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In a digital world does being faster, better and cheaper still count in business?

Posted By Paul Tero, Tuesday, October 8, 2019

Paul Tero a member of our Emerging Fellows program inspects the business agility in digital economy through a new post. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

One of the dominant narratives of the business world is that in order to succeed the products you provide either need to be cost competitive, be differentiated in some way, or you need to be quicker to market than others. Will this narrative hold as the economy turns fully digital?

 

Consider what happens today. In order to maintain profitability an external improvement approach may be taken: variations of current products may be offered, or price discounting may take place to increase the quantity sold, or new markets might be opened up. Another approach would be to focus internally. That is to reduce costs and to streamline processes. And a third approach would be to go down the innovation route and develop new products for the same or for different markets. All of these are variations on the faster, better, cheaper narrative. A narrative that holds true in an economy based on atoms, but does it hold for an economy solely based on bits?

 

We can gain some insights into this future state from the transition that is currently underway. This shift can be seen in the increasing proportion of business, of the economy, of even work itself being categorised as digital. Consider some observations. First, the marketing of goods and services. No longer does the maxim hold of “not knowing which half of the marketing budget is wasted”. For with the analytics available from advertising campaigns using social media channels and search engines the marketing budget can be spent more efficiently.

 

And second. What about the potential of big data, machine learning and the internet of things currently being brought to bear on say manufacturing processes, the logistics sector, and on agricultural practices? Finally, not forgetting consumers in all this data processing potential: we can find what we want or need more efficiently among the increase array of choices available to us.

 

Another insight from this transition is the merging of values with business activity. No longer can a company opaquely distance itself from that which is socially unacceptable. Today’s consumers, and even employees, increasingly call out participants in the local, national and global economies for lack of transparency and corporate behaviour at odds with forward looking standards.

 

A final insight is with respect to legal and political matters. Until recent times, the digital economy could be regarded as this anarchic wild-west frontier where the scale of profits was beyond comprehension and regulation was an anathema to the full gamut of stakeholders. But now we are seeing serious discussions concerning appropriate taxation regimes, effective safeguards of personal and private data for business use, and a range of attitudes of governments when it comes to how they use their citizens’ data.

 

So, from one perspective digital technology is making the market more efficient. Perhaps even moving it toward that holy grail of it being a perfect market. Where there is perfect information, sufficient products are available for consumers, and where the lowest cost is the hallmark of all goods and services produced.

 

And from another perspective, digital technology is making the market more transparent. Where the ulterior motives of its stakeholders become clearer and the governance of data is weighted in the consumer’s favour. In other words, there is possibility that a defining characteristic of the market of the future is its integrity. That across the globe the economy operates with a high level of ethics.

 

A fully digital economy, then, has the potential to be described in terms of it being a perfect and ethical economy. And this potential will shape the current dominant “faster, better, cheaper” business success narrative. Where even if you are “faster, better, cheaper” due to the nature of perfect markets long lasting economic rents will be almost non-existent. Where even if your business succeeds by being “faster, better, cheaper” the rewards may well be short-lived if that path to victory was less then ethical.

 

The implication is that “faster, better, cheaper” is becoming “faster, better, cheaper, clearer”. For even if the systems involved in the current transition to an economy based on bits seem opaque, the potential is for all digital economy systems to be fully pellucid.

 

© Paul Tero 2019

Tags:  business  digital economy  economics 

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The Bank of Facebook?

Posted By E. Alex Floate, Thursday, September 12, 2019

Alex Floate, a member of our Emerging Fellows program devotes his ninth blog post to Facebook’s digital currency innitiative. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

When Facebook first premiered their idea for a digital currency Libra in 2019, the reactions ranged from eye-rolling to predictions of a vast conspiracy to control the world. Most pundits could not understand how or why a social media platform would create or need a currency. The calls for regulation or legal action to disallow the notion were immediate.

 

However, within just a few years of introduction, more governments turned to nationalism or authoritarianism, and the Trumpian trade and currency wars of the early 2020’s disrupted global markets. Despite their mutual needs for trade and economic growth, the use of national currencies became a point of contention as the world fragmented into tribes.

 

The group most affected were entrepreneurs in the countries once called the third world. For them, globalization had brought a connection to the wider world of consumers, especially as 7G broadband and localized electrical grids were built out. The initiatives began by the Chinese in the 2010s to build out transportation infrastructure in Africa were bearing fruit by the mid-2020s. Small companies and farmers found they could directly market and ship to global customers. Into this currency void stepped the technology companies that were enabling the global marketplace.

