The Future, This Week 06 April 2018

Disclaimer: We'd like to advise that the following program may contains real news, occasional philosophy and ideas that may offend some listeners.

Intro: 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. Okay let's start. Let's start.

Kai: Today on The Future, This Week: unpacking inequality, why shooting for the moon is hard, and cars demanding attention in other news.

Sandra: 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 Team. So Sandra what happened in the future this week?

Sandra: So our first story comes from Citylab and it's titled "The Extreme geographic inequality of high-tech venture capital" and the article is by Richard Florida. And Richard is not only the editor-at-large of Citylab and the senior editor at The Atlantic but he's also a Professor of Cities at the University of Toronto. So the article talks about the geography of venture capital investment and tries to look at whether the inequalities that this generates has improved over time or not. And surprisingly even though the conversation for quite awhile has been around venture capital that are moving out of Silicon Valley to other areas of the United States places like Austin Texas for instance the author really highlights the fact that almost 45 percent of venture capital investment in the U.S. is actually only in the Bay Area, so San Francisco and Silicon Valley. If we add the corridor between Boston, New York and Washington this number goes up to 80 percent of all venture capital investment in the US.

Kai: And for comparison cities like Austin only get a comparatively small amount of the venture capital dollars or 1.1 percent, similar for Miami and Florida 1.6 percent, Atlanta 1.5 percent, Chicago 2.8 percent. So large cities with sizable economies that receive a comparatively very small amount of the venture capital funding that is going into start-up businesses.

Sandra: So this article really is about spatial inequality, the type of inequality that is driven by this discrepancy in venture capital. And then let's not forget venture capital is associated with things like increased economic output and increased wages which in turn drives rents. It drives other development in these areas and having 45 percent of a large country's venture capital investment in one very small contained area has created some significant spatial inequalities for the US.

Kai: And this issue of spatial inequality is mirrored in another article that came out this week in the New York Times titled "What's the matter with Trumpland" by Paul Krugman which highlights that at the same time as certain regions of the US are getting richer and more prosperous through innovation and investment in technology sectors through venture capital, other areas are left behind because the kind of innovation that this venture capital brings about in terms of automation for example has led to a decline in what the article calls good blue collar jobs.

And so while for example Mississippi as America's poorest state had been improving and catching up to other areas such as Massachusetts from the 1930s to the 1970s reducing the gap significantly, since then things have gone backwards so the geographic inequality that is brought about by innovation, venture capital, and technology innovation is not just that certain areas are getting richer and receive all the attention but that others are falling behind as a result of the technology investments.

Sandra: So one of the reasons we wanted to talk about this article today is that most of the conversations we have around Silicon Valley, venture capital only focus on the positive aspects, on the innovation aspect, on the creation of new technologies, new services, new products that make our lives better but very seldom do we have the conversation around the unsexy topics like inequality that are also an outcome of this distribution of capital. The other reason we wanted to talk about this article was that the geography of venture capital investment is seldom what you think when you think drivers of inequality. Most of the conversations that we have around inequality are conversations that focus either on wealth or on income, we talk about things like 8 billionaires today holding the same wealth as first half of the world's population or over 80 percent of the wealth generated last year going to the richest 1 percent in the world and very seldom do we look at different aspects of inequality. The story of inequality is far more complex than wealth and income.

Kai: Let's take for example yet another article this week about inequality: "Australia's digital divide is not going away" an article in the conversation written by a team of researchers from RMIT University and the University of Canberra, looking at data by the Australian Bureau of Statistics which has tracked over time the access of households and people to the Internet for example and they make the surprising observation that Internet penetration is actually stagnating that we haven't made any progress since 2014/15 in bringing more households online.

Sandra: So indeed the article also brings up the Inclusive Internet Index where it turns out we're 25th out of 86 countries, we're behind Russia and Hungary on Inclusive Internet. And the article also highlights the fact that not only did we not manage to improve this but actually we haven't managed to improve it for the people who are already at a disadvantage based on other types of inequality. So for instance the people who would have most to gain out of having access to the Internet, people who are unemployed, recent migrants, and so on are the people who are missing out. Those already at a disadvantage.

