low capital usage, great returns. every institution has to look at where they can get the returns. and to adjust their business model accordingly. >> you are moving away from the capital intensive, highly regulated investment banking businesses? >> i would not say we are moving away from it. the ballast which gives us stability. the other half is the engine room. have a business model which mixes the best of both worlds. time will prove if that is the case. >> new forms of lending going on. no bank in the middle,

peer-to-peer lending. there are some credit qualifications on both sides. the bank that provides the credit evaluation is out of the mix. is that a good thing or a bad thing? >> society started off with the barter system before. the first bank was formed -- i think it is great. system,on, the payment these are all innovations. if there is a market for it and they can do it efficiently and manage the credit risk, god bless them. it going to end in tears? with a set of problems emerging? >> nothing is risk-free, particularly around money.

understand thee credit risks they are taking. what really matters is getting your capital back first. >> spoken like a true banker. i have a lot more questions, but no more time. [applause] >> m.i.t. researcher andrew mcafee talks about the new machine age. he spoke with david brooks for 20 minutes. two very fun folks. your services are no longer needed, meet the robot. we have andrew mcafee, who has one of the hottest books on the market right now. colonist forooks, the new york times -- columnist for the new york times. at her opening dinner, david

gave a riveting, sobering talk about the subject happiness. in the back of the my mind i have the for a williams song going -- the pharrell williams song going on. the moral versus the economic as we look at the machine age that is coming. david brooks. >> i ask short questions. machines think, humans think, what is the difference? >> i think we both wish that i were thomas these days. you think you have written a book about economics and then somebody shows you what that actually means. machines don't think.

a the same way, there is great pioneer of artificial intelligence that said airplanes don't flap their wings. we see cool stuff going on in nature and we build machines that get theire. geeks talk to these uber and i say, are you building artificial brains, they generally say i have no idea how the brain works. i am solving an engineering problem. there are guys who are trying to reverse engineer the brain and put that in silicon. if they are successful, it will take them along time. the terminator or the matrix nightmare is not the one i find myself waking up screaming from. >> i would prefer machine to do it or set of rule-based checklists?

or -- i don't want that? hospital and i have some kidney problem and i probably want the checklist. i'm going on a date, i don't want the checklist. >> no, you do want the checklist. [laughter] >> social life at m.i.t. skeptical about the dating example, but most of us have lousy intuition about a lousy things and are very internal compass. a week ability to look at ourselves and be objective. i am not saying we should turn over our decisions to algorithms. we should probably be using it more than we do now.

do not outsource everything to a computer, that the market share of the algorithms should go up and a lot of domains. click some people say intuition is unconscious pattern recognition. >> i am one of those people. to believe otherwise, you have to believe there is something magical or ineffable about the human intuitive ability. i do not think it comes from any soul that we have. it comes from this really weird computer between our ears. not better in every domain and the digital stuff is getting better all the time. >> now we are interacting with machines. the chess example -- why don't you describe why humans working with machines are better at chess? >> chess is a wonderful thing to look at.

-- it encapsulates between intelligence. there are great quotes from now the cost talking about these mystical chess grandmaster's. once computers got better, we looked in the rearview window and said, this is just pattern matching. i had the chance to talk to gary and he was the world chess champion. between intelligence. there are great quotes from now when he first became world champion, he played 32 simultaneous matches against the best chess playing computers and he won 32-0. 10 years later, ibm beat him in a pretty close match and now it is not even close. they asked how he would prepare for a match against a computer and he said, i would so head to head is completely

boring. the machines have raced ahead except when we are able to combine human ability and digital ability and play these freestyle tournaments where any team comes together. and i get optimistic as a person again because it turns out that the right team will beat a grand master or a chess supercomputer or a grand master with a supercomputer. the right team is fairly geeky people who are both chess geeks and computer search and algorithm geeks and they combine what they can do versus what their machines can do and you beat everybody. >> what is the grand master bringing to the table? >> cass prove talks about it as the ability to generate a new idea. which seems weird to me. because the computers can justity rate through so many more ideas than we can these days. there is something especially in that portion of a chess game and i don't play nearly well enough to know this in detail but middle of the chess game when things are wide open, our weird computers can do a better job at seeing a for real

opportunity still than the digital stuff can. through some pretty -- i won't say magical but some pretty wild process. >> will computers ever write columns? [laughter] i should say that, thinking of some of my fellow columnists and maybe they already do. >> yeah. they clearly already do. >> not "the new york times." but the earnings announcements for corporate websites. for corporations that appear on the forbes website are written by an algorithm. that's just pretty run-of-the-mill journalism and here's a body of facts. right a pros narrative on top of that we can absolutely do that and nobody can tell the difference if the byline didn't say narrative science rather than a person's name on it. always a good idea to flatter your interviewer but what you and your colleagues do at the times i don't think it's anywhere close to being automated. i still have never seen a piece of technology that could awaken any kind of deeper response in me or another human. one thing i've learned, though, the mantra that i keep

