Big tech and automation during COVID-19 on The Future, This Week

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Disclaimer We'd like to advise that the following program may contain real news, occasional philosophy and ideas that may offend some listeners.

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: big tech in the time of corona, and why robots are not taking your job. 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. Hello, Sandra. Can you hear me?

Sandra I can, Kai. We're gonna try to do this from home today.

Kai As many other people, we are also working from home. We thought if Stephen Colbert can record his segment from home, if the ABC can do it, then surely we can do a podcast from home. So the sound quality might not be the best, but here we are.

Sandra So what shall we talk about?

Kai I think we'll stick with Corona for a while. It seems to be an important topic.

Sandra It is affecting pretty much everyone, including gin companies.

Kai You know that times are bad when our most cherished gin companies in Sydney pivot to making hand sanitizer.

Sandra Both Manly Spirits and Archie Rose are now making hand sanitizer.

Kai So is Brix in Surry Hills.

Sandra So is Four Pillars, although they're only making it for themselves and I'm not sure that counts.

Kai No, they should share it.

Sandra So, of course, these companies are helping out since there is a worldwide shortage of hand sanitizer. So, for instance, Archie Rose has released the grapefruit, cardamom and thyme hand sanitizer that follows the World Health Organization guidelines. And it sold out in a few minutes, even though it's priced at about $20 per half a litre bottle.

Kai Which, you know, apparently is the going rate for hand sanitizer these days. But seriously, these companies are stepping up. And, you know, I didn't know this so it comes as a bit of a surprise, but if those companies can actually retool their production lines to makes hand sanitizers, that serves an important function. And if they can make it into a nice smelling product, then do a bit of marketing off the back of it. Why not?

Sandra And there are companies like Manly Spirits were giving it the way when you buy their bottles of gin. But also there are companies like Southern Wild in Hobart were shifting their entire business models towards not-for-profit hand sanitizers, which they want to donate to schools in the region.

Kai So a really good deed that many of these companies do. And so it sort of oscillates a little bit between lifestyle product and real public service. So good on them, we say. So what else could we talk about?

Sandra Oh, we could talk about all the technology we're surrounded with right now working from home. I think that would be a good start.

Kai There is a couple of stories around big tech and tech companies and what all of this means for them.

Sandra Okay, let's do that, though maybe we should talk about why robots don't seem to be stealing as many jobs as previously predicted.

Kai Yeah, that was an interesting story in Wired as well. So, okay, let's do that.

Sandra So Kai, what happened in The Future, This Week?

Kai Our first story comes from The New York Times and it's titled ""Big Tech Could Emerge from Coronavirus Crisis Stronger Than Ever".

Sandra So clearly many of the big tech companies, Amazon, Microsoft, Google, Facebook and Apple are doing quite well during the crisis. All of us are surrounded by their services. Many companies are using them for work, demand is surging for everything that big tech is offering. Yet we thought there is a number of interesting angles around just how well tech companies might do out of the corona crisis.

Kai And our point is that while we look at how they're going now, if we look beyond the crisis, we can begin to see that they'll come out of this much stronger than many of their competitors, leading to more corporate inequality. The discussion around techlash has almost subsided, has certainly quieted down. And so they might come out of this even better than many are predicting right now.

Sandra We also want to debate a little bit about what happens to other tech companies, because while there has been a lot of attention in the news to companies like Amazon or Facebook or even Zoom and Netflix and how well they're doing, other tech companies like Uber or Lyft or Airbnb have not been so lucky. So there are increasing divides around what tech services we do use during the crisis. Let's start, though, with big tech and where these companies are right now.

Kai So the first point we want to make is that all of the big tech companies are incredibly cashed up because they're coming off a number of highly successful years. So they're in the best position to weather the crisis, whereas many of their competitors who are smaller, who are not sitting on the same cash reserves, might find it much harder to put through this crisis and actually make it out the other end.