Kai: And the inequality gap proliferates along a few different fault lines. Now first of all again: geography. So there's a stark contrast between inner city and rural areas, not surprisingly but it's almost like it's getting worse the further you move away from inner city areas and the numbers are actually quite significant. While almost 90 percent of those living in major cities have internet access at home, it's only 77 percent in remote areas and that does not include Indigenous communities who are among the most remote areas in the world and where Internet access is usually poor or non-existent. But this inequality also distinguishes by age for example, older Australians having less access to Internet by employment as you just said and obviously by income and that is really significant.

So in the highest income bracket it's about 97 percent of people who have access to the Internet whereas in the lowest income bracket it's only 67 percent and the article also highlights that the contrast is even bigger when you take into account that wealthy households have multiple devices always connected to the Internet while other households might have one computer that you can connect to the Internet so there's a stark contrast between being connected and having the ability to connect.

Sandra: So surprisingly the digital divide has largely remained unchanged in Australia. If anything it's actually getting worse in certain parts and this is not unlike inequality in general even though we've made tackling inequality a global priority, it's on the agenda of the World Economic Forum, it's the focus of a whole host of national and international committees, institutions, organisations. We have actually failed to even slow it down. And what we see with the digital divide for instance we see mirrored in things like the gender pay gap. In Australia the gender pay gap has remained largely unchanged for the past 30 years. It's been around 16 to 21 percent. And the recent report here at The University of Sydney Business School, the Australian Women's Working Futures Report actually looks at the fact that this gender pay gap has been extremely sticky and we'll have another podcast this week talking to one of the authors of the report Professor Rae Cooper in a lot more detail. And this brings me to another article we came across this week which was in the MIT Tech Review that was talking about the fact that while the gig economy is expanding in the US, worker benefits are not adapting to keep pace. This meant really that there was a growing number of people who are employed in the gig economy who lack things that we have come to expect from employment - things like paid leave or healthcare or retirement assistance. And this links back to a number of stories that we've had whether it was the gender pay gap at Uber or about other benefits in the gig economy. And this is just one week of news stories around the various facets of inequality. And it turns out overall we haven't managed to slow down or address inequality. On the other hand it highlights the fact that we find ourselves actually at a very dangerous point in history because there are a number of things that contribute to a rapidly increasing inequality and technological advancements are the first one that come to mind.

Kai: So if we look at some of the recent technological developments you could argue that while many are often discussed as empowering people and giving them access to the economy, such as the gig economy or the sharing economy, many of those initiatives turn out to actually increase inequality. So let's take three examples. Firstly the gig economy - when services such as Uber were first introduced they indeed served as a way for people to take up employment and earn an income. But as these services grow what invariably happens is that as more and more people engage in gig work they start competing with each other and that's actually what these platforms are designed to do. So while more people join the gig economy, prices are falling and the net benefit that each one of those workers derives from these services is reasonably marginal and goes backwards over time.

Take as a second example algorithms which we have talked about. Many of the algorithms that are employed in different parts of the economy and society have hidden biases which can cement and aggravate the social divide, economic divide, and inequality such as in which areas of a city get policed, who gets incarcerated or receives bail, who receives loans from banks. So we've discussed this at length and as a third example infrastructure such as the National Broadband Network in Australia which was designed to bring everyone onto the same platform and give people equal access to Internet speeds has since been peeled back and been based not on fibre to the premise for most households but on a mixed bag of technologies. And there have been recent studies which have shown that the NBN will only aggravate the digital divide and cement the inequality and access to Internet speeds between the inner cities and new developments in the city belts which receive access to fibre to the premise and rural areas which only receive access to satellite wireless or fibre to the node which incidentally are also very difficult to upgrade and futureproof. So technology in many respects is at the heart of aggravating inequality.

Sandra: And of course there are many further examples right. If you are trying to do journey planning or optimise transport in a city like Sydney if this is mediated through apps this obviously disadvantages certain people like the elderly who might not have equal access to transport to begin with and so on. But technology is not the only such factor right. We could talk here about climate change for instance, about the fact that this will impose a very heavy burden on disadvantaged communities and on the poor whether this is regionally distributed within places like Australia or the US if you have failing crops or a failure in productivity or rising crime this will first effect the poorer areas and also internationally the developing countries will be hit much harder than developed countries. So the conversation we often don't have is what if we live with inequality, what if we keep it. Why is it so important that we fix this?

