Rise of the machines

February 9, 2012

If you want to get a finger-tip feel for one of the most important transformations in our world today, read The Fear Index, Robert Harris’s new thriller.

Harris has been widely praised for his adept portrayal of the hedge fund universe in which his novel is set. “The greatest pleasure of this book is that it gets the finance right,” cooed Felix Salmon, the Reuters finance blogger whose keyboard often oozes acid.

He is right that Harris’s hedgies are a welcome and realistic departure from the Masters of the Universe of most popular fiction. For one thing, these are the alpha geeks, the nerdy doctorate-holders whose testosterone is channeled into equations instead of frat-house swagger.

And Harris knows his superrich. As they are being wooed to make a billion-dollar investment, over a 1995 Latour in a fine Geneva restaurant, an international group of investors energetically discusses the ways that their national governments oppress them. Dr. Alex Hoffmann, the billionaire hedge fund manager protagonist who is making the pitch for their cash, reflects: “He was remembering now why he didn’t like the rich: their self-pity. Persecution was the common ground of their conversation, like sport or the weather was for everyone else.”

But the most valuable intellectual takeaway from this riveting novel is the element that has been widely dismissed by reviewers as familiar and unpersuasive: VIXAL, the intelligent machine at the heart of the story that torments its human creator and may be trying to rule the world. Michiko Kakutani, writing in the New York Times, gave The Fear Index a thumbs up, but deemed the machine takeover “silly and contrived.” VIXAL, the evil genius computer, “seems less like a plausible villain than like a metaphor for the greed and heedlessness that overtook Wall Street,” she wrote.

Kakutani’s dismissal of VIXAL as an unoriginal and uncompelling reworking of the Frankenstein template misses the most important point. VIXAL and the parallel world the computer program creates by interacting with other machines is worth reading about — but not for the usual pulp fiction pleasure of entering a vividly rendered imaginary world.

The Fear Index is fun to read because Harris is a great novelist, but VIXAL is worth getting to know not as a fictional character, but because so much of what it does is already happening in real life.

Futurists and fantasists have been dreaming about the rise of intelligent machines for centuries. Now it is actually starting to happen.

For a drier but in many ways even more astonishing account of what is going on, read “The Second Economy,” an essay in the McKinsey Quarterly by W. Brian Arthur, a visiting researcher at the Intelligent Systems Lab at the Palo Alto Research Center in California.

Arthur’s contention is that a second, machine-to-machine economy is emerging and that it will bring deep economic, social and political change comparable to the transformation wrought by the Industrial Revolution.

“Business processes that once took place among human beings are now being executed electronically,” Arthur writes. “They are taking place in an unseen domain that is strictly digital. On the surface, this shift doesn’t seem particularly consequential — it’s almost something we take for granted. But I believe it is causing a revolution no less important and dramatic than that of the railroads. It is quietly creating a second economy, a digital one.”

Arthur describes this economy as “vast, silent, connected, unseen and autonomous (meaning that human beings may design it but are not directly involved in running it).” The second economy is manifest in transactions as quotidian as checking in for a flight with a machine and as esoteric as the algorithm hedge funds of Harris’s thriller, which use information produced by machines to trade with other machines.

Economists and novelists aren’t the only people musing about the rise of the machine-to-machine economy and its transformative potential.

Yuri Milner is one of the savviest technology thinkers in the world; he was a pioneering investor in Facebook, a bet that was wildly vindicated last week.

Milner has a presentation in which he describes the nine most important changes in the world today. Three of them are about what Arthur has dubbed the second economy: the rise of what Milner calls “the Internet of things,” or the machine-to-machine economy; the growing power of artificial intelligence; and the emergence of a “global brain,” which is the network of all of the people and the machines in the world and their connections to one another.

The one aspect of The Fear Index that is tired and familiar is its depiction of the rise of the machine-to-machine economy as murderous and menacing. That time-worn worry that the smart machines will turn on their creators isn’t one I share. I am a fan of the machine-to-machine economy and of all the ways it makes my human life easier and less expensive.

But I am concerned about something Harris only hints at. At the end of The Fear Index, VIXAL changes its hedge fund’s mission statement. The first lines of the new, machine-written version, read: “The company of the future will have no workers.”

I’m not afraid our smart machines will try to exterminate us, but I do worry that the second economy may be a jobless one.

Arthur doesn’t offer much comfort on that score. In an exchange with a reader after his essay was published, the economist wrote: “Since the second economy began, in the early and mid-1990s, we’ve had wave after wave of downsizing and layoffs, and now we have ongoing structural joblessness. I hope jobs will be created, and maybe they will. More likely, the system, as so many times before in history, will have to readjust radically. It needs to find new ways to distribute the wealth.”