repeating is i try to figure out what technology can and can't do. the mantra is never say never. >> you're around a lot of young people at m.i.t. and they're preparing for workplace with a much heavier technological footprint. >> yeah. >> how do you tell them to prepare for that given they won't know exactly what the technology is but they know it will be pretty big? >> i don't worry too much about the kids at m.i.t. mark andreesen has a great quote about this. in the future there are going to be two kinds of jobs. the jobs that tell computers what to do and the jobs that are told by computers what to do. only one of those categories is going to be a desirable well paid good job to have. the m.i.t. students are overwhelmingly going to be in that first category. what i worry about are the people who are currently in that middle that is populated by human beings right now. if andreesen's vision is right and i kind of think it is, that that middle is going to be hollowed out even more than it is now. and that is what keeps me up at night. >> ok. so let's get back to that and how journalism works.

if i wanted to write a piece ripping you i would take a sentence, i don't really worry about kids at m.i.t. says m.i.t. professor. that wosh the only quote you would get out of this. >> if that's the worst thing i say i would be really happy with that. i don't know how many of us shed tears for the poor students of m.i.t. and their job prospects. >> they do pay you. but let's talk about this core issue that you hear from everybody else but not so much from your book. and that is that technology ust is going to hollow out employment and when facebook bought what's app and i don't know what they paid but something on the order of $300 million or $400 million per employee. and you can generate a whole lot of value or at least prospective value with very few people. >> and we do try to talk about this in the book. we talk about the two main economic consequences of this astonishing tech progress that we're seeing.

the first is the good news. abundance and bounty and just more stuff. the second, though, is exactly what you point out. we call it spread. as our overall lable for it. the fact that the what's app team is way up at the top of any income or wealth distribution now. there are a lot of people at the bottom and exactly as you say, that traditional large stable prosperous american middle class is pretty clear that since about 1980, that middle class has been getting hollowed out. and i don't think it's a coincidence that 1980 kind of started the p.c. era. and this great democratization of technology. it's kind of an irony that as we have put -- i believe the most powerful tools for personal expression and individualality and entrepreneurship in the hands of people since about 1980, what we're seeing instead is an increase in spread and inequality in some things that we care about. >> is that just baked into the cake of technology? >> yes and no. i think that technology does have that superstrong tendency.

but the reason i'm trying to hedge a little bit is i don't want that to be any kind of reason or excuse to throw up our hands and say well that's just how it's going to go. good luck to everybody. you know, that's -- that's a terrible idea for all kind of reasons. the last sentence in our book is that technology is not destiny. we get to shape our destiny. i think there are these strong forces. but to me, that argues more strongly for policy interventions and hard thinking and all the things we as a society can do to -- to change the equation a little bit. >> what's possibly big enough -- you're talking about some fundamental forces that seem on the driving of inequality scales are bigger than raising the minimum wage on the policy scale. >> and i don't know how prominently that particular intervention should be featured. my -- the mantra i repeat about what the right playbook is going forward is innovation, more innovation and more inclusiveness in our economy. the thing we have to do,

there's a great exchange, i forget exactly who said it but the quote was gentlemen, we've run out of money. it's time to start thinking. i think the equivalent for this era is it's time to start innovating more than -- even more than we are. the only thing that's going to get us out of our problems. we can't tax our way out of it and can't spend our way out of it. all we can do is grow and innovate our way out of it. however, some of our current path of innovation is leaving a lot of people behind. which is why the other half of my mantra these days is inclusiveness. the data are emerging and the research is pretty wild. social mobility in this country is a lot lower than we think. and it's been a lot lower for quite a long time. so this american dream, you and i probably still believe in it and we carry it around. it's been a tougher sell these days. so finding ways to actually restore that, is really important. the first winner of the nobel prize in economics had a beautiful way to frame it. he said said inequality is a

race between technology and education. technology tends to exacerbate it and education is the great moderating force. let's not forget that. >> let's talk about some of the technological effects within industries or within the places where a lot of us work. so in my work area, the internet has had this weird effect that i think was unpredicted and used to be as a reporter go to a press conference and write 800 words and summarizing what happened. >> yep. >> that's basically gone. and i call those people the middle distance runners. >> yeah. >> and the people who are really good are the sprinters who are tweeting out a zillion things a day. >> yep. >> or what i hope i am, is the conceptual people. >> yep. >> and it's actually harder to find con isn'tual people, surprisingly harder to find people who can do that so distance people and sprinters but no middle distance in my field. what are other fields where you see weird effects from technological -- >> that pattern that you identified is to my eye sincere

