The Future, This Week 13 April 2017

Introduction: The Future. This week. Sydney Business Insights. Do 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: why Google might soon use your beach selfies to sell sunglasses, cities are out bidding each other for the shiny new Hyperloop and data science in the German Bundesliga.

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. 

Sandra: So what happened in the future this week? 

Kai: Our first story was all over the Internet. We picked this one from the Verge. It's about Google. Google begins showing Pinterest like shoppable photos in image search. So the article reports that Google is apparently introducing a new feature whereby they will by way of machine learning identify products that appear in photos and then they will use these photos to sell you the product and they will say look here are similar items. Why don't you want to buy this? And they are going to collaborate with retailers to make this possible. So in your image search which currently just presents a list of images which presumably you're looking for. You get the chance to buy what's in the images. 

Sandra: So for instance if I search for an image of Reese Witherspoon I could get at this point only handbags, sunglasses, and shoes but they will tell me what Reese Witherspoon is wearing at that time and where can I buy it. 

Kai: That's right. Which raises all kinds of interesting questions so my first immediate question was "What are the kind of photos that they are going to use this for?" "Will they use my photos?" Will they use anyone's photos and if they use my photos to sell products presumably you know I'm probably not wearing anything anyone wants to buy. But if they were to do this what are the implications? Can they just use anyone's photos in their commercial pursuits? Can they do this? Do they have the rights? Will I earn a royalty for them using my photos to allow a retailer to sell a product? This all gets very complicated in my view. 

Sandra: So in the first instance they're actually using something that they released last year where you actually have to tag the content that is in your picture in a very specific way using Google services. But in the future it's not inconceivable that machine recognition would get good enough to be able to identify the items that are in that picture.

Kai: That's what the article says so it doesn't have to be the exact same items. It's items like these. So identifying something that looks good enough to be the product in the picture that you could then purchase with a couple of clicks. That presumably takes you through to the retailers page. 

Sandra: To some retailers page and the question is "Who will these retailers be?" And based on what would you rank these retailers. Also it raises questions about how Google could be disintermediating what some of these companies are doing. So think of companies like Net A Porter or companies like Australia's The Iconic who would no longer be competing on their own terms with their design that they have on their website and all the other services that they use but rather would they be competing more on price because this feature only shows you the images. Let's say it's a bag it shows you the same bag on five different websites and you can compare on cost. 

Kai: That's right. So for a retailer initially this might actually be quite appealing because it might give them an edge to be present in the Google image search. They might get an edge over their competitors but over time once this becomes a thing and many retailers participate. Do those retailers not participate in what could potentially be their own demise or at least building up a very powerful competitor. Let's not kid ourselves. Google is big and their search is front and centre in how people use the Internet so we'll Google over time become the first entry point to shopping with no need to actually go to any of the retailers pages as a landing page. You could do all your shopping from Google. 

Sandra: Which is one of the arguments raised here that it would be like Pinterest where I would look at the picture of let's say a celebrity or in the future a friend click on their glasses and say hey can you ship this to my house. 

Kai: Which from a retailer point of view is quite appealing because you are catching people in a situation where they're actually looking at the picture. So they're in the mood of actually engaging with the situation that is in the picture which means that emotionally they might be more inclined to actually engage with the content and purchase those items. 

Sandra: Would it also become a way for retailers to advertise products without us knowing that they're these advertising products. So let's say I am shooting images with a famous celebrity and I require them to wear a specific type of sunglasses because I know this will show up in Google searches. Incidentally the product shows up next to the picture. So that's the cunning plan to catch people off guard to then sell them something. But I have a different thought here now with the recent problems Google is having around Youtube and advertisements placed next to inappropriate content, does that not raise the possibility that if they entrust identifying products to an algorithm that the algorithm might pick quite inappropriate pictures and then display. I mean that could be any shit in those photos and products which might not be in the best interests of the brands who... 

Sandra:...racist people carry your bag. 

Kai: Yes. The terrorist with the nice sneakers.

Sandra: But ultimately it comes down to the fact that through this Google has managed to actually find another or create a different kind of business. 

Kai: Yes they are using their market power and the relationship that they have with their users to monetise yet another part of their business. 

Sandra: So what's our next story for this week. 

Kai: Our second story is about the Hyperloop. So the Hyperloop is this shiny new thing that Elon Musk is planning to revolutionise the future of transport. The article that we have is from Wired magazine and it's entitled "Cities crave Hyperloop because it's shiny and talk is cheap". Now, what is that all about? Apparently Hyperloop One the company that is developing and planning to build the first Hyperloop has engaged two thousand and six hundred teams from all over the world representing cities and regions to bid for being allowed to build the first one. 

