BIG Ideas Exchange

Chris Halligan

June 13, 2014

Hi, I’m Chris(pictured here with Grace Halligan)

I’ve been part of a couple successful tech companies

Today, I’m a Partner with the most active seed stage venture firm in the Southeast

And I advise two early stage companies, principally in the areas of sales, marketing and strategy

I’m also friends with Terry Cox

I’m also friends with Terry Cox(and Rajeev Kulkarni, for that matter)

And I read books!

About Tyler Cowen

• Prof of Economics @ George Mason U

• Has an awesome blog: Marginal Revolution

• Intellectual omnivore: economics, art, fame, chess, culture.

Here’s a short review, written in haiku

Machines are coming /Winners, losers, few between /

Enough with the chess

What more serious reviewers say- Wall Street Journal -

What more serious reviewers say- The Economist -

This is not the feel good read of the summer.

But it’s thinking worth considering

Core Messages from “Average Is Over”

• Mechanized intelligence is here

• Mechanized intelligence is going to substantially change the world, its economies and our lives

• We are entering an age of increased and increasing inequality

• Understanding / exploiting mechanized intelligence represents your best road to winning in the next round of the game

“There’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital

technologies are acquiring these skills and abilities at an extraordinary rate.”

- Erik Brynjolffson and Andrew McAfee

“The Second Machine Age”

Cowen: Mechanized intelligence is putting big pressure on labor and generating big upside

for the “cognitive elite”

“The key question will be: Are you good at working with intelligent machines or not? Are your skills a complement to the computer or is the computer doing better without you? Worst of all, are you

competing against the computer? Are computers helping people in India and China compete against

you?”

Tyler Cowen

Average is Over

pg 4&5

What strategy would you use if you were pitted against a computer?

Jan Hein Donner, Dutch chess Grandmaster & 11 time chess Olympiad participant

“I would bring a hammer.”

People have been getting nervous about mechanization for centuries

• Ned Ludd

• Late 1700’s

• Credited with leading a revolt / movement against mechanical knitting machines

• Luddites fought literal war with British government

Interesting reality about knitting machines

• Worldwide clothing industry grew rapidly upon introduction of knitting machines

• Millions employed to this day, thanks to the machines

It’s easy to be afraid when machines

encroach upon your personal domain.

Most “Doom and Gloom” forecasts are wrong

My goal today: Discuss mechanized intelligence in the context of “Average is Over”

• Examples of Mechanized Intelligence

• Some implications for the economy and the world

• Things you (and I) can do

– Warning: Things get really hopeful at the end

Examples of Mechanized Intelligence

They are everywhere and they are amazing

Let’s start with computing

Abacus!

• ~ 8 centuries old

• Big enabler of early commerce

• Aided in the invention of Algebra

Graphing Calculators

• Invented in the 60’s

• 41% of world’s compute capacity in mid 80’s

• Aided in invention of personal computer

Personal Computer

• Launched in mid 70’s

• Big enabler of personal productivity

• Aided in the invention of Internet

Google

• Started circa 1997

• ~ 5,000 searches per second in US alone

• Global web traffic declined 40% when Google was out for 5 minutes in summer 2013

IBM Watson

• Invented in 2004

• Won at Jeopardy in 2011

• Used to aid doctors in triage at Sloan-Kettering today

Siri!

• Couple years old

• Fun to make fun of

• Really powerful when used right

Let’s talk automotive

The amazing welding robots of BWM in South Carolina

Google Self Driving Cars!

Self driving tractors!

Mechanized intelligenceis everywhere

This was written by a computer

There are tons of other examples. Mechanized Intelligence is here.

What does mechanized intelligence mean for the world, its people and economies?

“It was true in the great Industrial Revolution and it is true now: Machines do not put us all out of

work, as eventually machines create new jobs just as they destroy old ones. It is also true that the new machines of our age will rise to new and different workplaces and create a new set of

winners and losers.”

Tyler Cowen

“Average Is Over”

Pg 20

What kind of jobs are being created?

Growth categories

• Complex computer systems management

• Data analysis

• Human motivation and performance

• Marketing and demand generation

• Direct personal service

• Man / Machine Teams

Computer analysis and control

F-16 => ~100 people per mission

Predator drone => ~170 people per mission

Global Hawk drone => ~300 people per mission

Who are those additional people?

