DEDICATION Both of us dedicate this book to our kids—Hayes and Chase in Tom’s case, and David, Jane, and Ted in Julia’s. Julia has confidence that hers, in their very human and different ways, will make the world a better place. Tom is similarly sure that his will continue to find interesting and useful work, and hopes they provide him with grandchildren so that the theories in this book can be fully tested over the long run. CONTENTS Dedication Introduction 1. Are Computers Coming After Your Job? 2. Just How Smart Are Smart Machines? 3. Don’t Automate, Augment 4. Stepping Up 5. Stepping Aside 6. Stepping In 7. Stepping Narrowly 8. Stepping Forward 9. How You’ll Manage Augmentation 10. Utopia or Dystopia? How Society Must Adapt to Smart Machines Acknowledgments Notes Index About the Authors Also by Thomas H. Davenport and Julia Kirby Copyright About the Publisher INTRODUCTION I n the bucolic outskirts of tiny Talcott, West Virginia, stands a statue of a man who succeeded—however briefly—in beating a machine that threatened to take his job. John Henry, a steel driver working for the Chesapeake & Ohio Railway in 1870, was part of a crew carving a mile-long tunnel through Big Bend Mountain when management brought in a steam-powered drill. Henry said he could outdo the drill and he did, only to die soon after from the exertion. Roadside America, a guide to “offbeat tourist attractions,” sums things up: “As an inspiring tale for the working everyman, his story obviously leaves something to be desired.” We might wonder why it was so important to Henry to beat the machine. There is a bigger question, though: Why does his victory over the machine still resonate with the rest of us? Why the folktale and why the statue? Why do we still teach schoolchildren to sing his ballad? Anxiety about machines encroaching on the work of people runs deep. Some sixty years before the Great Bend Tunnel, the Luddites (possibly named after an early machine smasher, Ned Ludd) reacted more destructively to the stocking frames, spinning frames, and power looms that were making textile workers redundant. Some eighty years after John Henry, in 1955, Ford Motor Company workers rose up against unprecedented automation of the assembly lines in Brook Park, Ohio. Their wildcat strikes were blessed by local union leader Alfred Granakis, who called the automation of manufacturing an “economic Frankenstein.” The aftermath has always been far more positive than folks imagined. We could cite any number of economic studies giving the lie to what economists call the “Luddite fallacy.” They show that productivity gains have in fact always led —eventually if not immediately—to more jobs, not fewer. True, many tasks leave the hands of humans, but the technologies simultaneously usher in plenty of new, higher-order tasks for people to do instead. There has always been higher ground to which humans could retreat. Job losses due to “skill-biased technical change” are therefore real, but temporary. Even today, as an Oxford University study claims that 47 percent of total U.S. jobs are at risk of termination because of computerization in the near future, economists (and plenty of technology vendors) offer assurances that the same will happen again. But what if, this time around, things play out differently? What if there is no higher ground? It’s important to note that the type of work being displaced today is of a different kind than in the past. In fact, we can easily trace three eras of automation, based on the types of work they have brought machines forth to challenge. First, machines relieved humans of work that was manually exhausting and mentally enervating. This was the story of the late industrial revolution, which, having pulled all those workers off farms and into factories, proceeded to make most of them unnecessary with contraptions like the flying shuttle, the spinning jenny, and the power loom. And it’s a process that continues around the world. Consider Foxconn, the Chinese manufacturing subcontractor to global electronics brands like Apple. Starting in 2011, it started putting robots on the lines to perform welding, polishing, and such tasks—ten thousand of them that first year. In 2013, Chairman Terry Gou noted at Foxconn’s annual meeting that the firm now employed over a million people. But, he was quick to add: “In the future we will add one million robotic workers.”1 If that goal is realized, it will mean, of course, that some hundreds of thousands of human workers will never get hired—a loss of jobs for the local economy. But at the level of the individual worker, it might feel like less of a loss, because the particular tasks that are being taken away are generally not cherished. In Amazon’s gargantuan warehouses, for example, it’s tough for workers to pick and pack customer orders if they have to do the running from one end of the building to another—so tough that journalists working there undercover have published scathing articles about the inhuman demands placed on them. So now the company uses Kiva Systems (now Amazon Robotics) robots to bring shelves to the workers, allowing humans—who still have