Do More. Do Things That
Were Previously Impossible! Tim O’Reilly @timoreilly oreilly.com wtfeconomy.com SxSW March 9, 2018

Will there really be nothing
left for people to do? Is there really nothing left for humans to do?

Dealing with climate change Rebuilding
our infrastructure Feeding the world Ending disease Resettling refugees Caring for each other Educating the next generation Enjoying the fruits of shared prosperity

What is keeping us from
working on stuff that matters?

WTF?
Amazement or Dismay?
wtfeconomy.com

Our maps of the world
are steering us wrong In 1625, we thought California was an island

In 2005, we thought the
connected taxicab looked like this

This was science fiction, until
it wasn’t

And you thought drones would
deliver pizza

1. In 2018, we believe
that it is technology that will put people out of work

What happened when Amazon added
45,000 robots

Jeff Bezos calls this “the
flywheel”

Amazon ran this same play
in cloud computing Radically lower prices Create demand for something that didn’t really exist yet Open up Amazon’s platform so others provide more services Create more demand

Give people new superpowers

Michael Mandel on ecommerce vs
retail  Since 2007, hours worked by production and nonsupervisory employees in the digital sector have risen by 8.5 percent compared to a 3.4 percent increase in the physical sector.  The ecommerce sector is adding jobs much faster than the general retail sector is losing them.  The ecommerce sector added 355,000 jobs from 2007 to 2016—more than enough to compensate for the 51,000 jobs lost in the general retail sector.  Wage and salary payments to ecommerce workers have increased by almost $18 billion since 2007, in 2016 dollars. By comparison, real wage and salary payments to workers in general retail have risen by less than $1 billion over the same period. http://www.progressivepolicy.org/wp-content/uploads/2017/03/Tech-middle-class-3-9-17b.pdf

“Frontier Firms” are more productive,
and eventually pay everyone more

100 years
Lister’s Mill, Bradford

Why Innovation Takes Time to
Show Up in Productivity James Bessen

It is not just technology
innovation, but the diffusion of knowledge through society about how to use new technology that makes a difference in making us all richer.

Eventually, there were dozens of
specialized machines, and complicated workflows. But that wasn’t all. In addition to inventing new machines, people had to learn to use them, fix them, improve them. Systems were needed for distributing and selling the wealth of new products. An educated, prepared workforce is an ecosystem.

We sent children to school
instead of the fields and factories

On Demand Learning

A platform for people to
teach each other

“In order to fully reap
the benefits of a changing economy— and sustain growth over the long-term—businesses will need to increase the earnings potential of the workers who drive returns, helping the employee who once operated a machine learn to program it. They must improve their capacity for internal training and education to compete for talent in today’s economy and fulfill their responsibilities to their employees.” Larry Fink, CEO, Blackrock

Values Alert: Structural Changes In
the Economy “In the 35 years between their jobs as janitors, corporations across America have flocked to a new management theory: Focus on core competence and outsource the rest.”

It is machines that help
us to feed 7 billion

Our digital systems enhance our
capabilities with software and data the way our physical systems use heavy equipment  Users post 7 billion pieces of content to Facebook a day.  Expecting human fact checkers to catch fake news is like asking workers to build a modern city with only picks and shovels.  At internet scale, we now rely increasingly on algorithmic systems to manage what we see and believe.

“I’ve just invested in an
AI startup that will put 30% of call center workers out of a job.” (A VC who shall remain nameless)

Don’t replace people. Augment them!

