Daniel Rock

• Erik Brynjolfsson, Daniel Rock, Chad Syverson (2021), The Productivity J-Curve: How Intangibles Complement General Purpose Technologies, American Economic Journal: Macroeconomics. Abstract

  General purpose technologies (GPTs) such as AI enable and require significant complementary investments,including co-invention of new processes, products, business models and human capital. These complementary investments are often intangible and poorly measured in the national accounts, even when they create valuable assets for the firm. We develop a model that shows how this leads to an underestimation of productivity growth in the early years of a new GPT, and how later, when the benefits of intangible investments are harvested, productivity growth will be overestimated. Our model generates a Productivity J-Curve that can explain the productivity slowdowns often accompanying the advent of GPTs, as well as the increase in productivity later. We use our model to analyze empirically the historical roles of intangibles tied to R&D, software, and computer hardware. We find substantial and ongoing Productivity J-Curve effects for software in particular and computer hardware to a lesser extent. Our adjusted measure TFP is 11.3% higher than official measures at the end of 2004, and 15.9% higher than official measures at the end of 2017. We then assess how AI-related intangible capital may be currently affecting measured productivity and find the effects are small but growing.

• Seth Benzell, Guillermo Lagarda, Daniel Rock (Working), Do Labor Demand Shifts Occur Within Firms or Across Them? Non-Routine-Biased Technological Change from 2000-2016. Abstract

  A large literature has documented occupational shifts in the US away from routine intensive tasks. Theories of skill-biased technological change differ in whether they predict changes in occupational mix within firms, or merely across different firms or industries. Using LinkedIn resume records, BLS OES data, and Compustat employee counts, we estimate occupational employment for publicly traded US firms from 2000 through 2016. We find that faster employment growth among firms that disproportionately employ non-routine workers is the most important cause of SBTC, followed by within firm occupational mix rebalancing. The entry of new firms also plays a role, although firm exit is slightly routine-worker biased. R&D leads firms to have a larger share of routine workers. These results are most consistent with a theory of routine task demand reduction caused by the diffusion of infra-marginally implemented new technologies. We also introduce a new measure of business labor dynamism, capturing the frequency with which firms change their occupational mix. Consistent with trends in productivity and other measures of business and labor market dynamism, this measure has decreased steadily since 2000.

• Erik Brynjolfsson, John J. Horton, Adam Ozimek, Daniel Rock, Garima Sharma, Hong-Yi Tu Ye (Working), COVID-19 and Remote Work: An Early Look at US Data. Abstract

  We report the results of a survey on remote work for nationally-representative sample of the US population during the COVID-19 pandemic. The survey ran in three waves in April 2020, May 2020, and July 2020 covering a total of 75,000 respondents. Of those employed pre-COVID-19, we find that about half are now working from home, including 33.0% who report they had previously been commuting and recently switched to working from home. In addition, 10.1% report being laid-off or furloughed since the start of COVID-19. We find that the share of people switching to remote work can be predicted by the incidence of COVID-19 and that younger people were more likely to switch to remote work. Furthermore, states with a higher share of employment in information work including management, professional and related occupations were more likely to shift toward working from home and had fewer people continuing to commute. We find no substantial change in results between the first two waves, suggesting that most changes to remote work manifested by early April. However, by the third wave in July, employees started to return to workplaces, with 22 percent of those who had initially switched to remote work having switched back to commuting.

• Prasanna Tambe, Lorin M. Hitt, Daniel Rock, Erik Brynjolfsson (Working), Digital Capital and Superstar Firms. Abstract

  General purpose technologies like information technology typically require complementary firm-specific human and organizational investments to create value. These complementary investments produce a form of capital, which we call Information technology-related intangible capital (“ITIC”). An understanding of how the accumulation of ITIC contributes to economic growth and differences among firms has been hindered by the lack of measures of the stock of ITIC. We use a new, extended firm-level panel on IT labor investments along with Hall’s Quantity Revelation Theorem to construct measures of both the prices and quantities of ITIC over the last thirty years. We find that 1) prices vary significantly for ITIC, 2) significant quantities of ITIC have been  accumulating since the 1990s, with ITIC accounting for at least 25% of firms’ assets by the end of our panel, 3) that it has disproportionately accumulated in small subset of high-value, superstar firms, and 4) that the accumulation of ITIC predicts future productivity.

