By Greg Satell
From roughly the time of Jesus to Napoleon, life changed little. Then the industrial revolution replaced muscle power with steam power and human existence was transformed. Incomes, life expectancy and population, which had long been locked in Malthusian conflict, began to reinforce each other and rise in tandem.
It’s hard to overestimate how profound that change was. Prosperity, rather than being tied to land, became a function of the efficient use of capital. Physical strength was rendered largely irrelevant and education became a ticket to a better life. Technology, in effect, created the modern world.
We’re at a similar point in history today as intelligent machines are beginning to replace human cognitive power. This revolution, much like the industrial revolution that came before it, will change the basic rules of success that dominated the last few centuries. Rather than knowledge and intelligence, the ability to collaborate will be the defining competitive attribute.
The Rise Of The Knowledge Worker
The industrial revolution created truly incredible gains in efficiency. By pairing men with machines, rather than working livestock, productivity exploded. This, in turn, led to enormous social change, such as migration to cities, an end to child labor and the rise of public education.
It also changed how we organize work. Ideas from people like Frederick Winslow Taylor and Henry Ford showed that competitiveness could be drastically increased by organizing the factory floor more intelligently and implementing new techniques. Firms like Kodak and General Electric founded corporate labs to dream up new components and products.
It was these developments that led Peter Drucker to introduce the concept of the knowledge economy, where workers were not valued for their labor as much as they were for their expertise. By the 1950’s, firms were investing in corporate universities and other forms of training. Human capital began to outstrip physical capital.
We take this all for granted today, but a century ago, when most jobs were relatively simple and few people had anything beyond a very basic education, it would have seemed positively radical. The next shift, however, could possibly be even more transformational.
The Information Economy And The Media Revolution
Knowledge and information are often confused. Knowledge is highly personal. I might know how to swim or how to make a great souffle, but can’t easily transfer that knowledge to another. Information, on the other hand, is highly fungible and can be transferred efficiently, with minimal loss. What’s more, unlike physical products, the value information does not diminish with use.
Erik Brynjolfsson and Andrew McAfee, two economists at MIT, point out that information makes it possible to create scale without mass, because it allows business processes to be replicated nearly instantaneously and with perfect fidelity across an enterprise. This creates a fundamental shift in economics from the old economy of physical products.
High quality informational products also don’t incur any greater marginal costs than low quality informational products do. Google’s algorithms, for example, are just as easily replicated across servers as anybody else’s, which is something you can’t say about physical products, like luxury cars or watches.
What drives the information economy is media, which Marshal McLuhan called “extensions of man” because they allow us to extend our senses much farther and deeper than we can achieve organically. TV, for example, brings faraway events into our living rooms, just as the Internet allows us to share information in a way that transcends the limits of time and space.
It is that ability to extend our cognitive reach, much like the industrial revolution extended our physical reach, that is what’s driving change today.
The Rise Of The Robots
What’s new about the world evolving now is the emergence of informational products—both algorithms and physical robots—that also contain knowledge. Machines like IBM’s Watson can compile mountains of information, recognize patterns and perform analysis. Now, even in the cognitive realm, the work of humans is being replaced by machines.
It’s impossible to overstate how important this development is. A typical teenager today has more access to information—as well as true knowledge—than a genius ensconced in a major institution a generation ago. Samuel Arbesman even predicts that computers might soon be able to make discoveries that we can’t even understand, much less uncover ourselves.
Informational technology today is replacing human cognitive power much like steam power, the internal combustion engine and electricity replaced physical power during the industrial revolution. This is true not just in basic jobs like bank tellers and travel agents, but also advanced professions medicine, law and creative work.
No one is safe anymore. So in a sense, we’re all Luddites now.
It's No Longer What You Know, But How You Connect
Now that machines are increasingly replacing humans in doing cognitive tasks—work that was highly prized in the last century—the obvious question to ask is what will humans do? Geoff Colvin, argues in his book Humans Are Underrated that the obvious answer is to work with other humans. In other words, the social tasks that machines are almost comically bad at.
We’ve all experienced the frustration of having to deal with automated customer service, but the flaws in computers go much deeper than that. For example, artificial intelligence systems like IBM’s Watson can process medical information and suggest diagnoses, but can’t effectively interact with and counsel patients.
And while computers can do low level tasks very efficiently, like legal discovery and summarizing box scores they still can’t do socially driven tasks, like connecting with a jury, writing an impassioned plea or offering support to a colleague. Only humans can successfully deal with other humans and, more than ever, the high level work is being done in teams.
In truth, this new era we are embarking on will not be solely human driven or machine driven, but a collaboration between humans and machines. Consider that when a freestyle chess tournament that included both humans and machines was organized, the winner was not a chess master or a supercomputer, but two amateurs running three simple programs in parallel.
And that’s why the new economy really is a social economy. The future belongs not to the strongest or the smartest, but those who can collaborate—with humans and machines—most effectively.
This post was originally published in Forbes on NOV 6, 2015 @ 11:28 PM
Satell, Greg. "Why The New Economy Really Is A Social Economy." Forbes. Forbes Magazine, 15 Nov. 2015. Web. 21 Mar. 2017.