The Future, This Week 10 March 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 we're going to look at whether Silicon Valley sexism is a feature or a bug, why your condom might be spying on you, and fake milk. 

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. So what happened in the future this week Sandra?

Sandra: We're going to start by looking at sexism in Silicon Valley and all the stories that have recently come up with Uber. Today we'll try to look at the fact that Uber really seems not to be an outlier in this industry but sexism has been a problem for quite a while in Silicon Valley and it doesn't seem to be improving. 

Kai: No I think there's a number of reports now that are coming out which put emphasis on workplace problems, sexism but also a stark underrepresentation of women in the tech industry by and large. 

Sandra: We've picked up an article from the Ringer which has also been picked up by the MIT Technology Review that actually looks at the fact that this is widespread in Silicon Valley the fact that companies like Uber and Tesla and Facebook have all been hit with allegations or with actual lawsuits around this. And the fact that this problem doesn't seem to be going away regardless of how much bad press these companies get and no matter how widespread within the organisations the problem is. There is a lot of rhetoric around fixing this but there doesn't seem to be a lot of consequences for these companies or for their employees. 

Kai: What I found significant is that many people don't seem to be surprised. It seems to be a well-known problem within the industry. However what I find surprising though is that it contrasts quite significantly with the general narrative that you get around tech companies and there's been a number of articles in recent months about how the workplace culture in US tech companies is attractive to employees. All the perks that they provide for employees the innovative culture even diversity. There was an article in Fortune in January which basically said that diversity and innovation play a great role in becoming a great tech company. So they were actually saying that many tech companies play on the fact that they are inclusive that they are diverse. That they have all these kind of perks for their employees to present themselves as very attractive employers. And I think that runs counter to the whole narrative that is surfacing now in the wake of the Uber controversy.

Sandra: So it seems the reality is quite different and many have called for these companies to do something about it. What has been the response to that?

Kai: I think first of all there's research quoted in the Fortune article which says that workplaces that are admired by their employees for their inclusiveness and diversity are actually in a better position to innovate and I think it's common sense if you think about it. These companies build products they build apps for all of us. Right. Male / female. For quite a diverse population. So you would think that they would benefit from as diverse an input as they can receive. And so having a male culture having a male dominated workplace is not really in their best interest. 

Sandra: And yet it seems that for most of these companies the reality is that very few women work there. I think for Uber the numbers quoted in recent articles were, the best numbers were around 25 percent of the workforce being women and this was down to about 3 percent, some numbers were quoting in last year. Does that mean though for the ability of these companies to change themselves? And if you cannot enact change in an entrepreneurial culture because remember we're talking about these large companies like Uber or Facebook but Silicon Valley is about an entrepreneurial culture and start-ups and venture capital is giving money to these start-ups. If these are mostly men, how do you enact change where there is no large institution? We've seen very successful drives in let's say Scandinavia where the government might have enacted laws to make sure that there are women quotas for instance or in Australia indeed with the Australian Army and General David Morrison championing it from the top which you can easily do when you have an institution but when you're talking about an ecosystem like the one in Silicon Valley where this is pervasive, what do we do about this? 

Kai: Yeah it's a good question. I think my intuitive answer would be data. Right. Those companies are really susceptible to acting on evidence right. So if you have evidence and data that show that inclusive diverse companies are more successful than the ones that are male dominated I think that's a good bottom up way to introduce change to the industry because then it becomes an issue of business significance. It's a bit sad that it has to go via that route that it's not self-evident that they're doing the wrong thing but it might be a way that gets change underway and makes it an obvious normal fact of life that a diverse workplace brings about more diverse ideas and more innovation as a result. Which reminds me of a study that was quoted yesterday on the ABC when they were talking about International Women's Day. The study in Finland among traders which showed quite conclusively that female traders are more successful because they are less emotional when it comes to making business and investment decisions. And they consistently outperform their male counterparts. We have data in other industries and so studies to that effect in the tech industry might actually carry some weight.

Sandra: And indeed this would shift the conversation from not being able to capture the lost innovation to being able to capture the gains that we have along the products or services that these companies are delivering.

Kai: Yes indeed. Which brings us to our second topic of the day: device security. So the tech company is in focus this week for the security of the devices that each and every one of us are using. There was a report all over the news that CIA documents have been leaked to WikiLeaks that showed that the CIA is spying on each and every one of us increasingly not by tapping into the communication on the Internet which is increasingly encrypted. That's the good news. But by tapping directly into what they call the end points, the devices - your TV, your Smartphone. Which are deeply flawed when it comes to security it seems.