a showing of the hollowing out we've seen over and over. the profession of law is in some trouble these days. there are several reasons for that and turning out more law school graduates than we need. but also that middle distance of law is this work of reading a whole box full of documents and looking for patterns as part after discovery process or something. you hit a button. you get that right now. a very, very good lawyer, the equivalent of a "new york times" columnist for a lawyer is somebody who can prevent the problem up front or negotiate through a complex deal. i don't see that getting automated any time. but there are some pretty low level people and those middle distance runners are going away. i wouldn't be surprised to see the same thing happen in medicine. i.b.m. did not build watson just to win the game of jeopardy. they didn't unplug watson after it won on jeopardy. they sent watson to medical school. i personally am convinced that if watson is not already the world's best medical diagnose stick it will be very quickly.

a lot of doctors in the middle. >> did you read michael lewis' book "flash boys"? >> i haven't read "flash boyes." >> and using technology to rig the game. and most people hit the buy buten and assume it's automatically leads to a sale. but there's a lot of inner steps in there they don't even think about. >> yeah. >> are there other examples of that who are -- i mean, possibilities for corruption from people who just understand the technology better or -- >> yeah. there are tons of them. and entrepreneurship and innovation are kind of unguided processes. in general, i think they take us in the right direction and into a better place. but some of it clearly goes in to -- if not outright criminal activity, then counterproductive ones or exploiting these little holes that don't make us overall better off. they just make the innovator a lot better off. that's going to be part of the process going forward. as well. but i do still think that on balance, technology-based innovation takes us into a better place.

>> and what struck me about that book and also your book is the people who -- they were pushing a button to buy. and then when it hit the screen, the shares or whatever they were trying to buy were no longer there. they were seeing on the screen was not reflecting the real market. and they couldn't figure it out. and most people just say oh, that's a mystery and i can't figure it out. but a very few people were obsessive and spent -- they got obsessed with the problem. and they behaved in market irrational ways because they have this fanatical desire to understand what was going on and you have some of that as well. that this obsessive ability does have -- it's a unique human trait and character. >> the positive label we give to that is a geek. in my world of the tech industry, geek is a term of high, high praise. nerd is a little bit more ambiguous. but geek is really just the highest thing you can be called. and they've got that character, that they're just -- they're just tenacious about a problem. they don't ever let it go. when they have something like

an answer to it, what's amazing these days is the technology gives you such leverage if you answer it a tiny bit better. you can propagate that answer and capture a great big huming market. so technology, not just geeks like to play with technology. it's that technology amplifies geekry in a way that i've never seen before. >> and does it defeat social skills? does it minimize -- what other skills are become amplified? >> i know you're a fan of st. augustin. he has the best insight about what's going on with our screens. which are unbelievably addictive, right? our friends are there. there are these bright jewel-colored things they fit into our pockets. they're accessible in two seconds. and when the person we're talking to is boring we've got this whole world right here. it's a dire temptation. and i give in to it way too often. i'm going to get the augustine quote totally wrong but he says look what the world does. is put these temptations in front of us all the time. our job as -- to use your words

from last night, as more mature, more reflective or deeper people, is to be aware of that. and then to fight that battle against ourselves to try to become a better or more reflective person. in part by not -- not reaching for the darn phone every five seconds. i still like the phone. i still want it. but we need to be able to have a real conversation. >> you think it cuts our attention span? >> yeah, probably. but i have trouble believing that we could design any technology better at rotting our brains than network television. [laughter] and we survived that, right? >> hbo guys. >> no, he's cable. it's cool. but my generation survived that, just that passive, completely nonengaging experience. at least what we're doing now is so much more interactive. i do have faith that even with these -- these problem areas, they're going to make our brains better instead of worse.

>> my last question, i tend to say that we tend to underestimate the pace of technological change and overestimate the pace of behavioral change. and so we have these neat gizmos but still sitting here in this room. >> yeah. >> will this go away? >> let's hope not. i interact on technology a ton. and i come across interesting ideas and interesting people on twitter, on my blogs. in the online world. there is no substitute. and as a natural introvert, i would kind of much rather not have to go to conferences and talk with other human beings. but part of the struggle that where i've learned is that's actually where you get a spark, a new idea, something real and kind of cool in your life. is not just by staring at the screen or just doing that. but getting out there into the real world. i think it would be dire, dire, if that went away. >> we are out of time. i will say to wrap up, you are a well disguised introvert. >>