The Future, This Week 07 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.

Sandra: Today in The Future, This Week. Can we fight climate change by moving to the city? Does technology make us less productive and cyborgs?

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 Kai, what happened in the Future this week?

Kai: Our first study is published in Motherboard titled "Want to fight climate change? Move to a city". It's a story from the US which quotes data that shows that the average New York emits 30 percent less greenhouse gases than any other American. The article makes the argument that climate change is brewing and we're all looking for ways to reduce our footprint on the environment and the solution claimed here is to live in a dense city because people in cities like New York, they walk, they bike, they take mass transit, they take up less space, they live in smaller apartments and therefore they use less energy than their suburban counterparts.

Sandra: So if we think about the opposite of density that would be urban sprawl where we have these centres that are far from it say the CBD where people not only have to travel back and forth to go to work but we also have to transport goods. We have to make services available. We need hospitals out there, we need supermarkets, we need shopping centres. So living in that densely populated city would also help with having more land to do agriculture or other productive things. There would be lower costs for infrastructure but there would be lower emissions associated with transport of every single kind, less congestion and so on and so forth and less air pollution.

Kai: Also it makes the point that not everyone can live on an acreage block. There's just not enough land. So is this the solution that we all move to the city?

Sandra: First let's note that this is really not a new idea. Australia has a claim to fame here. A couple of Australian researchers, Newman and Kenworthy, in the late 80s famously developed this relationship between higher density and lower transport related energy consumption in world cities. Cities like Singapore or London have been pointed out as cities that have high urban density and also low transport related energy consumption. And at the other end we have cities like Houston or like Phoenix, Detroit that have large urban sprawl. Does this work every time is one question. So some big cities have experienced problems with higher density cities like Mexico City or Beijing that have very high pollution that struggle to keep on top of the waste that the garbage, the shit that's being produced by these cities.

Kai: Yes, it says so in the article and the article also points out that if this were to work houses in cities would have to become much more energy efficient. We would have to invest in insulation as well. But to me that points to a bigger problem which is that we should invest in more energy efficient building standards, insulation as such, in general which then would also make houses in the country and in the suburbs much more energy efficient. So to me this argument is a little bit flawed because it seems to make a particular ceteris paribus argument which means that all things equal, if everyone moved to the city now, which is not feasible, we would make inroads towards fighting climate change. But I think what we should be doing instead is increase the standards for building houses, insulation and also towards electric cars because the most problems from living in suburbs come from the pollution we create from transport and cars, having to take the cars to work, for shopping and everything. And also by losing so much energy in cooling down in summer or heating our houses in winter when insulation is really substandard in Australia and places like America when compared to Europe where the article quotes the Passive House Institute standards which show that you can have houses that are 86 percent more energy efficient for heating and 46 percent energy efficient for cooling by making them passive by going to electric heating, solar, photovoltaic water heating and all these kind of technologies that we have at our disposal.

Kai: So it is more a willingness to invest in those technologies which would solve the problem by and large which then would take sway in my view the advantage that high density city living has over urban sprawl. The problem there is mainly from the substandard building materials that we generally use than from the density as such.

Sandra: At this point we still have the transport problem and the transport related energy problem.

Kai: And they haven't solved this but us all moving to the city is probably a solution that is far less feasible than moving to electric cars that we then feed from the solar on our rooftops which is a technology that is just on the cusp of becoming available. So I think this will be a much better solution to the urban transport problems than it might be to move closer to the city, which in fact does not really work, does it, in places like Sydney and we're seeing this today.

Sandra: Yes Sydney is still struggling quite a lot with transport today. I think the article also points to this problem that you've touched upon that not all density is the same kind of density. We tend to think of density as an average density across the city which is actually quite hard to measure and we tend to use it to support the arguments, well how about we have these urban villages? We haven't managed to build them yet, just like we haven't managed to make high density work in Sydney. So even though a lot of theoretical arguments have been made for things like polycentric cities with urban villages, there is no city actually that functions under that model at the moment. It also brings up the question of what else is density good for. So reducing climate change, yes that could be one argument. But what about the relationship between density and human capital or the relationship with intensity and productivity. A couple of studies published in 2012 on the economies from the Federal Reserve Bank of New York and University of Georgia and/or Main have talked about the relationship between density and productivity and this is actually not quite so simple. We tend to treat all cities as the same but apparently if you're looking at the fact of productivity on places that have got low human capital, density is actually very counterproductive and it could have negative effects so density could be actually economically detrimental.