• Erik Brynjolfsson, Daniel Rock, Chad Syverson, “Artificial Intelligence and the Modern Productivity Paradox”. In The Economics of Artificial Intelligence: An Agenda, edited by Ajay Agrawal, Joshua Gans, Avi Goldfarb, (University of Chicago Press, 2019) Abstract

  We live in an age of paradox. Systems using artificial intelligence match or surpass human-level performance in more and more domains, leveraging rapid advances in other technologies and driving soaring stock prices. Yet measured productivity growth has declined by half over the past decade, and real income has stagnated since the late 1990s for a majority of Americans. We describe four potential explanations for this clash of expectations and statistics: false hopes, mismeasurement, redistribution and implementation lags. While a case can be made for each explanation, we argue that lags have likely been the biggest contributor to the paradox. The most impressive capabilities of AI, particularly those based on machine learning, have not yet diffused widely. More importantly, like other general purpose technologies, their full effects won’t be realized until waves of complementary innovations are developed and implemented. The adjustment costs, organizational changes, and new skills needed for successful AI can be modeled as a kind of intangible capital. A portion of the value of this intangible capital is already reflected in the market value of firms. However, going forward, national statistics could fail to measure the full benefits of the new technologies and some may even have the wrong sign.

• Daniel Rock (Working), Engineering Value: The Returns to Technological Talent and Investments in Artificial Intelligence. Abstract

  Engineers, as implementers of technology, are highly complementary to the intangible knowledge assets that firms accumulate. This paper describes how technical talent is a source of rents for corporate employers, particularly for the case of Google’s surprising open-source launch of TensorFlow, a deep learning software package. First, I present a simple model of how employers intangible assets expose them to the returns to their employees’ skill acquisition efforts. Then, using over 180 million position records and over 52 million skill records from LinkedIn, I build a panel of firm-level skills to measure the market value of exposure to newly available deep learning talent. AI skills are strongly correlated with market value, though variation in AI skills from 2014-2017 does not explain contemporaneous revenue productivity within firms. AI-intensive companies rapidly gained market value following the launch of TensorFlow, while companies with opportunities to automate relatively larger quantities of labor with machine learning did not. Using a difference-in-differences approach, I show that the TensorFlow launch is associated with an approximate market value increase of 4-7% for AI-using firms. AI superstar firms in the top quintile also appear to benefit, but show pre-trends in market value growth.

• Erik Brynjolfsson, Tom Mitchell, Daniel Rock (2018), What Can Machines Learn, and What Does It Mean for Occupations and the Economy?, American Economic Association: Papers and Proceedings, 108, pp. 43-47. Abstract

  Advances in machine learning (ML) are poised to transform numerous occupations and industries. This raises the question of which tasks will be most affected by ML. We apply the rubric evaluating task potential for ML in Brynjolfsson and Mitchell (2017) to build measures of “Suitability for Machine Learning” (SML) and apply it to 18,156 tasks in O*NET. We find that (i) ML affects different occupations than earlier automation waves; (ii) most occupations include at least some SML tasks; (iii) few occupations are fully automatable using ML; and (iv) realizing the potential of ML usually requires redesign of job task content.

Current Courses

• OIDD1010 - An Introduction To Operations, Information And Decisions

  OIDD 101 explores a variety of common quantitative modeling problems that arise frequently in business settings, and discusses how they can be formally modeled and solved with a combination of business insight and computer-based tools. The key topics covered include capacity management, service operations, inventory control, structured decision making, constrained optimization and simulation. This course teaches how to model complex business situations and how to master tools to improve business performance. The goal is to provide a set of foundational skills useful for future coursework atWharton as well as providing an overview of problems and techniques that characterize disciplines that comprise Operations and Information Management.

  OIDD1010001 ( Syllabus )

  OIDD1010002 ( Syllabus )

  OIDD1010003 ( Syllabus )

  OIDD1010004 ( Syllabus )

• OIDD6130 - Online Business Models And The Information-based Firm

  This course is devoted to the study of the strategic use of information and the related role of information technology. It is designed for students who want to manage and compete in technology-intensive businesses. Heavy emphasis is placed on applying information economics principles and theoretical rigor to analyze businesses in information-intensive industries using both qualitative and quantitative techniques. We will study information-based industries like digital media, social networks, financial services, and online retail as well as traditional businesses that are being changed by new digital capabilities. There are four broad themes for the course: the economics of information goods and services, information and consumer behavior, markets and market design, and network economics. Each day we will discuss a core topic in one or more of these themes, with an emphasis on bridging theoretical ideas to real world applications. Application topics might include applying artificial intelligence, platform economics, and cryptocurrencies. Technology skills are not required, although a background in information technology management, strategic management, data science, or managerial economics is helpful.

