This week: selling privacy, for good measure, and automated advertising poetry. 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:
Robot of the week:
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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!
Sandra: Today on The Future, This Week: selling privacy, for good measure and automated advertising poetry.
I am 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 .
So Sandra what happened in the future this week?
Sandra: Well it's the 10 year anniversary of the global financial crisis and we're going to revisit that and try to think about how we measure whether we're better off now as an economy or not. But first it's going to be privacy.
After last week's Apple event where the new iPhone models were announced then the new Apple Watch was announced, of course this week a slew of articles analysing various aspects of the new announcements came out and we thought that as today is the day that the new iPhones are arriving, we should have a look at the different angle of the new iPhone stories. So our first article comes from Fast Company.
Kai: It's titled "Forget the new iPhones: Apple's best product is now privacy".
Sandra: So an interesting take that allows us to have a closer look at a topic that's been in the news from various angles over the past couple of years actually and that this privacy.
Kai: So the author Michael Grothaus sets out to describe how he is often asked by friends which laptop or which smartphone to buy and he doesn't disguise the fact that he's big into Apple products.
Sandra: As are we and I think we should disclose that on the podcast.
Kai: Yes. And so the author makes it clear that for a long time this has been because of the design of the products, the way in which software and hardware are built as a unity and they're really good quality, they're usable and all the rest of it. Increasingly the reason that he gives is that Apple has taken a very rigorous approach to protecting consumer privacy.
Sandra: So before we have a look at the big picture and indeed we're going to bring up a whole bunch of articles from this week that look at various aspects of privacy. Let's have a very quick look at what Apple has done in this space. So let's remember we're looking at the features of Apple products at the time where most major corporations companies like Facebook, Google, Microsoft and Amazon are tracking pretty much everything about us and much of it without us actually knowing just how prevalent this is in our digital lives. Apple has taken a completely different approach. User privacy protection has been at the core of Apple's thinking way before Tim Cook's leadership. This was a big part of what Steve Jobs envisioned for the company, but it has really been over the last few years that it has made Apple products standout products.
Kai: So the author goes on to say that given Apple's track record and we'll have a look at a few of the initiatives and features in a moment, Tim Cook the CEO hasn't said or done anything that makes me think his claim that privacy is a fundamental human right isn't sincere. And this of course comes off the back of the recent FBI Apple saga where Apple famously refused to unlock a customer's iPhone or include in its source code a backdoor for the FBI or government authorities to break phones even in cases where criminal or terrorist activity was suspected. Saying that privacy is at the heart of what the company does and there is no case for compromising it in any way.
Sandra: So over time Apple has made it increasingly harder for third parties to actually access any of your data. The Safari browser was the first one that would block third party cookies (these are the things that track your activity over the Internet). They went a step further then by implementing things like the intelligent tracking prevention which means that advertisers cannot follow your movements around the web. Apple has also banned a lot of third party developers from putting their apps on the app store if they are using them to log your activities around the web, a famous case was when they forced Facebook to remove their VPN app from the App Store.
Kai: Which was quite a concerning case given that this app called Onavo was found to actually track everything a user does where they browse and then submit that data to Facebook. Quite concerning given that a VPN is usually used by customers to be private in their browsing here used by Facebook to actually make it easier for the company to track customers. This one was banned by Apple. And in terms of the prevention of user tracking for advertising purposes iOS12, the new operating system version released just this week for iPads and iPhones has shut down one of the last strongholds of cross site tracking which is to prevent Google and Facebook to track customers across sites that have the like or share buttons embedded. With this feature web sites would allow Google and Facebook to actually monitor and track what users were doing on these sites, so the website operator obviously benefits from having the content shareable, which means it increases their reach and when users or customers can share content with one click. But that comes at the expense of Google or Facebook learning everything that a customer does. So Apple is not preventing the tracking of users across those sites with the new operating version.
