8 takeouts on the impact of AI+Robotics in emerging countries.

Thanks to fellow i4j member - Virgilio Almeida who recently attended a conference in Brazil the impact of AI+robotics on the future of jobs in emerging economies. The focus was to discuss the impact on 1) economy, 2) society and on the 3) process of doing science in emerging countries. 

Key Takeouts 

1.  If wages reflect productivity similarly, the incentives to robotize would be the same in developed and developing  worlds. There was a lot of discussion on the positive impact of AI+Robotics on the productivity of emerging economies. 
2. Some of the panelists were concerned that some government could try to create barriers to import robots as a way of protecting local jobs. ( Ik comment:- Government’s created tariffs to protect industries - as they have progressively been removed by a country - it seems that the country is better off - focussing on doing what they do well in a free economy) 
3. Artificial intelligence + improved computerization + robotics based on biological analogies→ better machine substitutes for humans: higher elasticity of substitution. Freeman.
4. Technological change reduces costs of robot substitutes for humans over time, bounding wages: W < Production cost of robot substitute for any given task. Freeman
5. Who owns the robots rules the world! Richard Freeman
6. Shift of work on-line gives AI edge in its digital world; while improved sensors give robots abilities to see and change our off-line world.
7. what is the impact of  robots replacing humans in a market economy: robots do not consume! Impact on emerging economies (Freeman):
8. If you are paying workers $35 per hour to produce some good or service it surely pays off to buy a robot substitute that does the same work at $20 an hour. But what if the wage is $3.50 per hour? Keep the worker employed and forego robotization? Not necessarily.The economics requires that one compares the cost of the robot and workers in cost per unit produced. If the $35 per hour worker is 10 times as efficient as the $3.50 worker, the incentive for buying the robot is the same in both countries. In the high wage country, the firm would displace one worker and gain $15 per hour in profit. In the low wage country the firm would displace10 workers and also gain $15 per hour.

If you are interested, let me know and I will ask Virgilio to share his report with you 

Some benefits of AI in 3rd world countries

1. Drones that pick inaccessible crops and 
2. Mobile phones  give medical advice 
3. Remotely guiding local residents to perform intricate operations usually done by surgeons (hairlip surgery)

If you are interested, let me know and I will ask Virgilio to share his report. 

Entrepreneurs fuelling city growth in USA

The Bob Pritchard Column 

This show is all about entrepreneurs and the latest entrepreneurship study has some great news for the U.S. economy: startup growth is healthier than it has been in years.  

We know that small business employs the highest percentage of people and at a time of incredible and accelerating technological disruption, it is these startups that will drive the economy of the future.

 

Each year, the Kauffman Index study measures entrepreneurship growth in 40 cities nationwide. The study is focused on output rather than input, which means it's looking at factors like business density, new companies, and growth rates. The study also measures entrepreneurship at the national, state, and metropolitan level. 

 

This year, entrepreneurship grew in 34 of the 40 metro areas measured, which is the largest increase in the last decade on a national scale. This means that more new companies are cropping up nationwide, and they're starting up everywhere, not just in the bigger cities. If the trend continues, entrepreneurship growth could soon be back to pre-recession levels.

 

The usual big players like San Francisco and Boston stayed relatively stable compared to 2015's ranking, but other mid-sized cities went through some changes in the past year. Cincinnati had the biggest jump in the ranking since last year — it moved up 19 spots from 35 to 16 — while entrepreneurship slowed in Pittsburgh, moving the city from 12 down to 27.

 

Some cities had amazing growth of over 80% such as Number 3 ranked San Jose with a rate of startup growth of 128.1%, Washington DC with a rate of startup growth of 116.9% ranked at number one, San Antonio ranked number nine  with a rate of startup growth of 85.8% and Austin at number two with a rate of startup growth of  81.2%.

 

Of course usually the growth really blossoms when these startups go to IPO and San Francisco led with an amazing 16 IPO’s, followed closely by Boston with a fantastic 15  IPO’s, San Jose with 7 IPOs, San Diego with five IPOs and Washington DC with 4 IPOs.

 

Each of these cities is actively supporting entrepreneurs and the results are evident.   Helping entrepreneurs and providing infrastructure  should be close to the number one priority for cities to ensure their future.

Amcham Australia’s Innovation Mission To Boston

Biofuel for Aviation

The Bob Pritchard Column 

Globally, a raft of carriers ­including Qantas, Cathay Pacific, United, Southwest, jet Blue and Lufthansa have signed deals to purchase ­alternative jet fuels.  The secretariat of the International Civil Aviation Organization has also proposed ambitious new targets for biofuel use in aircraft. Qantas will buy biofuel from US company SG Preston for use on the long haul Los Angeles-Australia route.

 

The push for “sustainable” aviation fuel has received a fillip with Qantas poised to announce it will power its Los Angeles-based aircraft with biofuel from 2020.

