This week: what’s up with universal basic income, fiduciary moats, and cars in space in other news. 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.
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Introduction: 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.
Kai: Let's start.
Sandra: Today in The Future, This Week: what's up with the universal basic income, fudiciary moats, and cars in space in other news. I'm Sandra Peter Director of Sydney the Business Insights.
Kai: I'm Kai Riemer professor at the Business School and the Leader of the Digital Disruption Research Group. And so Sandra what happened in the future this week?
Sandra: Quite a few new stories coming up about universal basic income so we thought we'd pick one of them and have a longer conversation about universal basic income. So this story comes from the MIT Tech Review and it says that 80 percent of supporters of universal basic income say that funding for it should come from the companies that benefit from artificial intelligence.
Kai: So obviously this ties in with the whole automation narrative the fear that automation and artificial intelligence will do away with a lot if not most of the jobs that we hold today and that it will be hard for most people to sustain themselves given that there will be mass unemployment and the robots will do most of the work and so what do you do. And this is where universal basic income comes in. On the other hand though universal basic income is a much older idea that has sprung up in different contexts. So I think it's worth looking at what it is and where it came from originally and then we'll have a chat about what are the different narratives, the different conversations around this which turns out to be quite a deep rabbit hole if you will venture into it.
Sandra: So let's start with what is it. Many people talk about universal basic income but people mean different things. So first we must say that universal basic income at its core it's a regular government payment regardless of what income you have.
Kai: That's unconditional.
Sandra: Very importantly it is unconditional because we already have a lot of welfare systems which are payments by the government. But this would be an unconditional income regardless of how much you get paid. Second is how much should that pay be? Different people talk about different levels of pay so when we talk about universal basic income some people say that it should be a payment that is enough to keep you above the poverty line so that might be ten, fifteen thousand dollars a year that will ensure that you are above the poverty line. Other people say that this payment should be enough to guarantee you a middle class standard of living, a very different type of payment if we're looking at that range.
Kai: Absolutely and then there's some trials that have been discussed under the label of universal basic income that have handed out much lower subsidies to people say 500 or so dollars per month for example which is obviously not enough to live on but gives people the means to do things that they would not ordinarily be able to do if they had to rely on a low wage for example.
Sandra: So let's try to unpack this by looking at the reasons why this is appealing because universal basic income turns out is an idea that has support on both sides of the political spectrum, on all sides of the economic spectrum for a variety of philosophical reasons.
Kai: Yes for sometimes very different reasons and we do believe that it really matters why we want to do universal basic income because that will also determine how we're doing it, for what reasons and what we're trying to achieve.
Sandra: So the two of us did a bit of an analysis of the different ways to think about this, the different reasons, different schools of thought. So the first one turns out is a compensation argument.
Kai: And it relates directly to the Silicon Valley narrative around automation and incidentally this is where this argument is coming from so proponents of artificial intelligence and automation have realised that if they unleash this technology and should it turn out in the way that some predict it will, it will have wide ranging effects on society through automation and job losses and so the idea of a universal basic income is then in compensation for those job losses and the mass employment that might result and it is not just an altruistic argument to give people who are displaced by technology some money and compensation, there's a big idea behind this.
Sandra: So the argument goes along the lines if there is an autonomous truck driving down the road, I lost my job as a truck driver, I still need enough money to be able to participate in the economy to buy goods and services so the compensation argument would enable me to still remain part of the economy and to be a customer for those goods and services.
Kai: Absolutely so the realisation is that once you have mass unemployment at 20, 30, 40, 50 percent the economy wouldn't be able to function so you have to have some way of compensating people so that they can participate and therefore sustain the economy that is now heavily reliant on automation.