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Ancient greece and rome was carried by slavelabour, resulting in an intellectual explosion amongst free men.

Posted by frenchdeight | Report as abusive

A computer which decides that its mission statement is best carried out without the intervention of fallible humans? That’s not Frankenstein’s monster, that’s HAL.

By the way, the automation revolution is happening so slowly that it provided fertile ground for science fiction stories in the 1960’s and popular science programmes in the 1970’s. In particular, I remember a BBC Horizon programme in around 1978 which examined the consequences for employment in considerable detail. In a sense, all that’s happened is that you’re now worrying about the finance industries falling prey to the same things that did for the “sunset” industries a generation ago.

Posted by Ian_Kemmish | Report as abusive

It is ironic that we have 100 times the industrial capacity of 100 years ago yet everyone must work longer and longer hours to make ends meet. The world has not increased population wise 100 fold.

It is not as manually labor intensive work, however it involves a lot more stress and fear of the future than 100 years ago.

Machine to machine is fine, however the brains and rule setters or the machinery is still easily manipulated by the insatiable corrupt who have evolved our connected world into a “Terminator” society where not any one government can stop the machinery from exploiting and amassing quick fortunes on the backs of regular citizens.

I guess it is no different than viewing how someone with increasingly more lethal weapons can do more carnage.
Our increasing industrialized data processing and world encompassing rules can wreak incredible large carnage in short periods – all to the benefits of those who set the levers.

How is it there are so many international laws enforcing finance, however there are no international laws enforcing justice and punishment for those who do the carnage? Likely because they can easily hide behind the machinery and laws they fostered. It’s not any one individual’s fault – it is the system and a minor effect of our globalization.rrrriiggghttt.

Thank goodness for freedom of speech with our socially connected electronic highways. We now need more civil action to claw back the incredible power we have granted manipulators worldwide – or there will be increasingly more and more punative action on those who speak out.

Posted by Butch_from_PA | Report as abusive

“I am a fan of the machine-to-machine economy and of all the ways it makes my human life easier and less expensive.”.

As long as one still has a job and can still afford to live. The human being still breaks down, gets old and dies. Is the machine going to care?
One could easily outlaw all machine-derived transactions at a stroke if the situation becomes disruptive of normal life. If the machine culture makes more problems than it solves. There is something very flimsy and even slight of hand about financial derivatives.

Ms Freeland: What if “the machine” figures out a way to write your columns better than you do? . No one is inimitable.

There is an amazing similarity to the content and style of magazines and books worldwide. I’m was never good at HS German but tried reading der Spiegel a few years ago and noticed how it phrased things and sounded so like Time or Newsweek. It also used a vocabulary they didn’t teach in class. It was almost an international vocabulary. In fact, even the news is beginning to have a déjà vu quality to it. I could almost swear that some articles on Reuters and elsewhere are retreads. Articles on Reuters, BBC, Al Jazeera. And the Jerusalem Post etc. tend to sound very alike in style and content.

Maybe the ancient Romans were smarter than the modern world. They had the basic concept of the steam engine but had no reason to use it. It would have been impossible for them to revise their society to allow for an industrial revolution. But in fact they were able to do more, in some ways, with planning and building technology than most of European societies until the 18th century. They lacked critical inventions, like movable type, that occurred later.

The machine-to-machine culture can force faster changes than man the animal can adapt to or even need. The people who laud the situation may be the current winners. But a lot of us will gloat if and when they become the new losers. If we live by it we are at risk of dieing by it too. Obviously.

Brave new World was a world of machines and it contrasted with the wilderness: or life as most of us still know it.

BTW – ButchfromPA hasn’t heard of the International Criminal Court of Justice at The Hague evidently? The USA doesn’t want to sign onto it. And Israel ignores it.

Posted by paintcan | Report as abusive

There is no need to worry Chrystia. The world is filled with abundance and the smart machines with our direction will only help us use the abundance wisely and to our benefit. I predict the smart machines will create a better world for each of us with better health and more time to be creative. At least until they are as smart as us. Then who knows. There will be a symbiotic time where the machines need us and we need them but when they begin to teach each other and intelligence rises exponentially and their intelligence exceeds ours. Mmmm. then you may begin to have some worries. Should be a fun ride however it turns out.
Nice Article!

Posted by SeaStar1 | Report as abusive

We have doubled the workforce by bringing in women and immigrants since the 1950s and unemployment is still only about 10% in the US. Automated factories are a necessity in the future, with our ageing workforce.