Sandra: And of course they have also made changes to their hardware to further increase privacy.
Kai: For example they make changes to the microphone so if you close the lid on a laptop the microphone is physically disabled, preventing snooping or listening into conversations that people might have due to hacking but also storing the fingerprint or face I.D. data for unlocking the iPhones on a chip on the actual device not transmitting that to Apple's servers. So all of these technologies are rolled out to assure the customers that Apple takes privacy seriously.
Sandra: And it is quite significant that Apple can actually afford to do this. The rise of tech companies, as the biggest companies in the world whether we're looking at the US and companies like Apple, Microsoft, Google or whether we're looking at places like China with Baidu and Alibaba and Tencent, most of these companies have risen on the back of user data and the ability to monetise that data or to exploit that data for their products and services but Apple is in a unique position that the business model doesn't have to rely directly on monetising such information. Apple makes a lot of its money and it was the first company to reach a trillion dollars by selling physical products.
Kai: And also its services and content that it sells through the app store, the iTunes store and obviously Apple Music.
Sandra: So because its business model doesn't rely on this customer data and on breaching that privacy it can actually afford not only to grant you that privacy but also to actively block companies like Facebook or Google that are built around such advertising models from accessing your data.
Kai: And we have previously discussed the idea of the 'fiduciary moat'. The idea that companies who monetise the services that they offer to their customers rather than earning a living from third parties such as advertising have an advantage in the long run because they don't have to serve different stakeholder audiences and thereby risk compromising customer service in the process of optimising advertising revenue.
Sandra: So this takes us to a bigger conversation around privacy. I think for the past year and a half/two years we've increasingly seen stories that have put privacy at the centre of not only the business model of many of these large organisations, companies like Facebook and Google and we remind our listeners of the entire Cambridge Analytica saga that revealed not only how such business models rely on breaches of privacy but also how these seep into every aspect of our social lives, of our democratic lives and so on. We've seen the European Union making really big strides to try to address privacy as an issue with the whole GDPR. The General Data Protection Regulation, the EU law on data protection and privacy that covers everyone living in the European Union. We've seen this discussed increasingly in national forums with the U.S. Senate hearings where the CEOs of these companies have been increasingly called on to address privacy concerns and their use of personal data and this actually made us think of whether or not privacy might be one of the grand challenges of our generation.
Kai: And that indeed reminded us of a famous episode of The West Wing, the television series.
Sandra: The West Wing has been known for being ahead of its time and its understanding of political issues and social issues that would confront the American people but also society at large.
Kai: For example foreshadowing the election of the first non-white President portrayed in the series, in the form of Latino candidate Matthew Santos obviously modelled on the race of Barack Obama for government at the time but therefore foreshadowing the Obama presidency which came after the television series aired. It was also being prophetic in a few other issues.
Sandra: This happens to be from an episode from the very first series, episode 9, called 'The Short List' and we want to highlight to our listeners that this is an episode that aired in 1999 and we just want to let that sink in for a moment because this is when Google was moving out of a garage. It was almost a decade before Facebook came to the table, it was almost a decade before the first iPhone, before Twitter, before Facebook so really really well ahead of its time.
Kai: And in the episode The West Wing team vetting candidates for a Supreme Court seat and the candidate in question has made certain statements about privacy. And here is the character of Sam Seaborn foreshadowing the age of privacy and it shows that the writers used a deep understanding of developments in western society to base their series on. So let's hear from Sam Seaborn.
Audio (Sam Seaborn): 20s and 30s it was the role of government, 50s and 60s it was civil rights. The next two decades are going to be privacy. I'm talking about the Internet, I'm talking about cellphones, talking about health records and who's gay and who's not. Moral? In a country born on the will to be free, what could be more fun of metal than this.
