Where is the digital-fuelled growth?

We’ve had about 50 years of computing in business and about 20 years of the digital revolution. How are we faring on the question of digital fuelled growth and productivity? Many economists are coming to the surprising conclusion that technology may not be providing the boost we had expected.

This question really matters as politicians around the world are grappling with a voter backlash at disruption to industries and the promise of growth providing new jobs seems to be wearing thin. The population wants jobs but many fear that the new employment, relying on technology, are not going to be relevant to their individual skills or geography. New tech jobs are ending-up being concentrated in a few locations and requiring skills that are out-of-reach to those that have been displaced by global trends driven by digital channels.

Robert Gordon (author of The rise and fall of American Growth) splits productivity into three industrial revolutions: 1770-1840 (steam and transport), 1870-1920 (electricity, cars, city infrastructure, chemicals and working conditions) and 1970- (ICT). He argues that the second revolution provided about three times as much productivity growth as the other two. Worse, when he breaks-down the third revolution he argues that productivity growth has stagnated since early in this century.

The last part of the 20th century saw almost universal growth driven (arguably) by mass liberalisation of trade and the opening of new markets. Many assumed that technology was providing a virtuous boost. It seems that the rise of the web, digital technology and the smartphone have driven consumer demand but more economists like Gordon are questioning whether it has made the supply of that demand any more efficient.

So where has the productivity gone? I’ve argued before that Trading your way to IT simplicity In addition, we’ve lost some of the traditional ways of encouraging organisations to leverage their investments. Many of the online tools that we all use (such as search, collaboration and workflow) are fantastic but they don’t cost very much (and are often free) resulting in little governance to make sure that the benefits are realised.

Without a clear focus on realising productivity as the main aim of technology, many benefits are pleasing but of little benefit to the economy. For example, is there a real gain for the economy being able to check-in to your aircraft in half a dozen different ways? What about buying soap with a QR reader?

Ergonomics matter but much of what we implement is about gimmicks that are pleasing but don’t improve society.

That doesn’t mean that productivity growth for our economy isn’t coming, rather just that it may not be as easy or clear cut as we had expected. As we approach a new generation of robotics and artificial intelligence what do we learn? The problem is that the combination of genuine displacement of people without economic benefits mean there aren’t resources available to grow the job pool in other ways.

There have been thousands of words written about the threat of automation and I’ve previously given my view that Our machines won’t outsmart us. I’ve also written about Why aren’t I working a 4 hour day?.

We need to pivot our focus from whether jobs will be lost (they will, but new ones can be created) or whether machines will lead us into a terminator style future (they won’t), but rather how we change the trend on productivity.

The last 200 years have been amazing. Angus Maddison was an eminent economist who estimated the world’s long-term economic growth to be surprisingly small. According to Maddison’s work, from the Middle Ages through to the Industrial Revolution, the normal annual growth was less than 0.07%, far less than the numbers we assume today.

Without a change to the status quo, including new approaches to technology which unlock productivity growth, it could be that we are heading back to a world where growth is near zero. By the middle of the century, even population growth won’t help the world economy.

This is so important that it may be that there is a role for government regulation to ensure investment in technology results in productivity that is seen in the economy. It is in all of our interests to change the equation and find a way to turn our digital revolution into a new wave of productivity and wealth that everyone can share in.

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Is the crowd dumbing us down and killing democracy?

One of the most exciting features of the Internet is the ability to get the voice of the crowd almost instantly. Polling of our organisations and society that would have taken weeks in the past can be done in hours or even minutes. Ideas are tested in the court of public opinion in real time. This is potentially a huge boost for participation in democracy and the running of our businesses, or is it?

Our governments and businesses have long worked with a simple leadership model. We select our leaders through some sort of process and then give them the authority to act on our behalf. In the past, we asked our leaders to report back on a regular basis and, most of the time, we left them to it. In democracies we used elections to score the success or failure of our leaders. If they did well, we gave them another term. In business, we relied on a board selected by shareholders.

This really started to change with the advent of the 24 hour news cycle. Rather than curate 30 minutes of news once a day, the TV needed to find stories to fill all of the day. Unlike newsprint which had time for analyse, speed to air was a key performance metric of reporters and an initial, even if uninformed, sound bite was enough to get something to the public.

There is a popular movement to open-up government even further with regular electronic plebiscites and a default to open data. At its core is the desire to make the machinery of government transparent to all citizens. While transparency is good, it is the consequence of having “too many cooks in the kitchen” that leads to problems. Having everyone have their say, either through direct contributions or through endless polling means that the fundamental approach to decision making has to change. While fulltime politicians have the time to get underneath the complexity of a problem, the mass of voters don’t. The result is that complex arguments get lost in one or two sentence explanations.

