Sunday, November 23, 2014

Will Programmers Rule?

NEW DELHI – Marc Andreessen made his first fortune writing the code that became Netscape Navigator, the Internet browser. He is now a venture capitalist who evangelizes about the growing importance of software in business today. Indeed, he proclaims that software is taking over the world – that it will be the primary source of added value – and offers the following prediction: the global economy will one day be divided between people who tell computers what to do and people who are told by computers what to do.

Andreessen’s aim is to shock his listeners – not just for effect, but to get them to do something about it. To stop the world from being divided between a few alpha programmers and many drones, he wants the potential drones to stop taking easy liberal arts courses in college. Instead, he wants them to focus on courses in science, technology, engineering, and math (STEM), where the good jobs will be. But will this solve the problem that he poses?

Perhaps not. Two attributes of software creation allow a few talented programmers to corner the market and take all the associated profits. First, software with a slight edge tends to get a significantly greater share of the available market; and, second, the available market is global, because it costs so little to make an extra copy and send it anywhere in the world. As a result, those who are creative and competent enough to write that slightly better search engine will capture the global market.

In this winner-take-all environment, only a small number of those who have taken programming courses will reap a majority of the rents. Completing the right preparatory courses is no guarantee of receiving a share of the software jackpot. Differences in luck and talent among those equally prepared will ensure that the quality of software firms’ products lies on a bell curve, with only a few Googles and Facebooks and many more bored, moderately paid computer technicians helping the average confused person deal with malware.

Put differently, in a winner-take-all world, raising the average level of skills or education does nothing to alter the skewed distribution of income. So, will anything prevent inequality from widening?

The obvious answer is yes. But how society responds will mean the difference between a prosperous world and a world torn apart by slow growth and resentment.

Property rights are ultimately sanctioned by society, and, to the extent that they seem to be unfair, society has an incentive to change them. But will society see the software billionaire as having acquired her wealth unfairly, or will it see that wealth as a fair reward for cleverness?

The more that everyone has access to the same educational opportunities, the more society will tend to accept some receiving disproportionate rewards. After all, they themselves have a chance to be winners. Interestingly, software may itself reduce the cost of expanding educational access – witness the massive open online courses (MOOCs) offered by companies like Coursera.

But equal access is probably an unlikely ideal. The other extreme is very unequal access, made more unequal because the wealthy have the time to help their kids with homework and the money to arrange for tuitions, while the poor leave their children watching TV while they work a second job. Will the resentful workers who must follow a computer’s instructions – say, in assembling an order in Amazon’s fulfillment centers – vote to tax the programmers who put them there until the software creators lose the incentive to innovate, leaving society poorer? Or will the rich programmers all migrate to Monaco or Switzerland, taking the brains and rents with them, as society falls apart into barricaded and mutually resentful enclaves and ghettoes?

In reality, many intermediate possibilities exist. One is that cultural norms may develop that encourage billionaires to share their wealth, even if they are spared taxation. For example, the Giving Pledge is a commitment by some of the world’s richest people, Warren Buffett and Bill Gates among them, to devote the majority of their wealth to philanthropy.

Economic competition may also play a role – if billions are to be made by innovators, more of the most talented get into innovation, so that, even in a winner-take-all world, the winner captures the market for a fleeting moment before someone else takes it away from him. The billions to be made today may only be millions tomorrow.

And values also adjust. While a quartz watch keeps time more accurately than the most finely crafted handmade mechanical Swiss watch, the value of a quartz watch has plummeted, while Swiss watches’ value has climbed into the stratosphere. Even though they are virtually indistinguishable in appearance, people seem to cherish the knowledge that someone has lovingly crafted their watch.

So it may well be that the demand for discussing, say, medieval French church music in small classes at a university will grow even as the demand for MOOCs grows. Not everyone should heed Andreessen’s exhortation to quit liberal arts programs!

That is not to say that his basic concerns are unwarranted. Better access for all to fundamental needs like quality education is necessary to make the winner-take-all character of markets more tolerable. But societies may also have to change. If we are lucky, the changes will take place spontaneously.

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    1. CommentedKarthik M

      Oh yes! Everything depends on luck. Thank you for that Mr. Raghuram. How much do we owe you for this?

    2. CommentedKuruvilla Abraham

      We may stuff them with all the information in the world and fund them in the most extravagant of ways but if the education system does not rekindle the lost art of thinking then such coders will forever live as drones. And to meet this challenge on a large scale, there is presently no education system in the world that's worth its salt.

      The solution is to create a paradigm shift from left-brain lead learning to right-brain lead learning

    3. CommentedNathan Coppedge

      This is a remarkable article.

      What is clear to me is that ownership of industry is more of a gameplayer even than sheer economic differences. Beyond mere material difference is a qualia or dynamic difference, a 'problem' that cannot be bridged by any artificial means, including education.