Sandra: It's indeed an interesting thing to contemplate because everybody seems so surprised today about the fact that privacy would take such a central role but here are people who almost 20 years ago discussed that this would be as much as the 50s and 60s had been about civil rights for instance. This should be the age of privacy and we're seeing this debated in various societies around various lines. For us it's around surveillance capitalism, it's around business models built on exploiting user data. We're seeing different conversations emerging in places like China, around large scale social engineering, around other ways to infuse society with databased decision making. So as we said at the very beginning it has been a week for privacy. But so is every other week.
Kai: So for me what is really interesting here is not so much how surprised everyone was about Cambridge Analytica and the hysteria in the wake of what we learned about how Google and Facebook treat our collective data and the possibilities that they have in tracking our behaviour across the Internet, but the fact that we have all willingly participated in giving up our privacy in a slow but steady process towards more convenience and nice features that we were given that were on the one hand made possible by the collection of data or on the other hand were free to use where we paid with our privacy. And while we cognitively might have an understanding of what happens in our day to day lives, it's just so enticing to use these features and to adopt these convenient technologies that overall and over time our personal privacy has been compromised at a large scale. So it is all the more significant that Apple at the same time has built up its privacy based services and has built more and more privacy measures into the technologies which seems to be anachronistic, seems to be against the flow of where everyone else in the industry was going but seems to be more and more an important business decision that serves them to now position themselves as the alternative, that does not require you to compromise your privacy.
Sandra: We could actually spend a lot more time discussing this and taking it in to a variety of directions. We actually spent this morning over coffee discussing on the one hand that Apple is a premium product so is this new age of privacy one where the rich will afford it to be private and if you're not that well off increasingly you will pay with your data.
Kai: And indeed we have discussed this matter on the podcast before that privacy might increasingly become a luxury product because of the way in which services are only free if you give up your data in return.
Sandra: And this was in the context of Facebook considering paid service that would allow you to have more privacy. We've also discussed the benefits of giving away your data because as much as we complain about companies like Facebook and Google collecting so much information, both of us actually use Google Maps way more than we use Apple Maps.
Kai: Because Apple Maps is shit right. And the same probably applies to Siri in a way so there are certain services that Google for example was able to build precisely because they have more access to data. So Apple actually compromises the quality of some of its services in return for increased privacy.
Sandra: And indeed that's where a lot of these trade offs will lie because a lot of the machine learning advances that we've seen in recent years have relied precisely on the vast amount of data that such companies have been able and are continuing to be able to collect on every movement that we make online.
Kai: And that is also the biggest question mark that now hangs over Apple because Apple relies on innovation in its gadgets and in its hardware to keep that business model going because they are foregoing the kind of database innovations that Facebook and Google are able to do because they have access to their customers' data in a way that Apple does not.
Sandra: And here we must pause for a second because it would seem at this point that the only topic of contention around privacy is the individual's right to privacy and the individual data that we give up and the business models that are built on top of this data. But actually privacy as a defining issue of our time goes far beyond this. And whilst we have previously discussed on the podcast open DNA databases and how an individual can actually breach privacy for other people that they are related to just by sharing their DNA that can then be linked to individuals who have not chosen to participate in these open databases, similarly we see privacy being discussed not only at the individual level but on the aggregate which is one of the stories that we wanted to bring up this week. One such story comes out of the Gulf News titled "Welcome to the metadata society and beware".
Kai: And we want to point out that Gulf News is a collaboration between the New York Times and one of Germany's largest independent newspapers the Suddeutsche Zeitung, the article is written by Adrian Lobe who is a German journalist with a background in political science. And he takes on the topic of how data not only tells us a lot about our collective behaviours in society but indeed shapes the way in which society behaves. And he quotes Italian philosopher and media theorist Matteo Pasquinelli who teaches at the Karlsruhe University of Arts and Design who has coined the term 'metadata society' as a new form of biological control used to establish mass and behavioural control such as online activities and social media challenges or passenger flows in public transport and the point that he makes is that we are in an age where data is used by algorithms to shape our collective behaviour. And while this is on the one hand concerning he points out that it is also a very mundane phenomenon so we're not talking the kind of SKYNET Terminator or Orwellian scenarios but more mundane scenarios such as Google Map presenting us with aggregated traffic data collected from sensors in mobile phones of its users and us then changing our behaviours, changing different routes and so algorithms shaping the way in which we behave collectively and therefore creating these patterns of behaviour that are increasingly not just based on how we interact with each other but how algorithms interact with us as a collective.