This is happening at exactly the time that our global societies are becoming more complex and need sophisticated responses. Issues such as migration, debt and global taxation are too complex to be boiled down to a sound bite. It is telling that few have suggested turning our judiciary over to the court of public opinion!

H. L. Mencken, a well-known journalist from the first half of the 20th century who wrote extensively on society and democracy, once said “For every complex problem there is a solution that is concise, clear, simple, and wrong.” An overly crowd oriented approach to democracy results in these simple answers which are dumbing down our decision makers.

The danger doesn’t stop at our leaders, it also extends to the running of our organisations. We work more collaboratively than ever before. Technology is enabling us to source solutions from the crowd to almost any problem. This can work brilliantly for many problems such as getting a quick view on whether a brand message is going to resonate, or if a product would appeal to a particular demographic.

Where it can let us down is when we start trying to ask too many people to provide input to complex problems. Great design, sophisticated modelling and radical new product offerings don’t lend themselves well to having a large number of people collaborate to find the answer.

Collaboration and the use of the crowd needs to be targeted to the places where it works best. This is going to be more important than ever as more people move to the “gig economy”, the movement where they use platforms like 99designs, Expert360, Topcoder or 10EQS to manage their work. The most successful organisations are going to learn what questions and problems the crowd can solve for them.

Questions that require a simple, technical answer seem to suit this form of working well. Similarly, problems that can be solved with well-defined technical solutions are well suited to handing out to a group of strangers.

The crowd either completely rejects the status quo (the crowd as a protest movement), with little to offer in terms of alternative approaches or it slightly tweaks current solutions (the crowd without depth). Even the individual sourced through the crowd seems to be unlikely to rock the boat due to a lack of context for the problem they’re trying to solve.

The way we work and solve problems as a society and in our organisations is changing. The one thing we know for sure is that we don’t yet know how this will really work!

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The singularity and the future of intelligence

Everywhere you turn there is a discussion about the impact of technology on our future, whether it be how we work or how we live. Of particular concern is the encroachment of automation into virtually every part of our world.

Estimates vary, but it is credible to suggest that about half of all white collar work will be automated in the coming decades. However, the real revolution is often termed the “singularity”, in effect, the point where computers are smarter than we are.

Way back in 1962, John F. Kennedy said “I regard it as the major domestic challenge of the ’60s to maintain full employment at a time when automation is replacing men”. With just a little rewording, the same statement could be made today. We learn two things from this, the first is that the threat of automation is not new, the second is that properly managed there is no reason for the total number of jobs to decrease.

There will, however, be disruption which has social and economic implications. The jobs that will be created haven’t even been invented yet and not everyone working today will be equipped to take them up. Already we have worldwide and local shortages of technology workers while other sectors are shedding staff.

As machines get smarter, our role with them will become more complex. The trouble with the term smarter is that is that it conjures up images of a machine that is equivalent to us. As I’ve previously written, the limit of current technology is the ability to make “cognitive leaps”, that is the ability to determine something new from available data rather than repackage up an association that has been previously made. This boundary will protect many workers (see Your insight might protect your job).

However, as our technologies advance, the day is getting closer when we have to seriously think about what intelligence really means. The problem is we don’t know how the human brain achieves its feat of consciousness or how we achieve those cognitive leaps that are central to our intelligence.

Eminent quantum physicist Nicolas Gisin argues that free will and a conventional view of physics are in conflict (see New Scientist: Physics killed free will and time’s flow. We need them back). Gisin is well known for having successfully applied quantum mechanics to create commercial applications and also to have demonstrated some of the more controversial conclusions of the field such as quantum teleportation.

Gisin asks “Are we passive laundry machines through which thoughts happen to pass? Or are we active agents free to influence our thoughts and decisions?” He goes on to argue that modern science tends towards the machine view, he says “In a deterministic universe, where one thing leads inevitably to the next, any conception we have of free will is an illusion.”

Meanwhile, another physicist, Matthew Fisher, has speculated that our brains probably rely on quantum mechanics to achieve the magic of consciousness (see New Scientist: Is quantum physics behind your brain’s ability to think?).

Until now, the objectives of the many teams racing to develop quantum computers have been to solve algorithms that are in the domain of conventional computers but too ambitious for today’s processors. I’ve argued that these projects may not live up to their promise (see The Quantum Computer dream could be killed by information management).

It is possible that the really interesting outcome from current research into Quantum Computing could be a machine that displays many of the same qualities as our own brain. Until the workings of such a machine is designed, any date for the “singularity” is nothing more than speculation.

