The Future, This Week 29 September 2017

Introduction: This is The Future, This Week on Sydney Business Insights. I'm Sandra Peter. And I'm Kai Riemer. Every week we get together and look at the news of the week. We discuss technology, the future of business, the weird and the wonderful and things that change the world. OK let's roll.

Sandra: Today on The Future, This Week: ATMs free at 50, animal tracking and big data, and science fiction. I'm Sandra Peter, I'm the Director of Sydney Business Insights.

Kai: I'm Kai Riemer, professor at the Business School and leader of the Digital Disruption Research Group.

Sandra: So Kai what happened in the future this week?

Kai: Well we should be talking about ATMs. But since we have new music let's talk about carrots first.

Sandra: So the story we should really lead with is the fact that Australian farmers are facing the biggest carrot oversupply in 25 years but at DISRUPT we had someone who actually made the most of it.

Kai: So Linsey Pollak - he's an Australian music instrument maker and genius really. He was at DISRUPT.SYDNEY last Friday and he gave an incredible performance disrupting the expectations of the audience by playing all kinds of shit really: garden hoses, camping chairs, root vegetables...

Sandra: Plastic gloves.

Kai: The man build a saxophone out of two carrots.

Sandra: So this is Linsey Pollak playing a carrot saxophone that he had made in front of us, in front of the audience, by drilling basically two carrots together and making fingerholes and everything onstage and it sounds like that. And he's the composer and maker of instruments of our new music on The Future, This Week.

Kai: Yeah so the piece that you hear is our new theme music on The Future, This Week is a tune that he played live last Friday on a couple of garden hoses and a camping chair.

Sandra: So the theme for our DISRUPT Conference this year was "imagining the future" and we've done that with technology, with society, with investments in China, with a variety of things but probably most interestingly we've done it with musical instruments. And Linsey Pollak really disrupts an industry that hasn't seen a new instrument since the eighteen hundreds.

Kai: And Linsey also kindly agreed for us to use his music on the podcast and I think he found a brilliant way to help Australian farmers out because our audience members can go and build their own carrot instruments with the instructional videos that we will link to in the shownotes.

Sandra: So thank you Linsey.

Kai: Thank you Linsey.

Sandra: So now back to ATMs.

Kai: Our first story is from The Sydney Morning Herald and it concerns the big four banks getting rid of ATM fees for withdrawals from other banks. So you're with the blue bank and you only find an ATM with a red bank - usually they would charge you two dollars or more for having access to your own money that happens to be with a different banks. So those fees are gone now. So what's that all about?

Sandra: The article brings up a number of things that could be at play here whether banks needed a good news story after a series of recent scandals. Could it be because of calls for a Productivity Commission? Could it be because they're responding to customer concerns about the high fees that they're paying?

Kai: So are they just playing nice?

Sandra: Or is there a much simpler argument? Let's have a look at how much money the banks are actually making out of this. There are about two hundred and fifty million withdrawals each year, they're around two bucks each. So about 500 million dollars among the big banks. That's not a lot of money.

Kai: Not for the big banks especially not when we consider the cost of maintaining, running, updating and servicing the ATM network. It turns out that the banks are not actually making money off ATMs. In fact they're a big cost.

Sandra: Let's not forget if we look at withdrawal rates, ATM withdrawals are now at a 15 year low and they have been declining at 6, 7 almost 8 percent for the past three years in a row.

Kai: So as we move to a more and more cashless society where we have brilliant tap and go point of sale, ways of paying for things even small items coffees and stuff, people are less and less carrying cash and are less and less using ATMs.

Sandra: So what happens when banks move from a product to something that just costs them money? How do you think about the ATMs then?

Kai: So instead of treating ATMs as a product that costs a price, ATMs are becoming infrastructure that are essential to provide but not something that banks can differentiate on and it is only logical...

Sandra:...that instead of competing we should then try to get together and share this.

Kai: So we think the next move will be that the banks actually either outsource or create a joint venture and pool all their ATMs and then run an ATM network together or give it to one of the third party providers that already provide the majority of nonbank ATMs that you find in convenience stores, in pubs, in event locations.

Sandra: Or could ATMs disappear all together? Let's try to have a look at what's next. For Australia we have a number of things. First there's the soon to be introduced new payments platform which will allow Australians to send money to other Australians, to other people, businesses and have that transfer happen in real time including outside of any banking hours or shopping centre hours. And you could use their email address, their telephone number, or their ABN.

Kai: It's widely thought to be an enabling platform for fintech more broadly and innovation in the financial sector.