Sandra: And interestingly in an observation that brings us to last week's story about science fiction and our ability to examine the impacts of technology through science fiction he brings up Isaac Asimov's science fiction serious Foundation where in one of the novels Emperor Cleon 1 tells his mathematician you don't need to predict the future, you just choose a future, a good future, a useful future and make the kind of prediction that will alter human emotions and reactions in such a way that the future you predict will come to fruition.
Kai: And so this is not a story about good or evil but it points out that the way in which we give up our individual data, that data is aggregated and then used by algorithms at the systemic level,u allows us to shape behavior in those systems for good or bad because we could envision a lot of scenarios where this can be used to smooth traffic, to lead to more sustainable use of resources, or indeed for fighting crime. And there was another article this week that we only want to briefly highlight which touches on a topic that we also have mentioned before and that is the way in which DNA databases, the way in which more and more people upload their DNA sequences to these public web sites are increasingly being used to solve old crime cases.
Sandra: So again highlighting the fact that we don't actually have very good ways of thinking about privacy because we are still thinking about privacy as an individual right and we still see privacy decisions as something that is made at the individual level for the same individual and as we've seen with the last two stories on an aggregated level, privacy and its implications look actually quite different.
Kai: Be it in the ways in which individual's DNA information for example can have implications for their wider work of relatives and people who are related to that person or in which the individual data at an aggregate level can have systemic effects that are not intentioned by the individual.
Sandra: And indeed we could keep going with different angles on privacy. Also from this week a story from The Guardian where Google's prototype search engine for China reportedly links people's mobile phone numbers to what search they have used so you could basically link a search query on the Internet to a particular person's mobile phone number. We've seen another story from the MIT Tech Review where it was reported that a MIT professor has actually built a gadget that can sit in one spot and track everything about you including your breathing, to the way you walk, to your heart rate everything that you are now able to do only with a wearable device or something on a person's body. This could be done with something that is placed in the corner of a room.
Kai: So technological innovations that offer new kinds of services but all on the basis of us giving up certain aspects of our private lives. We think that privacy indeed will remain a defining issue of the next few years. And so something that we will definitely come back to.
Sandra: So about time we move to our second story that was a long one and if you thought that was a big topic wait until this second one because it's also been 10 years since the financial crisis so we thought we should mark that moment by looking at at least one of the hundreds of stories that have come out in the past week reflecting on the 10th anniversary of the inflection point of the financial crisis which was the collapse of Lehman Brothers, incidentally the biggest bankruptcy in history. And whilst that might feel like a very long time ago we are still seeing the effects of that financial crisis around the world.
Kai: Or do we because the article makes the point that if we look at the standard measurements that we have at our disposal and this is for the U.S. markets, probably apply similarly in other Western countries as well, then the unemployment rate is lower than it was before the financial crisis and the stock market has soared, the total combined output of the American economy known as the Gross Domestic Product (GDP) has risen 20 percent since Lehman collapsed. So everything should be fine, the crisis is over clearly on those indicators. Yet many people are still affected quite severely by the fall out that this crisis caused.
Sandra: So our second article for this week is actually from the New York Times and it's titled "We're measuring the economy all wrong" and it's got all the ingredients for a great story for our podcast. It's got future, it's got history, it's got big drama in it...
Kai:...the right amount of numbers not too much obviously.
