Why utilities need to be back in public hands

After 30 years of infrastructure privatisation in Australia, it’s time we put critical utilities (Energy, Water, Telecoms, Rail, et al) back in the hands of the public. While this may sound somewhat draconian and even semi-communist, right now it is the most capitalist move we could make, and our future depends on it. I spoke about it today on radio – you can listen here.

An Infrastructure Reset – Show me a rich country, and I’ll show you rich infrastructure. It’s what modern economies are built on and always will be. We are currently moving through a 200 year shift which involves an entire reset of the physical world around us. In telecoms we are rapidly moving to optic fibre and 5G. Energy is shifting away from coal to renewables (primarily solar) and we need to build out an ‘energy internet’ to replace our ageing grid. All cars will be electric in 8 years time and we’ll require highly distributed charging facilities where ever a car parks.  Every economy in the world, that wants to compete globally, must now build out, connected, post industrial infrastructure.

Natural Monopolies – There are certain things which are what economists call Natural Monopolies. These are industries where the most efficient way to serve a market is with a single operator or system. This is most often the case with large national based infrastructure. For example, it doesn’t make any sense economically to have 2 competing sets of national railways alongside each other, to have 2 sets or power lines, or wireless competitive 5g towers serving the same geography. This idea isn’t new, and goes way to back to Adam Smith and the Wealth of Nations. And while it would be dangerous to have infrastructure businesses that are privately owned not to having any competition, if they’re publicly owned, and regulated we can remove problems associated with monopoly operators.

Competing interests & political instability – When things like ‘energy‘ are owned by private firms, their imperative is maximise profits and serve their shareholders, not their customers. At a time when we should be shifting to new forms of infrastructure, privately owned utilities create misaligned incentives in the market place. This will be to our long term detriment in the Australian economy. The NBN is a classic example. At a time when NBN is being rolled out (public), it has to compete with the 5G networks of Telstra (private). If we had a single telecoms infrastructure provider, we’d have a chance to build out a singular, worlds best network. Instead, what we have is a piecemeal financial basket case. We, the tax payers, are the losers.

I  truly believe the leadership crisis we are currently facing in Australia (today and over the past decade), is partially because of the problems of vested interests trying to influence the public policy. We have a population that want to move towards renewable energy, yet factions within political parties are influenced by the coal lobby and short term financial interests. The net result is that leaders can’t make the decisions they need to for a future proof economy and we end up with a dysfunctional government.

The benefits of publicly owned utilities – Crucially, this idea isn’t something which sounds fanciful, but just isn’t possible financially. The investment markets have already priced in the truth of what I’m talking about here – that is, the cost of many infrastructure assets are at all time lows. Telstra has a yield of 7% and new coal fired power plants are literally un-investable. Hence, these infrastructure assets could be taken back into public hands at, or below the cost of capital to acquire them. If we did this, the Government would have the ability to build out what the people actually want, and what the future needs. These renewed Government owned enterprises could serve as future employment training grounds in critical skills arenas and we could re-engage our long lost technical apprenticeship model of employment. And let’s not forget that having infrastructure which is world class would facilitate startups to compete globally. This would benefit both the tax base (remember the Gov has a 30% Joint Venture with every business via tax) and open up export potential. What we learn building this out, could then be built in other countries. (software & hardware)

This program might be something we just need to do for 20 years before going private again. But what is clear that our telecoms are a mess, our energy system is a mess and we need new infrastructure quickly if we want to remain wealthy and relevant.

Just this week I was in Sri Lanka and they already have 5G well underway. Emerging economies are building out tomorrow, while wealthy countries like Australia mess around with yesterday’s technology to keep the rich and influential happy. It’s the great squander of our times. One of the reasons the government won’t serve us in Australia, is that we don’t own the assets the decisions are being made around. Maybe if we took the assets back, they’d have to make sure they run these industries properly or they wont get voted back in.

Radical times, require radical action.

What data and fences have in common

We’ve entered the age of the Data Imperialist. New world powers are taking resources before those handing them over have realised what is happening. Once again, it seems that the future is repeating the past.

Most things we value economically in the modern economy are quite far removed from real needs. We invent new asset classes that are things we don’t really need – unlike food, shelter, medicine and education. Where it gets tricky is when something which was once free, fluid and unencumbered gets claimed by a commercial interest. When it does happen though, the pattern is always the same.

