PART I
"The
Second Industrial Revolution"
On May 26, 1733, John Kay, a twenty-nine-year-old
inventor, received the news that the English Patent Office had awarded him a patent for
his New Engine for Opening and Dressing Wool, now known as the flying shuttle. To Kay this
was good news, for he had hoped to start a small business supplying his new machine to the
burgeoning English textile factory. What neither Kay nor his contemporaries realized at
the time was that his innovation in the weaving of cloth represented the launching of the
Industrial Revolution.
Like many innovations that come at the right time in the right place,
the flying shuttle caught on quickly. Unfortunately, Kay was more talented as an inventor
than as a businessman, and after losing most of his money in litigation attempting to
enforce his patent, he moved to France, where he died in poverty.
Kay nonetheless had a lasting impact. The widespread adoption of the
flying shuttle created pressure for the more efficient spinning of yarn, which led to Sir
Richard Arkwright's Cotton Jenny, patented in 1770. In turn, machines to card and comb the
wool to feed the new mechanized spinning machines were developed in the 1780s. By the turn
of the century all aspects of the production of cloth had been automated. The cottage
industry of English textiles was rapidly being replaced by increasingly efficient
centralized machines.
Good ideas catch on and innovators in other industries took note of the
dramatically improved productivity that mechanization had brought to English textiles. The
process of industrialization spread to other industries and to other countries. Major
innovations that followed included Ford's (1863-1947) concept of mass production and
Edison's (1847-1931) harnessing of the electron. Ultimately Europe, the United States,
Japan, ad other parts of the world shifted from an agrarian and craft economy to one
dominated by machines. The succession of increasingly efficient generations of automation
has continued to this day. The changing patterns of production and employment, together
with related scientific advances, have had dramatic effects on all aspects of modern life,
profoundly affecting our social, cultural, educational, economic, and political
institutions.
The Industrial Revolution was not without its controversies. Emerging,
appropriately enough, from the English textile industry, the Luddite movement was founded
in Nottingham in 1811. The movement posed a serious and violent challenge to what its
members perceived as a diabolical danger to the textile workers' livelihoods. In one
sense, the fears of the Luddites were accurate. Jobs they thought were threatened by the
new machines did indeed disappear. At the same time, however, new jobs were created as new
industries emerged and economic activity increased, although this was often of little
consequence to those displaced. The Luddite movement itself was ended within a decade of
its founding due to a combination of repression and prosperity, although its name has
remained very much alive as a symbol of a still lingering issue. Automation versus jobs is
still a particularly controversial issue in Europe, where it has had a noticeable impact
on the rate at which new automated t! echnol ogies are introduced. In the United States
the issue simmers beneath the surface of political debate but rarely affects the pace of
change. In Japan the issue is virtually unknown, due partly to a tradition in which the
prosperous "first tier" industrial corporations provide lifetime employment,
although employment guarantees are generally not extended by the less powerful
"second tier" corporations and cottage industries.
Let us examine the Luddite issue for a moment. It is generally
acknowledged that new jobs result as new industries are created by the advent of
automation. The critical question then becomes, How do these jobs compare to the jobs that
are displaced? In particular, for eery ten jobs that are eliminated by automation, are we
creating twelve new jobs or eight? Do the new jobs pay more or less than the older ones?
Are they more or less fulfilling? What about those who are displaced; can they be
retrained for the new jobs? Are they?
We now have over a century of extensive industrialization to look back
on, and an examination of some clear economic trends over the past century can provide
insights into at least some of the above questions. With regard to the numbers of jobs,
the answer is closer to twelve than eight. In 1870 only twelve million Americans,
representing 31 percent of the population, had jobs. By 1985 the figure rose to 116
million jobs held by 48 percent of the population. This substantial increase in the number
of jobs occurred despite the dramatic shift away from the labor content of agriculture. In
1900 more than a third of all Americans were involved in food production. Today Americans
are better fed and a major food exporter, with only 3 percent of the workforce involved.
