Insight:
The most powerful companies in the world all have algorithms at their core.
Industry Impact:
Starting with the financial industry, every vertical will be completely digitised, and controlled by valuable algorithms.
Overview
Algorithms are shrouded in mystery and power. Yet, they’re simply a process, or set of rules, to be followed in calculations - most often by a computer. Algorithms can be anything from a basic chocolate cake recipe to the code that recommends your shows on Netflix. Computers have increased the power of algorithms and now are at the centre of technology companies that dominate the Fortune 500.
Another group profiting from the power of algorithms is the finance industry. It is reported algorithms are responsible for 70% of the trades on Wall Street. They are designed to look for patterns and automatically buy or sell billions of dollars in milliseconds. They get smarter with every trade, redesigning their own equations based on real time market feedback. In 2010, 9.5% of the stock market simply vanished, and nobody has any idea how it happened. But, we can be confident that algorithms were behind it.
Diagnosis by Algorithm
Google have algorithms set up to alert authorities when clusters of people simultaneously search for symptoms of ill health. Governments can then allocate and distribute resources, stockpiling antidotes in specific locations in need.
Amazon: Revising Retail
Ask Amazon’s Personal Assistant, Alexa, to order office paper and the algorithm chooses the product. It’s this feature which will become one of the company’s most profitable because there isn’t a list of options offered to the customer, but instead, a single recommendation. This leaves Amazon to make purchase decisions for customers, pushing their own products for purchase.
This commercial power will inevitably lead to government regulation. Soon, we’ll understand what algorithms are doing with our data before we click accept. Translated into a language we can all understand, it’ll show what data is being collected, if it is being commercialised, and the key components that inform outcome.
Factors
Digitisation of Human Tasks
Ever since computing existed, code has been replacing menial tasks that help humans get to an accurate result faster. This started with simple maths calculations, and has grown into algorithms so advanced that the code that drives them is worth, potentially, trillions of dollars.
Billion Dollar Tech Giants move faster than Government
The exponential advancement of algorithms has been so fast that governments haven’t been able to keep up. Eventually though, they will need to regulate them. As consumers, we’re adopting tech products so fast, most of us are not aware of the real cost to us. Do we know what companies are doing with our data? How valuable actually is our personal data and internet behaviour? Humanising the terms and conditions so we can all can make informed decisions is something that will require government regulation. Similar to food packaging, it is likely a universal system will highlight the good, bad and ugly of any digital algorithm we give our data to.
Big Data is the Fuel
The billions of sensors in the devices of the ever increasing Internet Of Things, capture and feed unprecedented amounts of data into the cloud. This is open season for algorithms, as this ‘Big Data’ fuels their calculations. They can instantly see patterns that would take a human years to discover.
Moving forward
Tess’s personal AI, named Jay, follows her throughout her day, communicating with her seamlessly from the nearest device. In the morning, he connects to the stereo in her driverless car, and gives an update on important messages that have come in overnight, as well as the schedule for the day ahead.
“Good morning, Tess” says Jay from the surroundsound speakers in the car. “We should be arriving at the office in 18 minutes. Your meeting with Management is confirmed for 10am, and a light breakfast is ordered for everyone. Remember, you have 5 days of leave you need to take before the end of the year… I can see in September your calendar is looking quiet, so that would be the ideal time to take a holiday. You have liked a few of your friend’s photos from Hawaii, and it is the perfect time to visit then - should we look into Moving forward flights?”.
By accessing a few simple data points from Tess’s calendar, Instagram, weather feeds and flight price sites, the AI uses an algorithm to compute the perfect holiday for her.
“Ahh, Hawaii! Good call, Jay! I haven’t been for years”, says Tess with a sparkle in her eye.
Jay takes a fraction of a second to bring up some flight prices. “I can see here, Blue Sky Air is offering 20% off the flights if we sign up for 36 months of offers.”
Go for it, Jay - that sounds fair. ” Tess takes a sip of her coffee as the car quietly accelerates onto the driverless lane on the freeway.
Since the International Algorithm Act came in in 2020, companies can no longer profit from user data without first sharing the potential revenue that will be created from it. Gone are the days of unreadable pages of terms and conditions. Now, everyone ‘owns’ their data, and can see exactly how companies will profit from the details they hand over. The public’s personal information has a monetary value, which can be traded with companies for their goods and services.
This had a huge effect on Google and Facebook when it was released, as their business models were completely flipped, and the value and control was put back in the hands of the user. When the secrets of their algorithms were revealed, regulation tightened up and created a data economy that was much fairer for the people. Everyone from airlines to cinemas now pitch for you when you share the intent to buy, instead of Google auctioning you off to brands - Google now pay you when you declare an intent to buy something.
As Tess approaches the office, her inspired look into a live feed of the Maui surf break is interrupted by an email from the AARO, the Australian Algorithm Regulation Office.
Her client, Doze Inc., is a global retailer specialising in sleeping products ranging from pillows to herbal sleeping medication. She recently consulted them in their implemented facial recognition software out front of their stores at airports. It recognises millions of registered users as they pass their stores. Once recognised, the algorithm knows their travel schedule, and suggests relevant products to them as they pass the window.
In the email from an Algo Protection Officer, she is notified that her client’s algorithm is being audited as a customer has reported them for exploiting their agreement.
Tess pauses reading to clarify an important point, “Jay, did we submit Doze’s algo for the Q4 Code Submission?”
“No, we are still waiting for sign off from the client.”
“Well, nudge Yuri now, and tell him to get on it. All he needs to do is say the words ‘I approve’! It’s not like it is 2018, where we needed to send an email to approve stuff. We want to avoid AARO auditing us at all costs. It’s expensive and a massive time-waster.”
The Q4 Code Submission is a quarterly obligation for companies to declare the code in their algorithms for the AARO’s AI to review.
She immediately sets up a video conference in the car with an AARO Officer, who outlines what the issues are.
After a short conversation, she learns there is a privacy breach of the agreement with their customers. The destination of some passengers is appearing on the public screens out the front of the shops without that customer’s permission. To comply, Doze need to send a request to all customers asking them to accept the new terms, which includes a micropayment of $2.28 every time is it activated.
“Yuri has signed”, confirms Jay.
“OK, thank goodness. We may be able to avoid the audit, but we can’t avoid the cost of $2.28 per ping. I suggest we adjust the algo to remove the destination being displayed on the big screen. Please confirm Yuri is OK with this plan, thanks Jay”.
“Yes, Yuri has just approved, and I have notified the Doze developers of the change.” says Jay.
As Tess’s car pulls up to the front of the office, she finishes her coffee with a sigh, and resets for the day ahead.
“What a start to the day! I can’t believe it is only 8am. ” She steps out of the car and into the lobby, as Jay’s voice switches to the speaker on her mobile.
“Yuri says he is forever grateful”.
Tactics
If you want to understand the fundamentals and the power of algorithms, watch The Secret Rules Of Modern Living: Algorithms on YouTube.
Watch nowEvery business has the potential for a revenue saving, or generating, algorithm. The best way to develop this hypothesis is to review yours, and your client’s business, highlighting any process that requires improved speed and scale. Algorithms can find new efficiencies in these tasks, and if executed correctly can make a significant impact to the bottom line. To speed up this process, brief an Algorithm Specialist to explore a solution.
Find a SpecialistIf you want to continue your learnings, you can study the topic for no cost online at MIT with this podcast series.
Listen here