This week: platform monopoly, tech between science and fiction, and skinning fish for fashion. Sandra Peter (Sydney Business Insights) and Kai Riemer (Digital Disruption Research Group) meet once a week to put their own spin on news that is impacting the future of business in The Future, This Week.
The stories this week:
Other stories we bring up:
Future bites / short stories:
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Intro: This is The Future, This Week. On Sydney Business Insights. I'm Sandra Peter and I'm Kai Riemer. Every week we get together and look at the news of the week. We discuss technology, the future of business, the weird and the wonderful and things that change the world. Okay let's start. Let's start!
Kai: Today on The Future, This Week: platform monopoly, tech between science and fiction, and skinning fish for fashion.
Sandra: I'm Sandra Peter. I'm the Director of Sydney Business Insights.
Kai: I'm Kai Riemer, professor at the Business School and leader of the Digital Disruption Research Group.
Sandra: So Kai, what happened in the future this week?
Kai: Our first story comes from the New York Times, and it's entitled "Amazon's antitrust antagonist has a breakthrough idea". This is about Lina Khan who's 29, and she wrote a scholarly article reframing the idea of monopoly law in the face of the increasing dominance of Amazon.com in the US and worldwide really. And this is a story for various reasons.
Sandra: So Lina Khan published "Amazon's antitrust paradox" in the Yale Law Journal earlier last year. And just as far as academic articles go this is a 93 page heavily footnoted article, which we will include in the show notes. Which says has been picked up by a number of publications and a number of institutions in the US and has received a lot of attention.
Kai: This article is interesting for various reasons. For one because it sheds new light on the idea of antitrust regulation or what counts as a monopoly. But it is also relevant because of who wrote it and how it brings about change in the way in which the law profession understands anti-competitive legislation. So let's unpack this and have a look first at the argument that Lina makes.
Sandra: So to sum up the argument we want to remind our listeners that Amazon is indeed a very, very large company. For a brief time last week it was the second company in the world after Apple to be worth a trillion dollars. It also has more revenue than Facebook, Google and Twitter combined. And so far there hasn't been a lot of investigation of its size and its power.
Kai: So Google and Facebook and even Twitter have come under heavy scrutiny as we all know on the back off election tampering and advertising. And Amazon has largely gotten away unscathed in this public debate because they are different kind of company right, as a retail company. But Amazon is much more than that.
Sandra: So if you think about retail in the US about 44 cents of every dollar Americans spend online goes to Amazon. This is a huge number. Three years ago Amazon was worth less than Wal-Mart. And as of this year it's worth three times as much as the biggest physical retailer in the US. But then it also has Oscar winning movies. It's looking to build the second headquarter for which cities actually competed, even promising to rename their city should Amazon choose to host their headquarters there. And it employs more than half a million people at this point. And powers half of the Internet.
Kai: Through its Amazon Web Services. So Amazon is big. But Amazon also acts as a channel for many smaller retailers who sell their products through Amazon marketplace. So it's increasingly not only a competitor for many retailers but also at the platform by which those retailers reach their customers. Amazon taking a cut out of each of those transactions of course. Now Amazon by any standard is huge.
Sandra: So before we examine what this new understanding of antitrust law or monopoly legislation is, let's have a quick look at what an anti-trust law actually is. Because antitrust law is the American law that governs monopolies, that protects competition, and tries to deter anti-competitive behavior. Now, antitrust legislation in the US is known as competition law in Australia or monopoly law in places like China. And it governs trade practices across the world whether you're in the U.K., or whether you are in Australia, or in the European Union. What it does fundamentally is to make sure that no organisation gets large enough or has enough power to engage in behavior that is detrimental to the interests of consumers. And that historically has meant price. So protecting the interests of consumers, protecting consumer welfare, making sure that they're not charged exorbitant prices by one single competitor - and also at the same time ensuring that entrepreneurs can compete in the market - have been the traditional roles of competition law in Australia and antitrust law in the United States.
Kai: But this understanding of anti-competitive law in these narrow terms, that it mustn't have an adverse effect on consumers and the consumer market, hasn't always been that way. It used to be much broader.