Sandra: If however you look at density in places which rely on information or finance or arts and entertainment or professional services that put the high premium on things like creativity or of sharing ideas, then you have a positive effect from high density. So how can we think of density in just one area?

Kai: Yes, not all density is equal and what I would like to bring up is a model that is called value capture whereby cities develop, for example they are transport corridors with the help of private developers who are given the rights to develop the land around and on top of major train stations, for example. It's called value capture because the private developer gets to capture the value from developing those dense centres on top of those transport corridors. However it is not clear that these centres that we create are actually providing good quality of living especially when the developers build them in such a way that they discourage people to ever leave those centres so that people do all their shopping, all their entertainment, everything within those centres. People have looked at what these value capture developments look like in places like Asia and have found that they create a quite depressing and dystopian quality of living because they do not come with the kind of productivity effects and employment and things like that. They are merely there to capture the consumer and to discourage people from spending any of their money elsewhere, hence the name value capture. So I think we need a much more holistic thinking about the ways in which we make cities sustainable, worthwhile living in that create well-being for people and the kind of productivity that we want from tying in places to live with places to work.

Sandra: And speaking of productivity, our second story of the week refers to our failure to become more productive.

Kai: So this story appeared in The Independent in the UK. It states that productivity in the last decade has been dismally low and it asks can advances in technology actually explain why. So is technology to blame for low productivity? The article quotes some numbers, it says that productivity increase was just 1 percent in the US, 0.5 percent in Germany, 0.2 percent in the UK and Australia would sit round about that figure. So is technology actually a productivity killer?

Sandra: Well, some people would say yes. So one side of this argument, and this would be people like North western’s Robert Gordon with his famous book "The Rise and Fall of American Growth" who says that actually the technological improvements we have today do not compare to what we previously had when we had huge rises in productivity. So for instance when we brought about urban sanitation or we brought about electricity, or the telephone, or television, or even commercial flights, that we do not have profound technological changes today. And he claims that actually the miracles that underlay the productivity of America, the beginning and middle of this century, cannot be matched by technological advancements like Uber or Facebook or Amazon. They will touch productivity lightly, if at all, but they will not make a difference.

Kai: So are we using Facebook too much? Are we on social media in the workplace? Are we wasting our time at work rather than to work? Is this a problem here?

Sandra: Well some would argue, actually, no. The problem is not with the technology, the technology is actually helping. So MIT's Erik Brynjolfsson, with his co-author Andrew McAfee, they wrote the famous book called "The Second Machine Age" which talks about this huge technological destruction that we've seen over the past few years and they're saying, well, actually we do have this huge technological breakthroughs. But what we don't have is everything that came around the industrial revolution, things like investments in education, the ways we re-organised work, the policies that we have in place to make this thrive as an ecosystem, that it's not about just the technology. And we're actually failing to measure what technology looks like. So he says well the core technologies that are coming along, things that we've been talking about on The Future This Week, like artificial intelligence or machine learning, actually can and will create these changes but only when we rethink how we do education, how we organised work and the policies that we have in place.

Kai: If we look back in history just a couple of decades then this is not a new problem, it came up in the 1990s under the so-called "productivity paradox" when we invested a lot into computer technology in the late 80s in the 90s when famously the American economist, Robert Solo, said you can see the computer age everywhere but in the productivity statistics. So at the time the same Erik Brynjolfsson did an extensive study in to this phenomenon and he came up with a number of reasons of why the increased investments into IT and computers did not show up in those productivity statistics. And the first and main one was a mismeasurement of outputs and inputs. So if you take the investments into IT in the banking system, for example, and you look at how input and output is measured then investments in IT do not necessarily increase outputs but lead to fundamentally different ways of doing things. Take ATMs. ATMs as a technology allow us to get our money very quickly but it does not increase the output that a bank teller would do. So the bank teller might still be employed but the number of things that they do, the number of transactions that they do with customers might actually decrease. So in the measurement the output of the bank teller decreases or productivity goes down but only by way of using technology to do things that the person would have done, which then leads to a time lag in measurement because what actually has to happen is a re-organisation of the ways in which banks or businesses do their work but also then equally a change in the way in which we measure input and output because things that were previously done by people might now be done by technology and those people do different things so we have to adjust our measurement slightly.