Sandra: And let's not forget in places like Europe it has existed for quite a while and in places like Sweden where it's widely implemented we've seen the value of cash transactions drop to only about 2 percent of the transactions in Sweden.

Kai: Absolutely. So the European giros system has done that for years. To be fair, the NPP in Australia will come with added functionality and allow a whole more data driven services on top of that.

Sandra: So we are a bit slow to the game. I moved here 15 years ago and there were already no ATM fees in the Netherlands 15 years ago. You could also pay your bills at the ATM but that's a longer story.

Kai: Yeah so some of that we see here now.

Sandra: We've seen the introduction of things like Apple Pay as well although only one of the big banks is currently allowing for Apple Pay so we have not thoroughly embraced that.

Kai: And the banks have put a lot of effort in to building their smartphone apps including with customer to customer payment if you are with the same bank and split your bill. Let's not forget we have PayPal but by and large it's a very fragmented payments market which has grown on top of an already fragmented banking market. What are other countries doing?

Sandra: So I think a good example to look at is China and we had a couple of interesting presentations around this at DISRUPT as well - Jeongmin Seong who's a senior fellow at the McKinsey Institute in China. China is interesting because if you look at mobile payments it's a very late mover to the market. And what's happened is if you go straight to mobile payments, then you skip the whole reliance on cards, you end up with a system that dwarfs what we see in terms of transactions even in places like the US. So the share of Internet users in China making these mobile payments is about 68 percent. A country like US would be around 15 percent, still beholden to those legacy systems like credit cards. In China we see the value of mobile payments about 11 times that in the U.S. So we have about 790 billion dollars worth of transactions compared to only about 74 in the US. And these are payments conducted simply through mobile apps. For China this would exclude bank payments anything such as unionpay, credit card transactions, digital wealth, all of these things would be included. So what's in it is basically payments to a platform like WeChat. In this case, it doesn't rely on the same technology that we use, we would use NFC transmitters near field communication. In China you use QR codes and we see this widely spread to other Chinese economy. This is not only paying with WeChat at Starbucks by scanning a QR code but going to the markets where you buy half a kilo of carrots and pay with WeChat. These are beggers who stop you at the traffic lights and in one hand have a small plate to collect any remaining cash you might have and then in the other hand they have a QR code which you can scan to donate money for those instances as well. But you can pay in restaurants, you can pay in shopping centres, everywhere simply by using your QR code.

Kai: And we've discussed this previously on the podcast the phenomenon of leapfrogging the way in which entire countries that are not bound by legacy systems such as card based payments or even email in the case of China, can go straight to a mobile phone based payment system that is tied to the mobile phone number and not to your email nor to your bank account or card, inventing in the process entirely new ecosystems of payment and commerce on the back of that. But that's not the full story. So what about ATMs themselves? Is there a future for ATMs? Or are we just abandoning the idea altogether?

Sandra: So first there might be an argument for leaving ATMs behind. Let's not forget on June 27th the ATM turned 50. Another great Scottish invention, the ATM by the way, John Shepherd-Barron opened the first ATM in a Barclays Bank branch in London in 1967 and we've had them around for the last 50 years. As much as we were talking about their decline across the world, and it was a difficult job trying to find an ATM in China, we've seen places like Japan that still embrace them.

Kai: So yes while Japan is on the one hand a highly modern country that has always embraced technology to the fullest, it's also a very rural country and traditional country in places and just this week there was an article in The Japan Times which talks about mobile ATMs, ATMs on wheels basically being brought to rural parts of Japan for the first time where people are now brought into the electronic banking age where people previously did not have any easy way of accessing cash directly from their banks.

Sandra: Probably the larger story about whether we leave ATMs in the dust or not is a story about whether we are moving towards this cashless society or whether we want to move towards a cashless society or not. And that's clearly a larger conversation. There's a great argument going on between people like Kenneth Rogoff who's a Professor of Public Policy at Harvard, he's the former chief economist at the International Monetary Fund and people like James McAndrews who's a economist and fellow at Wharton who argue either for or against becoming this cashless society because on the one hand yes ATMs might be going but do we want them to go? And there is a good argument for the yes camp. It would mean less crime and tax evasion and greater flexibility for institutions to stimulate the economy when necessary.

Kai: At the same time it makes the argument that there are three dozen 100 dollar bills in circulation for every person in the US.

Sandra: And most adults have not seen a 100 dollar bill, so where are they?

Kai: So where are all those bills? Which goes to show that large parts of the official economy or unofficial economy are still based on cash.

Sandra: Which brings us to a no argument - we shouldn't get rid of cash.

