The Limits of Technology

As part of my home entertainment during lock-down, I have been enjoying a series of Web TV programmes called This Is Imminent hosted by Simon Waller, and whose broad theme asks “how are we learning to live with new technology?” – in short, the good, the bad and the ugly of AI, robotics, computers, productivity tools etc.

Niska robots are designed to serve ice cream…. image sourced from Weekend Notes

Despite the challenges of Zoom overload, choked internet capacity, and constant screen-time, the lock-down has shown how reliant we are upon tech for communications, e-commerce, streaming services and working from home. Without them, many of us would not have been able to cope with the restrictions imposed by the pandemic.

The value of Simon’s interactive webinars is two-fold – as the audience, we get to hear from experts in their respective fields, and gain exposure to new ideas; and we have the opportunity to explore ways in which technology impacts our own lives and experience – and in a totally non-judgmental way. What’s particularly interesting is the non-binary nature of the discussion. It’s not “this tech good, that tech bad”, nor is it about taking absolute positions – it thrives in the margins and in the grey areas, where we are uncertain, unsure, or just undecided.

In parallel with these programmes, I have been reading a number of novels that discuss different aspects of AI. These books seem to be both enamoured with, and in awe of, the potential of AI – William Gibson’s “Agency”, Ian McEwan’s “Machines Like Me”, and Jeanette Winterson’s “Frankissstein” – although they take quite different approaches to the pros and cons of the subject and the technology itself. (When added to my recent reading list of Jonathan Coe’s “Middle England” and John Lanchester’s “The Wall”, you can see what fun and games I’m having during lock-down….)

What this viewing and reading suggests to me is that we quickly run into the limitations of any new technology. Either it never delivers what it promises, or we become bored with it. We over-invest and place too much hope in it, then take it for granted (or worse, come to resent it). What the above novelists identify is our inability to trust ourselves when confronted with the opportunity for human advancement. Largely because the same leaps in technology also induce existential angst or challenge our very existence itself – not least because they are highly disruptive as well as innovative.

On the other hand, despite a general shift towards open source protocols and platforms, we still see age-old format wars whenever any new tech comes along. For example, this means most apps lack interoperability, tying us into rigid and vertically integrated ecosystems. The plethora of apps launched for mobile devices can mean premature obsolescence (built-in or otherwise), as developers can’t be bothered to maintain and upgrade them (or the app stores focus on the more popular products, and gradually weed out anything that doesn’t fit their distribution model or operating system). Worse, newer apps are not retrofitted to run on older platforms, or older software programs and content suffer digital decay and degradation. (Developers will also tell you about tech debt – the eventual higher costs of upgrading products that were built using “quick and cheap” short-term solutions, rather than taking a longer-term perspective.)

Consequently, new technology tends to over-engineer a solution, or create niche, hard-coded products (robots serving ice cream?). In the former, it can make existing tasks even harder; in the latter, it can create tech dead ends and generate waste. Rather than aiming for giant leaps forward within narrow applications, perhaps we need more modular and accretive solutions that are adaptable, interchangeable, easier to maintain, and cheaper to upgrade.

Next week: Distractions during Lock-down

 

 

 

 

 

 

Business as Unusual

At the time of writing, the Victorian Government has decided to defer the easing of Covid-19 restrictions, in the wake of a sudden spike in community transmissions. There was always a risk that opening up too much, too soon, would result in a second wave of coronavirus infections, as people returned to work, as shops, restaurants and bars started to re-open, and as people began socializing on a larger scale. There is even talk of more drastic local restrictions in so-called hot-spot areas.

Meanwhile, the deferment (and the extended State of Emergency) is creating further uncertainty for businesses in an already fragile economy. In recent weeks, I have been attending a number of on-line seminars on the broad theme of business in the post-pandemic era. Variously described as the “new normal”, the “new new normal”, and even the “next normal”, things are unlikely ever to be the same, and not many punters are willing to bet on the resumption of business as usual.

