WEBVTT 00:00:00.605 --> 00:00:02.877 Growth is not dead. NOTE Paragraph 00:00:02.877 --> 00:00:04.263 (Applause) NOTE Paragraph 00:00:04.263 --> 00:00:08.226 Let's start the story 120 years ago, 00:00:08.226 --> 00:00:11.858 when American factories began to electrify their operations, 00:00:11.858 --> 00:00:15.202 igniting the Second Industrial Revolution. 00:00:15.202 --> 00:00:16.313 The amazing thing is 00:00:16.313 --> 00:00:19.090 that productivity did not increase in those factories 00:00:19.090 --> 00:00:22.346 for 30 years. Thirty years. 00:00:22.346 --> 00:00:25.820 That's long enough for a generation of managers to retire. 00:00:25.820 --> 00:00:28.042 You see, the first wave of managers 00:00:28.042 --> 00:00:31.459 simply replaced their steam engines with electric motors, 00:00:31.459 --> 00:00:34.469 but they didn't redesign the factories to take advantage 00:00:34.469 --> 00:00:36.810 of electricity's flexibility. 00:00:36.810 --> 00:00:40.794 It fell to the next generation to invent new work processes, 00:00:40.794 --> 00:00:43.521 and then productivity soared, 00:00:43.521 --> 00:00:47.186 often doubling or even tripling in those factories. NOTE Paragraph 00:00:47.186 --> 00:00:51.909 Electricity is an example of a general purpose technology, 00:00:51.909 --> 00:00:54.139 like the steam engine before it. 00:00:54.139 --> 00:00:57.555 General purpose technologies drive most economic growth, 00:00:57.555 --> 00:01:01.009 because they unleash cascades of complementary innovations, 00:01:01.009 --> 00:01:04.641 like lightbulbs and, yes, factory redesign. 00:01:04.641 --> 00:01:08.251 Is there a general purpose technology of our era? 00:01:08.251 --> 00:01:10.759 Sure. It's the computer. 00:01:10.759 --> 00:01:13.418 But technology alone is not enough. 00:01:13.418 --> 00:01:16.184 Technology is not destiny. 00:01:16.184 --> 00:01:17.764 We shape our destiny, 00:01:17.764 --> 00:01:20.280 and just as the earlier generations of managers 00:01:20.280 --> 00:01:22.578 needed to redesign their factories, 00:01:22.578 --> 00:01:24.807 we're going to need to reinvent our organizations 00:01:24.807 --> 00:01:27.362 and even our whole economic system. 00:01:27.362 --> 00:01:30.964 We're not doing as well at that job as we should be. 00:01:30.964 --> 00:01:32.194 As we'll see in a moment, 00:01:32.194 --> 00:01:34.916 productivity is actually doing all right, 00:01:34.916 --> 00:01:38.778 but it has become decoupled from jobs, 00:01:38.778 --> 00:01:43.197 and the income of the typical worker is stagnating. 00:01:43.197 --> 00:01:45.716 These troubles are sometimes misdiagnosed 00:01:45.716 --> 00:01:49.428 as the end of innovation, 00:01:49.428 --> 00:01:51.557 but they are actually the growing pains 00:01:51.557 --> 00:01:57.147 of what Andrew McAfee and I call the new machine age. NOTE Paragraph 00:01:57.147 --> 00:01:59.029 Let's look at some data. 00:01:59.029 --> 00:02:01.931 So here's GDP per person in America. 00:02:01.931 --> 00:02:04.697 There's some bumps along the way, but the big story 00:02:04.697 --> 00:02:07.412 is you could practically fit a ruler to it. 00:02:07.412 --> 00:02:10.688 This is a log scale, so what looks like steady growth 00:02:10.688 --> 00:02:13.731 is actually an acceleration in real terms. 00:02:13.731 --> 00:02:15.891 And here's productivity. 00:02:15.891 --> 00:02:18.562 You can see a little bit of a slowdown there in the mid-'70s, 00:02:18.562 --> 00:02:22.300 but it matches up pretty well with the Second Industrial Revolution, 00:02:22.300 --> 00:02:24.991 when factories were learning how to electrify their operations. 00:02:24.991 --> 00:02:29.120 After a lag, productivity accelerated again. 00:02:29.120 --> 00:02:31.691 So maybe "history doesn't repeat itself, 00:02:31.691 --> 00:02:34.259 but sometimes it rhymes." 00:02:34.259 --> 00:02:37.395 Today, productivity is at an all-time high, 00:02:37.395 --> 00:02:39.372 and despite the Great Recession, 00:02:39.372 --> 00:02:43.624 it grew faster in the 2000s than it did in the 1990s, 00:02:43.624 --> 00:02:47.760 the roaring 1990s, and that was faster than the '70s or '80s. 00:02:47.760 --> 00:02:51.434 It's growing faster than it did during the Second Industrial Revolution. 