Ross: The Industries of the Future

The importance of a book like “The industries of the future”1 by Alec Ross can hardly be overstated.  By his own admission, “This industries_future_smallbook explores the industries that will drive the next 20 years of change to our economies and societies” (pg. 12). Whether or not the author succeeds in his ambitious task, surely he starts from quite a vantage point: former Senior adviser for innovation to Secretary of State Hillary Clinton, during the time he spent in the role he oversaw the transition to digital ecosystems of many an operation across the globe. The book is really a rich mine of potential showstoppers, giving lots of references to keep track of going forward. Due to the scope of the book, a review will be given here of its main undercurrents.

The problems addressed in the book naturally cluster into a neatly organized structure explored in another section of this blog. Here a quick summary:
  1. Robotics
  2. Genomics
  3. Algorithmic money, markets and trust
  4. Big Data
CH 1: HERE COME THE ROBOTS
WHAT. Cutting edge advances in the robotics landscape will be differentiated by country:
“Just as wealthier and poorer citizens reside at different technological levels, so do wealthier and poorer countries” (p.19) – where the “big five” (Japan, China, US, South Korea, Germany)  will be able to accrue huge benefit from their incoming preeminence in the robotics ecosystem.
WHY. What is the reason of this Cambrian explosion in the robotics ecosystem? Because of the confluence of enabling technologies, (p23): improvements in Belief Space (Bayes); cloud (swarm) robotics; new materials

The impact will be ubiquitous:  Automotive Industry (driverless cars: Google X), Operating Room (SEDASYS, also Nanorobots for cancer radiation), Academy (Aldebaran teaching computer science classes), Hospital and Human Care (therapeutic robots) etc.

The adoption pattern of those technologies will consist by initial high up-front capex (robot labor cost) that create offsetting savings in opex (human labor cost) (pgg. 37ff). Decisions like the Taiwanese Foxconn swapping robots for 1mio humans (pg. 35) – if scaled up, will create huge geographical tensions in f.e. China where a forced urbanization policy to keep labor cost down has been enacted by fiat for more than 30 years.
WHERE: Different countries will react to the shifting landscape in different ways:
while everywhere “the ratio of [capex and opex] will determine the future of work related patterns” (pg. 37), there will be places like Africa where the robotics revolution, because married to frugal innovation, will provide leapfrogging opportunities.
CH 2: THE FUTURE OF HUMAN MACHINE
The opening remark is wonderful: “The last trillion-dollar industry was built on a code of 1s and 0s. The next will be built on our own genetic code” (pg. 44) and “Genomics is going to have a bigger impact on our health than any single innovation of the 20th century” (pg. 74). Why is Ross so optimistic?
After the sequencing of the entire human genome (2000) “the size of genomic market” wyma96injyhrskhekdfetoday because of falling cost of sequencing and commercialization is where e-commerce was in 1994 (p 48). Think of PGDx Personal Genome Diagnostic or “liquid biopsy” – i.e. comparison of tumor cell with normal cells in same individual via Big Data analytics; think of CRISPR and designer babies; think of  Craig Venter’s latest projects: (a) Synthetic Genomics xenotransplantation (see here) and (b) Human Longevity Inc (p 62).
Here the old debate nature vs nurture risks resurfacing in a ghastly shape, whereby the socioeconomic fault lines (nurture) can be frozen in biological terms (nature). Moreover, and more concretely – by now this is not a Western-only enterprise: not no more. With Beijing Genomic Institute, China is willing to win the genomic battle, as US did win the internet race (pg. 66).
  • More books/talks on this here.
CH 3:  CODE-IFICATION OF MONEY, MARKETS, TRUST
This section argues that the code-ification and app-ification of money, markets, payments and trusts is a big inflection point for the disintermediation of large part of the current economy. Square, Alipay or Google-Wallet are the next iteration of digital money – while African based M-Pesa has succeeded in leapfrogging the banking system altogether in countries (like Kenya) where the physical infrastructure is lackluster or non-existent.