 

Although Facebook was the first to market with a digital currency, Amazon, Alibaba, and a few regional upstarts began using their positions as marketplaces to promote their in-house digital currencies as a means of global trade. They created means to earn additional currency, such as an exchange for personal information, reviews, actions as beta or market testers, or selling and buying on the marketplace. The member could earn additional Amazonians or Alibablers to spend within their respective marketplaces, and even at many outside venues.

 

As the reach of the tech companies expanded beyond supply chains and into services, the ability to negotiate paying for goods in services in their own currencies was greatly expanded. This allowed many companies to offer the option of being paid in corporate or domestic script. The corporate script became highly preferable as the companies offering it were able to better manage it for inflation and deflationary pressures. Additionally, by restricting it from most secondary markets the ability to manipulate the currency via speculation was taken away from those seeking to make money off other’s misery.

 

Companies also created a social scoring like the system China implemented in the late 2010s. This system was more reward than punishment and sought to incentivize behavior in line with the company’s values and social conscience. By allowing the company to track the individual throughout their day, including conversations and actions, the company could determine if they were acting as a good citizen of the planet.

 

When a person’s interactions were friendly, helpful, informative, and advanced civility or relationships, the score could potentially increase. Energy and water usage, recycling, using public or personally powered transportation were also monitored and properly rewarded. The opposite of these positive actions lowered the score. Higher scores were rewarded with extra currency, merchandise, or socially with offers of more prestigious jobs or responsible public positions. By 2040 these new scoring systems had replaced nearly all other methods of determining financial trust for an individual or organization.

 

By the year 2050, most smaller countries had outsourced their treasury functions to either Amazon or Alibaba. For most of these countries the new currencies offered access and stability and an opportunity to grow their economies. Entering the global marketplace on an equal footing allowed many countries to shake off the ‘third world’ label, and this was especially true on the continent of Africa.

 

© 2019 E Alex Floate

Tags:  digital economy  economics  Facebook 

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Who and what is holding us back from a fully digital economy?

Posted By Paul Tero, Friday, September 6, 2019

Paul Tero a member of our Emerging Fellows program discovers the future of digital economy by adding one more piece to a series of blog posts devoted to this topic. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

Consider the fields of human affairs in which we are experiencing change. There’s environmental change, shifts in international and domestic politics, technological advances and the constant innovation in the health and human services sectors. Let us not neglect the spheres of finance, education, and governance. The list goes on. Trends, change and drivers of change. All threads in the dynamic tapestry of early 21st Century life.

 

In amongst all of these changes that we are witnessing this article is focusing on one thing. We are examining the unfolding phenomena of the digital economy. In particular, who and what is stymieing the realisation of a fully digital economy in the decades ahead. As we attend to this, we need to be mindful of our own responses to this particular phenomenon. Are we more sanguine, saying: “Yes, bring it on. We will be utterly enmeshed in a fully digital economy by 2050”. Or are we more phlegmatic: “Don’t know. We could be more reliant on the digital economy by 2050!

 

However, asking questions is the key to the examination of the digital economy. Questions like: Who benefits from the status quo and who loses if we go fully digital? What are the social, political, economic, legal, environmental or technological barriers to realising a fully digital economy? Are cultural worldviews and belief systems the obstacles in the path to building an economy that is fully digital?

 

Turning firstly to the status quo. Benefiting from the status quo are those whose influence, power and profit are founded on the world of atoms. If these attributes of prominence do not translate to the world of bits, change is resisted. Remember the retailers of a few years back? To them the internet was but a passing fad. They saw no need to embrace the digital economy.

 

Our reference point for an examination of the social barriers could be the introduction of Facebook. Once Metcalfe’s law kicked in, ordinary people could see the inherent value in sharing their lives online and overcame their reluctance to enter their personal and private details into the Facebook database. Turning to one potential aspect of life that could be with us in the time ahead: personal artificial intelligence assistants (we do have Alexa, Cortana & Siri now don’t we?). Our uneasiness with being second guessed ahead of time by artificial intelligence may be rendered moot because of the value and ease these new machines bring to our lives, relationships and careers.

 

And what of the governing class and the way political life is conducted. Is it because of the Machiavellian dictum “never attempt to win by force that can be won by deception” that political barriers will remain? For with this category of barrier the perspective that “a fully digital economy is equivalent to full transparency” may well be the non-negotiable impediment raised by its stakeholders. An anathema to the political class.

 

And what of legal barriers? Consider the difficulties presented by cryptocurrencies, the machinations we have with privacy in a digital world, and the conundrums with copyright. And let us not forget the implications of RegTech, the jurisdictional challenges faced by taxation authorities in this digital world, and the quagmire at the interface of human bodies and technology.