Of course, when we do design such a machine, there will be some very difficult ethical and social considerations. I’ve argued before that despite the threat that such machines pose, ultimately Our machines won’t outsmart us, mainly because we are tough evolutionary creatures and we will assimilate the technology before we will let it rule us.

Regardless of when we manage to invent machines that can take the next step in artificial intelligence, there is no doubt that to both live and work in the twenty first century we need to be prepared to adapt, and quickly.

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The downside of blockchain

Imagine an invention that deliberately wasted resources. Maybe a car that burns oil just to create smoke that is easy to see or an electric light that uses twice as much energy to avoid burning out. That’s exactly what blockchain is doing, consuming large amounts of electricity for no purpose other than making fraud prohibitively expensive.

I recently had the privilege of collaborating with my colleagues from the Australian Deloitte Centre for the Edge on a report looking into distributed ledgers and the blockchain technology. Reading the result, it is striking how far we still have to go to invent our digital business future.

As a quick reminder, blockchain is a technology to support the exchange of value or contracts in an environment where anonymity is important and no one is to be trusted. The best known application of blockchain is in the exchange of Bitcoins, a virtual currency.

Business models for the future

In recent years, all of the talk of digital business has been the creation of new platforms as the success stories, like Uber, Airbnb and Amazon, wield increasing power and value. Of course, platforms aren’t new, banks and credit card providers have long played this role in our financial services sector.

One of the big questions for the future of the internet is whether we want to see more platforms with trusted parties or do we assume the worst of everyone and “trust no-one”. The potential advantage of moving away from platforms is the “democratisation” of business.

Instinctively, there is a lot to like about democratising business and taking the power away from a few platforms. The problem is that such a move comes with a tremendous cost. There are good reasons why consumers tend to gravitate towards these providers who have scale, even when it might not align to their view of an ideal world.

The downside of blockchain

There are usually good reasons to be worried when any technology is over hyped and this has never been truer than with the excitement that currently surrounds blockchain. There are two fundamental challenges that are particularly worthy of highlighting:

The first is that it relies heavily on the cost of electricity and use of computing resources to protect against fraud. Don’t be fooled, blockchain can be hacked allowing fraudsters to gain access to the payload. The most common payload of blockchain, and the product with which it is synonymous, is Bitcoin. The safeguard on the payload isn’t that it can’t be defeated but rather that the cost of fraud in electricity and computing resources is higher than the payoff.

Motivating anonymous participants, “miners” to expend computing resources sits at the heart of Satoshi Nakamoto’s clever invention of blockchain. Of course, Satoshi Nakamoto is a pseudonym with the real author or authors choosing to keep their identity a secret.

Christopher Malmo, writing on the Motherboard site estimates that each Bitcoin transaction uses the same amount of electricity as 1.57 households in a 24 hour period. That is not a function of the immaturity of the technology, it is a feature that protects transactions from fraud.

The second issue facing blockchain is that far from being open, it is the ultimate closed system. While no-one takes ownership of the data, it is deliberately encrypted in such a way as to make transaction details virtually unavailable for aggregation. That means many of the advantages that platforms provide are simply unachievable using an approach such as blockchain. Some of the platform capabilities that are lost include recommendation engines, transaction aggregation and fraud detection.

Potential roles for blockchain

Despite these challenges, blockchain is an incredibly clever solution. The challenge is finding the problem that it best solves.

Faced with the issue of openness or processing overhead, some organisations exploring blockchain have looked at closed communities where there exists a level of trust between the participants. This approach will allow some of the overheads to be reduced and models to be devised to share transaction information. The problem, however, is that once there exists at least some trust in the network it is likely that a platform model will provide greater functionality at a lower cost and complexity.

The strength of the technology comes in low volume, high value environments where no-one is able to be trusted and there are complex rules. This challenge exists when managing assets of many kinds in jurisdictions where there is little trust in the integrity of government or other holders of records. A related opportunity for blockchain may also be to support the trading of new types of assets where there isn’t yet regulatory support.

Maybe the future of blockchain is as a bridging technology while a community waits for a trusted platform.

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Opportunities beyond startups

Is it just me or has the world gone mad for startups and writing software? Don’t get me wrong, I am a big fan of startups and all that they bring to the economy. However, if you read the business papers or listen to investors you’d be forgiven for thinking that they are responsible for all the great innovations of the world.

Even the definition of startups is controversial. In general, investors expect them to focus on things (usually technological) that can be massively scaled. So many businesses calling themselves startups just turn into small businesses that serve a local region with a specific service or product. And these are the lucky ones, with the vast majority just disappearing within a few short years.

