Friction, hypereconomics, and social intercourse

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Friction is one of the more important concepts in the world. Many things are either made possible or impeded by friction.

Strike a match and the friction creates a flame. Yet that same kind of friction stops other things from flowing smoothly.

Perhaps the best description of the challenges that arise from friction is from the well known military strategist, Clausewitz:

“Everything is very simple in War, but the simplest thing is difficult. These difficulties accumulate and produce a friction which no man can imagine exactly who has not seen War . . . in War, through the influence of an infinity of petty circumstances, which cannot properly be described on paper, things disappoint us, and we fall short of the mark.”

From: Clausewitz, On War, Book I, Ch. VII

Recently Mark Pesce asked “What happens after we’re all connected?“, and he came up with the answer: “hypereconomics”.

Economics, fuelled by hyperconnectivity and enabled by the removal of friction in processes between people, equals hypereconomics.

And it is this removal of friction in processes, enabled by the internet and mobile technology, that creates the next frontier of opportunities for business.

The combination of mobile accessible applications and peer-to-peer social networks offers an astonishing array of new business opportunities.

In the Arab Spring and Occupy movements we have already begun to see the social and political shifts that are enabled when citizens can communicate and organize effectively through use of mobile technology coupled with social media.

The impact of these political and social movements will necessarily flow on to economic structures. This will create a gap for development of new business models based on removing friction and leveraging peer-to-peer capabilities offered by mobile devices.

Also people are getting used to helping themselves and each other, and the technology is enabling them to act collectively without a great deal of effort. This is the big shift.

We can now collaborate and act collectively even though separated geographically. No longer do we need to meet face-to-face to act. Collective action is enabled and made more efficient with mobile technology in so many hands. And it even facilitates better face-to-face meetings and action (viz. Occupy and the Arab Spring).

I am expecting to see a lot of disintermediation – shifts in the supply chain that that remove some existing intermediary players.

One of the first areas I expect to see this in is new mobile and online peer-to-peer payment models. Another area is aggregation of service providers and potential customers. Up until now aggregating those types of services required large capital investment, but now it just needs a peer-to-peer smart phone application.

If you are an existing economic or financial intermediary it’s time to start planning for this new reality. If you don’t then the dispersed peer-to-peer linked mob might just eat your lunch.

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When robots rule the world – the future of jobs in a hyperconnected world

UNSW CSE robot
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Steve Hopkins was telling me recently about an interesting law firm he’d come across in San Francisco – it’s called Robot. Where lawyer and junior partner Tim Hwang and his senior partners, Apollo Cluster and “Daria” XR-1029, work to merge legal and technical systems.

It was this law firm, and an interesting conversation Steve had with Tim Hwang, that sparked the idea for Steve’s session at last Saturday’s Social Innovation Unconference at Barangaroo.

We discussed the time in the future when robots run everything. And it got me thinking just how much robots already do for us. For most people the robots that run things are unknown and operating below their level of consciousness.

But let’s consider some of the work that robots already do for our society:

  • manufacturing – e.g. assembly lines for things like cars and packaging, quality control, building electronics components such as circuit boards
  • call centres – e.g. automated voice response systems
  • financial services – e.g. business decision support systems, straight-through-processing trading systems
  • the internet – e.g. search engine bots or those annoying Twitter bots
  • military – e.g. unmanned combat air vehicles (aka drones)
  • home and industrial cleaning – e.g. vacuum cleaners

I’ve been personally involved in developing and implementing intelligent business systems for a long time. Starting in the early days of voice automation and straight-through processing of financial transactions in the 1990s, through to the present day.

A large part of my work during the late 1990s and early 2000s was automating business processes and removing human beings from business processes. It was a huge shift in labour from human beings to robots. Those were mainly clerical jobs where a computer with a decision engine could easily replicate the work done by people.

Consider the productivity savings achieved by many of those projects; for example one project halved the number of call centre operators through the use of automation. That saving was achieved by addressing throughput constraints in both the inbound and outbound queues.

Firstly savings were achieved through the use of automated outbound calling technology – not waiting for the humans to dial a number but rather having the system start making the new outbound call while the earlier call was finishing. It also improved throughput by automatically bringing up the data entry screens for the call centre staff.

