The Future, This Week 12 May 2017

Introduction: The Future, This Week. Sydney Business Insights. Shall we introduce ourselves? I'm Sandra Peter, I'm Kai Riemer. Once a week we're going to get together and talk about the business news of the week. There's a whole lot I can talk about. OK let's do this.

Kai: Today in The Future, This Week: robots, apples and Apple; when living the good life on Instagram turns into real work and an industry where analogues still trumps, sorry, beats digital.

Sandra: I'm Sandra Peter. I'm the Director of Sydney Business Insights 

Kai: I'm Kai Riemer. I'm Professor here at the business school. I'm also the leader of the Digital Disruption Research Group. So Sandra what happened in The Future, This Week?

Sandra: So our first story is about apples. GV formerly known as Google Ventures decided to invest 10 million dollars in Abundant Robotics. And Abundant Robotics is building these robots to harvest apples and eventually other fruits. This is a machine that will go through the orchards day or a night, identify a ripe fruit. And then through not grabbing but a suction mechanism will remove such fruits from the trees. 

Kai: That's what it sounds like apparently, sucking apples right out of a tree. Now why is that such a big deal Sandra?

Sandra: Well it's a big deal. First of all machines in agriculture are not a big deal. In general we've had harvester's harvesting every sort of grain known to man and vegetable for ages now, but machines in orchards are a big deal because we haven't yet figured out how to remove fruit from trees without turning them into sauce or juice.

Kai: So there's two things here. First of all you don't just go and mow down the whole field because crops, grain, they all ripe at the same time. That's not the case with apples. So first of all you need to have the machine identify which Apples are actually ripe and leave the ones that are not on the tree and then picking the actual Apple is a delicate business you can't just rip it off because the Apple will bruise and then you can't sell it anymore. Supermarkets are very picky, so to speak, when it comes to the quality of the fruit. So developing a mechanism to take apples from the tree delicately is not that easy apparently.

Sandra: No it's not. But we're bringing up this story for a couple of reasons. First is because this is one of those examples again of innovation that is not sexy, not glamorous, finding the perfect mechanism to pick fruit off a tree, it's not one of those things that Elon Musk will go and talk about on wide variety of forums for geeks around the world. It's important for two reasons. One of them is because quite often such innovation also gets really bad press because it's sad that this is bad for jobs. We have quite a few people who are employed in you know picking fruits, apples, berries all sorts of things. And these sort of robots will lead to their destruction of yet again more jobs in these industries, which for us raises the question is are these jobs that people actually want to do. Are these jobs that are easy to fill that companies have no problem finding people to do.

Kai: So looking at the Australian experience fruit growers have been in the media quite often recently most recently when it came to the so called backpacker tax, taxing backpackers, making it less lucrative for backpackers to actually work in Australia which is an influx of workers that this industry depends on. So if you're a fruit grower it's very hard to find workers who do the fruit picking. Apparently these jobs are not very attractive for local workers so they very much depend on backpackers and seasonal workers to take these jobs. So a large part of what you do as a food picker is organizing labour, is trying to find people to actually pick the fruit so that they don't rot on the tree. So for these fruit growers having a robot that can reliably and consistently pick fruit is actually just a form of security that will make their business more reliable.

Sandra: Which brings us to our second point where this story becomes quite interesting given the potential that it has to increase food production. Now we know the statistics like the World Bank saying that we'll need 50 percent more food by 2050 just to stay in the population growth but also with an eye on climate change and diminishing crop yields and so on. The fact that such machines could be picking fruit around the clock it would improve productivity would also secure that labour force that you were describing. And also with the potential to extend this to other types of crops as well. So apples were one example but you could potentially do this in all the industries where it's actually quite difficult to pick.

Kai: Yes and we have seen a number of interesting robots being showcased recently robots that can climb trees that can climb walls and fly. So there's all kinds of different mechanical things that robots can do and how they can navigate in their environment that they can identify ripe fruits or distinguish carrots from weeds.

Sandra: Yeah. Which brings us to one of our favourite agricultural robots that we've come across which is the start up by Bosch called Deep Field Robotics and the robot that they've developed punches weeds to death in a tenth of a second. It physically punches weed's back into the ground. So no more using of chemicals in the field no backbreaking labour trying to pull weeds out but let the robot loose and it will identify the weeds...

