infrastructure Archives - Steve Sammartino

The Age of Digital Colonialism

Posted on November 29, 2018 by Steve Sammartino

For the first time in Australia’s history, we no longer own or control all of our critical infrastructure. And to that list we can add any country which isn’t the USA or China. Welcome to the age of digital colonialism.

Show me a rich country and I will show you a rich infrastructure. For anyone who has travelled to a less developed economy, we see it right in front of our eyes. Electrical wires scrambled like spaghetti linking up houses. Water only the locals will dare to drink. Roads that scare the most adventurous driver. Hospitals that make you want a helicopter lift out after an accident and education which isn’t a right, but a bonus for the fortunate few. The simple and clear difference between wealthy and poor countries is their infrastructure. It’s the platform which invents the economic possibilities of its people.

It’s easy to forget that wealthy countries didn’t just click their fingers and get their wonderful infrastructure. They had to invest billions of dollars over decades and centuries. When new technology arrived they had to embrace it, and very often build out the projects using government funds in large capital works, and at times, even take over private firms who got too powerful (antitrust). This is only ever possible in a moderate democracy. A country governed by people with its constituents’ best long-term interests at heart. It’s very difficult indeed to build the physical structure required for a wealthy economy in a corrupt state.

The infrastructure we so often take for granted is what businesses and the populace have danced on top of for the past 200 years. And in this time we’ve also had the greatest ascendancy in living standards in human history.

But now in this digital age we are building a new form of infrastructure. I like to call it the metastructure.

Metastructure: The data and algorithms which now preside over how we organise people, infrastructure and physical assets in the post-industrial era.

Some ‘non-exhaustive’ inclusions would be:

Search and Artificial Intelligence (Google is really just an AI engine)
Social Media – tools of connection with the general population.
Transport and logistics organisation platforms
Large data centres

China and the USA are the only countries that we know of on the globe who are building these pieces of metastructure at a Nation State Scale. In fact, they are going well beyond their own boundaries and are now deeply ensconced in a period of Digital Colonialism. Every other country it would seem is now renting their metastructure from the new overlords.

The funny thing is that we can’t really blame anyone or any Government for being complacent. This happened a lot faster than anyone expected, and unlike other infrastructure – it doesn’t reside in the country in physical form. The nature of data is that it doesn’t need a passport to enter a country and can colonise a market by stealth – a little like a virus would.

Its easy to say here – how is this any different to Coca-Cola becoming a global corporation or General Motors selling their cars around in every market the world over? The difference is simple. These things can’t swing an election, lead to ethnic cleansing or influence how your population thinks, feels or acts 200 times a day – but the metastructure can.

I think the smartest country in the world right now is China. They had the presence of mind to remove Google, Facebook (and their digital business units) from operating in their country so they could build out their own versions of them. They also understand that the new arms race is in Artificial Intelligence – rather than explosive fire power which defined the 20th century military industrial complex.

Any country that wants to maintain its sovereignty in the coming decades needs to invest heavily in the Structural Digital tools which will define the next 50 years. Not owning or controlling your own infrastructure can only every mean you’ll be subservient to those who provide it.

Why utilities need to be back in public hands

Posted on August 24, 2018August 24, 2018 by Steve Sammartino

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.

The NBN is bigger than the internet as we know it

Posted on October 30, 2017October 31, 2017 by Steve Sammartino

The number of people who want slower internet in Australia is exactly zero. The speed we need data transfers to occur at is much fast than our politicians think. The reason for that is simple, we haven’t even invented the technology or industries which will be underpinned by the required connectivity. This is merely the start of the revolution, we are only 20 years into the digital age, and thinking we can even conceptualise how data will be used in the future, and how much of it we’ll need is at best ignorant and in all probability conceited.

Consider this, when oil was first discovered bubbling out of a creek in Pennsylvania in 1859, we had no idea how this material might be used. Maybe for lanterns or heating or maybe even in some machines could use it instead of steam? But the airline industry? That was impossible to conceive as a use case for oil, as was personal locomotion and the plastics industry. Today the airline industry employs over 12 million people directly, and is an important conduit to global commerce.

The NBN is a non-polluting oil well of the future. It should be the conduit to the data economy in Australia. Transfer of data is core to any economy wishing to participate in modernity. Yet, in Australia the NBN has become a political football which is literally risking the financial future of every Australian. I’m flummoxed to hear that the CEO Bill Morrow has claimed that the average Australian (what is average anyway?) wouldn’t require download speeds of greater than 25 Mbps! Either he is deluded, he lacks understanding of exponential technology or he’s towing a political line. Data isn’t about being a techie or young, it’s akin to running water or electricity – In fact, it will probably become a vital remote health care ingredient for our ageing society. Here’s a few things we ought consider, and then start screaming loudly about relating the future of our economy and the technological infrastructure we ought be provided with:

