My talk to the joint OECD/G20 German Presidency conference on digitalization in Berlin on January 12, 2017. Fitness landscapes as applied to technology, business, and the economy. Note that the fitness landscape slides will not be animated in this PDF, which I shared this way so that you could see my narrative in the speaker notes. While it has some slides in common with my White House Frontiers conference talk, it includes a bunch of other material.
The future is full of
amazing things. On my way here, I spoke out loud to a $150 dollar device in my kitchen, asked it if my flight would be on time, and then asked it to call a Lyft to take me to the airport. A few minutes later a car showed up. And in a few years, that car might well be driving itself. Someone seeing this for the first time would have every excuse to say “WTF?” That of course is an expression of surprise and delight that stands for What’s the Future? But many lot of people are reading the news about technology and the economy and are feeling a profound sense of unease. They are also asking themselves WTF? What’s the Future? But in a very different tone of voice.
“…47 percent of jobs are
“at risk” of being automated in the next 20 years.” Carl Frey and Michael Osborne, Oxford University “The Future of Employment: How Susceptible Are Jobs to Computerisation?” They read that researchers at Oxford University project that up to 47% of human tasks, including many white collar jobs, could be eliminated by automation within the next 20 years.
Will there really be nothing
left for people to do? Is there really nothing left for humans to do? They’ve seen calls for Universal Basic Income, with the assumption that there will be nothing left for humans to do once corporations outsource all the work to machines. While I think Universal Basic Income is an intriguing idea, I don’t think we need it because there will be nothing left for humans to do. There’s plenty to do. The problem is that
Our global economy has the
mistaken idea that the goal of technology is to maximize productivity, even if that means treating people as a cost to be eliminated. Our economy has the mistaken idea that the goal of technology is to maximize productivity, even if that means treating people as a cost to be eliminated.
That’s a problem “The people
will rise up before the robots do.” Andy Macafee Co-author, The Second Machine Age Erik Brynjolfsson and Andy Macafee Even leaving aside the obvious problem of injustice and inequality, this is the stuff of revolutions. Andy Macafee, the author, with Erik Brynjolfsson, of the Second Machine Age, once said to me, talking of the fear that robots will take over, “The people will rise up before the robots do.”
We’ve seen this happen before
We’ve seen this happen before. In England, back in 1811 and 1812, a group of weavers led by Ned Ludd staged a rebellion, smashing the steam powered looms that were threatening their livelihood. Ludd and his compatriots were right to be afraid. The decades ahead were grim, as machines replaced human labor, and it took time for society to adjust.
The weavers of Ned Ludd’s
rebellion couldn’t imagine… But those weavers of Ned Ludd’s time couldn’t imagine that their descendants would have more clothing than the kings and queens of Europe, that ordinary people, not just kings and queens, would eat the fruits of summer in the depths of winter, luxuries brought from all over the world.
They couldn’t imagine… They couldn’t
imagine that we’d tunnel through mountains and under the sea, that we’d fly through the air, crossing continents in hours, that we’d build cities in the desert with buildings a half mile high, that we’d put spacecraft in orbit, that we would eliminate so many scourges of disease! And they couldn’t imagine that their children, grandchildren, and great grandchildren would find meaningful work bringing all of these things to life!
What is our failure of
imagination? Victorian England eventually rose to the challenge. Instead of sending children to work in the factories, they learned to send them to school. They shortened the work week and paid higher wages. And society became more prosperous. What is our failure of imagination? Why are we using technology to put people out of work rather than using technology to put people *to* work on the jobs of the future? What is our equivalent of sending kids to school instead of to work in the factories or the chimneys? What is our equivalent of the wonders that the industrial age brought to the world?
It isn’t technology that wants
to eliminate jobs “Technology is the solution to human problems. We won’t run out of work till we run out of problems.” Nick Hanauer It isn’t technology that wants to eliminate jobs. Here’s what technology really wants. Nick Hanauer, who was one of the speakers at my Next:Economy Summit last year, put it best when he said: “Technology is the solution to human problems. We won’t run out of work till we run out of problems.” Are we done yet? Are we done yet?
Some global grand challenges technology
can help us to solve • Climate change. • Rebuilding and rethinking the infrastructure by which we deliver water, power, goods, and services like healthcare. • Dealing with the “demographic inversion” — the lengthening lifespans of the old and the smaller number of young workers to pay into the social systems that support them. • Income inequality. • Displaced people. How could we use technology to create the infrastructure for whole new cities, factories, and farms, so people could be settlers, not refugees? Some global grand challenges technology can help us to solve - Climate change. - Rebuilding and rethinking the infrastructure by which we deliver water, power, goods, and services like healthcare. - Dealing with the “demographic inversion” — the lengthening lifespans of the old and the smaller number of young workers to pay into the social systems that support them. - Income inequality. “The people will rise up before the robots do.” - Displaced people. How could we use technology to create the infrastructure for whole new cities, factories, and farms, so people could be settlers, not refugees?
