Speaker 1: So I'd like to see the U S and other
Speaker 1: countries work towards shared prosperity. But I don't see it
Speaker 1: as a contest between one country or another. I see
Speaker 1: it as a contest between good policies and bad policies worldwide.
Speaker 1: Hello and welcome back to the Bloomberg Benchmark Podcast. It's Thursday, September.
Speaker 1: I'm Scott landman and economics editor at Bloomberg News in Washington,
Speaker 1: and I'm Daniel Moss, Executive editor for Global Economics at
Speaker 1: Bloomberg in New York. So, so, Dan, how did you
Speaker 1: get to work today? Did you come in a driverless car?
Speaker 1: I came to work, Scott, in a very drive of
Speaker 1: full car. It was a green taxi that I hailed
Speaker 1: close to my apartment in Brooklyn. I had to repeat
Speaker 1: where I was going three times, including the part about
Speaker 1: fifty eight. There's just something about the Aussi accent that
Speaker 1: didn't gel well. I feel for you, Dan, I didn't
Speaker 1: have a driverless car too. I still have my two
Speaker 1: thousand Honda occurred getting getting me where I need to go.
Speaker 1: So we're not quite there yet, but our next guest
Speaker 1: might have something to say about the direction the technology
Speaker 1: is going and how it's going to impact our society.
Speaker 1: Two weeks ago, we had on Robert Gordon, the economics
Speaker 1: professor at Northwestern who believes that the best days of
Speaker 1: American growth are behind us because we've already had the
Speaker 1: kinds of inventions that truly changed our world, like indoor
Speaker 1: plumbing and electricity. And joining us now is Eric Brynjolfson,
Speaker 1: who is a professor at Massachusetts Institute of Technology and
Speaker 1: director of its Initiative on the Digital Economy, and co
Speaker 1: author of the book The Second Machine Age Now. The
Speaker 1: subtitle of that book sets it up as a counterpoint
Speaker 1: of Professor gordon work progress and prosperity in a time
Speaker 1: of brilliant technologies. The author is not under selling it.
Speaker 1: We'll get to that in a second. Eric. Thank you
Speaker 1: for joining us. It's great to be with both. Dannon's
Speaker 1: got now. Eric, it's been three years since you debated
Speaker 1: Gordon at a TED talk and we're still stuck in
Speaker 1: this rut of weak productivity. America is having trouble breaking
Speaker 1: out of this two percent growth, and more and more
Speaker 1: economists seemed to be coming around to the view that
Speaker 1: maybe we are in a low growth era, that maybe
Speaker 1: Larry Summers has a point after he's harped on the
Speaker 1: idea of secular stagnation for the last few years. Has
Speaker 1: your optimism been dimmed at all by these kinds of developments?
Speaker 1: Not really, And I'll tell you why. I mean. First,
Speaker 1: I want to say that I very much enjoyed having
Speaker 1: these discussions with Bob Gordon. We're friends going way back,
Speaker 1: and UH, I loved his book. I thought it was brilliant.
Speaker 1: I agree with about nine of it. The part we
Speaker 1: disagree with, the part that people love to talk about,
Speaker 1: which maybe is the most important part, is not what
Speaker 1: happened in the past, but what's likely to happen in
Speaker 1: the future. And UH, Bob takes some of the pessimism
Speaker 1: of the of the recent past, the low productivity that
Speaker 1: we've had in the past decade or so, and UH
Speaker 1: uses it to bolsters argument that the best days are
Speaker 1: behind us, and UH, as Larry Summers and others who
Speaker 1: pointed out we have been in a low growth era
Speaker 1: for some time. However, I think much better days are
Speaker 1: ahead of us. And my optimism comes not from extrapolating
Speaker 1: what happened with productivity recently. It comes from going out
Speaker 1: and visiting companies UM in particular, I think we should
Speaker 1: remember that this is not the first time people talked
Speaker 1: about secular stagnation. The term was actually coined by Alvin
Speaker 1: Hanson back in the nineteen thirties, another really bad period
Speaker 1: for growth, and he basically said, as Bob Gordon says today,
Speaker 1: that the great inventions were all behind us. People were depressed.
