Can business managers safely play with FIRe?

The View from Taft, BusinessWorld
December 5, 2018

In 2016, Klaus Schwab, founder of the World Economic Forum, heralded the arrival of the second machine age and its promise as well as threats for business and society.   In his 2018 book titled after the phenomenon, Schwab explains that the basis for the so-called “Fourth Industrial Revolution”, commonly abbreviated as FIRe, is not new technologies alone but advances in connectivity and communications.

FIRe developments like artificial intelligence and cloud computing affect business practices and, ultimately, society because of the way they embed technologies and interconnections into all aspects of human lives.  As a simple example, the way we take pictures with our phones when we eat or shop, and then post these in social media, feed data on our location and purchases into huge databases of companies where intelligent software analyze and give recommendations to managers on our behaviors.  The speed with which we interact with each other, with highly capable machines, and with companies using advanced software and huge amounts of data has made all of us essentially part of an ever-growing, global and high-speed man-machine network.

The upside for business is tremendous.  More people will be accessible for business-oriented communications and transactions.  People will benefit because services previously available only to a few will become available to all who have a networked smartphone.  For example, PayMaya and similar financial technology services now make it possible for Filipinos without bank accounts to buy goods and services online.  In a country with more than 100 million people, the FIRe will mean tremendous growth in the marketplace for goods and services.

Media reports announced that PLDT and Smart successfully completed a cellular call last week using its 5G cell sites in Makati Central Business District and in Clark Freeport Zone, Pampanga.  5G is expected to deliver average speeds ten times faster than 4G.  This is certainly welcome since I have grown weary and impatient with the buffering indicator on my cell phone when using mobile Internet.  In any case, 5G will definitely accelerate the spread of FIRe in the Philippines.

But the FIRe, like its metaphorical counterpart, has to be handled with extreme care so that we can avoid getting burned.  “More connected”, “more data”, and “faster connectivity” does not always mean “better.”  The problem with an obsession with connectivity, data volume and speed is that, without critical thinking and ethical values, it just gets us in trouble faster.  After all, it’s an IT truism that “garbage-in, garbage-out.”

Schwab noted in 2016 that “in all moments of major technological change, people, companies and institutions feel the depth of the change, but they are often overwhelmed by it, out of sheer ignorance of its effects.” 

Where are the ethical dangers for management?  

Danger 1: Managers will use artificial intelligence (AI) analysis plus a lot of data to make efficient but biased decisions.  For example, companies will make hiring decisions using automatic systems to screen thousands of resumes.  Software will be programmed to measure indicators of desirable characteristics (called algorithms) such as extra-curricular activities and online work profiles which have led to “good hires” in the past.  Without human validation, this practice can lead to biased hiring practices on a massive scale.  Cathy O’Neil, in her book “Weapons of Math Destruction,” explains that decision software are trained on past successes to mimic human decision making. 

While biased human decisions in the past may have been reversible through human oversight and review, AI-enabled decisions will be made faster and with lesser transparency because managers will not know how software is making its recommendations.  One solution, according to O’Neil: “Encourage a human review that will ask experienced people who have been through bias training to oversee selection and evaluation. Let decisions be guided by an algorithm-informed individual, rather than by an algorithm alone.”

Danger 2:  Managers will use automatic quantitative reports in their PC screens and smartphones to make business decisions without understanding reality on the ground.  I call this “managing by video game”.  Fast and high-volume databases with real-time network data will tend to make decision-making a push-button affair.  Low sales volume in a particular area may tempt a manager to think that sales people are underperforming or that the product has low potential when, in fact, logistics issues have been causing stock outs. One solution, according to technology ethnographer Tricia Wang, is to use “thick data” to add human stories and meanings to quantitative reports. Wang predicted the explosion of smartphone sales in China based on her interactions with poor Chinese willing to spend a lot on these devises.  As history has shown, Nokia largely missed this trend even with its huge databases. 

Managers can play with FIRe to benefit businesses and people only if they do so with sound judgment based on direct human knowledge of business and social realities.