This is what technology wants
“Prosperity in human societies is best understood as the accumulation of solutions to human problems. We won’t run out of work until we run out of problems.” Nick Hanauer

The March of Progress

Technology is our superpower

Inequality is our kryptonite

2. In 2018, we still
believe that it’s acceptable for companies to maximize their profits, regardless of the social, environmental and human consequences

We’ve heard from the economists
and financial writers

What the great technology platforms
teach us about the economy and the future of work wtfeconomy.com

Fitness Landscapes The way in
which genes contribute to the survival of an organism can be viewed as a landscape of peaks and valleys. Through a series of experiments, organisms evolve towards fitness peaks, adapted to a particular environment, or they die out. Image source: http://evolution.berkeley.edu/evolibrary/article/side_0_0/complexnovelties_02

Fitness landscapes are dynamic When
conditions are stable, a population chooses one fitness peak and stays there. But when conditions change, populations must migrate to a new fitness peak.

Local Maxima Once you are
on a peak, it’s hard to get to another one, even if it’s higher. You have to go back down. It may be easier to get to the top if you are already starting from a valley floor.

Technology also has a fitness
landscape In my career, I’ve watched a number of migrations to new peaks, and I’d like to share with you some observations about what happened, and why. And then we’ll talk about some lessons for companies like Google, but also for the overall economy. Personal Computer Big Data and AI Smartphones Apple

Big Data and AI Tim
Berners-Lee, 1990 The World Wide Web Linus Torvalds, 1991 Linux

This happens in politics as
well Voters are moving away from the fitness peak of the neoliberal consensus. We don’t know yet where that new fitness peak will be, but the migration is telling us loud and clear that the economy needs some fresh thinking.

Yes, things are changing. But
one thing doesn’t change. A successful ecosystem creates opportunity for everyone, not just a few.

“Society is demanding that companies,
both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Larry Fink, CEO of Blackrock

BCG’s Sustainable Economic Development Assessment

Total Societal Impact as Business
Advantage

Climate change has been a
classic driver for the change in fitness landscapes, for organisms and for civilizations.

3. In 2018, too many
people still believe that technology is a magic bullet fired from the same old gun

Death Star Thinking “What’s the
lesson too many people take from that first and most influential episode in the franchise back in 1977? One incredibly well-placed shot into the thermal exhaust port and the entire apparatus of our oppression explodes spectacularly. All we really needed were the plans to the Death Star and a very talented fighter pilot guided by the truth (“the Force”.) Never mind that there are countless Death Stars ahead of us as the Imperial war (and the franchise) continues. That one glorious victory and the release it provided became the implicit theory of change.” Jennifer Pahlka, Death Star Thinking and Government Reform Jennifer Pahlka

Why simply adding an app
doesn’t change the game for taxis

“A business model is the
way that all of the parts of a business work together to create competitive advantage and customer value.” - Dan and Meredith Beam

A Business Model Map of
Southwest Airlines Low ticket prices Short-haul, point to point routes No seat assignments No baggage forwarding Lean gate and ground crews Highly paid employees Flexible union contracts High level of employee stock ownership

A Business Model Map of
Uber  A magical app that lets drivers and passengers find each other in real time  A networked marketplace of drivers and passengers  Augmented workers able to join the market as and when they wish  Managed by algorithm

The Augmented Worker Neo: “Can
you fly that thing?” Trinity: “Not yet.”

Gradually, then suddenly 1. We
are creating new kinds of partnerships between machines and humans 2. Artificial Intelligence and algorithmic systems are everywhere 3. The world is becoming infused with the digital

We see the same thing
with Uber and Lyft Oxford Internet Institute study:  50% more total hours worked  Higher wages per hour https://www.oxfordmartin.ox.ac.uk/downloads/academic/Uber_Drivers_of_Disruption.pdf

But…

Platforms are marketplaces. They have
to work for all of their participants. wtfeconomy.com

Creating a “thick marketplace” Markets
are outcomes. A better designed marketplace can have better outcomes.

