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The fragmentation of everything

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The rise of technonationalism. Diverging regulatory regimes. The spread of “walled gardens.” Polarization like nothing we’ve seen before. The confluence of several trends is poised to completely fragment our real and digital worlds. For companies, this raises a host of new risks, from cybersecurity threats to reputation risk—which, in turn, will require new responses and approaches.

The techonomic cold war

A “techonomic cold war” is already under way—an ongoing, often-invisible state of conflict at the intersection of technology and geopolitics.

Competition to dominate the next generation of technology infrastructure—such as electric vehicles, 5G networks, and quantum computing—is becoming increasingly heated. It’s a high-stakes contest and the countries setting the rules for these technologies could secure significant economic advantage, much as the United States benefited over several decades from pioneering the personal computer and the internet.

At the same time, populist and nationalist leaders have been ascendant in much of the world. These leaders have protectionist and interventionist instincts, and a willingness to buck established norms. It’s a combination which has resulted in the deployment of unconventional tools to favor domestic companies—not just tariffs and trade wars, but company bans and new forms of cyberattacks such as weaponized disinformation.

All of this is leading to the partitioning of both the real world (e.g., trade, labor mobility, and investment) and the digital world (e.g., tech platforms and standards). In this fragmented future, companies once used to operating on a global stage will instead find themselves restricted to operating within the spheres of influence of their home states. (For more, see “Techonomic Cold War” in EY’s Megatrends 2020 report and MIT Technology Review’s “Technonationalism” issue).

Regulators aren’t the only ones fragmenting the digital world. To a large extent, tech companies have been doing it themselves.

Divergent social contracts

Technology platforms are today’s basic infrastructure, increasingly inseparable from the economies and societies in which they exist. These platforms are increasingly where citizens get news, engage in political debate, network professionally, and more.

But while tech companies might seek to create seamless, integrated global platforms, they in fact deliver their offerings in vastly different societies. The social contract of the US is fundamentally different from that of China, Saudi Arabia, or even the European Union (EU). So, governments and regulators in different markets have been moving to recast tech platforms in the image of their social contracts. An early example was China, which developed its own platforms that better align with its social contract than do US-developed offerings.

Meanwhile, the EU has become increasingly active and visible in regulating technology. The most prominent recent example, the General Data Protection Regulation (GDPR), is a precursor of things to come. The GDPR tackles privacy and data protection, but much bigger regulatory issues loom, from the explainability of algorithms to the safety of autonomous vehicles (for more, see EY’s Bridging AI’s trust gaps report). As these technologies come of age and become more prominent in the lives of citizens, expect governments in different regions to become more active in regulating them. Over time, increasingly complex regulatory issues and divergent ideologies will create either separate platforms, or platforms that ostensibly have the same name but deliver fundamentally different user experiences in different geographies.

Walled gardens

Regulators aren’t the only ones fragmenting the digital world. To a large extent, tech companies have been doing it themselves. Walled gardens—closed, self-contained tech platforms or ecosystems—have endured because they are good for the bottom line. They allow companies to extract more value from customers and their data while offering a more curated user experience. In recent months, there has been a growing fragmentation of “over-the-top” media streaming services, with individual studios and networks developing their own subscriber platforms. Instead of streaming platforms that hosted content from a wide variety of creators, platforms will offer exclusive access to their own content—fragmenting the streaming media experience.

Hyperpolarization

It’s no secret that political polarization has been growing at an alarming rate and that social media platforms—while not solely responsible—have been fueling the trend. Filter bubbles in social media platforms have enabled the spread of misinformation, leaving platforms with the tricky and unenviable task of policing the truth.

Worrying as it may be, everything we have seen so far may be nothing compared with what lies ahead. As social media platforms become more active in stemming the flow of misinformation, its purveyors are starting to seek new homes free from policing. In the weeks since the recent US Presidential election, a growing number of Trump voters have started leaving mainstream social media platforms for alternatives such as Parler and Telegram. By the time the next Presidential election rolls around, it’s not farfetched to anticipate that we could see today’s social media filter bubbles replaced by entirely separate social media platforms catering to conservatives and liberals.