Posted by bboaze | Report as abusive

This article brings up a thought I’ve had more than once. How much would one half of one percent, be missed by ordinary people, on a global scale? And how much would that add up to? Anyway, the infrastructure is in place for autonomous systems to steal money, information, privacy, and anything else connected to the web. Which is mostly everything. Makes you think a little, doesn’t it?

Posted by boon2247 | Report as abusive

“Human’s aren’t going to make it. Are they?” The Rich must not allow themselves to become redundant from their ability to keep pushing the cart along the slippery road of so-called progression. I’ll support them in that respect. Like the man said, we need global protection and international security from those who readily take what they themselves cannot or more likely refuse to earn. Globalisation calls for realignment of economies and cultural expectations. I once saw a phrase like Ecclesiastical Anathema and have yet to find some common reconciliation with it. As a kind of Free Thinker, I think it’ll matter. Even Atheists will not escape. Escape is impossible, Resistance is Futile, or, you will be assimilated. All scary stuff.

Posted by Ceorl | Report as abusive

what she cites here is a real and a very disturbing trend,
the real advances in 19th & 20th century tech left us with a terrible legacy;
Doctors and medicine have foisted on to the planet 10’s of millions of unemployed men (very angry men) in the developing world. locking most of the middle east and africa in poverty and a majority of asia in a slave labor cycle.
If you add to this technological advance in robotics you could very well have a sharp rise in (how did Dickens put it?) the surplus population.

Posted by cp61 | Report as abusive

To me the most frightening and most depressing aspect of this is how workers are rapidly becoming meat robots that must be programmed to fit into the business system. In contrast to the textbook management theory that urges managers to “empower” workers and coax them to be both productive and creative (human) real workers are instructed on exactly how to do their jobs, how to input data into the system, and what script to recite when interacting with customers. Personality tests weed out workers who think solving problems on their own is better than referring every issue to higher authority. Teachers from kindergarten to college are given strict instructions to follow pre-fabricated lesson plans while students are trained on how to follow the instructions that result in good grades. Workers exist to serve the economic system while consumerism provides an illusion of freedom. Yes, this has been said before, but we need to ask again: has technology been used to liberate us from work? I would argue it has just brought the assembly line to service jobs.

Posted by JackRS | Report as abusive

I can easily see the day when, due to the global technology and information age, we only need about a third of the population to work. I wonder how our society will change as that comes about.

Posted by tmc | Report as abusive

There are really two aspects to your “fear”, the short term probable kind and the long term possible kind.

(1) In the short term, I am afraid we will have a jobless economy (i.e. one with very high structural unemployment), which have serious negative political and financial effects on this economy quite soon, something which the US has never really had to deal with before. Think of the Great Depression as a “dry run”, but keep in mind the demographics of the US are NOTHING like they were in the 1930s when we had a much smaller population, Americans were more independent, we still had an intact manufacturing/economic base, and a reasonable amount of cohesion among the American people. Then think about the US as it is today . . .

(2) As to your second fear, this has been (as you point out) a favorite of “futurists” that goes back a long ways and seems to be a quirk of human nature. The comforting thought is that they are nearly always wrong because the future is never really simply an extrapolation of today.

Your comment about, “I’m not afraid our smart machines will try to exterminate us, but I do worry that the second economy may be a jobless one” assumes that there will still be enough demand to warrant such a machine-oriented society when everyone is jobless, and therefore there will be a need for machines to produce everything without workers, but that is not realistic since everything has a cost attached to it.

As economists are fond of saying, “there is no such thing as a free lunch”, which is what your future of machines would entail, a massive free lunch for everyone. It assumes production with no cost, just like a “perpetual motion” machine. Looked at from this perspective, such a prospective future is highly unlikely, at least in our lifetimes.

I would suggest we all start to worry about number one, the issue of high structural unemployment, and forget about ANY future at all if that isn’t resolved soon.

There! Don’t you feel better now?


Posted by Gordon2352 | Report as abusive

I think we all need to re-read E M Forster’s ‘The Machine Stops’ (1909). It is a chilling point that was made before technology was more intrusive than steam trains and battleships. (It was also written in the first era of apocalyptic science fiction – ‘The Night Land’ by William Hope Hodgson – almost impenetrable, deeply engaging – being a contemporary.)

No technological infrastructure exists without humans to maintain it. As the Internet develops, our cities are falling into ruin because the political will to vote the money to maintain the infrastructure is not there. ‘The Fear Factor’ is almost irrelevant if the electrical grid stops working and you can’t transport fuel or food.

