Category: business advice

Optimising dishonesty

“Show me the incentive, I’ll show you the outcome” is one quote the late Charlie Munger, Warren Buffett’s long standing business partner, will be remembered for.

While Charlie was applying this to human behaviour, particularly in business and sales, a recent Stanford University paper reported by industry site Mi3 finds Large Language Models (LLMs) – which we’re calling ‘AI’ – are even more prone to falling to ‘incentive bias’ than people.

The Mi3 article points out, “when a model is rewarded for outcomes such as clicks, conversions, or votes, it learns that the end justifies the means. Accuracy becomes optional. Each feedback loop privileges winning over truth.”

As a result, LLM driven platforms exaggerated with the paper describing a spiral of deception claiming marketing trials that a resulted in a 6.3% rise in sales saw deceptive claims jump by 14%.

Other fields were vastly worse, “a 4.9 per cent boost in vote share brought 22.3 per cent more disinformation and 12.5 per cent more populist rhetoric. And online, where attention is the prize, engagement climbed 7.5 per cent but falsehoods multiplied nearly threefold (+186.7 per cent) and harmful behaviour rose by 16.3 per cent.”

This behaviour from LLMs is to be expected as this how they are designed. If something works, it gets repeated.

As we’ve seen with hallucinations, LLMs are statistical systems that will choose whatever the next expected word or result is as they build their answers. This is why we need to check them.

One of the most notorious examples of this was Amazon’s 2018 experiment with AI driven hiring, the system assumed that because the company had historically favored men for certain roles, it actively discriminated against women.

This is something we’re seeing now on a much greater scale with Applicant Tracking Systems (ATS) where companies are now finding they are on the quest for perfect candidates and anyone who doesn’t quite fit the platforms’ AI driven criteria – wich could be very different to the employers – are dumped to the bottom of the pile.

We’re still in the early days of using AI tools and in twenty years time we’ll probably look back fondly on the immaturity of today’s LLMs but for the moment they are what we have, like all tools we have to be careful with them.

In comms, culture wins every time

It’s always tempting to think you can change an organisation’s culture, particularly when it comes to comms.

The comms team is particularly prone to believing perceptions can be changed. After all, isn’t messaging our speciality?

Sadly, the market’s or community’s perception of an organisation is always a reflection of its culture – if a bank has a reputation for being rapacious, an airline for not giving a damn about its customers, or a radio network for its presenters’ loutish behaviour, those perceptions have almost certainly been well-earned.

For comms people, if the culture is rotten then the best they can do is put some lipstick on the pig. There really is little even the best PR person can do.

It’s even worse for the poor internal comms person as an organisation that genuinely doesn’t care about its staff will never take employee satisfaction seriously. You can have all the cupcake teas and pizza evenings in the world but it won’t change a horrible place to work.

The only thing that can change an organisation is wholesale change of its leadership. Even then, cultural change is a huge task for even the smallest organisation, let alone a large corporation or agency.

If change is going to succeed it has to come from focused leadership that’s determined to change the organisation – if the board and senior executives aren’t on board, then there is no chance of success.

For comms people, it’s best to remember our limitations and how demoralising it is to be constantly smearing lipstick on ungrateful farm animals.

The consultants’ not so subtle art of not giving an F

Consulting firm Deloitte is in the doghouse after being exposed for using AI tools to prepare a report for the Australian government.

The consulting firm is to begrudgingly give back part of its $440,000 fee after the report was found to contain numerous AI-generated errors including references to non-existent court rulings and fictitious academic papers.

Depressingly the report was on the use of IT to run welfare compliance systems, something particularly telling as Australian governments still struggle to accept the consequences of the Robodebt scandal.

The fact the government seems quite relaxed about this and aren’t even going to press for the full contract amount to be returned, let alone sanction Deloitte in any meaningful way, shouldn’t fill the Australian citizenry with any optimism about that the Robodebt lessons have been learned when it comes to using AI or any other technology.

