Paul Wallbank, writing about the digital economy

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.

You don’t wanna be on the front page.

Nothing amuses a journo or ruins a PR’s day more than a CEO or founder declaring “we want to be on the front page of x publication.”

The sensible response to that demand is ‘why?’ and it’s an important question for anyone looking for media coverage.

Usually ‘x publication’ is the nation’s major business outlet, think the AFR in Australia, the FT in the UK, or the Wall Street Journal in the United States. Every country has its equivalent.

Positive stories leading a site or paper aren’t something easily won, unless you’re buying space which is a different story.

However, regardless of whether you’re buying space or you’ve earned a story at the top of the page, is it something you really want and, if so, why?

A favourite story of mine involves an old colleague who was editing one of Australia’s top tech magazines (back in the days when front cover CDs drove sales).

Her magazine awarded ‘PC of the Year’ to a small suburban computer shop, resulting in that store deluged with orders.

Great news, right?

Not so for the business as the owners found themselves overwhelmed with work and, shortly after, buried with customer complaints as they struggled to meet demand. Eventually they went out of business with a horde of disaffected clients and consumer affairs on their tails.

Most business owners don’t think through why they are looking for publicity – if you suddenly get attention are you risking ending up like that suburban computer shop?

The answer to the ‘why’ question often turns out to be complex – some businesses are looking to juice sales or build their brand; others, particularly in the startup space, want to get on investors’ radars; while high-growth businesses may be looking at attracting good quality staff.

And there’s ego, which is often the biggest driver of the “I wanna be on the front page” demand.

The latter’s easy to get dispel with a litany of all the times CEOs and founders careers have been scuppered by a high-profile scandal on the front pages – basically the “you don’t wanna be on the front page” reply.

More complex are the other motives, and they require a nuanced, well-thought out strategy with the audience and the desired end result being key considerations.

Often, that audience is more in a niche publication, or even the company’s own social and owned channels, rather than a city or national publication.

While it’s a good ego-stroke to see yourself illustrating the day’s top story in the national business paper, for most organisations that’s not where the real benefit of media coverage lies in building a name, selling a product, or catching the eye of well-heeled investors.

Sensibly thinking about where you want to be seen is the first step to getting coverage. Of course, you still need to have something decent to cover.

But, no, you really don’t need to be on the front page.

Y2K and its roll in my downfall

Two decades ago today, the world was breathing a collective sigh of relief as as the direst predictions of Y2K turned out to be overcooked.

I was one of those, at the time running an IT support business and appearing on a fortnightly tech segment on the local ABC station. Little did I know that Y2K had already set me on at least two career changes.

The radio show itself had been as a result of the Y2K bug. In early 1998 I heard a pundit giving some dangerous computer advice on the-then 2BL – now ABC Sydney.

His advice risked locking small business owners out of their accounting systems and it wasn’t hard to imagine the devastation he could cause for any proprietor following his instructions.

So I dashed off a fax to the show’s producers – the ABC didn’t accept emails from the public in 1998 – arrogantly suggesting it might not be a bad idea to think twice before inviting the guest back again.

Two weeks later Bob Hughes, ABC Sydney’s then weekend announcer called asking if I’d like to come in and talk about Y2K and some of the other issues I’d raised in the fax.

I rocked up the following Saturday morning and did ten minutes on air giving, what I hoped, was a useful and plain English overview of the Y2K bug dispelling some myths and hysteria as well as some useful tips on checking for problems.

Then, without warning, Bob opened the line for listeners’ calls.

After what felt like two hours of stumbling my way through a range of random callers, Bob said “see you in a few weeks” and I was on the roster.

I ended up doing ABC shows for the next 18 years. First on ABC Sydney Weekends and then on the national Nightlife program with the evergreen Tony Delroy.

It was one Thursday night spot with Tony that started my writing ventures. I appeared with Yvonne Adele, now a professional MC and public speaker but then making her name as Ms Megabyte.

Yvonne had been working with John Wylie and Sons on the Australian edition of their flagship PCs for Dummies but her commitments were making it hard for her to give the project the time it needed. She put my name forward to work on them.

Having already written one book on small business IT which had been born out of the feedback from the radio spots, PCs for Dummies was an obvious move and it led to four more titles.

That writing in turn led to a Smart Company column covering small business tech issues which I stuck with for ten years as I moved on from my IT support business and dabbled in other ventures.

As the other ventures didn’t have the success of PC Rescue, I found myself increasingly relying on freelance writing for income which eventually led to contributing pieces to the mainstream newspapers on tech and NBN issues.

Eventually that turn to journalism saw me spend two years News Editor at Mumbrella and now a role at a Australia’s main IT professional organisation.

All of this started with the Y2K bug. It’s funny how things take you where you don’t expect.

