The technologies of the past, by replacing human muscle, increased the value of human effort - and in the process drove rapid economic progress.

Those of the future, by substituting for man’s senses and brain, will accelerate that process – but at the risk of creating millions of citizens who are simply unable to contribute economically, and with greater damage to an already declining middle class.

Estimates of general rates of technological progress are always imprecise, but it is fair to say that, in the past, progress came more slowly.

Henry Adams, the historian, measured technological progress by the power generated from coal, and estimated that power output doubled every 10 years between 1840 and 1900, a compounded rate of progress of about 7 per cent per year.

The reality was probably much less.

By contrast, progress today comes rapidly. Consider the numbers for information storage density in computer memory. Between 1960 and 2003, those densities increased by a factor of five million, at times progressing at a rate of 60 per cent per year.

At the same time, true to Moore’s Law, semiconductor technology has been progressing at a 40 per cent rate for more than 50 years. These rates of progress are embedded in the creation of intelligent machines, from robots to automobiles to drones, that will soon dominate the global economy – and in the process drive down the value of human labour with astonishing speed.

This is why we will soon be looking at hordes of citizens of zero economic value. Figuring out how to deal with the impacts of this development will be the greatest challenge facing free market economies in this century.

To be sure, technological progress has always displaced workers. But it also has created new opportunities for human employment, at an even a faster rate.

This time, things may be very different – especially as the Internet of things takes the human factor out of so many transactions and decisions.

The “second economy” (the term used by economist Brian Arthur to describe the portion of the economy where computers transact business only with other computers) is upon us.

It is, quite simply, the virtual economy, and one of its main byproducts is the replacement of workers with intelligent machines powered by sophisticated code.

This booming second economy is brimming with optimistic entrepreneurs, and already spawning a new generation of billionaires.

In fact, the booming second economy will probably drive much of the economic growth in the coming decades.

Suppose, today, that the robots and smart machines of the second economy are only capable of doing the work of a person of average intelligence -–that is, an IQ of 100.

Imagine that the technology in those machines continues to improve at the current rate. Suppose further that this rate of technological progress raises the IQ of these machines by 1.5 points per year.

By 2025 these machines will have an IQ greater than 90 per cent of the US population. That 15 point increase in IQ over 10 years would put another 50 million jobs within reach of smart machines.

The simplistic policy answer is better training. But at this pace of change, improving the educational system will be perpetually too little and too late.

Likewise, artificially boosting the minimum wage will only hasten the reckoning by subsidising job replacement by intelligent machines.

Ultimately, we need a new, individualised, cultural, approach to the meaning of work and the purpose of life.

Otherwise, people will find a solution – human beings always do – but it may not be the one for which we began this technological revolution. Bill Davidow is the author of Marketing High Technology and a co-author of Total Customer Service and The Virtual Corporation. Michael S. Malone is an associate fellow at Oxford's Said School of Business. He is the author of The Intel Trinity : How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company. In association with Harvard Business Review