Tuesday, November 1, 2016

Book Review - The Second Machine Age


Authors: Andrew McAfee & Erik Brynjolfsson
Title: The Second Machine Age
Year: 2014
ISBN-13: 978-0393239355
ISBN-10: 0393239357


An interesting book. I recommend for students in Economics, MBA/MSC, or any Technology students. Written by two active academics, scientists and thinkers.

The book adds on to this exciting and intriguing topic of the  digitization of economic activities, and its implication on our lives and our societies.
For anyone who wonders why we're seeing high income inequality and unemployment, this book will clear up a lot of mysteries.

The book is extensively footnoted with numerous references to the work of other academics and economists.

The idea
The idea that computers have now reached a maturity that big changes are expected to happen in the near future. We can expect higher productivity growth due to the Internet.
The authors brought known trends like Apple's Siri, Google's driverless car among others.
The authors seem to be hard-believers in Artificial Intelligence (AI) that is "threatening to replace human labor". They took a ride in Google’s self-driving car around the Mountain View campus and surrounding roads with no bump and no hard brake. 
Google named the driving software Chauffeur.

Starting from chapter 7 through 11, the book moves the focus to the effects of technological advances on peoples lives and the study of economics. The authors make the case that income inequality is a consequence of the digitization of economic activities.

US-egocentricity
The authors have a lot to say about the US -like many US authors- and nothing to say about the rest world. They mention Facebook, Google, Amazon, probably the trendiest companies or the silicon valley based ones, but nothing about companies who have been/are innovating, making this technological transformation and change possible; companies like Finnish Telecom giant Nokia, or Swedish Telecom giant Ericsson with its 35 thousands patents & innovations in Mobile networks, making it possible for Google, Facebook and/or Amazon to enjoy Mobility, reaching by that, a new mobile customer segments.
Skype was not invented in silicon valley but in a suburb of Stockholm, capital of Sweden.

Beyond GDP
This chapter start with this amazing quote from Robert F. Kennedy “The Gross National Product does not include the beauty of our poetry or the intelligence of our public debate. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion. It measures everything, in short, except that which makes life worthwhile.

interesting chapter on the utility of GDP as a metric for measuring welfare. Again, the music industry example was brought up to support the case.
The authors demonstrate, using other examples of the Over The Top services, that GDP is not capturing all productivity generated by these services. Of course this concern is not new, it has been raised before by many economists and non-economists. Economics Nobel prize laureate Joseph Stieglitz is one of them.

Artificial Intelligence, cultural differences and low-cost data workers
The book displays an awareness of how the "likes" of Google, Twitter, Facebook and Amazon already rely on low-cost workers’ smarts to power the companies’ seemingly miraculous information systems.
Computers do not wield the cultural affinities necessary to interpret this kind of cultural elements; but people do.

This is the hidden labor that enables companies like Google, Twitter, Amazon, Facebook to develop products around AI, machine learning, and big data.

Recommendations (chapters 12-14)
This chapter was divided in 3 chapters: recommendations for individuals, policy makers and long- term recommendations. The topic is so important and so complex topic that it requires at least a book in itself to cover it.
Strangely enough, all the recommendations chapters begin with quotes from non-US internationally known names such as Gandhi and Picasso, but it feels like the authors are (again!) speaking to US "individuals" and the US "policy makers.