Hatching Free Range Ideas

The second economy, a neural backbone for the first economy

In How we learn and think on October 6, 2011 at 8:27 pm

I just read a really readable, cogent article sent to my through McKinsey’s e-newsletter and written by W. Brian Arthur, who is described in the article as:

a visiting researcher with the Intelligent Systems Lab at the Palo Alto Research Center (PARC) and an external professor
at the Santa Fe Institute. He is an economist and technology thinker and a pioneer in the science of complexity.

I say BIG BRAIN. The paper is incredibly readable and quite fascinating. It provides both a believable pessimism on the overall jobs market while providing an optimistic perspective on the economy.


Twenty years ago, if you went into an airport you would walk up to a counter and present paper tickets to a human being. That person would register you on a computer, notify the flight you’d arrived, and check your luggage in. All this was done by humans.

Today, you walk into an airport and look for a machine. You put in a frequent-flier card or credit card, and it takes just three or four seconds to get back a boarding pass, receipt, and luggage tag. What interests me is what happens in those three or four seconds.

The moment the card goes in, you are starting a huge conversation conducted entirely among machines. Once your name is recognized, computers are checking your flight status with the airlines, your past travel history, your name with the TSA  (and possibly also with the National Security Agency). They are checking your seat choice, your frequent-flier status, and your access to lounges.

This unseen, underground conversation is happening among multiple servers talking to other servers, talking to satellites that are talking to computers (possibly in London, where you’re going), and checking with passport control, with foreign immigration, with ongoing connecting flights. And to make sure the aircraft’s weight distribution is fine, the machines are also starting to adjust the passenger count and seating according to whether the fuselage is loaded more heavily at the front or back.

His point is that this second economy is made up of the bits and bytes of information that are collected, related and shared about practically everything — soon to be everything that doesn’t require human judgement. People who are responsible for business processes had better watch their backs (or their fronts or futures or something). And that is where many of the jobs have disappeared, permanently.

The other point is that this neural underpinning of the first economy will be responsible for the productivity improvements that will drive the growth of GDP. The basic problem is that if jobs are the ticket to prosperity and there are fewer jobs, fewer people will have tickets to this new prosperity.

This was a very short book report but you have to read the book to find out how it ends.


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