The Governments job isn’t to make a profit out of infrastructure. They should realise that they will profit from new industries built atop of it. They seem to forget the tax we pay (30% min for business) is a quasi joint venture they are the beneficiaries of. They benefit from innovation on platforms, but only when they have the quality the future requires. Besides, it is our money they are already investing on our behalf. Profit centricity is a flawed approach.
Rich Countries are built on rich infrastructure. In less developed nations, the common element is crumbling or barely existent infrastructure. Low quality roads, tangled electrical grids, insufficient education, marginal hospitals. We are squandering the shift as developing nations take their chance and ensure they use connectivity to redefine their economies. Just Google internet speeds by country and see where we rank and some of the surprising speeds of developing markets.
We’ve opened the door to Curve Jumps. There’s a chance that 5G mobile networks will be faster than the jumbled mix of FTTP, FTTN and FTTC NBN Co is now building. The network may obsolete before it’s completed, or even worse, a national infrastructure play could end up being served by global technology conglomerates: Google, Facebook and Space X with their various internet service projects. It’s also possible that 5G mobile networks will circumvent the NBN in cost & speed. By trying to save money, the entire project is at risk.
The future economy lives on the meta-structure. The amount of data we are creating is already doubling every 18 months and we are at the start of the start. All the important innovations of the future will depend on the robustness of technological infrastructure, and will create a new meta -structure of virtual business models which live at a meta level a above the concrete and steel. The trillion sensor economy of the IoT, Desktop manufacturing and 3D printing, Drone based logistics and Virtual Roadways in the sky. All these things require faster than we imagine internet access, unlimited imagination and an ‘over investment’ in the infrastructure.

If we want equal economic opportunity around our big land, then it requires a strong national network, where our regional areas have the opportunity to build a location independent future. Everything humans and governments have ever built that mattered involved taking leaps of faith and investing more than we need now, so we can all benefit tomorrow.

You can listen to my thoughts on the NBN here. And be sure to tune in to 3AW every Monday at 4.30pm as I take on a topic that matters for our future with Tom Elliot.

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If you liked this post – you’ll dig my new book – The Lessons School Forgot – a manifesto to survive the tech revolution.

Falling in love with infrastructure

Posted on July 4, 2011 by Steve Sammartino

Here’s a list of companies who should’ve done something, yet instead, let someone else do it for them. And in being asleep at the wheel, they will never be as powerful (read relevant) again.

Yellow Pages	should have become…	Google
Encyclopaedia Britannica	should have become…	Wikipedia
RCA / Sony / BMG / EMI / Warner	should have become…	iTunes
Newspaper classifieds	should have become…	Craigs List
Trading Post	should have become…	eBay
Barns & Noble	should have become…	Amazon
Industry X	could well become…	Your startup

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The key point is this. The future doesn’t care about your legacy, or how things were done in the past, it only cares about what people actually want. And people don’t care about your existing infrastructure, they only care about themselves.

There’s a million more of these examples out there, and many more to come. The question is which industry will you disrupt because they are too in love with their existing infrastructure?

Brand names are worthless

Posted on March 4, 2010 by Steve Sammartino

We often read about the value of brand names: “The ikea brand alone is worth $12 billion – Interbrand”

Not really. The value of a brand is the infrastructure and value chain which has been built behind it, resulting in the ultimate revenue streams. In truth the brand name is worth very little. Think about many of the unexpected and surprising corporate failures. Lehman Brothers, Ansett Airlines and Worldcom to name a few. What are their brand names worth today? Zilch.

If the brand name was really worth something, they would be sold and re-launched in some capacity. When any company is bought, the brand name is merely an adendum. It’s not the name that is being bought, rather the system, the structure, actually it’s the organisation. Of which the brand name is a very small part, even though it is what is spruked as the compenant of ultiamte value.

Startups who want to build a brand should think less about names and logos and more about building an infrastructure and revenue streams.

New York Series: Contingency Plans

Posted on February 25, 2009 by Steve Sammartino

It’s no secret I’ve spent some time abroad recently – the tile of recent entries has been a total giveaway.

One of the areas I reckon all entrepreneurs should cut their teeth in is a bit of gardening. The skills required for successful gardening happen to be highly transferable for entrepreneurs. I always keep my my garden in good nick. But this is the condition is was in upon my return.

My beloved box hedges are not very healthy to say the least.

Sure we had some hot weather. But I knew it was the middle of a Melbourne summer which regularly gets temperatures above 40c / 100f . So why didn’t I prepare for the resources to cater for the ‘potential challenges’ the hot weather could present to my garden? It’s pretty simple really. I assumed it would be OK for a few weeks. I assumed that things would progress as normal and we wouldn’t have the hottest temperatures on record – which we did.

I failed to prepare for the worst case scenario. Actually I failed to have an infrastructure set up so things would not only continue in my absence, but have the ability to respond to extraneous circumstances. The net result is business failure. Dead garden. Which means that my garden business is still a sole trader, a side interest or maybe just a hobby.

We only have a business when we can be absent and;

things get done anyway
emergencies get attended to
our customers are unaware of our absence
we return with no ‘noticeable’ difference

So the questions we must ask ourselves as entrepreneurs, is how we are building an infrastructure which doesn’t rely on us? It’s only once this is in place, that we actually have a business.