Here are some of the challenges and opportunities that lay ahead:

Future of Work

As employees head back to the workplace, employers will need to balance the need for productivity and business continuity with the obligation to provide a safe working environment. Some staff can’t wait to get back to the office, some will prefer to continue working from home (if they can), while a large number would probably welcome a mix between the two. This has prompted debate on introducing a 4-day working week, the introduction of team rostering (e.g., alternating one week in, one week out), and possibly the end of hot-desking.

Overall, new work practices will necessitate a re-think on office space, workplace location and employee facilities. Some commentators have predicted that companies will need to extend their current premises (to allow for adequate space per employee); while others suggest CBD workplaces may need to decentralize towards more suburban or regional hubs (to reduce commuting times, to relieve congestion on public transport and to allow people to work closer to home). The latter may also stimulate local economies as people reallocate their commuting costs and daily expenses into local shops, cafes and services.

Innovation

Change and uncertainty should drive companies to innovate – in fact, former Prime Minister Malcolm Turnbull recently spoke about innovation in light of the pandemic. His view is that current technological trends will only accelerate, and industries facing disruption will be displaced even faster. So no time for complacency, and no point waiting for normal service to resume.

Necessity has driven many retail and restaurant businesses towards more online engagement with their customers, and those that have been shown to be creative, resilient and agile appear to have found a way through the lock-down. Equally, many businesses used to delivering their services in person have had to find ways to embrace digital solutions – no doubt enhancing their digital transformation in the process.

Self-sufficiency

We’ve heard about the need for food and fuel security – especially when supply chains are disrupted, and when countries pursue “domestic first” policies in relation to essential goods and commodities.

While Australia is a net food exporter, we still have to import many daily staples. Primary producers have come to rely on lucrative export markets, so in the light of trade wars and import bans, local farmers and consumers alike will need to adjust their expectations – on choice, price, seasonal availability and market volumes.

Australia is also in the enviable position of being potentially self-sufficient in energy – but although we are rich in renewables, we are still reliant on fossil fuels, and recent events revealed our vulnerability to volatility in the oil markets. It suggests the current environmental and economic debates around weaning ourselves off coal, oil and gas are only going to become more critical.

There has also been a call for a larger domestic manufacturing base – not only to enhance workforce skills and productivity, but also to ward off supply chain disruption. Some have called for a return to domestic car production. Even if that were desirable, let alone a realistic option, I don’t imagine that anyone would welcome the bad old days of churning out Australian-made gas guzzlers that nobody wants to buy. We would need to advocate for smarter cars, energy efficient and non-fossil fuel vehicles, environmentally sustainable materials and manufacturing process, and possibly different car ownership models (in line with the trend for ride share businesses and smart city solutions) and more creative financial incentives to the industry than wholesale subsidies.

Other manufacturing sectors that are getting attention include medicines and medical supplies (surely there must be a market for domestically-produced PPE made from bio-degradable materials?), clothing (again, an opportunity for environmentally sustainable materials and manufacturing processes), processed goods (after all, we already have much of the raw material), domestic appliances and technology.

One area where Australia has also proven vulnerable is in recycling. China and the Indian Sub-continent are pushing back at taking and processing our exported waste. So we have to get smarter at recycling household waste (paper, plastic, glass and metal) especially if in a post-pandemic world we see a return to single-use items and additional sterile and protective packaging for foodstuffs and personal products. We also need to look at e-waste, and find ways to extract more recycling value from obsolete devices.

The lock-down during the pandemic has also highlighted an opportunity to re-connect with the “make do and mend” mentality of our parents and grandparents. Again, if supply chains are disrupted, buying a replacement item might not be an option. But often, nor is it possible to buy replacement parts – either they rely on the same supply chains, or there are no user-serviceable parts available. What if manufacturers and distributors had more of an obligation to take back and recycle their products, or to include more interchangeable parts in their designs, and enable consumers to become more self-sufficient in repairing and maintaining their electronic and electrical goods?

Federal, state and local governments have a huge role to play here – from mandating the use of more recycled and recyclable materials, to incentivizing recycling schemes, from supporting local repair workshops and “maker” projects, to creating more common and open standards around components and replaceable parts.

