Brad Feld Reviews The Lights in the Tunnel_8 docx

THE LIGHTS IN THE TUNNEL / 234 CopyrightedMaterial–Paperback/Kindle available @ Amazon Trouble in China IfconsumerspendingintheU.S.andtherestofthe de- veloped world remains depressed, China may ultimately find itdifficultto sustain thegrowthit needsto keep its workersemployed.GiantretailersintheUnitedStateswill likelycontinuetoexertextremepressureonChineseman- ufacturers to produce ever cheaper, better and more so- phisticated products. These businesses may have little choicebuttoturnincreasinglytoautomationasawayto improveefficiencyandtrimcosts.Inasocietythatoffers littleinthewayofasafetynet,thesavingrateamongChi- neseworkersmightremainveryhigh,orperhapsevenin- crease, in spite of the government’s efforts to somehow spur consumer spending. All this may lead to increased incidentsofcivilunrestandinstability.  Continuing Instability in the Financial Markets Aseveryoneknows,thecurrentcrisisbeganwiththesub- primemeltdown.Acasecancertainlybemadethatstag- natingwagesplayedaroleinthecauseofthatmeltdown. Obviously,lowwagesmadeitdifficultforthesepeopleto repaytheirloans. Beyondthat,Ithink itisalsotruethat,to some de- gree,themotivationbehindsubprimeloanprogramswas theideaofthe“ownership society.” Basically, inlightof increasingevidencethatwagespaidtoaveragepeopleno longerofferalikelypathtosuccess,weturnedinsteadto thepromiseofrealestatespeculationandtriedtoextendit toasmanypeopleaspossible. Appendix / Final Thoughts / 235 CopyrightedMaterial–Paperback/Kindle available @ Amazon Itdidn’tturnoutwell,andthelessonisthatvirtually allassetvaluesinoureconomyarebasedontheassump- tionthatwearegoingtocontinuehavingavibrantmass marketeconomysupportedbyrobustconsumerspending. Ifthatbasicassumptionisthreatened,weareverylikelyto see increased risk, volatility and, ultimately,deflating val- ues. The “ownership society” idea just isn’t workable— consumersneedincomes(andconfidenceinthecontinuity of those incomes) to support the sustained discretionary spending that powers the economy. Remember: Every- thingthatisproducedbytheeconomyis ultimatelycon- sumedbyindividualhumanbeings. *   Ugly and irrational political battles IftrendssimilartotheonesI’velistedabovedodevelop, andifthereisnocoherentunderstandingandreasonable consensus regarding what is occurring, a dark scenario may develop. Political battles will become even more heated,partisanandirrational.Manypoliticiansmayactin evenmorepurelyself-interestedwaysastheycometoge- nuinelyfearthespecteroftheirownunemployment. Conservatives will likely cling to the idea that taxes should be cut on business even as it becomes clear that such cuts will result in little or no job creation. Liberals   *  GDP is equaltoPersonalConsumer Spending + Business Invest- ment (which occurs in anticipation of future consumer spending) + NetExports(consumer spendinginothercountries) +Government Spending(moneythatthegovernment spendstoprovideservicesto individual people). It all comes down to individual people buying stuff. THE LIGHTS IN THE TUNNEL / 236 CopyrightedMaterial–Paperback/Kindle available @ Amazon may callfor increased job training evenastheprospects formoreeducatedworkersarediminishing.Theymayalso throw their weight behind organized labor, and this will leadtoacontinuingbalkanizationoftheworkforceintoa protectedeliteversusafarlargernumberofhighlyvulner- ableworkers. Appendix / Final Thoughts / 237 CopyrightedMaterial–Paperback/Kindle available @ Amazon Outsmarting Marx Thecentralthesisofthisbookisthat,astechnologyacce- lerates, machine automationmay ultimately penetrate the economy to theextent thatwages no longer provide the bulkofconsumerswithadequatediscretionaryincomeand confidenceinthefuture.Ifthisissueisnotaddressed,the resultwillbeadownwardeconomicspiral. Itmustbeacknowledgedthatthisideaisquitesimilar tothepredictionsthatweremadebyKarlMarxinthemid tolate1800s.Marxpredictedthatcapitalismwouldsuffer from a relentless “accumulation of capital,” resulting in massive unemployment and wages that would be driven downbelowsubsistencelevel.Thisinturnwouldresultin