 

Finally, there is who we are as individuals, as members of families, communities, tribes and nations. All revealing a rich and complex global panoply of worldviews and belief systems. We can conjure images of dystopia, pockets of doomsday preppers, and activists driving the techlash movement. All as symbols of resistance to a fully digital economy. And similarly we watch the countervailing forces of progressives and conservatives. Progressives seeking a better way, conservatives seeking to only incrementally improve the way things are. And then we have the reactionaries who are bent on impeding any forward movement that the forces of improvement show.

 

Given all this, is it any wonder that we have so far been able to thread the needle of change. Is it any wonder that the quality of so many parts of our daily life for so many lives is better than what it was decades ago? There is no single “who” or “what” holding us back from a fully digital economy. But there is this: a multitude of challenges that are to be overcome on our collective arc of accumulation.

 

© Paul Tero 2019

Tags:  digital economy  economics  finance 

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Will the offline world really matter anymore?

Posted By Paul Tero, Thursday, August 8, 2019

Paul Tero a member of our Emerging Fellows program envisions the future of offline world in our social affairs. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

As we consider what life could be like at the half-way point of this Century, it is instructive to step back and view the flow of history. It is through an appreciation of how human affairs have changed, and what has driven those changes, that we can grasp what lies ahead. That we can begin to form answers to the questions at hand.

 

Questions such as: will the offline world matter in 2050? Will the teenage grandchildren of today's teenagers interact with the physical world as is currently the case? Will the limitations of our physical world be overcome by then? Will the digital realm be a greater source of influence than the temporal?

 

Prior to recent times, our lives were centred on the world of the atom rather than the world of the bit. It was solely in physical spaces that we built relationships, grew economies and exercised political influence. From the villages of the agricultural age to the cities of the industrial age, domestic, business and government activities were conducted exclusively through analogue means.

 

It is without question that we are in a period of transition. The balance is shifting from the physical to the digital. For although the online world is ubiquitous, we are still beholden to our physical world. Even though the domain names and the virtual properties they represent sell for millions, the power and opportunity that is afforded through the ownership of real-estate is even more significant. Even though a cadre of eminence grise wield the power of social media in commercial and political spheres, we still respond through our presence at the checkout or the ballot box. And even though the value of digital services is rising, our nations’ export earnings still tend to be dominated by that which can be carried in ships.

 

Given that the trees of tomorrow are todays seedlings, that the systems of tomorrow and the way things will be nascent today. What do we see around us? Today our social and retail transactions are dominated by ever-present digital transaction. And, as we grow more comfortable with its safety and ease, tomorrow digital transactions are more than likely to become ubiquitous in all other aspects of our lives such as our domestic, employment, health, romantic and spiritual affairs.

 

Today, most of us are generally free to live our lives free from statutory manipulation. But as we see administrations around the world learning to leverage digital tools to achieve social outcomes, opposing voices may well be reduced to obscurity. For even the phenomena such as the growing Tech-Lash or the various uprisings coordinated through social media will surely fade into impotence as the State develops and controls the digital-only narrative to maintain political control.    

 

And so, in the time ahead, it is conceivable that our lives may well be centred on the world of the bit rather than the world of the atom. It is more than likely that it will solely be in virtual spaces that we build relationships, grow economies and exercise political influence. Where we are headed, transitioning from the cities of the current information age to megapolises of the coming intelligence age it is quite reasonable to assume that all domestic, business and government activities will be conducted exclusively through digital means.

 

From our vantage point from which we have surveyed the sweep of history, we can indeed be confident of one thing. That the life that the teenage grandchildren of today's teenagers experience will be vastly different to our current reality. We can be sure that the offline world won’t be as ascendant in our social affairs. Nor as influential in the ebbs and flows of economic decisions and transactions. And finally, neither as significant for those actors that gain and wield political power. The dominance of the offline world is set to wane.   

 

© Paul Tero 2019

Tags:  digital economy  offline world  power 

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In a fully digital world will companies still need to account for the environment?

Posted By Paul Tero, Friday, July 5, 2019

Paul Tero a member of our Emerging Fellows program inspects the structure of business and the changing environment in a digital economy. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

There are a number of ways in which companies account for the environment. It could be a seasonal perspective in terms of the variations in goods and services brought to market, another is from an environmental perspective in terms of energy usage as well as production and packaging materials, and a third is from a shareholder and stakeholder perspective in terms of statutory requirements. In recent years the triple bottom line reporting framework has made its way into corporate practices. Where companies, for reasons due either to regulatory compliance or enlightened executives, report on profit, people and planet. That is in addition to their standard financial statements. Organizations are reporting on metrics related to their staff and their impact upon the environment.

