Brynjolfsson and McAfee

Supported by Greenhaven Road Capital, finding value off the beaten path.

For a long time, there were only small changes in human existence. Then James Watt was asked to fix a steam engine. Watt fixed, tinkered, thought, experimented, and (is credited) with the invention of the double acting piston. Then the industrial revolution took off. Watt’s invention is a GPT (general purpose technology). Christened to remove water from mines, it was implemented in many other places. Subsequent GPTs were railways, the internal combustion engine, and electricity.

Technology becomes a GPT and not just a T when it’s applied to adjacent domains. In the early days of electricity, factories kept their layouts but changed their fuel. Electricity became an OG GP with the conveyer belt.

From there we get the Model-T, which benefited from another GPT, the combustion engine. Then we got the internet. As Andrew Ng noted, malls with websites weren’t Amazon competitors. What makes an internet company said Ng, is acting like an internet company. One example is Spotify and the Discover Weekly Playlist. AI may be another GPT, because Brynjolfsson said, “The core AI breakthroughs have applications in just about every part of the economy.”

This doesn’t mean the end of work. “It’s too soon to worry about the end of work…it may be that someday we will be able to make machines that do the full spectrum of what humans can do but that’s not the challenge we face today.” Ng said to think of tasks, of “anything a typical person can do with less than a second of thinking we can probably now assume automate.” Ajay Agrawal said much the same, “AI doesn’t do workflows, it does tasks,” and “Think of the recent advances in AI as advances in prediction; better, faster, cheaper prediction.”

Brynjolfsson isn’t worried about jobs so much as returns from work. Median income is flat since 1999 and though the economy has grown, the top twenty percent (based on wealth) earned more than 100% of the gains. They are the Apple iPhone of the economy.

What’s allowed this? People do more with less. Facebook bought Instagram when there were fifteen employees. When photography was a chemistry problem, Kodak occupied the lord’s estate and 145,000 serfs kept the kingdom running. When photography became an arithmetic problem Kevin Systrom & Mike Krieger stormed the gates with a band of merry men. Though it wasn’t only men, it was Systrom’s wife, neé girlfriend, who contributed an essential idea.

Instagram’s success is emblematic of the digitization bull that’s gone through the economic china shop. Along with easy copies are zero marginal cost distribution and the rise of the individual. Steve Jobs got this wrong, noted Brynjolfsson’s co-author, Andrew McAfee. Jobs mistakenly wanted the app store to remain closed. But the iPhone’s ascent accelerated when it opened, creating what Alex Moazed calls a Modern Monopoly.

Though we do more with less, “it would take the average American only eleven hours of labor per week to produce as much as he or she produced in forty hours in 1950,” this doesn’t mean the end of jobs is nigh. The Second Machine Age is an optimistic book about work.

AI, like other technologies, can supplement humans. Thanks to algorithms we’ll stick with base rates rather than have overconfidence in our abilities. McAfee said, “The single biggest failure mode that I see when I talk to smart people is that smart people tend to have exaggerated version of a failure mode, to be too confident of their own judgment.”

Then there are the jobs that won’t be too affected. In a study of 964 O*Net occupations, most had 20-30 tasks and most of the tasks were things algorithms won’t or can’t do. “When you look at all the tasks of a particular occupation, some of them were suitable for machine learning but many others were not. There was no case where machine learning just ran the table and was able to do the whole set.”

We talk about truck drivers being automated but truck drivers do a lot. Finn Murphy wrote that he was not only a driver but a manager, counselor, and in one case, an honorary Native American. Hal Varian makes a similar point when he points out that only one job has been automated away, the elevator operator. But, the tasks from that job have shifted to other areas, receptionists, concierges, and hostesses all do more.

Education might help. “There’s an increasing need for interpersonal skills…It’s not that work is disappearing but that there’s a whole bunch of tasks that only humans can do and we need to shift our skillset into those and then labor income is likely to go up.”

In another talk Brynjolfsson explains, “Right now and for the next ten years training and education are probably at the top of my list and most economists…I don’t think our schools are doing a very good job teaching those, or worse yet, many of them are actually crushing them.”

Seth Godin wants schools to teach students how to lead and how to ask interesting questions. Bill Burnett at Stanford ( said school cripples our creativity, “Something happens, mostly our educational system which promotes a massive fear of failure and a search for only one right idea.”