Speaker 1: He pointed out that there wasn't more land that we
Speaker 1: could take advantage of. Population growth was slowing and ran
Speaker 1: through some great inventions that you know, had already been discovered,
Speaker 1: and didn't think of any new ones ahead of us. Well,
Speaker 1: in Alvin Hanson's case, it turned out that he was
Speaker 1: a hundred eighty degrees wrong. Literally, the best three decades
Speaker 1: we've ever had so far, we're right. After Alvin promulgated
Speaker 1: the idea of secular stagnation, the forties, fifties, and sixties
Speaker 1: were just blockbuster decades for growth and productivity. And I
Speaker 1: think we should take that as as a warning and
Speaker 1: be a little humble about what we think will be
Speaker 1: going what will happen going forward. Productivity is really what
Speaker 1: drives living standards more than population growth or any the
Speaker 1: other uh factors, and productivity is inherently unpredictable. Economists sometimes
Speaker 1: call it a measure of our ignorance, because it's the
Speaker 1: residual that's left over after you account for all the
Speaker 1: things that you can measure, like labor and capital. So
Speaker 1: both in theory and in practice, it's it's very hard
Speaker 1: to predict productivity. After I debated Bob Gordon, I did
Speaker 1: a little exercise. I took all the ten year periods
Speaker 1: we have on record and compared the productivity growth in
Speaker 1: one ten year period to the productivity growth in the
Speaker 1: next ten year period. And guess what the correlation was
Speaker 1: from one decade to the next. There is none. Yeah,
Speaker 1: that's right, there was absolutely none. Um. You know, sometimes
Speaker 1: you had much better decades, like after Alvin Hansen's discussion
Speaker 1: of secondar stagnation. Sometimes you had correlation, but on average
Speaker 1: it turned out to be a big zero. And uh so,
Speaker 1: just saying hey, we've had some bad years, ergo it's
Speaker 1: going to keep getting bad. That that doesn't have much
Speaker 1: empirical support or, as I said, theoretical support. So Eric,
Speaker 1: how has all this escaped or sailed below the popular
Speaker 1: economic narrative where best with the use of terms like
Speaker 1: new normal quote unquote slow recovery quote unquote wageless recovery.
Speaker 1: This all seems at odds with what we're hearing a
Speaker 1: lot of at the moment. Can you explain that? Well,
Speaker 1: it depends who you talk to. And there's no question
Speaker 1: we've had some very low growth, both in productivity and
Speaker 1: overall economic growth, and I think that's legitimate to point out.
Speaker 1: And there's a lot of things we can do in
Speaker 1: the to compact some of the cyclical problems we've been having.
Speaker 1: I think people still underestimate the scale and scope of
Speaker 1: the Great Recession and the cyclical factors that are still
Speaker 1: slowing us down. Um So I wouldn't belittle those concerns,
Speaker 1: but I also wouldn't use them to extrapolate into what's
Speaker 1: happening with technological progress. That's a whole different ballgame. Technological progress.
Speaker 1: It's very different from the underutilization of labor and capital
Speaker 1: in the economy. If you, understan want to understand what's
Speaker 1: going on with technological progress, you need to talk to technologists,
Speaker 1: and I spend a lot of time doing that in
Speaker 1: places like Silicon Valley and of course here at at
Speaker 1: M I T and UH, maybe it's just escaped the
Speaker 1: popular discourse in some parts of the country. But among
Speaker 1: technologists UH, people are very optimistic. People like Bill Gates
Speaker 1: say that the innovation has never been faster. I was
Speaker 1: just back from a two week visit to UH, to
Speaker 1: Silicon Valley, meeting with a lot of the tech leaders,
Speaker 1: and and they continue to be very, very optimistic, and
Speaker 1: they feel like there are some great things that they
Speaker 1: are making investments in. And I think if you look
Speaker 1: at the broader market, it's also pretty bullish on technology. Um,
Speaker 1: what are the five most valuable companies in America? Well,
Speaker 1: they're all tech companies. They are Apple, alphabet or Google, Facebook, Microsoft,
Speaker 1: and Amazon. These are tech companies and their sales are
Speaker 1: growing rapidly. Their profits are enormous, the biggest in history.
Speaker 1: And investors must be very bullish because they are putting
Speaker 1: their their valuations at pretty decent levels. So that suggests
Speaker 1: to me that maybe inside the Beltway or in other places,
Speaker 1: people aren't optimistic about technology. But I hear a different
Speaker 1: story when I visit technologists. So is there any single
Speaker 1: invention that you see out there or a couple inventions
Speaker 1: that that could really change the world? You know, you
Speaker 1: talk a lot about driverless cars, artificial intelligence, three D printing,
Speaker 1: things like that in your in your book. Are things
Speaker 1: like that going to really boost productivity or do we
Speaker 1: have to think of a combination of these inventions like
Speaker 1: you talked about as well. I think it's both some
Speaker 1: core technologies and the recombination of these technologies. And if
Speaker 1: I were forced to say the ones that are most
Speaker 1: excited about right now, I would have to say the
Speaker 1: broad cluster of artificial intelligence, particularly what I sometimes called
Speaker 1: the second wave of the second machine age, which is
Speaker 1: this ability for machines to learn on their own how
Speaker 1: to solve problems using neural nets, deep learning, reinforcement learning,
Speaker 1: and that is what's enabling some of these inventions. You
Speaker 1: talked about driverless cars, and we featured them at the
Speaker 1: beginning of our book, and some people kind of made
Speaker 1: fun of us for being very science fiction e back in.