Secondly savings were achieved by adding customer self help options at the start of the inbound call process and by providing support to move customers to online self service. Instead of a human being tied up on the phone for 2-5 minutes with a customer trying to ascertain their needs the IVR and the customer did that work thus freeing up the operators to take more calls.

Arguably these improvements through increased automation were not as good for customers as they were for the bottom line of the companies, nor were they very good for the call centre staff that became redundant. And many would argue (as do I) that shifting the business processing efforts to consumers does not always make for excellent customer experiences. But cost and process optimization is a fundamental business practice.

It’s interesting to consider what other jobs will be removed from people via the next rounds of automation. The jobs that will go next are most likely to be middle class and white collar jobs.

The jobs that could go include: journalists, lawyers, managers and supervisors, warehouse personnel, sales staff (if the sales are all online how many do you need in a store?). Fundamentally, if your job or substantial parts of your job,  can be defined by means of a decision tree then your job is at risk of a robot taking over.

Welcome to the brave new world of work. What’s your plan to survive when robots rule the world?

Note: I’ve left out the entire area of robots for health since I don’t know much about it – but I reckon that will be huge too.

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Welcome to the panopticon

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Tonia Ries has just published an article titled Privacy Fail: Klout Has Gone Too Far, which outlines how Klout is indexing social networks and creating/measuring user profiles, even if they have never registered with Klout.

About the same time Facebook was accused of creating ‘shadow profiles’ on users and nonusers.

As I said recently, welcome to the panopticon.

When Jeremy Bentham originally came up with the idea of a panopticon he introduced it saying:

“Morals reformed – health preserved – industry invigorated instruction diffused – public burthens lightened – Economy seated, as it were, upon a rock – the gordian knot of the Poor-Laws are not cut, but untied – all by a simple idea in Architecture!”

Source: Bentham, Jeremy The Panopticon Writings. Ed. Miran Bozovic (London: Verso, 1995). p. 29-95

And thus it is, that by the beginning of the twenty-first century, we have (well most of us) willingly and freely chosen to become part of an electronic panopticon.

Privacy is now only possible by a steadfast refusal to participate in digital society in any way – by becoming like the Unabomber and moving to a shack in the woods. And even then, if others who participate in the electronic society mention your name or activities online, you are still caught up in the net.

Global surveillance has been made easy, simple, and ubiquitous. The very devices – laptops, tablets, mobile phones – we all carry enable this constant geophysical tracking via the SIM cards and wifi connections.

However, as we are seeing with the various #Occupy movements around the world, these same technologies that enable surveillance of us by the authorities, also enable sousveillance of the authorities by us.

This is one of the interesting things about living in an electronic panopticon. Unlike Bentham’s inmates we are not physically constrained to cells. We can move about freely (for the most part).

And we can also co-opt the same technology to create our own networks. Those networks can become peer-to-peer and frictionless. They can enable us to organise into groups very easily and to share information and ideas in ways that used to be hard.

The panopticon is here, it’s time to turn it to our own ends.

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Robert Kiyosaki drops in to visit @ValerieKhoo & shares some insights

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It always delights me when friends get to meet interesting people. Thus I was pleased to see that Valerie Khoo, founder of the Sydney Writers’ Centre, recently had a visit from Robert Kiyosaki.

It is worth watching the entire video as Kiyosaki shares his thoughts on business, the economy, and some possible responses (and he does talk about his new book, Midas Touch: Why Some Entrepreneurs Get Rich – And Why Most Don’t).

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Labour, forced labour, and capital – is the ground shifting?

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Free people offering their labour in exchange for monetary reward has been fundamental concept for western society. Since the mid-nineteenth century we have not really used forced labour for production.  But two examples in recent times make me wonder if that assumption still holds true:

  1. Prisoners painted room for former UK Home Secretary, Jacqui Smith
  2. Wisconsin Union Workers Replaced With Prison Labor Under Scott Walker’s Collective Bargaining Law [HT: @umairh and @johnrobb for this link]

We’ve blithely assumed that we will always be able to sell our labour on the free market and that there will be some (more or less depending upon the economic situation) buyers of our labour – hence much xenophobia on the part of many.

We’ve also assumed that our only competitors for selling our labour on the free market are other free people – either native to our lands or foreigners.

Forced labour used to be an important component of the labour market in Australia, after all we were founded as a penal colony for the UK. However, for the most part, in the west we have not had indentured labour since the nineteenth century.