In the economic power of jobs we see the most dramatic change. The gross
national product on a per capita basis and in constant 1958 dollars went from $530 in 1870
to $3,500 in 1970. There has been a similar change in the actual earning power of the
available jobs. This 600 percent increase in real wealth has resulted in a greatly
improved standard of living, better health care and education, and a substantially
improved ability to provide for those who need help in our society. At the beginning of
the Industrial Revolution life expectancy in North America and northwestern Europe was
about 37 years. Now, two centuries later, it has doubled.
The jobs created have also been on a higher level and indeed much of the
additional employment has been in the area of providing the higher level of education that
today's jobs require. For example, we now spend ten times as much (in constant dollars) on
a per capita basis for pubic school education than we did one hundred years ago. In 1870
only 2 percent of American adults had a high school diploma, whereas the figure is 76
percent today. There were only 52,000 college students in 1870; there are 7.5 million
today.
Attempts to project these trends into the future, including a recent
study by the Institute for Economic Analysis at New York University, where a detailed
input-output model of the U.S. economy was studied, indicate a continuation of these same
trends. While there will be ebbs and flows in economic development, the trend over the
next two decades indicates that employment and productivity will continue to increase, as
will the average educational level of the population. The study indicated, for example,
that the share of jobs going to professionals will increase from 15 percent today to 20
percent by the end of the next decade, with engineers and teachers accounting for
virtually all of the increase.
From these trends it would seem that the concerns of the Luddite
movement are not well founded. From a macroeconomic point of view, it is clear that
automation and other related technological advances have fueled over a century of dramatic
economic development. There are nonetheless difficult, if often temporary, dislocations
that result from rapid technological change. As our smokestack industries contract,
workers with one set of skills do not necessarily find it easy to develop new careers.
With the pace of change accelerating, we as a society need to find a way to provide viable
avenues for displaced workers to reenter the economic mainstream with something more than
a new dead-end job.
As profound as the implications of the first Industrial Revolution were,
we are now embarking on yet another transformation of our economy, based once again on
innovation. The Industrial Revolution of the last two centuries - the first Industrial
Revolution - was characterized by machines that extended, multiplied, and leveraged our
physical capabilities. With these new machines, humans could manipulate objects for which
our muscles alone were inadequate and carry out tasks at the previously unattainable
speeds. While the social and economic impact of this new technology was controversial, the
concept of machines being physically superior to ourselves was not. After all, we never
regarded our species as unequaled in this dimension. Jaguars can run faster than we can,
lions are better hunters, monkeys are better climbers, whales can dive deeper and longer,
and birds are better fliers - indeed, without machines we cannot fly at all.
The second industrial revolution, the one that is now in progress, is
based on machines that extend, multiply, and leverage our mental abilities. The same
controversies on social and economic impact are attending this second great wave of
automation, only now a new and more profound question has emerged. Though we have always
regarded our species as relatively mediocre in physical capability, this has not been our
view with regard to our mental capacity. The very name we have given ourselves, Homo
sapiens, defines us as the thinking people. The primary distinction in our biological
classification is the ability of our species to manipulate symbols and use language.
Before Copernicus (1473-1543), our "species centricity" was
embodied in a view of the universe literally circling around us in a testament to our
unique and central status. Today our belief in our own uniqueness is a matter not of
celestial relationships but of intelligence. volution is seen as a billion-year drama
leading inexorable to its grandest creation - human intelligence. The spectre of machine
intelligence competing even tangentially with that of its creator once again threatens our
view of who we are.
This latest revolution, based on machines that expand the reach of our
minds, will ultimately have a far greater impact than the revolution that merely expanded
the reach of our bodies. It promises to transform production, education, medicine, aids
for the handicapped, research, the acquisition and distribution of knowledge,
communication, the creation of wealth, the conduct of government, and warfare. The
cost-effectiveness of the key ingredients in our new technological base - computers and
related semiconductor technology - is increasing at an exponential rate. The power of
computer technology now doubles (for the same unit cost) every 18 to 24 months.
