Using Machines to Race

This is an informal summary of Race Against the Machine (Brynjolfsson, McAfee) which I found intriguing.  The book says that much of our increased structural unemployment is due to the rapid pace of technological advancement and the inability of training to keep up with this tech progress.  Economists refer to this training lag and the technologies most subject to it by the acronym “Skill-Biased Technical Change” (SBTC).   In the author’s view (and mine) SBTC is one of the primary factors in the current economy which has broken the link between value creation and job creation. The authors point out that capital equipment spending has returned to pre-recession levels, but our human skills at creating and supporting the newly technologically possible innovation and organizational processes is sadly lagging.

There are a large number and wide variety of potential jobs that would be available if there were people who knew how to do them. More people with the new and evolving hands-on computer skills are needed.  Equally or more important, people are needed who can conceptualize new uses of technologies to redefine decision work flows, user/customer incentive systems, and a whole range of other processes.  These are ways to combine computer and human capital making the sum greater than the parts. Interestingly, it is getting the process right that matter most.  The authors say, “weak human + machine + better process” was superior to a strong computer alone and, more remarkably, superior to “strong human + machine + inferior process”.

Superior processes are easily replicated by competitors – so the real competitive advantage goes to organizations that have the process improvement process as a core competency.  That means we all have to be in the business of organizational innovation.  Improved business models, organizational structures, and technology platforms are the scaffolding required for some of the future superiority in processes. Knowledge of the business domain is critical – but it needs to be paired with being adept at conceptualizing it as being done in a different way.

The book speculates about concurrent experimental process innovation by thousands of “micro-multinationals” (businesses with few employees with worldwide suppliers, partners and customers).  This large number of innovators could lead to a combinatorial approach to configuring applications, systems, activities into processes for sales, distribution, financial and other activities. Using IT, processes can either be scaled up or customized as needed for a product.

The fastest growing areas of system and process innovation would be the ones that are rewarded for collaborating on and sharing their new methods.  Perhaps the most critical area for this is education.  All of these approaches will need to create control groups for alternate approaches, quantify what works – but only some will have the culture to share their findings and replicate superior approaches across organizations.

Towards the end the authors say that “successful economies in the 21st century will be those that develop the best ways to foster organizational innovation and skill development”.

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