2030 Scenario
Platform Domination
Headlines Alibaba launches low-cost robot nanny US Supreme Court rejects EU data protection rules PWC launches new online MSc in Global Professional Services Big Three host Chinese premier at World Economic Forum Tech investors behind campaign for universal basic income
PLATFORM DOMINATION
This is a world where the key to success is platform ownership and controlling access to data, consolidated by automated data gathering and analysis. In 2030 we live in a world where a few platforms control access to data gathered and used in business, government, the third sector, media and culture. Benefitting from ownership of and access to such data infrastructures, global elites set the rules for everyone else. International business and data-sharing is organised within the ‘splinternet’ – the major geo-political regional blocks which have their own rules and regulation – China, North America/Britain, the EU, and Russia and their allies, within which you can be reasonably certain what the terms of business are. For business and for consumers, day-to-day life generally takes place within one of these blocks with patchy access to services and data beyond. Network effects ensure that only the largest players with bundles of data and expertise are viable in each block. Small and mid-sized firms survive in niche markets around each platform. Without real competition, innovation is limited and margins are thin. Innovation exists on the margins of the platforms, such as in China’s AI-enabled ‘belt and road initiative’ territories where there is limited privacy but a proliferation of data-driven real time services from the internet of things. To underpin these blocks and their underlying technologies, new developments include robot rights and universal basic income to support a disenfranchised consumer class, for whom meaningful work is becoming rarer. People’s lives are increasingly filled with data-driven, personalised, media-rich services achieved through bodily and domestic surveillance, with built-in, unobtrusive political and social messaging.
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Winners in this world A globally mobile elite of platform business owners and employees willing to move to find the regulatory environment to suit them Professional firms able to use AI to increase quality, deliver faster and reduce cost to serve the dominant platforms – but with reduced margins. Consumers with access to media-saturated, data-driven, real-time services with reduced error, customised to their preferences and enabling them to keep on message with fast-moving cultural trends
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Losers in this world One-stop shop and small firms which have to specialise to survive Innovators and entrepreneurs without access to data, unable to implement or scale their solutions Citizens with concerns about unequal access to products and services, based on real-time analysis of sentiment and preferences, or manipulation of choices driven by automated pattern-matching People in senior positions in professional services, who cannot expect to earn the salaries that previous generations enjoyed Traditional professional service workers, especially those in junior roles, who have little prospect of career advancement
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PLATFORM DOMINATION
Global trading and economic environment Globalisation intensifies, driven by the flows of capital associated with a small elite of investors and the diffusion of information and technology and communication networks, with ever greater computer power and related technologies. One driver of globalisation is the dispersal of data. Keen to avoid national laws and regulations over personal and corporate data holdings, owners of data have devised means of fragmenting it (like pieces of a jigsaw puzzle, or disaggregating a lake into a set of pools) such that the various pieces can held in different (and multiple) jurisdictions while abiding by the laws in each. It is now commonplace for businesses and, to a lesser extent consumers, to access data-based services from all over the planet, although very often users have no idea where services are based geographically or the trade-offs being made in terms of privacy, workers’ rights or environmental impact. Underlying issues include the lack of innovation. The platform owners charge rates that extract the maximum rents that keep them in the game, while minimising the profits of the firms accessing their data. Businesses which try to introduce new or better products or services, but which do not comply with the platform orchestrators’ ‘rules of the game’, cannot grow. This is because competition is not based on product quality, but rather conformity to a platform driven by network effects. Think of the rivals to the PC at the height of Microsoft and Intel’s dominance – they did not dominate because they made the best product, but because of network effects.
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UK political, economic and technological standing The UK’s exit, coupled with a debt crisis in Italy that threatens the existence of the Euro, severely weakened the EU. While many EU leaders wish to increase the power of the state – and super-state – against worldwide corporations, and to protect citizens and private data, they are preoccupied with trying the save the Union in the face of populism in central and eastern Europe, and the Euro, to oppose a still neo-liberal USA which favours globalisation and is locked in a battle for domination with China. While at first sight the UK is stronger out of the EU, its real influence on world affairs is marginal. Ironically, given the Brexit mantra of ‘take back control’, the UK is now much more a rule taker than a rule maker in world affairs. The rules, however, are now not set in Brussels, but in Beijing, Shenzhen, California, Moscow and Dubai, and in the board rooms of global corporations that operate across several geo-political blocks. The UK is also very much a taker (or user) rather than a maker of technologies. China and its belt and road allies dominate the development of A.I. and related automation and robotics technologies. Keeping China in its sights, the US also enables unregulated technological progress, despite the regular efforts by anti-trust Democrats to challenge the power of the new monopolies. But faced with global competitors, and US law-makers choose not to intensively regulate data, privacy and ethics of US-based corporations.