Qantas announced last week it will buy the renewable jet fuel from Philadelphia-based biofuel company SG Preston for use in aircraft operating from Los Angeles to Australia.

 

Qantas will buy eight million gallons (36 million litres) of renewable fuel each year and was aiming at reducing carbon emissions and becoming more fuel efficient.

The move comes after Qantas ran trials in 2012 on a Sydney-­Adelaide service powered by a biofuel that combined cooking oil with conventional jet fuel and after Virgin Australia announced last week that it would trial biofuel on planes out of Brisbane for the next two years.

 

The commercial biofuel deal would enable Qantas to lock in supply for the LA-based aircraft where we have a large fuel ­demand and where the biofuel industry is more ­advanced.  Qantas was constantly looking for ways to be more fuel-efficient.

 

The biofuel, which uses plant oils, emits half the carbon emissions over its life cycle than traditional jet fuels. It will be a 50:50 mix of fuel produced from plant oils with traditional jet fuel.  The move comes as carriers have stepped up their efforts to use biofuels.

 

In June, the International Air Transport Association called for governments to roll out policies to fast-track the deployment of aviation biofuels. These included loan guarantees and capital grants for production facilities and fiscal ­incentives for projects. Sustainable aviation fuels are an integral part of a comprehensive strategy but at the moment they are not being produced in enough quantity at a competitive cost.

 

Qantas said it was working with the federal and state governments on “the design of policies to support commercialization of aviation biofuels in Australia, which is currently sub-scale”.

 

Aviation biofuel will play a growing role in allowing airlines to reduce emissions in coming ­decades

China is winning the race of electric vehicles

Written by Geoffrey Handley

As Tesla’s value continues to rise, it is easy to once again (and incorrectly) assume that leadership of this sector resides in the West.

It doesn't.

More often than not, food is delivered to my home in Shanghai by one of Meituan.com's 200,000 (yep! two hundred thousand.) strong delivery crew, every single one of them riding electric scooters.

1 Company

200k Staff

ALL ON ELECTRIC VEHICLES

Meituan is just one player in a very competitive space. In this regard, they're not unique. Electric scooters aren't their ‘thing’ or part of their brand or USP.

In China, electric vehicles are table stakes, status quo. 

It's part of the infrastructure. Not only Meituan or their competitors in food delivery, but for everyone.

As consumers, most Chinese have  never been faced with the decision of whether or not to go electric.

For years now electric has been and still is, the first - and for many - the only vehicle option.

All while the rest of the world continues to debate not only climate science but the inherent and obvious consumer and economic benefits of electric vehicles. And once again, putting whatever imaginary "rights" ahead of our very real and actual "responsibilities."

In much the same way that this current first generation of digital or digital-first natives shape our future globally, when it comes to vehicles, transport, infrastructure and the culture of electric, intelligent and autonomous, China and Chinese are our planet's first electric natives.

From an industry perspective I am reminded of a Q&A session w/Jack Ma. When asked about the many differences between Amazon and Alibaba, he talked scale, pointing out the running and capex costs associated with maintaining an ever growing fleet of petrol guzzling vehicles vs an efficient electric army. 

Logistics costs passed onto the consumer or borne by the shareholder throttling scale, even for giants.

The differences are huge. Aside from the obvious - electric being cheaper to run vs gas:

• Costs to hedge or maintain actual petrol reserves.
• Wear and tear, time / cost inefficient maintenance, service and spare parts.
• Reliance on and on-going training of this service workforce in what is essentially dead tech.
• Safety implications through capped / hardwired speed limits.
• Actual capex cost of the fleet, whether your own or 3rd party.

All in all an inefficient waste of time, mind and capital solely to prop up an inefficient dead man walking industry out of self-serving nepotism, or worse, lack of will and foresight. Zombie rent seeking much?

Amazon is one of the main faces of the future in the West, a symbol of tomorrow. In that respect, when the torch bearer for leading and changing the world for the better is reliant on outdated, extractive and destructive methods of the past, it doesn't really shout “let’s hear it for tomorrow!” does it….

Arguments around laws, legislation, subsidies, or even dare I say it, technology are not the solve. It's culture, pure and simple.

Culture is the character and personality of your organization - company or country. It's what makes your group unique and is the sum of its values, traditions, beliefs, interactions, behaviors, and attitudes.  Culture is at the bedrock of it all and the laws, legislations, subsidies are just outputs produced by the people all defined by it.

And China's culture as the planet's first electric transport native nation is the reason why the country is dominating this space.

A culture that is tangible and global, as demonstrated last week by the most Swedish of Swedish brands, Volvo, announcing that it will only produce electrified cars - in line with their Chinese parent Geely.

Let's not forget, culture is, after all, the most valuable competitive advantage and a massive force multiplier.

