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Copy and Steal: the Silicon Valley Way

In a videoconference hosted by Indian start-up website Inc42, I gave Indian entrepreneurs some advice that startled them. I said that instead of trying to invent things, they should copy and steal all the ideas they can from China, Silicon Valley and the rest of the world. A billion Indians coming online through inexpensive smartphones offer Indian entrepreneurs an opportunity to build a digital infrastructure that will transform the country. The best way of getting started on that is not to reinvent the wheel but to learn from the successes and failures of others.

Before Japan, Korea and China began to innovate, they were called copycat nations; their electronics and consumer products were knockoffs from the West. Silicon Valley succeeds because it excels in sharing ideas and building on the work of others. As Steve Jobs said in 1994, “Picasso had a saying, ‘Good artists copy, great artists steal,’ and we have you know always been shameless about stealing great ideas.” Almost every Apple product has features that were first developed by others; rarely do its technologies wholly originate within the company.

Mark Zuckerberg also built Facebook by taking pages from MySpace and Friendster, and he continues to copy products. Facebook Places is a replica of Foursquare; Messenger video imitates Skype; Facebook Stories is a clone of Snapchat; and Facebook Live combines the best features of Meerkat and Periscope. This is another one of Silicon Valley’s other secrets: If stealing doesn’t work, then buy the company.

See also: Time to Rethink Silicon Valley?

By the way, they don’t call this copying or stealing; it is “knowledge sharing.” Silicon Valley has very high rates of job-hopping, and top engineers rarely work at any one company for more than three years; they routinely join their competitors or start their own companies. As long as engineers don’t steal computer code or designs, they can build on the work they did before. Valley firms understand that collaborating and competing at the same time leads to success. This is even reflected in California’s unusual laws, which bar noncompetition agreements.

In most places, entrepreneurs hesitate to tell others what they are doing. Yet in Silicon Valley, entrepreneurs know that when they share an idea, they get important feedback. Both sides learn by exchanging ideas and developing new ones. So when you walk into a coffee shop in Palo Alto, those you ask will not hesitate to tell you their product-development plans.

Neither companies nor countries can succeed, however, merely by copying. They must move very fast and keep improving themselves and adapting to changing markets and technologies.

See also: 3 Technology Trends Worth Watching  

Apple became the most valuable company in the world because it didn’t hesitate to cannibalize its own technologies. Steve Jobs didn’t worry that the iPad would hurt the sales of its laptops or that the music player in the iPhone would eliminate the need to buy an iPod. The company moved forward quickly as competitors copied its designs.

Technology is now moving faster than ever and becoming affordable to all. Advances in artificial intelligence, computing, networks and sensors are making it possible to build new trillion-dollar industries and destroy old ones. The new technologies that once only the West had access to are now available everywhere. As the world’s entrepreneurs learn from one another, they will find opportunities to solve the problems of not only their own countries but the world. And we will all benefit in a big way from this.

Too Much Tech Is Ruining Lives

Just four years ago, I was a cheerleader. Social media was supposed to be the great hope for democracy. I know because I told the world so. I said in 2014 that no one could predict where this revolution would take us. My conclusion was dusted with optimism: A better-connected human race would find a way to better itself.

I was only half right: Nobody could have predicted where we have ended up. Yet my optimistic prognosis was utterly misguided. Social media has led to less human interaction, not more. It has suppressed human development, not stimulated it. As Big Tech has marched onward, we have regressed.

Look at the evidence. Research shows that social media may well be making many of us unhappy, jealous and — paradoxically — antisocial. Even Facebook gets it. An academic study that Facebook cited in a blog post revealed that when people spend a lot of time passively consuming information, they wind up feeling worse. Just 10 minutes on Facebook is enough to depress — clicking and liking a multitude of posts and links seems to have a negative effect on mental health.