Finance and Digital Money

At a time when many people are on reduced income and/or or relying on government welfare, the pandemic has also demonstrated a need to rethink our relationship with money in general, and cash in particular.

The latest round of QE by governments and central banks to offset the financial impact of the pandemic has highlighted once again the fragility of current monetary policies, including fractional reserves and treasury buy-backs. The decision to print money on demand will only increase public appetite for crypto currencies as a legitimate store of value – including stable coins and (ironically) central bank digital currencies – and paradoxically, accelerate the removal of physical cash from the economy.

In times of crisis, digital currencies can also transfer money to remote recipients faster and cheaper than traditional means (i.e., incumbent remittance businesses, bank transfers, payment gateways), and actually increase transparency and traceability.

The lock-down also revealed that many people did not have a sufficient financial buffer to withstand job losses, especially in the casual workforce and the so-called gig economy. This suggests a new approach is required for how people are remunerated for their labour and services, taxed on their income, and incentivized to save for the future. Current systems cannot address these issues because they are over complex, far too rigid, and totally dis-empowering of the people they are designed to serve and support.

Digital currencies (along with the benefits of Blockchain technology, and the new economic models represented by digital assets and tokenization) will enhance trends such as decentralization, peer-to-peer networks, trust-less systems, fractional ownership and more sophisticated barter structures.

Bitcoin was created in response to the GFC, it has now come of age in the post-COVID-19 era.

Next week: Antler Demo Day – Rewired

 

 

 

 

 

The Ongoing Productivity Debate

In my previous blog, I mentioned that productivity in Australia remains sluggish. There are various ideas as to why, and what we could do to improve performance. There are suggestions that traditional productivity analysis may track the wrong thing(s) – for example, output should not simply be measured against input hours, especially in light of technology advances such as cloud computing, AI, machine learning and AR/VR. There are even suggestions that rather than working a 5-day week (or longer), a four-day working week may actually result in better productivity outcomes – a situation we may be forced to embrace with increased automation.

Image Source: Wikimedia Commons

It’s been a number of years since I worked for a large organisation, but I get the sense that employees are still largely monitored by the number of hours they are “present” – i.e., on site, in the office, or logged in to the network. But I think we worked out some time ago that merely “turning up” is not a reliable measure of individual contribution, output or efficiency.

No doubt, the rhythm of the working day has changed – the “clock on/clock off” pattern is not what it was even when I first joined the workforce, where we still had strict core minimum hours (albeit with flexi-time and overtime).  So although many employees may feel like they are working longer hours (especially in the “always on” environment of e-mail, smart phones and remote working), I’m not sure how many of them would say they are working at optimum capacity or maximum efficiency.

For example, the amount of time employees spend on social media (the new smoko?) should not be ignored as a contributory factor in the lack of productivity gains. Yes, I know there are arguments for saying that giving employees access to Facebook et al can be beneficial in terms of research, training and development, networking, connecting with prospective customers and suppliers, and informally advocating for the companies they work for; plus, personal time spent on social media and the internet (e.g., booking a holiday) while at work may mean taking less actual time out of the office.

But let’s try to put this into perspective. With the amount of workplace technology employees have access to (plus the lowering costs of that technology), why are we still not experiencing corresponding productivity gains?

The first problem is poor deployment of that technology. How many times have you spoken to a call centre, only to be told “the system is slow today”, or worse, “the system won’t let me do that”? The second problem is poor training on the technology – if employees don’t have enough of a core understanding of the software and applications they are expected to use (I don’t even mean we all need to be coders or programmers – although they are core skills everyone will need to have in future), how will they be able to make best use of that technology? The third problem is poor alignment of technology – whether caused by legacy systems, so-called tech debt, or simply systems that do not talk to one another. I recently spent over 2 hours at my local bank trying to open a new term deposit – even though I have been a customer of the bank for more than 15 years, and have multiple products and accounts with this bank, I was told this particular product still runs on a standalone DOS platform, and the back-end is not integrated into the other customer information and account management platforms.