Kai: Yes so in order to unpack this we need to look at two separate things. What are the problems in society that are created by inequality and more importantly what do we mean by inequality. And is all inequality necessarily bad? So let's look at some of the economic and societal costs of inequality. So there's been a lot of discussion recently around the political polarisation in Western societies chiefly in the US but also in Australia and in European countries which can be traced back to an increasing economic divide. So the loss of civility in the political discourse, entrenched views between left and right, and the inability to actually talk to each other is often traced back to increasing economic inequality but also soaring health costs, the shrinking middle class is at the heart of breaking down of economic activities in certain parts of the world especially parts of the US because the argument goes that while the rich will save a lot of their income, the poor don't have much discretionary income to spend so it's usually the middle class that supports a functioning economic system.

Sandra: And this economic inequality actually in turn leads to an inequality of hope and this inequality of hope really constrains the type of political and social activities that you can have more generally. Think about the fact that social movements that have historically emerged as a result of inequality things like Occupy Wall Street. Did they really fail to capture the public imagination in the way they used to, we do not have those large social movements as a response but rather people have gravitated towards political populism and nationalism as a response to an inequality of hope about the future.

Kai: Which also points to another and probably very crucial element of inequality which is that a lot of talent and creativity and ingenuity is wasted in society when people don't have the same access to education opportunity and they cannot escape their situation which leads us to the actual point here.

Sandra: This is not about redistribution of wealth or about making an argument for everybody being able to earn the same amount of money or accumulate the same amount of wealth but rather it is about the equality in opportunity.

Kai: Now I want to go to an article that was published last year in the BBC which is titled "There's a problem with the way we define inequality" which makes exactly that point. The authors quote research that's on the study of fairness and they say okay so there might be a problem with wealth distribution but that's not at the heart of how inequality works in the everyday world. And so they say it's much more important that we talk about equal opportunity and equal access to resources. So the problem is that often inequality in wealth locks us into a situation where people do not have equal access to education, to opportunities becoming an entrepreneur, of access to other social amenities in society and that this is really at the heart of what the problem is.

Sandra: So what you're saying here is that equality for equalities sake is not a good thing either.

Kai: Exactly. So studies have shown that when people are rewarded equally with the same rewards regardless of their effort and the work that they put in that this is also not perceived as being fair. So there's no problem with inequality in rewards as long as those rewards are based on merit and reflect the work and the contribution that someone has made to a team or an organisation or society. So inequality as such is not the problem when the rewards are tied to effort and contribution. The problem is the inequality in the opportunity to have a fair go to begin with. So what we need to strive for as societies is equal access to healthcare, cultural offerings, but especially education so that people can actually have a fair goal and then reward those who put in more work, contribute more,, achieve better education and if rewards are tied to that are tied to merit, they're not perceived as being unfair. The situation is out of kilter when the system is already stacked against people and they cannot escape their situations so this is not about achieving equality as an end in itself but actually achieving first of all equality of opportunity and fairness in rewarding people based on merit.

Sandra: But a conversation around potentially renewing the foundational economy and thinking about education, health, and utilities and food and so on is probably beyond the scope of this particular episode.

Kai: Yes indeed and I do think that we do need interdisciplinary and holistic approaches to tackling this. This is not just an economic problem. This is not just a social or sociological problem this is not just a technological or a political problem. And I think universities can actually potentially lead the way here by pooling their resources and creating these interdisciplinary initiatives to lead research into a better understanding of the causes of inequality and how equality actually works in everyday life.

Sandra: Let's have a look at our second story for today which is also a big one. It comes from MIT's Technology Review and it's asking the very valid question why is getting back to the moon so damn hard. We did this in the sixties, why is it that in 2018 we cannot go back to the moon?

Kai: Exactly so in the 60s we basically rode to the moon on the equivalent of a Volkswagen Beetle when today we have high tech AI robots. We have access to all this great technology. Why can't we just do it?