Kai:...And fully mechanically ram this poor weed into the ground where it will never see the light of day again.

Sandra: How fantastic is that.

Kai: It's an ingenious piece of technology that does a job that really no one wants to do.

Sandra: And that is actually the key. The jobs that no one wants to do. Another one of our examples was harvest automation which actually moves potted plants around nurseries and greenhouses. And again this is an innovation not because people can't do this job because they can moving pots from left to right. It's not a big deal but is because people won't do these types.

Sandra: And if we think about food security and the growing world population in fact we will need more of those workers which are in short supply today already. So robots might be the only way to reliably increase our food production in a way that is sustainable.

Sandra: So two thumbs up for not sexy but awesome robotics in agriculture.

Kai: Yes indeed. And it kind of ties in with this larger narrative about robots and job loss and manufacturing and this is where we bring Apple in apple as in no "s" at the end. Apple recently announced that it will put one billion dollars into a fund to invest into US manufacturing and Donald Trump and the media got all excited but there's already news stories which say let's not get overly excited because what Tim Cook said in the announcement is that they will invest in advanced manufacturing which if you read it correctly will mean robots. Which at the same time is where the future of manufacturing lies especially in high wage countries. So when Apple says they're going to put their money behind manufacturing what they obviously mean is the kind of modern manufacturing of new products that will do with high automation but probably not that many jobs.

Sandra: And this leaves us with a big problem. Quite often such investments are out there not only for the fact that they will create a certain amount of jobs directly but also indirectly by creating a whole ecosystem around it of people who will make coffee for these employees, who will dry clean their clothes, who will take them from left to right. Now will these robots actually need Starbucks?

Kai: No apparently not. This article in M.I.T. Technology Review outlines how manufacturing in this day and age means more robots. It kind of ends on a positive note that it says yes but manufacturing has always had this spill-over effect that for every one dollar in sales of manufactured products there will be a dollar 30 in output from other sectors. But in my view that pretty much relies on the fact that when you employ people in manufacturing they will need coffee shops and dry cleaners and they will buy cars and they will consume. But if you're employing robots that might no longer be the case. So not only do we not get the job scrolls from investments into manufacturing in Western countries we also do not get the same spill-over effects.

Sandra: Or if there is a spill-over, there is a very very small not a significant one as we all expect.

Kai: So the article rightly asks wouldn't it be better if this money was put behind service industries and grow these because they are much more labour intensive. If indeed driving employment is the key rationale behind this.

Sandra: I think there's nothing wrong with investment in advanced manufacturing. However we have to call it what it is. This is not an employment initiative. This is an investment in advanced manufacturing.

Kai: And innovation.

Sandra: Which brings us to our second story forward today. Instagram.

Kai: The article we referring to is in the New York Times on the 3rd of May. It's titled "That solo travel blogger? She just wants a vacation". So the article portrays a travel blogger by the name of Kiersten Rich who runs a blog the blonde abroad in which she portrays her travels to foreign countries, photographs herself and post these blogs and stories and photographs to her 350,000 monthly readers. So she's travelling all over the place and has a story online.

Sandra: We're talking about this because this is actually a business. This sounds like a lifestyle blogger on first take. Instagram my beautiful life on Instagram. But yet this is a real business right. She employs quite a number of people to do this, receive sponsorships from a wide variety of companies so there's an entire business model behind this.

Kai: Yes so when you read the blog and the Instagram it looks like someone just documenting all the great travel that they do, having fun along the way and living the good life. But if you look behind this venture, there's eight people employed. There's money being made and the travel is all paid for. So in fact the travel that she does is a great way for destinations to market themselves so they usually pay for her to come to go to local attraction.

Sandra: To have authentic experiences?

Kai: Yes have authentic pre-scripted experiences, document on photographs and post this to her followers.

Sandra: So how did this all start out? And this takes us back to an earlier article in The New Yorker that spoke about hashtag 'van life' and this whole idea of documenting your life 'the van life community' and way of living began to take off a few years ago thanks to a guy called Foster Huntington who created this Instagram hashtag after quitting his corporate job in Manhattan. About six or seven years ago. So that he could buy a van and live his life as a nomad, have the travels, not the lifestyle travel that we see with this blogger, but again go around the world and for years document his life on the road, inspire others to leave their lives and take to the open road and have rich experiences.