Sandra They've also got that near monopolies over certain areas of business like Amazon in e-commerce or Google in online advertising or the strength that Facebook has in social media.

Kai Let's take a look at them one by one. As people are confined to their houses and only essential services such as retail operate in society, Amazon is doing incredibly well, taking a big share of the online ordering market, certainly in the US, but also in places like Europe or Australia, to the point that they have announced that they are hiring 100000 additional warehouse workers in the US alone in order to cope with demand.

Sandra Amazon is also one of the major cloud computing platforms, and as more and more companies move online, they need to augment their infrastructure for corporate networks to cope with the number of employees now working from home and using the software. So, again, they'll be in a better off position, and this would be the case with a company like Microsoft as well. So if we're looking at a company like Microsoft, Teams, which we also use, has grown about 40 percent in the week, that there's almost 50 million daily users on the platform.

Kai So as everyone starts working from home companies such as Microsoft, but also Google with its Hangouts product, and Facebook with Facebook for Workplace, and the fact that Facebook is now being used for communicating in work, but also in private life, they're doing incredibly well in terms of user numbers and adoption of their platforms, potentially crowding out many of these smaller competitors. There's one notable other company, which is, of course, Zoom, which is taking a lot of the education market, a lot of lectures, a lot of seminars are now run via Zoom, but also a lot of corporate video conferencing.

Sandra And the movements in Zoom's share price have been spectacular. Zoom is now worth more than four airlines combined. So in the US, Zoom has a market cap of just over 44 billion dollars at the moment. That's American Airlines, Delta, United and JetBlue altogether. And that is absolutely huge. Its share price went from about $60 about a year ago to about $160 these days. And another article in The New York Times makes the case that the company now has an unheard-of price-to-earnings ratio of 1865. And that's usually considered a good measure of a company's true value, but consider a company like Facebook whose price to earnings ratios is about 23, Zoom's is 1865. Google is about 21.

Kai Which is, of course, a good indication for just how much the word has come to rely on online video conferencing and these online work tools.

Sandra And speaking of Facebook, we have to say that its main ad business will undoubtedly take a hit because of this move online. However, that might be offset by the jump in messaging and in the news that people consume on Facebook or in watching videos or just pretty much connecting online whilst they're at home.

Kai And the same is, of course, true for Google and its service, YouTube. While they might find it harder to sell advertising to corporations in this crisis, many companies are now cash poor. A lot of companies who would advertise are struggling and might go out of business. The increased use and adoption, the increased intensity of use might ultimately make up for this, and the adoption, if it lasts beyond the crisis, might put them into a much, much better position than they have ever been.

Sandra And let's not forget about Apple, which even a couple of weeks ago seemed extremely at risk from the coronavirus because of its very strong dependence on Chinese factories. So looking at Apple's supply chain, it seemed to be a near disaster with all the factories closed down, all of Apple's shops closed down. But many of those factories are opening up and pretty much back to normal. Given the way that China has been able to deal with the crisis and people do seem to be using more and more devices online to cope and spending money on all sorts of digital services, which Apple now has a big share in as well. And Apple even released things earlier this week.

Kai So Apple just released new versions of its iPad Pro, and also of its popular MacBook Air computer, as a strong signal that they believe that even though most of their stores worldwide are now closed, they can still, of course, sell online. And so it remains to be seen. But the expectations are that those devices will still do really, really well because people rely on those devices in working from home. So the demand for mobile devices is certainly going to go up. But speaking of Apple and their pivot to services around both news and, of course, entertainment, music and now Apple TV Plus. This is, of course, the other category that is doing incredibly well, which is entertainment.

Sandra Indeed, we've seen a huge rise in entertainment from companies like Netflix and as you've mentioned, Apple TV Plus or Amazon Prime, all of which are seeing a huge increase in their streaming services. So high, in fact, that in Europe, Netflix was asked to reduce its video quality for its stream, to reduce the strain on Internet networks, and the company has agreed to do so for the next month. YouTube also agreed to suspend high definition across Europe for a month.