Sandra: So this story comes on the back of the fact that the deadline for the Google Lunar X Prize quietly passed away this weekend, may it rest in peace. This was the 20 million dollar prize that Google and X Prize together had offered for the first non-governmental organisation to complete a lunar mission and we've had multiple extensions of the deadline, the original date was back in 2012 and the competition actually got killed off at the beginning of this year when it really became clear that no company would make it to the moon by the end of the deadline which was last weekend. So why is it that we really can't go back to a place we've been to in the sixties?

Kai: So the article says in short: resources. When the US made its first moon landing, NASA's basically built this thing because they had to be the first on the moon. And in today's dollars the Saturn 5 rocket used in the Apollo program would have cost about 1.16 billion dollars. So that's a lot of money. But it's also the motivation because this was a nation competing with another nation in the cold war which focused attention and it was basically a space race.

Sandra: And this space race had two important characteristics for how we got there in the first place. First it was that it was a technological and military exercise. Let's not forget the Soviet Union had managed to put Yuri Gagarin into space in 1961, just a couple of years after they managed to put the first satellite into orbit. So for the United States it became a technological and military exercise of dominance of space and that was the first very important characteristic. Because this was a national security exercise during the Cold War, NASA had access to an enormous amount of money that hasn't been seen since. Their budget was about 5 percent of the US national budget. Now it's about zero point four percent which is the same amount they got in 1959 the first year that NASA operated. So first was access to an enormous pot of money. The second really important characteristic of the way we got to space in the first instance was that the space race was a public exercise which used the public imagination of people in the states to see a reason to legitimise going into space. And here is John F. Kennedy making that case.

Audio - John F Kennedy: There is no strife, no prejudice, no national conflict in outer space as yet. Its hazards are hostile to us all. Its conquest deserves the best of all mankind and its opportunity for peaceful cooperation may never come again. But why some say the moon? Why choose this as our goal? And they may well ask why climb the highest mountain? Why 35 years ago fly the Atlantic? Why does Rice play Texas? We choose to go to the moon. We choose to go to the moon. We choose to go to the moon in this decade and do the other things not because they are easy but because they are hard. Because that goal will serve to organise and measure the best of our energies and skills because that challenge is one that we are willing to accept. One we are unwilling to postpone and one we intend to win and the others too.

Sandra: This was not the speech about military might this was a speech that this is important for us as a human race to do.

Kai: And that situation has changed vastly. Putting the first man on the moon is an incredible achievement for humanity, it gives you goose bumps, it's the kind of moment that defined a nation. And therein lies the difference. So to me what this story shows quite beautifully is the difference between a high profile one-off project that gets a whole nation behind it compared to the much more boring but difficult undertaking of creating a business infrastructure because what we're talking about now is creating businesses around travel to the moon or using the moon as a natural resource for mining but in essence an undertaking that requires to create a sustainable business supply chain.

Sandra: So if you do not have access to 5 per cent of the U.S. budget what you need is a whole range of players, some of them niche players, that have different offerings in this ecosystem to create a supply chain to manage to go back over and over whether it is to the moon or to mars. So that's the first significant difference.

Kai: But the point the article also makes is that when the U.S. first went to the moon they didn't build the kind of infrastructure and supply chain that would have been needed to go there a second or a third time.

Sandra: The fact that we have failed to do this again in such a long time actually means that maybe some innovation activities like going to the moon or going to Mars that require investment that span decades is not actually achievable unless someone makes that large commitment upfront. The second aspect that we discussed earlier was about this public vision of the value of going to space. It turns out that today not only do we not have that big investment upfront that would allow us to develop the technologies, there is also no real vision to be able to sell spending so many resources on such a project. And this is one vision that Elon Musk tried to create, this big vision of robots coming to get us and of space being our only means of salvation but currently we'd have no big overarching public narrative that offers us a compelling public reason to spend those resources.

Kai: And so in the absence of this grand narrative companies are struggling to find finance and so they are experimenting with putting advertisements on the side of their rocket or once they would put a rover onto the moon you know having advertisements projected onto the side of the vehicle so an advertising model or a model that is based on a promise of mining resources so they are struggling to find an economically viable model. And Elon Musk actually put it into words when he said that creating a rocket company has to be one of the dumbest and hardest ways to make money. If it was about money I'd just do another Internet company.