Rory Sutherland noted that the opposite of a good idea may be another good idea, which is contrary to the one-right-answer attitude in some schools. Pat Dorsey praised the liberal arts approach to education; “In a way equity investing combines a lot of different fields in that it is a set of ever-shifting problems to be solved. It’s not electrical engineering where there’s a right answer to everything. There is never a right answer to what the company is worth, or what is the competitive advantage to a business, or how much cash will they generate in five years.”

Which brings us to Erik Brynjolfsson and Andrew McAfee’s, Machine, Platform, Crowd. They wrote this one because “People who run companies kept approaching us in the hallways of places like Davos and kept on saying, ‘I believe your story, now what do I do?’ In some cases, I got the impression that there was desperation behind the questions,” explained McAfee.

Brynjolfsson and McAfee’s solution is in the title; collaborate with machines, harness platforms, and use the wisdom of crowds.

They wrote the book because “The narrative these days is that technology is killing jobs and it’s not too far from that narrative to ‘therefore technology is a bad thing’. We think that’s a really harmful road to go down.” Paul Daugherty agrees, “I’ve started using the term ‘collaborative intelligence’ rather than ‘artificial intelligence’. The problem with AI is it scares the public and it leads to the wrong discussions.”

Another stumbling point is making GPTs general. Malls with websites aren’t Amazon and record stores online aren’t Spotify. The issue is that “Tech progress rewrites the business playbook.” McAfee said, “I see a lot of companies underestimating the power of machines a lot of companies underestimating the power of platforms and a lot of companies not doing a great job of tapping into the crowd.”

Okay, so how can someone use these ideas?

For machines, we need to get away from HiPPO decisions ( and move to Geek decisions. This is sabermetrics in baseball like the Oakland A’s. This is running 10,000 experiments a day like at Google. This is who to market new shows to like at Netflix.

For platforms, the key is the interface. How can an organization create an easier way for customers to find X? How can an organization create easier ways for producers to create X? Successful platforms solve for Michael Munger’s three T’s; triangulation, transaction, and trust.

For crowds, the key is trusting weirdos. McAfee said that the core can be bested by the crowd. “I honestly just mean these hundreds of millions or very soon billions of complete stranger weirdos out there available on the internet that you can tap into where you can access their knowledge and their tenacity and their energy if you do it correctly.”

Yet again we’ll remind ourselves that technology is a tool like a shovel not a panacea like a silver bullet. It’s still up to the user not to hammer their thumb. Machines, crowds, and platforms are wonderful compliments for decision making. McAfee said, “The failure mode among really smart people is to trust themselves too much.”

No one knows how fast work will change. We’ll get glimpses of pieces first. The duo gives examples like a smart grid in a series of factories or an autonomous shipping route from Dallas to Los Angeles. While Brynjolfsson wants more training, McAfee wants changes to the entrepreneurship policy and physical infrastructure.

Neither seems to think work is going to go away in the next thirty years, and McAfee points out work is more than a job. “I’ve become a fanatic about work, about the value and importance of something like a job. The evidence is overwhelming that when work leaves a community bad things happen.”

Roger Lowenstein wrote about Warren Buffett, “(he) understood that most people, regardless of what they say, are looking for appreciation as much as they are for money.” Voltaire concluded, “Work keeps at bay three great evils: boredom, vice, and need.” Adam Smith suggested that man wants to be loved and be lovely. Andy Grove wrote this:

“I felt the frustration that comes when the things that worked for you in the past no longer do any good.”

“Businesspeople have emotions, and a lot of their emotions are tied up in the identity and well-being of their business.”

“In many instances, your personal identity is inseparable from your lifework.”

Change, especially when your personal identity is at stake, isn’t easy. Brynjolfsson and McAfee cite the work of Angus Deaton and Ann Case who coined ‘deaths from despair’. “I think about which of those social problems will be fixed by a magical check from the government showing up every month,” McAfee said, “and my answer is basically none.”

Jobs give more than money.

We don’t know how the future will be different only that it will be different. In that spirit we’ll take our final word from Andy Grove:

“You need to plan the way a fire department plans: It cannot anticipate where the next fire will be, so it has to shape an energetic and efficient team that is capable of responding to the unanticipated as well as to any ordinary event.”


Thanks for reading.

4 thoughts on “Brynjolfsson and McAfee”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.