The use of automation by
business to reduce labor costs and increase profits is a social and political choice, not an economic law! It’s not new technology we should be afraid of. It’s the dominant ideology that says that people don’t matter, that the need for business to maximize profits is as natural as the law of gravity. The use of automation by business to reduce labor costs and increase profits is a social and political choice, not an economic law! I made this case in an article I wrote last year on LinkedIn, arguing that the rules of economics that we take for granted are more like the rules of a game than the laws of physics. The rules could be optimized to make the game better. That is your challenge.
The March of Progress If
you’re like me, you’ve gotten accustomed to seeing charts like this, from Max Roser’s Our World in Data, documenting the march of progress during the 20 th century. We’ve congratulated ourselves repeatedly for the seemingly inevitable continuation of that progress, despite bumps in the road. In Silicon Valley, people are so optimistic that they imagine that progress will become exponential.
But not everyone is equally
happy But as Brexit and the election of Donald Trump tell us, there are a large number of people who don’t think the economy of the future will be better for them.
Fitness Landscapes The way in
which genes contribute to the survival of an organism can be viewed as a landscape of peaks and valleys. Through a series of experiments, organisms evolve towards fitness peaks, adapted to a particular environment, or they die out. Image source: http://evolution.berkeley.edu/evolibrary/article/side_0_0/complexnovelties_02 Recent events in world politics, as well as the history in the technology industry as I’ve lived it for the past thirty years, remind me that the notion from evolutionary biology, of a fitness landscape, is perhaps a better metaphor for how the future unfolds than the graph that goes always up and to the right. A fitness landscape is a way of visualizing how genes contribute to the survival of an organism and a species. External conditions can be viewed as a landscape of peaks and valleys. Through a series of experiments, organisms evolve towards fitness peaks, adapted to a particular environment, or they die out.
Fitness landscapes are dynamic When
conditions are stable, a population chooses one fitness peak and stays there. But when conditions change rapidly, populations must migrate to a new fitness peak. When conditions are stable, a population chooses one fitness peak and stays there. But when conditions change rapidly, populations must migrate to a new fitness peak. That’s what Brexit and Donald Trump voters are trying to do.
Local Maxima Once you are
on a peak, it’s hard to get to another one, even if it’s higher. You have to go back down. It may be easier to get to the top if you are already starting from a valley floor. One of the really interesting ideas is that there are local maxima in a fitness landscape – peaks of adaptive success – that organisms are evolving towards. But they key point is that you can’t easily get from one peak to another. You have to go down before you can go up again. It may be easier to get to the top if you are already starting from a valley floor.
Technology also has a fitness
landscape In my career, I’ve watched a number of migrations to new peaks, and I’d like to share with you some observations about what happened, and why. And then we’ll talk about some lessons for digitalization of the overall economy. Personal Computer Big Data and AI Smartphones Apple So why am I telling you this? Technology and business also has a fitness landscape, and one that changes very rapidly. In my career, I’ve watched a number of migrations to new peaks, and I’d like to share with you some observations about what happened, and why. And then we’ll talk about some lessons for digitalization of the overall economy. When a new wave of technology hits, a new company almost always becomes dominant. The dominant company of one technology wave sometimes manages to survive, but it loses its privileged position as the technology marketplace migrates to a new peak. The path to the top of each new peak requires new competencies – a new fitness function – and the old competency actually holds back the previously dominant company.
Big Data and AI Tim
Berners-Lee, 1990 The World Wide Web Linus Torvalds, 1991 Linux One of the things that I’ve learned is that the surest way to drive entrepreneurs to seek the fitness peak of a new technology and a new business model is for dominant players to take too much of the value for themselves. And just as in biology, it’s easier to get to the new peak from the valley. I watched this happen with Microsoft in the 1990s. The company had used its dominance over the operating system to lock out competitors. But the innovators just went elsewhere, where there was an opportunity for open innovation, and invented the future on the way up a new fitness peak. Tim Berners-Lee introduced the World Wide Web in 1990, and Linus Torvalds introduced Linux in 1991. Between the two of them, the paradigm changed. Software was now a commodity. Big data was the new source of competitive advantage, with Google at the latest peak in the fitness landscape. Net lesson: You lose when you try to capture too much of the value for yourself. And you lose again if you hang on to the old rules of business when faced with the resulting change in the fitness landscape.