      Secondly, where we speak of qualia we may as well also speak of crowd-sourcing and 'minimalist' citizens who wish to make small change doing just about nothing. Clearly, in antimony to the gameplayer dynamics, there is just as much potential in tapping bored citizens for extra variables. This is especially true with growing populations, and education is not necessarily more than a 50% contributor. It isn't the only function of the shifty and restless economy.

      Putting these two variables together gives a better picture of the technological future: dynamic industry-owners and shifty-restless drop-in-the-bucket contributors. But there are enough of the two types to have already merged into a third category that is not being utilized: drop-in-the-bucket prodigies that have game changing information but no chance to profit. Clearly these would benefit by sheer cheap tools and public innovation systems, such as more Starbucks LAN-type services, electrodes, or quality based integration (I speak in reference to the obvious correspondence between surveys-internet-news---SIN and the very important reasons to use emotional systems---VIRTUES)

    4. CommentedPranav K

      I disagree with this point. The new information age will make equal access more likely. People sitting in africa can do a course conducted by American university at little cost as it is also a content which can be shipped at little cost.


      The real essence of Education should be impart self realization. Because science fetches you money but arts don't give you money. Science if not studied in proper manner will lead to greed and destruction of environment. The classic example is plastic and nuclear bombs. Intellectual knowledge can be developed through study of arts. This coupled with scientific knowledge will promote quality in education.

    6. Portrait of Pingfan Hong

      CommentedPingfan Hong

      To some extent this divide has already happened in the world, not just limited to software. We have a group of people who invent and design machines while another group of people become slaves of those machines.

    7. Commentedsrinivasan gopalan

      As is his wont, Raghuram Rajan has hit upon a nice proposition to apprise the world that liberal arts cannot be allowed to languish, even if software programmers were to rule the roost. The world today gets going not because of the wealth of a few but because of the abstemiousness of many who do not always set store by riches as much as they get enriched by the acquisition and spread of knowledge. Knowledge per se to hone one's psychic prowess is too important to be ignored as it helps many a person to get contented, though the pursuit to keep oneself fully occupied for livelihood does count. Inequality in the existing global order both at the micro and macro level has been taken as given as people disport themselves in their own preoccupations of consequence to their conscience. So Rajan's plea for letting liberal arts co-exist side by side STEM is a sane one as against the excessive and overbearing importance being fixated on the pursuit of information technology. G.Srinivasan, Journalist, New Delhi

    8. CommentedTristan de Inés

      Entrepreneurs dealing in information are successful today because we live in the Information Age, just like mechanical engineers were successful in the Age of Industrialization. The future belongs not to "programmers" resting on their laurels, but, as always, to those pioneers, empowered by the tools of today, who are willing to go beyond the current into new, emerging technologies. This almost always requires a multidisciplinary approach. Strong contenders would be found in the fields of biotech, robotics, AI, virtual and augmented reality, or the private enterprises exploring a new "Space Age 2.0".

      I realize that this is besides the point you are trying to make in the article as a whole, so forgive me for picking out the headline as the focus of my comment.

    9. CommentedIndranil Chakraborty

      I think software industry has features of increasing returns to scale, yet the issue raised by Professor Rajan may be overstating the problem a bit. Ultimately what wins the day is not killer software ideas but a generally good idea backed sound business instincts (IBM's DB2 / OS2 made way for Oracle / MS althougb atleast according to Grestner IBM product was leagues ahead) ..moreover software patents are not that popular and hence it is pretty easy to copy an efficient execution (if not the algorithm)..

    10. CommentedMatt Stillerman

      Software is the new prose. It is currently the best way to capture knowledge and make it more liquid; more easily applied. In the past you would write and publish a book. This is still effective, but requires a person to read the book in order to employ the knowledge, a time-consuming and potentially expensive process.

      The real value (and cost) is in the knowledge--the often hard work required to figure things out. That's why it is often much easier to rewrite software than to write the first version. I predict that coding and "figuring stuff out" will, in the future, be teased apart, and that only the latter will be well compensated. And, a liberal arts education would be excellent preparation for such a career, in my opinion.

    11. Commentedcaptainjohann Samuhanand

      Indian Billionaires except Azim Premji can cheat their workers and put diamond crown in temples butwill not give to charity in India while they give to US educational instituions because their wealth are in tax havens.How many in India can afford laptop or a PC but it is worth knowing that a girl living in slum in India and father earning about $100 per month can make their daughter to come first in chartered account exam in India beating even LSR students. that gives hope

    12. CommentedProcyon Mukherjee

      Raghuram has raised a much broader question, in a world where we have disproportionate rewards, which is heavily skewed, while the opportunities for preparing a generation is such that it is finally luck how a minuscule minority gets the advantage of appearing for a course that would eventually create the skills and expertise needed to 'take all', it is pertinent to ask how do we turn the tide towards fairer opportunities and perhaps also make a reward system that is not so heavily skewed. The crux of the problem would boil down to the apparent dysfunctional arrangement between opportunities with high connection to jobs and actually to what subject streams the students are headed. There is no automatic mechanism that would make these two intertwined to give an end result that is optimal. Here the market mechanism does not work.