00:02:51.434 --> 00:02:53.177 And that's just the United States. 00:02:53.177 --> 00:02:56.425 The global news is even better. 00:02:56.425 --> 00:02:58.785 Worldwide incomes have grown at a faster rate 00:02:58.785 --> 00:03:01.281 in the past decade than ever in history. NOTE Paragraph 00:03:01.281 --> 00:03:06.332 If anything, all these numbers actually understate our progress, 00:03:06.332 --> 00:03:08.244 because the new machine age 00:03:08.244 --> 00:03:09.908 is more about knowledge creation 00:03:09.908 --> 00:03:12.239 than just physical production. 00:03:12.239 --> 00:03:15.177 It's mind not matter, brain not brawn, 00:03:15.177 --> 00:03:17.239 ideas not things. 00:03:17.239 --> 00:03:19.809 That creates a problem for standard metrics, 00:03:19.809 --> 00:03:23.311 because we're getting more and more stuff for free, 00:03:23.311 --> 00:03:25.952 like Wikipedia, Google, Skype, 00:03:25.952 --> 00:03:29.015 and if they post it on the web, even this TED Talk. 00:03:29.015 --> 00:03:32.318 Now getting stuff for free is a good thing, right? 00:03:32.318 --> 00:03:34.083 Sure, of course it is. 00:03:34.083 --> 00:03:37.951 But that's not how economists measure GDP. 00:03:37.951 --> 00:03:43.543 Zero price means zero weight in the GDP statistics. 00:03:43.543 --> 00:03:45.655 According to the numbers, the music industry 00:03:45.655 --> 00:03:48.655 is half the size that it was 10 years ago, 00:03:48.655 --> 00:03:52.311 but I'm listening to more and better music than ever. 00:03:52.311 --> 00:03:54.503 You know, I bet you are too. 00:03:54.503 --> 00:03:57.226 In total, my research estimates 00:03:57.226 --> 00:04:01.980 that the GDP numbers miss over 300 billion dollars per year 00:04:01.980 --> 00:04:05.326 in free goods and services on the Internet. 00:04:05.326 --> 00:04:07.115 Now let's look to the future. 00:04:07.115 --> 00:04:09.378 There are some super smart people 00:04:09.378 --> 00:04:14.397 who are arguing that we've reached the end of growth, 00:04:14.397 --> 00:04:17.955 but to understand the future of growth, 00:04:17.955 --> 00:04:20.638 we need to make predictions 00:04:20.638 --> 00:04:23.928 about the underlying drivers of growth. 00:04:23.928 --> 00:04:27.734 I'm optimistic, because the new machine age 00:04:27.734 --> 00:04:32.764 is digital, exponential and combinatorial. NOTE Paragraph 00:04:32.764 --> 00:04:35.028 When goods are digital, they can be replicated 00:04:35.028 --> 00:04:39.537 with perfect quality at nearly zero cost, 00:04:39.537 --> 00:04:43.555 and they can be delivered almost instantaneously. 00:04:43.555 --> 00:04:46.355 Welcome to the economics of abundance. 00:04:46.355 --> 00:04:50.045 But there's a subtler benefit to the digitization of the world. 00:04:50.045 --> 00:04:54.645 Measurement is the lifeblood of science and progress. 00:04:54.645 --> 00:04:56.793 In the age of big data, 00:04:56.793 --> 00:05:01.079 we can measure the world in ways we never could before. NOTE Paragraph 00:05:01.079 --> 00:05:05.174 Secondly, the new machine age is exponential. 00:05:05.174 --> 00:05:11.109 Computers get better faster than anything else ever. 00:05:11.109 --> 00:05:14.677 A child's Playstation today is more powerful 00:05:14.677 --> 00:05:18.733 than a military supercomputer from 1996. 00:05:18.733 --> 00:05:21.940 But our brains are wired for a linear world. 00:05:21.940 --> 00:05:25.828 As a result, exponential trends take us by surprise. 00:05:25.828 --> 00:05:28.430 I used to teach my students that there are some things, 00:05:28.430 --> 00:05:30.364 you know, computers just aren't good at, 00:05:30.364 --> 00:05:32.749 like driving a car through traffic. 00:05:32.749 --> 00:05:34.762 (Laughter) 00:05:34.762 --> 00:05:38.253 That's right, here's Andy and me grinning like madmen 00:05:38.253 --> 00:05:40.637 because we just rode down Route 101 00:05:40.637 --> 00:05:44.306 in, yes, a driverless car. NOTE Paragraph 00:05:44.306 --> 00:05:46.889 Thirdly, the new machine age is combinatorial. 