Sandra: Indeed the Antitrust Act came out of another interesting moment in history, and that was the second industrial revolution. And came as a response to the fact that at the time there were hundreds and hundreds of railroads, short line railroads, which were increasingly being bought up and consolidated into bigger and bigger systems. And remember the second industrial revolution is not only about new types of manufacturing but it's really this moment where large scale corporations start to emerge when new modes of transport, new networks of communication emerge and consolidate into these large organisations that have different effects on life and different effects on work but also that need to be made sense of be managed and governed in new ways that did not exist up to that point. So as a response to the short line railroads being consolidated into bigger and bigger systems, people started to argue that in order for the economy to remain vigorous and to be successful it would require opportunities for each of the individuals to build their own businesses, it would require free competition and it would need to ensure that prices are on the control. And at that point Senator John Sherman put that 'if we will not endure a king as a political power we should not endure a king over the production transportation and sale of any of the necessaries of life'. And thus the Antitrust Act came to be, and this was in the late eighteen hundreds as a response to what was going on in the economy and the power that these new companies were starting to gain.
Kai: Now, what Lina argues is that at the time what people were arguing about was driven by a much broader understanding of the power and effects of monopolies and large corporations. But that over time and trust has become interpreted and understood and therefore executed in the courts for example, much more explicitly in terms of a rather narrow effect that such monopolies might have on consumer prices. So any economics textbook will tell us that the adverse effect of a monopoly is that a monopolist can basically freely set prices and therefore exploit the willingness to pay off consumers. And that monopolies therefore lead to higher prices and so price has then become the counter indicator. If prices are still low if is still price pressure then we have nothing to fear from a monopoly. Now in case of Amazon it is pretty clear that Amazon is undercutting everyone in terms of the prices and that they are keeping prices low because they're reinvesting any profits into growing into more and more areas.
Sandra: And indeed if you're an Amazon customer as most of us are to some extent, and with Amazon entering Australia increasingly more or more Australians will be none of us are really complaining about the fact that these are the lowest prices you can get. There is overnight delivery, you have access to more products and more services than you ever did before so it's very hard to argue on the grounds of consumer welfare because as consumers we absolutely love being part of this system and having access to all the benefits that it gives us.
Kai: Oh I've been a long time customer since back in the day when they launched in Germany and I still think they haven't really fully launched in Australia. They're basically a shadow of what they are in other countries still but they're growing here. So the argument that you make is reflected by a number of scholars, academics and more professionals who have come out to attack Lina's argument, saying that Amazon has been good for consumers, have been good for innovation, and instilled new competition into areas of the economy that weren't efficient enough. So there's a lot of arguments that actually say we shouldn't fear Amazon because they've been good.
Sandra: And indeed even on this podcast we have previously made the argument that Amazon also has what we called a fiduciary mode where we said actually it's in Amazon's best interest to keep the prices low and to do the best thing they can by their consumers because ultimately we are the ones who pay Amazon's bills. So, unlike Facebook or unlike Google who get their money from advertising so the consumer is not the ultimate player of the bills, in the case of Amazon and Apple it is actually in their best interest to do this. To keep innovating, to keep us happy and to keep the prices low.
Kai: But this is where Lina comes in and says that this argument misses the point about what Amazon actually has become. And it is also an argument that is too short sighted. So firstly she says that yes, Amazon might actually have low prices as they are executing their growth strategy but that might not be what happens down the track. So if we want customer welfare and innovation and low prices then we mustn't create an entity that is so large that at some point they might execute their monopoly powers. But the more important point that she makes is one that we have made on the podcast previously, and that is that Amazon increasingly is becoming a platform, an infrastructure for doing retail far beyond being just a retailer in a market. Here's what she has to say.
Lina Khan (file tape): I think one of the main issues with Amazon right now is that there is a huge conflict of interest baked into the business model. And this is because Amazon is an infrastructure service for all of these other companies. But it's also competing directly with many of the companies that are using its platform. So you see this, you know, in sector after sector where you have all these independent producers that are reliant on Amazon's platform to reach consumers but oftentimes they find that Amazon has actually introduced a replica good oftentimes through you know spotting what's doing well on its platform. And I think that is a really a parasitic dynamic that we're now seeing where you have these independent producers that are undertaking the initial risk of bringing goods to market, but it's ultimately Amazon that is able to reap off of that risk.
Sandra: So that was Lina Kahn giving an interview to NPR in April of this year examining Amazon's business model.