See also: The World Doesn’t Need Silicon Valley  

Meantime, the green-eyed monster thrives on the social network: Reading rosy stories and carefully controlled images about the social  and love lives of others leads to poor comparisons with one’s own existence. Getting out in the warts-and-all real world and having proper conversations would provide a powerful antidote. Some chance! Humans have convinced themselves that catching up online is a viable alternative to in-person socializing.

And what of consumer choice? Former Google design ethicist Tristan Harris noted in an essay on how technology hijacks people’s minds, that it is actually designed to give us fewer choices, not more. When you do a Google search for a restaurant, for example, you are presented with a limited set of choices, with advertisers appearing at the top of a list. We rarely browse to the second page of search results. Harris likened this to what magicians do: “Give people the illusion of free choice while architecting the menu so that they win, no matter what you choose.”

We are becoming unthinkingly reliant — addicted — to ease of use at the expense of quality. We are walking dumpsters for internet content that we don’t need and that might actively damage our brains.

The technology industry also uses another technique to keep us hooked: feeding us a bottomless pit of information.

This phenomenon’ is the effect Netflix has when it auto-plays the next episode of a show after a cliffhanger and you continue watching, thinking, “I can make up the sleep over the weekend.” The cliffhanger is, of course, always replaced by another cliffhanger. The 13-part season is followed by another one, and yet another. We spend longer in front of the television, yet we feel no more satiated. When Facebook, Instagram and Twitter tack on their scrolling pages and update their news feeds, causing each article to roll into the next, the effect manifests itself again.

Perhaps we should go back to our smartphones and, instead of playing Netflix or sending texts on WhatsApp, use their core function. Call up our friends and family and have a chat or — better — arrange to meet them.

Meanwhile, Big Tech could carve an opportunity from a crisis. What about offering a subscription to an ad-free Facebook? In return for a monthly fee, searches would be based on quality of content rather than product placement. I would pay for that. The time savings alone when booking a trip would be worth it.

See also: No, AI Isn’t Taking Over Firms’ Decisions  

Apple pioneered the Do Not Disturb function, which stopped messages and calls waking us from sleep, unless a set of emergency criteria were met by the caller. How about a Focus Mode that turned off all notifications and hid our apps from our home screen, to ease the temptation to play with our phones when we should be concentrating on our work, or talking to our spouses, friends and colleagues?

In the 1980s, the BBC in Britain ran a successful children’s series called “Why Don’t You?” that implored viewers to “turn off their TV set and go out and do something less boring instead,” suggesting sociable activities that did not involve a screen. It was wise before its time. The TV seems like a puny adversary compared with the deadening digital army we face today.

Insurtech: The Year in Review

As we reach the end of 2017, the first full 12 months where insurtech has been recognized as a standalone investment segment, we wanted to reflect on what has been an incredible year.

From the start, we at Eos believed that insurtech would be driven globally, and that has certainly played out. This year, we’ve visited: Hong Kong, Amsterdam, New York, Las Vegas, Nigeria, Dubai, India, Singapore, Bermuda, Milan, St. Louis, Munich, Vienna, Paris, Zurich, Cologne, Chicago, San Francisco, Silicon Valley, Seattle and Toronto. We’ve expanded our geographic footprint to include the East and West coasts of the U.S. and India and have seen fantastic progress across our expanding portfolio. We’ve welcomed a number of new strategic partners, including Clickfox, ConVista and Dillon Kane Group, and launched our innovation center, EoSphere, with a focus on developing markets

At the start of the year, we published a series of articles looking at the key trends that we believed would influence insurtech and have incorporated these in our review of the year.

We hope you enjoy it! Comments, challenges and other perspectives, as always, would be greatly received.

2017: The year innovation became integral to the insurance sector

How are incumbents responding?

We are seeing a mixed response, but the direction of travel is hugely positive. A small number of top-tier players are embracing the opportunity and investing hundreds of millions, and many smaller incumbents with more modest budgets are opening up to innovation and driving an active agenda. The number sitting on the side lines, with a “wait and see” strategy is diminishing.