Kai: We're talking the beautiful old Volkswagen vans here that these people take to the streets to the roads with. And there's a whole movement of people roaming mostly the coastal strips to photograph themselves surfing and having fun at the beach and living the good life, living in this van and portraying this great lifestyle away from the daily grind of the office work that most of these people have left behind. But how does it all work?

Sandra: Well there's a very well documented business model behind it, a wide variety of advertisers pay these people that have strong online following to showcase their products or advertise...

Kai:...Or talk about their services or you know advertise for a movie, have a nice decal on your laptop that is unassumingly placed in the picture. So it's basically a form of sponsorship and product placement so that these people while they go about living their enviable life...

Sandra: But not openly so. No one says this is actually a sponsored...

Kai: No but these people surround themselves with these products and sometimes they comment on you know how great a product is but it's very unassuming, it's very low key. But apparently it works.

Sandra: It works because some of these photos that look so impromptu so spur of the moment have taken hours to actually take the right shot have been released at exactly the right time during the day when the advertisers themselves know it will get most impact and it will get re-tweeted most, or liked most, of re-shared on social media most.

Kai: So ironically living the enviable life turns out to be hard work...

Sandra:...Really hard work.

Kai: So here's a quote from The New Yorker article. "King was fretful about the delay. Sponsors were clamoring for posts. We really need to create content she said. And that's hard to do in this concrete jungle." So this is just an example of the kind of pressure that these people are feeling that they have to constantly go to nice places, pose for photos produce content and post this to their followers because engagement has to be continuous. The way in which Instagram is nowadays working with these algorithms is that if you drop off and you don't produce content next time you create content you won't show up in the follower feed so you really have an incentive to continuously produce content and content of the kind that engages your audience. So these people really look at what gets likes all these metrics what is the kind of content that gets us likes that gets us engagement and then they produce more of that content. So it turns out that living this good life really becomes a way of satisfying an audience.

Sandra: And for advertisers this is actually the Holy Grail. You're producing content all the time. There is no downtime and you're also producing content that is not overtly advertising, its authentic life where the product just shows up somewhere in the background.

Kai: And we're talking a 500 million dollar industry in 2015 which is supposed to grow to 5 billion dollars by 2020. And the key word here is micro influences. So advertisers are really interested not in those big name celebrities but...

Sandra: That's always been the case - big name celebrity, right? This is not something new.

Kai: Nothing new. Well we're talking here people in a kind of mid-range that have about 50,000 to 200,000 - 300,000 followers which congregate around certain lifestyles, certain topics where you have a followership that really identifies with a certain way of living that products then can target.

Sandra: So teenage fashion bloggers or people who race drones or people with particularly photogenic cats, dogs, hamsters...

Kai:...Or people constantly travelling and living the so-called authentic good life that turns out be such hard work.

Sandra: Yes and this wonderful life always portrays the beautiful sunset field of poppies views never the ugly sides of this. The hours spent fixing your busted up van or the two hours you've spent in the poppy field half naked trying to take that shot.

Kai: The fight that you have with your partner living on two square meters with all kinds of rubbish in the van.

Sandra: Or the two hours you spent on the beach trying to take that perfect picture with sand just right, glistening in the sunset.

Kai: Hashtag shit life. But why is the audience so fascinated with this content. Right. So one hypothesis would be that people who are actually in the daily office grind they look at this and they sort of live vicariously the kind of life that they might aspire to but not actually get to live. And that supposedly makes them feel better but that's not even the case.

Sandra: That's really not the case because what we've learned from research and there's some research from the Oxford Internet Institute that shows that Instagram actually made users feel 11 percent worse about their lives than any other social media platforms. Perhaps just because of this because it actually gives people this filtered version of everybody else that look real feel real but are actually more false than anything else.

Kai: Yes. Or you look at this all day and then you look at your own life and it just makes you feel miserable that you are in the office while these people live the perfect life. The irony of course is that they are in an equally daily grind to produce content for their audiences. And so no one really lives the good life here. So what's the point?

Sandra: I don't know but it raises some really good questions about things like authenticity. Instagram is meant to be this intimate place where you show the most hidden corners of your life and you expose them. But if authenticity is recalibrated by these business models to be not real but the reality that a handful of people put together for you so that it seems real, what are the chances of people who want to portray their real real lives?