One of the reasons people put a priority on startups is the observation that the Global 2000, Fortune 500, or any other listing of businesses, changes every few decades. What is seldom recognised is that for every Microsoft, Google or Apple there are hundreds of other companies in the lists that are simply mergers or spinoffs of existing businesses.

Even established companies are deciding that it is fashionable to get out of their core businesses and become software companies. Whether it is professional services, engineering or retail, there is a strong push to be more like a startup and to work like a software company.

The greatest opportunities of the 2020s are likely to emerge from some of the exciting technologies that are appearing in fields such as robotics, materials science, autonomous vehicles, machine intelligence and genetics. All of these require greater lead times and research than can be invested by the vast majority of internet startups who are trying to be the next big thing by linking communities and tagging social media.

Like the gold rushes of the nineteenth century, when professionals abandoned their vocations for the chance at quick riches, too many companies seem to be willing to abandon their core for the riches of the Internet. The reality is that the majority of these ventures will have the same experience as their nineteenth century forebears.

What the best businesses are doing is looking again at their “core”, that is what makes them unique. For these businesses, it isn’t about turning themselves into software companies, rather it is about understanding their strengths and then using these to contribute to the evolution of key technologies.

If a company is brilliant at engineering, it is unlikely that they will translate into being a social media business but they can invent brilliant new products in these new fields using their existing capabilities that will appeal to a new generation of clients. Real advances come from building on each business’s core rather than turning their back on what made them great and moving to the new cool thing.

Startups play an important role in our economies as they come up with step-change business ideas in sectors that are resistant to evolution or competition. However, if all innovation incentives are directed to this sector, the economy begins to resemble a roulette wheel. The high failure rate of startups is a feature not a problem as they take on risk that established business wouldn’t consider. However, the bulk of wealth isn’t generated by the high risk/high return nature of startup gambles.

Small business is the bedrock of employment in most economies. The policies that will support the development of solid small to medium businesses are very different to those that are needed by genuine startups. Similarly, large long-term investments are best made by big businesses that require very different government incentives again.

We risk repeating the turn-of-the-century dot com bubble. Government policies and investors are leaning towards quick wins and looking for internet startups to take their money. Yet, the bubble always bursts and only a tiny fraction of these businesses, or their ideas, survive. The vast majority of the growth, wealth and advancement of society will come through the success and innovation of existing companies.

Let’s think about the big wins for society in both new technologies and support for jobs. Let’s then balance our policies to encourage the right mixture of software focused startups, small business jobs and big business investment in future technologies. Let’s also encourage a culture where each builds on their core rather than trying to be something that they’re not.

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New ideas aren’t always brilliant

Change is the lifeblood of organisations. It is essential in our products, technology, organisational models and every aspect of how we work and produce for the benefit of our stakeholders and ourselves. Everyone can think of organisations that failed to change quickly enough, perhaps the best example being Kodak.

The virtual shelves are full of books written through the eyes of the executive who is trying to make change happen. In almost every case, the assumption is that the change proposed is the right one and that anyone opposing change is a negative for the business. The persona of the obstacle is all too often an aging middle manager who is stuck in their ways and unwilling to embrace modernity.

Everyone is keen to denounce doubters of new ideas as being stuck in their ways. However, few also point to all of those bad ideas that weren’t guiding the organisation to a better future but rather were just genuinely bad ideas! Maybe if there had been a few more obstacles to change we might still have companies like Pan Am and HIH in Australia.

How do you know whether someone’s objection to change is recalcitrance and when it is a genuine insight that the change is a bad one?

Seek feedback

Everyone is capable of producing ideas but most great ideas are recognised only after they are tested in the crucible of the real world. No one, regardless of how smart they are, comes up with something brilliant every time. For every “hit” there are multiple “misses” which looked just as good when written down but fail the same real world test. While the best leaders are better than most at recognising the hits and misses, no one is able to spot them all.

It sounds obvious, but it is important to seek feedback from others no matter how confident you are in the approach you want to take. It doesn’t matter if it is an organisation structure, new product or a marketing campaign.

Feedback may not come from the obvious places and the challenge is to look for it from people who have insight into unintended consequences. This is more important than ever as our organisations and products have become more complex. I’ve looked before at why our organisations don’t operate the way we expect when I asked why I aren’t working a four hour day. I’ve also suggested that it is important to make simplicity a goal in its own right, but recognise that it is a goal that will never be reached (see Trading your way to IT simplicity).

Testing the ideas

Beyond feedback, there are two ways that a leader can test their ideas. The first is by evidence and the second is by debate.