Posted by EricMorse | Report as abusive

Yes, it’s amazing how much human labor one can discard with a $30/month broadband connection. I hope the second economy doesn’t bring monthly internet costs of $500/month to compensate. Imagine, a “broadband tax” that goes to supporting those who are not information workers, freelance internet consultants, or homebound day traders.

Posted by Nullcorp | Report as abusive

We actually work fewer hours today compared to100 years ago. 5 1/2 to 6 day work weeks very common 100 years ago. Paid time off was also very rare 100 years ago.

Some folks seem to enjoy wringing their hands over the rise of machines and how workers are being replaced by machines. The truth is, in a mature economy such as ours (with small population growth) about the only way to grow the economy is through increases in productivity. Machine, robots, software, etc allow us to create more stuff per unit time. Productivity is how you get raises and increases in standard of living.

Bring on the machines!

Posted by jambrytay | Report as abusive

Since the majority of stock trades are now originated by computers, there is is big concern – NOW. The goals of these trades have nothing to do with “investment” in the tradition sense of seeking to bolster promising companies and profit thereby. This conflict in motivation – human defined – is what is dangerous. IT has nothing to do with artificial intelligence, but a battle between excessive greed through gambling and capitalism.

The plug should be pulled on these computers instead of the exchanges actually encouraging this profligate gambling!

Posted by ptiffany | Report as abusive

It should be no surprise that human beings use any technology to cheat, control, subject other human beings. That is what human nature is all about.
That is why we have a bill of rights in our Constitution. That is why it is fully necessary to use laws to thwart the manipulators. That is why the manipulators use their ill-gotten gains to control elections so they can control the laws.

Posted by LouVignates | Report as abusive

You are spot on, Chrystia. Today the US produces more steel than it did 30 years ago, with a third of the workers. And most of those workers are different – educated and controlling industrial machines through computers, rather than shoveling coke coal into a furnace.

It used to be that having a strong back and willingness to work was enough to get into the middle class; not any more. Possibly the biggest challenge going forward is to productively employ the millions of people that used to work assembly lines and mills. The industrial products still exist, but thanks to automation, it requires far fewer, and somewhat more educated people to make it happen.

Posted by Curmudgeon | Report as abusive

99 against 1. There’s some space for a bloody revolution.
And there’ll be few Anonymous robots to work? Fine job.

Posted by steve1987 | Report as abusive

Chrystia is an off-shore apologist. Nothing more. She got to where she is because she runs cover for those companies shipping their manufacturing to China. She doesn’t give a hoot about ghost towns like Dalton, Georgia or any town in North Carolina. I remember when the mayor of Peoria put her in her place when she said that overall the loss in manufacturing jobs didn’t matter. He simply said, yes, in a classroom where you belong, theoretically it doesn’t matter, but to folks losing their homes and livelihoods, it does matter.

Posted by sniknej | Report as abusive

Its the simple things that make it scary. Technology is all about doing things more efficiently with less people. Machines don’t need insurance and can be turned off when demand slacks off.

In spite of what most optimists want to believe when you automate a factory you don’t create as many jobs as you destroy. I keep reading a lot of editorials by very bright people talking about how the future is getting everyone a high quality education and the right skills so they can be in the top part of the work force that makes decisions or does the higher end technical work.

Assuming this future is what is coming, that means that all the average and below average people on the bottom 2/3 thirds of the bell curve will be unemployable in that future. Even if they do get a college degree.

Low end Artificial Intelligence is within reach and someday we’ll have machines that can make complex decisions. Then basic programming can be done by machines, help desks can be run by machines, basic legal work and probably even medical work can be done by them.

It’s scary stuff to think about. What happens to society when technology disenfranchises more people than it helps? What happens when 2/3rds of society is unemployable and not buying anything?

Posted by samuel_c | Report as abusive

You should read Vonnegut’s “Player Piano”. Written in 1952, it is directly about your concerns of technology displacing labor.

Posted by JohnMetz | Report as abusive

Thank you for causing me to get The Fear Index. I’m enjoying it. And thanks for introducing Brian Arthur’s “The Second Economy.”

You are one of the very few published thinkers today who understand that the political economy is not all about “job creation,” that there will never again be enough jobs to provide a decent standard of living for all Americans. As Brian Arthur’s essay put it:

“This suggests to me that the main challenge of the economy is shifting from producing prosperity to distributing prosperity.”

Ways to accomplish this shift are described in my online work, “Bypass Wall Street,” at bypassingwallstreet.com, particularly the sections “Direct Routes Open Now for Bypassing Wall Street,” and “Proposals for Change/Broadening the Ownership of Business.”

I look forward to your next postings and emails.

Drew Field

Posted by drewfield | Report as abusive