Sandra: A recent example of this was the Samsung smart TV hack that made it seem like the TV was off while it was still spying on people in the house. And I think this is quite important to bring up alongside the host of other devices that might be hacked in our lives.

Kai: If we think about self-driving cars, self-driving trucks, the Smart home, hackers can potentially hack into your security system which might give them easy entry into a house that is supposed to be very secure. Hacking into self-driving cars, hijacking cars while you're sitting in the car, hijacking self-driving trucks...these are all quite scary prospects and I think we'll be seeing more of this as the Internet of Things proliferate and smart devices make their way into all different parts of our daily lives.

Sandra: And indeed the Internet of Things conversation has been around everything from as you've said smart cars but also smart toasters and smart television sets and smart toothbrushes, wearable devices including very personal wearable devices like condoms.

Kai: Indeed a new smart device that is supposed to come on market in the next coming months that measures your personal performance while engaged in the act. And you can actually share that data via a smart phone app with your friends, the world. I'm not sure who wants to do this but it does point to the fact that we are increasingly collecting very personal data that might not be as secure as many people might believe.

Sandra: So wearables so far have helped us monitor our heart rate, our steps that we take, what kind of personal data are the smart condoms collecting?

Kai: Apparently things like thrust, velocity. Not sure why these are important measurements and why you would want to share them with the world. But the point here is that the more we have these devices in our lives the more we're being susceptible to spying on us. So the moment the condom is spying on us our smartphones are spying on us our TVs, our toasters, our fridges what are we going to do about this? I mean these are light hearted examples but examples like car hijacking, truck hijacking especially in the face of recent terrorist attacks they point to some really serious threats. So what is the industry doing about it?

Sandra: The industry is finally taking notice about this. Last week was mobile world congress week in Barcelona and the security industry had a fairly blunt message for those thousands of brands at the world's largest trade mobile show. And the message was get your shit together. 

Kai: Yes security experts outlined quite convincingly that the architecture most mobile devices most Internet of Things devices are built on is still a fairly ancient architecture when it comes to technology. There's still the architecture of the computer or the standalone computer of the 70s and 80s in many respects so we have to really fundamentally rethink the way in which we deal with device security in a day and age where everything seems to be connected to the Internet in the near future and that not only makes this a topic for everyday people but for businesses because the fact that the CIA can hack into end point devices means that anyone with enough ingenuity and money can potentially do it which points to the very real problem of commercial espionage. 

Sandra: And indeed it's important to remember the fact that we have sort of three types of hackers if you will. We have organised crime groups whose main motivation is to get some kind of financial gain from hacking the system. But then we also have terrorists groups where the gain from doing such an attack is either the loss of life or loss of business or just sheer panic. And then we have the state attacks, the foreign governments that would perform these attacks on the variety of devices where the motivation is gaining knowledge, gaining insight into things. So Cyber security is becoming a very complex problem not only a very urgent problem. And in order to try to address this in the US the non-profit group Consumer Reports has decided to actually add to their detailed reviews of consumer goods. Also cyber security has a rating category that will go alongside every single product which makes this a problem for the future of business for all companies. 

Kai: So connected devices will have a rating when it comes to security including our smart condoms is that what you're saying?

Sandra: That is what I'm saying. And interestingly they've teamed up with Google to do this. This and to publish an open standard which will also be available on GitHub and this standard would cover things like security, privacy, ownership, governance and compliance. So it's interesting for a number of reasons. 

Kai: We have one more topic - fake milk Sandra.

Sandra: Fake milk? Is there such a thing as fake milk?

Kai: Apparently there is. There's been some controversy around what can be called milk. There was an article last week in the New York Times about fake milk. Apparently the milk industry the dairy industry is really worried especially in the U.S. where this is coming up now that start-up companies, innovators in the food industry, are selling their plant based products as milk and they don't like it because the milk industry has been in decline, milk sales has been down between 11 and 17 percent in 2016 depending on the source. Whereas those startups and milk such as almond milk, soy milk chocolate milk and all kinds of milk vegan products sold as cow free milk are seemed to be very popular and gaining in market share. And so there's been an initiative by 32 states to bring a piece of legislation before Congress called the Dairy Pride Act which will define for the first time milk. 

Sandra: How do we define milk? Is it where it comes from or is it what we do with it? If we're using almond milk or soy milk, rice milk as a substitute for milk in coffee or cakes.