Speaker 1: But they're happening even faster than we predicted that for
Speaker 1: that matter, faster than I think most of the technologists
Speaker 1: even predicted. UM Singapore is rolling up driverless taxis actually
Speaker 1: rolled them out last week using some M I T technology.
Speaker 1: Uber has some driverless cars in Pittsburgh this month. And
Speaker 1: they still have a human sitting in the front seat
Speaker 1: just to kind of keep an eye on it. But
Speaker 1: the technology is happening pretty rapidly, and that's driven by
Speaker 1: these machine learning systems that have vastly improved vision. When
Speaker 1: we wrote the book, humans could see better than machines.
Speaker 1: Now in many tasks, machines are much better, for instance,
Speaker 1: that recognizing street signs or uh interpreting images in a
Speaker 1: big databases like image net. The same technology is vastly
Speaker 1: improved voice recognition, and even in mundane things that we
Speaker 1: don't hear that much about, like power use in data centers.
Speaker 1: Google's deep Mind team, a group of AI researchers turned
Speaker 1: their technology on their own data centers and very quickly
Speaker 1: found that they were able to run them more efficiently. Um,
Speaker 1: they're working to diagnose diseases better. So what we're doing
Speaker 1: is taking this core technology of artificial intelligence machine learning
Speaker 1: and combining it with knowledge and lots of different areas
Speaker 1: to create new products and services. Eric, I'm glad you
Speaker 1: mentioned the belt White a little while ago. The sort
Speaker 1: of technological advances that you're talking about saying to be
Speaker 1: running parallel to or transcending the political process Is there
Speaker 1: anything that could go wrong or right with this essentially
Speaker 1: optimistic view after the election? Oh very much so. I
Speaker 1: can see a lot of ways this can go wrong.
Speaker 1: You know, technology is a catalyst for bigger changes, but
Speaker 1: by itself, technology doesn't raise living standards. It requires a
Speaker 1: host of complementary innovations, just as it did in the
Speaker 1: Industrial Revolution, investments in education, reorganization of work, new policies.
Speaker 1: I don't see as being nearly as good at those
Speaker 1: complementary innovations or nearly as fast at those complementary innovations
Speaker 1: as we have been in the core technologies, and the
Speaker 1: political system doesn't give me a lot of optimism. And
Speaker 1: that's the part that, if anything, I'm more depressed about
Speaker 1: than it was in the past. And that shows up
Speaker 1: in some really alarming statistics that we highlighted in the
Speaker 1: our and and I highlighted in our book the second
Speaker 1: machine age UM like the stagnation of median income. It's
Speaker 1: bumped up a little bit the past year, but it's
Speaker 1: still lower now, significantly lower now than it was back
Speaker 1: in the year two thousand. UM that income at the
Speaker 1: fiftie percentile, overall income of the economy, overall GDP per
Speaker 1: person is higher, much higher than it was. So how
Speaker 1: is that possible that median income is lower. Well, that's
Speaker 1: because it's become more unequal. There are a lot of
Speaker 1: people who have jobs, a lot of particularly routine information
Speaker 1: processing jobs that aren't as much in demand as they
Speaker 1: were a decade or two ago. Um. There's a variety
Speaker 1: of reasons for that, but one of the most important
Speaker 1: ones is the machines can do a lot of those
Speaker 1: jobs better, like travel agents or routine tax preparation, or
Speaker 1: just a lot of clerks and middle managers that used
Speaker 1: to shuffle a lot of paper. Machines are getting really
Speaker 1: good at that, reading legal documents, etcetera. That's a concern,
Speaker 1: and we need to rethink our policies, retrain people, boost
Speaker 1: entrepreneurship to help invent new goods and services. Uh and
Speaker 1: and people need to work harder at their own skills
Speaker 1: and educate themselves so that they'll be more prepared for
Speaker 1: the kinds of jobs that machines don't do as well.