diminishedconsumerdemand,fallingprofitsandultimate- lyeconomiccrisisorevencollapse. Iftheargumentsinthisbookprovecorrect,thenwe may bein thesomewhatuncomfortablepositionofcon- ceding that Marx was, at least in some ways, perceptive aboutthechallengesthecapitalistsystemwouldeventually encounter.That,ofcourse,doesnotmeanthatweshould consideradopting Marx’s solution. He advocated theab- olition of private property, acentrallyplanned economy, and perhaps most chillingly, the overthrow of govern- mentsanda“dictatorshipoftheproletariat.”Inthewake of the collapse of communism, these ideas have been shownunequivocallytobe non-starters. They deserveto besweptintothedustbinofhistory. Theanswertotheproblemisclearlytoadaptoursys- tem.Thefreemarketeconomyisnotanaturalphenome- THE LIGHTS IN THE TUNNEL / 238 CopyrightedMaterial–Paperback/Kindle available @ Amazon non.Itisreallyamachinethatwehavebuiltandrefined overcenturies:itisanenginethatisfundamentallydriven byincentives.Marxwantedtotakeasledgehammertothat engine.Ourjobistotuneit,andevenre-engineeritifne- cessary,sothatitwillcontinuetopowerprosperityindefi- nitely.  Appendix / Final Thoughts / 239 CopyrightedMaterial–Paperback/Kindle available @ Amazon The Technology Paradox Mostpeoplewhowatchmoviesorhavereadsciencefic- tionnovelsarefamiliarwiththepotentialparadoxesasso- ciatedwithtimetravel. Forexample,ifyouwereableto travelbackintimeandthendosomethingtopreventyour parents from meeting before you were born, or perhaps killayoungerversionofyourself,thenyouwouldpresum- ablyceasetoexist.Whileweobviouslydon’tneedtowor- ry too much about the practical problems of owning a timemachine,Ithinkthatthereisasomewhatanalogous issueassociatedwiththefutureoftechnology. Manytechnologistswhothinkdeeplyaboutthefuture believethatgenuinelyamazing thingsare possible.These visions include things such as truly intelligent machines and advanced nanotechnology that would allow us to transform matter, generate abundant clean energy and perhapscreatetangibleobjectswiththesameeasethatwe nowcreategraphicsonacomputerscreen.Thereisalsoa greatdealofspeculationaboutfantasticmedicaladvances thatmightcuremajordiseasesandperhapsevendramati- callyextendthehumanlifespan. *    *  While many diet books are a bit ambitious in terms of what they promise,RayKurzweilandTerryGrossmantakethingstoanentirely newlevel with two books (Fantastic Voyage: Live Long Enough to Live Forever and Transcend: Nine Steps to Living Well Forever) based on the premise that ifyou can justhold on longenough to make ittothe point of extraordinary technological acceleration (the “Singularity”), you should be abletotakeadvantageofthecontinuous medicalad- vancesthatwillensue,andthenmanagetobecomeessentiallyimmor- tal. You won’t find many other books that discuss subjects such as THE LIGHTS IN THE TUNNEL / 240 CopyrightedMaterial–Paperback/Kindle available @ Amazon TheessentialpointIwanttomakeisthatallthistruly amazingstuffwillrequireenormousinvestment.Certainly,tril- lionsofdollarswillneedtobeinvestedinordertomake such technologies a reality. As I have pointed out throughout this book, such investment cannot occur in theabsenceofrobustconsumerdemand.Withinthecon- textofthefreemarketeconomy,noinvestorwouldmake suchaninvestmentunlessheorsheanticipatesavibrant marketfortheresultingtechnology. IwouldalsoarguethatthelevelofautomationIhave beendiscussinginthebook—inotherwords,theideathat a substantial fractionof routine,average jobs willbeau- tomated—representsamuchlowerpointonthetechnolo- gycurvethanall thisreallyfantasticstuff.Therefore,itwill occurfirst.AsIhavepointedout,iftechnologypermanently eliminateshugenumbersofworkers—and createsperva- sive fear in the minds of those who still have jobs— consumer demand would surely suffer dramatically. The bottomlineisthat,ifoureconomicmodelisnotadapted to the new reality, technology could essentially kill itself off.Itisquiteeasytoimagineascenarioinwhichtechnol- ogyreachedacertainpoint,butthensloweddramatically orevenhaltedbeforegettingtothereallyamazingthings.   