When convergence arrives, corporates will have the opportunity to make significant productivity gains. This genesis business model - popular in Silicon Valley - is the Distributed Autonomous Organisation, or DAO. It will be the focus of my talk at this year’s Disruption Summit Europe on 4th September.
I speak a lot at technology conferences about Artificial Intelligence, the Internet of Things, Blockchain, smart contracts and advanced robotics. We’re seeing substantial press coverage at the moment taking each of these technologies as a separate entity. This can be attributed to VCs, startups and tech giants hyping up their products, all in the ruthless pursuit of ROI.
Nevertheless, we need to start giving consideration to the convergence of these technologies. When they are acknowledged together there will be a considerable impact on business, politics, economics and employment.
The DAO uses the combination of various different types of disruptive technologies to become an organisation that is essentially run by an AI system. In a DAO, the board of directors can tell the intelligent computer programme what it wants - “16 per cent net profit on turnover” - for example. The AI will go away, figure out how to do this and then make it happen.
Ultimately, this is where many corporations want to be. They want this level of productivity and efficiency in the system and to be able to dial up profit on demand. However, such increased productivity also has a darker side. What the DAO model doesn’t take into account is that, whilst economic profitability soars, human job losses mean that tax receipts will take a dramatic swing downwards. This leaves businesses - and society - to deal with the consequences.
Getting ready for the DAO
Let’s face it, the British Government is not even prepared to be prepared for Brexit. This indicates that getting ready for the convergence of AI, the IoT, Blockchain et al will be a tall order, let alone dealing with everything that follows.
To counter this lack of preparation we need to start talking more about the distributed autonomous system. We need to understand how the DAO works - with a particular focus on the fact that it removes the need for human intervention - before we build it in the first place.
Many VCs are pumping a huge amount of money into AI, Blockchain and the like, because they can see that the convergence is going to take place. It’s important to talk about this disruption. Also, there is the clear need to think more about the issue of polarisation of profits. This is where profits extracted from traditional business are being moved to technology businesses.
Falling tax receipts and job losses
The really good news about convergence and the DAO is that economic productivity is going to go through the roof. Unfortunately however, tax receipts are going to fall through the floorboards. And if tax is not paid locally by the incumbent that is causing productivity to increase, then we have a very serious problem. This is why the much discussed principle of the universal basic income (UBI) is not going to work. We are simply not going to have the tax receipts to pay for it.
Many people hold the view that technology simply displaces jobs and just creates them somewhere else. This is wrong for two distinct reasons.
Dematerialisation is the first. Take your iPhone. Your iPhone is your map, your compass, your torch, your camera, your diary, your games console and more. Smartphones have replaced many physical items which, a decade ago, were made - but which we now no longer have much need for. The value of these objects therefore disappears. Apple is giving away the torch and the camera free of charge. And that’s just the start of it.
Second comes the service sector. You’d be forgiven for thinking that, in the midst of all this technological disruption, there would be an increase in the number of service jobs. Unfortunately this isn’t the case. Whilst AI is currently in the ‘augmentation phase’ - enhancing the capabilities of human workers - it is set to enter the ‘displacement phase’ in around three to five years’ time. This means that machines will soon take over people’s jobs.
In the future, a lot of service jobs – lawyers, accountants, even journalists – will be replaced by AI. We are yet to work out the full consequences of this, but there are foreseeable problems ahead. The World Economic Forum recently warned that AI may destabilise the financial system, which could lead to another economic crash like the one we faced in 2008.
Preparing for disruption
Businesses that can get their heads around the effect of AI on jobs now are going to have a major advantage moving forward. A high proportion of current innovation is coming out of very well-funded technology businesses such as Uber and Amazon. These companies are changing our lives with their products, but we are yet to think about the long term consequences of this for society.
Disruption due to convergence is going to happen. Currently it is the self serving and profit hungry VCs who are leading the conversation. This is why we now, urgently - at a macro-economic and political level - have to start thinking about directing the social conscious towards the Distributed Autonomous Organisation.
The whole discussion really needs to be centred around outcomes: increased productivity and decreased employment. These forces are set to shake the very economic foundations of the Western world.
John Straw, entrepreneur and co-founder, Disruption Summit Europe
Image source: Shutterstock/violetkaipa