Kai: The point that she's making is the point we've made around platforms, and that is that they increasingly control access. So we've said this about Facebook for example, where increasingly for small businesses in particular in rural areas in many developing countries Facebook has become the Internet. So instead of having a Web site you have a presence on Facebook and this is where customers find you. And equally for Amazon, because it's become so powerful and is the go to platform for many customers, their first point of contact listing products on Amazon's Marketplace which then show up in the search results of a customer alongside Amazon's own offerings, has become imperative for many businesses if they want to reach customers. And so the the platforms, both Facebook and Amazon, wields incredible power in terms of granting or restricting access both for customers and for retailers. So they can basically shape their terms and conditions to ban anyone from their platform that they don't want to do business there. In fact regulating who can do business in certain industries.
Sandra: And that's indeed what Lina says and I quote here, "the thousands of retailers and independent businesses that must drive Amazon's rail - as a reference to the early rail systems of the earlier Second Industrial Revolution - that must drive Amazon's rails to reach market are increasingly dependent on their biggest competitor. So the thing that she underlines is indeed that Amazon has so much data up on so many customers and so many retailers and is quite willing as we've seen a number of times to forgo profits, that it has so many advantages that go far beyond what is reflected in things like market terrible things that you would normally look at to assess whether something is or isn't a monopoly and these advantages might stem from shipping from the warehouse infrastructure. All of these things that allow it to have an influence that is then much broader than that market share.
Kai: And on top of this there's the influence that companies like Amazon exert over the labor market. So there's the observation that while the economy has been growing in the US, wages have been stagnant and in effect going back in certain sectors. And there have been numerous reports about the working conditions in Amazon's warehouses, the way in which pay is not very high and people are being controlled by algorithms being set daily targets that are almost unachievable without a lot of stress. And that's been an article recently in Australia that made the point for the working conditions in the new Amazon warehouse here. So what Lina is saying that we need to rethink antitrust legislation and the role of monopolies beyond the effect on consumer prices, taking into account market access, the way in which these companies reshape markets but also the effect that they have on other markets like the labor market.
Sandra: And I think the New York Times article summarises that argument quite nicely when it points out that the question this really this brings to the fore is whether or not we trust Amazon or any large company for that matter to really create our future.
Kai: And we also want to say that this is not being an anti-tech or arguing necessarily to break up Amazon, but it is to point out that it is important for a functioning economy for competition and also for innovation not to be stifled. That no single player gets to control too much of the economic system.
Sandra: And let's remind people that these sort of questions are questions that we've been grappling with in the past few years. We've had the big landmark case US versus Microsoft, one of the biggest anti-monopoly cases to come along in the last years. We've also seen increasingly in places like Europe, the European Union imposing a record fine on Google for having a virtual monopoly in internet search and so on and so forth. So this things that we are actually trying to grapple with.
Kai: And there's another aspect about this article which is really interesting, and that is that Lena Kahn wrote this article as what the article calls an 'unknown law student'. It was quite remarkable that it was published by the Yale Law Journal. But more importantly, she approached the topic in a way that is very unlike the dominant view in academia. And that harks back to our discussion about what is obvious from two weeks ago. Because for anyone who joins the law profession or the policy circles and who learns about antitrust law, it would be obvious that a monopoly is judged by price. She brought a fresh perspective by going back to a much earlier much older almost forgotten understanding of antitrust regulation that breaks with a lot of the assumptions that we knew were true or taken for granted in policy circles and lawmaking. Up until recently... so, the article makes the point that this has really opened up a fresh way of rethinking antitrust legislation by going back to an earlier understanding and by bringing back some of the long-forgotten aspects of concentrations of power. So it is quite significant that an outsider would bring in those ideas.
Sandra: And would see the obvious which is that if you go back to the basics any anti-monopoly or any antitrust and trust legislation really has to do with preventing the huge concentrations of economic or political power in the hands of one organization which is what we're seeing with Amazon.
Kai: Now speaking of what is new or obvious, we want to go to our second story which has to do with how technologies come about and how we think about it and see the world around us through the eyes of science fiction.
Sandra: Our second story comes from Wired and it's titled Why science fiction is the most important genre. And it's actually reporting on another podcast episode from The Geek's Guide to the Galaxy. Fantastic podcast by the way. And this week geeks guide to the Galaxy interview historian and author Yuval Noah Harari. He is the author of the bestselling books 'Sapiens' and Homo Deus. And also the author of a new book entitled 21 lessons for the 21st century. But the lesson that we want to focus on today...
Kai: Is isn't it convenient that he found 21 lessons for the 21st century. If he had only 20 lessons, it wouldn't make it the same book.
Sandra: No, it would be a book of the 20th century, wouldn't it.