It wasn’t just me that saw Y2K deliver a career change, for the Australian IT industry, the year 2000 was its peak. That year saw the dot com boom peak and the introduction of the GST. It was a good time to be in tech.

But good times don’t last, and the combination of Y2K passing, the GST being implemented in July 2000 and the tech wreck coming at the end of the year, many Australian tech professionals found themselves driving cabs or working on building sites.

The industry lost many good people and only in the last few years, two decades on, has it truly recovered. But that’s a post for another time.

Australia’s lost business agility

The latest IMD digital competitiveness ratings show Australia sliding down the ranks, how can we address this decline?

The recent digital competitive index by Swiss business school IMD, flagged a worrying trend in Australian industry, reporting the nation’s commercial sector is falling behind its international counterparts in digital competitiveness.

Overall the IMD’s digital competitive rankings weren’t terrible for Australia with the nation only sliding one place to 15th globally from its 2018 place — albeit down from ninth five years ago.

But the indicators that kept Australia in the top 20 were in the nation’s international student numbers and the national credit rating, hardly the mark of an economy on the leading edge.

Jarringly, the survey ranked the nation’s business agility, 45th out of the 63 economies surveyed.

IMD’s definition of an economy’s business agility includes the local industry’s adoption of big data, IT integration, concentration of robots and local companies’ ability to respond to opportunities among other factors.

For those of us who’ve spent the last two decades proselytising about the importance of investing in technology, the fall was disappointing but unsurprising as Australia has long been lagging in its digital investments.

The answers to why this is happened over a twenty year period that saw Australia become one of the world’s richest economies lies mainly in the investment priorities and opportunities of the nation’s small business and corporate sectors.

With the exception of the mining industry, Australian corporations aren’t globally focused. Most of the nation’s large corporations are domestically facing service providers like banks, telcos, toll road operators and supermarkets which sees them focused on maximising local profits rather than competing in international markets.

Most of them also operate as duopolies or monopolies, so much so that in most sectors, Australia can be described as the ‘Noah’s Ark of business’.

Added to that, those dominant local corporates have shareholders addicted to high dividends., in turn reducing the funds available for reinvesting in the businesses.

When Australian corporates do invest in digital technologies, it’s almost always to slash costs. A mindset which leads them into disastrous deals with global IT outsourcers and tech vendors.

Of course continual failure on that level doesn’t matter when you can pass the costs of failure onto customers by increasing milk prices or credit card fees.

For the small business sector there’s a slightly different set of constraints, however with most SMB’s also being local service providers they haven’t needed to invest to stay competitive.

But small businesses trying to compete in global markets, or looking to invest invest, face another problem — accessing capital.

Over the last 30 years, Australia’s small business sector has been frozen out of bank lending with loans only accessible to proprietors able to pledge 100% collateral — usually home equity — against their loans.

For providing effectively risk free loans Australian banks charged handsomely, helping make them the profitable banks on the planet, something that was missed in the weak, and dare one say naive, conclusions of the Hayne Royal Commission into the nation’s finance industry.

The upshot of the banks’ refusal to lend to small businesses means their investment and subsequent productivity has stagnated and fewer have been able to compete in global markets.

So Australia’s fall in competitive indexes isn’t surprising and it’s an added handbrake on the economy as the government struggles with flat income growth, stagnant private sector employment rates and declining GDP per capita.

Fixing these roadblocks is wholly up to government — the banking system needs to be reformed, taxation policies need to be overhauled and serious consideration has to be made about breaking up the nation’s more inefficient and dominant corporates to stimulate domestic competition and innovation.

Sadly, there’s little recognition of the problem among Australian’s politicians, bureaucrats, business leaders or media and, one suspects, there’s no appetite for meaningful reform.

So Australia will muddle along for the moment, but its hard to see how living standards can be maintained as the country’s business sector stagnates.

Which is the real warning from the IMD.

Changes

Last month everything changed.

Instead of waking up at 5am, lying in bed and checking the overnight news and media releases on my phone, I was able to lie in, consider going to the gym and wandering into work at a sensible hour.

My two years as Mumbrella’s news editor had come to end.

Modern digital journalism is not for the lazy or the faint hearted. The tyranny of a daily newsletter means the editors are always hungry for stories and stressing about scooping the opposition.

The hours up to sending the daily newsletter – around 10.30am for Mumbrella – go in a blur.

After the newsletter is sent, the duty editor’s challenge is to keep the website up to date while keeping a beady eye out for breaking news, story ideas for coming days, complaints about earlier stories and moderating the often defamatory comment stream.

Lucky editors have great reporters in their teams. In my case, I had Zoe Samios and Abigail Dawson who both awed and scared me with their work ethic and ferocious competitiveness.