Kai And so there is now an expectation that these companies will come out of those crises with a strengthened subscriber numbers, strengthened usage as work practices might change and there might be a more lasting push to working from home or working flexibly. These tech companies are set to be real beneficiaries beyond the crisis.

Sandra But as with these companies and with big tech, there is the question of competition. So we started off by pointing out to the fact that many of these companies do have a virtual monopoly or in some cases there is an oligopoly, with very few companies heading up many of these areas. But we've seen one trend over the last few years that is actually being amplified by the corona crisis, which has been the fact that big pack has swallowed up most of the startups and most of the potential rivals, increasing the concentration in not only areas like entertainment, but also in more critical fields like artificial intelligence. And if we look at the number of acquisitions that these companies have done, the large tech companies in the US have swallowed up a large proportion of these startups, especially in fields like AI.

Kai So what this crisis then reveals is that not only will big tech come out of this very strong with the ability to buy up smaller competitors that might lose in valuation during the crisis to acquire crucial technologies, many of the small tech startups might also find it very hard to enter into the next financing round as capital worldwide is drying up. So there's no a real risk that innovation is stifled on both fronts because of startups dying and acquisitions through big tech.

Sandra And indeed there is a great Bloomberg article that we'll include in the shownotes that shows, for instance, companies like Mila, that's a Montreal-based deep learning lab that has about 450 researchers. And it's supported by several of the major universities working in this space, saying that they really struggle and have huge difficulties facing up to the cost of the computing power that increase not only as AI models were getting more and more complex, but now with the additional strain on cloud computing services because of the world moving online. And these companies were already struggling with replicating findings that Google and Facebook were making available through research papers, but now increasingly struggling to even stay in the game or at least trying to stay somewhat independent.

Kai And so we've previously discussed on the podcast the issue of the growing corporate inequality that we see in the world, where the large tech companies now have huge valuations on the share market, have gigantic turnover, which they generate with comparatively small numbers of employees.

Sandra And indeed big war coffers that they can deploy in cases of crises like the current pandemic.

Kai And so we would expect that this corporate inequality is only set to grow as a result of the COVID-19 crisis.

Sandra But there's really one other thing that the coronavirus seems to have killed off, which is the techlash or 'break up big tech'. Whilst up until February of this year we couldn't go a week without seeing some story coming out either from the Australian media or from the US media around breaking up big tech, around how these companies are toxic or around their approaches to privacy. That seems to have almost died off in the last few weeks as the pandemic seems to have all but killed off the complaints about the giant tech companies, and the giant tech companies are now more and more seen as the saviours in the attempt to contain the crisis.

Kai And I think that's the point here, there's two effects that are happening. One is, of course, attention. The attention is on COVID-19, governments worldwide are grappling with the crisis, resources are poured into dealing with the health emergency. So that contributes. But also, there's a realisation that during this crisis, we're actually depending on their services, and so they are increasingly in the good books because they make it possible to cope with the crisis in the business worlds. They provide the cloud computing to move business online, they provide the communication infrastructure that keeps work afloat, and they're even flexible enough to react to what was initially a false statement by the US president that Google would build a COVID-19 Portal, to then actually turn this initially false statement into reality by being able to, within a matter of weeks, set up this very service and become involved in helping to fight this crisis.

Sandra So while these companies are still pretty much the purveyors of surveillance capitalism as they ever were, the landscape in which they're playing is now less competitive than ever before. It has become increasingly difficult to draw attention to things like privacy and surveillance in the midst of everything that's going on.

Kai And to be clear, those privacy issues won't go away. They might actually aggravate as Google is now put in charge of building a health portal, potentially more and more of the private information of at least initially US citizens will be in the hands of this company. So as we come out of this crisis, the other end, not only might they be in a more monopolistic position generally, they might also have a much stronger hold on our private information. So there is a potential that techlash will come back down the track.

