At CES earlier this month there was a lot on display including a jetpack, a holographic wall, a 65'’ TV that rolled up when you are not using it, and full sized drones that folded up and fit in your (cargo) pocket. What stood out for me was the robotics section. These robots really stood out because they were powered by artificial intelligence, or AI.
Robots are defined by first being able to sense, then compute the inputs of those sensors, and lastly actuate based on the results of those computations. Sounds fancy, but the elevator at the Aria Hotel at CES is considered a robot as it has sensors to see how full the elevator is, computes the weight limits, and acts by skipping floors if the elevator is “full” all while sending a new elevator car to the floors it skipped. No AI involved, just a robot using data to respond to a set of pre-defined instructions.
AI typically doesn't have any physical presence other than the supercomputer that it runs on. Twenty years ago, IBM’s Deep Blue defeated reigning chess champion Garry Kasparov, however, it was a computer telling a human what moves to make on its behalf (no different than you interacting with Siri or Alexa on your phone.)
Not much changed when 20 years later, Google/DeepMind’s AlphaGo defeated Lee Sedol in the Chinese game of Go (significant as the amount of moves compared to chess are astronomical.) Again, you had a supercomputer AI being controlled by a human.
What makes the robots at CES so compelling is that they combine robotics and AI. While in the movies for decades, this is a relatively new concept. Most robots just react to a set of pre-determined instructions based on data collected by their sensors (including self-driving cars, they just have a really, really sophisticated set of instructions and sensors).
The first robot that caught my eye was Omron’s AI powered robot playing ping pong against attendees of CES. While this is a cute example, the AI would read your facial expressions, body language, and other surroundings as well as use sensors to track the ball and react to the shot . If you are a level 1 player, the robot will play you at a level 1 skillset, if you are level 100 player, the robot will play you at the level 100 skillset. No human standing in for Omron.
Sure, robots playing ping pong are cute, but why is this important? Omron has no intention to enter their robot in the Olympics, however, their pick and place machine could very well take over every factory in the world, doing QA better than humans on the assembly line using a robotic AI.
Another pick and place AI robot, built buy Soft Robotics, can be controlled remotely by in a web browser or mobile app, allowing the factory managers to be replaced remotely as well as line workers.
The robots were not limited to the factory floor or the ping pong table, but also in the ocean where Qysea’s Fifish will make decisions that send back digital video.
One Step Closer to Skynet?
Yes.
But while the movies make us fear the Terminator and Skynet, the implications of these robots at CES are far more immediate and real. Millions of jobs will be displaced in the next decade due to AI. While I’m bullish on the long term employment opportunities, the short term will be chaotic at best.
All the systems that power the world are not equipped to handle the future that is being ushered in by technology. Be it the SEC responding to cryptocurrency, cable news responding to Donald Trump, the FDA responding to digital health startups, or Universities trying to prepare our youth, we need to take a hard look what powers society and take action. Else Skynet will take over…
Note: this is an abridged version, download the full white paper here.
Introduction
The monumental advances of the last century — the automobile, the airplane, the personal computer and mobile phone, and the Internet — can almost certainly be attributed to a regulation of supply and demand by Adam Smith’s “Invisible Hand.” The father of capitalism proposed the theory in 1776, positing that “enlightened self-interest” naturally produces the best outcomes for all. The notion of choice under scarcity (supply and demand) went unquestioned until recently, as the market has been experiencing a slow but cataclysmic shift. More products are digital and experiential; they’re comprised of bits and bytes and stored in the cloud, not assembled in factories and sold in stores. The march of progress has rendered our concept of supply and demand obsolete.
Even more recently, British economist Ronald Coase posited that it’s in a company’s best interest to expand and become a “firm” — a vast entity owned collectively by shareholders — in order to lower their costs and increase efficiency. Nearly four decades later, Michael Jensen and Dean William Meckling’s 1976 paper “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” led, indirectly, to a period of corporate growth in which shareholders shaped the effects of capitalism and customers were often overlooked and underserved.