Kai: So James McAndrews who is a fellow at the Wharton Financial Institution Centre and a former director of research at the Federal Reserve Bank says getting rid of cash would hurt all those without a bank account. The so-called unbanked part of the population - in the U.S. currently, 7.5 percent of all households. And there's also a significant number in Australia who under current regulations find it hard to actually get a bank account in the first place. And while those people might not be users of ATMs they still depend on cash so the more we move away from using cash in our day to day lives, the more we are hurting those and creating a further divide between those who are banking or have access to technology, smartphones and everything else and those who are left behind. So moving away from cash would have to go hand in hand with a rethinking of the regulations and access to a bank account as a basic human right for example.

Sandra: Yep and there are countries actually grappling with these ideas right now, so places like India. But where does that leave the Australian ATMs?

Kai: So my view is that we will see two things happen: one is we will see a consolidation around ATMs in public spaces and we might actually end up with the banks outsourcing their ATMs and so when you go to a shopping centre instead of seeing two separate ATMs from all major banks you might just see a couple of ATMs from a third party which might incidentally also charge fees again but this is basically the nonprofitable, non important part of ATMs which is just basic access to cash where you need it at the point of sale. The bigger story is what happens with innovating ATMs and turning them into something much different, into electronic banks that we might see in rural areas where banks are not inclined to actually run a full bank branch, we might see more fully equipped electronic self-service banks that yes might give you cash but that's only a small part of the services that those machines will provide. And we already see them being rolled out in bank branches across the country.

Sandra: Or we might just see a new app on our phone. Our second story is about the golden age of animal tracking - comes from The Atlantic. Talks about the fact that with new advances in technology particularly around GPS this idea of tag sensors and other fairly small and cheap devices now that are capable of tracking all kinds of species around the world.

Kai: So the article mentions a book called "Where the animals go" by geographer James Cheshire and designer Oliver Uberti...

Sandra:...who have spoken to dozens of scientists tracking animals and this is everything from owls to deer to pythons, hyenas, whales, elephants, plankton and really the book displays in a wonderful way the data that they have collected on the behaviour of these animals.

Kai: And what they learn about the animals sometimes in surprising ways and how this data is used in novel and interesting ways. So animal tracking is not new.

Sandra: No the earliest recorded instance of someone tracking a bird actually is 1804. The article mentions a young naturalist named John James Audubon who tied silver threads to the legs of Eastern Phoebes - these tiny brown and white songbirds that lived near his house in Philadelphia and they would fly away for the winter and then come back the next spring and they would still have the little silver threads attached to their legs. So we've come a long way from tying threads to animals to track them around the world. So what does animal tracking today tell us about the use of data?

Kai: So the way in which we collect data about the animal kingdom it's not unlike the way in which we collect data about human behaviour, about how cities work, transport systems, healthcare systems, the use of sensors hashtag Internet of Things, hashtag autonomous vehicles. So the question is how do we make use of that data that we have at our disposal? And the article has an interesting insight. So James Cheshire says we've really transitioned from monitoring animals as a resource to be exploited to monitoring them as individuals within a species.

Sandra: So the first way we use data is really just to exploit resources. This idea of finding correlations, of looking short terms and really focussing on what outcomes we could achieve and we've done that with animals, we've done that with customers, with the way we run our business. So really just trying to exploit those resources find correlations and focus on the outcomes that we could get, making more sales for instance or reaching more customers.

Kai: This is what we commonly think about big data. Having these huge varieties of data and we look for patterns and then we're going to exploit those patterns by extracting more value out of customers, by making them buy more, by having a better way of targeting ads to viewers on YouTube or Facebook. And that's basically a hit and miss business - we're only interested in statistical correlations but we do not care too much about individuals. We do not care much about particular cases we are more interested in large scale patterns and exploitations of those data as a resource.

Sandra: But the article then highlights this second idea of using the data to understand individuals in their context so moving really from big data to small data.

Kai: But this requires a shift in thinking as well. So we are no longer just interested in tracking populations in order to find the best way to harvest fish of the sea but actually tracking individual animals and trying to understand their habits and their patterns so the article has an interesting example where data showed that a flock of seagulls was flying 40 miles away from their breeding ground and they couldn't explain this behaviour until they took a closer look on the ground and they learned that those seagulls would feed on the remnants of a potato chip factory. So what we learned from this is that in order to understand individuals in their populations we have to go from big data to small data. We have to put data in context and we have to enrich it with other data sources and the same holds true when we try to understand the lives of customers that we try to design products for. We cannot just work on the basis of generalised patterns, we have to get inside the world of those who are living those lives. So we have to actually gain access to richer data sources.

