The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson, Andrew McAfee
Authors: Erik Brynjolfsson, Andrew McAfee
Ads: Link
humans are still the ones doing the driving, innovations like Waze will help us get around more quickly and ease traffic jams. Waze is a recombination of a location sensor, data transmission device (that is, a phone), GPS system, and social network. The team at Waze invented none of these technologies; they just put them together in a new way. Moore’s Law made all involved devices cheap enough, and digitization made all necessary data available to facilitate the Waze system.
The Web itself is a pretty straightforward combination of the Internet’s much older TCP/IP data transmission network; a markup language called HTML that specified how text, pictures, and so on should be laid out; and a simple PC application called a ‘browser’ to display the results. None of these elements was particularly novel. Their combination was revolutionary.
Facebook has built on the Web infrastructure by allowing people to digitize their social network and put media online without having to learn HTML. Whether or not this was an intellectually profound combination of technological capabilities, it was a popular and economically significantly one—by July 2013, the company was valued at over $60 billion. 17 When photo sharing became one of the most popular activities on Facebook, Kevin Systrom and Mike Krieger decided to build a smartphone application that mimicked this capability, combining it with the option to modify a photo’s appearance with digital filters. This seems like a minor innovation, especially since Facebook already had enabled mobile photo sharing in 2010 when Systrom and Krieger started their project. However, the application they built, called Instagram, attracted more than 30 million users by the spring of 2012, users who had collectively uploaded more than 100 million photographs. Facebook acquired Instagram for approximately $1 billion in April of 2012.
This progression drives home the point that digital innovation is recombinant innovation in its purest form. Each development becomes a building block for future innovations. Progress doesn’t run out; it accumulates. And the digital world doesn’t respect any boundaries. It extends into the physical one, leading to cars and planes that drive themselves, printers that make parts, and so on. Moore’s Law makes computing devices and sensors exponentially cheaper over time, enabling them to be built economically into more and more gear, from doorknobs to greeting cards. Digitization makes available massive bodies of data relevant to almost any situation, and this information can be infinitely reproduced and reused because it is non-rival. As a result of these two forces, the number of potentially valuable building blocks is exploding around the world, and the possibilities are multiplying as never before. We’ll call this the ‘innovation-as-building-block’ view of the world; it’s the one held by Arthur, Romer, and the two of us. From this perspective, unlike in the innovation-as-fruit view, building blocks don’t ever get eaten or otherwise used up. In fact, they increase the opportunities for future recombinations.
Limits to Recombinant Growth
If this recombinant view of innovation is correct, then a problem looms: as the number of building blocks explodes, the main difficulty is knowing which combinations of them will be valuable. In his paper “Recombinant Growth,” the economist Martin Weitzman developed a mathematical model of new growth theory in which the ‘fixed factors’ in an economy—machine tools, trucks, laboratories, and so on—are augmented over time by pieces of knowledge that he calls ‘seed ideas,’ and knowledge itself increases over time as previous seed ideas are recombined into new ones. 18 This is an innovation-as-building-block view of the world, where both the knowledge pieces and the seed ideas can be combined and recombined over time.
This model has a fascinating result: because combinatorial possibilities explode so
The Web itself is a pretty straightforward combination of the Internet’s much older TCP/IP data transmission network; a markup language called HTML that specified how text, pictures, and so on should be laid out; and a simple PC application called a ‘browser’ to display the results. None of these elements was particularly novel. Their combination was revolutionary.
Facebook has built on the Web infrastructure by allowing people to digitize their social network and put media online without having to learn HTML. Whether or not this was an intellectually profound combination of technological capabilities, it was a popular and economically significantly one—by July 2013, the company was valued at over $60 billion. 17 When photo sharing became one of the most popular activities on Facebook, Kevin Systrom and Mike Krieger decided to build a smartphone application that mimicked this capability, combining it with the option to modify a photo’s appearance with digital filters. This seems like a minor innovation, especially since Facebook already had enabled mobile photo sharing in 2010 when Systrom and Krieger started their project. However, the application they built, called Instagram, attracted more than 30 million users by the spring of 2012, users who had collectively uploaded more than 100 million photographs. Facebook acquired Instagram for approximately $1 billion in April of 2012.
This progression drives home the point that digital innovation is recombinant innovation in its purest form. Each development becomes a building block for future innovations. Progress doesn’t run out; it accumulates. And the digital world doesn’t respect any boundaries. It extends into the physical one, leading to cars and planes that drive themselves, printers that make parts, and so on. Moore’s Law makes computing devices and sensors exponentially cheaper over time, enabling them to be built economically into more and more gear, from doorknobs to greeting cards. Digitization makes available massive bodies of data relevant to almost any situation, and this information can be infinitely reproduced and reused because it is non-rival. As a result of these two forces, the number of potentially valuable building blocks is exploding around the world, and the possibilities are multiplying as never before. We’ll call this the ‘innovation-as-building-block’ view of the world; it’s the one held by Arthur, Romer, and the two of us. From this perspective, unlike in the innovation-as-fruit view, building blocks don’t ever get eaten or otherwise used up. In fact, they increase the opportunities for future recombinations.
Limits to Recombinant Growth
If this recombinant view of innovation is correct, then a problem looms: as the number of building blocks explodes, the main difficulty is knowing which combinations of them will be valuable. In his paper “Recombinant Growth,” the economist Martin Weitzman developed a mathematical model of new growth theory in which the ‘fixed factors’ in an economy—machine tools, trucks, laboratories, and so on—are augmented over time by pieces of knowledge that he calls ‘seed ideas,’ and knowledge itself increases over time as previous seed ideas are recombined into new ones. 18 This is an innovation-as-building-block view of the world, where both the knowledge pieces and the seed ideas can be combined and recombined over time.
This model has a fascinating result: because combinatorial possibilities explode so
Similar Books