Sandra: And here we must know two things: first is that this is really a Silicon Valley narrative and there are actually trials in Silicon Valley at the moment, one coming out of the Y Combinator where about 3000 people will receive a thousand dollars a month for five years to see if this works out. There was also this week again the Stockton Economic empowerment demonstration again in California trying to account for these factors. But really this hinges on the fact that automation, machine learning, AI will displace a whole lot of jobs and this is an argument that we've had previously on this podcast, were not going to rehash it today, on how reliable are those numbers and how fast is this going to change, what percentage of the population will be affected and so on.
Kai: It is worth noting though that in the MIT Tech Review article where half of Americans are in favour of universal basic income, of those 80 percent say that this should actually be paid by those companies who unleash AI and automation, so they make the argument that no no no we don't need higher taxes on all of us, it should be those who actually caused this mass displacement who should pay for this and we can argue how realistic this is. We've previously discussed the feasibility of taxing robots so it will be very hard to pinpoint exactly who is responsible for the automation and who should pay what. So the practicality of that is quite questionable.
Sandra: But this idea of a universal basic income really doesn't rest only on the automation or the technology argument it really goes far beyond that. And there are four other schools of thought that believe universal basic income is desirable and should be part of our society.
Kai: Absolutely. And the compensation argument is probably the least philosophical or ideological of those schools of thought, it's a very instrumental one. Technology takes away jobs. We have to compensate people. The other schools of thought all tie in with certain ideologies and world views. So the first one and somewhat related to the compensation argument is the poverty alleviation argument.
Sandra: So this is the argument from the left if you're looking in terms of a political spectrum and the argument goes there should be a financial safety net to ensure that nobody in society lives beyond the poverty line. So it's basically a safety net argument similar to welfare arguments that we have.
Kai: So it's a different form of safety net. But it's also one which says that rather than having the stress of working multiple jobs, with all the health problems that come with living a stressful long hour minimum wage life, people should have access to a basic income in order to sustain themselves so that they can basically live a healthier and a more fulfilling life and go about their business in a different way and also spend more of their energy actually doing worthwhile things rather than looking for jobs and all the transaction costs that come with the daily struggle of getting by.
Sandra: And we can talk about mental health benefits. We could talk about the ability to retrain, to go back to school and all of those arguments. But there are of course also those who say while there are problems with this conception of universal basic income as well, for instance you take away a lot of the dignity that comes with doing a job. If you lose your job even though you are getting that money you are not drawing any meaning or any purpose in life out of the work that you will do so people will lose the dignity that comes with having a job.
Kai: And also it's not universally liked on the left itself because there's the power argument that once you give everyone universal basic income there's no basis for unions for example to organise workers and actually stand up for themselves and get organised in enterprise bargaining for example because there is no longer a reason for doing that.
Sandra: So it will reduce the power that workers have and the control that they have over their own jobs in the long term. So that's the argument on the left. Interestingly universal basic income is something that the right also supports but for very different reasons.
Kai: So the libertarian argument finds appealing that a universal basic income could be a way to reduce government spending and government programs so it could be a way to achieve small government, so we call this the small government school of thought, universal basic income which would be paid to each individual who would then use this money to look after themselves instead of receiving free healthcare or free education that money would then have to be spent whichever way the individual sees fit, to invest more in education or more in healthcare so it puts more choice in the hands of individuals which is appealing to the libertarian school of thought.
Sandra: So theoretically you could shrink the welfare state, you could reduce the bureaucracy that has come with ensuring that you have all these welfare programs and it's worth mentioning here that both the libertarian and the poverty alleviation argument go back to the 1960s on both sides of the political spectrum you had people like Milton Friedman, Nobel Prize winning economist, who proposed versions of the universal basic income.
Kai: So in the form of a negative income tax which if you didn't have any income you would get a set amount of money paid back from the Tax Office and then progressively your tax would then kick in. So in effect his proposal amounted to a universal basic income.
Sandra: Also people like Dr. Martin Luther King who fought for economic justice. So besides leaving the civil rights movement and being an activist in that space, a lot of his work and actually the work that he was later assassinated for was around economic justice and fighting against economic inequality and universal basic income was one of the things that was seen as a solution for this.