  • Those it gets taken from don’t understand the ‘market value’ of what is being taken
  • It gets taken by using tools the others haven’t got.

Into this category we can put land, gold, oil and now we can add data.

Think back to when imperialists sailed to far off lands to plunder the resources from traditional owners. They put fences around things. A fence to someone who’d never seen one would seem like a very strange idea. The mere concept of anyone actually owning land unheard of in many cultures. There’s no value in a fence because no one can own the land! But of course, those who trespassed or tried to access the now fenced off resource were met with gunpowder – a tool the victims didn’t have access to, let alone grasp its power at first.

Online privacy and security are a lot like this. We’ve literally allowed the data imperialists to put a data fence around our lives. While we have known for a long time that knowledge is power, few people in the past 20 years have truly understood how much information we’re really handing over, and the many ways it can be leveraged economically. They, like the conquistadors before them, took it from us before we realised and they too did it with tools we didn’t understand.

Their favourite hack – hiding the truth in 20,000 word long legalese designed to obfuscate. Oh, and they offered us the sugar hit of emotional candy along the way so we could all ‘connect’ on-line – as if that wasn’t already possible with the old school internet. They’ve successfully stooged us out of the most important resource in the emerging economy – data. Henry Ford and his factory friends pulled the same trick on us 100+ years ago when he convinced us to trade in our artisanal skills and independence for highly paid piece labour. Privacy and security are the workplace health and safety of the digital era. The data wars are only just starting and we’ve got to fight back. But how?

Here’s a few ideas to get us started:

  1. Remember everything digital is traceable and on file, forever. There is no anonymity. Never put anything online you wouldn’t want on the front page of a newspaper.
  2. Don’t be platform lazy. Yeah, I know it’s easier to connect on social media platforms… but go direct when possible. Talk on the phone, get your own email client, text – heck, get some analogue FaceTime happening.
  3. Data is labour. We need to socialise the idea that our data should be our personal copyright. Corporations should be renting from us. We created it, we ought own it and it is an own-able resource – if we will it to be.
  4. We have to put our hands up high on what we won’t accept. Data breaches are unacceptable and we should punish platforms with serious consequences – and make sure it’s as unacceptable as pollution and unsafe work practices.
  5. We need to push our Governments to embrace blockchain technology and crypto-economics to enable valued, yet safe, use of data. We need to push them to protect us and our data when they have access to it and protect us from corporations who are data deceivers.

Data like any asset can and should be used for good – where the benefits are shared and protected by those whom create it.  And this is why Blockchain is the most important technology of the past 20 years. It makes the above things possible. And let’s never forget this – our Governments are no different to School yards. It’s a popularity contest. They do what gets them voted back in. What this means is that all we have to do is make these ideas popular.

Steve.

How to invest in technology

One of the most common questions I get asked is, ‘What technology or companies should I invest in? You study technology everyday and spend time large companies, so you must have an opinion’. And you guessed it – I sure do. While I’m not an investment advisor, there are some interesting things which we can be sure of when it comes to investing and technology.

The hot technology of the day will always be overpriced. We can expect that hot tech stocks, and even raw materials that go into technology will attract attention and demand that push their prices up. While this may be justified based on future expectations, it often reduces the potential return on investment. We often see this in P/E ratios. For example, the P/E ratio of the S&P500 is currently 24.37 compared to a long term average of 15, due to the big tech stocks currently making up such a big portion of it. In fact, six stocks (Google, Amazon, Facebook, Microsoft, Netflix and Apple) make up 30% of the S&P500. Sure, some stocks continue to rise like these have – but how many of them did you pick to be as big as they are now back in 2005? When it comes to stocks, I take the Warren Buffett approach and invest in Indexed Funds – that way I get all the winners and none of the cost. You can listen to a podcast I did on this topic that explains it succinctly.

Focus on the beneficiaries of the technology. The way to do this is to scrutinise social and economic structures will change due to new technology. Structures which live a layer or two outside of the technology itself, yet stand to benefit significantly from it. One particular area which is both underpriced and about to benefit from a large technology shift is certain forms of real estate. Transport historically has had an big impact on how and where we live. As we enter an era of autonomous transport, it will be easier to live further afield from major cities, and commute either virtually or in your ‘rolling lounge room’ one or two days a week to the office. While Henry Ford facilitated the birth of suburbs through affordable cars, autonomous vehicles and the work from home revolution will invent exurbs – places of great beauty within two hours of a major city. Via technology, these places will have all the benefits of a major city, but the advantage of a tranquil and desirable natural landscape. It’s possible to buy large land tracts in Geelong (1 hour from Melbourne) for a little over the median house price in the suburbs.