The big trend at work here is the interplay of dispersion and concentration: local communities of buyers and sellers are surely empowered by the availability of decentralized, peer-to-peer (payment) solutions (like M-Pesa) but at the same point the central routing of these transaction is operated in a progressively more and more centralized way.  “Coded markets like eBay and Airbnb simultaneously concentrate and disperse the market. With coded markets available to even the smallest vendors, a trend has arisen that pushes economic transactions away from physical stores and hotels toward individual people. .. .The route through which it is dispersed, however, redirects each of those transactions through a small number of technology platforms usually based in California or China” (pg. 93)

But arguably the deepest innovation coming from techno-utopianism in the markets, payment & trust ecosystem is Blockchain (original paper by Nakamoto; some links here).  An investor is quoted saying (pg. 115) that “the problem with the Internet from 1995 to 2010 was that it enabled information dissemination and communication but lacked any ability to transfer value between individuals. From 1995 to 2010 every industry in information services was transformed beyond recognition – newspapers, music, TV, etc. – as was any industry involved in communication and connection between individuals – phone fax auction recruiting etc. […] Conversely from 1995 to the present day there has been almost no impact by the Internet on the financial services or legal industries.”
The importance of Blockchain and distributed ledgers as an enabling ecosystem where smart contracts can render entire industries obsolete or radically disrupt their internal workings (like in the financial industry) deserves its own section, which will be regularly updated – hence the discussion on this can finish by quoting MIT Media Lab director Joy Ito (p 116): “My hunch is that the Blockchain will be to banking law and accountancy as the Internet was to media commerce and advertising. It will lower costs, dis-intermediate many layers of business and reduce friction. As we know one person’s friction is another person’s revenue”.
  • More books/talks on this here.
CH 5: DATA: THE RAW MATERIAL OF THE INFORMATION AGE
WHAT: A few figures first: “As recently as 2000, only 25 percent of data was stored in digital form. Less than a decade later, in 2007, that percentages had skyrocketed to 94 percent” (pg. 154). This is the dataquake.  “Big data is just the application of the commodification of computing power combined with the wider availability of cloud computing” (pg. 157).
The areas which will be visited by most action are;
–  Human interface in Machine Translation (pg 159): “Universal machine translation will accelerate globalization on a massive scale”. Advances in bioacoustic engineering will deliver sleek interfaces, no more robotic voice in the next 10 years;

–  Precision Agriculture: native, or retasked as Monsanto with FieldScripts (pg 162)

will reshape the agribusiness landscape: “The promise of precision agriculture is that it will gather and evaluate a wealth of real-time data on factors including weather, water and nitrogen levels, air quality, and disease – which are not just specific to each farm or acre but specific to each square inch of that farmland” (pg 162);
–  FinTech (pg 168ff). The financial industry is in essence an information processing operation.   “A bank is basically a giant ledger of contracts that have future positive and negative cash flows. A bank’s entire income is based on how the present value of those cash flows changes moment to moment” (pg. 170). FinTech arises because banks struggle to roll up their analytics to one central view of their cash flows. Standard Treasury, the “digital first” bank, aims to exactly that. Another FinTech area is the real-time screening: “In a coded-money economy, a lender knows a merchant’s true value because it has real-time access to its books” (pg. 171). Knowing all the transaction allows Square Capital (ibidem) to open credit lines and grow the business of its clients with unprecedented accuracy;

–  Our quantified selves: Delegating more and more of our decisions to non-human actors will trigger important questions regarding our agency. 4a48f0fc0642f24699278951c93f3770“Serendipity fades with everything we hand over to algorithms. Most of these algorithms are noiseless. They gently guide us in our choices. […] And because they constitute the value of a company’s intellectual property, there is an incentive to keep them opaque to us” (pgg. 180-1)
A couple more points: “When data goes from being unstructured to structured, it takes on the values and prejudices baked into its formulation” (pg 183) and “Correlations made by big data are likely to reinforce negative bias” (pg. 184). A thoughtful discussion on this -Dataism- is in an article by Yuval Harari, see Financial Times article.
  •  More books/talks on this here.
 Concluding remarks
Is Silicon Valley going to exert increasing gravitational pull or the decentralization triggered by commodification of big data ecosystems (AWS) will allow business to spread across the geographical avenues of domain expertise?  Where will be the focal points of the “next economy” and its accompanying class? Alpha cities (London, Tokyo, NY, Singapore) and places like Estonia “The Little Country that could” (see its e-residency scheme) and Israel, or the geographical gradient will be less steep?
“With these platforms the Valley has become like ancient Rome. It exerts tribute from all its provinces. The tribute is the fact it own these platform businesses. […] The value flows to one of the places of the world that can produce tech platforms. So the global regional inequality is going to be unlike anything we have ever seen”, argues an investor2 (p 94) in the book.
Will the vision of world leaders be commensurate to such scenarios? The big forces shaping our future – technology, platform & free-lance economy, environment no longer fall into old ideological divides. The twin faiths of the Age of Extremes – capitalism and communism – were both based on epistemological fallacies: the first that the randomness of the economic process could be eliminated in toto; the second that such randomness acts for the benefit of human society. “The principal political binary of the last half of the 20th century was communism versus capitalism. In the 21st century it is open versus closed” argues Ross (pg 215). On such a hopeful note our review of Alex Ross wonderful book terminates. It should be mandatory reading for all thinking people.