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Divergence/similarity between law and accounting In the past accountancy and law firms were more distinct. Accountancy is scalable, which is why this industry consolidated into the big four, now the big three. Law has always been more fractured, because most legal activities do not scale. There has been some convergence, however, as due to increased computer power, text data is increasingly analysable in the same way as numerical data, which creates a competitive advantage for large law firms that did not previously exist. Or perhaps more accurately, it creates a major competitive disadvantage for small law firms. Because of the largely fixed costs of computer technologies, and indivisibilities, there has been an unprecedented process of consolidation in the law industry. But at the same time, these developments in computing and analytics have encouraged the Big Four (or Three) accounting firms to move into legal services, especially in the second half of the 2020s. They used their scale to build data lakes and developed analytical technologies which were out of reach of the smaller accountancy firms. Smaller accountancy firms increasingly struggled against this domination, being forced out of business or into small, specialised niche markets that were insufficiently profitable for the Big Four/Three to take an interest in. By the mid-2020s however, text mining and text analysis was sufficiently well advanced for text to become the new numbers, and the Big Four / Three were able to move with ease into text-based spaces, such as the law. They were particularly interested in areas of the law which are highly codified and involve high volumes of standardised, or fairly standardised procedures: that is, the kind of thing that accountancy firms have always excelled at. Rather than 10
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seek to own data, their core competence is based on processing very large quantities of data that is owned by all sorts of people and organisation – value is added by data pooling. Rents are charged for accessing the data pool. Thus both the remaining law and accountancy firms are considerably bigger than in the past, or at least the significant players are much bigger. However, convergence is not total. While accounting standards have become increasingly harmonised within the main global trading blocks, legal systems continue to differ, not least because the basis of legal systems differs. Roman law defines, and therefore codifies, all the things that are legal; common law presumes anything is legal until it is decided that is it not. This difference provides some competitive defence for the remaining small to mid-sized UK law firms, as it makes the task of codifying the law, and therefore automating legal practice, considerably harder than automating accounting practices. Small and mid-sized law firms therefore survive in niche markets, but the advance of technological capabilities coupled with falling prices (i.e., Moore’s law) means that as time passes ever smaller areas of law become both viable for automating and attractive for take-over by the big players.
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Technological diffusion There has been substantial technological diffusion, but as ever it is those technologies for which there is demand, and which fit into the emerging system of production, that develop and diffuse fastest, while much hyped technologies (such as crypto currencies) which do not find application stall. The cloud has become ubiquitous. It has become routine for businesses and consumers to access cloud-based services without a second thought as to where these services are based. It really doesn’t matter to the end user.
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PLATFORM DOMINATION
Access to and ownership of data Data is owned by all sort of organisations, and individuals, large and small. But data ownership is not really important, in part because most data is, in isolation, of negligible value. Owning data is like owning a telephone handset – it is essentially useless without being plugged into the network, and the value is in the network rather than the data. The owner of the network charges for access (line rental in the telephone analogy), and then adds value both by data pooling and by providing additional services on the basis of the pooled data. Network effects have ensured that the largest networks are viable. Small networks are not attractive, and new networks are incredibly hard to build due to high switching cost and the absence of switching benefits, at least initially. The orchestrators of the network hold the key position, not only because they can charge rents for using the network but because they can monitor all of the activities undertaken by their customer base, thereby generating more valuable information. This position is held by the Big Four/Three accounting firms. In reaction to this, an infrastructure of ‘ark data’ has emerged enabling data gathering, sharing and analysis outside the main geo-political blocks and their varied surveillance and compliance regimes.
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Societal acceptance of AI Although different geo-political blocks regulate and organise social and technological infrastructures differently, in general people are less fearful of AI. It has not decimated employment in the way that many had predicted. Or at least, not yet. Generally speaking AI and robotics have taken over menial, and highly repetitive tasks, resulting in reduced errors. As a result, routine or repeated activities related to health and well-being, task achievement in workplaces and social participation are monitored in real time with analysis of patterns leading to rapid diagnostics, feedback and error correction. The use of AI has also encouraged greater consistency in professional services work. Healthcare clinicians’ diagnoses and legal judgements, for example, are more consistent. Patients and clients are happy because work tends to be done faster with greater reliability and surety. Alongside these developments, the implementation of universal basic income (UBI) advocated by tech firms, among others, is premised on people having more time, more choice. In the context of legal and accounting services, AI is also accepted and automation is essential for the 24-7 accounting, audit and legal services that the big platforms require.
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PLATFORM DOMINATION
Regulatory alignment re AI, data, privacy and ethics Within power blocks, there is regulatory convergence. This means that several concurrent regulatory regimes co-exist. Only very large firms can adjust their responses to these different regimes resulting in truly-global service offerings with the illusion of pooled data. Further the big platform-based businesses are highly adept at regulatory arbitrage. Other firms decide to focus on operating inside one regulatory block. Laws intended to protect personal and confidential data have inadvertently increased the power of the largest global professional service businesses, as only the largest businesses have the resources to enable them to curate these vast and dispersed data pools, which, to create valuable insights, need to be complied virtually into data lakes. While they do contribute to the provision of data, and seek to own and protect their own data pools, smaller and mid-sized professional service firms do not have the resources to join up the pools to form data lakes. They either have to rely on the largest professional services firm, or third parties, from which they buy external data access as a services but in so doing they also reveal considerable information, just as searching in Google does today.
