Wednesday, November 6, 2013

Erik Brynjolfsson's TED talk: Race with the Machines

In the TED talk “The key to growth? Race with the machines”, Eric Brynjolfsson starts out by pointing out that when American factories began to electrify their operations towards the end of the 19th century (during the industrial revolution), it took about 30 years for productivity to increase in those factories. The reason he suggests is that the then existing generation of managers simply replaced the steam engine with electric motors, but did not redesign the factories to take advantage of the flexibility that electricity offered. Computing and IT is a general purpose technology like electricity, and we should reinvent our organizations and our economic systems to leverage it.

Brynjolfsson then talks about a number of points, many of which, incidentally, are mentioned in the McKinsey article reading Ten IT-enabled business trends for the decade ahead”:

  • Business model around “free”: He estimates that the global GDP numbers do not account for about $300 billion worth of “free” good and services on the Internet (like Wikipedia, Google Search, Skype, etc.)
  • Big data and advanced analytics: Measuring data points is much easier in a highly digitized world, and we are measuring many things that we previously couldn’t.
  • Digital meets physical: He used to teach his students that there are some things even computers may find difficult, like driving a car. But we are now witnessing a trend towards using digital capabilities in a physical world.
  • Automating knowledge work: He calls IBM’s Watson “only a 7 year old child” and already its intelligence enables it to apply (and get) call center jobs, along with legal and banking jobs. “Recently, its teachers let it surf the Internet unsupervised. The next day, it started answering questions with profanities.”
  • Offering anything as a service: He talks about how software like TurboTax is replacing the traditional services like tax preparation; and in the process 17% of tax preparers have lost their jobs.

One of the interesting points about Brynjolfsson’s talk is that he presented it in February this year – before Mckinsey’s May 2013 report. It is remarkable how many similarities can be found among the two.

Another interesting point Brynjolfsson makes is that our brains think linearly, and the exponential trends in technology take us by surprise. Compared to growth in productivity due to electric motors, he predicts that it may take up to a century to fully realize the implications of the technology trends we are witnessing today. So even though the article looks at the impact of trends within the next decade’s perspective, it may take organizations considerably longer to entirely realize the benefits in terms of productivity and profitability.

Below is the complete TED talk.

P.S. While I was writing this post, I tweeted the Brynjolfsson talk – and guess who “favorited” it. Probably my only brush on Twitter with someone famous.

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