Consequently, capitalism — a system intended to meet demands and dispense opportunities — served the greater good with less and less efficacy. Management focused on increasing shareholder wealth (as well as their own) and societies eased into an era of abundance. Desperate to increase shareholder benefits and secure their positions, executives acted against their broader self-interests and ended up harming their customers, their employees, the world’s most vulnerable populations, and themselves.
Meanwhile, a massive decline in regulation (beginning in the 1970s and continuing in the 1990s) pshed society toward economic instability through a series of smaller scale booms and recessions. The steady evolution of technology protected society largely from a great depression, but since that same technology is rendering the theories of Smith and Coase obsolete, we’re approaching a tipping point. The decline of the spirit of capitalism is reverberating slowly, but surely, around the world, drawing the ire of its usual critics, and prompting the strong commentary of more unexpected voices, too.
Laudato Si’: On Care for Our Common Home
In 2015, Pope Francis wrote a groundbreaking encyclical entitled, “Laudato Si’: On Care for our Common Home.” It’s a detailed censure of humanity’s collective failure to care for the environment while pursuing capitalistic interests, the effects of which have only hastened a global, and potentially catastrophic, climate crisis.
His Holiness’s letter is somber, but not without optimism. He begins and ends with a plea to begin a new conversation about the future of the planet, one that includes everyone, because it affects everyone. It’s a clarion call, an appeal to the entire human family — and young people in particular — to cooperate in an effort to “redress the damage caused by human abuse” and offer solutions to the “sufferings of the excluded.”
“The urgent challenge to protect our common home includes a concern to bring the whole human family together to seek a sustainable and integral development,” he said. “For we know that things can change.”
Pope Francis wasn’t the first of his faith to plead with humanity to be more mindful of the planet and the human family that inhabits it. In the 1970s, Pope Benedict asked believers to “recognize that the natural environment has been gravely damaged by our irresponsible behaviour. The social environment has also suffered damage. Both are ultimately due to the same evil: the notion that there are no indisputable truths to guide our lives, and hence human freedom is limitless.” Bartholomew pointed to the ethical and spiritual implications of environmental problems, advising that we replace “consumption with sacrifice, greed with generosity, wastefulness with a spirit of sharing.”
The Laudato Si’ coincided with a watershed moment: capitalism is at a crossroads. Previously focused only on shareholders and profit margins, not consumers, faltering businesses have required governments to intervene on behalf of children, workers, the environment, and businesses deemed “too big to fail.” With the new capitalism — Capitalism 2.0 — entrepreneurs are choosing to be driven by both mission and profit. The culture of the firm has been disrupted. The new Gig Economy, driven largely by freelancers, means the firm has a lower survival rate, which leaves more opportunities for startup companies to transform the corporate space.
The principles of Capitalism 2.0 are currently unfolding thanks to The Laudato Si’ Challenge(named by His Eminence Cardinal Turkson and inspired by the November 2016 Right Now! Conference), which is assisting startups as they expand their solutions to the world’s boldest challenges. The challenge includes a call-to-action for businesses to lead the way in care for our common home by protecting the ecological diversity of the Earth and humankind. The Laudato Si’ Challenge is one of a number of strategies to stimulate mission-driven efforts that are addressing threats to humanity like climate change, but is one of the only initiatives that prioritizes social enterprise efforts that are driven to achieve a mission and turn a profit.
The Past
Pope Francis’s encyclical touches on a number of problems resulting from the pursuit of progress that is unfortunately often accompanied by a general disregard for the planet. His holiness mentions the following scourges specifically: pollution, throwaway culture, climate, water, loss of biodiversity, decline in human life, breakdown in society, global inequality, and weak responses to the difficulties at hand. While we’ve made advances in technology, that progress has come at the expense of people living in developing countries. We deplete their natural resources and exports while making no effort to replace them. Meanwhile, the jobs we’ve relied on for generations are getting outsourced or dying out forcing many former workers below the poverty line. Experts such as Roger Martin, author of Fixing the Game, believe this gradual decline started when executives centered their attention on shareholders instead of consumers.