Kai: But equally on the right of the spectrum UBI doesn't have full support. So there's the laziness argument that if you take away the monetary incentive that comes with work, the argument goes that people would just slack off, watch TV all day or play computer games, take the money and just enjoy a lazy life and will not contribute anymore to economic output in society.
Sandra: So reduced economic activity, reduced output which means that everybody will be worse off.
Kai: Yeah so reduced GDP, no ability to pay for universal basic income in the first place so the doomsday scenario is that the whole economy will fall apart once you take away the financial incentive to work.
Sandra: We should note that in none of the experiments was this observed so there have been quite a few experiments in different countries with universal basic income. None of them have observed this. For instance, in Canada in the 1970s there has been less than 1 percent who actually slacked off and started doing nothing. Alaska's had a permanent fund since the 1980s, people haven't stopped working as a result of that either. But that shouldn't surprise us should it?
Kai: No because it takes us straight to the fourth school of thought which we term the alienation school of thought. So the argument here basically contrasts two conceptions of work. One is the transactional nature of work which is you know you receive money for your labour and the other is the identity aspect, the purpose aspect of work and the argument says that modern society, industrialised society, Taylorism have alienated people from their work and therefore from their sense of identity so quite obviously it draws on part of Karl Marx' work who argued that the moment that a worker is no longer responsible for the output of their economic activity they're just selling their labour, they are alienated from what they do and who they are so you could argue that a craftsperson who does woodwork, what they do, the economic benefit from their labour but also the identity as a craftsman is very much all tangled up in what they do in their economic activity. If you go to a factory and you sell your labour to a corporation then quite often and especially in digital work these days you just engage in certain menial, repetitious tasks and the Amazon warehouses come to mind which is actually the argument and one of the articles that we will put in the show notes. So the argument goes that for more and more people work is just a means to sustain themselves economically but they do no longer draw a sense of fulfilment, identity, and purpose from the work.
Sandra: This is also in a large part the Scandinavian conversation around the universal basic income where having this income would allow you to pursue work that is meaningful to you even though that work might not be economically sufficient to sustain your life.
Kai: Yes so on the one hand this explains why people even though they receive a basic income will not cease to work because work is more than just earning a living, it's something that you do because it gives you a sense of fulfilment, achievement, and purpose. Conversely it also says that much of the economic activity that we do leads to de-motivation and a lack of engagement and we can actually see this in the economy, in large organisations where people do engagement surveys the results are often shocking. That people are not really engaged with their work, you know they can't wait to go home because they get their sense of identity outside of the work context. So the alienation school of thought says that giving people a universal basic income frees them up of the struggle to earn an income and allows them to put their creativity, their ingenuity, and their energy to places in society where it really counts be it through volunteering or with the safety net to actually engage in entrepreneurial activity.
Sandra: This argument also goes to the fundamental obligation that people are seen to have towards society to contribute with meaningful work to the society, rather than an individualistic argument where we are entitled to some sort of benefit, this is money that allows us to be meaningful contributors to society.
Kai: Which then leads us to our fifth school of thought where the idea of a common obligation but also a common wealth or a common participation in the proceeds of economic activity is at the heart of the argument.
Sandra: So this is the universal basic income as a means of social justice argument and this goes way back. This goes way back to people like Thomas Paine one of the founding fathers of the United States, an Englishman who really brought to the forefront the enlightenment era conversation around the rights of man. So he wrote a number of books including The Age of Reason and the Rights of Man that among other things spoke about this idea of having common wealth. The fact that the earth's resources are something that we should all be sharing in. This idea has interestingly come back today given that a lot of what new tech companies are based on is our data, the data that each of us generates. So the same way we thought about having royalties for instance from mining or from oil explorations, we should think about having royalties now from the data that we share.
Kai: Literally the data mining.
Sandra: So the Commonwealth argument. An argument much more on the side of the rights that we are entitled to rather than enabling us to perform the responsibilities that we have.