advancedartificialintelligenceandcybernetics—andalsohaveplenty ofrecipesforhealthydishes.  Appendix / Final Thoughts / 241 CopyrightedMaterial–Paperback/Kindle available @ Amazon Machine Intelligence and the Turing Test Thisbookhasprimarilybeenconcernedwiththepotential economicimpactofwhatresearchersinthefieldofartifi- cialintelligencewouldcallnarrowAI.Inotherwords,ma- chinesandsoftwarethatarecapableofsophisticatedanal- ysis,decisionmakingandreasoningwithinarelativelynar- rowfieldofapplication.Suchmachinesarenotreallyintel- ligentinanymeaningfulsense—buttheyarehighlycom- petentatperformingspecificcomplextasksandmaywell exceedthecapabilityofahumanworker. NarrowAIapplicationsarealreadyinwidespreaduse; expertsystemssuchasthesoftwarethatcanautonomous- lypilotandlandairlinersandmanyoftheadvancedfea- tures built into Internet search engines and multiplayer role playing games fall into this area. Narrow AI is the practicalsideofartificialintelligence,andforthatreason, we can expect that it will attract substantial commercial investment.AsIhavearguedinthisbook,machinesexhi- bitingvastlyimprovednarrowAIcapabilitymayultimately be poised to permanently take over a great many of the moreroutinejobsintheeconomy. WhilenarrowAIisincreasinglydeployedtosolvereal worldproblemsandattractsmostofthecurrentcommer- cialinterest,the HolyGrailofartificial intelligenceis, of course, strong AI—the construction of a truly intelligent machine.TherealizationofstrongAIwouldmeantheex- istenceofamachinethatisgenuinelycompetitivewith,or perhaps evensuperiorto,a human beinginitsabilityto reasonandconceiveideas.TheargumentsIhavemadein THE LIGHTS IN THE TUNNEL / 242 CopyrightedMaterial–Paperback/Kindle available @ Amazon thisbookdonotdependonstrongAI,butitisworthnot- ingthatiftrulyintelligentmachineswerebuiltandbecame affordable, the trends I havepredicted here would likely beamplified,andtheeconomicimpactwouldcertainlybe dramaticandmightunfoldinanacceleratingfashion. ResearchintostrongAIhassufferedbecauseofsome overlyoptimisticpredictionsandexpectationsbackinthe 1980s—long before computerhardware was fast enough to make true machine intelligence feasible. When reality fellfarshortoftheprojections,focusandfinancialback- ingshiftedaway fromresearchintostrongAI.Nonethe- less,thereisevidencethatthevastlysuperiorperformance andaffordabilityoftoday’sprocessorsishelpingtorevital- izethefield. ResearchintostrongAI canberoughlydivided into twomainapproaches.Thedirectcomputationalapproach attemptstoextendtraditional,algorithmiccomputinginto therealmof true intelligence. This involves the develop- ment of sophisticated software applications that exhibit generalreasoning.Asecondapproachbeginsbyattempt- ingtounderstandandthensimulatethehumanbrain.The Blue Brain Project, 57  a collaboration between Switzerland’s EPFL (one of Europe’s top technical universities) and IBM, is one such effort to simulate the workings of the brain.Onceresearchersgainanunderstandingofthebasic operating principles of the brain, it may be possible to build an artificial intelligence based on that framework. Thiswouldnotbeanexactreplicationofahumanbrain; instead,itwouldbesomethingcompletelynew,butbased onasimilararchitecture. Appendix / Final Thoughts / 243 CopyrightedMaterial–Paperback/Kindle available @ Amazon When might strong AI become reality—if ever? I suspectthatifyouweretosurveythetopexpertsworking inthefield,youwouldgetafairlywiderangeofestimates. Optimistsmightsayitwillhappenwithinthenext20to30 years. Amorecautiousgroup would placeit 50or more yearsinthefuture,andsomemightarguethatitwillnever happen. True machine intelligence is an idea that, in many ways,intrudesintotherealmofphilosophy,andforsome people,perhapsevenreligion.Whatisthenatureofintel- ligence? Is intelligence algorithmic? Can it be separated fromconsciousnessorself-awareness?RogerPenrose,one of the world’s top mathematical physicists, has written severalbooks 58 suggestingthattrueartificialintelligenceis unattainableusingconventionalcomputersbecausehebe- lieves that intelligence (or at least consciousness) has its