Second economy of digital machine-to-machine (Brian Arthur)

The digitized machine-to-machine “second economy” of digitized business processes will be same size as “first economy” of physical/tangible in about 20 years, says Brian Arthur, cited by Chrystia Freeland.

His 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,” Mr. 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.”

“The shrinking human factor in a machine-to-machine economy” | Chrystia Freeland | Feb. 9, 2011 | Globe and Mail at

This second economy of information complements the first economy familiar in industrial economy.

Now this second, digital economy isn’t producing anything tangible. It’s not making my bed in a hotel, or bringing me orange juice in the morning. But it is running an awful lot of the economy. It’s helping architects design buildings, it’s tracking sales and inventory, getting goods from here to there, executing trades and banking operations, controlling manufacturing equipment, making design calculations, billing clients, navigating aircraft, helping diagnose patients, and guiding laparoscopic surgeries. Such operations grow slowly and take time to form. In any deep transformation, industries do not so much adopt the new body of technology as encounter it, and as they do so they create new ways to profit from its possibilities.

Original article as “The second economy” | W. Brian Arthur | October 2011 | McKinsey Quarterly at (registration required).

The shrinking human factor in a machine-to-machine economy - The Globe and Mail