Sandra: So isn't that normally the other way around? 

Kai: Yeah. You would think that normally companies would bid to be allowed to provide infrastructure that our city or region wants to build. So this time this is the other way round. So why all these councils and regions and cities so keen to be the first one to build one of those. 

Sandra: Because this is fantastic publicity for these cities right. It's the shiny new thing. It's this technology that would have suspended the capsule through a mile long near a vacuum tubes at speeds that are reaching over eleven thousand kilometres 700 miles per hour. Right.

Kai: It sounds fantastic. Literally. Because we haven't done this yet. We don't even know for sure that the physics of it works. It sounds really great. Right. I want to ride in one. There's no doubt about it if we had one here in Australia it would be awesome to go in one of those from Sydney to Melbourne rather than having to queue up at the airport and all the rest of it. 

Sandra: The closest we got to that was actually last week Elon Musk's company Hyperloop One managed to build the first full scale testing site. So this is the develop test track which will help actually research the levitation propulsion and the vehicle control and the vacuum technologies that are associated that you would need to fix before any commercial launch. 

Kai: Yes. This test site was built in a desert strip somewhere in Nevada to show off the technology and presumably to run some tests. But my question is what will the cost be once Hyperloop becomes operational? Is this a viable technology? Can we do this? 

Sandra: Well depends what we want to do with it. So there are two questions here. And first of all PwC actually that some of the maths last year. So under current conditions PwC estimates that it could cost half a billion dollars to build a single operational Hyperloop to capable of sending things 30 miles away. So that's very very expensive. The argument within the article was that first and foremost this would change the future of transport and a lot of these communities are talking about the future of transport. This cost becomes somewhat more important if we tried to look at Hyperloop as a solution for supply chain or distribution or hauling cargo rather than people. If we think about hauling cargo and indeed last year Dubai and the Ports Authority in Dubai as DP World has started to work with Hyperloop to study the viability of using this technology to unload ocean containers. Now this would solve a lot of problems because many of these ports are automated already. They would move this cargoes you have to solve less technical problems if you're just booking cargo on this. Cargo doesn't have to breathe. 

Kai: No and one of the problem is you will have to build these in a straight line because they are going at speed at several hundred miles per hour. And with people in there you don't want to shit yourself every time you go into a bend, right, so you want to make sure that people are comfortable which means that it takes a lot of engineering and they are actually discussing to put these under ground so that the steel construction is not exposed to the sun and cannot deviate from its straight line and all the rest of it which will be very expensive and drive cost up. 

Sandra: Also all the regulations that are associated with transport for people is much more complex to navigate than that for cargo and indeed let's not forget that for cargo. Yes. You might not have a problem if you have bends but the cost the efficiency of building the sort of thing depends a lot on your ability to load things quickly on the Hyperloop so taking them off ships or off containers or liners and loading them up and also on the handling capacity of each of these hyper loops. So to be able to pay for itself I think PwC was estimating that each of these needs to replace about 300 trucks to be cost effective. So that would have to be taken into account. 

Kai: And also let's not forget when you bring in a new technology like this, it will not overnight replace everything we have. So you would have to build a new infrastructure on top of existing infrastructure presumably along existing rail lines which are not always straight which means you have to buy land, which is in many areas that need more transport, they're also densely populated, so land is expensive. You have to relocate people or you have to dig tunnels. So the cost of building these in the areas most at need of new transport will be very expensive. 

Sandra: Indeed. And some of the countries that we know are looking at this in terms of freight are the US as we mentioned before but also Switzerland and Russia. And let's not forget that Hyperloop One even though it's the one that's covered in the news all the time it's not the only company that is trying out this technology. Hyperloop Transportation Technologies is based in Slovakia. Toronto's got Canada's Transpod and indeed China is looking at different technologies that maglev technologies to replace Hyperloop. 

Kai: So if all of these companies are working on it it's likely that some of this will be built. And so we're learning more about the technology and as we do this we've seen in the past that once technology reaches a certain point of maturity the cost might come down. So is this a viable alternative? Or are all those regions and cities now bidding for this just parading because it gives them nice press coverage. 