There also appears to be a growing idea that we should also apply ‘user pays’ principles to people who receive support from society. This means that there is a growing notion that prisoners (and the unemployed) owe society something in return for the support that they receive from society.

I wonder how long until western industry works out how they can use the nexus of this ‘user pays’ ideology, the the need to reduce costs, and the adoption of forced labour? It’s interesting to consider this idea given the continued drive to reduce costs and while the prison population is not in a good position to protest their treatment.

UPDATE: And now I see that the redoubtable Douglas Rushkoff is asking Are jobs obsolete? it seems that I’m not the only one with questions about the shifting relationship between labour and capital. Also it appears that in the US the Unemployed face tough competition: underemployed.

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What kind of zombies have we created?

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I was reading Bill Bonner’s recent post Zombies Born of Government Spending where he posits the notion of zombies in our economy. As Bill defines it:

“In economic terms, a zombie is a parasite. He contributes less to the economy than he takes from it. He lives at the expense of others.”

His argument is that social welfare programs as practised by most of the developed world only work during good times. As he argues:

“It’s relatively easy to turn people into zombies. And it’s fairly easy to support them when an economy is healthy and expanding. But when an economy goes into a contraction, you can no longer afford to give the zombies their meat. Then what?”

This is an interesting question. Western societies have created a group of people with few skills and no means by which they might generate value to exchange.  Nor do many in this group appear to have bonds to the society within which they exist and they exhibit few loyalties to ideas or ideals outside of mere existence and consumption.

But the real issue is how we create a new economy, one that is founded on creation of real value and its exchange, and not ephemeral things (like hybrid securities and CDOs). One that sustains and nurtures community rather than destroying it through extreme competition and crazy ideas like the priority of shareholder value above all other things.

This raises some important questions:

  • If the government can no longer sustain them (or us) then what happens?
  • How do we create ways of connecting people with skills to share with those who want to learn?
  • By what mechanism can we develop shared values that support the creation of valuable skills?
  • How do we create communities of people that choose to contribute and collaborate for the common good?

We don’t have to let what’s happening in other places happen here. We have the choice. We can create communities where real value is exchanged between real people. Not what passes for value in the some places – faux celebrity, immediate gratification, and continuous consumption – but sustainable and sustaining value.

There used to exist such things as commons in the past – commonly held land and other resources. But we have few of these remaining to us nowadays.  It might be times to create some new common resources to share in a fair and equitable manner?  We have already seen the rise of new forms of sharing and common ownership through Creative Commons on the internet. It makes me wonder what other things for which this approach will work. I suspect that Mark Pesce’s work on his Plexus innovation is a beginning in this quest.

It is worth considering how we can each begin to nurture collaborative behaviour and thinking in our local spheres to work against the zombie world view.

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How do we create and share value in a jobless economy?

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Jeff Jarvis sparked my thinking on this recently with his post on The Jobless Future. As Jeff so bluntly stated:

“We’re not going to have a jobless recovery. We’re going to have a jobless future.

Holding out blind hope for the magical appearance of new jobs and the reappearance of growth in the economy is a fool’s faith.”

If that is the case in the US, and we have riots on the streets in the UK, Spain, Greece, north Africa and the middle east, then things are not looking good in large portions of the world. There will likely be flow on economic and social effects around the world, especially since Richard Florida is pondering if riots could come to Canada too.

Nouriel Roubini may be right in his assertion that “Karl Marx had it right. At some point, Capitalism can destroy itself.”

The inherent instability of markets in the US and Europe mean that jobs are going to be harder to come by, especially for the less educated and the less skilled.

All of this got me thinking about what skills are really useful in this new world that is developing before our eyes? What kinds of businesses and communities will be more resilient in the face of changing economic verities? How do we need to recast our expectations and aspirations for this new world that is unfolding?

That kind of thinking led me over to John Robb’s blog and one of his recent posts, Entrepreneurs and Open Source Hardware. Perhaps we are all about to become open source entrepreneurs?

The kind of economic environment that is emerging is one where sustainable and ethical business models can come into their own. Not large scale, top-down, industrial operations. Rather there is an opportunity to develop peer-to-peer and networked organisations. Social innovation, social enterprise and ideas like collaborative consumption become significant, and a return to older ways of organising businesses – like co-operatives and mutual associations – become critical.