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The standing of the professions The standing of the professions in UK society has remained relatively high. Professional services are augmented, but AI has yet to replace human decision making, and is widely seen to have taken the drudgery out of a lot of professional services work. There is greater consistency in the provision of services, fewer mistakes and fewer scandals in AI-enabled services as well as a decline in the real price of professional services. Prices have declined not because professional service firms want to provide cheaper services, but because of the intensity of competition, especially for more basic services.
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Future professionals and their work There is reduced the demand for young professionals, and para-professionals, which has become a cause for concern: ‘Where will the next generation of human experts come from?’ Whether being a professional is attractive to new entrants very much depends on whether AI and associated technologies complement or substitute the role that you are able to play. Traditional early career entrants from university into the law and accounting professions are far fewer. There aren’t as many jobs, and career progression is likely to be, at best, slow, because those ahead of you are next in line for promotion. Careers advance one funeral at a time. On the other hand there are new career paths and roles for those who can combine knowledge of the law and/or accounting with other skills, enabling the setting up and running of AI-enabled services. These skills are in demand both financially and intellectually. Universities have recognised this, providing joint honour courses on computing and law, and computing and accountancy. Big firms invest in building up these capabilities and training the next generation of ‘hybrid’ professionals who supervise AI-enabled tasks. But mid-size firms are unable to compete for talent here and other than in very specialist niches, lose out in the new talent wars. Managers in larger law and accountancy firms are happy because they do not have to manage so many people who are hungry for career progression while the ladder up which they seek to progress gets ever narrower.
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Timeline to 2030 Things to look out for between now and 2030 if this scenario emerges include: Growing activist and political discussion about monopolies but regulation The UN sets up a new data regulation and protection body – with no teeth Behind-the-scenes advocacy by platform owners for policy makers to implement universal basic income Increasing evidence of stand-offs between China and the US reducing investment and trade China intensifies investment in its Belt and Road initiative enabling automation of large-scale data collection, sharing and analysis from devices across multiple countries Text becomes (almost) as analysable as numbers so firms with expertise in quantification can now take on textual analysis
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Interview with a Retiring Professional, 2030 Janet Preece founded Preece+Co with two colleagues in 2002 when she was in her mid 30s, and built the business up over time from being a general practice law firm to one that is specialised in high volume consumer law – flight delays in particular have provided a large chunk of “bread and butter”. Janet has always been keen on technology, much more so than most lawyers. She gets this from her dad, who worked for Acorn computers back in the early 1980s before PC’s came to dominate. She remembers his drive for technological excellence. But being the best isn’t always a winning strategy. Her dad used to tell the story of how Bill Gates visited little Acorn and was impressed by how much more sophisticated their operating system was than MS DOS (http://news.bbc.co.uk/1/hi/ technology/7307636.stm), but Gates went on to be the world’s richest person while Acorn went bust. She studied biology at university, only later converting to the law. So Preece+Co have been at the forefront of applying technology to law. Janet remembers how they worked with Manchester University’s computer scientists generally wearing Star Trek t-shirts to apply artificial intelligence to decision making. For example, with flight delays you want to know will the airline accept the claim is valid, or will they fight, and if they fight what are your chances of winning. If you can eliminate the cases that the airline will fight and win then your success rate soars and you don’t waste money on loosing cases – it is a “no win no fee business” after all. In fact, that was just the beginning, because identifying winning and losing cases did not require artificial intelligence in the form of machine learning at all – it just required coded data and regressions. Later, machine learning was applied which improved the predictions. In those days law firms competed against each other on the basis of their services. This included price competition, and by focusing on high volume cases Preece+Co could also get by with very few qualified lawyers. They preferred para-legals – qualified lawyers not only expect to be paid well, but expect to be fed interesting
work, and that was not in abundant supply. Para-legals were just the ticket. But the company was also keen not to over specialise. Janet recalled how the government and the insurance industry changed the award rates on personal injury compensation almost overnight 20
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which destroyed a good chuck of their business. But at least in those days the government still essentially set the rules. In the last ten years the Big Four (now Big Three) has taken over – you either play their game or you don’t play at all. And they are like betting companies whose customers are gamblers – what they want is for you to keep playing until your pockets are empty. What they don’t want is for you to walk away. So, it is a fine balance, which they have got that down to a T. Janet muses that they probably use AI and machine learning to judge just how much juice they can extract. So she looks back upon her career in the law. It has been fun. Preece+Co gave her and her co-founders a good living, and provided a good living to their employees and their dependents; in total hundreds of people in Handforth in South Manchester, not a place full of opportunity. She bought and paid for a big house, drove nice cars, took exotic holidays, and paid her kids’ university fees up front so they did not start life in debt. But when her son John mused that he would like to follow her into the law, she was both proud and horrified. Just as she could not have followed her father into the computer business and enjoy the same success, nor could John now do what she done – times have changed, but what goes around comes around. Just as Microsoft’s dominance killed off Acorn, now the Big Three’s domination has killed opportunities for mid-sized independent law firms. He might try to become a dentist, she mused – that still pays well and has resisted automation. Or he might follow his grandfather in computers – at the interface of computers and human intelligence. That, surely will be in demand for foreseeable future.
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