Chapter 4. What Is to Be Done? Prescriptions and RecommendationsRead more at location 775
In the previous two chapters we showed how quickly and deeply computers are encroaching into human territory, and discussed the economic consequences of this phenomenon—how digital progress can leave some people worse off even as it improves productivity and grows the overall pie.Read more at location 779
The legend of John Henry became popular in the late 19th century as the effects of the steam-powered Industrial Revolution affected every industry and job that relied heavily on human strength. It’s the story of a contest between a steam drill and John Henry, a powerful railroad worker, to see which of the two could bore the longer hole into solid rock.6 Henry wins this race against the machine but loses his life; his exertions cause his heart to burst.Read more at location 782
This lesson remains valid and instructive today as machines are winning head-to-head mental contests, not just physical ones.Read more at location 794
The game of chess provides a great example. In 1997, Gary Kasparov, humanity’s most brilliant chess master, lost to Deep Blue, a $10 million specialized supercomputer programmed by a team from IBM.Read more at location 796
After head-to-head matches between humans and computers became uninteresting (because the computers always won), the action moved to “freestyle” competitions, allowing any combination of people and machines.Read more at location 800
This pattern is true not only in chess but throughout the economy. In medicine, law, finance, retailing, manufacturing, and even scientific discovery, the key to winning the race is not to compete against machines but to compete with machines.Read more at location 808
How can we implement a “race with machines” strategy? The solution is organizational innovation: co-inventing new organizational structures, processes, and business models that leverage ever-advancing technology and human skills. Joseph Schumpeter, the economist, described this as a process of “creative destruction”Read more at location 821
To put it another way, the stagnation of median wages and polarization of job growth is an opportunity for creative entrepreneurs.Read more at location 825
There has never been a worse time to be competing with machines, but there has never been a better time to be a talented entrepreneur.Read more at location 827
Entrepreneurial energy in America’s tech sector drove the most visible reinvention of the economy. Google, Facebook, Apple, and Amazon, among others,Read more at location 828
eBay and Amazon Marketplace spurred over 600,000 people to earn their livings by dreaming up new, improved, or simply different or cheaper products for a worldwide customer base.Read more at location 832
Apple’s App Store and Google’s Android Marketplace make it easy for people with ideas for mobile applications to create and distribute them.Read more at location 835
Threadless lets people create and sell designs for t-shirts. Amazon’s Mechanical Turk makes it easy to find cheap labor to do a breathtaking array of simple, well-defined tasks.Read more at location 837
Heartland Robotics provides cheap robots-in-a-box that make it possible for small business people to quickly set up their own highly automated factory, dramatically reducing the costs and increasing the flexibility of manufacturing.Read more at location 840
Collectively, these new businesses directly create millions of new jobs.Read more at location 842
Fortunately, digital technologies create enormous opportunities for individuals to use their unique and dispersed knowledge for the benefit of the whole economy.Read more at location 852
technology enables more and more opportunities for what Google chief economist Hal Varian calls “micromultinationalsRead more at location 854
But are there enough opportunities for all these entrepreneurs?Read more at location 859
New digital businesses are often recombinations, or mash-ups, of previous ones. For example, a student in one of our classes at MIT created a simple Facebook application for sharing photos. Although he had little formal training in programming, he created a robust and professional-looking app in a few days using standard tools.Read more at location 862
Because the process of innovation often relies heavily on the combining and recombining of previous innovations, the broader and deeper the pool of accessible ideas and individuals, the more opportunities there are for innovation.Read more at location 867
We are in no danger of running out of new combinations to try. Even if technology froze today, we have more possible ways of configuring the different applications, machines, tasks, and distribution channels to create new processes and products than we could ever exhaust.Read more at location 869
Here’s a simple proof: suppose the people in a small company write down their work tasks— one task per card. If there were only 52 tasks in the company, as many as in a standard deck of cards, then there would be 52! different ways to arrange these tasks.8 This is far more than the number of grains of rice on the second 32 squares of a chessboard or even a second or third full chessboard. Combinatorial explosion is one of the few mathematical functions that outgrows an exponential trend. And that means that combinatorial innovation is the best way for human ingenuity to stay in the race with Moore’s Law.Read more at location 872
