NEOC 2019-2020

On Digital Technologies and Transformation - Ramblings of a Technophobe Also a Back to the Future Story

Farid bin Mohamed Sani November 2018

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’, ‘transformation’

• Why now? The trends… again

• The economics of it

• The fear of it • Reading list

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’, ‘transformation’

• Why now? The trends… again

• The economics of it

• The fear of it

• Reading list

A summary of Malaysia’s internet journey over 20 year

https://www.google.com/publicdata/explore?ds=ife8n327iup1s_&ctype=b&strail=false&bcs=d&nselm=s&met_x=indicator_46006&scale_x=lin&ind_x=false&met_y=indicator_43606&scale_y=lin&ind_y=false&met_s=indicator_141706&scale_s=lin&ind_s=false&idim=country:12303&ifdim=country&tunit=Y&pit=1416412800000&ind=false&icfg&iconSize=0.39

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Malaysia has always been forward thinking in its aspiration of transforming to a knowledge-based economy, with Internet penetration rapidly increases since 1998, ahead economically comparable nations

Source: World Bank (updated 7 May 2014) via Google Public Data; MCMC statistics

Internet Penetration Measured Against GDP per Capita

Over 20 years ago, Malaysia accelerated ICT adoption anchoring on Vision 2020 – transforming to a knowledge-based economy and becoming a fully developed nation

This aspiration was solidified with the establishment of the Multimedia Super Corridor (MSC) in 1998

As of Q1 2014, household broadband penetration reached 67.3%, one of the highest in the region

1998

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How did we do it?

• Leadership foresight and risk taking

• Collaborative approach, reinforcing each other – Not adversarial – Public-private partnership

• Takes into account the economics of it all, macro- and micro-. – Makes decision making rational and not random (by and large)

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An aside on the internet – a back to the future story

• Electricity!

• Over time, the value chain evolved from fully integrated to specialization and collaboration – Everything was Edison-GEC – Over time it split, from equipment manufacturer to electricity generators/

distributors to electrical consumer products

• Same now with internet/ telco. The producers of internet (telcos) do not understand IT/ digital and the feeling is mutual. And yet they need each other.

• Also like electricity, it’s getting pervasive in daily life. Being taken for granted. – One day, it will only be noticed when it is not there, like clean air.

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’

• Why now? The trends… again

• The economics of it

• The fear of it

• Reading list

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A rant on jargons

• Different meanings to different people

•  In this day and age of fast hype-cycles, words are used to mean something else when another perfectly good word already exists… e.g. ‘pivot’

• Nevermind. Today we talk about ‘technology’ and ‘digital’

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Defining technology

• To an economist – The technical means for production of goods and services (credit Paul

Krugman)

• To most people – The new stuff invented after our kids are born

• To the ‘financiers’ – Whatever works to hype up my value

•  In our context today – Technology just means information technology (credit Peter Thiel) – Also means the meaning evolves with time because information

technology is, and has been, exploding in complexity

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Then what is digital?...

Whatever that is not analogue?

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Digital as used nowadays

• A fairly loose concept combining these factors and trends

• COMPUTING hardware – Ultra powerful hardware (are we near the limits of

Moore’s ‘law’?) – Miniaturisation

• BANDWIDTH and connectivity – Pervasive internet – Excellent speeds (we are near the limits of bandwidth

demand per application, however, we are running more applications simulateously on more devices now)

• ALGORITHMS –  Many concepts invented in 1960s, but only now can be

implemented practically

• MOBILITY – packaging these factors together such that you can move around

• SENSORS – detect and measure whatever that is measurable

CHEAP, MASS ADOPTION

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’

• Why now? The trends… again

• The economics of it

• The fear of it

• Reading list

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The trends enabling digital

Source: ourworldindata.org; GE

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Progress in algorithm design (1/2)

Source: Hello World by Hannah Fry

What algorithms do (in reality always in combination)

• Making ordered lists, e.g. – Google search page ranking – Waze fastest route

Prioritisation

• Picking a category, e.g. – Filtering inappropriate content on YouTube – Targetted marketing algorithms on Facebook

Classification

• Seperating noise from signal – Various algorithms on voice/ image recognition – Filtering choices to what is most appropriate (again

FB)

Association

Filtering

• Finding linkages – Amazon’s recommendation engine – Dating websites – FB friend recommendations

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Progress in algorithm design (2/2)

Rule based

• Step-by-step instructions • Vast majority of algorithms are rule based • Powerful but ‘stupid’

Machine-learning

• Machine learns as we go along • More commonly called Artificial Intelligence • Algorithm only says ‘how to learn’, but does not dictate

how the answer comes about. • What is ‘answer’? The output of machine learning as

actually a rule-based algorithm that is continuously modified as the machine ‘learns’

• Various strategies, but typically tries to mimic living systems, e.g. neural networks, genetic algorithms, etc

• As a result, no two outputs are ever the same. And the algorithms typically do not make sense to a human being. Black box! Can lead to unpredictable outcomes when the scenario handled was not covered in the original learning environment.