Sandra: And we've seen this move in business from relying on big data to talk about what customers want and to predict what customers will want to things like Design Thinking and reliance on empathy and ethnography to better understand the world that the customer lives in, the world that the client is and design for those specific things. With GPS tracking and animal welfare we're seeing wonderful examples of this playing out for instance with people like Derek Bailey who is a professor from New Mexico State University who is currently at Central Queensland University in Rockhampton and he is really looking at how to better manage livestock with this tracking technology. Whilst in Australia our farms have really extensive pasture where you can't see the livestock, this sort of technology would allow you not only to know where they're going but to see what these animals see every day. And because of that be able to tell whether the animal is sick or each animal has a problem with nutrition and really interact with the animal in its environment when they need it.

Kai: Hashtag moo. So we have big data and the perspective of exploiting resources. We have small data and the understanding of individuals but there is a third level that we want to bring up which is systemic data and the understanding of systemic interactions and we can again go back to the animal kingdom and there's a really interesting study that has been captured in a short video which we will put in the shownotes which follows the introduction of wolves back into Yellowstone National Park.

Sandra: (Audio of wolves) So when the wolves were reintroduced they set off a cascade of events that affected the whole range of animals the deer that inhabited the forest, the way the plants regrew, the river beds, a whole change of systems that had feedback loops that were interacting.

Audio: One of the most exciting scientific findings of the past half century has been the discovery of widespread trophic cascades - a trophic cascade is an ecological process which starts at the top of the food chain and tumbles all the way down to the bottom.

Kai: So the point that we're making is that increasingly in order to change the world and innovate we have to understand the world systemically. And that means that we can't just look at simple linear cause and effect relationships or individuals in their environment but that we have to understand the interaction of multiple systems, the feedback loops and the chain of reactions that are being set off. So we need to bring a systemic approach to understanding data from multiple sources and how those sources interact.

Sandra: And as we're seeing this in the animal kingdom, so we're seeing this weird research that we're doing in smart cities where the exact same technology of tags and sensors and other GPS enabled devices are allowing us to capture very rich data. But again something that we must study as a system.

Kai: Where the transport system interacts with the healthcare system, with the behaviour of people commuting, with the effects on obesity, with the way in which we are creating city centres and we increasingly learn that many of the big and wicked problems that we face can only be tackled in this systemic way.

Sandra: And were doing this at the University of Sydney with heart disease and obesity at the CPC - at the Charles Perkins Centre where we are looking at things like diabetes, obesity, and cardiovascular disease but we are looking at it through research partnerships and collaborations with a range of disciplines that explore the interconnectedness of environment, food, health, and our work practices and so on.

Kai: Yes so absolutely based on the fact that many of the problems can only be understood systemically require the interactions of various areas of expertise and an understanding and a reading of data from a systemic point of view and the Charles Perkins Centre is a good example that it is up to us to bring that perspective to the data. The data doesn't tell us these things. It is up to us to bring a exploitation, an individual, or a systemic perspective and depending on our perspective we will see different things in the data. So I think that's worth keeping in mind because a lot of the problems that we are tackling are in fact systemic while we often tend to look at them in a more linear, in a more cause and effect kind of way.

Sandra: For something like healthcare it's quite often easy to fall in love with the new app or the new sensor that you can wear or the new Fitbit. However explorations of the future of health have to go beyond that and try to think about how we reimagine the system itself to provide a world class healthcare solution. Incidentally join us to explore some of these questions on a event we have together with the American Chamber of Commerce where we indeed look at the future of healthcare. All the details will be in the shownotes so join us Tuesday 7th of November.

Kai: And the way in which we have to move away from simple linear predictions of the future based on say a singular new technology to a more holistic understanding of systems and words brings us to our third story: the use of science fiction in imagining the future in engaging with innovation.

Sandra: So our last story comes from Slate - "How to write a novel set more than 125 years into the future" and Annalee Newitz the author of Autonomous explains how she went about building her book in the year 2144.

Kai: So how do you do that? How do you go to a place that is so far in the future and make it believable?

Sandra: This is not about taking one technology and thinking out what it could become. This is not about predicting what the future would be like but rather constructing a whole new world, constructing a timeline seeing the evolution of a range of factors and this is not just about technology it's about our social practices, our cultural practices, about how that complex ecosystem works together and then letting your characters inhabit those worlds.