A pervasive emphasis on the expectations market has reduced shareholder value, created misplaced and ill-advised incentives, generated inauthenticity in our executives, and introduced parasitic market players. The moral authority of business diminishes with each passing year, as customers, employees, and average citizens grow increasingly appalled by the behavior of business and the seeming greed of its leaders. At the same time, the period between market meltdowns is shrinking, Capital markets — and the whole of the American capitalist system — hang in the balance.
Thus, the corporate world is plagued by continuing scandals. Executive compensation has increased while corporate performance has declined, and many executives have lost sight of the psychologically and economically rewarding business of creating value.
But that’s all starting to change.
The Present
In its relatively short lifespan, Capitalism 2.0 has emerged with two promising strains: the cross-subsidy model (or 1:1 model), in which consumers can effectively donate a product for every purchase they make, and the mission-driven model.
The 1:1 enterprise model, espoused by TOMS, Warby Parker, Bombas, WeWood, and so many more, has endured its share of criticism for giving humanitarian aid at the expense of economic advancement in the developing world. Still, this model launched a broader interest among business owners in social entrepreneurship, even carving out space for businesses that are not just socially conscious, but propelled entirely by a belief that sustainable solutions for problems like hunger, waste, water, and climate change can be as lucrative as foot-, eye-, and wrist-wear — perhaps even moreso. Enter the mission-driven enterprise, typified by companies like Tesla and the nine startups who are participating in The Laudato Si’ Challenge. These are the representatives of Capitalism 2.0 who embrace double sustainability and are pioneering models that enable solvency for businesses and for humanity as a whole.
Auxiliary virtues of Capitalism 2.0 include transparency and accountability. Johnson & Johnson demonstrated these values during the Tylenol crisis of 1982. Within a week of the first death that came as a result of tampering in the Chicago area, Johnson & Johnson ordered a recall of every single bottle of Tylenol in existence. They put an immediate stop to all production, all advertising. Undoubtedly, the moves came at a tremendous profit loss, but the company credo explicitly names the “first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.” Putting customers first allowed Johnson & Johnson to survive a devastating tragedy and continue to serve the people who rely on them to manufacture impeccable products.
Similarly, Proctor & Gamble has long abided by a customer-first credo:
We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.
The customer-first philosophy, long considered optional by executives desperate to meet shareholders expectations, is becoming the rule rather than the exception because it’s better for people, and it’s better for pocketbooks.
The Future
Each technological revolution introduces a class of professionals that were unimaginable just a generation before. Workers in the Industrial Revolution couldn’t fathom a world that required automotive technicians, airline pilots, and telephone operators, and members of the Greatest Generation are mystified by professional titles like “Growth Marketer” and “Data Scientist.” Our grandparents came of age in a society that still factored farming into the GDP. Today, there aren’t enough people doing farm work to factor it into unemployment statistics.
Just as farmers from the 1850s couldn’t predict the factories of late 19th century, and how turn of the 20th century manufacturers could foresee changes that would result from auto and aviation industries would, we similarly can’t imagine the jobs that will exist in 25 or 50 years. The Information Age will usher in more jobs than ever before; the nature of those jobs remains to be seen.
As it has for centuries, this turnover will likely produce a painful cycle wherein jobs are lost, replaced, and lost again. The magnitude of the economic turmoil will depend on how disruptive the new technologies are. Artificial intelligence, robotics, and machine learning are profoundly disruptive, which means our communities are experiencing, and will continue to experience, financial discomfort, political unrest, socioeconomic uncertainty. A laid-off coal miner West Virginia can’t fill a software engineering position in Silicon Valley, for instance. These are the people who will need our financial, educational, and emotional support as they gain the skills they need to compete in a new economy.