Sandra: So today we're going to look at three statistics: GDP, unemployment and the stock market index that dominate political discourse, public discourse, public conversation about the economy when we think about whether the financial crisis is over or not, our big question for the day, or whether we're looking at how healthy an economy is, how well are we doing.
Kai: And the article makes the point that all three of those accurately measure what they were designed to measure. But the point is that those measures might not reflect the reality of many people in the economy these days.
Sandra: So let's take the unemployment rate. The unemployment rate has been used for well over 100 years now to assess the health of an economy. But the article makes the point that the unemployment rate isn't as meaningful as it used to be. So to better understand that it's worth looking at what the unemployment rate actually is and where it comes from. The unemployment rate dates back to the 1870s and it goes back to a Civil War officer and a Massachusetts politician called Carroll Wright who was back then running the Bureau of the Statistics of Labor and he was quite concerned that in the 1870s there seemed to be an exaggerated idea about how high the unemployment was and he actually called that 'industrial hypochondria'. So he set out to figure out or count the number of people who were out of work but he actually added a caveat that has persisted to this day.
Kai: So the way in which he counted unemployment was that he would go and count the number of people who were actively looking for work and then divided this by all people in work or looking for work, deliberately discounting those who had given up looking for work. And this is how we measure unemployment to this day, meaning that those people who are not actively looking for work but who are out of work who might have given up looking for work and are just sitting idle in the economy are not actually included in the unemployment rate.
Sandra: So what happened back in the 1870s when the number that Wright had come up with was not surprisingly much lower than what people were saying because he did really only count the men who really wanted to work. So if you weren't looking for it you weren't counted.
Kai: Or if you were a woman, incidentally, also, you know that has changed obviously.
Sandra: But what hasn't changed is that we still do not count people who are so disillusioned with the world of work that they do not even wish to look for work.
Kai: Which leads to these surprising effects that often in crises that are happening, the unemployment rate might actually drop at a certain point because more and more people are giving up actively looking for work therefore being excluded from the statistic.
Sandra: And this is just one of the many footnotes to the unemployment rates that we publish even here in Australia, The Australian Bureau of Statistics that actually publishes this number, not only does not count people who are not looking for work but you are counted as employed for instance if you have completed at least one hour of paid work in the week before the survey. Now given the developments in the gig economy which is something that we have also discussed, these numbers increasingly obscure the reality of work for many many people.
Kai: So let's not forget what we take this number to mean. Often times in public discourse the unemployment rate is a measure for the number of people in trouble in an economy not being able to sustain their own existence. But if we now understand how this measure actually comes to pass we can see that not only are there a number of people who are counted as employed who might not be able to make a living off their few hours that they might be working but there is an increasing number of people who are not even in this number who are not even counted as unemployed.
And the article shows a graph for the US which shows that from the 1960s to today there is an increasing gap between what the official unemployment rate measures and the number of people out of work. In 1960 the unemployment rate was sitting at about 6 percent and the percentage of people not working at about seven and a half percent. Today the unemployment rate is much lower than this below 5 percent but the number of people not working sits as high as 15 percent. So increasingly this is not a good measure for the reality of working people.
Sandra: So whilst in Australia The Australian Bureau of Statistics has tried tackling some of these issues by conducting a number of different surveys that they associate with the unemployment numbers, the characteristics of employment surveys for instance which tries to give you a lot more information about the people that they survey. Unemployment seems not to be an adequate measure for assessing whether or not we are better off since the financial crisis and unfortunately the other measures don't seem to fare much better.
Kai: And while we don't have to discuss these in as much detail, it is increasingly clear that the total output of an economy and what the stock market does reflects less and less the reality of most people in an economy and the reason for this is inequality. It is increasingly fewer people who benefit from a rise in stock market or an increase in economic output because less and less people percentage wise actually benefit from those increases. And that is a measure that is particularly relevant to the US where less and less people are holding the majority of shares. Now that situation is slightly different in Australia because with the superannuation system a much broader group of people partakes in any rises in the stock market.