I was very lucky.

That luck held in working alongside Josie Tutty, Mumbrella’s deputy editor, whose editorial sense and attention to detail saved me from countless shocking howlers.

With that team, Mumbrella managed to score its highest ever traffic in 2018.

Those opportunities, privileges and challenges came at a cost, though with stress an every-present problem for everyone in editorial teams.

One former editor of an industry website told me they had PTSD after four years of running one site.

Despite the stresses, those two years had been interesting. I’d learned a lot and I’m eternally grateful to Tim Burrowes for the opportunity to have a deep, if short, dive into an industry which I didn’t really understand along with the privilege of working with some of the smartest and hardest working young journalists in Australia.

It was also the opportunity to be on the editor’s side of journalism, a challenge I genuinely thought I would never get.

However when Zoe, Abby and Josie decided to move on for their own individual reasons, it was time for me to move on as well.

Again, I was lucky. A role at the Australian Computer Society opened up which allows me to get back into tech in a position that gives me the opportunity to help raise the IT industry’s importance to the nation’s and political leaders.

This has been my passion and was too good an opportunity to pass up.

Added to the attractions were a much shorter commute, nicer offices, more civilised working hours and far less stress.

I’ll miss the hipster vibe of Chippendale, even though I was probably the oldest person in the suburb, let alone the office, along with the opportunity of dressing like an extra from Mr Robot.

Now I’m at Barangaroo (the towers in the featured image) I have to dress like a sensible, middle aged adult.

The last two years were at times fun, at times dispiriting and at times infuriating. On the latter point, it’s remarkable how sensitive those outwardly hard-nosed agency bosses, journalists and publishers can be when relatively trivial stories upset their fragile egos.

I won’t miss those panicked phone calls from hysterical publishers, journos and agency bosses who, quite frankly, were old enough to know better. You know who you are.

But on balance, my time at Mumbrella was a challenging and fun adventure. I wish the new team, as well as Tim and his co-founder Martin Lane, all best in navigating a business reporting on an industry that doesn’t understand its own challenges.

So I’m thankful for the opportunity, and I’m grateful for the change.

I hope to see many of you around in the new role.

GE’s Predix predicament – an industrial giant finds software is hard

GE’s IoT predicament illustrates just how complex the engineering and management challenges of the Internet of Things really are.

Industrial giant General Electric is finding software is hard, reports Business Insider.

The company, which former CEO Jeff Immelt declared was a ‘digital industrial company’ is finding its Predix software system and associated cloud services are far more complex and difficult to manage than expected.

Back in 2015, I toured the head office of GE Software outside of Silicon Valley and interviewed the division’s boss, Bill Ruh.

Ruh was upbeat about the internet of things – or Industrial Internet in GE’s terminology – with an estimate the IoT was worth $14 billion to the company as it found new efficiencies and markets.

Today that vision’s looking a little tarnished as the company struggles with a 25% share price drop and a self imposed ‘time out’ on Predix’s development.

GE’s IoT predicament illustrates just how complex the engineering and management challenges of the Internet of Things really are.

The software needs of a sensor in a train brake pad are very different to that of fuel pump in a jet engine or the blade controllers of wind turbine.

Added to that is the challenge of organising, storing and securing the information these devices collect. This is the main reason why GE is moving its data management services to AWS and Microsoft Azure.

That a company with the resources and top level commitment of GE is struggling with this underscores the complexity of the internet of things. That complexity is something every IoT advocate and connected device vendor fails to consider at their, and their customer’s, peril.

No promises from the NBN – the nation building project that guarantees nothing

Australia’s NBN originally promised much, now it guarantees nothing.

Since Australia’s National Broadband Network has started ramping up its connection, the project has been plagued with complaints of underperformance, culminating in Telstra admitting thousands of its customers were entitled to refunds.

Today the national customer rights watchdog, the Australian Consumer and Competition Commission published a range of guidelines for advertisers, something I covered for Mumbrella.

What’s striking though – apart from the ACCC’s adding a new layer of complexity with ‘minimum typical busy period speeds’ is the regulator’s requirement for ISPs to state maximum evening speeds on the network, with the cheapest plans offering no guarantees of speeds at all.

There is no qualifying minimum speed for a plan labelled as ‘basic evening speed’ given there is no slower speed tier to which a consumer could move.

By the ACCC’s figures, a third of subscribers on the NBN to date are on the lowest speed plan with no guarantee of any speed at all.

The telephone system being replaced by the NBN at least guaranteed a dial tone and data speeds slightly better than an acoustic coupler, now a large proportion of Australians will not even get that.

Australians are spending at least $50 billion dollars on a project that will see a third of the nation going backwards, future generations are going to wonder how we managed this.