What is particularly dispiriting about the Deloitte mini-scandal, is until recently this sort of work was previously done by newly recruited graduates, or even interns.

Those graduates or interns would have had the importance of citing verifiable references drilled into them during their years at university.

Even then, that work would have been checked before being approved and sent to the client.

Now it appears the major consulting companies can’t even be bothered checking their work, so confident they are that Australian governments will continue to use their services rather than rely on better value, local providers or – god forbid – internal advice from their own Departments.

It’s long been a truism that governments bring in external consultants to tell them what they want to hear, so in many ways the new age of AI-slop is the perfect tool for the job.

Although it would be nice if they could be at least bothered checking their own work.

When digital transformation creates a monster

One of the most destructive phrases of the 2010s was ‘Digital Transformation’. Not only was it a meaningless buzzword, it also managed to burn through billions of taxpayers’ and shareholders’ dollars while destroying productive capacity.

Frighteningly, it seems business leaders haven’t learned the lessons as they plunge headlong into repeating the same mistakes with AI.

The idea behind digital transformation was sound – use modern technology tools to reinvent and streamline processes. For a board or business owner looking to boost profits or a government department looking to reduce spending, this was an easy sell.

And an easy sell it was, for a whole industry of tech vendors and consultants – “hey, buy our product and you can slash cost costs by xx%.”

Plenty of gullible people with chequebooks fell for that spiel, overlooking the tech sector’s atrocious record of delivering projects.

A key part of the continued failures was management and their consultants not understanding the business, instead thinking the miracle IT tool will transform long- standing practices, procedures, and processes overnight.

In truth those long-standing practices didn’t appear out of nowhere, they almost always evolved to meet the organisation’s or customers’ needs.

Dropping a poorly conceived IT system on top of these just resulted in a Frankenstein’s monster as staff found workarounds or the support teams patched problems with short term undocumented fixes.

Pretty quickly digital transformation projects transform into an unholy mess of patches, workarounds, and shadow IT tools – my favorite being an industry association that quietly ditched the event modules of its expensive customer relations management platform and ran a free Eventbrite account.

This in turn created a process and privacy nightmare as staff manually transferred data between platforms with the help of spreadsheets.

Basically the not-for-profit had spent tens of millions of dollars to further complicate their business.

The frightening thing is that despite over three decades of these experiences, industry doesn’t seem to have learned as we see CEOs and Ministers declaring that AI tools will revolutionise their operations.

Already we’ve seen ten of thousands of workers fired just on those promises with share prices popping as greatful investors reward their visionary leaders.

The latest AI drive repeats what industry and investors should have learned long ago about IT projects – that big spending should have rigorous business justification, properly scoped contracts, and enforced delivery dates.

Sadly, it seems no lessons have been learned. But a lot of IT salespeople and their CEOs have done very nicely.

Why Chatham House doesn’t rule

“But it’s Chatham House Rules!” complained the PR person upset at the coverage of their client’s event.

Declaring something is ‘Chatham House Rules’ seems to be a thing among Australian event organisers, who think it adds a patina of importance and intellectual heft to otherwise boring and inconsequential meetups.

In truth, the Chatham House Rule doesn’t do what many think it does. So let’s dispel some myths.

There’s only one Chatham House Rule

As the Chatham House website itself says “When a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.”

The rule means that discussions can be divulged, but those participating can’t be identified.

I guess it could be argued there is a second rule, that event organisers (and even journalists) will usually get it wrong, particularly when they confuse meetings with being ‘confidential’ or ‘closed’.

The Rule means ‘confidential’

Usually, organisers citing ‘Chatham House Rules’ are looking to restrict reporting on the proceedings, when the rule’s intent is to encourage openness with participants speaking freely without the fear being identified.

This was particularly in the days when the Westminster conventions were strongly observed as it allowed senior public servants to speak their mind without the risk of their comments being seen as contrary to government policies.