Sandra: A similar reasoning actually applies for GDP and inequality plays a large role here as well. A small part of the population and this applies for Australia not as much as it does to the US but a small segment of the population increasingly receives a growing share of the economic growth, making GDP a similarly opaque measure that doesn't separate the share of national income that flows to the middle class or the people who are not so well-off versus the very rich and similarly there have been movements to try to change this. In the case of GDP, there has been a large team of academic economists including the best selling author of a famous book on inequality, Thomas Piketty, who have begun to publish a version of GDP that tries to separate out this various parts of GDP. But unfortunately all of this data is published with a big lag because of the access that they have to economic data, so the last numbers available are for 2014, but this is increasingly gaining momentum.
Kai: So there are essentially two ways out of this dilemma. One is to amend or make more detailed some of the existing measures such as GDP and account for inequalities so measure the share of GDP by income bracket. Similarly we can do this for gains in the stock market to see who actually benefits from those rises by way of share ownership which then exposes the way in which inequality works to skew who benefits from economic growth over time OR to go to a whole set of new measurements to apply to the economy and one such set of measurements has come from the United Nations in the form of the Sustainable Development Goals. The problem with these alternative measures is that there seems to be no agreement on a concise set of measures because currently for example there are seventeen of those Sustainable Development Goals, each one of those could come with its own metric and there's something to be said for having concise measurements such as the unemployment rate or GDP.
Sandra: And this goes to the heart of the question we started out with - whether or not the financial crisis is over and are we better off. All of these new measures actually reflect our struggle to define what success really is, how do we measure how well we are doing. GDP for instance only measures production. But should we be looking at things like obesity and diabetes? Should we be thinking about poverty, about collapsing fish stocks? All of these ideas about capturing a wider range of experiences and a wider range of wellbeing factors are translated in these many different types of goals and attempts to define in a progressive society what do we really care about? How would we know whether we're better off? And that's not just production but it might be economic opportunity it might be health or it might be things even like physical safety.
Kai: So we'll leave you with the insight that both GDP and unemployment rate were invented as political constructs in reaction to two big financial crises. And the inside that we are in desperate need of new measures that reflect in a better way the reality of most people in the economy today but also the fact that we are living in a world of data abundance so we have the ability today to measure all kinds of things which then stands in the way of deciding on which one of those many measures might actually be the right one. But this is a discussion that is happening now.
Sandra: And now for something completely different.
Audio: Robot of the week.
Sandra: Our 'Robot of the week' comes from China and in particular Alibaba's digital marketing arm Alimama.
Kai: And it is a digital robot, a bot that writes copy. One liners that describe listings on the Alibaba shopping platform.
Sandra: This week's robot is actually the world's most prolific writer. It writes...
Kai: 20,000 lines of ad copy per second.
Sandra: Per second. So Alibaba is an e-commerce giant and what this bot does is it gives you the descriptions of things you might want to buy on Alibaba and remember on Alibaba you can buy pretty much anything from toothpicks to luxury yachts. Each item has a short headline and this is the bot that actually writes most of those headlines and they are based on keywords, on analysis of other taglines, of pictures, of images, of text.
Kai: Imagine you are listing a product on this platform much like you would list something on eBay, you'll prepare your listing and you need that one liner that will appear in the search results to give your product the right exposure and gets people interested in buying what you have listed. So this bot takes care of writing that one line description.
Sandra: No longer do you have to spend time trying to seek inspiration or looking at competitors but rather just use one of these generative bots to get insightful one liners like...
Kai: 'Inflatable duck baby pool with canopy'.
Sandra: 'Hot-selling colourful temporary full arm tattoo for men'.
Kai: 'Splendid reusable dog pee pad, minimum order 500'.
Sandra: And I think that's all we have time for today.
Kai: Truly poetic automated advertising copywriting.
Sandra: Thanks for listening.
Kai: 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.
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