rootsinquantummechanics—theareaofphysicsthatgo- vernstheprobabilistic,andseeminglybizarre,interactions thatoccurbetweenparticlesofsubatomicsize. IfstrongAIdoesarrive,howwillweknow?Thatisa question that was first askedbyAlan Turing nearlysixty years ago. Turing, a legendaryBritish mathematician and codebreakerduringWorldWarII,isoftenconsideredto bethefounderofcomputerscience.In1950,Turingpub- lishedapaperentitled“ComputingMachineryandIntelli- gence,”inwhich he proposed atesttoanswer theques- tion:“Canmachinesthink?” Turing’stestwasbasedonagamepopularatparties at the time. In today’s terms, it amounts to a three-way instant messaging conversation. One participant is a hu- [...].. .THE LIGHTS IN THE TUNNEL / 244 man judge The other participants are another person and a machine—both of whom attempt to convince the judge that they are human by conducting a normal conversation If the judge can’t tell which participant is which, then the machine is said to have passed the Turing Test The Turing Test is perhaps the most well-known and accepted method for measuring true machine intelligence... intelligence In practice, the rules would need to be further refined, and it seems likely that a panel of judges would be required rather than a single person In my opinion, the main problem with the Turing Test is that it is, as Turing pointed out in his paper, an “imitation game.” What it really tests is the ability of an intelligent entity to imitate a human being—it is not a test of intelligence... Michigan: The university by then had a very advanced interactive time-sharing system called the “Michigan Terminal System” or MTS Most students in advanced computer science and engineering courses used interactive terminals However, 7 Copyrighted Material – Paperback/Kindle available @ Amazon THE LIGHTS IN THE TUNNEL / 248 interactive computer time was very expensive, so punch cards were still used in introductory... 40 China’s high saving rate the result of government policy, see: Eamonn Fingleton, In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony, NewYork, St Martin’s Press, 2008 41 Pietra Rivoli, The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power and Politics of World Trade, John Wiley and Sons, NewYork, 2005, p 40 42 Ibid p 142 43 Jeff Rubin... Material – Paperback/Kindle available @ Amazon THE LIGHTS IN THE TUNNEL / 252 Blinder, Alan S., “Is Government too Political?” Foreign Affairs, November/December 1997 Web: http://www.foreignaffairs.org/19971101faessay3815/alan-sblinder/is-government-too-political.html 50 Jeremy Rifkin, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era, NewYork, Penguin Group, 1995... technologists believe that the exponential progress of information technology will ultimately level off In other worlds, the graph will somedaybecome an “s-curve,” somewhat similar in shape to the graph of human capability that appears later in the “Diminishing Returns” section (see page 4) However, there is no way to knowhowfar in the future this might occur, and there is little evidence to suggest it will happen... Material – Paperback/Kindle available @ Amazon Appendix / Final Thoughts / 245 society and economy.* However, there is a more subtle danger posed by the specter of strong AI: it distracts us from the far more immediate economic impacts that will likely result from narrow AI Recent articles in the press59 have pointed out that machines currently exhibit “insectlevel” intelligence In other words, if we were... broadly intelligent machine today, we’d likely end up with something about as smart as a cockroach The problem with that comparison is that it gives us a false sense of security; it glosses over the obvious reality that cockroaches neither land aircraft nor defeat human beings at games of chess When machine capability is focused narrowly, the story is very different I think there is little doubt that in the. .. 