Sandra: Well we'll just have to wait and see. But we need to remember that if we're looking at something like transport and freight transport the time scales that which we need to look might not be the ones that people are actually taking into account these days. So yes indeed if you look at fixing the American infrastructure probably the one trillion dollar that Donald Trump wants to spend on it is not going to go a long way into fixing it. I think infrastructure in the U.S. has a huge problem. 

Kai: Yes. We know from the recent election campaign that there was a lot of talk about fixing the infrastructure across the US bridges that are in dire need of repair potholes to be fixed and roads. So there's lots of things to be done. And Trump has committed money towards this but obviously engaging in a bid for the Hyperloop is a much more interesting and sexy project than engaging in those day to day fixes that no one really thanks you for because everyone expects infrastructure to work so it's not something that you gain huge brownie points for. So maybe those cities and regions do not exactly expect to win and then actually having to pay for the Hyperloop. But it is a nice distraction and a visionary thing to engage in and we can always dream of being involved in something like this. I'd love to ride in one of those. I wouldn't sign up to be the first test user. 

Sandra: Yeah. So clearly this is not just the matter of technology or investment that people want to do but also of a major long term public commitment. If this about to take off in a significant way. 

Kai: Which takes us to the most significant story of the week - football or how we call it in this part of the world soccer in the German Bundesliga. The article in The New York Times asks "Where Have All The Goals Gone" in the Bundesliga and I had to click on it and I had to read it being German and all. And it turned out to be a really interesting article about data science and how people these days figure out how to get a competitive advantage in many sports really. And a little bit of research turns up a whole slew of articles that all deal with big data, sensors, analytics in how to gain the edge in sports in playing the game in winning and also getting ahead in the big business of sport. 

Sandra: So what was the problem with the Bundesliga? 

Kai: So the problem in the Bundesliga is that the Bundesliga has always been known for being the one league in Europe that has the most goals, that is known for the most attacking style of football which is really exciting for the spectators. And this year average goals per game are down down significantly to the point that they're falling way behind other European countries and so people have done some digging and figured out that this is actually related to a new style of playing the game that comes in reaction to what is called the pressing game which apparently has been the dominant style of playing soccer that German teams have favoured in the past. Now this new style as a reaction to this is actually the result of some data scientists figuring out how to actually shut down this game and come up with a counter strategy. Without going into the mechanics of playing the game, the point is that with this new defensive style, teams are successful but they don't have to score many goals and it has led to a shift in the way the game is played and the number of goals that are being scored. 

Sandra: So data science is ruining soccer? 

Kai: Well as much as you can ruin soccer to begin with. I mean you know some people would argue is not the most exciting game because it's not a high scoring game. 

Sandra: You said it I didn't. 

Kai: Yes I know. Such as basketball. Or AFL or other high scoring games. But apart from this fact what it tells us is that you can utilize things like big data or pattern analysis data mining to figure out certain patterns in the way in which the game is played and exploit this to your advantage.

Sandra: So the advantage might be winning the game but then soccer as is basketball or AFL or any other sport is also big business. So is data science whilst making you better at playing soccer also making the sport worse off because the sport is more boring less people will watch it. 

Kai: Yeah that might be the unintended side effect. You might be winning the game but you might be losing out on the business so how do you deal with this? 

Sandra: And also is this an arms race? You use data science to actually shut down the place I have. I arm myself even more. I use data science to figure out how you're playing and so on. Where in the end we're all just all standing in the middle of the field. 

Kai: Yes I think this is one of the major learnings is that any such advantage that you figure out by way of data analysis can be copied easily by other teams and they do. Which then neutralizes the advantage. So any such advantage is often very short lived and that's really the same in business where businesses are always keen to figure out these success factors that give you an edge that give you a competitive advantage. And a lot of research goes into finding the one mechanism or the theory that will explain how companies gain a competitive advantage. The thing about social systems like business is though that once this knowledge becomes public people actually change their behaviour accordingly and if everyone does what gives you an advantage no one will gain the advantage. And we have to start from scratch which is a lot of what we do in business research isn't it. 

Sandra: As one of our colleagues has pointed out soccer is at a major disadvantage as well because sometimes in business there is a loophole where you can cooperate to achieve the best advantage. So both of us have armed ourselves but we find ways of cooperating that advanced both our strategies. Whereas in soccer or any other competitive sports there just this one winner.

Kai: This is not a good strategy. Teams have done this in the past. Colluded and collaborated to lay out a nil all draw to eliminate someone else from the tournament. I don't think... 

Sandra: Germans would never do that. 