Nevertheless, history will show that the Information Age was much more constructive than not — and actually became one of the biggest job creators of all time. Moreover, if we place our focus on what consumers need, we can ensure that our entrepreneurial endeavors will be relevant and profitable, and that laborers will find meaning and fulfillment in solving problems for a living, whether on a small or grand scale.
This is the vision of The Laudato Si’ Challenge. Nine startup companies, selected from a set of more than 300 applicants, traveled to the Vatican to refine and accelerate their mission-driven enterprises. Each one endeavors to combat one (or more) of the devastating threats to the world today, at an affordable price.
Mandulis Energy — Renewable energy that turns agricultural waste into electricity and clean cooking fuel.
Nokero — Efficient solar powered lights to decrease indoor air pollution from kerosene.
Smart Yields — An app that allows farmers to have insights into how to grow crops and improve efficiencies of current crops.
Rise Products — Upcycles waste from breweries into high protein, low carb, cholesterol free, artisan flour.
Aqus — First income-generating water filter that is designed to be affordable to people in developing worlds.
Innov8tia — Patented microwave technology that changes toxic sludge into clean water and energy.
ProTrash — Pays people for recyclables with cash cards that can only be used for food, medicine, or other necessities.
Scooterino — The only ride-share service using scooters in Europe.
papr — Creates paperless workflows for enterprises using “File > Print.”
Conclusion
Capitalism 2.0 is just that: capitalism. But instead of prioritizing shareholder value at the cost of efficiency, transparency, and accountability, the new generation of entrepreneurs will prioritize the customer experience first and their broader mission (a close) second. This is not just the most moral way to run a company, it’s also the most profitable.
The ushering in of Capitalism 2.0 will not be without turbulence. There will be disruption, as there always is when society moves from one technological phase to the next. Some jobs will disappear. Some workers will be displaced. But as the New Era of Business supersedes the shareholder driven status quo, it will find novel ways to serve its customers, and better ways to educate, train, and utilize its workers.
Meanwhile, The Laudato Si’ Challenge will provide funding and mentoring for the young entrepreneurs who are answering the Pope’s clarion call to care better for our common home, Earth, and its most vulnerable people. Today, this approach to business is still novel. In ten years, it will be standard practice. And hopefully, the next generation will never imagine that Capitalism was done any other way.
Capitalism 2.0 was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
Thomas Malthus was the original proponent of the notion that there will be no jobs and no food in the future — and he made this prediction all the way back in the late 1700’s.
However, his wasn’t a prophecy of intelligent robots stomping out the little guy, but instead a commentary on the impending economic juggernaut that was the machine age.
“The industrial revolution will automate all the jobs and nobody will have anything to do!” he said. And really, can you knock the man for his anxious foretelling?
Back in the 1700’s, farming was virtually the entire economy. If they calculated GDP, farming would have been like 90% of GDP. Our friend Thomas was just reading the writing on the wall. His only mistake was being epically, embarrassingly wrong.
The industrial revolution was the greatest job creation engine of all time.
It created jobs that were unimaginable only 30 years earlier — much in the same way that Web Designers, Growth Marketers, and Data Scientists, were all unimaginable occupations 30 years ago. In fact, so many people all over the world switched from farm work to industrial work that today, farming isn’t a factor in a developed nation’s GDP and is left out of unemployment statistics. It literally got written out of the books.
Time marches on though.
Now we are exiting the Industrial Revolution and teetering on the cusp of truly entering the Information Age, a brand new era powered by connectivity and this big group of little people you keep reading about called Millennials.
Now sure, self-driving cars will eliminate the taxi (and Uber) driver, and machine learning will take away software developer jobs. Robots will serve coffee, iPads will teach our children, and I’ll be able to use a tricorder instead of going to the doctor. These are the things we’ve been promised.
So nobody will have a job in the future, right?
Well, hang on.