Sandra: So what we're seeing happen now is that were trying to fit a traditional type of innovation model, have a lot of players, build a supply chain, make things reusable, make things multi-purpose. We're seeing this type of model being adapted to a problem that is not well suited to a solution in that space. So another article from Forbes titled "Sorry America we're not going back to the moon" outlines the vision out of the US and out of the Trump administration to build a lunar space station orbiting the moon. And it highlights the fact that interestingly having an orbiting lunar space station will not get us any closer to landing on the moon or to landing on Mars but it actually functions in the innovation ecosystem framework in that it would provide a use for the space launch system which we already have. It would provide a potential application for the Orion capsule system which we already and it will provide potential partnership opportunities whether with private players or other national players but is not the solution that will get us closer to one of these big projects. It's a solution that functions in a traditional innovation ecosystem space.

Kai: So the answer to the question of why it's so hard to go back to the moon is then because it's no longer about proving that it's feasible to do it but actually creating the economics around a sustainable business of doing so which is a vastly different undertaking.

Sandra: So very quickly let's have a look at a few short stories/ future bites.

Kai: So my first one is from Quartz and it's titled "An AI powered design trick could help prevent accidents like Uber's self driving car crash". So the article makes the argument that we now have these self-driving car capabilities, Tesla's autopilot, Waymo is buying thousands of cars that they want to put onto the road as self-driving cars. Uber maybe not so much after recent events but the article makes the point that we're not quite there yet. We do not have level 5 self-driving capabilities and we actually don't know whether we are ever going to get there but the current situation is that the driver still has to pay attention and the recent second death with a Tesla autopilot shows that when the driver doesn't things can go wrong. So the article makes the, in my view, bullshit argument that we need more tech in order to create a device that will alert the driver if they fail to pay attention to the road when the car is self-driving. To me that makes no sense whatsoever.

Sandra: It does seem a pointless argument that has come up again and again. There is a good reason why we were trying to go to self-driving cars to begin with and trying to skip that very stage and this is a conversation that keeps coming back like an annoying rash. And even though I see the point of technology that alerts you when you're not paying attention being used in classrooms for instance where students are no longer paying attention.

Kai: That would be good.

Sandra: Why would we want to complicate the already difficult task of making autonomous vehicles with more technology.

Kai: Yeah so I take the point that you know if I'm driving a car and I might be falling asleep having something alert me so that I can actually safely stop the car and take a break, that makes sense to me right, but a self-driving car that requires me to be alert and pay attention while I'm not driving the car, I would find that task much more difficult than actually driving the car. So what am I gaining from the self-driving capability when I have to pay attention by essentially watching a movie of a road unfolding in front of me but I'm actually not in control of the car. This to me makes no sense whatsoever.

Sandra: Plus if the car can realise that I need to pay attention to the road maybe it can avoid the thing I need to pay attention to in the first place.

Kai: So we either go to full self-driving capability or we have certain safety measures in the car that augments my driving and makes it safer. But this in-between thing now I think is the worst outcome that we could ever get to is a car that drives itself but cannot actually do it properly so I have to pay attention all the time. That makes no sense to me whatsoever. So what's something that you learned this week?

Sandra: So my very quick bite comes from Curbed and it talks about an alternative to bricks and concrete that has half the carbon footprint and it's made out of desert sand.

Kai: So building castles from sand?

Sandra: Building skyscrapers from sand.

Kai: Or bridges.

Sandra: Sand is something that we already use to make glass or to make computer chips or to strengthen concrete on many buildings but it's usually quite coarse sand. What this new company called Finite is trying to do is really to use very fine grained sand that is overlooked in construction for now to create a very powerful concrete-like material and the coolest thing about it is that it is biodegradable so while still remaining strong enough to build things out of it, it is biodegradable and that sounds almost too good to be true. But it's interesting to look at the fact that the construction industry and especially the alternative building materials haven't experienced as much innovation as other areas they're not one of the things that we see or talk about really often but the gritty sand that we are currently using is really depleting faster than we can replenish it. So coming up with good viable interesting biodegradable solution is actually a really big plus.

Kai: And even though we haven't mentioned Facebook this week...

Sandra: You just have.

Kai: Yeah this is all we have time for today.

Sandra: Thanks for listening.

Kai: Thanks for listening.

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. Music is composed and played live from a set of garden hoses by Linsey Pollak.

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