Kai: Well people then naturally call it milk. I think everyone understands that it's not cow milk but if we use it like milk then why not call it milk? So the industry is worried that those products chew into their margins so they fight over the territory and over wanting to own the word milk. 

Sandra: And they are indeed encroaching on their territory. So we've had as you've mentioned decreases in traditional milk sales but sales are things like almond milk have gone up 250 percent last year according to Nielsen. 

Kai: Yes. But what I think is that this is a topic of wider relevance for innovation more generally because it points to what happens during innovation when new products encroach on the territory of incumbent products, is that there's always a fight over who gets to own the category. In the case of milk, this is interesting because milk itself, the shelf milk that we buy in the supermarket is controversial because the organic raw milk producers argue that this is actually industrialised milk. And so the point here is that what we call milk these days is not what comes straight from the cow. It's actually also the product of an industrial process of homogenisation, pasteurisation, heating, taking fat out of the product. And so what comes straight from the cow is now raw organic un-homogenised and pasteurised full cream milk. So it has to carry all these kind of adjectives because it's different to what it is now than normal standard, which is supermarket shelf milk but that's far from the original product that comes from the hooved animal. So that already points to a change in what the product is today versus what the product used to be 100 years ago. 

Sandra: So indeed in Australia raw milk that comes straight out of a cow - it's not milk it's fake milk as well. 

Kai: In fact it's illegal. You cannot sell it. Many countries in the world have made it illegal. In some countries it's perfectly legal to buy raw milk like in France you can buy it in Germany in Asian countries whereas in other countries it's illegal. In fact the US is almost split in half some states allow it. Others don't.

Sandra: So there seems to be always a debate between incumbents and innovators around what the broader categories that these innovations are happening around what these broad categories are called. 

Kai: Yes. The moment it disrupts us come into the industry and want a piece of the industry and innovation happens and the products change, incumbents and disruptors will naturally fight over who gets to own the normal category. 

Sandra: So have we seen this before? 

Kai: Well milk is a good example because industrialised milk is now milk whereas what used to be milk is now raw milk unpasteurised milk. So what used to be the normal standard now has to carry an adjective whereas industrialised milk is now the normal category. And we see this in all kinds of different industries. In fact it's not a new phenomenon. In the eighteen hundreds, similar controversy broke out over the sales of margarine which was touted at the time as counterfeit butter. In 1886 dairy producers supported a federal tax on margarine and in 1902 interestingly that law was amended to increase the tax on margarine that looked like butter which was coloured to be yellow, margarine in fact is white, but margarine that was made to look like butter incurred a higher tax. I can't believe we're talking tax again. 

Sandra: I was going to say we did get back to tax. So how did people dodge tax back in the day? 

Kai: There was one producer which shipped margarine just in the white natural colour and then put a sachet with yellow dye so people could actually colour their margarine to make it look like butter. I don't think that was a lasting product success. 

Sandra: What do we learn from this for innovation more generally? 

Kai: These fights over food identity or product identity are a normal example of how innovation unfolds when it becomes normal in an industry where we go from something that is new and disruptive to it becoming normal to what used to be normal taking on a place in a niche in an existing industry. And indeed I think we're going to see more and more of this. 

Sandra: I think so too. So a similar debate is already starting to break out around what we call meat. And what we call hamburgers. So if we have meat that is grown in a lab that has not come from the same hooved animal that our milk is coming from, should that still be called meat? Should they be called fake meat?

Kai: Yes indeed. You could argue it is still meat because it's got the same genetic makeup but it did not come from an animal. And the controversies around this, there's a name for this it's called ontological politics. It points to the fact that reality doesn't just present itself to us, it's an outcome of our practices our conventions and the way in which we negotiate collectively what things are called, what things are, what gets accepted, what gets rejected, what gets put into a niche and what becomes normal as innovation unfolds over time. 

Sandra: So indeed we've seen this already with phones with old phones being now called landlines, with smartphones now just becoming phones and with dumb phones being called dumb phones.

Kai: And with milk, who knows we might come to call what we call milk now cow milk. I presume in countries where milk from other animals is sold, this is already the case, goat milk, horse milk, cow milk. Who gets to say that what we call now milk in the supermarket isn't called cow milk that sits next to soy milk or almond milk and different kinds of milk. Or we might end up with a situation where the regulator says no, no you cannot call soy milk soy milk you have to call it soy drink or almond drink. And indeed that's already the case in Germany for example. This ontological politics can play out very differently in different countries in different communities where it ties in with local conventions and the way in which products are being used.

Sandra: So until next week - Got milk?

Kai: Got milk?

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 podcasts. 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.