Right now this opportunity is wide open a few years out from when new forms of transport will change everything. It’s this type of technology investing few people ever think about.

Steve.

The Blockchain Evolution

New technology often goes through a hype cycle, but few get get hyped more than Blockchain. I imagine most of my readers are across it, if not, I wrote a blockchain 101 article you can read in 2 minutes flat. Now, I’ll put my hand up high, and admit right here and now that I’m a true believer. Before I tell you why, the image below is the reason I decided to write this.

I notice this image on Linkedin – it was posted by someone in an industry poised to benefit significantly from the technology. What astounded me was the absolutism of the statement. Even if a technology doesn’t emerge, it’s a far more useful life and business strategy to have an open mind to new possibilities.

There’s 3 simple reasons I think Blockchain will become a vital layer in our lives.

(1) It solves a real problem: It allows us to transmit things of value (like currency) without making a copy and removes the need for traditional intermediaries. We can finally trade with each other online using cryptography to create trust and transparency/anonymity.

(2) The technology has proven use cases: It has already been proven to ‘work‘ with crypto currencies. While it faces technology hurdles including excessive energy usage, a poor user experience and slow transaction speed – these are problems many similar technologies, like the early internet faced as well. Dial-up internet anyone?

(3) There’s a huge amount of financial and human capital going into it: The sheer investment of intellectual capacity and money flowing into the space almost guarantees that problems with it will be solved and new ways of employing the technology will be found.

In fact, that’s how it always happens. Cars today are very different from cars in 1920. The internet is a very different beast today compared to when we browsed on Netscape. And it’s always the three factors above which are required to keep a new technology from disappearing.

Blockchain isn’t Blockchain, rather, it will become something somewhat different from what we see and experience now. With the prize so big – it has potential to topple some of the worlds biggest industries, and so many people engaged in inventing the desired functionality, we can be certain it won’t go away. Historically, making a technology work smoothly is where the biggest financial wins usually come from.

 

What data doesn’t understand

It’s true data, and our new found ability to sift through large volumes of it, has come with many benefits: fraud detection, genomics, natural language processing to name a few. But, data doesn’t get humanity. It’s just a reflector, not the director. As a tool it has certain biasses built into it. One of which is its ability to take the wide, and make it narrow. It’s also great at finding correlation between the disparate. You know data what it isn’t good at? Detecting boredom.

We humans are weird beings and right at the point when data might tell us something is heading a certain way, we about face, and go in the exact opposite direction, often quicker than anyone expects. Probably because we love variety, nuance and something a little different.

It turns out that computers don’t actually understand – they calculate. The word computer itself used to be a job title of people who literally added things up. The large majority of algorithms we employ calculate the probability of something. That probability calculation will be based on the stack of code it feeds from. And the larger that stack, the deeper and more hidden the bias will be inside it. What this means for us, is that when we change our mind, on a whim, ‘the system’ won’t see it coming.

The stimulus we get as humans comes from the real and messy world we we live in. So much of which still sits outside of the data economy, even with all the tracking we do these days. So what does this mean for us? It means that unexpected change is inevitable, and the data wont tells us it’s coming. We need to look for it ourselves and measure it from personal human experience. Variety is one of the great human desires, and just when something is peaking in popularity, we decide to leave the building for no real reason other than the fact we are human.

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How to predict the future

Predicting the future seems like an impossible task, but there is a trick to it. It’s less about guessing what’s next, and more about piecing together what’s already here. A veritable mash up of tools, behaviour and incentives.  Sure, there will always be unexpected turns in events – economic externalities, social backlash and political events which we’ll never predict. But, the vast majority of the time, what is about to occur in business or an industry is there to be seen, and acted upon a long time before it happens at scale. The way I do it is by observing three things in particular.

Anthropology: This is what doesn’t change. Or that which changes very slowly – human behaviour. We are running a very old piece of software as humans – a 400,000 year old code, otherwise known as our DNA. By studying our human proclivities we can observe patterns which demonstrate what we value and how we’re likely to behave in a given set of circumstances. We need to study behaviour, everywhere we go. Paying attention pays dividends.