Testing by evidence requires rigour. While it is tempting to make the available data fit the hypothesis, it really only works if an experiment is designed in advance with two distinct outcomes, the status quo (or “null hypothesis”) and the alternative which represents the proposed change.

In almost every case of business transformation, new product or investment, it is hard to define experiments. The advice that has come through observing companies like Netflix and Capital One is that investing in designing tests is extremely effective no matter how difficult it seems.

Another method that leaders can apply is the running of short, sharp, debates. Recruit six candidates from a variety of backgrounds and randomly assign them to argue for and against the proposal. The debates work best with an enthusiastic audience who are instructed to vote for the best argued position (and not just for the idea they like). Of course, the strongest arguments are usually based on the best available data!

A great leader will listen to feedback and be prepared to walk away from change that doesn’t stand up to testing or debate. When these leaders do commit to change, they are seen to have taken a considered approach and will not only lead their organisations further but they will keep them at their destination for longer.

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My digital foundations #2

It’s time to set some principles to support the choices you are making for your personal digital architecture. This second instalment of digital foundations will help you extend your architecture to protect your digital content and assets.

In the first instalment of My digital foundations #1 we established a foundation identity and managed the passwords that are ubiquitous to our digital lives. Now we can build on this identity and start to manage our content.

Some principles

Everyone talks about the cloud. This is really no more than moving your data to someone else’s servers and accessing the content through the Internet. The advantages of using the cloud are just as applicable to all our digital lives as it for the organisations that you work for or with.

Moving to the cloud does not mean that content isn’t also being stored locally. It does mean, however, that all content is stored remotely and sometimes replicated locally. The best three examples of content to make sure are properly in the cloud are the files you keep in folders, your digital media (sometimes in folders and sometimes within a media app) and your email.

You also want to ensure that precious digital content is not exposed to a single hit attack. You may be feeling particularly secure because your lifetime of photos is sitting on a cloud drive, secure both on the hard drives of your computer and the server of your provider. Imagine, however, what happens if you get attacked by malware that locks or otherwise scrambles your hard drive (or even just a family member hitting “delete”). Before you know it, the server copy has also been lost or scrambled.

Some cloud services offer version history, which would be a fall-back. A better alternative is to have a physical copy of precious content as well as the cloud version. The physical copy can sit in any location while the virtual copies are protected by the cloud.

Cloud drives and digital media

One of the most important services in your digital life is your cloud drive. There is a plethora of options out there (for example, see Wikipedia’s list of file hosting options).

While most providers do not allow you to have more than one account connected to your device, they do generally allow each account to share folders. For this reason, don’t be tempted to log into the service from work and home using the same account, rather create separate accounts and then share appropriate folders. A similar approach should be applied to each member of your family by creating family folders.

Managing photos and digital media is more complex. Many people are simply overwhelmed by the complexity of downloading the photos and videos from their smartphone. Worse, even if you do work it out, the providers are constantly changing and the approach that works today may not be available tomorrow. It is worth investigating options for cloud based photo and video storage and the associated procedure for downloading images and videos from your device. If you want one approach that will stand the test of time, consider simply using your cloud drive as the primary home of your images and export them to your album product of choice.

Email client

The future of email remains controversial, but it is very likely that it is here to stay (see Email works too well). You should treat email like your paper correspondence (particularly as more and more of your bills and communications end-up in this form). You probably keep a file for your papers with tabs for A to Z and should consider doing something similar for your email folders.

It is also likely that you will end-up with more than one email account that you want to map to your email client. The most common mistake that people make is to leave email on their hard drive by using an email client such as Microsoft Outlook or Mozilla Thunderbird locally.

You need somewhere that you can consolidate email centrally that can also act as a webmail client and central, cloud-based, store that will be persistent for many years. Arguably services such as Yahoo!, Google and Microsoft dominate this space but they are by no means the only providers (see Comparison of webmail providers).

In My digital foundations #1 you chose such a service for your digital network administration. The decision you made then might inform this choice, but it does not have to be the same. Either way, you can choose to map that email account to this service.

With a central store, you are now free to choose an email client. Your one requirement is to ensure you use the IMAP and not POP protocol. The client should leave the email in your central consolidated store. For a list of candidates see Comparison of email clients.

Your architecture

In just two posts, your digital life is supported by a cloud-based network with the potential for numerous participants and elements that manage your most important content. It doesn’t take long before the network is more complex that you can easily visualise without a supporting architecture diagram.

Keeping track of the information flows and making sure that your family is safe will be the subjects covered in the next instalment of “my digital foundations”.

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