Just as our farmer from the 1800’s couldn’t have imagined the factory that he’d be working at in the next decade, or how someone from the early 1900’s couldn’t have imagined how the auto and aviation industries would dramatically shrink the world, or even how someone from 2000 couldn’t have imagined the digital marketing jobs that exist today, we similarly can’t imagine the jobs that will exist in 25 or 50 years.
The Information Age will usher in more jobs than humanity has ever seen before. We just don’t know what they will be yet.
Keep in mind though, that these jobs will come in a cycle — as they have for centuries. First jobs will be lost, and then they will be replaced a few times over. The magnitude of this progression is dependent on how disruptive the technology is — and AI, robotics, machine learning — these things are going to be exceptionally disruptive.
So sure, in the short term we will witness tremendous pain. We already are to some extent, and it’s causing a great divide to open within our country, and around the world.
Just as a laid off coal miner in Pennsylvania or an unemployed auto worker in Detroit can’t move to Silicon Valley and fill the open engineering roles out here, unskilled labor in central Britain can’t move to fill the tech jobs in London.
What do these things (partially) lead to? One has orange hair and the other has made it way cheaper to travel to England.
So yes, there will be tremendous upheaval of the status quo as we transition away from jobs that have sustained many over the past century — and those people will need assistance, not just financially, but also emotionally. Furthermore, they will need a new education to bestow them with the skills required to be competitive in the new economy.
Nevertheless, in the long term — say 50 years from now — we will look back and see that the Information Age was not the harbinger of humanity’s gainfully-employed doom, but instead a revolution that went on to become the new most powerful job creation engine of all time.
But think about it: When’s the last time you’ve download a new app that has truly transformed your life? It’s probably been awhile.
Yes, the average smartphone owner still uses apps. It’s just that we use the same five apps 80% of the time we spend on our phones. This makes it difficult for new apps to emerge and take over our phones to the point the average app loses 77% of its users within three days of being downloaded.
A Look Back
We used to have mainframes and terminals were the killer app back in the day. Then came along the client/server era and desktop application software (which ran on top of Windows). Up next, there was the web where the killer app was the browser and the webpage itself.
Which brought us to the app-filled mobile era — characterized by the lack or absence of desktop software and usually limited or no functionality on the web. Instagram didn’t have a web site until recently and there’s no (useful) web version of Candy Crush, for example.
It’s hard to imagine a world where apps are an afterthought. But as technology evolves and AI rises, we’re inching closer and closer to that reality.
The Post-App Era
We’re entering an era with no apps, no websites, no desktop software and no mainframe terminal.
For example, I was talking to a startup the other day. They don’t have an app.
You interact with it via chatbots in Facebook Messenger and other platforms. When you need to talk to a human, it jumps out to Skype.
The platform uses AI to keep track of interactions and it pings you on your Echo or Google Home to ask you for some input. It’s pretty cool stuff.
I asked the founder when they were planning to build an app. He told me that he figured they would have built an app by now, but they already had 50,000 daily active users and none of them have asked about an app — making it a low priority.
You wouldn’t have heard that five years ago. Or even a year ago.
Chatbots, Chatbots, Chatbots
According to Gartner, “smart agents” will facilitate 40% of all mobile interactions by 2020. Think Siri, Alexa, and Cortana — AI secretaries of sorts that learn more over time and can be customized to meet your specific needs.
Similarly, chatbots — which are already found on platforms like Facebook Messenger and Slack — will become a major communication medium for brands. Users of tomorrow (and today, really) will be able to pay their bills, shop for items, check the weather, and conduct research by interacting with these AI platforms.
It’s an exciting transition. Users won’t have to worry about hopping from app to app to app, nor will they have to worry about clogging their phones with apps they hardly use.
Whereas apps force users to behave in certain ways, chatbots, combined with AI and natural language processing, promise the ability to enable users to customize their experiences to their own preferences. The end result? A more efficient and enjoyable experience that adds more value to the user’s life.