The great opportunity of the
21st century is to use our newfound cognitive tools to build better marketplaces

4. In 2018, we believe
that human-hostile AI is a future risk

We are all living and
working inside a machine

The coming robots are not
autonomous

Symbiogenesis and the origin of
eukaryotic cells: “species form new composite entities by fusion and merger” “Nearly all extranuclear genes are derived from bacteria or other sorts of microbes. In the search for what genes outside the nucleus really are, I became more and more aware that they're cohabiting entities, live beings. Live small cells reside inside the larger cells…. different bacteria form consortia that, under ecological pressures, associate and undergo metabolic and genetic change such that their tightly integrated communities result in individuality at a more complex level of organization. The case in point is the origin of nucleated (protoctist, animal, fungal, and plant) cells from bacteria…. species form new composite entities by fusion and merger.” Lynn Margulis

Biological symbiosis doesn’t stop there
“All zoology is really ecology. We cannot fully understand the lives of animals without understanding our microbes and our symbiosis with them…. When we look at beetles and elephants, sea urchins and earthworms, parents and friends, we see individuals, working their way through life as a bunch of cells in a single body, driven by a single brain, and operating with a single genome. This is a pleasant fiction. In fact, we are legion, each and every one of us. Always a ‘we’ and never a ‘me’.... Heed Walt Whitman: “I am large, I contain multitudes.” Ed Yong

From genes to memes “Language
doesn’t emerge de novo in each person; it is passed, with little modification, from generation to generation. We speak the language of our parents, they spoke the language of their parents, and so on, further and further back in the past.” – John Skoyles

And you can think of
the Internet as the next evolutionary step

AI is “the most serious
threat to the survival of the human race” Elon Musk

The runaway objective function “Even
robots with a seemingly benign task could indifferently harm us. ‘Let’s say you create a self-improving A.I. to pick strawberries,’ Musk said, ‘and it gets better and better at picking strawberries and picks more and more and it is self-improving, so all it really wants to do is pick strawberries. So then it would have all the world be strawberry fields. Strawberry fields forever.’ No room for human beings.” Elon Musk, quoted in Vanity Fair https://www.vanityfair.com/news/2017/03/elon-musk- billion-dollar-crusade-to-stop-ai-space-x

Algorithmic systems have an “objective
function” Uber and Lyft: Passenger pick up time Google: Relevance Facebook: Engagement What is the objective function of our financial markets?

The Equinix NY4 data center,
where trillions of dollars change hands

We didn’t mean to increase
inequality and gut our economy “The Social Responsibility of Business Is to Increase Its Profits” Milton Friedman, 1970

Zeynep Tufekci Author of Twitter
and Teargas

“The art of debugging is
figuring out what you really told your program to do rather than what you thought you told it to do.” Andrew Singer Andrew Singer

5. In 2018, we are
still trying to revive the old economy, rather than inventing the future that is possible now

“Economic Possibilities for Our Grandchildren”
The world of his grandchildren—the world of those of us living today— would, “for the first time . . . be faced with [mankind’s] real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.” John Maynard Keynes John Maynard Keynes

Divergence of productivity and real
median family income in the US

There’s plenty to go around.
It’s just not going around!

“If total US household income
of $8.495 trillion were shared by America’s 116 million households, each would earn $73,000, enough for a decent middle- class life.” Brian Arthur

The fundamental economic question is
no longer how to incentivize production but how to incentivize fair distribution of the fruits of increased productivity Brian Arthur

So what are we going
to do about this?

It is the job of
the entrepreneur to redraw the map

We Need the “Human Colossus”
to Work on Stuff that Matters

What’s the Future? It’s Up
To us wtfeconomy.com

Tim O’Reilly  Founder &
CEO, O’Reilly Media  Partner, O’Reilly AlphaTech Ventures  Board member, Code for America  Co-founder, Maker Media @timoreilly • O’Reilly AI Conference • Strata: The Business of Data • JupyterCon • O’Reilly Open Source Summit • Maker Faire • Foo Camp • … • 40,000+ ebooks • Tens of thousands of hours of video training • Live training • Millions of customers • A platform for knowledge exchange • Commercial internet • Open source software • Web 2.0 • Maker movement • Government as a platform • AI and The Next Economy