Kai: So here on The Future, This Week we think that universal basic income will be one of the big topics of 2018 and we thought it's worthwhile actually unpacking this and it's important that when we discuss UBI we're aware of what is the conversation that we engage in, what are the assumptions, why are we doing it. So those five schools of thought: small government, poverty alleviation, compensation, alienation, and common wealth make distinct arguments, they have distinct ways of achieving universal basic income and they also differ in their criticism.
Sandra: And the reason we want to have and we might implement universal basic income will have huge impacts on the economics of how we fund this, on how we think about the meaning of work, on the politics of universal basic income, on the support and on its place in society. So even though this will come back I think it's now time to move a second story of the week.
Kai: "The unbeatable advantage of Apple and Amazon" is the title of this Tech Crunch article which makes a really interesting argument about the business models of the large tech companies so it starts off by contrasting Apple and Amazon with other companies such as Facebook and Google. The main argument that Anshu Sharma the author, serial entrepreneur and venture capitalist makes is that Apple and Amazon have what he calls a fiduciary moat.
Sandra: So this speaks to the trust that ultimately the consumer places in those companies. Apple and Amazon uniquely hold the trust relationship directly with the consumer. So think about Apple and the third party apps that it sells you. You trust Apple to vet these apps for you, to make sure that the content is appropriate, that you get what you're paying for and similarly Amazon has had this unique focus on delivering the best customer experience around its entire range of offerings whether they are selling products through Amazon or whether it's Amazon Web Services or any other offerings.
Kai: So the author asks the fundamental question who are you working for? Where does your income come from? So in the case of Apple and Amazon the end user and the consumer are actually the ones who are paying for the service so for both Apple and Amazon they have every incentive to optimise their products and services for the end user. This is different however in the case of Google and Facebook.
Sandra: In which case the end user for the products and services is us whereas the actual customers are people who place ads on these platform for instance or businesses. So the interests of the customers and the end users are not aligned.
Kai: And this is actually at the heart of all the problems we've discussed late last year that platforms such as Facebook and Google have from optimising their services for time spent on the platform, clickability of content, and ultimately the success of ads placed with that content and the ad spend that results from the activity on the platform. So the argument is that if you're optimising the platform to increase the amount of advertising dollars that are coming in the door, the user actually takes a back seat and it's not necessarily for them that you optimise your platform which then leads to these problems with inappropriate content showing up in the YouTube kids platform or which are at the heart of the problems with social media addiction and people spending all this time on Facebook and actually not necessarily having a good experience in the end with social media addiction increasingly becoming a mental health problem.
Sandra: So the article really points out that companies like Apple and Amazon benefit from really a fiduciary moat. They come with this huge benefit of consumer trust which actually carries through from one service that they have to another. So think about Apple or Amazon trying to enter the healthcare space or the finance space, that fiduciary advantage actually carries on to those, you trust Apple that if they offer you financial services they will not misuse your private data. If Amazon enters the healthcare space and we're seeing that at the moment with Amazon, Berkshire Hathaway, and JP Morgan partnering to address healthcare for employees, that advantage of trust in the organisation because I am both the customer and the end user provides them with an incredible competitive advantage.
Kai: So the significance of this way of looking at business models is the idea that the companies who have the interests and well-being of their users at the heart of their business model will find it easier to actually venture into other fields because they carry with them this trust relationship that they establish whereas companies who do not necessarily have a financial interest in working for their main user group might have to fight an uphill battle to establish the trust that might be necessary when companies venture to affect changes in healthcare or education which are highly trust based industries.
Sandra: And the magnitude of this effect should not be discounted. So a Bain study from the end of last year showed that over fifty five per cent of US customers would be willing to pay for financial products from these tech firms.
Kai: So this becomes a really good way to analyse the business model of companies and so if you look at companies like Netflix and Uber we see very different pictures.
Sandra: With a company like Netflix again those interests are aligned. Netflix does not have any advertising and does absolutely everything to maximise value for the people watching its shows.