Kai: Let's listen to what he has to say.
Yuval Noah Harari (file audio): Today's science fiction is the most important artistic genre. It shapes the understanding of the public. Of things like artificial intelligence and biotechnology, which are likely to change our life and to change society more than anything else in the coming decades.
Sandra: So this was Yuval Noah Harari on The Geek's Guide to the Galaxy podcast. And this takes us back to a Congress session that Kai and I had in September of last year. Here's what we had to say.
Sandra (file audio): We want to make the case that science fiction actually has an important role to play in how we think about the future of technology, society, the future of work. And indeed we've seen a whole range of companies working with science fiction writers. So for instance Microsoft, Apple and Google and other firms have sponsored talk series where science fiction writers talk to their employees, and their researchers and developers, trying to link together science fiction and technology in what sometimes is called 'Design Fiction'. These imaginative works that tried to explore new ideas. But these are again on the spectrum of the plausible. And indeed science fiction has a bad name with regard to technology because most of it is placed on a spectrum. There are these plausible worlds that are worthwhile in every detail. But then there are also these very out there ideas that really just try to take one technological advancement to its natural conclusion.
Kai (file audio): Absolutely and there's no point creating a utopian future when you have no idea how to construct a plausible timeline that would get us there. So if we take the example of Steve Jobs there's evidence that he was imagining very early on before the iPad was conceived, a world in which classrooms would be transformed and learning would happen with those tablets where access to information and textbooks would be seamless. And he understood quite well what it would take to do this, the building of ecosystems, of a platform, of an apps store, getting the publishers on board. And arguably we haven't really gotten there yet because it's complicated. But in many ways this is the way in which people like Steve Jobs operate. They create a new future centred around a new way of working or living, and then come up with a plausible timeline in order to get us there.
Sandra: So science fiction is not only useful in understanding how technology comes into our lives, but good science fiction Harari argues, plays a key role in shaping public opinion as well. Which is why he says that there is a problem with the fact that most science fiction books and most movies about artificial intelligence these days really revolve around that moment where the computer actually gains consciousness and start to have feelings, rather than some of the more significant challenges that this technology presents to us. And he says that this actually they public attention from the really important and realistic problems that are likely to happen soon. He makes a good argument for the fact the science fiction needs to grapple with more realistic issues, things like artificial intelligence creating permanent useless class, as he calls it. People who have nothing to do. His argument is that if you want to raise public awareness of such issues, a good science fiction movie could be worth hundreds of articles in Science or Nature or in the New York Times for that matter.
Kai: So I want to go a little bit beyond what he's saying here, and argue that science fiction has indeed shaped a lot of the discussion around artificial intelligence and technologies like this in a way that isn't always helpful. A lot of the bullshit narrative we get straight out of artificial intelligence such as that, yes we can create conscious machines. There is no evidence for it. Not scientific anyway. It's an argument that is purely based in our belief or indeed in science fiction. So my argument would be that a lot of the hype around technology we get from science fiction, and that that is unhelpful because it drives narratives to unrealistic expectations but also to dystopian fantasies that are unlikely to ever happen. While at the same time masking the real dangers, something that we have discussed quite a lot on the podcast. And that Harari argues science fiction should explore. He argues that movies could be much more grounded in reality and imagined in a more realistic yet still futuristic way what might happen in a world of automation where people need to reinvent themselves and their identity four, five or six times across a lifetime. So he says that this could lead to really interesting scripts and plots. And in fact the argument that he makes is that science fiction should change and become more involved in the current discourse around tech and its effects on the world.
Sandra: And indeed he notes that things like artificial intelligence and biotechnology may be some of the most critical issues that we are faced with across the world these days, but there are barely a blip on the political radar. And indeed his argument of a stronger reliance on this might ensure that we open to the worst case scenarios or we attend to the negative impact that this might have on our society. Things like polarisation or inequality or indeed the rise of psychological stress that might be associated with displaced workers. And speaking of blips on the radar, actually science fiction we argue has a lot to offer academia and research as well. So work that a colleague of ours here Dirk Hovorka and I do together revolves really around how you can use methods like science fiction to engage with futures in a way that actually attends to the human conditions and the day to day life with such technologies. How can we highlight what it's like to live with these things in the future. The social, the political, the economic alternatives to the way the world exists today. And we argue that using such methodologies allows us to focus away from simplistic predictions of the future but to highlight matters of concern with regards to the deployment of such technologies in society.