Most of the combinations may be no better than what we already have, but some surely will be, and a few will be “home runs” that are vast improvements. The trick is finding the ones that make a positive difference. Parallel experimentation by millions of entrepreneurs is the best and fastest way to do that.Read more at location 876
As technology makes it possible for more people to start enterprises on a national or even global scale, more people will be in the position to earn superstar compensation.Read more at location 881
While winner-take-all economics can lead to vastly disproportionate rewards to the top performer in each market, the key is that there is no automatic ceiling to the number of different markets that can be created.Read more at location 882
To keep up, we need not only organizational innovation, orchestrated by entrepreneurs, but also a second broad strategy: investments in the complementary human capital—theRead more at location 889
Unfortunately, our educational progress has stalled and, as discussed in Chapter 3, this is reflected in stagnating wages and fewer jobs. The median worker is not keeping up with cutting-edge technologies.Read more at location 892
It’s not a coincidence that the educational sector also lags as an adopter of information technologies.Read more at location 898
The optimistic interpretation is that we have tremendous upside potential for improvements in education.Read more at location 902
A good example is the free online course on artificial intelligence at Stanford that attracted at least 58,000 students.Read more at location 907
At the K-12 level, Khan Academy offers over 2,600 short educational videos and 144 self-assessment modules for free on the web. Students can learn at their own pace, pausing and replaying videos as needed, earning “badges” to demonstrate mastery of various skills and knowledge, and charting their own curricula through the ever-growing collection of modules.Read more at location 914
The very best “superstar” teachers can be “replicated” via technology, giving more students a chance to learn from them.Read more at location 922
softer skills like leadership, team building, and creativity will be increasingly important. They are the areas least likely to be automated and most in demandRead more at location 931
Conversely, college graduates who seek the traditional type of job, where someone else tells them what to do each day, will find themselves increasingly in competition with machines, which excel at following detailed instructions.Read more at location 933
The Limits to Organizational Innovation and Human Capital InvestmentRead more at location 935
First, not everyone can or should be an entrepreneur, and not everyone can or should spend 16 or more years in school. Second, there are limits to the power of American entrepreneurship for job creation.Read more at location 938
When significant numbers of people see their standards of living fall despite an ever-growing economic pie, it threatens the social contract of the economy and even the social fabric of society.Read more at location 946
By itself, redistribution does nothing to make unemployed workers productive again.Read more at location 949
No country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order.Read more at location 952
Invest in education. Start by simply paying teachers more so that more of the best and the brightest sign up for this profession, as they do in many other nations.Read more at location 960
Hold teachers accountable for performance by, for example, eliminating tenure. This should be part of the bargain for higher pay.Read more at location 964
Focus schooling more on verifiable outcomes and measurable performance and less on signaling time, effort or prestige.Read more at location 966
Increase the ratio of skilled workers in the United States by encouraging skilled immigrants.Read more at location 969
Teach entrepreneurship as a skill not just in elite business schools but throughout higher education.Read more at location 974
Create clearinghouses and databases to facilitate the creation and dissemination of templates for new businesses. A set of standardized packages for startupsRead more at location 978
Aggressively lower the governmental barriers to business creation.Read more at location 981
Invest to upgrade the country’s communications and transportation infrastructure.Read more at location 985
Increase funding for basic research and for our preeminent government R&D institutions including the National Science Foundation, the National Institutes of Health, and the Defense Advanced Research Projects Agency (DARPA)Read more at location 989
Preserve the relative flexibility of American labor markets by resisting efforts to regulate hiring and firing.Read more at location 993
Make it comparatively more attractive to hire a person than to buy more technology. This can be done by, among other things, decreasing employer payroll taxesRead more at location 996
Reduce the large implicit and explicit subsidies to financial services. This sector attracts a disproportionate number of the best and the brightest mindsRead more at location 1008
Reform the patent system. Not only does it take years to issue good patents due to the backlog and shortage of qualified examiners, but too many low-quality patents are issued, clogging our courts.Read more at location 1010
Shorten, rather than lengthen, copyright periods and increase the flexibility of fair use.Read more at location 1013