Kai: It employs data very rigorously to create content that is appreciated, to create original TV series that are liked by consumers.
Sandra: And to ensure that that experience is optimised for one single purpose: getting you to stay on the platform for as long as possible and providing you with entertaining content.
Kai: Uber, on the other hand, who has two constituent groups, customers taking rides on their service and the drivers providing those rides. So both of those using the platform, Uber hasn't really been known to work in the best interests of either of them. They've had a lot of problems on both sides of their business model.
Sandra: This also means that when some of these companies run into problems, companies like Apple have a lot of trust capital to draw on for instance the whole controversy around the battery life in the phones users were much more willing to forgive Apple for this and to see it as an exception to the rule whereas Uber having no trust capital, no moat to surround itself with has really struggled to come back from all the scandals that have been in the media around the practices that they have.
Kai: So we think that a fiduciary viewpoint is a really good additional way of analysing technology based business models.
Sandra: And the implications of those business models so if we take this conversation further we could rethink for instance the idea of monopolies. Companies like Amazon have been accused of having a monopoly power, of concentrating power, but traditionally the concentrated power has come at the great expense of the user. However monopolies like Amazon have actually improved the user experience tremendously. So we might be in the situation to rethink legislation around this, to rethink the effects of different types of monopolies in the space so think Amazon versus Facebook.
Kai: So we'll end the podcast with a new segment which we call Future Bites, where Sandra and I will pick a couple of short stories each week.
Sandra: That we've come across, don't have time to discuss in-depth on the podcast but think are worth raising if we want to consider their impact on the future of business.
Kai: So Sandra what's your first story?
Sandra: Well it's got to be the SpaceX rocket that Musk shot into space.
Kai: Elon Musk shot a Tesla Roadster sports car into space in a test flight of his new three booster Falcon Heavy rocket and it made news all over the Internet. So if you haven't seen it, you probably fell asleep. What is so interesting about that story?
Sandra: First it's the most pounds of thrust since the Apollo missions back in the 60s and the 70s and pretty much a private company has managed to do something that the US government hasn't done for more than 50 years, neither have the Russians nor the Chinese. So pretty impressive feat because they managed to re-land two of the booster rockets back on Earth which touched down in tandem on the second most watched YouTube clip in history.
Kai: Okay now let me be devil's advocate here because we can all agree on some level this is really cool shit, it's a big rocket and as a sports car in space and it makes for great YouTube entertainment. But is this innovation? I mean we're doing something that as people we were able to do in the 1960s since then we've lost the ability to put a person on the moon, we're just regaining the ability to shoot big rockets back into space. How is this significant?
Sandra: So I think it's quite telling that we haven't managed to put anything into space of this size since the 1960s and it's quite important that we actually jumpstart that type of innovation again. So this is the first private such heavy rocket. And I think the opportunities that it opens up into what we could do in space are tremendous and just restarting, jumpstarting that type of innovation is quite significant. Also you can't argue with the fact that the man shot a Tesla Roadster into space with a dummy that was carrying Asimov's Foundation Series - that's pretty cool.
Kai: Yeah it is cool and I'm sure he'll hatch some plans to actually get that Roadster back and sell it. I mean it would fetch a decent price - a Roadster that has been to Mars and back. But why does it have to be a private entity that gains the capability to shoot rockets on the moon? Why are governments not doing it anymore? Why is it not in the collective interest of a people, of a country, of a society to do this right? I mean you could argue that we don't have a cold war anymore. There was a space race between the Soviets and the Americans and that probably led to a lot of willingness to spend that kind of public money to go to space. Isn't there a danger that if we leave it to private corporations that only a few people with the financial means to actually either shoot stuff into space or shoot themselves into space will benefit from this? How does the greater public benefit from this?
Sandra: I think it goes back to the argument before neither NASA or companies like Boeing have managed to do this feat because there was actually no real race to do this. Right now with companies like SpaceX in the game, there is a good chance that we will restart this type of competition. But we said these are going to be short stories so let's keep to them. What's one of your short stories for the week?