Speaker 1: That does, is that what you're trying to do with
Speaker 1: this competition inclusive innovation. Thanks for mentioning that, so you know,
Speaker 1: we don't want to just talk about it UM and
Speaker 1: research it. We wanted to take an active role. So
Speaker 1: here at M I t A, we've got a research
Speaker 1: center called the Initiative on the Digital Economy, and we've
Speaker 1: launched an inclusive innovation competition to recognize and reward the
Speaker 1: companies that are doing what I just described, that are
Speaker 1: using technology to involve more people in the workforce to
Speaker 1: create more shared prosperity. I've been reviewing those applications along
Speaker 1: with an all star lineup of judges. That is a
Speaker 1: cause for optimism because there are just so many amazing entrepreneurs,
Speaker 1: social entrepreneurs and for profit entrepreneurs and people working with
Speaker 1: labor and with technology that are in the process of
Speaker 1: reinventing our economy. So that's what we need to see
Speaker 1: more of. We need to encourage it UM. Sadly, broadly speaking,
Speaker 1: entrepreneurship has not been keeping up with technology. Uh. Great
Speaker 1: work by Halta Wanger and Steve Davis and others has
Speaker 1: pointed out that we haven't had as dynamic economy as
Speaker 1: we used to have, so so that that would be
Speaker 1: where I want to work harder. And UH, if we
Speaker 1: do that, I think median incomes will recover Now that
Speaker 1: that brings us to a related issue, which is the
Speaker 1: government's role in all of this. Paul Krugman, for example,
Speaker 1: who you said in your book is a fan of
Speaker 1: government borrowing at low interest rates for infrastructure. There's also
Speaker 1: an issue with government support for R and D. What
Speaker 1: role does the government play in the Second Machine Age? Yeah,
Speaker 1: you know, I think there's too many people who try
Speaker 1: to make it in either or either the government does
Speaker 1: or the private sector. I think it's got to be
Speaker 1: a both and Um, the government has an absolutely essential
Speaker 1: role in basic R and D helping set standards, provide
Speaker 1: the basic infrastructure. The Internet itself started as a government project,
Speaker 1: and so on top of that, there was a bunch
Speaker 1: of companies that made billions of dollars making the Internet
Speaker 1: more relevant to consumers and more useful for businesses. I
Speaker 1: think we've got to continue that spirit of government focusing
Speaker 1: on basic R and D and infrastructure and also boosting
Speaker 1: education and then making it easier for companies to build
Speaker 1: on that foundation to create wealth. Much of the Second
Speaker 1: Machine Age appears sensitor around the United States. How has
Speaker 1: America placed relative to other lodge economies in this next
Speaker 1: golden era of tech and productivity. I think one of
Speaker 1: the advantage of the United States has is it's encouraged
Speaker 1: a lot of the kinds of entrepreneurship, not as much
Speaker 1: as it should or could, but still it's encouraged it
Speaker 1: in a way that a lot of other countries haven't.
Speaker 1: It had a relatively well educated workforce and one that
Speaker 1: has a lot of creativity. But this is not really
Speaker 1: one nation versus another nation kind of question. These innovations
Speaker 1: are largely boundary lists and I just just back from Helsinki,
Speaker 1: where there's some amazing people working at companies like super Cell,
Speaker 1: creating billions of dollars of value with just a handful
Speaker 1: of engineers. Um Stockholm is another example. Amazing things happening
Speaker 1: in London, in Tokyo, in Shenzang, in Bangalore. If you're bright,
Speaker 1: and you have an idea and you have access to
Speaker 1: the Internet, you can reach a billion people and do
Speaker 1: amazing things in the way you couldn't have previously. This
Speaker 1: is a very new era. I had an undergraduate student
Speaker 1: who wrote a little app. He said he took him
Speaker 1: a few weeks, and uh, in a few months he
Speaker 1: had a million users. That's something that wouldn't have happened
Speaker 1: ten or twenty years ago, and it really has lowered
Speaker 1: the boundaries to innovation quite a bit, and we all
Speaker 1: stand to gain from it, regardless of where those in
Speaker 1: leaders are located. But it sounds like you're definitely not
Speaker 1: a US declinist. No, I mean it's not. And again
Speaker 1: it's not the US versus other countries. I'm pretty optimistic
Speaker 1: because I see such amazing technologies in the pipeline. I'm
Speaker 1: concerned because it's not automatic that those technologies are going
Speaker 1: to benefit everybody, or benefit people more broadly. So I'd
Speaker 1: like to see the U, S and other countries work
Speaker 1: towards shared prosperity. But I don't see it as a
Speaker 1: contest between one country or another. I see it as
Speaker 1: a contest between good policies and bad policies worldwide. It's
Speaker 1: about to tell you about a real life technological challenge
Speaker 1: he faced on the weekend with his car. That's right.
