0:00:00.605,0:00:02.877
Growth is not dead.

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(Applause)

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Let's start the story 120 years ago,

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when American factories began to electrify their operations,

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igniting the Second Industrial Revolution.

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The amazing thing is

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that productivity did not increase in those factories

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for 30 years. Thirty years.

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That's long enough for a generation of managers to retire.

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You see, the first wave of managers

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simply replaced their steam engines with electric motors,

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but they didn't redesign the factories to take advantage

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of electricity's flexibility.

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It fell to the next generation to invent new work processes,

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and then productivity soared,

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often doubling or even tripling in those factories.

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Electricity is an example of a general purpose technology,

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like the steam engine before it.

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General purpose technologies drive most economic growth,

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because they unleash cascades of complementary innovations,

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like lightbulbs and, yes, factory redesign.

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Is there a general purpose technology of our era?

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Sure. It's the computer.

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But technology alone is not enough.

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Technology is not destiny.

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We shape our destiny,

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and just as the earlier generations of managers

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needed to redesign their factories,

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we're going to need to reinvent our organizations

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and even our whole economic system.

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We're not doing as well at that job as we should be.

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As we'll see in a moment,

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productivity is actually doing all right,

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but it has become decoupled from jobs,

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and the income of the typical worker is stagnating.

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These troubles are sometimes misdiagnosed

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as the end of innovation,

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but they are actually the growing pains

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of what Andrew McAfee and I call the new machine age.

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Let's look at some data.

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So here's GDP per person in America.

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There's some bumps along the way, but the big story

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is you could practically fit a ruler to it.

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This is a log scale, so what looks like steady growth

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is actually an acceleration in real terms.

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And here's productivity.

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You can see a little bit of a slowdown there in the mid-'70s,

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but it matches up pretty well with the Second Industrial Revolution,

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when factories were learning how to electrify their operations.

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After a lag, productivity accelerated again.

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So maybe "history doesn't repeat itself,

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but sometimes it rhymes."

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Today, productivity is at an all-time high,

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and despite the Great Recession,

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it grew faster in the 2000s than it did in the 1990s,

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the roaring 1990s, and that was faster than the '70s or '80s.

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It's growing faster than it did during the Second Industrial Revolution.

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And that's just the United States.

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The global news is even better.

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Worldwide incomes have grown at a faster rate

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in the past decade than ever in history.

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If anything, all these numbers actually understate our progress,

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because the new machine age

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is more about knowledge creation

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than just physical production.

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It's mind not matter, brain not brawn,

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ideas not things.

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That creates a problem for standard metrics,

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because we're getting more and more stuff for free,

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like Wikipedia, Google, Skype,

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and if they post it on the web, even this TED Talk.

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Now getting stuff for free is a good thing, right?

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Sure, of course it is.

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But that's not how economists measure GDP.

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Zero price means zero weight in the GDP statistics.

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According to the numbers, the music industry

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is half the size that it was 10 years ago,

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but I'm listening to more and better music than ever.

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You know, I bet you are too.

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In total, my research estimates

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that the GDP numbers miss over 300 billion dollars per year

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in free goods and services on the Internet.

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Now let's look to the future.

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There are some super smart people

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who are arguing that we've reached the end of growth,

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but to understand the future of growth,

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we need to make predictions

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about the underlying drivers of growth.

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I'm optimistic, because the new machine age

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is digital, exponential and combinatorial.

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When goods are digital, they can be replicated

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with perfect quality at nearly zero cost,

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and they can be delivered almost instantaneously.

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Welcome to the economics of abundance.

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But there's a subtler benefit to the digitization of the world.

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Measurement is the lifeblood of science and progress.

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In the age of big data,

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we can measure the world in ways we never could before.

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Secondly, the new machine age is exponential.

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Computers get better faster than anything else ever.

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A child's Playstation today is more powerful

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than a military supercomputer from 1996.

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But our brains are wired for a linear world.

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As a result, exponential trends take us by surprise.

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I used to teach my students that there are some things,

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you know, computers just aren't good at,

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like driving a car through traffic.

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(Laughter)

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That's right, here's Andy and me grinning like madmen

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because we just rode down Route 101

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in, yes, a driverless car.

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Thirdly, the new machine age is combinatorial.

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The stagnationist view is that ideas get used up,

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like low-hanging fruit,

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but the reality is that each innovation

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creates building blocks for even more innovations.

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Here's an example. In just a matter of a few weeks,

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an undergraduate student of mine

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built an app that ultimately reached 1.3 million users.

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He was able to do that so easily

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because he built it on top of Facebook,

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and Facebook was built on top of the web,

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and that was built on top of the Internet,

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and so on and so forth.

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Now individually, digital, exponential and combinatorial

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would each be game-changers.