Kai: More Elon Musk. The man is just all over the news, this time in South Australia. Tesla is helping the government build a virtual solar based power plant. Fifty thousand South Australian homes will be fitted with five kilowatt of solar power and a 14 kilowatt hour Tesla power wall battery. And all of these houses will be centrally organised into a virtual rooftop based power plant to add to the strategy by the South Australian Government to become energy independent and to do something about the problems that they've had in the past - blackouts and everything - they've already added the large scale industrial sized Tesla battery plant. So a lot of interesting developments there.
Sandra: Definitely an interesting one to keep an eye on since in Australia we still have more than half of our electricity generated through coal and only about I think it's 15 percent that we generate through solar. More than half those households are social housing so a very interesting development to keep an eye on.
Kai: And it comes at the same time as news that in New South Wales, the State government has approved a record number of industrial sized solar plants that are going to go up over the next few years. So there is some real movement in Australia now to put to good use all of the sunshine that we enjoy here.
Sandra: I've got another one for this week: new study that's coming out of the University of Chicago, Stanford, and Uber's own team is that female Uber drivers earn a $1.24 per hour less than men.
Kai: Yeah that's an interesting story and it's not that Uber is actually discriminating on the basis of gender the amount of money a driver gets per kilometre. What is being rewarded here is risky driving.
Sandra: So apparently women drive slightly slower than men. They also work less hours per week. So even though you have an algorithm that supposedly doesn't see things like gender and race and so on it doesn't take into account the differences in driver behaviour. So we're seeing a pay gap even in a place where none should be present. It also raises some very interesting questions around how would you address this? Would you now discriminate against men so that you end up with equal pay? There is no obvious way to fix the situation.
Kai: Yes so this is interesting and I agree there is no obvious solution, what the researchers found is that there is a number of behaviours in which men act differently to women, driving longer distances, driving in different locations, at different times, driving a little faster so there's no obvious solution. And the question is: is this even a perceived problem, so do women in this situation actually feel hard done by or conversely will these results help them maybe adjust their behaviour and you know earn more money.
Sandra: I think after all it really highlights this idea that the gender pay gap is not disappearing any time soon because of technology and b) the fact that this is more deeply rooted in our society and the practices that we have women might be going to pick up kids from school for instance and about the broader behaviours in society rather than just about labour markets.
Kai: So my last story's from the Washington Post and they report on scientists leaving Amazon reviews and it's amazing. So scientists are appropriating everyday products as part of their laboratory equipment used in experiments. Biologists, physicists are using things like...
Sandra: Nail polish and tea strainers and gas canisters and condoms.
Kai: It has started a bit of a craze with a hashtag 'review for science'. People leave reviews for these products about how they've been useful in their experiments and tweeting about them and some of them are actually hilarious. My absolute favourite is about this guy Jules Bristow who uses condoms as a membrane through which to feed insects. He says it's an amazing product but he only gives it two stars because it causes problems when paid for on the corporate card.
Sandra: Well really you could argue that e-commerce has enabled a whole lot of innovation, access to all these products that you never thought you could find or get delivered to you in less than four hours, has allowed people to use tea strainers to work with ants or similar social species has allowed people to disseminate these kinds of innovations and really experiment with a whole bunch of things that they would have never thought about.
Kai: Absolutely and while people have always used all kinds of things in these experiments, you have access to a much wider range and also you can tell each other about it which is a great thing so I think it's fantastic and also some of those reviews are really humorous so we encourage you to look them up and we'll put the link in the show notes as always and that's all we have time for today Sandra.
Sandra: Thanks for listening.
Kai: Thanks for listening to this.
Outro: That 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 was composed and played live from a set of garden hoses by Linsey Pollak. You can subscribe to this podcast on iTunes, Soundcloud, Stitcher 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 firstname.lastname@example.org.