“If 2016 was the year when ‘some’ insurers started innovating, 2017 will be remembered as the year when ‘all’ insurers jumped on the bandwagon. And not a minute too soon! When I joined 3,800 insurance innovators in Las Vegas, we all realized that the industry is now moving forward at light speed, and the few remaining insurers who stay in the offline world risk falling behind.” Erik Abrahamson, CEO of Digital Fineprint

We are more convinced than ever that the insurance industry is at the start of an unprecedented period of change driven by technology that will result in a $1 trillion shift in value between those that embrace innovation and those that don’t.

Has anyone cracked the code yet? We don’t think so, but there are a small number of very impressive programs that will deliver huge benefits over the next two to three years to their organizations.

“We were pleased to see some of the hype surrounding insurtech die down in 2017. We’re now seeing a more considered reaction from (re)insurers. For example, there is less talk about the ‘Uber moment’ and more analysis of how technology can support execution of the corporate strategy. We have long argued that this is the right approach.” Chris Sandilands, partner at Oxbow Partners

Have insurers worked out how to work with startups? We think more work may be needed in this area….

See also: Insurtech: An Adventure or a Quest?  

The role of the tech giants

“Investors are scrambling for a piece of China’s largest online-only insurer… the hype could be explained by the ‘stars’ behind ZhongAn and its offering. Its major shareholders — Ping An Insurance (Group) Co., Alibaba Group Holding Ltd., Tencent Holdings Ltd.” – ChinaGoAbroad.com

“Tencent Establishes Insurance Platform WeSure Through WeChat and QQ” – YiCai Global

“Amazon is coming for the insurance industry — should we be worried?” – Insurance Business Magazine

“Aviva turns digital in Hong Kong with Tencent deal” – Financial Times

“Quarter of customers willing to trust Facebook for insurance” – Insurance Business Magazine

“Chinese Tech Giant Baidu Is Launching a $1 Billion Fund with China Life” – Fortune 

We are already well past the point of wondering whether tech giants like Google, Amazon, Facebook, Apple (GAFA) and Baidu, Alibaba, Tencent (BAT) are going to enter insurance. They are already here.

Notice the amount of activity being driven by the Chinese tech giants. Baidu, Alibaba and Tencent are transforming the market, and don’t expect them to stop at China.

The tech giants bring money, customer relationships, huge amounts of data and ability to interact with people at moments of truth and have distribution power that incumbents can only dream about. Is insurance a distraction to their core businesses? Perhaps — but they realize the potential in the assets that they have built. Regulatory complexity may drive a partnership approach, but we expect to see increasing levels of involvement from these players.

Role of developing markets

It’s been exciting to play an active role in the development of insurtech in developing markets. These markets are going to play a pivotal role in driving innovation in insurance and in many instances, will move ahead of more mature markets as a less constraining legacy environment allows companies to leapfrog to the most innovation solutions.

Importantly, new technologies will encourage financial inclusion and reduce under-insurance by lowering the cost of insurance, allowing more affordable coverage, extending distribution to reach those most at need (particularly through mobiles, where penetration rates are high) and launching tailored product solutions.

Interesting examples include unemployment insurance in Nigeria, policies for migrant workers in the Middle East, micro credit and health insurance in Kenya, a blockchain platform for markets in Asia and a mobile health platform in India.

Protection to prevention

At the heart of much of the technology-driven change and potential is the shift of insurance from a purely protection-based product to one that can help predict, mitigate or prevent negative events. This is possible with the ever-increasing amount of internal and external data being created and captured, but, more crucially, sophisticated artificial intelligence and machine learning tools that drive actionable insights from the data. In fact, insurers already own a vast amount of historical unstructured data, and we are seeing more companies unlocking value from this data through collaboration and partnerships with technology companies. Insurers are now starting to see data as a valuable asset.

The ability to understand specific risk characteristics in real time and monitor how they change over time rather than rely on historic and proxy information is now a reality in many areas, and this allows a proactive rather than reactive approach.

During 2017, we’ve been involved in this area in two very different product lines, life and health and marine insurance.