That is why China has and will continue to drive our electric and autonomous future.

#ChinaMatters

Ik research after this article :- 

The goal is  to have 5 million electric vehicles on the nation's roads by 2020, thus making China a pacesetter in the field, is a tall order, but measures now being unfolded make it clear that the government means business. Such success will not only help rid big cities of smog, but also put the country on track to honor a pledge it made a year ago to reduce its carbon dioxide emissions per unit of GDP by 60 percent to 65 percent of the 2005 level by 2030.

Six years ago China surpassed Japan as the world's biggest carmaker. A year later it became the world's biggest car market, and the country's new energy car market now seems to be on the cusp of pulling off a similar feat. In the first seven months of this year about 90,000 new energy vehicles were sold in China, compared with about 63,000 in the US, the China Association of Auto Manufacturers says. 

Are bank days numbered?

Bob Pritchard talks about the future of Banks 

A surge in new methods and avenues to circumvent conventional bank finance, from cryptocurrencies and blockchain to crowdfunding, presents the next major challenge for regulators in Washington, according to Business Insider.

 

President Trump vows to roll back financial regulations aimed at preventing another financial crisis, in particular post-crisis legislation known as Dodd-Frank, despite these rules making big banks safer by forcing them to fund their operations with more equity capital relative to their debt.  But this may be the wrong focus.

 

 

The new issue now for the next 10 years is going to be fintech, and how fintech is going to affect financial intermediation in the US. And if you go out to Silicon Valley, all the discussion is all about how can we strip the profits from the big firms.

 

The challenge is that regulatory bureaucracies in Washington, including the Federal Reserve itself, may be too slow to react to new technologies, in the same way that policymakers missed the risks embedded in the so-called “innovations” in mortgage finance that ultimately fuelled the worst housing bust and financial crisis in modern history.

 

Innovation is happening every day and the regulatory world does not react well to that. They react legalistically. That’s the issue that’s going to face the new leadership of the Fed going forward. Weakening Dodd Frank or doing something more with Dodd Frank is beside the point when Silicon Valley is as powerful as it is.

 

Big banks’ are trying very hard to domesticate some of the new technologies, including investments in blockchain, although this is unlikely to be enough to catch up with the speed of change coming out of the more cash-flush, venture-capital driven tech world.

 

Banks will always say buy the technology and bring it into the regulated sector but are these slow moving, extremely conservative institutions really going to be able to innovate quickly or are they just big bureaucracies that are going to be way too slow to react to an overwhelming onslaught of innovation and cash.  To compound their problem, consumers do not like banks and believe they have been screwed them for long enough.

 

Why the #Retailpocolypse

So, chain retailers are closing up shop as an alarming rate. Just last week, Sears announced it was closing more stores, and Claire’s once the per sq ft profit leader in mall-based retailing filed for bankruptcy. This week, post-bankruptcy, Gymboree announced it is shutting 350 stores.

(Ik comment :- In Australia - Laura Ashley, Topshop, and many other smaller retailers failing. in South Africa - Stuttafords department store )

What in tarnation is going on here? Is this seriously all Amazon’s fault?

The fall of mall based retail is based on a couple of things. 

1. it’s not about the anchor Tennant anymore 

First, media consumption has changed dramatically. In the mall heyday (80s-90s), retail media was largely driven by local media advertising (TV, radio, print). In that paradigm, anchor stores (Macy’s, Lord & Taylor, Sears, etc.) were able to capture a huge share of consumer attention and shape their product desires. The anchor would advertise, drive foot-traffic, and all of the stores in the mall benefitted. Media today has changed – it is no longer possible for an anchor to own a market. Consequently, anchors can have less influence in the media market and can compel less traffic. That hurts the overall mall experience because the smaller stores suffer disproportionately.

2. big Box Retail - passe 

Big box retail (stand-alone stores like Best Buy) are predicated on a prolonged suburban flight. Their sense of “destination shopping” was built up around bigger and better homeownership (more rooms = more stuff to buy). The flight away from cities has slowed dramatically. More families are staying in or very near cities where the concept of a “big box” store is not feasible due to both space and cost constraints.

3. Ecommerce and Amazon 

E-Commerce has been a huge factor, but it isn’t determinative. Let’s assume that 10% of all retail is e-commerce. Further, let’s assume that half of that (5%) belongs to Amazon. 1% goes to online only retailers (Wayfair, etc.). The remainder is traditional retail moved online. So, 6% has moved completely away from traditional retail – the market may have shrunk, relatively speaking, for traditional retail. But that is a 6% decline in 15 years (since e-commerce became “a thing”), but again, that is relative because overall, retail grows 1-3% annually. So, at worst, the relative retail market is 94% as big as it was pre-ecommerce, and at best, it is a wash and the relative market is flat for the last 15 years.