strong advantages in spotting the specific items and packing them appropriately—to stay in one place. Does it make the job easier? Without a doubt. Does it mean Amazon needs fewer people to fulfill a given number of orders? You bet. The second era of automation followed workers to the higher ground they’d headed for when machines took the grunt work. For the most part, this wasn’t the realm of the dirty and dangerous anymore. It was the domain of dull. Think, for example, of the 1960s-era secretary toiling away in a typing pool, translating scribbled or spoken words into neat memos. Some might call this “knowledge work,” since it calls on brain rather than brawn, but it clearly stops short of decision-making. After computers were invented, it was easy territory for machines to make more productive. For some secretarial tasks, here’s how far that process has gone. In the midst of working on this section, Tom was planning to meet a friend for coffee later in the week. The friend is an independent consultant, so it was slightly surprising to learn, by being cc’d on an email, that he employed an assistant, “Amy.” He wrote: Hi Amy, Would you please send an invite for Tom and me for Friday 9/19 at 9:30A.M. at Hi-Rise Cafe in Cambridge, MA. We will be meeting in person. Thanks, Judah Curiosity getting the best of him, Tom looked up the company in Amy’s email extension, @x.ai. It turns out X.ai is a company that uses “natural language processing” software to interpret text and schedule meetings via email. “Amy,” in other words, is automated. Meanwhile, other tools such as email and voice mail, word processing, online travel sites, and Internet search applications have been chipping away the rest of what used to be a secretarial job. Era Two automation doesn’t only affect office workers. It washes across the entire services-based economy that arose after massive productivity gains wiped out jobs in agriculture, then manufacturing. Many modern jobs are transactional service jobs—that is, they feature people helping customers access what they need from complex business systems. But whether the customer is buying an airline ticket, ordering a meal, or making an appointment, these transactions are so routinized that they are simple to translate into code. You might well know someone—a bank teller, an airline reservations clerk, a call center representative —who lost his or her job to the new reality of computerized systems enabling self-service. At least, you feel the absence of them when you contact a company and encounter a machine interface. Just as Era One of automation continues to play out, so does Era Two. There is still plenty of work currently performed by humans that could be more cheaply and capably performed by machines—increasingly smart ones in particular. Think, for example, of the loneliness of the long-distance trucker—a job, by the way, that didn’t exist in the early industrialization era but was created by technological progress. Human drivers are still kings of the road, but perhaps not for much longer. Tom recently asked a senior FedEx executive whether he thought that his company would switch anytime soon to self-driving trucks. His casual response—“Well, not on the local routes”—is perhaps not what the drivers’ union would want to hear. It occurs to us that every type of low-level service task the two of us did during our college summers could probably be done better today with automation—Tom’s floor sweeping at a steel mill by a high-powered Roomba, for example, and Julia’s retail clerking by a self-service kiosk. Even Tom’s best days working at a service station might soon be surpassed by the robotic gas pumps undergoing regulatory testing now. And this brings us to Era Three, with automation gaining in intelligence and (excuse us while we check our mortgage balances) now breathing down our necks. Now computers are proving in various settings that they are capable of making better decisions than humans. As the technology research firm Gartner notes, this will make the next two decades the most disruptive era in history, one in which computer systems “fulfill some of the earliest visions for what information technologies might accomplish—doing what we thought only people could do and machines could not.”2 As with other dramatic technology advances, Era Three will bring both promise and peril. The good news is that new cognitive technologies will help to solve many important business and societal problems. Your local doctor will have the expertise of an international specialist. You’ll be guided effectively through mazes of online products and services. Whatever your job, you’ll have the knowledge at your fingertips to perform it productively and effectively. If you have a job, that is. The obvious peril in Era Three is more job loss. This time the potential victims are not tellers and tollbooth collectors, much less farmers and factory workers, but rather all those “knowledge workers” who assumed they were immune from job displacement by machines. People like the writers and readers of this book. Knowledge Workers’ Jobs Are at Risk The management consulting firm