Sandra: So measurement shortcomings, and as you've mentioned quite a few economists have been pointing these out, even people like Joseph Stiglitz, have been pointing out that the fact that things like the Internet are fundamentally changing the way we assemble data or deliver services simply cannot be captured in the ways we traditionally used to do this. Others go even a bit further and saying well we shouldn't be measuring production we should actually be measuring people's well-being so we should have different ways of thinking about productivity all together.

Sandra: Which raises another question about technology and productivity. This conversation makes the fundamental assumption that more productivity is better.

Kai: Yes the argument is always that productivity, especially labour productivity, and more output and growth will lead to better living standards when those benefits are distributed across the economy and across society.

Sandra: So is there a case, for instance, for banks handing out more loans even if they were bad loans, that they are handing out more loans for people who cannot pay them, and we've seen a financial crisis as the result of that. But those banks have been more productive. And if we introduce technologies or different business models or ways of doing things where we give up less loans to people who can pay them, are we worse off in terms of productivity?

Kai: Which points to another problem a productivity measure is fundamentally a quantitative measure. So the argument has been made that while technology might not necessarily lead to more quantity and outputs it might lead to a very different quality in the utility of services that we create in the wellbeing of people in the work conditions that we create in our workplaces so there are other effects that might come from technology that are not necessarily related to creating more with less.

Sandra: So does technology have a productivity problem.

Kai: No I think it has a measurement problem. In fact I think we have a measurement problem with productivity more general. We hear all of these calls in the media quite often that we need to increase our productivity. We have a productivity commission that looks into all parts of our economic life now, we can increase productivity so productivity has become a kind of a panacea for how we make things better. But often hear arguments such as in order to increase our productivity we need to work longer hours and that doesn't make any sense to me does it.

Sandra: No that's bullshit.

Kai: Exactly. Because the way productivity is defined if you work longer hours productivity goes down. Right. We all know that we can work productively for a certain number of hours. In fact there's been a study recently by the ANU which says that on average about 39 hours is a good amount of time to work during the week. Anything you work longer, productivity drops off sharply and so does well-being. So working longer hours actually decreases productivity. However the problem here is again with measurement is in the detail. Because if you do not actually count those extra hours and include them in the equation then you do increase output. But if you are only counting the hours that someone has in their contract not the hidden work that they might do after hours on paper productivity increases. But it means that people start self-exploiting that they chew into their spare time by doing extra work which benefits the employer, benefits our statistics because those hours are not included in the statistics. I think we do have a measurement problem with productivity all over the place.

Sandra: As we move to an economy that is more and more based on services and professional services on people and on technology productivity is a very enormously tricky concept and we should be quite careful in how we use it.

Kai: Yes and because at the national level we often count GDP and presumably we can count this quite well. But if on the other hand we include in the input we want to get to our labour productivity we have to count the number of hours work and that’s a much more tricky way to do it you can do this in surveys but you don't have to rely on people actually giving you the number of hours that they work not the number of hours that they got paid for for example or that they have in their contracts. So if we're not in a position to actually count the number of hours worked and the inputs correctly then we are in no position to actually measure productivity...

Sandra:...And technology will get short changed there as well because a lot of the technologies that we have are free technologies think google think Facebook and so on Google Maps. These are technologies that again would show up in that free time that would never be counted anywhere. So productivity increases from those free technologies would not appear

Kai: No. And the other aspect is that people can now very easily take their work into their spare time on their mobile devices so they can do work after hours they can work longer hours. The question is whether they are getting paid for those hours and whether those hours and the output that is created are actually included in those statistics.

Sandra: So maybe we're measuring output too narrowly. Maybe the output should indeed be about well-being or that well-being in the context of sustainability.

Kai: Speaking of productivity and well-being our next story concerns employees being injected with microchips to become more productive, to open doors with their hand and their microchip that they have implanted in their hands and to be at work as cyborgs.

Sandra: So this story comes from Futurism.com and it talks about employees that have an RFID microchip the size of a grain of rice implanted usually into a person's hand or wrist and it's the same kind of chip you would have implanted in your pet. And these RFID chips are really everywhere. Every time you swipe your card to get into your office or you swipe your key to try to get into your building or you get on a train and you use your OPAL card, even credit cards have these chips. So now we could have them in people.