Kai: And we do want to make the argument again that this is not about science fiction predicting the gadgets of the future, or the fact that some science fiction might have foreshadowed gadgets that we use today. Indeed in hindsight we will always find examples that foreshadowed this. But that this is really about envisioning worlds in which technologies have become normal, and therefore imagining alternatives - both utopian and dystopian - about what it means to live with certain technologies as they become part of our collective lives.
Sandra: So for instance episodes of Black Mirror that envision a world in which all of us have a score based on all the interactions we have with everyone around us. This has been an episode from season 3 called 'Nosedive', where every single one of us has a reputation score based on how we interact. When we have coffee together and I rate you, and Megan and I interact in the studio and I rate her and she rates me. And it tries to reimagine how behaviours in the world, how our social world would be different if this happens.
Kai: And a good science fiction show makes us uncomfortable because it preserves enough of our world that it is not just an outlandish fantasy, it is actually a possible future. And also I think that Black Mirror in particular is uncanny because it seems to become more and more a blueprint for how centralised governments seem to engage with their citizens.
Sandra: Or indeed large monopoly organisations, as we've seen with companies like Facebook.
Kai: So I think we will come back to the topic of science fiction, and thinking with science fiction as a way of doing research in a future podcast.
Sandra: Thinking with good science fiction.
Kai: Absolutely. And now finally to something completely different.
Sandra: One future bite, one short we just could not pass because it's titled "Forget leather: The future of fashion is all about fish skin."
Kai: Yes you heard correctly. This is about using fish skin as a form of leather.
Sandra: And this is of course a follow up to the many conversations we've had, whether they were about fast fashion or recycling and also follow up to our May 25th story about fungi sandels.
Kai: Edible footwear essentially. We haven't been told whether these fashion items are indeed edible, but we have been assured by the article that they do not smell.
Sandra: So created by Icelandic designer whose name we're probably going to butcher now.
Kai: Boas Kristjanssen.
Sandra: As part of this high-end collection called Karbon. There are shirts on the catwalk at Paris Fashion Week that are made out of fish skin.
Kai: For all intents and purposes the models wearing them do sport a maritime theme, in colours of the ocean - greenish, bluish, could be coming straight out of a science fiction movie actually.
Sandra: But reading a bit further, it turns out that fish leather seems to be something that you can make luxury clothes out of, shoes, bags. Companies like Prada or Dior or Louis Vuitton, Ferragamo have all sorts of fish skin from the Atlantic Leather Company for their fashion shows and collections. And even Nike, for instance, is experimenting with creating running shoes out of perch leather. And speaking of fish, turns out that one ton of fillets of fish leads to some 40 kilograms of skin that goes to waste.
Kai: So sustainability is indeed again a major driver here. Beyond the fun of experimenting with unusual materials and the nice headlines that this makes in the media. But there's a reason for why this shows up in Wired magazine, and that is that it is a new technology for not only doing established products in a different way but also for solving an important waste problem.
Sandra: And for us than it fits right at the intersection of megatrends like technology but also things like resource security. But we have to watch that one because apparently we will be depleting our fisheries by 2050. But also at this rise of demand from the new growing middle class in places like China, where two years ago imports of leather products have surpassed those of raw leather materials for the first time and this demand is not being satisfied by what we can produce now.
Kai: And so fish skin also becomes a little bit of an economic success story. The article quotes Gunnstein Bjornsson, the chief executive of Iceland's Atlantic Leather, who have innovated on the process of turning fish waste into high quality leather products. And the company actually gets most of its raw produce from a fishery, a factory producing fish basically, and then uses that material to take you through the process of tanning and dyeing. And then exports the raw material to be used in fashion items and clothing and leather belts and handbags and so and so forth. So the beginnings of a thriving industry in Iceland exporting fish leather.
Sandra: And that's all we have time for today.
Kai: Thanks for listening.
Sandra: Thanks for listening.
Outro: This was The Future, This Week. Made awesome by the Sydney Business Insights team and members of the Digital Disruption Research Group. And every week right here with us our sound editor Megan Wedge who makes us sound good and keeps us honest. Our theme music is composed and played live from a set of garden hoses. You can subscribe to this podcast on iTunes, Stitcher, Spotify, Youtube, SoundCloud or wherever you get your podcasts. You can follow us online on Flipboard, Twitter or SBI.sydney.edu.au. If you have any news that you want us to discuss, please send them to email@example.com.