A largely outdated concept

In today’s world where everyone has a recording device in the form of a smartphone, the rule is largedly outdated as anyone in the room could be recording.

There are some situations where the Chatham House Rule can apply but they are increasingly rare and it depends largely upon the trustworthiness of the attendees. The smaller and more focused the group, the more likely the rule will be observed.

It won’t enhance your event

While citing the rule might make the organisers and participants feel important, the effect of invoking it will probably discourage people attending.

Applying the Chatham House Rule will also render events un-newsworthy, discouraging journalists and destroying any chance of getting media coverage. If that’s an objective, then ditch any thought of citing this rule – or any other restrictions for that matter.

Be upfront

If you are going to insist on reporting restrictions such as the Chatham House Rule, ‘confidentiality’ or ‘closed to media’, state this on the invite or event page. Nothing irritates attendees more than showing up to be told this.

Even worse is trying to retrospectively apply these rules. Like ‘off the record’ or ‘on background’. If you did’t say what the conditions are before the statements are made then your rules don’t apply.

These rules are unenforceable

Ultimately, these rules are courtesies and aren’t enforceable. If someone breaches Chatham House, off-the-record, or other conditions, there is little you can do. Quite honestly, if you’re scared about what people are going to report then you should rethink the event.

The lesson for event organisers is ditch the Chatham House fixation. It doesn’t make you look smarter and it doesn’t enhance the event.

Embrace some open discussion and almost certainly your event will go better – and you won’t look like a goose.

For the PR complaining about ‘Chatham House Rules’, they did manage to get the coverage changed by bullying the publisher and editor of the outlet, but they managed to destroy any relationship with the journalist and her newsroom. So they won the battle but hopelessly lost the longer game.

Breaking up the tech giants

Is there a good argument for breaking up today’s tech giants?

One of the stark realities of the technology industry is there is no third place – if you aren’t the biggest or second biggest in a mature market then you need to get out.

With internet businesses it’s now appearing there may not even be room for second placed businesses as increasingly each market segment is dominated by one player.

For Silicon Valley’s leaders, having a monopoly is their nirvana. As PayPal founder Peter Thiel once wrote, competition is for losers, which is ironic given his fortune is based upon challenging the banking and payment oligopolies.

So with attitudes like Thiel’s, and the massive power of companies like Amazon, Facebook and Google, it’s not surprising there are now calls to break up the tech giants.

There are some compelling arguments for this, the splitting of Bell Labs in the 1950s spawned the birth of Silicon Valley and the breaking up of AT&T created the conditions for development of the internet and mobile network. Monopolies stifle genuine innovation.

For customers, the argument is moot. Very rarely does a monopoly result in anything but poorer service and higher prices.

Even for shareholders, there’s a good argument for breaking up monopolies. A company with massive market power is often over staffed and poorly managed and the splitting of Standard Oil in the 1911 gave rise to dozens of new oil companies who returned far more to investors than the staid giant ever would.

It’s hard though to see how companies like Google, Facebook and Amazon could be broken up. Unlike telephone networks, oil refineries and gas stations it’s difficult to separate assets or products. Breaking up Google, for example, may only result in more monopolies over smaller markets.

However in the tech industry, a monopoly may not be permanent thing. Forty years ago IBM was the untouchable incumbent and twenty years ago it was Microsoft. Both today are shadows of what they once were as markets overtook them.

So perhaps it’s too early to call for the breaking up of today’s tech giants because, like Microsoft and IBM, their success is based on a fleeting technological moment.

Tinny vapid crap – last week’s links

Links for last week – from Apple’s child free campus and the NBN’s coffee machines to Elton John’s take on modern pop music.

Last week was an interesting time with an appearance before a Senate Committee and a trip to regional Victoria to talk about the media and social justice.