Kai: So the article talks about a company called Epicentre. So I got a little bit uneasy reading the article in particular about the way in which people seem to embrace and celebrate and have those events where they could get injected with those microchips...

Sandra:..The chip parties? ...

Kai:...The chip parties. And people saying ah this is really good. I want to be a part of the future and becoming a cyborg or having this thing implanted in my wrist really makes me part of this. So that part I found slightly disturbing. The argument about how we become cyborgs I find a little too obvious. I think we are cyborgs already. If a cyborg is someone who is entangled with technology who lives with and through technology in their everyday way why would I only be a cyborg once the technology actually goes under my skin rather than be in my hand? Shouldn't it be about the effects and are we not cyborgs by way of being connected to the Internet 24/7, having these smartphone under our pillows. The first thing we check in the morning the last thing we check in the evening. Bumping into people in the streets checking our messages or texting or having accidents in our cars. Our cars are being connected and wrapped in technology sensors. Everything. I think we have become cyborgs already. The idea that we only become cyborgs once we actually have things in our bodies, in my view is just based in a false philosophy which puts too much emphasis on the physical attachment of things to our bodies. I think we are already cognitively we are cyborgs and we have become cyborgs at least in the last 10 years with the advent of mobile technologies.

Sandra: I think it's culturally such a strong barrier, once it gets under our skin, literally, that we struggle with this idea and the news that the company might do this and it's about Epicentre in Stockholm, that the company might do this is so outrageous and we see it as such an invasion of our privacy even though the wearable devices that most of us have or indeed our phones as you mentioned do so much more than what these chips could do. To me it also seems interesting that the embedded technology seems to move actually very slowly and I think it is that cultural barrier. The exact same story about Epicentre Stockholm employees using the microchip to open doors and use photocopiers and so on came out in 2015. The BBC covered it in terms of business times covered it with the exact same data. So it's been two years since then. But the conversation hasn't moved at all.

Sandra: I agree with you. I think it makes for great headlines and it is something that captures people's imagination and it disgusts people or it is a stand in for the future itself. But I think it's a distraction. I think the argument that we become cyborgs by way of having things in our bodies is a distraction from the fact and the effects of technologies in our everyday lives. The way in which technology already shapes the way in which we interact but also the way in which we see ourselves and the way in which we see our environment and act in the world. For example the way in which we drive our cars with GPS has changed the way we navigate has changed the way in which we understand our environments has changed to what we pay attention to. Take Instagram, people who Instagram they will see the world as Instagram-able instances they go to coffee shops and cafes and they will look out for Instagram-able piece of food or scenery. Meaning that once you are part of a community that uses technology in a certain way you already start seeing the world in different ways. I think that is already something that we could call a cyborg in practice.

Sandra: Well in that case maybe Microchips are a step back. RFID technology only can do one thing and is transmit the number to someone who can receive it whether it's our photocopier or our door indeed our car.

Kai: But those technologies obviously might become more sophisticated. I think we can learn from the mobile technology mobile phone example that we've really become cyborg once we forget about those technologies they become so everyday so normal that we just use them. So they become part of us whether they are under our skins or in our hands or otherwise attached to us doesn't really matter in my view. The moment in which technology becomes so backgrounded that we take it for granted they become part of us. And that to me is the definition of a cyborg.

Sandra: I think we're scared that when we become cyborgs without us wanting to. We still choose the technology that we have at this point whether it's our wearables or our mobile phones. And at this point our RFID tags, but what if someone else should decide that we need one.

Kai: Yeah I should have one but also do we actually freely choose. Or is it not that sometimes we just don't have any choice. If you were to work in a company where it is normal to embrace having a chip in your hand you don't necessarily want to be the only person standing apart and not having the microchip. Similarly can you abstain from using iPhones and devices on which you can listen to The Future, This Week?

Sandra: I definitely can't.

Kai: No. That's my point. So the choice of whether or not we want to become a cyborg is increasingly made for us. But we of course are concerned about is when governments decide that certain groups of people need to be microchipped so that they can be identifiable be it for seemingly good reasons in health care or be it other more sinister reasons. I think the question of choice and to what extend we do want to become cyborgs is an ethical one that we would probably have to come back to in the near future...

Sandra:...And explore in more detail. I think that's all we have time for today.

Kai: Thank you very much for listening.

Sandra: See you next week.

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