Technology: This is what does change. The tools we use to get things done, and they are in a constant state of flux. If the barriers to entry are lower enough to switch to a better, more efficient and enjoyable method of getting anything done – we will. The trick, is that very often the tool is available a long time before it is widely distributed. It first must be affordable and available geographically before we can embrace it. When we study what’s next in technology it’s easy to see where shifts are likely to occur because most emerging technologies follow price/ performance ratios which are very predictable. This happens both at the industrial and consumer level. Importantly, the eventual adoption of a new technology can’t be based on utility alone, it must also be socially acceptable to our species. Google Glass comes to mind as an example of something we simply didn’t like. Likewise, large corporations often find it difficult to embrace new technology for weirdly social reasons. Because new technology ignores both the financial and emotional investment a company may have made in now outdated infrastructure. Legacy firms often get disrupted because they fall in love with their tools and systems, instead of the problem they are meant to be solving for people. Read here – successful humans don’t like change.

Economics: This is what ties to the above two elements together. A simple way to define economics is the study of incentives. Wider incentives are what shapes our behaviour, and in turn influences the way money flows around people and the systems we live inside. The question we need to ask here, is will this technology facilitate the way people behave and provide a big enough incentive for them (Corporations and Consumers) to move to this new way of getting things done. If so, how will it change the way money, things and people move around.

So, when it comes to thinking about tomorrow, start by thinking about what’s already here today.

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Why E-Sports might just help your career

“Hey kids, get out inside out of that fresh air, stop exercising and start playing some video games why don’t you!” – Said no parent ever, maybe they should?

On my weekly radio spot this week I spoke about video games, or E-sports as it’s known. I proposed that gaming is a valid use of kids spare time, and could even help them in later life and their careers. My mum, with good intentions hated my going to the ‘dodgy’ video arcade, and later despised the time I spent gaming on my TRS-80 (yes my dude was a block, but I have a good imagination). But, it did lead me to a lifetime of interest in technology, and now that’s become a career. Occasionally we need to open our minds enough so that we can reframe an outdated perception. And maybe even back it up with some facts, so here’s a few about the E-Sports industry worth considering:

Economics: Video game sales (think hardware and software) is more than twice the size of the movie industry world wide. it will near $130 billion in 2018. The Pro E-Sports industry is estimated to be $1.5 billion this year with over $100 million in prize money, and has over 385 million annual viewers. Yes – people watching people play video games – both on line and live. In fact, the biggest ever crowd at a video game tournament was 52,000 people in a stadium in Germany.

Careers: There is currently 13,000+ professional E-Sports players. While the average annual pay packet is relatively small at $4500 a year, the top player earnings are right up there with with more traditional sports. Kuro Takhasomi took home a handy $3.5m last year and more than 200 players earned more the $100,000 for playing ‘games’.

Skills: Like any sport, there’s a natural hierarchy and not all hopefuls will make it to the elite level. Though, there is something different about E-Sports – they prepare us for the emerging world in ways few traditional sports can. Studies show they are good for rapid problem solving, brain speed, memory, algorithm awareness and management and even fine motor skills. They’ve been used to train soldiers, pilots, surgeons and it’s fair to assume their use in pre-career simulations, will continue and even extend through the use of VR and AR.

In any case, it does seem that the correlation between gamers and a desire to learn the underpinning technology is high. Surely this gives gamers an advantage in future proof technological career paths.

Social: When I mention to people I regard E-Sports as a ‘real sport’ it is often met with scepticism, and even ridicule. At which time I often remind people how ridiculous grown ups chasing dead animals filled with air to kick them through big white sticks is. All games are silly by definition, and they often take generations on the fringe before they enter mainstream culture. But after a couple of generations of computer games, I feel we are on the precipice of that shift right now. The spectator side of the industry is real, and will have wider career and industry opportunities than many people imagine.

So is it a sport? Well that depends on how you view things. Here’s one definition of Sport: “An activity involving physical exertion or skill in which an individual or team compete against one another or for others entertainment.” It fits as far as I can tell. And if you’re worried it will make society more obese than it already is, don’t fret too much. It’s only a matter of time before these games involve players in haptic suits running around on fields shooting up people somewhere on the other side of the globe.

Click here to here me discuss Gaming on 3Aw with Tom Elliot. And be sure to tune in at 4.30pm every Monday for your Future Fix.

Go play, Steve.