Finally, don’t get me started about the NBN, possibly one of the main hurdles to increased productivity for SMEs, freelancers and remote workers. In my inner-city area of Melbourne, I’ve now been told that I won’t be able to access NBN for at least another 15-18 months – much, much, much later than the original announcements. Meanwhile, since NBN launched, my neighbourhood has experienced higher density dwellings, more people working from home, more streaming and on-demand services, and more tech companies moving into the area. So legacy ADSL is being choked, and there is no improvement to existing infrastructure pending the NBN. It feels like I am in a Catch 22, and that the NBN has been over-sold, based on the feedback I read on social media and elsewhere. I’ve just come back from 2 weeks’ holiday in the South Island of New Zealand, and despite staying in some fairly remote areas, I generally enjoyed much faster internet than I get at home in Melbourne.

Next week: Startup Vic’s Impact Pitch Night

 

 

 

 

 

Why don’t we feel well off?

The past month has seen a number of reports on the current state of the Australian economy and global financial systems, 10 years after the GFC. The main thesis appears to be: if another crash is coming, can local markets cope, as an extended period of cheap credit and low inflation inevitably comes to an end. Combined with US-Sino trade wars, a softening housing market, and a sense of economic inertia, there is a feeling that Australians see themselves as worse off, despite some very strong economic data in recent weeks.*

Picture Source: Max Pixel

First, the positive news:

The unemployment rate continues to remain comparatively low, and overall job participation is high. This is reflected in higher tax receipts from both corporate profits and personal income. The RBA has kept interest rates low, and inflation remains relatively benign.

Recent data from Roy Morgan Research suggests that personal assets are growing faster than personal debt. Significantly, “average per capita net wealth, adjusted for inflation, is 30.5% higher than it was before the onset of the global financial crisis”.

So, if more people are in work, credit is still cheap, our assets have grown, and prices are stable, we should feel well off compared to the GFC, when interest rates and unemployment rates initially both went up.

Even higher energy bills (a major bone of contention with consumers) need to be assessed against lower costs of clothing, communications and many grocery items.

Second, the less positive news:

A combination of higher US interest rates, more expensive wholesale credit, and more stringent lending rules means that Australian borrowers are already being squeezed by higher mortgage rates and tougher loan to value thresholds. This could only get worse if there is a full-scale credit crunch.

Wage growth has stagnated, despite lower unemployment and higher participation rates. There is also a sense that we are working longer hours, although this is not as clear cut as there is also evidence we are also working fewer hours.

Regardless, Australian productivity output is considered to be sluggish, adding to the overall downward pressure on wages. (More on the productivity debate next week.)

More significantly, Roy Morgan Research has identified a growing wealth disparity based on asset distribution – but this may be a combination of changing earning, saving, investing and spending patterns. For example, if younger, would-be first-time home buyers feel priced out of the housing market, they may choose to invest in other assets, which may take longer to appreciate in value, but may not require as much upfront borrowing.

Third, preparing for a fall….

If a new market crash or a credit crunch comes along, how resilient is the economy, and how will people cope? Worryingly, fewer people are able to cope with unexpected expenses due to lower saving rates and maxed out credit cards. Over-leveraged companies and individuals will be hard pressed to meet their repayments or refinance their loans if interest rates rise steeply or lending standards tighten further.

Then there is the ageing population transitioning into retirement – baby-boomers who are “asset rich, but cash poor”. If they expected the equity in their homes and/or the balance in their superannuation accounts to fund their old age, they may be in for a shock if the housing bubble bursts and stock markets decline, especially if they are expected to live longer.

Finally, the RBA may have few options left in terms of interest rate settings, and a future government may be less wiling to spend its way out of a crisis (more Pink Batts and LCD TVs, anyone?). And while Australian companies may have strengthened their balance sheets since the GFC, overall levels of debt (here and overseas) could trigger increased rates of default.

*Postscript: if there was any further evidence required of the disconnect between the value of household assets (net worth) and a lack of feeling wealthy, this recently published Credit Suisse Global Wealth Report 2018 makes for some interesting analysis.

Next week: The Ongoing Productivity Debate