 

Building on the acceptance of reporting on more than one performance parameter, there is a nascent movement to embrace the quadruple bottom line. Where this fourth performance parameter is "purpose". Defined as the ethics, culture and desires of the organization. The administrative policies and processes that are established by government bodies, and are used to govern companies and organisations, change over time. Long gone is the notion that business reputation is solely built on a profit and loss statement.

 

Into this governance implication let us now draw two threads of previous thought: the structure of business and the changing environment. First, we know that the process business engages in to make a profit will change in the decades ahead. Pervasive digitisation will drive an increasingly ubiquitous phenomena of process automation and forms of cognitive processing. Limiting the typical set of tasks available for the human workforce to those requiring people skills and/or thinking skills. Secondly, while this trend of digitisation gathers apace the climate and natural environment in which business and the digital economy is beholden to will still be changing. There are two responses to these macro changes. The first, described as a pathway of current and common ambition, is to succeed in humanity having a light footprint on the environment. On the other hand, the pathway of lackluster ambition necessarily leads to outcomes that are less than optimal for all life forms.

 

There is currently a broad acceptance of the concept of a global carbon budget. Therefore, one can envisage that, over the course of the time horizon we are concerned with, this principle of a global budget being established in corporate governance practices. Where economic entities are given a "profile" to work within. Thus, realising a transition from triple bottom line reporting through quadruple to quintuple. That is adding "profile" to the currently recognised profit, people, planet and purpose.

 

With respect to the triple and quadruple bottom line reporting the sense is that these governance outcomes are the result of internal motivations. The result of what the business decides to do. With the "profile" metric, the sense is that the reporting is on the outcomes with respect to the environmental budget that any business is given to work within. This "profile" metric, a response to a set of imposed environmental limits, is relevant to both climate outcomes. Through either an enforced collaboration upon all businesses to ensure a continued light footprint, or a set of rules to limit the damage upon our common habitat.

 

The image of this future for business, the government and the economy is where the operational milieu of business is characterised as an expanse of intensely interconnected entities that are data and computationally rich. Where the description has morphed from being called a digital economy into an intelligence economy. Where the wisdom of the quintuple bottom line enforces the boundaries of all behaviour.

 

In a fully digital world companies will not only need to account for the environment. They will be required to.

 

© Paul Tero 2019

Tags:  digital economy  economics  environment 

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What’s Cash?

Posted By E. Alex Floate, Tuesday, June 11, 2019

Alex Floate, a member of our Emerging Fellows program examines the concept of cash in a global digital economy through his fifth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

Adam Smith suggested over two-hundred years ago that all money is nothing but a matter of belief. Even with the complexity of today’s economic and monetary systems, it still appears that Smith was right. We believe money has value and that value will be accepted by others. Even commodity-based money systems, such as the gold standard, relied on belief that the commodity is of value and exchangeable for other goods or services. Belief, value and trust is what composes our money.

 

Currently governments serve the function of guaranteeing trust that money is worth the face value printed on it. That as legal tender it is exchangeable for other items of value. This trust and value placed in currencies is based on the belief of the economic and political stability of the country. Some currencies, such as the US Dollar have greater belief entrusted to them and are used more widely than others for both legal and illegal transactions; the USD accounts for more than 85% of currency conversions on any given day. Despite predictions of impending doom of the US Dollar due to quantitative easing during the 2008 recession, those moves by the US Treasury bolster the status of the dollar as it demonstrates the willingness of the government to protect the Dollar based economy.

 

Exchanging money can be simple when the other person is standing in front of you and can be easily handed the preferred legal tender. Try to transact across distance, or with large sums, and gatekeepers to the money will necessarily become involved. These include the treasury that issued the money and create the rules for the currency, the banks or institutions that will carry out the transaction, and the institution that receives or sends the money depending on whether you are the buyer or the seller. 

 

Each of these institutions, in addition to having the mechanisms and expertise to conduct the transaction, are also part of the trust mechanism that ensure the belief in the currency remains intact. However, all these gatekeepers create friction in the system that increase the costs of transferring value. Technology can be key in removing those frictions, but current financial interests who profit from this friction will do their best to maintain the status quo. Smokescreens that create the illusion of digital currency will become more common, but the call will most likely remain for the US dollar to remain the universal currency.

