Ethics and a pragmatic approach to the use of technology has taken centre stage in the technology industry as artificial intelligence (AI) and machine learning gain momentum and become an increasingly disruptive force in many industries around the world.

While technology has offered the world untold benefits, it has also disrupted business models and has put the future of the worlds labour force in question as robots and computers can perform basic tasks with enhanced efficiency and no days leave or sick leave.

“Pragmatism is needed here. Wholesale changes will benefit nobody. Technology can make the world a better place…or much worse,” warns GTconsult Co-Founder and CEO Bradley Geldenhuys.

A fork in the road.

I recently read an article which points out why there is a desperate need for an ethical approach.

Imagine a growing Israeli startup whose product is deepfake videos that are based on artificial intelligence and appear to be utterly authentic. The company’s marketing efforts, according to its website, are conducted by two departments — “consulting for corporations” and “consulting for governments and politicians.” In addition, “the company helps its customers uncover their opponents’ weak spots and make them go viral.”

Finally, imagine that the company describes its employees as “highly experienced men and women, graduates of elite units of the IDF intelligence branch and Israeli government intelligence agencies,” and that its technology is based on developments by these same security agencies. On top of all of this, of course its board of directors includes former heads of Mossad and the Israeli General Security Service (Shin Bet), as well as retired senior army officers.

The article points out that, when you are done imagining this, it’s time to think about the private intelligence firm Black Cube. Various investigative reports published recently in the media in Israel and abroad paint a troubling picture — not because the company is violating the law, but because of its lack of ethics and internal moral code.

Clandestine actions.

The article points out that according to these reports, Black Cube does not work only for giant corporations that want to dig up incriminating information about their competitors, it also has contracts with foreign governments that seek to repress political opponents. It not only helps governments find those who are evading their financial obligations, but also to harass women who complain about crimes of sexual violence. Not only does it identify those who defame rival businesses, but it also frightens off regulators and watchdogs, human rights activists and journalists.

Black Cube, of course, is not alone in this. Have you ever heard of NSO, whose flagship product, Pegasus, can turn any cellphone into a mobile spying device? Or Glassbox and its product line? The list of such companies is long, and most of them are all but unknown. All of them are based on exploiting the skills, technology and professional culture created in the Israeli security establishment.

The article adds that there is nothing new about former members of the Israeli defense and security agencies selling weapons and military know-how. But what has been added in recent years is the technology twist. Former high-ranking security officials and intelligence operatives, including from the renowned 8200 unit, strike out on their own. Some of them find employment in firms that break new ground, improve the world and better society; but others, in their greed, are willing to sell spyware and offensive cyber-weapons to dictators in Africa who need them to stamp out criticism and revolts.

Nothing new.

The article points out that this is also not a situation unique to Israel. Veterans of western security agencies worldwide face similar dilemmas once they retire from their careers in public service and seek their next professional challenges. The startup nation however, is based, to a large extent, on veterans of Israel’s high-tech units in the defense establishment. While this association certainly does bring honor, prestige, revenue and jobs to the Israeli economy, two issues resulting from this relationship need to be considered.

The first relates to ethics. If anything is clear today in the world of technology, it is the need to include ethical concerns when developing, distributing, implementing and using technology. This is all the more important because in many domains there is no regulation or legislation to provide a clear definition of what may and may not be done. There is nothing intrinsic to technology that requires that it pursue only good ends. The mission of our generation is to ensure that technology works for our benefit and that it can help realize social ideals. The goal of these new technologies should not be to replicate power structures or other evils of the past.

The article adds that startup nation should focus on fighting crime and improving autonomous vehicles and healthcare advancements. It shouldn’t be running extremist groups on Facebook, setting up “bot farms” and fakes, selling attackware and spyware, infringing on privacy and producing deepfake videos.

The second issue is the lack of transparency. The combination of individuals and companies that have worked for, and sometimes still work with, the security establishment frequently takes place behind a thick screen of concealment. These entities often evade answering challenging questions that result from the Israeli Freedom of Information law and even recourse to the military censor — a unique Israeli institution — to avoid such inquires.

The article asks: how can we know when the government permits to be sold, and to whom, technologies that were developed by the private sector but that have security implications? How can we know who intervenes when a foreign country in Europe arrests spies sent by a commercial firm, or when a Gulf state is targeted by an Israeli high-tech company? How can we know when the companies are serving the national interest, and their own bottom line — and who gets to decide this, anyway? And what is the impact on the defense establishment itself with the migration of its stars directly from national service to high tech? What effect does this have on the state’s decision-making process about which technologies to invest in, whom it trains and what it purchases?

Better or worse?

The article points out that technology can make the world a better place — or much worse. Sometimes the results are mixed. We are all acquainted with app developers who make their terms of use impossibly complicated so they can invade our privacy; but not everyone is in the business of developing spyware or cyberattack technologies. The challenges created by social media platforms are well known, but not everyone uses them to manipulate others and to run an army of trolls to intimidate certain individuals.