1. [ Ross, Alec. The industries of the future Simon & Schuster , 2016]
2. [ Charlie Songhurst, see here]

Big Data and AI strategies

We live in the so-called dataquake:

‘A few thousands of years ago, you needed to be a god or goddess if you wanted to be painted, be sculpted, or have your story remembered and told. A thousands years ago you needed to be a king or queen, and a few centuries ago you needed to be a rich merchant, or in the household of one. Now anybody, even a soup can, can be painted.”

Thus Ethem Alpaydin, in the brisk “Machine Learning” (MIT, 2016) . JPMorgan has come up with an insightful introduction to this in the context of quant finance. Here a link to it.

China rightly prides itself of being at the forefront of AI research. Worldwide.
As a visit in one random Chinese supermarket can remind the casual observer,

china_supermarket.jpg

they do have the biggest demographic indeed, and they cannot fail to harness that wealth of human data generating processes to train ever more advanced networks. But what if video games can be used to train networks? What if, as AlphaGo Zero has recently accomplished, there is less and less scope for human agency even at the stage of training such a network? Human data generating processes can at best inhabit a vast region of collinearity, a small spanning set of independent components. See also here.

Relentless pace of automation

It must have felt slightly odd when, at the Morreeb Dunes Festival 2017, United Arabs Emirates, robots substituted human jockeys in the camel race.
Embed from Getty Images

In his farewell speech, in Chicago, Obama explicitly said:

The next wave of economic dislocations won’t come from overseas. It will come from the relentless pace of automation that makes a lot of good middle-class jobs obsolete.

Those words were an apt reminder, if anything, of the interesting report that the White House commissioned to top experts in the field, “Artificial Intelligence, Automation and the Economy” (link|pdf). Quite unusually in the litany of experts works on the topic, the report borders on ideas such as universal basic income, the hollowing out of middle-class as a link in the erosion of the political center, the (education) measures necessary to accompany the transition – a stark reminder of the huge increase of public spending in education at the beginning of 20th century that eased the transition in US  from an agricultural to an industrial economy.

Further pointers in this previous post, on Human and Horses.

On Chomsky and Hobsbawm (cont’ned)

mosaic_in_villa_romana_del_casale

Upon visiting the splendid mosaics in Villa Romana del Casale (Piazza Armerina), one is reminded very clearly of the intelligent remark made by Karl Marx  according to which work had no social relevance in the ancient world. Because of oversupply due to slave labour, no place for the creative activity of man was on display in the ancient world – there simply was no place for it.

Take now another of Marx’ great insights (from the ‘Grundrisse’, as quoted in George Lichtheim, ‘A Short History of Socialism’ pp. 100-101):

What appears as surplus value on the side of capital, appears on the workers side as surplus labor … beyond the immediate requirement for the maintenance of his existence. The great historic side of capital is to create this surplus labor, superfluous labor from the standpoint of mere use value, mere subsistence; and its historic destiny is fulfilled as soon as, in the one hand, needs [wants] have been so far developed that surplus labor beyond necessity [subsistence] has itself become a general need [want] … on the other hand, the general disposition to work [industriousness] has, through the severe discipline of capital … been developed into the general property [possession] of the new breed of men [ des neuen Geschlecht] – finally, when the development of labor productive forces … has reached the point where the possession or maintenance of societal wealth requires a diminishing quantity of labor time, and where the laboring society takes up a scientific attitude to the process of its progressive reproduction … where consequently the kind of work man does, instead of letting it be done by things on his behalf, has come to an end.