Sandra But before we move to our second story and the robots many of us hope will take over our jobs now, we would be remiss if we didn't mention a few other tech companies, because whilst the focus, as we've said, there's often these days on the companies that are doing well, whether it's the Zoom's or the Netflix's or the Facebooks or the Googles of today, there is a number of companies that are quite vulnerable to this crisis. So companies like Airbnb, who are supposed to go public this year has seen its rentals drop precipitously as people no longer travel and are no longer allowed to even leave their house. Companies like Uber, pretty much any car sharing company are obviously struggling as people are not leaving their houses. Not to speak of the drivers who are now left not only without a job, but also without benefits.

Kai But in many cases with existing lease payments on their cars that many have bought just to drive for Uber. So there's a real crisis now, not only for the company itself, but for many of its drivers. And of course, there's many other services such as TripAdvisor and Yelp, all the kind of portals that sit atop the hospitality or the travel industries that provide valuable digital services when people can be out and about and move about the world who are all struggling with this crisis. Now let's move to our second story, which comes to us from Wired magazine and is titled, "If robots steal so many jobs, why aren't they saving us now?"

Sandra There have been ongoing discussions in the media for the last few years around AI and automation replacing many of our jobs. And we've debated this at length in various different episodes. But what this article in Wired tries to highlight is that the coronavirus crisis is actually exposing a lot of what is built into that story of machines taking over our jobs.

Kai And of course, we've heard a lot in recent years around robots coming for our jobs, with sometimes outlandish predictions of 47 percent of all jobs will be automated. It has become increasingly clear that robotic process automation, robots or AI oftentimes automate certain tasks, but very seldom entire jobs. And so what we see now is that AI or robots are not in a position to keep companies afloat. We do not see the kind of automation that might replace workers and keep services alive when people have to disperse, have to go home or have to leave factories. Tesla, for example, which is widely regarded as pushing the boundaries of automation and having the most automated factories, had to close down their factory in Fremont, California, precisely because those few people who run the plant had to go home.

Sandra And more simply, if we're looking at the types of jobs that are really needed now. Doctors, nurses, health care workers, or indeed even other essential work, keeping the grocery stores stocked and open. We've seen in Australia Woolworths and Coles struggling to get the workforce needed to keep the shelves stocked in the US, as you've mentioned before, we've seen Amazon hire 100000 people for their warehouses, even though arguably that's one of the jobs that is quite prone to automation. So we've seen problems not only in the types of jobs that would need to be automated at this point, but also in how we're able to scale these jobs.

Kai So if we take Amazon as an example, you're absolutely right that they have a high degree of automation in their warehouses. But there's two issues in a situation like this. One is that robots cannot possibly pick all goods from shelves yet, they don't have the same dexterity as a human hand, so you still need a lot of humans to do a lot of the packing. But you also can't scale that well, you cannot just order hundreds of new robots in a situation like that. But it is much easier to hire labour in a situation which leads to high unemployment in the population anyway. So in those instances, robots are not the ones that are saving us here.

Sandra So the question here is then, are there any jobs where maybe robots will take over our jobs during such a crisis?

Kai So it might not be in the warehouses, but we've seen a lot of applications of AI, for example, in helping to model the spread of the virus. We've seen applications of AI in medical research trying to find a cure for the virus, going through large amounts of information, finding new proteins that might help develop medication or vaccines for the virus. So these are areas certainly where a AI and automation has helped doctors and researchers in fighting this crisis.

Sandra And indeed we might see other applications, one of the major barriers for not having autonomous vehicles on the road has been that there are lots of human drivers. These days you might see new applications in autonomous vehicles. But an area that we're quite interested in, which is business, there are seen to be fewer and fewer places to automate.

