This is an illuminating book about the benefits and challenges of the digital technologies. It is written by professor Erik Brynjolfsson and Andrew McAfee at the MIT Sloan School of Management in 2014.

I read it twice this year and still feel it’s worth reading again.

gists and some facts

  1. The big stories
    • The Industrial Revolution in late eighteenth century, particularly the steam engines, allows us to overcome the limitations of muscle power. The computer technologies nowadays are doing the same thing for mental power.
  2. The skills of the new machines
    • Computers are good at following rules, but lousy at pattern recognition.
    • The three key characteristics of technological progress in the era of digital hardware, software, and networks are: exponential, digital, and combinatorial.
  3. Moore’s law and the second half of the chessboard
  4. The digitization of just about everything
    • The unique economic properties of digital information: such information is non-rival, and it has close to zero marginal cost of reproduction.
    • Information is costly to produce but cheap to reproduce.
    • Six of the ten most popular content sites throughout the world are primarily user-generated, as are six of the top ten in the United States.
  5. Innovation: declining or recombining?
    • The three novelties of Second Industrial Revolution: electricity, the internal combustion engine, and indoor plumbing with running water, all of which came onto the scene between 1870 and 1900.
  6. Artificial and human intelligence in the second machine age
  7. Computing bounty
    • GPT always need complements. Coming up with those can take years or even decades, and this creates lags between the introduction of a technology and the productivity benefits.
    • Perhaps the most important complementary innovations are the business process changes and organizational co-inventions that new technologies make possible.
  8. Beyond GDP
    • More and more what we care about in the second machine age are ideas, not things - minds, not matter; bits, not atoms; and interactions, not transactions.
    • The trends in GDP growth and productivity growth are not sufficient measures of our overall well-being, or even our economic well-being.
    • With a greater volume of digital goods introduced each year that do not have a dollar price, this traditional GDP heuristic is becoming less useful.
    • Production in the second machine age depends less on physical equipment and structures and more on the four categories of intangible assets: intellectual property, organizational capital, user-generated content, and human capital.
    • “What gets measured gets done”
  9. The spread
    • In recent years, median wages have stopped tracking productivity.
    • For the first time since before the Great Depression, over half of the total income in the United States went to the top 10% of Americans in 2012. The top 1% earned over 22% of income.
    • Between 1973 and 2011, the median hourly wage barely changed, growing by just 0.1% per year. In contrast, productivity grew at an average of 1.56% per year during this period, accelearting a bit to 1.88% per year from 2000 to 2011.
    • 2x2 matrix of work: cognitive versus manual, routine versus nonroutine
  10. The biggest winners: stars and superstars
    • In many industries, the difference in payout between number one and second-best has widened into a canyon.
    • The ratio of CEO pay to average worker pay increased from 70 in 1990 to 300 in 2005.
    • Direct digital oversight also makes hiring the best candidate rather than the second-best much more important.
    • With technology, suddenly the top-quality provider can capture the whole market.
    • Why winner-take-all markets?
      • Digitization creates winner-take-all markets because with digital goods capacity constraints become increasingly irrelevant.
      • Technological improvements in telecommunications and transportation expand the market individuals and companies can reach.
      • Networks and interoperable products are of increased importance.
    • Instead of going head-to-head with a superstar, some individuals and businesses are instead finding ways to differentiate their products, to find or create and alternative niche wherethey can be the world’s best.
    • “Education per se is not going to make up the difference.”
  11. Implications of the bounty and the spread
    • While family income grew by around 20% between 1990 and 2008, prices for housing and college grew by about 50%, and health care by more than 150%.
    • “Inclusive institutions bring prosperity, and extractive ones bring poverty.”
    • “Don’t compete against close substitues, especially if they have a cost advantage.”
    • Offshoring is often only a way station on the road to automation.
  12. Learning to race with machines: recommendations for individuals
    • ideation
    • large-frame pattern recognition
    • highly complex communication
  13. Policy recommendations
    1. Teach the children well. When technology advances too quickly for education to keep up, inequality generally rises.
    2. Restart startups. For all but 7 years between 1977 and 2005, existing firms as a group were net job destroyers, losing an average of approximately one million jobs annually. Startups created on average a net 3 million jobs per year.
    3. Make more matches.
    4. Support our scientists. After rising for a quarter-century, US federal government support for basic academic research started to fall in 2005.
    5. Upgrade infrastructure.
    6. Tax wisely.
  14. Long-term recommendations
  15. Technology and the Future



When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind. — Lord Kelvin

If you want to have good ideas you must have many ideas. — Linus Pauling

Freedom of the press is limited to those who own one. — A.J. Liebling

Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another. — Milton Friedman

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have little. — Franklin D. Roosevelt

Work saves a man from three evils: boredom, vice, and need. — Voltaire