At that point, we will have moved from an era of polarization to one of hyperpolarization. For anyone worried social media platforms are doing too little to curb misinformation, imagine how much worse things will be with platforms that don’t even try.

Risks and challenges

The techonomic cold war necessitates a new approach to cybersecurity. “Companies need to guard against not just malware and phishing attacks, but weaponized disinformation,” says Kris Lovejoy, EY’s global consulting cybersecurity leader. “We’ve seen disinformation used to attack elections, but there’s no reason it couldn’t be used to target companies. Most companies today do not have the safeguards and protections they will need in the next frontier of cybersecurity.”

A second challenge is lack of transparency. Commerce thrives on transparency, yet instruments such as company bans are opaque and seemingly arbitrary. To the extent these instruments undermine transparency, they create uncertainty for businesses.

The regional fragmentation of platforms by regulation and divergent social contracts increases the complexity of regulatory compliance and the risk of regulatory noncompliance. Beyond mere compliance, companies face significant brand and reputation risk if consumers perceive platforms to be misaligned with societal values.

A hyperpolarized future will create some of the most significant challenges of all. Losing the last tenuous bridges between our divergent echo chambers would threaten everything from social stability to the future of democracy and the very existence of a shared reality.

This content was produced by EY. It was not written by MIT Technology Review’s editorial staff.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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AT&T may keep majority ownership of DirecTV as it closes in on final deal

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A DirecTV satellite dish mounted to the outside of a building.

Enlarge / A DirecTV satellite dish seen outside a bar in Portland, Oregon, in October 2019. (credit: Getty Images | hapabapa)

AT&T is reportedly closing in on a deal to sell a stake in DirecTV to TPG, a private-equity firm.

Unfortunately for customers hoping that AT&T will relinquish control of DirecTV, a Reuters report on Friday said the pending deal would give TPG a “minority stake” in AT&T’s satellite-TV subsidiary. On the other hand, a private-equity firm looking to wring value out of a declining business wouldn’t necessarily be better for DirecTV customers than AT&T is.

It’s also possible that AT&T could cede operational control of DirecTV even if it remains the majority owner. CNBC in November reported on one proposed deal in which “AT&T would retain majority economic ownership of the [DirecTV and U-verse TV] businesses, and would maintain ownership of U-verse infrastructure, including plants and fiber,” while the buyer of a DirecTV stake “would control the pay-TV distribution operations and consolidate the business on its books.”

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Fintechs could see $100 billion of liquidity in 2021

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Three years ago, we released the first edition of the Matrix Fintech Index. We believed then, as we do now, that fintech represents one of the most exciting major innovation cycles of this decade. In 2020, all the long-term trends forcing change in this sector continued and even accelerated.

The broad movement away from credit toward debit, particularly among younger consumers, represents one such macro shift. However, the pandemic also created new, unforeseen drivers. Among them, millennials decamped from their rentals in crowded cities to accelerate their first home purchase, to the benefit of proptech companies and challenger mortgage players alike.

E-commerce saw an enormous acceleration in growth rates, furthering adoption of online payments platforms. Lastly, low interest rates and looming inflation helped pave the way for the price of Bitcoin to charge toward $30,000. In short, multiple tailwinds combined to produce a blockbuster year for the category.

In this year’s refresh of the Matrix Fintech Index, we’ll divide our attention into three parts. First, a look at the public stocks’ performance. Second, liquidity. Third, we highlight one major trend in the sector: Buy Now Pay Later, or BNPL.

Public fintech stocks rose 97% in 2020

For the fourth straight year, the publicly traded fintechs massively outperformed the incumbent financial services providers as well as every mainstream stock index. While the underlying performance of these companies was strong, the pandemic further bolstered results as consumers avoided appearing in-person for both shopping and banking. Instead, they sought — and found — digital alternatives.

For the fourth straight year, the publicly traded fintechs massively outperformed the incumbent financial services providers as well as every mainstream stock index.

Our own representation of the public fintechs’ performance is the Matrix Fintech Index — a market cap-weighted index that tracks the progress of a portfolio of 25 leading public fintech companies. The Matrix fintech Index rose 97% in 2020, compared to a 14% rise in the S&P 500 and a 10% drop for the incumbent financial service companies over the same time period.