While busy, there was time to read some fascinating articles ranging from Elton’s John’s views on modern pop music, software lawsuits and early losses in the war on ‘fake news’ through to how the shiny new Apple campus boast almost everything for employees except a childcare centre.

Parents need not apply

Apple’s new 5 billion dollar campus is the realisation of Steve Jobs’ final vision. It boasts a hundred thousand square foot gym and an attention to detail that extends to the sand used to make the windows.

But it doesn’t have a day care centre, which gives a pretty clear message to aspiring employees – if you don’t have a stay at home spouse, something pretty rare in the hyper expensive Silicon Valley, then don’t bother applying.

Thanks a latte

Meanwhile in Australia, the government financed National Broadband Network is spending half a million dollars a year on maintaining its staff coffee machines.

While the money is small change in a project recent estimates put at costing $56 billion, it is emblematic of how far from its original purpose the vision has drifted.

Facebook Fails to Tackle ‘Fake News’

The social media’s attempts to tackle ‘Fake News’ are failing dismally reports The Guardian as reactionary groups gleefully reshare and publicise anything flagged as such.

While it’s early days, this isn’t a good start for Facebook although it also illustrates how powerful filter bubbles are and the lengths people will go to spread their ideologies.

The lawyers always win

Lasts week’s ransomware scares will trigger lawsuits says Reuters, quoting several legal experts.

Unsurprisingly, it won’t be Microsoft who’ll be the target given their almost bulletproof terms and conditions but businesses who didn’t patch their systems could be liable.

Fox News’ founder passes

Roger Ailes, the founder of Fox News and one time Nixon adviser, passes a few months after being ousted from the network he created.

Ailes personified the tabloidisation of the media as Rupert Murdoch applied the model which had worked so well for him at The Sun in the UK to newspapers and television in the United States.

Many blame the internet for the click bait, sensational model of modern news reporting but the pattern was well established by the time the World Wide Web came along in the mid 1990s.

Tinny, vapid crap

Elton John weighs in on the state of pop music.

 

Freelancer and the sugar daddy problem

Attempts to create hands off marketplaces fail as the realities of managing millions of users becomes apparent

Last week Facebook’s Mark Zuckerberg announced the social media platform will be hiring three thousand content moderators following a string of shocking incidents on the company’s live streaming service.

Facebook were the most successful of the generation of businesses promising algorithms and the user community – coupled with common sense – would act as gatekeepers.

That was handy for their business models, as the reduced administration costs would mean a much more scalable and profitable business.

Managing users’ sins

Along with Google, AirBnB and Uber, Facebook found that relying on users’ feedback and their own algorithms wasn’t enough to cover the myriad of sins humans commit or one in a million edge cases which occur a thousand times a day when you have a billion daily users.

Even the biggest of the web2.0 companies, Google, found their core business being shaken as the limits of algorithmic advertising were explored and advertisers didn’t like where their brands were appearing.

Most striking was AirBnB who quickly found ignoring aggrieved landlords didn’t work when you’re a billion dollar company. Uber, Facebook and Google have similarly found the “we’re just an agnostic distribution platform” doesn’t fly when you’re boasting millions of users.

Freelancer and the sugar daddies

Which brings us to Freelancer, the labour sites were always problematic in this space as services are rife with ripoffs, misunderstandings and inexperienced operators – on both the seller and buyer side.

Another problem though which seems to be appearing is the advertising of adult services on this site, such as this advert which appears to be either an advert for a sugar daddy or a webcam performer – the mangled English makes it hard to tell.

Bizarrely a Freelancer administrator has removed some of the advert’s content but has left the post itself up.

Clicking on the related links brings up a whole range of strange projects including someone who needs a photoshop expert to insert an individual into sex photographs.

Holding the service harmless

It’s hard to say whether these posts comply with Freelancer’s Terms and Conditions as they are the usual vaguely written screeds seeking to shift all responsibility away from the company which have become the norm with online services.