Kai: No, Germans never do this. I don't think it's quite what you get away with in competitive sports. Not good for business not good for the sport but data science censors analytics is here to stay. It actually transcends soccer. Now in every sport, we have sensors that are now allowed in tennis rackets that you can use in competitive tournaments which will analyze your stroke play and will give you data and you can then compare your data with other players data which would then feed back into training and into the way in which the game is played. Now my question is if everyone does this and has access to the same data, will not everyone then play the same way? Does that lead not just to a levelling the playing field but also to an elimination of differences and a rather boring affair if everyone wants to do it. 

Sandra: So first of all this might be a strategy question. Does this lead to a "this is the one best strategy that will win"? And in some sports like tennis there might be one best way to hit the ball. In other sports like basketball so in the NBA Wearables have been around for a very long time but there is very limited use because what happens in a lot of sports and you mentioned tennis and basketball would be in the same area where wearable biometric trackers can provide statistics on anything from heart rate to skin temperature to pulse to how often you move to how quickly you react. It becomes not only a question of strategy but also a question of negotiating power. So if your coach has the on how hard you are trying or whether you know if your heart rate doesnt go up fast enough you know you're not trying hard enough or if your heart rate does go up too fast maybe you do a training wasn't good enough. You're not fit enough. So can I use that as a very strong negotiation tool to say Well your next contract is not going to be good enough or I might use it underhandedly to say well actually I'm going to trade you for someone better because I have all this data on you. Which has led in the MBA, so in professional basketball, to these trackers having very limited use and the data is being collected to be of very limited use because the unions have been very firm on what you can and cannot do. But this becomes no longer about strategy but about the power of negotiation. 

Kai: Yes and the parallels with business do not end there because as in business right ones business models become largely the same in an industry one strategies are no longer providing any competitive advantage. It's all about execution which means it's coming back to skill right so players can actually showed their individual skill. So much like in business execution is often key and much like everyone praises Apple for example for their great products and their strategy it's execution that really allows them to be such a big player at scale in the business of producing physical products. So execution we often forget. But in soccer it's what we all admire in players like Ronaldo or Ozil or the stars of the European Champions League.

Sandra: And in the end technology might actually make their lives better. In the National Football League in the U.S. microchips implanted into players jerseys are helping collect information that will make sure that they don't get injured so often that track fatigue and so on. So these players can be better protected. 

Kai: Yeah that's really interesting. I remember a story a keynote I heard at a conference once given by the CIO at the time of the Cirque de Soleil way back in 2007. They were doing it back then collecting all this data about the acts that their athletes are performing to build up this huge knowledge base basically to prevent injury and to manage a career and the fatigue of their acrobats so that this does not translate into professional sport is no surprise but probably really good because some of these athletes are really under the pump because they play a lot of games. It is big business after all and it is very important for teams to manage their players to make sure that they get through a long season. 

Sandra: So technology is fully transforming the business of sport and potentially in the future what we conceive of a sport might itself change. 

Kai: Yes technology has not just transformed sport it has brought about whole new forms of sport such as e-sport. 

Sandra: Indeed the BBC has reported that the University of Utah has become the first U.S. college to offer scholarships for competitive video gaming. 

Kai: Which, and I have seen it on TV, seems like a pretty athletic undertaking it's draining not just mentally but also physically. 

Sandra: And also big business. It's estimated that it's going to be about a billion dollars worldwide within the next couple of years. 

Kai: I think we are going to talk about this in the future. But for today this is all we have time for. 

Sandra: Can we have an Easter egg at the end? 

Kai: I think we'll have an Easter egg. 

Sandra: Thank you for listening. 

Kai: Thank you 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 podcast. 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.

 

Easter egg…

Kai: I can give you the intro. But you have to then say something intelligent about it. Just say yes and then make your intelligent point whatever you want to say.

Kai: Is that the intelligent thing?

Sandra: No that's not the intelligent thing I'm going to say. There is much more depth where that came out from. No try again.

Kai: Try again. I can do, you can do better.

Sandra: Come on. It's soccer man. You can do better.

Kai: I can do this. I said shit just then right? 

Sandra: Did you? 

Kai: Yeah. I said shit already. You didn't even notice. I'm on the record that there could be any shit in those photographs I said. And your product next to it. Ha ha ha. Listen you're not listening to what I'm saying. We're having a conversation here. 

Sandra: You never listen to the shit I say. 

Kai: Hey what? 

Sandra: You never listen to the shit I say. 

Kai: And I say hey what?

Sandra: Wrap it up. Do we have enough? Is that all we have time for?