The Bonnie Lea Book Club convened to discuss a book on the social and economic revolution happening today, entitled Machine Platform Crowd. The book begins with examples of the Triple Revolution, a quick synopsis of three major trends that the book focuses on: computing power, including deep learning, self-learning "Machines"; Platforms, where new business ideas can be tested and shaped, giving us the largest transportation company in the world (Uber), with no vehicles, the largest hospitality company, Airbnb, with no properties, and the largest content creator in the world that doesn't create any content (Facebook); and finally the crowd, small market microcosms, inspiring businesses exactly what products consumers want, ss well as solve problems too big or complicated for individuals operating independently.
The writing was OK, but the volume of information and examples cited made reading tedious in large chunks. Further, while excellent in technology, was less insightful in matters of business. That said, we are all glad we read it for the insight into the trends affecting our economy and our society.
Computers have only recently emerged from a marginal role in business, keeping track of money, information transmission, and data storage, into a more central role in decision making today. Instant recall and deep thinking analysis of ever greater amounts of data means machine decisions eclipse many traditional human roles. In many businesses, the only humans that matter are the customers. This is the second machine age. It's bigger than the first.
One of the distinctions of this confluence of deep learning machines and platforms is between bits of data and atoms. When information (bits) is the product, platforms can distribute to customers as perfect products, for free, and instantly. Music is one example: there is no marginal additional cost to distribute a song to another listener. Free, perfect and instant is difficult to compete with. And this ‘free, perfect and instant’ is changing the economic applications of supply and demand with lower and lower prices bringing more new buyers into a market.
An example of what the crowd can create, consider Linux, an open-source operating system, meaning its source code is freely available, and anyone can make changes to make it more stable and effective. Microsoft and Apple hold their source code close. Today Linux powers over 1.5 billion Android phones, and is the most professional operating system in the world. The crowd brings a diversity of thought, experience and insight that no panel of experts can offer. Crowd solutions work best when open and self-regulating: good solutions progress, bad ideas die. One of the contributors to Uber's and Airbnb's success is that both buyer and sellers of service can rate each other. These solutions can exceed the performance or insight of the "core", the experts - the HiPPOs (Highest Paid Person in the Office).
Platforms will not cannibalize everything, and in some cases simply add demand that hadn't existed: Airbnb's offer of homes and interaction with hosts, for example. However, disruption to all industries with information assymetries will still be widespread.
Decentralization and fast powerful computing enable Bitcoin, an open, decentralized currency. Because ledgers exist in blocks, showing where each bitcoin has been spent, the chain of previous ledgers provides the entire history of bitcoins spent. However, digital currencies may not survive national governments interests (China) or ownership by a block of more than 50% (who could decide who keeps their currency).
We talked a lot about the disruption expected in employment: millions will be displaced. New jobs will be created as others are made. The question is the transition, the re-tooling. Digitization puts pressure especially at the lower end of wage earners. We know that wages as a percentage of GDP are shrinking; capital is taking an ever larger share of GDP. This trend is sure to accelerate. While the book doesn't delve into the social implications of this pattern, the conclusion is easy to draw: bad for the lower half of today's wage spectrum; possibly bad for the lower 90% in a few years.
Doug and Rob both talked about the effect of block chains on the internet of things; including whether processing power can keep up with the volume of data. Both agreed that the open nature of block chains will have tremendous impact on financial transactions, as they can eliminate the risk of fraud, and can follow every transaction to the nano-grids.
Our conversation eventually turned to when machines eclipse human creativity, and then, the Skynet concept, the Rise of the Machines, a new Alpha on planet earth. Bill argued that human creativity, with every nuance from personal experiences, will never be eclipsed by machines. Can a machine hold two different opinions on a single subject? Not today. Not yet?
The social benefits of lower prices will continue to benefit workers at the lower end of the wage spectrum. But what will these folks do when the jobs they’ve trained for don’t exist?
The book talked about the future of platform development, and the continued disintermediation of the knowledge vendor. The internet has already disrupted travel, finance, and many other industries. Platforms thrive where asymmetrical information exists, accelerating the disintermediation process. Are future platforms only for the FANGs? - the digital giants: Facebook, Apple, Netflix and Google. Is economic growth limited to the FANGs with their head start on the aggregation of data? The immediate solution is to provide the services along with the human element. It may be a barbell effect: OK for the very large, already ahead, and OK for the small, who can leverage the powers of this second machine age without the legacy ballast. Time will tell, but recognizing the landscape is one requirement.
Overall, the book was a wake-up call on this new economic age we're entering into. Worth the read.
Our next book:
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