  OIDD6130001 ( Syllabus )

  OIDD6130003 ( Syllabus )

• OIDD8990 - Independent Study

  OIDD8990035

Past Courses

• OIDD1010 - Introduction To Oidd

  OIDD 101 explores a variety of common quantitative modeling problems that arise frequently in business settings, and discusses how they can be formally modeled and solved with a combination of business insight and computer-based tools. The key topics covered include capacity management, service operations, inventory control, structured decision making, constrained optimization and simulation. This course teaches how to model complex business situations and how to master tools to improve business performance. The goal is to provide a set of foundational skills useful for future coursework atWharton as well as providing an overview of problems and techniques that characterize disciplines that comprise Operations and Information Management.

• OIDD3990 - Supervised Study

  This course number is currently used for several course types including independent studies, experimental courses and Management & Technology Freshman Seminar. Instructor permission required to enroll in any independent study. Wharton Undergraduate students must also receive approval from the Undergraduate Division to register for independent studies. Section 002 is the Management and Technology Freshman Seminar; instruction permission is not required for this section and is only open to M&T students. For Fall 2020, Section 004 is a new course titled AI, Business, and Society. The course provides a overview of AI and its role in business transformation. The purpose of this course is to improve understanding of AI, discuss the many ways in which AI is being used in the industry, and provide a strategic framework for how to bring AI to the center of digital transformation efforts. In terms of AI overview, we will go over a brief technical overview for students who are not actively immersed in AI (topic covered include Big Data, data warehousing, data-mining, different forms of machine learning, etc). In terms of business applications, we will consider applications of AI in media, Finance, retail, and other industries. Finally, we will consider how AI can be used as a source of competitive advantage. We will conclude with a discussion of ethical challenges and a governance framework for AI. No prior technical background is assumed but some interest in (and exposure to) technology is helpful. Every effort is made to build most of the lectures from the basics.

• OIDD4690 - Info Strat & Econ

  This course is devoted to the study of the strategic use of information and the related role of information technology, and designed for students who want to manage and compete in technology-intensive businesses. The topics of the course vary year to year, but generally include current issues in selling digital products, intermediation and disintermediation, competing in online markets, emerging technologies, managing artificial intelligence and data science for business, and technology project management. Heavy emphasis is placed on utilizing information economics to analyze businesses in information-intensive industries. Technology skills are not required, although a background in information technology management, strategic management or managerial economics is helpful. The course is designed to complement OIDD 2100, OIDD 2150, OIDD 2450, and OIDD 255X.

• OIDD6130 - Online Business Models

  This course is devoted to the study of the strategic use of information and the related role of information technology. It is designed for students who want to manage and compete in technology-intensive businesses. Heavy emphasis is placed on applying information economics principles and theoretical rigor to analyze businesses in information-intensive industries using both qualitative and quantitative techniques. We will study information-based industries like digital media, social networks, financial services, and online retail as well as traditional businesses that are being changed by new digital capabilities. There are four broad themes for the course: the economics of information goods and services, information and consumer behavior, markets and market design, and network economics. Each day we will discuss a core topic in one or more of these themes, with an emphasis on bridging theoretical ideas to real world applications. Application topics might include applying artificial intelligence, platform economics, and cryptocurrencies. Technology skills are not required, although a background in information technology management, strategic management, data science, or managerial economics is helpful.

Knowledge @ Wharton

• CJ Handron, Co-founder of Diamond Kinetics, Knowledge @ Wharton - 04/17/2024
• The Impact of AI on Financial Literacy | Michael Roberts, Knowledge @ Wharton - 04/16/2024
• Why Staying in Your 401(k) After Retirement Makes Sense, Knowledge @ Wharton - 04/15/2024
• How Social Insurance Drives Credit Card Debt, Knowledge @ Wharton - 04/15/2024
• Understanding the Value of Networks for Mothers Reentering the Workforce, Knowledge @ Wharton - 04/11/2024
• Golf Analytics & The Masters, Knowledge @ Wharton - 04/10/2024
• Three Things All New Managers Should Be Doing, Knowledge @ Wharton - 04/09/2024
• How ‘Thinking Out of the Shoebox’ Made Stuart Weitzman a Success, Knowledge @ Wharton - 04/09/2024
• How Financial Literacy Affects Household Debt and Bankruptcy | Sasha Indarte, Knowledge @ Wharton - 04/09/2024
• How Stock Price Volatility in Closely Held Firms Distorts Capital Allocation, Knowledge @ Wharton - 04/09/2024