Kai: Yeah I think for a lot of these travel bloggers or the van life movement I think people start out living this life and then it turns out that no one can actually live this life unless they have a sizable nest egg that they can suck up in the proceeds. Because people have to somehow earn a living and sustain themselves. And so working part time as this couple in this article has done and trying to be connected to the Internet and do some web development work didn't quite work. So they took to sponsorship and marketing and product placement and then that takes its own dynamics. I think the irony is that portraying authenticity in a continuous stream of content produced for an audience is just probably not possible because you lose that very authenticity the moment you try to play to the taste of an audience.

Sandra: And this leads to photos that quite often look staged that look really...

Kai:...Outrageously adventurous...

Sandra:...And leads to some wonderful parody accounts with Barbie mid-west Barbie posing in a variety of different classical Instagram-able locations.

Kai: There's another Instagram post of the name of Celeste Barber who restages celebrity photos and you know look it basically shows what these photos would look like if an ordinary person were to pose in these poses. Or my favourite which directly plays on the whole van live movement, an Instagram account called "you did not sleep there" which collects all these photos from travel blogs where people supposedly slept in these outrageous locations far away islands, overhanging rocks, rainforests with dangerous animal creatures and all these kind of places where the account pokes fun of.

Sandra: So we got to this story because of the business models that grow on top of things like Instagram.

Kai: Yes my name for this would be a colonising practice and we see this in other parts of life quite often. So in this case you have people travelling and they then do Instagram on top of this immediate advertising practice grows. But there comes a point where the actual travel is only organised to satisfy the needs of sponsors and an audience and it crowds out what actually was fun about it beforehand. And we see this in other places like horse racing used to be a sport organised for pleasure. And while there certainly some people still in this industry who take pleasure in racing horses, it's really the betting practice that now drives the organisation of horse races for the sole purpose so that people can bet on them. Sport is more and more organised to comply with the needs of television audiences and even in universities we see that the need to innovate and create products and commercialise research is now driving the way research is organised which means that fundamental or basic research is constantly under threat from the innovation practice which wants more products being produced and we are being asked to think of our audiences as research users. And so universities find it more and more hard to resist the trend that innovation drives research. So I think that this is something that we commonly see in various industries. And I think it's very important that a balance is being struck between keeping the original practice and keeping what made that practice fun for the people who were in this practice and satisfying the other practice that sits on top of the original one.

Sandra: So you don't kill off the host.

Kai: That's right. Otherwise we come to a situation where the practice that sort of sits on top acts more like a virus that might kill off the host and in the process loses what made it viable in the first place. If you get rid of basic research there won't be anything to commercialise and innovate with.

Sandra: So the danger is about redefining what real is, in the case of Instagram? Or what authentic is? Or in the case of research what good is?

Kai: What good research is rather than commercialise research. So I think this is an interesting and colourful example of something that we see quite often in various hearts of life and business in more general terms.

Sandra: Which brings us to our last fun story of the week and its back to watches.

Kai: Back to watches. We've touched on watches and we talked about Fitbits and Apple Watch before.

Sandra: This story comes from The Verge and it talks about the fact that despite the advent of the smartwatch with all its faults that we have discussed at length last week, the clock hasn't stopped for mechanical watches. And it talks about the mechanical watch industry that's faced with economic downturns with currency devaluation with smartwatches and every kind of other wrist smart device that's out there. It still is thriving.

Kai: Yes. And why is this so. That's the question. So why do people still love handmade analogue watches. Why does analogue beat digital in this market?

Sandra: Well first I think it goes back to part of the conversation we had last week about the real estate on the hand and about what you would want to use that real estate for. If you look at smart watches this is a technology driven industry where you're aiming for the best that is out there, right? The best watch that you can put on there.

Kai: That's right. But it also says that in this industry of mechanical watches there is no one best thing, it's about choice, it’s about the creation of something beautiful. It's complication in the sense of the word for its own sake to create masterpieces that people admire and want to have on their wrist.

