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Positive Futures

Can the impending digital revolution work out for everyone? Two of MIT Sloan’s leading thinkers want to ensure it does.

By Zach Church

Positive Futures

Imagining a future where computers can do almost anything can sometimes be more Nineteen Eighty-Four than The Jetsons. The march of technology has been awe inspiring. But it also has been disconcerting, with millions losing their jobs to automation, global power structures being redrawn, and, in the United States, an eroding middle-class economy that gave rise to collective anger on both ends of the political spectrum.

The story isn’t new to anyone familiar with the basic gripe behind both the Tea Party and Occupy Wall Street movements. Spurred on by incredible advancements in technology, the U.S. economy has grown in both productivity and gross domestic product. Meanwhile, employment and median income have stagnated, and jobs and money are increasingly harder to come by due to population growth. Erik Brynjolfsson and Andrew McAfee, authors of Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, expect that this “great decoupling,” underway for two decades, will only become larger.

So that’s bad, right? Well, only half so. Brynjolfsson and McAfee have been studying what happens to economies, organizations, and labor as technological innovation follows Moore’s law to the hilt. But where others see impending disaster, they see encouraging growth. As the leaders of MIT Sloan’s new Initiative for the Digital Economy, they believe that inventing organizations and institutions that complement this new digital-era economy is a grand challenge for our times. With the initiative, they are issuing that challenge to their colleagues and contemporaries.

“There’s no economic law that says when technology creates wealth, it also automatically creates the same number of jobs or that everybody benefits evenly,” says Brynjolfsson, the director of the MIT Center for Digital Business, the Schussel Family Professor of Management, and chair of MIT Sloan Management Review. “We’ve been lucky that’s more or less what happened for most of the past hundred years, but there’s no guarantee it’s going to happen going forward.” “What happens to the median worker is something that will depend on our ability to innovate on other dimensions, like economic institutions and inventing new industries and new business models,” he says.

“So far, our technologist friends at MIT have been doing a great job, and it’s time for us to step up at the business school to keep up with them. We need to invent new economic institutions, new industries, new business models, and new ways of organizing work that will thrive in this emerging world of accelerating technology.”

And here’s where Brynjolfsson and McAfee break away from peers like George Mason University’s Tyler Cowen, whose 2011 book, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, argued that technological innovation has fallen off and will not drive new wealth, and Northwestern University’s Robert Gordon, whose August 2012 paper, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” inspired significant discussion. Brynjolfsson and McAfee describe themselves as digital optimists. They believe not only that technological innovation has not and will not stagnate, but that it can also mean a better economy and a better society for everyone.

A portfolio of astounding achievement.
This is a decidedly optimistic take on the future. It comes from a pair who rode in Google’s self-driven car, who watched as IBM’s Watson supercomputer wiped the floor with MIT Sloan and Harvard Business School students in a Jeopardy! match, and who meet regularly with leading scientists working in robotics and artificial intelligence. The enthusiasm coursed through McAfee’s TEDxBoston talk last summer. (“We ain’t seen nothing yet,” he told the audience, and it’s clear he can’t wait until we do.) Told that 3D printers can now create LP records—a relatively consumerist, non-essential achievement—McAfee simply remarks, “Wow.” These guys see it all, and yet news of an incremental advancement rouses them. They have no reason to be surprised, yet see every reason to be excited.

“The Google car by itself is probably a trillion-dollar innovation,” says Brynjolfsson. “The self-driving car is going to have that kind of impact on the economy. So far, it’s a tiny fraction of that. And you go through the other emerging technologies: what Watson’s ability to answer questions is going to do not just for call centers, but also for medical diagnosis and legal research. The numbers start adding up in a pretty staggering way. And these are just for the ones that we’ve actually seen and tried out. The impact will be that much larger when you consider the ones on the drawing board that are still to come.”

That sort of technological advancement comes in all sizes and is constantly underway at MIT and MIT Sloan. Brynjolfsson and McAfee see it in their own work. With an MIT Sloan doctoral candidate, Brynjolfsson crunched mountains of publically available search data to build a housing sales predictor that outshone the leading models in the industry. And that was in 2009. McAfee recently studied the effect of new monitoring technology in restaurants, allowing managers to judge employee performance and improve loss prevention. The revenue implications, he says, are significant.

Both the housing sales and restaurant-monitoring cases are just that: case studies. They are encouraging—each foretells a technology-driven shift in industry standards that would add value without necessarily cutting jobs or wages. However, they really start to become significant when viewed not only in the aggregate, but also as part of a new era in technological and economic development. That’s the era Brynjolfsson and McAfee want economists, business leaders, engineers, and scientists, working together, to lead the country toward.

“This is a great world that we’re heading into,” says McAfee, who is associate director and principal research scientist at the MIT Center for Digital Business. “This is not some apocalyptic or dire scenario. Erik and I firmly believe that we’re not heading into an economy where there’s not enough to go around. What this technology bundle is doing is bringing us into a more bountiful, more abundant world.”

“But getting from here to there is very disruptive,” Brynjolfsson adds. “Just doing business as usual and relying on the same kind of economic institutions will become increasingly dysfunctional. So we have to manage that transition. If we don’t manage it, there could be a lot of people who are left behind, at least temporarily. That’s bad for them, and, frankly, it’s bad for everybody.”

A new initiative, a grand challenge.
And that’s where the Initiative for the Digital Economy comes in. A major effort from MIT Sloan, the initiative addresses the impact of technology on businesses, the economy, and society. The way Brynjolfsson sees it, the engineers and scientists across campus have brought us to this brave new world. It’s time for the business and management side of MIT to make it work for society.

“We need to invent the economics and the social system that can keep up with what they’re doing on the technology side,” he says. “We need to come up with a system that will find jobs for the people whose tasks can now be done by computers or, better yet, leverage them into doing something that could never have been done before.”

So here are some of the MIT players who might be involved: MIT Sloan’s top-rated Information Technology group along with its leading Finance, Organization Studies, and Technological Innovation, Entrepreneurship, and Strategic Management groups; the vaunted and interdisciplinary MIT Media Lab; the Computer Science and Artificial Intelligence Laboratory, known as CSAIL and home to some of the world’s top artificial intelligence (AI) researchers; Brynjolfsson and McAfee’s MIT Center for Digital Business; and MIT’s Economics department, where the faculty and alumni roster is dotted with the names of Nobel Laureates. And those are just the obvious participants, and only the ones at MIT.

“What we want to do with this initiative is bring those people together to get that dialogue going and have it be very explicit, where the AI researchers tell the economists what’s doable,” Brynjolfsson says, “and the economists talk to the roboticists about the implications of their technologies, and we work together with a discussion that could not happen any other place in the world.”

And then there is the possibility for input from industry leaders, among whom interest in the new digital economy is high. A recent MIT Sloan alumni event hosted by Brynjolfsson and McAfee in San Francisco included guest speakers like O’Reilly Media founder Tim O’Reilly, TIBCO founder Vivek Ranadivé, and Rethink Robotics founder Rodney Brooks.

It all adds up to a lot of smart people capable of reshaping the way economies and industries function, along the way ensuring that work, employment, and livable wages remain a reality of American life. “Ultimately, all these technologies aren’t going to be valuable unless they help people,” Brynjolfsson says. “It’s one thing to have a machine that does wondrous things—but unless it creates economic value and helps society, what’s the point?”