00:05:46.889 --> 00:05:50.937 The stagnationist view is that ideas get used up, 00:05:50.937 --> 00:05:52.793 like low-hanging fruit, 00:05:52.793 --> 00:05:55.956 but the reality is that each innovation 00:05:55.956 --> 00:05:59.212 creates building blocks for even more innovations. 00:05:59.212 --> 00:06:02.557 Here's an example. In just a matter of a few weeks, 00:06:02.557 --> 00:06:04.629 an undergraduate student of mine 00:06:04.629 --> 00:06:08.740 built an app that ultimately reached 1.3 million users. 00:06:08.740 --> 00:06:10.439 He was able to do that so easily 00:06:10.439 --> 00:06:12.266 because he built it on top of Facebook, 00:06:12.266 --> 00:06:14.199 and Facebook was built on top of the web, 00:06:14.199 --> 00:06:15.897 and that was built on top of the Internet, 00:06:15.897 --> 00:06:18.315 and so on and so forth. NOTE Paragraph 00:06:18.315 --> 00:06:23.080 Now individually, digital, exponential and combinatorial 00:06:23.080 --> 00:06:25.430 would each be game-changers. 00:06:25.430 --> 00:06:27.620 Put them together, and we're seeing a wave 00:06:27.620 --> 00:06:29.013 of astonishing breakthroughs, 00:06:29.013 --> 00:06:32.073 like robots that do factory work or run as fast as a cheetah 00:06:32.073 --> 00:06:34.869 or leap tall buildings in a single bound. 00:06:34.869 --> 00:06:37.101 You know, robots are even revolutionizing 00:06:37.101 --> 00:06:38.930 cat transportation. NOTE Paragraph 00:06:38.930 --> 00:06:41.200 (Laughter) NOTE Paragraph 00:06:41.200 --> 00:06:43.932 But perhaps the most important invention, 00:06:43.932 --> 00:06:48.997 the most important invention is machine learning. 00:06:48.997 --> 00:06:52.373 Consider one project: IBM's Watson. 00:06:52.373 --> 00:06:53.962 These little dots here, 00:06:53.962 --> 00:06:58.822 those are all the champions on the quiz show "Jeopardy." 00:06:58.822 --> 00:07:01.366 At first, Watson wasn't very good, 00:07:01.366 --> 00:07:06.988 but it improved at a rate faster than any human could, 00:07:06.988 --> 00:07:09.675 and shortly after Dave Ferrucci showed this chart 00:07:09.675 --> 00:07:11.327 to my class at MIT, 00:07:11.327 --> 00:07:14.869 Watson beat the world "Jeopardy" champion. 00:07:14.869 --> 00:07:18.858 At age seven, Watson is still kind of in its childhood. 00:07:18.858 --> 00:07:24.176 Recently, its teachers let it surf the Internet unsupervised. 00:07:24.176 --> 00:07:30.122 The next day, it started answering questions with profanities. 00:07:30.122 --> 00:07:32.396 Damn. (Laughter) NOTE Paragraph 00:07:32.396 --> 00:07:34.676 But you know, Watson is growing up fast. 00:07:34.676 --> 00:07:38.888 It's being tested for jobs in call centers, and it's getting them. 00:07:38.888 --> 00:07:42.612 It's applying for legal, banking and medical jobs, 00:07:42.612 --> 00:07:44.562 and getting some of them. 00:07:44.562 --> 00:07:46.451 Isn't it ironic that at the very moment 00:07:46.451 --> 00:07:48.685 we are building intelligent machines, 00:07:48.685 --> 00:07:52.134 perhaps the most important invention in human history, 00:07:52.134 --> 00:07:56.109 some people are arguing that innovation is stagnating? 00:07:56.109 --> 00:07:58.528 Like the first two industrial revolutions, 00:07:58.528 --> 00:08:01.662 the full implications of the new machine age 00:08:01.662 --> 00:08:04.344 are going to take at least a century to fully play out, 00:08:04.344 --> 00:08:07.376 but they are staggering. NOTE Paragraph 00:08:07.376 --> 00:08:10.712 So does that mean we have nothing to worry about? 00:08:10.712 --> 00:08:14.392 No. Technology is not destiny. 00:08:14.392 --> 00:08:16.961 Productivity is at an all time high, 00:08:16.961 --> 00:08:19.944 but fewer people now have jobs. 00:08:19.944 --> 00:08:23.064 We have created more wealth in the past decade than ever, 00:08:23.064 --> 00:08:26.968 but for a majority of Americans, their income has fallen. 00:08:26.968 --> 00:08:29.280 This is the great decoupling 00:08:29.280 --> 00:08:32.256 of productivity from employment, 00:08:32.256 --> 00:08:35.360 of wealth from work. 00:08:35.360 --> 00:08:37.706 You know, it's not surprising that millions of people 00:08:37.706 --> 00:08:40.552 have become disillusioned by the great decoupling, 00:08:40.552 --> 00:08:42.299 but like too many others, 00:08:42.299 --> 00:08:45.396 they misunderstand its basic causes. 