The CFA Society New York Book Club met on August 8th, 2017 to discuss “The Second Machine Age” by Erik Brynjolfsson and Andrew McAfee. Approximately 10 members attended and interestingly, the first question asked was if anybody actually purchased a hard copy? Turns out 2 of the members did but most used a digital copy. The book takes you through the evolution of technology from the Ice Age in 25,000 BC, to the world warming around 14,000, to the domestication of work animals in 8,000, to writing in 3,000, then democracy in 500AD originating in Athens, and finally to about 1800 when there was 1 billion people on the planet and all of a sudden, a major growth catalyst was invented. The industrial revolution started with the creation of the steam engine which led to more efficient production, factories, and mass transport. The growth catalyst of the steam engine was followed by electricity which the authors characterized as the first machine age. The second machine age is the rise of the robots, computers, AI, autonomous cars, 3D printing, Internet of Things, the digital age, etc. The authors believe we are in the middle of the 2nd machine age which is expected to enhance productivity, wealth, and growth.
Technology has provided exceptional bounty and consumer surplus which is not necessarily accounted for in the lower GDP numbers since the financial crisis. Cell phones and internet connectivity for example have provided vast amounts of information, power, and programs at our finger tips that 20 years ago was simply not accessible unless you had a super computer, if that. However, the spread of the winner takes all market environment has led to greater inequalities. In the future, routine jobs both skilled and unskilled are most at risk as those are the ones that are likely to be automated. Idea creation, adaptability, and being flexible will be the key competitive advantages for future generations.