What Is the New Economics?

Robert Shiller's sixth lesson is that there is a next big thing. "Robotics," he says. "Maybe 10 or 20 years down the road, robotics will be a really big deal. A lot of things will be automated. I think that automation should be a real national concern because of the potential for disruption of income distribution. Common-labor wages will be harmed by the invention of robots that can do simple tasks." To underscore the seriousness of his point, Shiller brings up . . . RoboSoccer.

RoboSoccer? "They had it on TV," he says, genuinely excited. "It's an annual event. You have to design a robot that plays soccer, and then there's an indoor soccer arena, and your robot can't be radio controlled. The robots have to play entirely on their own, and they have to know how to follow the rules somehow. I saw segments of the soccer game, and it actually looked like a soccer game. You could see them playing."

Shiller chuckles at the inanity of the idea of robotic soccer -- do robots really need exercise? But then he turns to the larger point. "The program quoted someone who said that RoboSoccer today is what computer chess was 20 years ago, when the games were laughable. The computers were easily defeated. But, the show said, within 50 years, no human soccer team will be able to defeat a robot team. I don't know whether that's true or not, but I can see advantages that computer robots might have as a team compared with humans. I can easily believe that a robot team could beat any human team."

Shiller then draws a picture of your new neighborhood. "In the near future, half of the 'people' you encounter will be robots. They'll be out on errands for somebody. Every now and then, a robot will stop you and ask you for directions. Robots have already taken over a substantial part of the world. It's computer technology that, I think, is a really big thing."

Shiller's seventh lesson is experiential: If you really want to understand something -- really understand it -- don't just analyze it, do it. According to Shiller, there's no substitute for experience. And so, although this academic is best known as the man whose prose helped puncture the Internet bubble, he is himself a partner in a dotcom company. "In 1991 we founded Case Shiller Weiss Inc.," Shiller says. "At that time, Allan Weiss was the president and only employee. The company has grown to about 20 employees now. We wanted to create futures markets or some kind of derivative market in real estate. And we wanted to provide indexes for contract settlement. That was the initial idea -- which, unfortunately, still hasn't happened." In other words, Shiller's company sounds exactly like any other startup dotcom.

"But I'm still hopeful that it will happen," Shiller continues. "So we constructed what we call 'by-zip-code real-estate price indexes.' Then we got this idea to create an automated valuation model using our indexes for individual houses. We created a Web site where you can type in the address of any home, and, for a price, we'll tell you an estimated value of the house. So we're a dotcom company with the same issues that other dotcom companies have -- competitors can steal your list."

Overall, Shiller says, the dotcom experience has deepened his appreciation for life in the new economy -- and added to his criticisms of life in the university. "I view the world through the eyes of a dotcom entrepreneur," he says. "We don't know who is going to set up a competing Web site within the next few days. And if our competitors are giving it away on their Web sites, what does that mean for us? In the past, universities have not exactly been thrilled when professors got involved with business. But I think it's been a great thing for me, because it changes my perspective on the world. I get shaken out of my overly academic perspective. I can talk with Allan Weiss on the phone, and then I can go to some seminar right afterward where there's a professor giving a talk about the mathematics of the economics of infinity (if I explained the topic to you, you wouldn't believe me)."

And the eighth and final lesson that Professor Shiller has to offer? "Well," he says, thinking like a teacher again, "one thing that I believe is that people exaggerate the speed with which things will happen. I like to use the example of the movie 2001: A Space Odyssey. It's based in exactly this year. The movie came out in 1968. When I watch it, it still looks like the future to me. It doesn't look like 2001. People are traveling to Jupiter, after all, and that computer, HAL, has abilities that no computer has today. At the time, there was a lot of talk about spin-offs from NASA technology, things such as communications satellites. It happened -- but not as fast and not as dramatically as people thought it would. So the reasonable assumption is that robotics, as I said, is coming. It is coming. And maybe in 30 years, robots will be beating us in soccer. But then again, it might take a good 100 years."

And then Shiller adds, "Incidentally, 2001 came out during another peak in the market."

John Ellis (jellis@fastcompany.com), a regular Fast Company columnist on digital matters, is a writer and consultant based in New York. Find out more about Robert Shiller on the Web (www.robertshiller.com).