Speaker 1: A few days ago, my car's battery died while I
Speaker 1: was out with my family. Um, you know this might
Speaker 1: illustrate a couple of our issues. I was able to
Speaker 1: search easily for an open service shop using Google Maps,
Speaker 1: but I still had to trudge there and wait awhile
Speaker 1: to get the battery installed, and you know, just the
Speaker 1: fact that the battery he runs out. That's another issue
Speaker 1: that you point to in your book. We haven't developed
Speaker 1: the kinds of battery technologies, uh that we have and
Speaker 1: other kinds of information technology. We're still using the same
Speaker 1: technology as decades ago to power cars. We haven't really
Speaker 1: made full advance in that yet. There's no equivalent of
Speaker 1: Uber for car repairs like this, Is this a bottleneck
Speaker 1: in the economy? Do we have to wait until we
Speaker 1: can get driverless cars that can charge batteries that last forever?
Speaker 1: There are thousands of all next and that's one of them.
Speaker 1: Or is entrepreneurs called them opportunities? Um? Uber for car repair?
Speaker 1: I think that there's probably going to be a bunch
Speaker 1: of business plans submitted to our VC friends after this podcast.
Speaker 1: I would sign up for that. And Uh, that's something
Speaker 1: that our mobile infrastructure makes easier to handle than previously.
Speaker 1: I was just looking at some charts on battery technologies
Speaker 1: and I always astonished that it's it's really started improving
Speaker 1: quite a bit lately. Um. You know, uh, Elon Musk
Speaker 1: is bringing on the Gigafact three that's going to drive
Speaker 1: down production costs quite a bit, and and feeling they're
Speaker 1: thinking of developing even cheaper battery factory. So I think
Speaker 1: we have a lot of barriers to overcome. Um. This
Speaker 1: is a theme that I write about in my research
Speaker 1: a lot that that when someone makes a big invention
Speaker 1: like electricity, the steam engine, or the microprocessor, then thousands,
Speaker 1: if not millions of other people have to make complementary
Speaker 1: innovations that make it really useful. And that's the process
Speaker 1: we're going through right now, whether it's with electric vehicles
Speaker 1: and self driving cars, or mobile telephony or artificial intelligence.
Speaker 1: Al Right, professor, well, thank you very much for joining us.
Speaker 1: We'll leave it there. It's been a pleasure. So we've
Speaker 1: now heard from both Gordon and Brynjolfson. Who do you
Speaker 1: think is right? Well, we'll just have to wait and see.
Speaker 1: Maybe both of them could be right, but you know,
Speaker 1: there's there's uh they but they both raised some pretty
Speaker 1: strong points about whether the best days are behind us
Speaker 1: or whether you know, there's really no coreation between what's
Speaker 1: happened before and what will happen in the future. It's
Speaker 1: like they say, in the markets, past performances is no
Speaker 1: indication of the future. So it just depends if we're
Speaker 1: in that age and and maybe we could have these
Speaker 1: innovations and still you know, and not have growth or
Speaker 1: growth without innovations. I was struck by Eric's upbeat tone,
Speaker 1: and that comes through in the book. Scott. I'm wondering
Speaker 1: if the period we're in now is kind of analogous
Speaker 1: to the early nineteen nineties. The popular narrative was in
Speaker 1: America was washed up. There was a rising Asian power
Speaker 1: which was going to crush us jobless recovery, wageless recovery.
Speaker 1: And yet as the nineties unfolded, something of a great decade,
Speaker 1: and even Bob Gordon talks about progress in productivity, significant
Speaker 1: progress made in the nineteen nineties. I wonder whether we're
Speaker 1: at the cusp of something now. But the popular narrative
Speaker 1: is just so down we don't even read allies. It's
Speaker 1: happening before our eyes. Well, that's going to keep us
Speaker 1: busy for the next ten or twenty years trying to
Speaker 1: answer these questions and talk about them with our audience.
Speaker 1: Right then, thank goodness, Benchmark will be back next week,
Speaker 1: And until then you can find us on the Bloomberg
Speaker 1: Terminal and Bloomberg dot Com, as well as on iTunes,
Speaker 1: pocket casts, and Stitcher. While you're there, take a minute
Speaker 1: to rate and review the show so more listeners can
Speaker 1: find us and let us know what you thought of
Speaker 1: the show. You can talk to and follow us on
Speaker 1: Twitter at Daniel Moss, d C at Scotland, and our
Speaker 1: guest is it at Eric. Bring see you next week.