 

2020 performance of individual fintech companies vs. SPX

2020 performance of individual fintech companies versus S&P 500. Image Credits: PitchBook

 

Fintech incumbents and new entrants vs. the S&P 500

Fintech incumbents and new entrants versus the S&P 500. Image Credits: PitchBook

E-commerce undoubtedly stood out as a major driver. As a category, retail e-commerce grew 35% YoY as of Q3, propelling PayPal and Shopify to add over $160 billion of market capitalization over the year. For its part, PayPal in the third quarter signed up 15 million net new active accounts (its highest ever).

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Walking with Dolly

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A walk is, more often than not, a solitary experience. As far as the age of COVID-19 is concerned, that’s probably more bug than feature. It’s a way to escape the confines of a shutdown for a few glorious moments, to get some air and, for better or worse, reflect on the day that’s passed or the one to come.

It can, like many things these days, however, be isolating.

For me, long weekend walks have been a sort of lifesaver throughout this bizarre year. Following two months of being completely sidelined over (non-COVID) health issues, I began walking more per week than I ever have. It was a slow process at first — frankly, never leaving my one-bedroom apartment for April and May made it so it was physically painful to walk around the block when I finally felt comfortable going outside.

These days, I walk every morning, regularly crossing the bridge into Brooklyn and Manhattan. Until I started using Apple’s new Fitness+ service a few times a day, it was easily my main source of exercise. In November, however, my Apple Watch Activity bars swapped the more generic gray for the Fitness+ yellow. But even as I’ve made a point to do a couple of indoor exercises a day, I still start each day with a walk. Rain, snow, this weekend’s sub-freezing weather — skipping a day would feel like breaking a promise to myself.

My actual bars (not sure what happened in September — maybe testing a competitor’s device)

This morning Apple dropped the first five installments (episodes?) of Time to Walk. The feature is an attempt to expand the Fitness+ experience beyond the confines of its titular iOS app. A largely Watch-based experience, the feature leverages much of the wearable’s existing features (and Apple’s growing software ecosystem) to offer a more tailored and multimedia experience than you would get listening to a podcast or music alone.

As with the canny arrival of Fitness+ (December) and handwashing for watchOS (September), Apple says the timing was something of a happy coincidence. The company had been working on the feature well before COVID-19 entered the picture.

“Everything from Time to Walk and our launch of Fitness+ was something we had been working on well before COVID,” the company’s senior director of Fitness Technologies Jay Blahnik tells TechCrunch. “From the very beginning, we thought of Fitness+ as a place where everyone was welcome. We wanted it to feel like a place where, whether you’re new to fitness or very fit, there was something for everyone.”

For many, a walk (or push, in the case of those who use a wheelchair for mobility) is square one when it comes to daily workouts. For my part, I was certainly far more comfortable taking quick strolls around the neighborhood. With limits on space and no real exercise equipment to speak of beyond a kettlebell and yoga mat, attempting to approximate the gym experience at home has seemed a fool’s errand.

April found me trying some YouTube yoga classes with limited efficacy. Like most attempts to exercise, it didn’t stick. Walking every day was the only thing that did. And for the first time in my life, COVID-19 found me walking without any particular destination in mind. That old cliché about it being about the journey not the destination is fine when you don’t mind constantly being late to meetings. Walking for the sake of itself, however, changes the dynamic significantly. I speak to artists, writers and musicians on a regular basis for my podcast. The common sentiment is a familiar one: You simply can’t force creativity. But for those who make a point to regularly walk and run, it’s perhaps the most surefire way to kickstart the process.

Time to Walk is Apple’s attempt to capture some of that lightning in a bottle — to follow a rotating cast of big names as they walk through locations that mean something to them. The company says it’s been making an effort to meet guests where they are and essentially coach them through the process. The ability to do so is, of course, depends on their given location — especially with all of the sorts of travel restrictions that have been in place since early last year.