 

But in a global digital economy who will be the new gatekeepers? Though legal tender is the property of the issuing country, value stored in the money is not the property of the government. Value can be exchanged by other means, such as digital currency or credit in exchange for value. A future where Alibaba or Amazon trade in their own currency, with employees and contractors exchanging their value for credits on account, is not that far outside the realm of possible.  

 

A threat to both traditional means of exchanging value and potential new universal currencies are the rise of nationalist and tribalistic movements across the globe. If these movements win out physical and digital borders will become hardened, networks will be splintered, and markets fragmented. In this situation where will innovation come from, and how will value be held and exchanged? Those organizations and individuals with technical knowledge and savvy will be in the best position to navigate and profit from this situation. Those outside of this group may find themselves with either diminished ability to easily transact with the new digital currency or be at the mercy of a new set of gatekeepers, who have ‘digital collars’ instead of white ones.      

 

© 2019 E Alex Floate

Tags:  cash  digital economy  economics 

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In a fully digital economy, will you need the same things as you do today?

Posted By Administration, Monday, May 6, 2019

Paul Tero a member of our Emerging Fellows program thinks that in a fully digital economy we won’t be needing the same things as today, but we will be needing the same types of things. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

We produce goods and services and we trade in those goods and services because we either want them or need them. There is a market for them. But in the decades ahead, in a market of bits rather than of atoms, will we still be using the same things we do today? From a final consumer perspective, will the digital economy of the future be unrecognizable compared to today's economy?

 

Consider the retail sector. Where it’s all about the creation and trade in products for the home, for our relaxation, for our sustenance. Or the business sector, where that same dynamic of creation and exchange can be used to drive innovation, to improve operational efficiency, or to maintain a market profile. Or even the public and the not-for-profit sectors, where those same market mechanics apply. That is, in order to provide services, products are purchased. And where nascent product creators are supported.

 

Reflect too on the structure of this global production and trade system. At over $80trillion dollars, the global economy is broadly comprised of agriculture (primary activity) at 3%, industry (secondary) at 30%, and services (tertiary) at 60%. An important factor in all of this are the sources of government taxation. A third of government revenue is from income, profits and capital gains and a third from taxes on goods and services.

 

Assuming ceteris paribus, in the coming decades you and I will still have need for shelter, for food, for companionship and relaxation. The same argument can be made for business, for government and the third sector comparing the needs of today and tomorrow. Of note, however, is the form through which the need is satisfied. We no longer desire, for example, to take our family in a horse drawn buggy on a holiday to the sea-side, or to join with family and others to around a wireless set listening to the latest play. Nor do businesses require a typing pool for the efficient production of company memos and customer missives.

 

Nowadays digital channels of communication are usurping long establishing temporal forms of connections. Nowadays, micro-targeting of marketing messages is more effective at driving trade in goods and services than legacy mass media. Nowadays, there is a greater level of involvement and transparency with those that are served by the public and third sectors compared to times past.

 

And tomorrow? Through a utopian lens we could see life being further enhanced by digital technology. It could be argued that just like today, where a life stage for an adolescent is marked by receiving a smartphone, that same transition for a teenager in 2050 could be celebrated by receiving their own life-enriching wearable AI tech. A world, for this teenager, where the uncanny valley is no longer a limitation in media and entertainment channels. A world, as teenagers look at the career paths of their parents, that is dominated by the output of firms that have put a high priority on employees with first rate people skills and thinking skills.

 

Likewise, through a dystopian lens, life for that teenager in 2050 could be one that is further controlled by digital technology. AI implants mark the adolescent life transition. Options for entertainment and other daily choices are slanted toward optimal social outcomes. Beckoning career paths are with firms that are aligned with forms of surveillance capitalism.

 

The threads that are common to both scenarios are the changes in social structure and the innate desire to make things easier for ourselves. Over time our social institutions change and the people to which we ascribe status. It could be argued that in recent history major sport clubs and/or political parties have supplanted religious groups as our common social institutions. It could be that the realm of the AI and quantum computing scientist and engineer becomes the new sanctum. A new standard of social acceptance that leads to the erasure of the barrier to all forms personalised AI tech.

 

Regarding the desire for making things easier, the so-called “efficient transaction hypothesis”, witness the smartphone. We embraced it because it made complex or time-consuming tasks (personal transactions) more efficient. It made communication easier, information gathering easier and entertaining easier. A significant factor of human nature that will drive the future acceptance of technologies that we perceive today as pervasive and distasteful.

 

In a fully digital economy we won’t be needing the same things as today, but we will be needing the same types of things. The world of atoms meets our needs today; the world of bits will meet our needs tomorrow.

 

© Paul Tero 2019

Tags:  digital economy  economics  service 

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