• Communications, analysis and computer control people

Mechanized Intelligence creates massive data

Which creates a pressing need for Data Scientists

Everything is going to collect data

What are the new data sources in your industry?

Human motivation and performance

“Computer use increases the need for skilled workers, computers tend to increase workers’

autonomy and computers increase the need and ability for management to monitor their workers.”

Tyler Cowen

“Average is Over”

Page 33

“It’s the manager who is the scarce input, and that is one way to think about why managerial salaries have been going up so much. Managers play a role

of growing importance in coordinating complex, large-scale production processes.”

Tyler Cowen

“Average is Over”

Page 28

Marketing

“Despite all the talk about STEM fields, I see marketing as the seminal field for our future

economy… The more that earnings rise at the upper end of the distribution, the more

competition there will be for the attention of the high earners and thus the greater importance of

marketing.”

Tyler Cowen

“Average Is Over”

pg 22-23

Direct Personal Service

“We can expect a lot of job growth in personal services, even if those jobs do not rely very

directly on computing power. The more that the high earners pull in, the more people will compete

to serve them.”

Tyler Cowen

“Average Is Over”

Pg 22

• Richard Eng

• Hong Kong’s Millionaire Tutor

• 50K students in 12 schools

But…

Servicing the Well to Do and High Aspiration crowd is major growth industry

Man / Machine Teams

“Intelligent machines aren’t going to take over the entire economy all at once, but they will slowly revolutionize our economy. As each economic

sector utilizes the new intelligent technologies, the notion of an effective man-machine team will

radically change and become extremely diverse.”

Tyler Cowen

“Average Is Over”

pg 49

Examples of man / machine teams

• Emergency room triage

• Automated DJ’s => “Denise”

• Freestyle chess teams

A few words about chess in Tyler Cowen’s “Average Is Over”

• Dr Cowen really likes chess

• He writes about chess a lot in this book

• No, really, he writes about chess a lot in this book

• Seriously

• Dr Cowen thinks chess is way more interesting than I do

A few interesting chess bits

• Until the late 90’s, humans routinely beat computers

• In 1997, Deep Blue beat Garry Kasparov

• Today, cheap computer programs crush the best humans

• Freestyle teams – Humans with a computer aid beat the best chess programs

– The best humans to team with a computer are NOT the best chess players themselves

• When computers play chess against computers, it looks crazy

– Computers think of chess very differently than we do

What you and I should do about the advent of mechanized intelligence

Don’t Fight / Fear Mechanized Intelligence

Use It

Understand Mechanized Intelligencein your industry and markets

Consider how your business targets / services the affluent and upwardly mobile

Cultivate your self-education skills

Cultivate conscientiousness

“The premium is on conscientiousness, namely whether the worker can follow some

straightforward requests with extreme reliability and basic competence.”

Tyler Cowen

“Average Is Over”

Pg 32

Or, as David Brooks puts it…

So our challenge for the day is to think of exactly which mental abilities complement mechanized

intelligence. Off the top of my head, I can think of a few mental types that will probably thrive in the

years ahead.

David Brooks

New York Times

Dec 9, 2013

Freestylers

“This skill requires humility (most of the time) and self-confidence (rarely). It’s the kind of skill you use to overrule your GPS system when you’re driving in a familiar neighborhood but defer to it in strange surroundings.”

Synthesizers (eg Kirk Goldsberry)

“The computerized world presents us with a surplus of information. The synthesizer has the capacity to surf through vast amounts of online data and crystallize a generalized pattern or story.”

Humanizers

“Humanizers take the interplay between man and machine and make it feel more natural. Steve Jobs did this by making each Apple product feel like non-technological artifact.”

And he cites others

• Conceptual Engineers

• Moralizers

• Greeters

• Economizers

• Weavers

This is actually pretty hopeful

The economic transition based on mechanized intelligence is certain but it’s going to take years

and years

• MILWAUKEE, June 10, 2014 -- The latest Manpower Employment Outlook Survey reflects continued hiring confidence among U.S. employers for Quarter 3 2014, as U.S. employers report a seasonally adjusted Net Employment Outlook of +14%. This is the strongest Net Employment Outlook since Quarter 2 2008, when the Outlook was also +14%. The third quarter Outlook is up from +13% in Quarter 2 2014 and from +12% during Quarter 3 2013.

But these trends are real

The best way to prepare yourself for the coming revolution is to improve yourself to

the maximum extent that you can