Kai: Absolutely. And so interestingly the author in the article makes the point that her audiences would be completely on board with the idea of sentient robots and how technologies evolve. But that we're not very good at envisioning social change and I just remembered there's this interesting video set in the 1960s where people imagine what the future would be like and they portray in this short film how a household would work and they have all these crazy devices which allow the family to do home shopping and electronic banking and electronic...

Sandra:...and it works really well in terms of predicting technology. So it basically predicts Amazon, and home theatres, and cameras around the house, and new types of communications and Wikipedia.

Kai: All with 60s style technology with machines which have little knobs and TV screens.

Sandra: Let's remember this is the 1960s predicting 1999. But they don't do that well with social change.

Audio: What the wife selects on her console will be paid for by the husband at his counterpart console -all bills and transactions will be carried out electronically.

Kai: So what we have here is a utopia set in the social world of the 1960s. What has evolved is the technologies we use but the family structures, the social structures, the norms, gender, all of this has stayed in the 1960s. And so the point we want to make is that we're often doing just that - we extrapolate the use of technology and come to predictions that are essentially technology rich versions of the social world of today. But that's not what science fiction authors do. They go to an entirely different place and their skill is to imagine holistically the sociotechnical the sociomaterial make up of these worlds where everything has changed- the social makeup and the technologies in ways that feel both familiar and alien and strange at the same time not unlike what our world would be like for people who would be transported from the 1960s where many of the technology predictions might have come true. But the social makeup would feel very alien because the dynamic in which society has evolved couldn't have been predicted just by looking at how technologies might evolve.

Sandra: So Kai what you're seeing is that this really isn't about predicting the future or indeed predicting the future of technology but rather experimenting with plausible futures. But we want to have a look at what that has to do with business.

Kai: Well Keith Logan, one of our speakers at DISRUPT last Friday, was calling for a Chief Science Fiction Officer as a role in business in charge of imagining futures.

Sandra: We want to make the case that science fiction actually has an important role to play in how we think about the future of technology, society, the future of work. And indeed we've seen a whole range of companies working with science fiction writers. So for instance Microsoft, Apple, and Google and other firms have sponsored talk series where science fiction writers talk to their employees and their researchers and developers trying to link together science fiction and technology in what sometimes is called design fiction, this imaginative works that try to explore new ideas. But these are again on the spectrum of the plausible and indeed science fiction has a bad name with regard to technology because most of it is placed on a spectrum. There are these plausible words that are worked out in every detail but then there are also these very out there ideas that really just try to take one technological advancement to its natural conclusion.

Kai: Absolutely. And there's no point creating a utopian future when you have no idea how to construct a plausible timeline that would get us there. So if we take the example of Steve Jobs - there is evidence that he was imagining very early on before the iPad was conceived. A world in which classrooms would be transformed and learning would happen with those tablets where accessed information and text books would be seamless and he understood quite well what it would take to do this - the building of ecosystems of a platform, of an app store, getting the publishers on board, and arguably we haven't really gotten there yet because it's complicated but in many ways this is the way in which people like Steve Jobs operate. They create a new future centred around a new way of working or living and then come up with a plausible timeline in order to get us there.

Sandra: So science fiction can play a huge role in how we think about business. And as you've said it's about imagining that future. So it's not necessarily the fact that Jules Verne has inspired so many technologists to invent some of the things that he talks about, that Star Trek has inspired us to have comms that are still in our phones and not on our clothes but we're getting there which is inspiring us to think about replicators. It's inspiring us to think about transporters and so on but it's about this idea of balancing utopian and distopian futures. It's about the idea of playing out the moral implications or the ethical implications of the technologies that live in that world and how society chooses to reorganise itself around them. And there are indeed great applications for things that we are struggling with now with the facts of technology. For instance we could think about what an education system would look like in case we only worked two days a week whether it's because there are no jobs out there or whether it is because technology has made our lives easier. But an education system that would prepare you for life rather than for work so many many things that this is suited for.

Kai: And that's all we have time for today.

Sandra: Thanks for listening.

Kai: Thanks for listening. And here's some more of our new music.

Sandra: Courtesy of Linsey Pollak.

Outro: This was The Future, This Week. Made awesome by the Sydney Business Insights team and members of the Digital Disruption Research Group. And every week right here with us our sound editor Megan Wedge who makes us sound good and keeps us honest. Our theme music was composed and played live from a set of garden hoses by Linsey Pollack. You can subscribe to this podcast on iTunes, Soundcloud, Stitcher or wherever you get your podcasts. You can follow us online, on Flipboard, Twitter or sbi.sydney.edu.au. If you have any news that you want us to discuss please send them to sbi@sydney.edu.au.