4.  Private equity investment - not growing - they want out 

The reason why e-commerce isn’t determinative lies in the nature of what has been keeping chain retail afloat for a long time – private equity. From Staples recently selling to Sycamore Partners to a thousand other retail stories, retail has been propped up by private equity. Those kinds of purchases are usually highly-leveraged (meaning that there is a lot of debt to be paid). The debt service required in these kinds of transactions puts huge strain on a companies cashflow. In times of strong growth, it is not an issue. But economic growth has been at a crawl since 2008, therefore debt-fueled expansion has been treacherous. And for most retailers, margins are very skinny. So with little pricing power, most retailers have seen declining margins, slower growth and fixed debt service. This is NOT a recipe for success.

5. The retail experience sucks - Customer Service is Lousy 

The retail experience is lousy. As companies fight through those rising fixed costs (real estate, etc.) and declining margins, they have deprecated the on-floor retail experience. In an effort to streamline costs and operations, retail has kept pay to a minimum and at the same time diminished the autonomy of the job. Therefore, retail is filled with poorly paid workers who are forced to stay inside a very small box. Here is a news flash – nobody wants that job, so the only people who take that job are those who have the fewest options.Therefore the quality of the retail experience declines rapidly. And to be clear, it is not the fault of the employees, but rather the system in which they work. But ultimately, shoppers do not respond well to terrible experiences and they vote with their dollars.

6. Logistics and delivery to your door has improved 

UPS & FedEx (as well as the huge leaps forward in flat-pack technologies meaning more things can be shipped) have become dramatically better at logistics, and relative costs (dollars per pound shipped) have dwindled. Superior delivery logistics have enhanced the e-commerce experience to the point where practically anything can be at your doorstep in 2 days or less from dozens of sellers. Consequently, we see fewer consumers willing to put up with terrible retail experiences when they can get their desired products with a modicum of inconvenience.

7. younger consumers want more - they are in control - not the mall 

Younger consumers are different. Since younger consumers (those >45) have a lifetime of digital media consumption, they respond to different stimuli. The Macy’s 1-Day sale strategy where Macy’s could own the discussion, as we talked about in #1, is over. But today’s consumer is more influenced by non-advertising influences than ever before. When I was young, MTV was a huge product demand driver. But even that was fairly centralized. With media consumption widely dispersed, even an ardent watcher of broadcast television with its 16-20 minutes of every hour chock full of ads likely sees more non-advertising driven influences every day. From YouTube celebrities to Instagram feeds to the obscure interest-driven discussion forum, consumers are bombarded with more and varied influences to shape their purchase desires. Therefore, their retail dollars are more dispersed. They spend in more places and across more brands than ever before. The traditional mall-based or specialty retailer cannot stock a wide enough selection to accommodate the widely influenced product desires of a non-mainstream media audience. This diminishes the power that larger retail brands have in the marketplace.

8. The 2008 crash 

2008 happened. The housing market crashed. Real wages declined. Credit became tighter. And almost a decade later, we are still talking about economic recovery. 2008, for a small percentage of the population, drove real and meaningful change in the buying habits of Americans. Add that to poor job growth in the low end of the white collar world and the increased debt faced by those with student loans, and we have a portion of the population with less disposable income than before. While the impact of those consumers may not dramatically reshape the market, it will have pockets of dramatic impact. If we also consider that birth rates in the US have dropped in the last decade, there is a portion of the younger workforce who are, in real terms, poorer than ever, and they are having fewer children. Spending on children is a huge economic driver. Fewer babies to people with fewer means results in fewer purchases.

9. We are busy - no time 

We are busier now than ever before. In the US, we work longer hours, take fewer vacations and feel more stressed than ever. Regardless if true, we feel more time pressure than ever before, therefore we are less likely to view shopping as a regular leisure activity. If it doesn’t feel fun to go shopping at a mall or a store, we are just less likely to do it.

10. Entertainment and toys have gone digital 

The world of digital has reshaped entertainment. While anecdotal, see if this story doesn’t ring true. Kids used to play with toys. After a while, toys would get dull and they would get replaced. However, phones and tablets, in many ways, have replaced a portion of the toy spectrum. Rather than purchasing a $15 game, or a $30 toy, my kids spend $0.99 on a new app. That take dollars away from retail and slides them into the pockets of Apple, Google & Amazon (and developers) rather than to the cash registers at Target, ToysRUs or others. We have replaced physical stuff, to some extent, with digital stuff. And while the impact might be small, it adds to the issues of slow growth and rising costs for retailers (from #4).

Whew.

PS: This was originally published on my blog, timkilroy.com - 10 Random Thoughts on the Retailpocalyse. I invite you to follow me there, or check out more marketing-focused content at my other endeavor, SellingToTheC.com where I spout off a lot about e-commerce marketing.

Ik comment (so what’s the opportunity for retailers??)