We also need to find ways to create and exchange value in an environment where traditional mechanisms might no longer be available to us. This means creation of new means of value exchange, or even new kinds of currencies. Reverting to gold is not really feasible, after all it’s rather heavy to tote around. Thus virtual currencies might even come to replace some of the existing ones

If you consider it unbelievable that major currencies can fail then it’s time to go read some history. Just to put it in perspective there’s a great visual post by Jeff Clark over at The Daily Reckoning that illustrates the risk rather neatly: A Thousand Pictures Is Worth One Word.

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Business, boring jobs and social good

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Over the past 150 years businesses have dealt with the challenges of increased scale by optimizing processes, resource allocation and expenditure. However, there is a limit to how much one can optimize a business and not damage the society within which that business exists.

I have spent a goodly part of my career working on optimizing large scale businesses and increasing productivity.

The main way to achieve that is by automating routine and repetitive tasks or outsourcing them to lower cost regions, thus making low paid jobs redundant. That process generally takes bottom line cost out of the business and increases productivity as a by-product. Where it does create new jobs they are rarely suitable for the workforce that has been displaced through this process.

Many older workers have been pushed out of the workforce due to the disappearance of these types of jobs. For them it seems too late to re-train, and many face ageism from employers who are unwilling to give them a chance at different roles.

Thus we are wasting the talents, energy and skills of many older workers who now languish unhappily on welfare payments.

But it is also interesting to consider this: if the many young unemployed people across the western world had been born twenty years earlier they would be doing those repetitive jobs and earning an income. Those jobs have disappeared. And they have disappeared either due to optimization and productivity improvements.

So what do we do with all of the people who used to do those old jobs? In most western countries (except the USA) we pay them some kind of social welfare benefit. That allows them to subsist. But what do they do with their time while subsisting? Are they included somehow in the community? Do they have a role, apart from being passive recipients of welfare, that make them feel part of society?

A boring repetitive job is boring for many young people. But it does provide some benefits: they earn an income; they learn real-world work skills; it gets them out of the house; it gives them some kind of purpose outside of themselves; and it is really a good way to get them thinking about what else they can do with their life.

My first job was utterly dull and boring. It gave me the impetus to get back into study and work out ways to never have a job that dull again. It also gave me a perspective on how business works, and it is a perspective that I could not have achieved from outside.

But now most of those entry level (boring) jobs have gone. And many young people do not want to take them even if available. That is a bit sad.

We seem to have mostly banished boredom in our society, and that might not be an entirely good thing. The social benefit provided by those lost jobs has not been replaced.

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Riots, desire, consumerism, community and values.

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Want is a funny word. It can mean different things, such as:

“absence or deficiency of something desirable or requisite” or
“to be lacking or absent, as a part or thing necessary to completeness”, or
“to feel a need or a desire for; wish for”, or
“to wish, need, crave, demand, or desire”
(Source Dictionary.com)

The scenes in the UK of rioters and looting were awful on many levels. But one scene that was repeated that was especially revelatory was the looters trying on goods in the stores before they stole them.

That behaviour spoke to me of want.

In the past, usually riots were because people lacked some necessity – food, freedom, the right to vote. That is, the rioters acted in response to want in the sense of absence or lack of something. This is the kind of rioting we have seen in the middle east in recent times, places like Egypt and Syria.

But in the UK we saw rioters, unfocused on anything except inflicting damage on property and helping themselves to goods for which they had a desire. That is, acting in response to want in the sense of desire for something. And that something wanted was material goods rather than aspiration to freedom or truth.

This is different. It is about people who have learned to desire those things for the acquisition of which they do not have sufficient economic resources. And yet, they do have the means – through a collective act of will – to achieve access to the goods they desire.

The looters have achieved their want, they now have the material goods that they sought. However, in achieving those goods they have destroyed the community facilities upon which they and many others rely. They have reinforced their other-ness. They have achieved a short term goal while simultaneously creating the platform for increased levels of dissatisfaction.

I suspect that material goods will not really fulfil the wants of the rioters and looters in the UK. Their anomie will remain. And they will recall the power of their collective action. They will also recall the powerlessness of the authorities in the face of that collective action.

It might be as Winston Churchill once said (in slightly different circumstances):

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Source: Sir Winston Churchill, speech at Lord Mayor’s Luncheon, Mansion House, London, November 10, 1942

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