Unlike some revolutions, this latest transformation of our industrial
base will not arrive after one brief period of struggle. It will be a gradual process, but
it is one already under way. The potential exists to begin to solve problems with which
the human race has struggled for centuries. An example is the application of computer
technology to the needs of the handicapped, a personal interest of mine. It is my belief
that the potential exists within the next one or two decades to greatly ameliorate the
principal handicaps associated with sensory and physical disabilities such as blindness,
deafness, and spinal cord injuries. New bioengineering techniques that rely on expert
systems and computer-assisted design stations for biological modeling are fueling a new
optimism for effective treatments of a wide range of diseases, including genetic
disorders. The increase in per capita wealth - 600 percent in the past 100 years - is
projected to continue. There are many other examples of anticipated benefit.
The potential for danger is also manifest. We are today beginning to
turn over our engines of war to intelligent machines, whose intelligence may be as flawed
as our own. Computer technology is already a powerful ally of the totalitarian.
The advent of intelligent machines is altering global trade
relationships. A remarkable aspect of this new technology is that it uses almost no
natural resources. Silicon chips use infinitesimal amounts of sand and other readily
available materials. They use insignificant amounts of electricity. As computers grow
smaller and smaller, the material resources utilized are becoming an inconsequential
portion of their value. Indeed, software uses virtually no resources at all. The value of
the technology lies primarily in the knowledge governing the design of the hardware,
software, and data bases that constitute our intelligent machines, and in the ability to
continue advancing these designs. This decreasing importance of material resources has
allowed Japan, a country very poor in natural resources but rich in knowledge and
expertise, to become one of the two wealthiest nations on the planet. There is the
potential for emerging nations to largely skip industrialization and develop
postindustrial societies based on an information economy. While the first Industrial
Revolution increased the demand for and the value of natural resources, the second
industrial revolution is doing the opposite.
In the case of computer software, it is apparent that one is paying for
the knowledge inherent in the design and not for the raw materials represented by the
floppy disk and users' manual. What is sometimes less apparent is that the same economic
model holds for most computer hardware as well. An advanced chip generally costs no more
to produce than a floppy disk. As with a software program, the bulk of the cost of a chip
is neither raw materials or manufacturing labor, but rather what accountants call
amortization of development, and what philosophers call knowledge.
It is estimated that raw materials comprise less than 2 percent of the
value of chips (which is about the same estimate as for software) and less than 5 percent
of the value of computers. As our computers become more powerful, the percentage of their
value accounted for by raw materials continues to diminish, approaching zero. It is
interesting to note that the same trend holds for most other categories of products. Raw
materials comprise about 20 percent of the value of musical instruments, with this figure
rapidly declining as acoustic musical-instrument technology is being replaced with
digital-electronic technology. George Gilder estimates that the cost of raw materials for
automobiles is now down to 40 percent of total costs. Again, this figure will continue to
decline with the increasing use of computers and electronics as well as the replacement of
expensive and relatively simple body materials such as steel with inexpensive yet
relatively complex alternative materials such as new high-tech plastics.
With regard to the world of defense, military engagements such as the
Israeli destruction of Russian SAM sites in Syria, the use of "smart" missiles
in the Falklands war, and others have illustrated the growing importance of artificial
intelligence in the military. Many military observers now predict that in the 1990s,
artificial intelligence technology will be of greater strategic importance than manpower,
geography, and natural resources. A major program called SCI (Strategic Computing
Initiative) envisions the soldier of the future relying on a vast network of intelligent
computers to make tactile decisions, fly planes, aim weapons, and avoid enemy fire.
A lesson we can draw from these observations is the importance of
education and training in a world relying increasingly on skill and innovation and
decreasingly on material resources. One reliable prediction we can make about the future
that the pace of change will continue to accelerate. he revolution manifest in the age of
intelligent machines is in its earliest stages. The impact of this new age will be greater
than the radical technological and social changes that have come before it. It cannot be
stopped. We need to understand it, live creatively with it, and harness it constructively.
That is what this book is all about.
AMID THE RECENT SPATE of books
anticipating our possible technological futures, Ray Kurzweil's The Age of Spiritual
Machines stands out both for its enthusiasm and for its odd and unsettling vision of the
future. If Kurzweil is right, when we finally take to the stars, we will more closely
resemble the Borg Collective than the United Federation of Planets — and we will have
embraced this fate of "assimilation" simply in the course of trying to keep up
with our own technology.