Monday, July 31, 2017

Early Indications July 2017 Review essay: Machine Platform Crowd by Andrew McAfee and Erik Brynjolfsson

Despite U.S. CEO pay being a bigger multiple of average wages than ever before, the job is also incredibly stressful, with intense shareholder pressure. Ford, GE, and Macy’s all have new chief executives this year, in part because product companies are valued much lower than platforms: Ford stock currently trades around $11.00 a share while Tesla is in the 300s. Former Ford CEO Mark Fields is out of a job; Elon Musk is a worldwide rock star.

Academic readers who follow Internet economics have known of MIT professor Erik Brynjolfsson’s work for nearly 25 years, while general tech/business readers know his collaboration with Andrew McAfee, The Second Machine Age, that has sold well for the past three years. Their new book is very sound in its architecture, and even though I wish it went forward to use the model more (see below), I will be assigning this title in both undergraduate and masters’ classes starting in August. That makes it the first book I have ever assigned for business-school student purchase.

The book is written with exceptional clarity over a robust conceptual scaffolding. The global economy, we are told, is negotiating three ”rebalancings” as digital business practices expand their reach and impact. First, thinking machines (we learn a lot about the game of Go) can outperform humans on new kinds of cognitive tasks previously thought to be impossible for computers. Second, platform business models (Google, Apple, Amazon, Facebook, and Uber lead the list) outperform sellers of products; witness GE’s effort to become an industrial Internet of Things platform under former CEO Jeff Immelt. Finally, firms are no longer the default way to get things accomplished: digitally coordinated crowds are counterposed against “the core,” which means formal organizational structures: “the knowledge, processes, expertise, and capabilities that companies have built up internally, and across their supply chain” (p. 15).

Never do the authors go into Chicken Little mode and say the corporation is endangered or that all non-Internet stocks are “toast.” Rather, the challenge will be to negotiate the balance between each of the three dualisms. We will for a very long time have various blends of machine and human, platform and product, and crowd and core. The book’s examples of the three dualities are well chosen, hitting the right note between familiarity and below-the-radar startup, and with global coverage.

It should be clear that I find the book very valuable; it’s attractively comprehensive and accessible without being pedestrian. That said, it could be better, and I will note some little things then some bigger things that could aid in this pursuit. First, I don’t find the “core” concept as intuitively solid as the other five 5 tent-poles — readers can decide for themselves. Secondly, the book includes those annoying business-book checklists at the end of every chapter. This may be a marketing-mandated reaction to demographic change given that old guys like me might not be the meat of the book’s target audience, but the last book (that lacked the chapter end matter) sold very well for Norton, who also published the new book. I’m not sure why they were deemed necessary this time around.

More substantively, it concerned me that Uber gets let off without much of a critical reading. The company absolutely is rewriting our sense of what is possible in Internet business practice, and an incredible growth rate demands its inclusion. Still and all, nothing is said regarding the company’s extraordinary string of allegedly criminal conduct regarding Google IP (currently being tried in a California courtroom), outright deceit (proven lies told to drivers, riders, regulators, and likely investors), and a systematically sexist corporate culture (in addition to treating female employees horribly, the company has spied on female reporters who use the service and compiled the “rides of glory” analysis of men who were driven to an address not their own after some late hour at night). McAfee and Brynjolfsson are correct to include Uber as a harbinger of machine/platform/crowd dynamics, but to leave the company’s broadly and consistently appalling aspects unspoken cheapens the book.

My larger disappointment is more structural. The three rebalancings are very much taken in isolation, but combinations thereof show the power of the currents we are navigating. Google/Alphabet is a machine learning platform company, whether in its autonomous vehicles, its Nest thermostat business, or its core advertising/search operation. Amazon uses crowds (to write reviews of products and reviews of reviewers), it is a portfolio of platforms from AWS to Kindle to Echo to partner sellers, and machine learning drives everything from product recommendations to shipping time estimation to asset provisioning. In other words, what do the two MIT researchers have to say about the systematic impact of overlapping machine, platform, and crowd expertise? Not a lot. A few companies are mentioned in multiple sections of the book, but in the conclusion, where I expected to to transcend the three silos, there is nothing. In 2017, can a company aspire to platform status without machine learning dominance? I doubt it. (Look at aspiring platforms Snap or Slack for confirmation.) Why is this concurrence so? Perhaps platforms are the strategic objective, machine learning (and human talent expertise alongside it) the core competency, and crowd utilization a byproduct of the platform’s scalability?

Let me end on a positive note, for my disappointment is a product of how much value I found in the base typology. Rather than being written for Silicon Valley (“here’s how to create the next billion-dollar startup”), Machine Platform Crowd feels directed at the rest of us. That is, rather than informing the next Mark Zuckerberg or Travis Kalanick (both of whom, in my view, have profited too much on the privacy tax they levy on others), the book feels like it is sounding the alarm. Unless the likes of Caterpillar or GM or Marriott or Time Warner or Target or your favorite Big State University get the joke and build credible platforms on top of innovative machine thinking (in part by harvesting crowds’ insight and diversity of outlook), far too much of our future economic welfare, privacy, and consumer choice will be concentrated in a radically distilled winner-take-all economy. McAfee and Brynjolfsson are cognizant of the broad ramifications of their work, pragmatic but far from confident that this movie will end happily for the mass of the world’s middle class:

“Depending how they are used, machines, platforms, and the crowd can have very different effects. They can concentrate power and wealth or distribute decision making and prosperity. They can increase privacy, enhance openness, or even do both at the same time. They can create a workplace imbued with inspiration and purpose, or one that is driven by greed and fear. As the power of our technology grows, so do our future possibilities. This potential increases the importance of having clarity in our goals and thinking more deeply about our values” (p. 334).

Now more than ever, where are the relevant yet enduring resources for that pursuit? McAfee and Brynjolfsson have asked many of the critical questions, but it is up to far more of us to help answer them.