12 MIT Initiative on the Digital Economy
  13. 13. Machine Intelligence Interacting with physical world 13 MIT Initiative on the Digital Economy • Fine and gross motor control • Vision and other senses Language • Voice recognition • Natural language processing • Creating narratives Problem Solving • Answering unstructured questions • Rule based analysis • Pattern recognition and classification
  14. 14. The Digital Frontier 14 MIT Initiative on the Digital Economy
  15. 15. Accuracy and Questions Answered on Jeopardy! 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0% 20% 30% 40% 50% 60% 70% 80% 90% 100% 10% Percent Answered Accuracy 11/2010 04/2010 10/2009 05/2009 12/2008 08/2008 05/2008 12/2007 12/2006
  16. 16. The Digital Frontier 16 MIT Initiative on the Digital Economy
  17. 17. The Digital Frontier 17 MIT Initiative on the Digital Economy
  18. 18. 18 MIT Initiative on the Digital Economy
  19. 19. 19 MIT Initiative on the Digital Economy
  20. 20. 20 MIT Initiative on the Digital Economy
  21. 21. What does this mean for the economy? 21 MIT Initiative on the Digital Economy
  22. 22. 22 MIT Initiative on the Digital Economy The Bounty
  23. 23. $300 BILLION PER YEAR 23 MIT Initiative on the Digital Economy
  24. 24. 24 MIT Initiative on the Digital Economy
  25. 25. The Great Decoupling 25 MIT Initiative on the Digital Economy
  26. 26. WHAT’S GOING ON? 26 MIT Initiative on the Digital Economy
  27. 27. 27 MIT Initiative on the Digital Economy The Hard Truth Digital progress makes the economic pie bigger. But there is no economic law that everyone, or even most people, will benefit.
  28. 28. Three Sets of Winners and Losers 1. High Skilled vs. Low & Mid Skilled Workers 28 MIT Initiative on the Digital Economy
  29. 29. 29 MIT Initiative on the Digital Economy Skill Disparities
  30. 30. Polarization of the Labor Market Mid-wage workers have been hit hardest in both employment and wages 30 MIT Initiative on the Digital Economy
  31. 31. Three Sets of Winners and Losers 1. High Skilled vs. Low & Mid Skilled Workers 31 MIT Initiative on the Digital Economy 2. Capital vs. Labor
  32. 32. 120 117 114 111 108 105 102 99 32 MIT Initiative on the Digital Economy Capital vs. Labor Corporate Profit as % of GDP Labor Share of GDP 96 10 8 6 4 2 0 1947 1958 1969 1980 1991 2002 2013 Labor Share (2009 = 100) Corproate Profits as % of GDP Corporate Profits After Tax as % of GDP & Non-Farm Labor Share, 1947-2013 Source: research.stlouisfed.org
  33. 33. Three Sets of Winners and Losers 1. High Skilled vs. Low & Mid Skilled Workers 33 MIT Initiative on the Digital Economy 2. Capital vs. Labor 3. Superstars vs. Everyone Else
  34. 34. 34 MIT Initiative on the Digital Economy 0 1 0 1 1 0 1 1 1 0 1 1 1 1 0 0 1 0 1 0 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 0 0 1 0 0 0 1 0 1 1 0 1 1 1 0 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 0 0 1 1 1 0 1 0 1 0 0 1 0 1 0 1 1 0 1 1 1 0 1 0 1 1 0 1 1 1 1 0 0 1 1 1 1 1 0 0 1 1 1 1 0 1 0 1 0 0 1 0 0 0 0 1 0 1 1 0 0 1 1 0 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 0 0 1 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 0 0 1 0 1 0 1 1 0 1 1 1 0 1 1 1 1 0 0 1 0 1 0 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 1 1 1 0 0 0 1 0 1 1 1 1 1 1 0 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 0 1 1 1 1 0 1 0 1 0 0 1 0 1 0 1 1 1 1 1 1 0 1 0 1 1 0 0 1 0 1 0 0 1 1 1 1 1 0 0 1 1 1 1 1 0 1 0 1 0 0 1 0 0 0 1 0 1 1 0 0 1 1 1 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 1 0 1 1 1 1 1 0 1 0 0 1 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 1 1 1 1 0 0 1 0 1 1 0 1 1 1 0 1 1 1 1 0 0 1 0 1 1 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 0 0 1 0 0 0 1 0 1 1 0 1 1 1 1 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 0 0 1 1 1 0 1 0 1 1 1 1 0 1 0 1 1 1 1 1 1 0 1 0 1 1 0 0 1 0 1 0 0 1 1 1 1 1 0 0 1 0 1 1 1 1 1 0 1 0 0 1 0 0 0 1 0 1 1 0 0 1 1 0 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 1 1 1 0 1 0 1 0 1 0 0 1 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 0 0 1 0 1 1 1 1 1 0 1 1 1 1 0 1 0 1 0 1 0 0 1 0 0 0 1 0 1 1 0 0 1 1 0 1 1 1 1 0 0 1 0 0 1 1 1 1 1 0 0 1 0 1 0 1 0 1 0 1 0 1 1 0 1 0 1 1 1 1 1 1 0 1 0 1 1 0 0 1 0 1 0
  35. 35. 35 MIT Initiative on the Digital Economy Superstars
  36. 36. WHAT IS TO BE DONE? 36 MIT Initiative on the Digital Economy
  37. 37. 37 MIT Initiative on the Digital Economy
  38. 38. “Digital technologies change rapidly, but organizations and skills aren’t keeping pace. As a result, millions of people are being left behind.” 38 MIT Initiative on the Digital Economy Our View
  39. 39. The New Grand Challenge • Digital technologies will continue to accelerate. • Our skills, organizations and institutions are lagging. • Business as usual won’t solve this problem. We need to reinvent our economy and society to keep up with accelerating technology 39 MIT Initiative on the Digital Economy
  40. 40. The Initiative on the Digital Economy 40 MIT Initiative on the Digital Economy
  41. 41. The New Landscape • What challenges and opportunities do you see? • What are your concerns and questions? 41 MIT Initiative on the Digital Economy
  42. 42. 42 MIT Initiative on the Digital Economy To learn more, visit: http://digital.mit.edu/erik http://digital.mit.edu/ide http://secondmachineage.com

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