Men, women – and machines

The rise of interconnected digital machines is threatening to change our economy in profound ways

Image of Gillian Tett

This month, we enter the season of Goodwill to All Men (and Women). But there is a bitter irony. What will actually make the world go round this holiday season is not simply the labour of real-life women and men – but the silent actions and communications of millions, if not zillions, of interconnected machines.

Think about it. If you travel this holiday via airports or train stations, you will invariably be clutching tickets with electronic barcodes, which will be waved at automatic turnstiles or check-in desks – which will duly send signals to other machines. If you buy a holiday gift or groceries, you will wave more barcodes – and probably swipe credit cards too; hence more silent electronic communication.

And as turkeys or toys fly off retail shelves, messages will be sent on electronic systems that will communicate with supply depots, warehouses and transport groups across the world, to create a seamless supply chain. Almost any action you take today, in other words, involves an interconnected digital machine. One might almost call these machines the third great sex: in the labour market now, it is not simply a question of men versus women, but men, women – and machines.

Does this matter? Brian Arthur, an esteemed economist, scientist and visiting scholar at the Palo Alto Research Center, thinks it does. For the crucial thing to understand about these new digitised machines, he argues in a thought-provoking piece written in the latest McKinsey Quarterly, is that they are not just automating human processes; since 1990, these machines have been communicating with each other and interacting with decreasing human oversight. The net result is the rise of a second, “digitised economy”, which is operating alongside the “real” human world – and threatening to change our economy in profound ways.

“If I were to look for adjectives to describe this second economy, I’d say it is vast, silent, connected, unseen and autonomous (meaning that human beings may design it but are not directly involved in running it),” Arthur explains. “It is self-configuring, meaning it constantly reconfigures itself on the fly, and increasingly it is also self-organising, self-architecting and self-healing,” he adds. Indeed, the digitised system is so well-installed and self-sufficient that Arthur likens it to a giant neural network, or tree roots in a forest: invisible, entwined, crucial – and vast. “By a rough back-of-the-envelope calculation, in about two decades the digital economy will reach the same size as the physical economy,” he warns. “It’s as if there will be another American economy anchored off San Francisco and growing all the while.”

Some economists might dispute these calculations (Arthur does his sums by noting that productivity has grown about 2.4 per cent a year since machines started to talk to each other, and assumes that digitisation accounts for 65-100 per cent of the productivity increase with modest population growth, and projects that trend forward). But whatever number you prefer, the implications are fascinating. One question, for starters, is what might happen if that “neural network” were to go haywire, or be sabotaged.

Another is what this means for human jobs. These days, it is popular in America to blame the fact that unemployment is at 9 per cent on the competitive threat from places such as China and India. But Arthur believes that the key factor is the growth of the digitised economy. To be sure, rising productivity has brought many benefits: in a digitised economy there is potentially more gender equality (since women can generally compete better when it is brain, not brawn, that counts); and rising productivity ensures that growth continues, even if labour supply stays the same. This is important since, as a separate piece for the McKinsey Global Institute notes, “As baby boomers retire and the female participation rate plateaus, the US economy will receive significantly less lift from increases in the labour force and will therefore have to rely increasingly on productivity gains to fuel growth.”

But while Arthur expects that this “second economy will certainly be the engine of growth and the provider of prosperity”, the risk is that “there may be prosperity without full access for many.” In other words, the rise of the second economy could produce enforced idleness for some (say, those without jobs) and hyperactive productivity for others (ie those with jobs). Indeed, in some respects, this is what has already developed. Thus, he predicts, “the main challenge of the economy” in the future will shift “from producing prosperity to distributing prosperity” – at least as far as policymakers and economists are concerned. The next time you swipe a barcode, in other words, spare a thought for the wider implications of what you have just unleashed. The arrival of that third (interconnected machine) sex may yet turn out to be far more profound than any of the power shifts that happen between women and men in the next few years.

gillian.tett@ft.com

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