37 “Vernor Vinge on the Singularity,” Web: http://mindstalk.net/vinge/vinge-sing.html 26 Copyrighted Material – Paperback/Kindle available @ Amazon Notes / 251 Chapter 3: Danger 38 Robert J Shapiro, Futurecast: howsuperpowers, populations, and globalization will change the wayyou live and work, NewYork, St Martin’s Press, 2008 39 Thomas L Friedman, The World is Flat: A Brief History of the Twenty First... rating: Roy Longbottom’s PC Benchmark Collection, Web: http://www.roylongbottom.org.uk/mips.htm#anchorAmdahl 9 All computer MIPS ratings are taken from Wikipedia: http://en.wikipedia.org/wiki/Instructions_per_second The MacIntosh and Lisa computers used the Motorola 68000 microprocessor with a rating of 1 MIPS 10 Calculating the amount in Bill’s pocket: Google makes this easy Just enter the following . THE LIGHTS IN THE TUNNEL / 234 CopyrightedMaterial–Paperback/Kindle available @ Amazon Trouble in China Ifconsumerspending in the U.S.and the restof the de- veloped. 38 RobertJ.Shapiro,Futurecast:howsuperpowers,populations,andglobaliza- tionwillchange the wayyouliveandwork,NewYork,St.Martin’sPress, 20 08.  39 ThomasL.Friedman, The WorldisFlat:ABriefHistoryof the Twenty FirstCentury,NewYork,Farrar,StrauseandGiroux,2005,2006. 40 China’shighsavingrate the resultofgovernmentpolicy,see:Ea- monnFingleton, In the Jawsof the Dragon:America’sFate in the Coming EraofChineseHegemony,NewYork,St.Martin’sPress,20 08.  41 PietraRivoli, The TravelsofaT-Shirt in the GlobalEconomy:AnEcono- mistExamines the Markets,PowerandPoliticsofWorldTrade,JohnWiley andSons,NewYork,2005,p40. 42 Ibid.p142. 43 JeffRubinandBenjaminTal,“WillSoaringTransportCostsRe- verseGlobalization?,”CIBCWorldMarketsStrategEcon,March27, 20 08. Web: http://yaleglobal.yale.edu/about/pdfs/oil.pdf 44 Revenueperemployeenumbers.Source:GoogleFinance,basedon 20 08 revenue. 45 “…growthwithoutjobcreation.”, The Economist,August11,2003. Web: http://www.economist.com/agenda/PrinterFriendly.cfm?Story _ID=1 985 889  46 Huether,David, The Caseof the MissingJobs,BusinessWeek,April 3,2006.Web: http://www.businessweek.com/magazine/content/06_14/b397 81 16.htm  47 Technicallythismightbebettercalled“regressive”or“reversepro- gressive”since the deductionishigheratlowerwagelevels.However, thosewordshavenegativeconnotations… 48 FareedZackaria, The FutureofFreedom:IlliberalDemocracyatHomeand Abroad,NewYork,W.W.Norton&Co.,2003,p.172-173. THE. 7 Punchcardsat the UniversityofMichigan: The universitybythen hadaveryadvancedinteractivetime-sharingsystemcalled the “Michi- ganTerminalSystem”orMTS.Moststudents in advancedcomputer scienceandengineeringcoursesusedinteractiveterminals.However, THE LIGHTS IN THE TUNNEL / 2 48 CopyrightedMaterial–Paperback/Kindle available @ Amazon  interactivecomputertimewasveryexpensive,sopunchcardswere stillused in introductorycourses. 8 AmdahlMIPSrating:RoyLongbottom’sPCBenchmarkCollection, Web: http://www.roylongbottom.org.uk/mips.htm#anchorAmdahl 9 AllcomputerMIPSratingsaretakenfromWikipedia: http://en.wikipedia.org/wiki/Instructions_per_second. The MacIntoshandLisacomputersused the Motorola 680 00micropro- cessorwitharatingof1MIPS. 10 Calculating the amount in Bill’spocket:Googlemakesthiseasy.Just enter the following in the searchbox: .01*2^((1 986 -1975)/2)(replace1 986 with the desiredyear) 11 RayKurzweil, The Singularity in Near:WhenHumansTranscendBiology, NewYork,PenguinGroup,2005 12 ““S”and“U”encodedwithin the interferencepatternsofquantum electronwaves”,StanfordNewsService: http://news- service.stanford.edu/news/2009/january 28/ small-01 280 9.html  13 Manytechnologistsbelievethat the exponentialprogressofinfor- mationtechnologywillultimatelyleveloff. In otherworlds, the graph willsomedaybecomean“s-curve,”somewhatsimilar in shapeto the graphofhumancapabilitythatappearslater in the “DiminishingRe- turns”section(seepage4).However,thereisnowaytoknowhowfar in the futurethismightoccur,andthereislittleevidencetosuggestit willhappenanytimesoon. 14 Formoreon“quants”and the creationofexoticderivatives,see: EmmanuelDerman,MyLifeasaQuant:ReflectionsonPhysicsandFinance, NewYork,JohnWileyandSons,2004. 15 CharlesDickens,OliverTwist. 16 JamesJ.Heckman  andPaulA.LaFontaine, The DecliningAmeri- canHighSchoolGraduationRate:Evidence,Sources,AndConse- Notes