Again quoting Lichtheim (loc. cit. p. 101) ‘from the standpoint of the mature Marx, capitalism appears as a historically conditioned mechanism for developing society’s productive power to the point where the subordination of labor to capital, of living people to dead matter, will become unnecessary’. A splendid contribution on this direction, focusing in particular on the changing nature of ‘time’ in the upcoming industrial society is in the influential article by Edward P. Thompson “Time, Work-Discipline, and Industrial Capitalism” (1967).

The question is then: what can we do with Noam Chomsky’s remark about distributed, horizontal, vertically-free organization of social labour? The global supply chain that I hold in my hand when I use my Android – can we really do without the kind of pressure that capitalism extracts from the worker? the kind of productivity tyranny it imposes on the men and women composing the human mass it insists upon?

Feed-forward networks and teleology

Bertrand Russell, in “History of Western Philosophy” pgg. 86-87, writes:

The atomists, unlike Socrates, Plato, and Aristotle, sought to explain the world without introducing the notion of purpose or final cause. The “final cause” of an occurrence is an event in the future for the sake of which the occurrence takes place. In human affairs, this conception is applicable. Why does the baker make bread? Because people will be hungry. Why are railways built? Because people will wish to travel. In such cases, things are explained by the purpose they serve. When we ask “why?” concerning an event, we may mean either of two things. We may mean: “What purpose did this event serve?” or we may mean: “What earlier circumstances caused this event?” The answer to the former question is a teleological explanation, or an explanation by final causes; the answer to the latter question is a mechanistic explanation. I do not see how it could have been known in advance which of these two questions science ought to ask, or whether it ought to ask both. But experience has shown that the mechanistic question leads to scientific knowledge, while the teleological question does not. The atomists asked the mechanistic question, and gave a mechanistic answer. Their successors, until the Renaissance, were more interested in the teleological question, and thus led science up a blind alley.
 

Is a feed-forward network (or any inverse problem) going to change this in a qualitative way? The mind goes again to Norbert Wiener, in his 1943 article “Behavior, purpose, Teleology”. McCulloch and Pitts, with their logical calculus of nervous system, were round the corner.

Deflation of human agency

senateHouse

One of the premier Art Deco buildings in London, the famed Senate House (above) keeps resonating in my mind every time I wander inside it. Especially overnight.
Vastly different in concept but equally capable of impressing with its geometry, the Brutalist masterpiece by Ernő Goldfinger (Trellick Tower: below) gives a sort of shock on its first appearance.

Trellick Tower was an ideal-typical realization of Le Corbusier’s “Radiant City” concept but in “A Clockwork Orange” Kubrick placed Alex and his comrades in one of Britain’s most notorious environments, Tavy Bridge area of Thamesmead South: in the Brutalist architecture Kubrick sensed the scary vibrations coming from Skinner’s “Beyond Freedom and Dignity”. Who was right?

Norbert Wiener said that the fundamental assumption of 1930 dictatorships rested on a conceptual fallacy, i.e. the misrepresentation of the human nervous system:

[the] aspiration of the fascists for a human state based on the model of the ant results from a profound misapprehension both of the nature of the ant and of the nature of man. […]. The human individual, capable of vast learning and study, which may occupy almost half of his life, is physically equipped, as the ant is not, for this capacity. […] Those who would organize us according to permanent individual functions and permanent human restrictions condemn the human race to move at much less than half speed.
( The Human Use of Human Beings, pg.51-2)

Both the modernist utopia of the Swiss architect and the dystopia hinted at by Wiener rested on the same assumption: life is path-dependent, human being is intrinsically plastic, and can be cast in various shapes. In  “Variation of Animals and Plants” (1871),

Darwin had already found that the brains of hares and rabbits that grew up confined in boring hutches were 15 to 30 percent smaller than those of their wild counterparts. Conversely,  when animals are placed in an “enriched environment,” a large enclosure full of objects that are renewed each day and in which they can play with one another, their brains grow and develop more synapses. Children who are seriously neglected during their early development also have smaller brains […]; their intelligence and linguistic and fine motor control are permanently impaired, and they are impulsive and hyperactive.  (D. Swaab, “We are our brains”, 2014)

The question at stake in the dilemma above is really the interplay of freedom and necessity. This is the message that resonates from the Senate House and the Trellick Tower. We cannot escape this message:  we can only hope to be able to stand their presence, to endure their shadow.