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Put them together, and we're seeing a wave

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of astonishing breakthroughs,

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like robots that do factory work or run as fast as a cheetah

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or leap tall buildings in a single bound.

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You know, robots are even revolutionizing

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cat transportation.

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(Laughter)

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But perhaps the most important invention,

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the most important invention is machine learning.

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Consider one project: IBM's Watson.

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These little dots here,

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those are all the champions on the quiz show "Jeopardy."

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At first, Watson wasn't very good,

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but it improved at a rate faster than any human could,

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and shortly after Dave Ferrucci showed this chart

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to my class at MIT,

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Watson beat the world "Jeopardy" champion.

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At age seven, Watson is still kind of in its childhood.

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Recently, its teachers let it surf the Internet unsupervised.

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The next day, it started answering questions with profanities.

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Damn. (Laughter)

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But you know, Watson is growing up fast.

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It's being tested for jobs in call centers, and it's getting them.

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It's applying for legal, banking and medical jobs,

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and getting some of them.

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Isn't it ironic that at the very moment

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we are building intelligent machines,

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perhaps the most important invention in human history,

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some people are arguing that innovation is stagnating?

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Like the first two industrial revolutions,

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the full implications of the new machine age

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are going to take at least a century to fully play out,

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but they are staggering.

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So does that mean we have nothing to worry about?

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No. Technology is not destiny.

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Productivity is at an all time high,

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but fewer people now have jobs.

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We have created more wealth in the past decade than ever,

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but for a majority of Americans, their income has fallen.

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This is the great decoupling

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of productivity from employment,

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of wealth from work.

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You know, it's not surprising that millions of people

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have become disillusioned by the great decoupling,

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but like too many others,

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they misunderstand its basic causes.

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Technology is racing ahead,

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but it's leaving more and more people behind.

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Today, we can take a routine job,

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codify it in a set of machine-readable instructions,

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and then replicate it a million times.

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You know, I recently overheard a conversation

0:09:03.272,0:09:05.224
that epitomizes these new economics.

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This guy says, "Nah, I don't use H&R Block anymore.

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TurboTax does everything that my tax preparer did,

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but it's faster, cheaper and more accurate."

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How can a skilled worker

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compete with a $39 piece of software?

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She can't.

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Today, millions of Americans do have faster,

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cheaper, more accurate tax preparation,

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and the founders of Intuit

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have done very well for themselves.

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But 17 percent of tax preparers no longer have jobs.

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That is a microcosm of what's happening,

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not just in software and services, but in media and music,

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in finance and manufacturing, in retailing and trade --

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in short, in every industry.

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People are racing against the machine,

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and many of them are losing that race.

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What can we do to create shared prosperity?

0:10:00.969,0:10:03.986
The answer is not to try to slow down technology.

0:10:03.986,0:10:06.543
Instead of racing against the machine,

0:10:06.543,0:10:10.220
we need to learn to race with the machine.

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That is our grand challenge.

0:10:13.349,0:10:15.673
The new machine age

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can be dated to a day 15 years ago

0:10:18.786,0:10:21.664
when Garry Kasparov, the world chess champion,

0:10:21.664,0:10:25.370
played Deep Blue, a supercomputer.

0:10:25.370,0:10:27.382
The machine won that day,

0:10:27.382,0:10:30.350
and today, a chess program running on a cell phone

0:10:30.350,0:10:32.646
can beat a human grandmaster.

0:10:32.646,0:10:36.011
It got so bad that, when he was asked

0:10:36.011,0:10:38.574
what strategy he would use against a computer,

0:10:38.574,0:10:42.590
Jan Donner, the Dutch grandmaster, replied,

0:10:42.590,0:10:44.361
"I'd bring a hammer."

0:10:44.361,0:10:48.041
(Laughter)

0:10:48.041,0:10:52.585
But today a computer is no longer the world chess champion.

0:10:52.585,0:10:55.239
Neither is a human,

0:10:55.239,0:10:58.818
because Kasparov organized a freestyle tournament

0:10:58.818,0:11:00.734
where teams of humans and computers

0:11:00.734,0:11:02.833
could work together,

0:11:02.833,0:11:05.990
and the winning team had no grandmaster,

0:11:05.990,0:11:08.455
and it had no supercomputer.

0:11:08.455,0:11:12.630
What they had was better teamwork,

0:11:12.630,0:11:17.646
and they showed that a team of humans and computers,

0:11:17.646,0:11:20.694
working together, could beat any computer

0:11:20.694,0:11:24.214
or any human working alone.

0:11:24.214,0:11:25.878
Racing with the machine

0:11:25.878,0:11:28.221
beats racing against the machine.

0:11:28.221,0:11:30.785
Technology is not destiny.

0:11:30.785,0:11:32.527
We shape our destiny.

0:11:32.527,0:11:33.974
Thank you.

0:11:33.974,0:11:38.990
(Applause)