The article adds that Israel, and its tech business community, must carefully consider the negative ramifications of excelling in technology while disregarding moral and ethical questions. The “startup nation” must conduct extensive discussions on the crossroads between ethics and technology so as to endow the next generation with the strong moral compass necessary to navigate in this new world. The unanswered question at hand is how Israel, and similar western democracies, can grapple with the growing phenomenon of technological entities whose sole purpose is profit without any qualms about the moral implications of their products and services.

The benefit side of the coin.

Its not all bad news. I read an article about how technology is benefitting the manufacturing industry.

The Forbes article points out that the global manufacturing market reached $38 trillion in 2018, contributing a 15% increase in global production output. Within this market, a broad range of goods is produced and processed, spanning from consumer goods, heavy industrials to storage and transportation of raw materials and finished products.

To sustain ongoing growth, today’s manufacturers are hyper-focused on three key mandates. First is to improve utilization rates of expensive fixed assets that are below optimal capacity. Second is to fill the current and increasing void of specialized labor. Deloitte estimates that by 2028, the skills gap in the US will result in 2.4 million unfilled seats out of a total of 16 million manufacturing jobs. Lastly, manufacturers must protect operating profit as industry average EBITDA margin continues to decline from 11.2% in 2015 to 8.6% in 2018.

The Forbes article adds that many startups are now starting to offer tailored products and services to help traditional manufacturers meet these goals. Until recently, hardware components such as sensors were expensive and had unclear ROI. Data was siloed, and no solution to scale insight was available. However, since the AI revolution in the early 2010s, startups are finding ways to overcome these challenges through technical innovation.

Sorting arms: Uncertain bets with high potential.

Startups producing sorting arms are now aggressively spending on R&D to try to solve key technical problems such as the robot’s ability to perceive exact geometry of an object or to exert the precise force needed to handle it.

The Forbes article points out that, as a result, startups are starting to specialize by product categories: Ready Robotics in industrial products, Soft Robotics in lightweight products, Righthand Robotics in packaged goods, and Plus-One Robotics in parcels. A set of startups raised their Series A in late 2018 at post-funding valuation range of $30-50 million. This vertical will likely generate some unicorns in the next few years, given the vast addressable market and impact of this technology in manufacturing.

VCs should invest in teams with extraordinary technical capabilities and look out for business models with relatively shorter sales cycles.

Auto-guided vehicles: Mature companies, less opportunity for VC returns.
The Forbes article adds that several startups have managed to find product-market fit and commercialize their solutions in auto-guided vehicles. Successful startups like Grey Orange, Geek+, fetch robotics, and six river systems have raised Series B or C funding at post-funding valuations surpassing $150 million.

Traditionally high hardware component costs for auto-guided vehicles have dropped as batteries and sensors become commoditized.

The Forbes article points out that complex technical challenges around robot vision and mechanical movement to lift elements have now largely been met. However, as this vertical matures, companies are finding it increasingly difficult to secure and maintain a unique competitive advantage. Given that most auto-guided vehicle startups are beyond $100 million valuation range, opportunities for outsized VC returns are also drying up.

THE INDUSTRIAL SaaS REVOLUTION.

The increasing usage of industrial sensors and robots has created a new market opportunity for industrial SaaS providers.

The Forbes article adds that, in 2012 the median VC deal size in this vertical was $700,000, while in 2017 the median deal size rose to $2.5 million.

SaaS improves the productivity of industrial clients and thus helps increase throughput. Two of the most promising verticals within this space are predictive maintenance and visual insights providers.

Visual insights: Advances in the learning curve.

The Forbes article points out that Lukewarm growth of robotics until recently made it difficult for startups betting on computer vision to find strong product-market fit.

A set of highly skilled engineering teams like Humatics, Neurala, Perceptin, and Hangar leveraged their Series A funding to build great visual technology and expertise, but still had difficulties finding sticky use cases.

The Forbes article adds that VCs should remain patient and support startups in their efforts to commercialize products; given the complexity of the technology and inevitably high switching costs for customers. First movers will ultimately enjoy a significant competitive advantage in this vertical once it’s achieved.

We’ve only scratched the surface of Industry 4.0.

The first wave of disruption in manufacturing tech came with sensors and big data analytics, but this is just the beginning.

Finally, the Forbes article points out that manufacturing tech startups are now creating cutting-edge, disruptive technology to add tremendous value to clients and generate lucrative returns to investors. Given the breadth and complexity of opportunities in this sector, the next wave of unicorns will likely come from robotics and AI SaaS in manufacturing.

“We are far from a complete global takeover, but we need to start appreciating the value of technology. On the flipside, we also need to be aware of the risks involved with the growth of AI. Its not all sunshine and roses,” said Geldenhuys.