The organization of society implied by those massive structures is a reminder that man is a social animal, thriving in the social organization of labor. At the same time their very conceptual and physical presence deflates human agency to the level of the ant: which corresponds in material terms to the epistemological pessimism of Dostoevsky’s “Great Inquisitor”, when he assumes that the elite has to control the common man as he is not able to discern good from evil for himself. Christ gave men liberty out of a misplaced thrust, the Inquisitor’s stance reads.

Truth is that today we cannot do without the towers and what they represent. We have to inhabit these imposing concrete islands. We have to pass through them, to rise to their level if we want to face our time. But we have to accomplish that without losing the touch with our uniqueness of human beings. We do not want to relinquish Enlightenment’s epistemological optimism, lest we end in Great Inquisitor’s trap.

There is no room to regress to previous modes of social interaction. We have to struggle for “the human use of human beings” while inhabiting the many towers of Modern times.

Ascesa & Declino: “All that is solid melts into air”

panorama 002

In his marvelous study of modernism All that is solid melts into air, Marshall Berman claims there is an idea which the human civilization owes to the Germans: the idea that economic development and human expansion are one and the same phenomenon. Quoting him:

“In order for people, whatever their class, to survive in modern society, their personalities must take on the fluid and open form of this society. Modern men and women must learn to yearn for change: not merely to be open to changes in their personal and social lives, but positively to demand them, actively to seek them out and carry them through.
They must learn not to long nostalgically for the “fixed, fast-frozen relationships” of the real or fantasized past, but to delight in mobility, to thrive on renewal, to look forward to future developments in their conditions of life and their relations with their fellow men.
Marx absorbs this developmental ideal from the German humanist culture of his youth, from the thought of Goethe and Schiller and their romantic successors. This theme and its development […]
may be Germany’s deepest and most lasting contribution to world culture” (see ASMA, pgg 95-96)

Take Italy. The time of Fellini & Antonioni, Burri & Fontana was the time of Natta pioneering plastic, Ferrari & Alfa Romeo triumphing in international car contexts, Olivetti inventing arguably history first PC, Piaggio building Vespa. In Pisa, the strongest PDE school in Europe was being created under the auspices of Ennio De Giorgi (of Hilbert XIX problem’s memory). In Milan, Berio & Maderna with the Studio di Fonologia Musicale were actively advancing the frontier of 12 notes agenda.

One must then be grateful to Emanuele Felice for his wonderful book on Italian Economic History (“Ascesa e Declino”, Il Mulino, 2015): a story that appears to reinforce the point raised by Berman. This article is a quantitative summary.
Italy had given birth to the modern world with Renaissance, and its lead went as far as Galileo, having progressed through the likes of Leonardo, Piero della Francesca, Michelangelo and Machiavelli (admittedly without cuckoo clocks). A remark is appropriate here, as the book is a bit reticent about the decline in the XVII century. One should not indulge in the idealistic fallacy of attributing that decline to whoever ordered to burn people at the stake for their ideas (although that did not help, of course): Cipolla (see: The Decline of Italy: The Case of a Fully Matured Economy) is exhaustive, here. Responsible for the collapse were economic causes, not encrusted geocentric ideologies.

Italy resurfaced from that ordeal  only at the beginning of XX century, had another dip into troubled waters under Mussolini and really took off after 1945. That was the time where we were strong again, leaders in the visual arts & cinema, strong in science, big in design.

Cultures and civilizations evolve, they are living systems: it is a delusion to think scarcity and material privation can engender systems of thoughts, scientific revolutions, deep art.

This is not an input-output analysis, for exceptions, i.e .heroes or geniuses capable of penetrating the core of the problem from afar, do exist: take Dostoevsky, thinking about the dissolution of the Western-christian Weltanschauung from the midst of S. Petersburg, or Kafka, perceiving the fall of Europe from the backwater of Prague.

But Marx needed the British Museum (i.e. London) to write ‘Das Kapital’. Late XIX Wien was the center of Europe when Freud, Schönberg, Klimt, Wittgenstein, Gödel, Musil and Mach were destroying every gradualist & deterministic conceptual foundation for XX century man and woman.

That was the center of the economy: hence of culture.
The rest is backwardness: hence –with Gramsci-  folklore (pgg. 626 ff).

Are we serious when we think we can escape this mirroring?