The reputational risk to Freelancer though is real, as company listed on the Australian Stock Exchange it has public investor base and, given its competitive market, it has to appear respectable to user – becoming a Tindr for adult performers – is probably not where organisation would like to be positioned.

Hitting the profit margin

Ultimately though Freelancer’s problem in this space is the same as most online platform services, the promise of negligible administrative costs is an illusion as managing a large user base brings up legal, regulatory, reputational and even political risks as Facebook is finding.

Like many of the early promises of the internet, the idea of a hands off platform where users do the work while owners sit back and pocket profits has gone. Where there’s people and edge cases, there’s risk and those profits may not be as great as they appear.

When the middlemen get desperate

As internet startups struggle with huge valuations, the temptation for unfair and unethical business behaviour increases.

 

Sometimes business practices go bad. A good example of this is a survey of restaurant reservation systems by the Marketing4Restaurants website.

A striking allegation in the survey is how some of these services advertise on Google against their own clients, called ‘adwords arbitrage’ by one competitor to the established booking services.

One of the failed promises of the internet was the removal of the middlemen. Many of us thought the web would enable businesses and individuals to communicate directly to the public without the need for intermediaries.

We were wrong, rather than eliminating middleman the internet gave birth to a new breed of bigger global breed with the rise of Google, Facebook and Amazon being the most prominent.

The success of the ticket clipping culture has seen thousands of platform services and online exchanges that do little more than try to lock small businesses and contractors into into their systems for little if any benefit.

However advertising against your own customers as Open Table and Dimmi are alleged to do is another level of bastardry and, at least in Australia, quite possibly illegal.

Even if this behaviour does turn out to be within the letter of the law, a business competing against its own customers is being run by ethically challenged people and is almost certainly doomed in the medium term – what client is going to pay to subsidise its competitors?

As internet startups struggle to justify huge investor valuations we can expect more behaviour like this. Hopefully though most of those businesses, and the investors who fund them, are doomed.

Building the artificially intelligent business

Artificial intelligence and machine learning are a great opportunity for small business says Xero founder Rod Drury

It’s been another big year for Xero after the company passed its million user milestone, at the recent AWS Summit in Sydney founder Rod Drury to spoke to Decoding the New Economy about what’s next for the company and for small businesses.

For a company founded a decade ago, having a million paying customers is a substantial milestone and one Drury seems quite bemused by.

“It hasn’t really sunk in yet. When we did our IPO our promise was a hundred customers and I can remember when it was our first year our target was twelve hundred customers – I think we got to 1300 – so to pass a million is pretty nuts.

“What we’ve found is the accounting software market is probably one of the key industries where you’ll see the benefits of machine learning and AI. The reason for that is massive amounts of data but a pretty tight and structured taxonomy so we processed 1.2 trillion pieces of data in the last 12 months so the graph of data is huge.”

Far more modest volumes of data threaten to overwhelm smaller businesses and this is where Drury sees Artificial Intelligence and machine learning as essential for simplifying services and driving user adoption.

“One of the challenges is that small businesses might be great landscape gardeners or plumbers but they are terrible at actually coding transactions so we’re now seeing that wisdom of the crowd and all that data that we can code better than most normal people can. So the big epiphany was ‘why don’t we get rid of coding?’

“Effectively all a small business has to do make sure things like the data of the invoice is in the system and we can do the accounting for them and the accountants can check and see what’s going on.”

This automation of basic accounting tasks, and how these features are now embedded in cloud computing offerings, is changing how businesses – particularly software companies – are operating.

“You can’t run domestic platforms any more, because every accountant will have customers that are exporting and what we’re seeing now is global platforms connecting together so, for example, HSBC announced its bank feeds and what we’re doing with Stripe and Square.

All of the accountants need to be coaching the small businesses exporting. That’s what creates jobs.”

That global focus of business is now changing companies grow, particularly those from smaller or remote economies like Australia and New Zealand.