Sandra: And the wonderful thing about mechanical watches is that if you switch one out for a different one say this week you want to wear a LeCoultre, it doesn't take away from the benefit that you derive from the watch whereas if you decide to switch your Apple Watch for an Android this week that takes away a lot from the benefit you derive from your watch. But we like the mechanical watch industry for a number of reasons. First it's one of the industries that withstood traditional disruption a la Christensen style disruptive innovation in the 70s. In the 70s we saw the advent of quartz watches, in Asia it was called the Quartz Revolution and it brought with it cheap democratisation of wristwatches. In Switzerland it was Quartz Crisis not the Quartz Revolution given that the Swiss used to own about 50 percent of the world market for watches. This was a huge problem for them and it almost killed off the industry which came back with a vengeance. We might say. Second it's got some of the nicest barriers to entry of any industry. You need a crazy amount of capital to compete or even set up something to compete with the likes of Vacheron Constantin or any of the great watch makers.

Kai: So is this just for people to show off their wealth and to show that they can wear something incredibly expensive. Clearly there's more to it isn't it.

Sandra: No I think this is really a preference or something that is handcrafted, all of these watches by the way are handcrafted down to the little rivets that go into the watch, to every single part where you have artisans who make this and indeed in an era where everything is made by machines, everything is made on an assembly line and there are thousands of identical versions of a product, owning something that is artisanally made is one of these counter trends that has emerged even in places like Etsy where we've seen the rise of small artisans but especially with high end things like watches.

Kai: Yes. In Germany I remember there's a local catalogue business and website called Manufactum them which basically sells artisanal tools, everyday appliances and items that reflect a way of doing things mechanically that you would do electronically these days. I think the idea that in this hyper digitised electronic world people are craving things that are created by hand by human skill, that reflect things that resonate with us because they were created by other human beings and not mass produced. I think there's a little bit of that going on the craving of not necessarily a romanticised world of the good old days but more a modern version of the expression of humans skillfulness.

Sandra: And that is of course what has kept this industry going since the 70s, since the Quartz Revolution or the Quartz Crisis, depending on how you look at it. Of course today there's another side to the story as well that this huge growth in the Swiss watch making industry is fuelled by of all places China, where this industry has grown. Think it was something like a hundred fold over the last 10 years or so where Hong Kong sells more watches than the entire United States. That is every single place in the United States.

Kai: So we're thinking fake watches here. But the Swiss have a history of fake watches haven't they?

Sandra: Indeed. You would think that's something as unique and as superbly handcrafted like the Swiss would be immune to fakes. But in the 1850s, and this is a reminder that the history sort of recasts how we look at things, in the 1850s the Swiss were famous for making fake watches that looked and smelled and sounded exactly like English for French watches but they were of a lower quality. The Swiss had figured out how to outsource a lot of the components of the watch so they could just assemble them. So they were making fake English and French watches.

Kai: So how came the Swiss to dominate this market?

Sandra: Well the war happened...

Kai: We won't mention the war usually but in this case...

Sandra:...In this case World War Two and Switzerland was neutral so it could continue to make watches where places like the U.K. and the French and also the Americans let’s not forget...

Kai: And the Germans were busy producing other things...

Sandra: We shall not mention the war.

Kai: I'm not mentioning the war.

Sandra: So this is how the Swiss came to establish themselves and dominate, become the powerhouse of mechanical watchmaking.

Kai: So we love history on The Future, This Week and I think it's important sometimes that we look at longer time frame as to how disruptions or innovations unfold.

Sandra: Exactly and I think the mechanical watch industry provides a wonderful perspective where if you take the really long term perspective, so this is going back to let’s say the 1700's and the 1800's up until today, we could take timeframes that tell a story of disruption, quartz watches we can take time frames that tell a story of fake watches and of cheap copies and of failure to innovate. We can take examples where environmental conditions lead to the emergence of a dominant player in an industry. So the stories we could tell here are so multiple given the timeframes that we take that we are quite often just so enthralled with a particular point in time that we forget the longer term.

Kai: Yes. And looking forward. Who knows 20 - 30 years from now where we point to certain countries today to accuse them of being the origin of fake products. They might revert this situation and taking out of the Swiss watchmakers playbook and become the powerhouses of electronics of original thought and innovation. So the point we're making is that when we look at innovation and how innovation unfolds, time scale matters.

Sandra: And that's about all we have time for this week.

Kai: Thanks for listening.

Sandra: Thanks for listening.

Outro: This was The Future, This Week, brought to you by Sydney Business Insights and the Digital Disruption Research Group. You can subscribe to this podcast on Soundcloud, iTunes or wherever you get your podcasts. You can follow us online, on Twitter and on Flipboard. If you have any news you want us to discuss please send them to sbi@sydney.edu.au.