McKinsey thinks a lot about knowledge workers; they make up essentially 100 percent of its own ranks as well as its clientele. When its research arm, the McKinsey Global Institute, issued a report on the disruptive technologies that would most “transform life, business, and the global economy” in the next decade, it included the automation of knowledge work. Having studied typical job compositions in seven categories of knowledge workers (professionals, managers, engineers, scientists, teachers, analysts, and administrative support staff), McKinsey predicts dramatic change will have already taken hold by 2025. The bottom line: “we estimate that knowledge work automation tools and systems could take on tasks that would be equal to the output of 110 million to 140 million full-time equivalents (FTEs).”3 Since we’ll continue to use the term “knowledge workers” quite a bit, we should pause to define who these people are. In Tom’s 2005 book, Thinking for a Living, he described them as workers “whose primary tasks involve the manipulation of knowledge and information.”4 Under that definition, they represent a quarter to a half of all workers in advanced economies (depending on the country, the definition, and the statistics you prefer), and they “pull the plow of economic progress,” as Tom put it then. Within large companies, he explained, the knowledge workers are the ones sparking innovation and growth. They invent new products and services, design marketing programs, and create strategies. But knowledge workers don’t only work in corporate offices. They include all the highly educated and certified people who make up the professions: doctors, lawyers, scientists, professors, accountants, and more. They include airline pilots and ship captains, private detectives and bookies—anyone who has had to study hard for their job and who succeeds by their wits. And every one of these jobs has significant components that could be performed by automated systems. It’s a category that’s fuzzy around the edges. Does it, for example, include London taxi drivers—who famously have to acquire “the Knowledge” to be licensed? Does it include a translator? A filing clerk? A tour guide? For the purposes of this book, we can leave those as questions. Where exactly we draw the line is not all that important because, when we think about what work is threatened, it’s all of the above. Why Worry About Less Work? Machines are becoming so capable that, today, it is hard to see the higher cognitive ground that many people could move to. That is making some very smart people worry. Massachusetts Institute of Technology (MIT) professors Erik Brynjolfsson and Andy McAfee, for example, in their acclaimed book, The Second Machine Age, note that the anticipated recovery in labor markets has been just around the corner for a long time. The persistence of high unemployment levels in Western economies might mean that the dislocation caused by the last wave of skill-biased technical change is permanent. Paul Beaudry, David Green, and Benjamin Sand have done research on the total demand for workers in the United States who are highly skilled.5 They say demand peaked around the year 2000 and has fallen since, even as universities churn out an ever-growing supply. Income inequality is a growing concern in an economy that has fewer good jobs to allocate. There is already evidence that the big payoffs in today’s economy are going not to the bulk of knowledge workers, but to a small segment of “superstars”—CEOs, hedge fund and private equity managers, investment bankers, and so forth—almost all of whom are very well leveraged by automated decision-making. Meanwhile, labor force participation rates in developed economies steadily fall. Silicon Valley investor Bill Davidow and tech journalist Mike Malone, writing recently for Harvard Business Review, declared that “we will soon be looking at hordes of citizens of zero economic value.”6 They say figuring out how to deal with the impacts of this development will be the greatest challenge facing free market economies in this century. Many seem to agree. When the World Economic Forum (WEF) surveyed more than seven hundred leading thinkers in advance of its 2014 annual meeting in Davos, Switzerland, the issue they deemed likeliest to have a major impact on the world economy in the next decade was “income disparity and attendant social unrest.” Explaining that “attendant social unrest,” WEF’s chief economist, Jennifer Blanke, noted that “disgruntlement can lead to the dissolution of the fabric of society, especially if young people feel they don’t have a future.”7 And indeed, various studies have shown that idle hands really are the devil’s playground. (Perhaps the best was a 2002 analysis by Bruce Weinberg and his colleagues that looked at crime rates across an eighteen-year period in the United States.8 All the increases, they discovered, could be explained by rising unemployment and falling wages among men without college educations.) It isn’t only that people become disgruntled when they lack the income that flows from a good job. They miss having the job itself. This was what