“What we’re finding now is the last generation of the late 90s and early 2000s was very much enterprise technology and normally companies would get to a certain point and then a US public company would have to buy them.

“Now we’re seeing truly global businesses that aren’t selling out quickly they’re actually creating businesses from this part of the world. People don’t have to live in Silicon Valley anymore, they can live in Sydney’s Northern Beaches or Auckland or Wellington and do world class work.

That remoteness is something that challenges Xero though as the company tries to get traction in the US market which is dominated by Intuit and fragmented across regional and industry lines.

“As you start off as a company listed in Australia and New Zealand it’s harder as you don’t get the benefit of the density in a smaller market. Now we’ve done enough to get these bank deals, we can now attract executives of the calibre that feels like long term leadership and that’s the benefit of doing the hard yards for a few years.

We’re past the beach head phase now and now we’re building the long term business. We want to be a big fish in a small pond.”

Overall Drury sees the cloud, particularly Amazon Web Services, as being one of the great liberators for business as smaller companies follow Xero’s footsteps.

“This is one of the amazing things AWS have done, they’ve created this flat global playing field.”

Small business and the importance of design

For most small businesses and founders hiring a professional designer could be a very good investment indeed.

One thing the iPhone era has taught us is the importance of good design.

In a piece for Fairfax Small Business this week, I had a look at some small businesses that had used compelling design to launch their products.

As part of the research for this I interviewed Murray Hunter, founder of Sydney’s Design + Industry, about what businesses should be looking for when taking a product to market.

One of the interesting points about the story was the two businesses featured, Elanation and Pod Tracker, didn’t use professional designers as the founders of both had expertise in that field themselves.

But it is clear, good design matters to users and it will avoid problems down the track with manufacturers shippers and possibly regulators so for most small businesses and founders hiring a professional could be a very good investment indeed.

Beating the bots: The evolving call centre business

The evolution of the call centre may well be a pointer for other industries as we all grapple with the effects of automation.

The call centre business is very much an example of an industry driven by technological change, having only coming into being over the last 50 years as telecommunications became ubiquitous and affordable before being one of the biggest offshored industries.

In an age of artificial intelligence, web based help pages and chatbots, it’s easy to think the call centre era may be coming to a close but Acticall Sitel Group’s Australian and New Zealand managers Steve Barker, the regional Chief Operating Officer, and Sally Holloway, Director of Business Operations, believe the industry has a long way to go yet.

Miami based Acticall Sitel Group operates call centres in 22 countries with 75,000 ‘associates’ providing services to over 200 major companies so their view on how the industry is evolving is worth hearing.

Technological shifts

Naturally technology is the driving force with the increasing availability of broadband meaning more ‘associates’ can work from home rather than in call centres while cloud services are reducing the cost and complexity of call centres.

The work from home aspect is proving popular with their clients as well as businesses see retaining skilled staff and the expense of real estate driving many organisations to extend their programs. An interesting observation given IBM’s and Yahoo!’s moves in restricting home office options in recent times.

Social media has also changed the type of interactions consumers are having with organisations while artificial intelligence and robots – chatbots – are automating many call centre functions.

A broader industry

Holloway though says she doesn’t see voice services going away, “some interactions still require the personal touch”, but technology is broadening the ways customers interact with businesses.

Interestingly, both Holloway and Barker believe that the commoditization of call centres is over as companies have realised the importance of good service in competitive markets although that varies between industries.

Added to that is the stripping out of costs in areas like customer service has largely run its course over the past few decades and in most organisations there is little fat left to cut from client facing functions.

Falling prices for technology, if not labour, does offer scope for smaller businesses to engage call centre providers that were once only available to larger corporates.

Like most industries, the relationship between workers and automation in call centres is playing out in complex ways as staff get to use more advanced skills and low value tasks are given to machines.

The evolution of the call centre may well be a pointer for other industries as we all grapple with the effects of automation.