Kai So you could envision that as in our cities are swept empty of cars because we're going to a shelter-in-place lockdown in places like New York City and streets are empty. You could potentially deploy autonomous delivery drones or even vehicles that could be used in a crisis like that if we had them available at scale, it actually helps supply essential goods for the population, for them not having to leave their houses to go grocery shopping, for example, or having human delivery people being vulnerable to the virus, having to make those deliveries.

Sandra There are, however, a number of domains where machine learning was actually making good inroads, making predictions and forecasts based on previous data, and that there's all aspects of business and economics. Whether it was in finance or in marketing, in the way people behaved, in the way industries were predicted to evolve, in the way the economy was predicted to respond. We have seen quite good applications of machine learning.

Kai And so the point we want to make is that there's a problem here in the face of the corona crisis. And as we're now hearing voices say, couldn't we just have AI model and predict where this crisis is going, what the implications for business will be? We want to say that this is largely a bullshit argument that forgets how these technologies actually work.

Sandra We've discussed this a number of times on the podcast and we'll include some previous episodes in the shownotes. Most of the deep learning technologies that we employ today rely on past data to make predictions of the future. So whether that is what you will want to watch on Netflix or how much toilet paper you will buy at the shops, or indeed what numbers of people will travel overseas, or how many restaurant bookings we will have. They all rely on past data to make predictions about the future.

Kai And so we've previously made the point, and it was often a more theoretical point, that these technologies, deep learning that glean from large amounts of past data, predictions about the future work really well under stable circumstances, but that they break down when we have disruptive events or things that are unprecedented, which is precisely, of course, what we're seeing right now. So any such models, any such systems that have been built to predict the kinds of consumer behaviour that are now majorly disrupted.

Sandra Or how economic activity will rebound or how work and employment will evolve.

Kai So any such predictions will not be possible with these types of technologies, because the data from which we might make those predictions precisely doesn't exist. In situations where the world is changing at a magnitude we're seeing right now, AI-based predictions are simply not useful. And so what we have to rely on now in these situations is the kind of human sense making that will slowly allow us to better understand what the implications of this world changing event might be.

Sandra So pandemics such as this one are really transformative global events and they require fresh thinking, whether we want to understand the impacts on economy or on businesses or industries or on workers, or society at large. And it's clear that we're barely grasping the nature of the global calamity that is the coronavirus crisis. And it's quite difficult to understand what it will mean for the business world. So it's here that universities and experts actually can play a big role, coming together to use expertise or available data models, but above all, drawing on new thinking, on imagination and new understandings to help make sense of this crisis. So at the University of Sydney Business School and through Sydney Business Insights, we're actually putting up a portal on the SBI website.

Kai So what we will do on this portal is provide regular updates on how COVID-19 impacts the future of business. We will ask questions around what will this crisis mean for economic growth? Questions around worker well-being, how this is impacted by work moving into the home. What does it mean for transport and travel in the long term? How will global supply chains be redefined?

Sandra We'll look at whether inequality, whether in the corporate space or in society, will grow, whether big that will make moves now to curb misinformation, or whether work will indeed ever be the same with all of us now working from home.

Kai We will ask for, and we will provide, original research, expert opinions. We'll make available data sources and models, repositories. We'll have, of course, our podcast, news articles, commentaries. So we want this to become a place that highlights fresh thinking, new understandings and expert opinions about what this crisis means, beyond the immediate impact, for the future of business and society.

Sandra As the coronavirus sets out to change our world forever, we're asking all of you to join us in the following weeks in thinking about what's to come.

Kai And that's all we have time for today. And we will, of course, be back.

Sandra On the Future...

Kai Next week.

Sandra This week?

Kai Yes. But next week.

Sandra On The Future, This Week. Next week. Thanks for listening.

Kai Thanks for listening.

Outro This was The Future, This Week, made possible 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 was composed and played live on a set of garden houses by Linsey Pollak. 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 sbi@sydney.edu.au

Kai Hello, Sandra, can you hear me?

Sandra No.

Kai I see. And that's all we have time for today.