Bringing this insight round to
the world you live in, of economics, this graph from James Kwak shows the rise in the share of corporate profits going to finance. Banking is a system that was created to serve the needs of the real economy of goods and services, but now it largely serves itself. One of the big drivers of the increase in profits is program trading, which does little or nothing for the real economy. Rana Foroohar, author of Makers and Takers, a book about the rise of finance and the decline of industry, estimates that only 15% of financial activity now goes to the real economy. 85% is simply people profiting from moving money around. Government spends a lot of time looking at how to regulate the impact of technology companies like Google and Facebook. I believe you should be looking more strongly at the financial industry. A financial transactions tax, limits on stock buybacks and executive compensation, would be a good start. The worldwide economic malaise is a symptom of this problem.
What is the result? Voters
are moving away from the fitness peak of the neoliberal consensus. We don’t know yet where that new fitness peak will be, but the migration is telling us loud and clear that the economy needs some fresh thinking. Voters are moving away from the fitness peak of the neoliberal consensus. We don’t know yet where that new fitness peak will be, but the migration is telling us loud and clear that the economy needs some fresh thinking.
Yes, things are changing. But
one thing doesn’t change. A successful ecosystem creates opportunity for everyone, not just a few. Yes, things are changing. But one thing doesn’t change. A successful ecosystem creates opportunity for everyone, not just a few. The fundamental fitness function of government is to make a better life for all its citizens. A group such as the G20 must take as its scope a better life for all citizens of the world. What I’ve learned from watching successions of technology leadership is that companies lose that leadership when they forget this.
We will create the economy
of the future when we remember that the function of technology is to empower people to do things that were previously impossible! We will create the economy of the future when we remember that the function of technology is to empower people to do things that were previously impossible!
Government statistics, economic modeling, and
regulations are too slow for the pace and scale of the modern world “Would you cross the street with information that was five seconds old?” - Jeff Jonas, IBM Fellow The greater speed and scale of the systems we use today make a compelling argument that the tools government relies on to manage the economy are far, far too slow. As former IBM fellow Jeff Jonas noted, “Would you cross the street with information that was five seconds old?” Yet government statistics for managing the economy are usually years old, while hedge funds and other financial players are no longer forecasting, but, as Google chief economist Hal Varian calls it, “nowcasting.”
Our problems with the financial
industry are analogous to the Facebook “fake news” controversy. We’ve got an entire industry based on Fake Finance. If there were one piece of advice I’d give you, it would be to take a much harder look at whether our current financial system is serving the real economy. I think you’ve done a much better job of managing that here in Germany, but in the US at least, shareholder capitalism has run amok. Frankly, I think Facebook and Google have a far better record of policing themselves in the public interest than our financial system does.
Users post 7 billion pieces
of content to Facebook a day. Expecting human fact checkers to catch fake news is like asking workers to build a modern city with only picks and shovels. At internet scale, we now rely increasingly on algorithms to manage what we see and believe. Fake news also teaches us a lot about how regulatory systems need to change. There have been many calls for Facebook to use human fact checkers to eliminate fake news. Users post 7 billion pieces of content to Facebook a day, and most stories that go viral do so in a matter of hours. Expecting human fact checkers to catch fake news is like asking workers with picks and shovels to build a modern city. At internet scale, we now rely increasingly on algorithms to manage what we see and believe. Those algorithms are the tools of human judgment, not a replacement for it, just like the giant machines we see on the skyline of Berlin are the tools of human effort.
This is why Mark Zuckerberg
tells his team “Move fast and break things.” - Mark Zuckerberg One of Mark Zuckerberg’s rules, which he drummed into his staff from the earliest days of Facebook, is to “move fast and break things.” This is completely counterintuitive to those who live in the careful world of politics (though as Donald Trump has shown us, that is changing.) This is not an injunction to be careless, just a reminder that urgency and innovation beat over-careful planning in a fast moving world. Facebook, Google, Amazon, and other Silicon Valley success stories are machines for learning.
“Build, Measure, Learn.” Eric Ries,
The Lean Startup What drives Mark’s injunction is an approach that has been formalized by Eric Ries as “the lean startup.” Eric tells the story of his first startup, which designed and built a complex 3D avatar system for instant messaging. It failed utterly. In thinking what they could have done differently, Eric realized that they could have saved themselves years of effort and millions of dollars if they had built something much simpler. He defines the “minimum viable product” as “that version of a new product a team uses to collect the maximum amount of validated learning about customers with the least effort.” A typical Silicon Valley company doesn’t release software after years of specification and procurement, followed by years of development, only to fail on release, like the US healthcare.gov website. Instead, features are rolled out and tested incrementally in what Eric calls a “Build, Measure, Learn” cycle. Features are built incrementally, tested on users, and deployed only when they are known to work.