Approaches

Source: Hello World by Hannah Fry

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These trends too have enabled modern Back to the Future products

Cloud computing

• Remember IBM mainframes?

Medical diagnosis

• The big attempt in 1970s to replace doctors

Autonomous driving

• Remember Knight Rider KITT2000?

Examples

Apple

• Conceptually simply repeating the same strategy that led to their failure in 1980s – Closed system – Graphics orientation – Mobility solutions (PDA, Apple Newton)

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’

• Why now? The trends… again

• The economics of it

• The fear of it

• Reading list

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Some critical issues – the use cases of ‘digital’ drives the economics (1/2)

• To think of digital economics, must think of value chains and value webs simultaneously

• Simplified value chain: – Network equipment manufacturers → telco service provider → applications provider →

consumer

• Telco is critical component of the chain. But yet growth has tapered off for the last 10 years, with increasing investments to cater for bandwidth demand. But this is the foundation, nothing else (digital) can exist without strong infrastructure service

• The explosion in digital is really then at the application layer.

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Some critical issues – the use cases of ‘digital’ drives the economics (2/2)

•  Consumer centric applications – By far the largest growth is in the “attention merchant” category of applications

•  Applications that grabs your attention and tries to reside in your head •  Biggest examples YouTube, Facebook, Twitter •  And yet they are free: why? Because the user is the product. •  Who is the customer? The advertisers! They are fundamentally a B2B application

– Second type are the platform providers connecting consumers to non-digital products. They themselves do not provide the products •  Amazon, Lazada, classic e-commerce •  Grab, Uber, Airbnb

– Third type is the subscription model. Usually cloud related services, e.g. •  Spotify (music in the cloud), Dropbox (storage in the cloud), Evernote (note sharing in the cloud),

etc.

•  Business enabler applications – Products that allow businesses to run better, e.g. SAP – Newer wave of products exist as well, e.g. immersion technologies to allow architects and

engineers to collaborate on a 3D virtual model in real time.

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Some Back to the Future lessons on digital economics

• Lesson 1 – there is a divergence in the interests of the founder, the investors, the company, the consumers and the customer

• Lesson 2 – the financial/ investment system encourages this divergence

• Lesson 3 – as a result most consumer centric application companies do not make money and have little long-term prospect. But prospect for the founder is somewhat more positive than the company

• Lesson 4 – the real long-term bet appears to be in the business enabler aspects of digital

At the end of the day, the world is REAL not VIRTUAL

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’

• Why now? The trends… again

• The economics of it

• The fear of it

• Reading list

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The fear of Information Technology is old… Really old… with repeated themes thru the centuries

•  “… create forgetfulness in the learners' souls, because they will not use their memories; they will trust to the external written characters and not remember of themselves. The specific which you have discovered is an aid not to memory, but to reminiscence, and you give your disciples not truth, but only the semblance of truth; they will be hearers of many things and will have learned nothing; they will appear to be omniscient and will generally know nothing; they will be tiresome company, having the show of wisdom without the reality.” – Socrates on writing

•  “… the modern world overwhelmed people with data and that this overabundance was both ‘confusing and harmful’ to the mind… should be regulated and controlled” – Conrad Gessner re the printing press 1565 (paraphrased)

•  Schools “… exhaust the children’s brains and nervous system with complex and multiple studies, and ruin their bodies by protracted imprisonment” – Sanitarian 1883

•  Children “developed the habit of dividing attention between humdrum preparation of school assignments and the compelling excitement of the loudspeaker” – Gramaphone 1936, describing the radio

•  “… hurt radio, conversation, reading, and the patterns of family living and result in the vulgarisation of American culture” – Ellen Wartella, describing the opposition to TV in the early years of TV

•  “Is Google making us stupid?” – Nicholas Carr, The Atlantic

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How then do we progress?

•  I DO NOT KNOW!

•  DON’T THINK ANYBODY DOES EITHER

•  But perhaps at the centre of it all as we consider technologies, esp of the ‘cyber’ or digital types are two core principles – The real world is real. It’s a physical world. Digital technologies support and enhances it

– Humans are at the centre. Technologies that enhances human capabilities rather than replace human capabilities tend to win in the long term.

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CONTENT

• Malaysia’s Internet Journey

• The jargon - ‘technology’, ‘digital’

• Why now? The trends… again

• The economics of it

• The fear of it

• Reading list

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Some recommended reading

• The Master Switch: The Rise and Fall of Information Empires – Tim Wu

• The Attention Merchants: The Epic Scramble to Get Inside Our Heads – Tim Wu

• Hello World: Being Human in the Age of Algorithms – Hannah Fry

• The Entrepreneurial State: Debunking Public vs Private Sector Myths – Marianna Mazzucato

• Disrupted: My Misadventure on the Start-Up Bubble – Dan Lyons

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END OF DOC