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Vast, automatic and invisible: the "Second Economy" is here
Delaney Turner 270003RQ8K Delaney.Turner@ca.ibm.com | | Tags:  baforum
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There's a fascinating article in the latest McKinsey Quarterly - one I'd deem essential reading before you head down to Vegas for Information On Demand 2011.
You have registered, right?
It's called The Second Economy and it's written by W. Brian Arthur, an economist, author, a visiting researcher with the Intelligent System Lab at the Palo Alto Research Center (PARC) and an external professor at the Santa Fe Institute.
The full article (including PDF download) is available here, and I've provided some excerpts below.
"Vast, automatic, invisible"
Arthur makes the argument that digitization is creating a "second" economy that's vast, automatic and invisible. In turn, this economy is driving the biggest change to our world since the Industrial Revolution:
In 1850, a decade before the Civil War, the United States’ economy was small—it wasn’t much bigger than Italy’s. Forty years later, it was the largest economy in the world. What happened in-between was the railroads. They linked the east of the country to the west, and the interior to both. They gave access to the east’s industrial goods; they made possible economies of scale; they stimulated steel and manufacturing—and the economy was never the same.
A Second Economy on a Smarter Planet?
As I read through the piece I was struck by how closely Arthur's Second Economy mirrors the attributes of a Smarter Planet - that is, one that's increasingly instrumented, interconnected and intelligent. Take, for example, the dramatic transformations we've seen in air travel:
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 TSA1 (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. Is this the biggest change since the Industrial Revolution? Well, without sticking my neck out too much, I believe so. In fact, I think it may well be the biggest change ever in the economy. It is a deep qualitative change that is bringing intelligent, automatic response to the economy. There’s no upper limit to this, no place where it has to end. [...] I think that for the rest of this century, barring wars and pestilence, a lot of the story will be the building out of this second economy, an unseen underground economy that basically is giving us intelligent reactions to what we do above the ground.Who benefits?
An economist and "pioneer in the science of complexity," Arthur also posits on the impact of this Second Economy on the nature of work:
The second economy will certainly be the engine of growth and the provider of prosperity for the rest of this century and beyond, but it may not provide jobs, so there may be prosperity without full access for many. This suggests to me that the main challenge of the economy is shifting from producing prosperity to distributing prosperity. [...] For centuries, wealth has traditionally been apportioned in the West through jobs, and jobs have always been forthcoming. When farm jobs disappeared, we still had manufacturing jobs, and when these disappeared we migrated to service jobs. With this digital transformation, this last repository of jobs is shrinking—fewer of us in the future may have white-collar business process jobs—and we face a problem.What's your role?
As the architects of your organization's own information networks, I'd argue that you have a direct hand in building this Second Economy. As the largest conference in the IBM Software universe, I'd also argue that Information On Demand is the ideal forum to discover these ideas and discuss the ways you can harness them to drive better outcomes on all fronts.
What do you think?
Leave a comment below, tweet using #IOD11 or visit the IOD Social Media Aggregator to join the discussion.