Every day, they are inspecting
the performance of their workers and giving them instruction (in the form of code) about how to do a better job In digital systems, the workers are programs, and software engineers are their managers Programmers are actually managers. Every day, they are inspecting the performance of their workers and giving them instruction about how to do a better job. The Build-Measure-Learn cycle is the equivalent of a manager giving feedback to his employees. Except that the employees are now programs. Companies like Google and Amazon run thousands of experiments a day, constantly improving their algorithms and their product.
“This isn’t just how we
should be developing software. It’s how we should be developing policy.” Cecilia Muñoz, Director, White House Domestic Policy Council Working with the new United States Digital Service, the White House developed its new college scorecard program using these techniques. As Haley van Dyke, Deputy Director of the USDS told the story, the USDS team that built the software was raked over the coals for not incorporating features requested by White House staff. They replied that they had tested these features on thousands of students, and none of them used them, so they took them out of the product. When staffers protested that they wanted their features in the product, Cecilia Muñoz, the Director of the White House Domestic Policy Council, backed up the USDS team, saying “ “This isn’t just how we should be developing software. It’s how we should be developing policy.”
One of the things that
it is essential to understand is that, as Tom Steinberg, the founder of the UK non-profit MySociety, once wrote, “Good governance and good policy are now inextricably linked to the digital.” Digitalization is no longer an option. We have to get it right.
One of the most useful
documents outlining how to apply the best practices of the technology industry to government is the UK Government Digital Service design principles. It’s unfortunate that after the change in government, the UK GDS has been sidelined, with a return to business as usual. I worry that the same thing may happen in the US.
“Doing digital is not the
same as being digital.” Josh Bersin Deloitte As you think about digitalization, it’s important to remember that, as Deloitte’s Josh Bersin put it, “Doing digital is not the same thing as being digital.”
“We have to go from
apps to ops.” Jennifer Pahlka Code for America & USDS My wife, Jennifer Pahlka, founder and executive director of the nonprofit Code for America, which works to bring government services into the digital age, and who was the co-founder of the United States Digital Service, likes to say that government has to move “from apps to ops.” In moving to digital, government has too often simply recreated its old paper-based processes rather than reinventing them. It’s essential to rethink services in light of what is now possible.
One country that has done
a good job of the first generation of digitalization is Estonia, which was also the home of Skype, one of technology’s great success stories. Estonia didn’t just recreate its paper based processes, it created a whole new digital infrastructure centered on what its people really need.
“The smartphone is becoming a
remote control for real life.” Matt Cohler, Benchmark Partners I said that what Estonia had done was the first generation of digitalization. It’s critical to understand that digitalization is coming to the real world. Matt Cohler, one of Facebook’s earliest employees and now a venture capitalist, noted one key point about his investment in Uber. He said “the smartphone is becoming a remote control for real life.” This is a key takeaway from on-demand apps. Don’t get all caught up in whether or not being an Uber driver is better or worse than being a licensed taxi driver. Think about how technology can transform real world processes. We have to reinvent processes, not just duplicate them.
“Uber is a lesson in
building for how the world should work instead of optimizing for how the world does work.” Aaron Levie, Box.net I know you aren’t big fans of Uber here in Germany. But it is an application that teaches us something very important about the future. We had connected taxicabs before Uber. They just stuck a credit card reader in the back along with a television screen to show ads. It took a radical rethinking of the possibilities lying latent in digital technology to realize that a smartphone in the hands of both drivers and passengers meant that it would be possible to completely change the way transportation was summoned, who provides it, and how payment is collected. What business processes are you simply recreating in the digital era, when you should completely reinvent them? Aaron Levie, founder of another internet startup, box.net, made this admiring comment about Uber that has always stuck with me. “Uber is a lesson in building for how the world should work instead of optimizing for how the world does work.”
Zipline, a California startup working
in Rwanda, is a great example of reinvention. It shows how two of the latest technologies, on-demand and drones, can utterly transform how we think about healthcare delivery. They have been doing a pilot project, delivering blood and critical medicines to isolated local clinics. The country has poor, often impassable roads, and lacks developed hospital infrastructure. Postpartum hemorrhage is a major cause of death. By drone, blood can reach any corner of the country in 15 minutes or less. We should be thinking about how technologies like on demand and self-driving cars would let us reinvent public transportation and the shape of our cities, not regulating them as a threat to incumbent 20th century industries! The key to making good use of new technology is to keep your eyes fixed on the fitness function of government, which is the greatest good for all of society. Embrace the future. Don’t fight it. WTF can also stand for “Welcome the future!” Thank you very much.