Ultimately, Apple says, the decisions of where to record are made by the guests. “Some guests said, ‘this is where I want to go,’ ” says Blahnik. “And some guests were like, ‘no, I want to to do the walk I normally do.’ For us, it’s not about Shawn Mendes in the Grand Canyon, it’s about where they want to go. Sometimes that’s limited by COVID, but what we found delightful was for many people, they loved to take the walk they loved to take.”

The first four guests — Mendes, Dolly Parton, Draymond Green and Uzo Aduba — run the gamut on approaches. “We think about the stories, we think about the diverse guest,” says Blahnik. We think about all of the ways you’d like the conversations to go. But what was important to us was that the idea resonated with them. The idea of going out for a walk, having a lovely conversation and hearing stories that could give you a different perspective.”

Parton, who turned 75 earlier this month, recorded her session in a studio — in contrast to the other three names. She relates a handful of stories largely revolving around her upbringing in Sevier County (pronounced “severe”), Tennessee. There’s a story about a Christmas tree and one about opening a literacy center with the help of her father (who struggled with his own ability to read and write).

She somewhat self-effacingly relates a story about the time her hometown erected a statue of her. “So I went home, and I said, ‘Daddy, did you know they’re putting a statue of me? Do you know about the statue down at the courthouse?’ ” Parton explains. “And Daddy said, ‘Well, yeah, I heard about that.’ He said, ‘Now, to your fans out there, you might be some sort of an idol. But to them pigeons, you ain’t nothing but another outhouse.’ ”

According to Parton, her father would visit the statue at night with a bucket of soap and water to clean the pigeons’ mess off his daughter’s likeness. Her segment culminates with something approaching a behind the music-style segment, describing stories behind three of her own songs: “Coat of Many Colors,” “Circle of Love” and “9 to 5.” The latter is the real gem of the bunch, contrasting her morning routines to costars Jane Fonda and Lily Tomlin, while describing the role her acrylic nails played in the songwriting and recording process.

Image Credits: Apple

Green’s stories are more emblematic of the rest. On a walk around Malibu, the Warriors power forward discusses some inspiration stories on and off the court, from being told he would never be a star to a time he tried and failed to cheat on a test in school. The stories are purposefully personal. Aduba relates some of her own struggles to break into acting, as she walks her amusingly named dog Fenway Bark through Fort Green Park in Brooklyn.

The guests share images relating to their stories or snapshots of where they go on their walks, which are delivered to the wrist with a haptic buzz. At they end of the journey, they share three handpicked songs that can be saved to a playlist on Apple Music, similar to what the company has done for its Fitness+ workouts.

Write-ups of the Time to Walk have thus far compared it to podcasting — understandably so, given that it’s an on-demand, audio-first experience. Though the feature, which downloads directly onto the Watch when the new installment drops once a week, has its own flavor, according to Apple.

“Often podcasts are hosted,” Blahnik says, by way of distinction. “In our journey to build out this experience, we certainly considered if there should be a host walking with this person. What we realized is that, for what we were trying to create, the intimacy of having the singular guest talk to you felt a lot more like you were on a walk with them. The notion that it’s not happening in a studio (in almost all cases), that they’re walking someplace that inspires them. You’ll hear that with Draymond and Shawn — with Shawn he’s huffing and puffing up that hill and it’s kind of nice because you’re in that moment together.”

Time to Walk isn’t raw, exactly. It is an Apple production, after all. The company’s certainly not tossing out found audio here. But the content does seem more off-the-cuff than many of its productions, even as it’s packaged together with a slick intro and a trio of songs at the end. But it’s a nice change of pace for those looking for something that feels a little more personal than we’re accustom to from some of the names involved.

Your own mileage will vary, depending on, among other things, your interest in the guest. Though, there’s always a chance someone you’ve never been particularly interested in — or even heard of — will offer some unique tidbit or interesting way of looking at things. That’s one of the potential upsides of having Apple doing the curating here — there’s some interesting potential for discovery. And even in the case of artists you’re familiar with, there’s good potential to discover something new.

The weekly 20 to 45-minute audio supplement won’t make the actual act of walking any less solitary — but for a little while, at least, it’s nice to feel like someone’s along for the ride.

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