00:08:45.396 --> 00:08:48.006 Technology is racing ahead, 00:08:48.006 --> 00:08:51.556 but it's leaving more and more people behind. 00:08:51.556 --> 00:08:55.075 Today, we can take a routine job, 00:08:55.075 --> 00:08:58.166 codify it in a set of machine-readable instructions, 00:08:58.166 --> 00:09:00.993 and then replicate it a million times. NOTE Paragraph 00:09:00.993 --> 00:09:03.272 You know, I recently overheard a conversation 00:09:03.272 --> 00:09:05.224 that epitomizes these new economics. 00:09:05.224 --> 00:09:09.421 This guy says, "Nah, I don't use H&R Block anymore. 00:09:09.421 --> 00:09:11.869 TurboTax does everything that my tax preparer did, 00:09:11.869 --> 00:09:16.427 but it's faster, cheaper and more accurate." 00:09:16.427 --> 00:09:18.226 How can a skilled worker 00:09:18.226 --> 00:09:21.235 compete with a $39 piece of software? 00:09:21.235 --> 00:09:23.202 She can't. 00:09:23.202 --> 00:09:25.982 Today, millions of Americans do have faster, 00:09:25.982 --> 00:09:28.369 cheaper, more accurate tax preparation, 00:09:28.369 --> 00:09:29.855 and the founders of Intuit 00:09:29.855 --> 00:09:32.348 have done very well for themselves. 00:09:32.348 --> 00:09:36.562 But 17 percent of tax preparers no longer have jobs. 00:09:36.562 --> 00:09:38.640 That is a microcosm of what's happening, 00:09:38.640 --> 00:09:43.317 not just in software and services, but in media and music, 00:09:43.317 --> 00:09:47.003 in finance and manufacturing, in retailing and trade -- 00:09:47.003 --> 00:09:50.898 in short, in every industry. 00:09:50.898 --> 00:09:53.993 People are racing against the machine, 00:09:53.993 --> 00:09:57.083 and many of them are losing that race. NOTE Paragraph 00:09:57.083 --> 00:10:00.969 What can we do to create shared prosperity? 00:10:00.969 --> 00:10:03.986 The answer is not to try to slow down technology. 00:10:03.986 --> 00:10:06.543 Instead of racing against the machine, 00:10:06.543 --> 00:10:10.220 we need to learn to race with the machine. 00:10:10.220 --> 00:10:13.349 That is our grand challenge. NOTE Paragraph 00:10:13.349 --> 00:10:15.673 The new machine age 00:10:15.673 --> 00:10:18.786 can be dated to a day 15 years ago 00:10:18.786 --> 00:10:21.664 when Garry Kasparov, the world chess champion, 00:10:21.664 --> 00:10:25.370 played Deep Blue, a supercomputer. 00:10:25.370 --> 00:10:27.382 The machine won that day, 00:10:27.382 --> 00:10:30.350 and today, a chess program running on a cell phone 00:10:30.350 --> 00:10:32.646 can beat a human grandmaster. 00:10:32.646 --> 00:10:36.011 It got so bad that, when he was asked 00:10:36.011 --> 00:10:38.574 what strategy he would use against a computer, 00:10:38.574 --> 00:10:42.590 Jan Donner, the Dutch grandmaster, replied, 00:10:42.590 --> 00:10:44.361 "I'd bring a hammer." NOTE Paragraph 00:10:44.361 --> 00:10:48.041 (Laughter) NOTE Paragraph 00:10:48.041 --> 00:10:52.585 But today a computer is no longer the world chess champion. 00:10:52.585 --> 00:10:55.239 Neither is a human, 00:10:55.239 --> 00:10:58.818 because Kasparov organized a freestyle tournament 00:10:58.818 --> 00:11:00.734 where teams of humans and computers 00:11:00.734 --> 00:11:02.833 could work together, 00:11:02.833 --> 00:11:05.990 and the winning team had no grandmaster, 00:11:05.990 --> 00:11:08.455 and it had no supercomputer. 00:11:08.455 --> 00:11:12.630 What they had was better teamwork, 00:11:12.630 --> 00:11:17.646 and they showed that a team of humans and computers, 00:11:17.646 --> 00:11:20.694 working together, could beat any computer 00:11:20.694 --> 00:11:24.214 or any human working alone. 00:11:24.214 --> 00:11:25.878 Racing with the machine 00:11:25.878 --> 00:11:28.221 beats racing against the machine. 00:11:28.221 --> 00:11:30.785 Technology is not destiny. 00:11:30.785 --> 00:11:32.527 We shape our destiny. NOTE Paragraph 00:11:32.527 --> 00:11:33.974 Thank you. NOTE Paragraph 00:11:33.974 --> 00:11:38.990 (Applause)