The convergence of life and health insurance and application of artificial intelligence combined with health tech and genomics is creating an opportunity to transform the life and health insurance market. We hope to see survival rates improving, tailored insurance solutions, an inclusion-based approach and reduced costs for insurers.

Marine insurance is also experiencing a shift due to technology

In the marine space, the ability to use available information from a multitude of sources to enhance underwriting, risk selection and pricing and drive active claims management practices is reshaping one of the oldest insurance lines. Concirrus, a U.K.-based startup, launched a marine analytics solution platform to spearhead this opportunity.

The emergence of the full stack digital insurer

Perhaps reflecting the challenges of working with incumbents, several companies have decided to launch a full-stack digital insurer.

We believe that this model can be successful if executed in the right way but remain convinced that a partnership-driven approach will generate the most impact in the sector in the short to medium term.

“A surprise for us has been the emergence of full-stack digital insurers. When Lemonade launched in 2016, the big story was that it had its own balance sheet. In 2017, we’ve seen a number of other digital insurers launch — Coya, One, Element, Ottonova in Germany, Alan in France, for example. Given the structure of U.K. distribution, we’re both surprised and not surprised that no full-stack digital insurers have launched in the U.K. (Gryphon appears to have branded itself a startup insurer, but we’ve not had confirmation of its business model).” – Chris Sandilands, partner, Oxbow Partners

Long term, what will a “full stack” insurer look like? We are already seeing players within the value chain striving to stay relevant, and startups challenging existing business models. Will the influence of tech giants and corporates in adjacent sectors change the insurance sector as we know it today?

Role of MGAs and intermediaries

Insurtech is threatening the role of the traditional broker in the value chain. Customers are able to connect directly, and the technology supports the gathering, analysis and exchange of high-quality information. Standard covers are increasingly data-driven, and the large reinsurers are taking advantage by going direct.

We expected to see disintermediation for simple covers, and this has started to happen. In addition, blockchain initiatives have been announced by companies like Maersk, Prudential and Allianz that will enable direct interaction between customers and insurers.

However, insurtech is not just bad news for brokers. In fact, we believe significant opportunities are being created by the emergence of technology and the associated volatility in the market place.

New risks, new products and new markets are being created, and the brokers are ideally placed to capitalize given their skills and capabilities. Furthermore, the rising rate environment represents an opportunity for leading brokers to demonstrate the value they can bring for more complex risks.

MGAs have always been a key part of the value chain, and we are now seeing the emergence of digital MGAs.

Digital MGAs are carving out new customer segments, channels and products. Traditional MGAs are digitizing their business models, while several new startups are testing new grounds. Four elements are coming together to create a perfect storm:

  1. Continuing excess underwriting capacity, especially in the P&C markets, is galvanizing reinsurers to test direct models. Direct distribution of personal lines covers in motor and household is already pervasive in many markets. A recent example is Sywfft direct Home MGA with partnerships with six brokers. Direct MGA models for commercial lines risks in aviation, marine, construction and energy are also being tested and taking root.
  2. Insurers and reinsurers are using balance sheet capital to provide back-stop to MGA startups. Startups like Laka are creating new models using excess of loss structures for personal lines products.
  3. Digital platforms are permitting MGAs to go direct to customers.
  4. New sources of data and machine learning are permitting MGAs to test new underwriting and claims capabilities and take on more balance sheet risk. Underwriting, and not distribution, is emerging as the core competency of MGAs.

Customer-driven approach

Three of the trends driving innovation that we highlighted at the start of the year centered on the customer and how technology will allow insurers to connect with customers at the “moment of truth”:

  • Insurance will be bought, sold, underwritten and serviced in fundamentally different ways.
  • External data and contextual information will become increasingly important.
  • Just-in-time, need- and exposure-based protection through mobile will be available.

Over time, we expect the traditional approach to be replaced with a customer-centric view that will drive convergence of traditional product lines and a breakdown of silo organization structures. We’ve been working with Clickfox on bringing journey sciences to insurance, and significant benefits are being realized by those insurers supporting this fundamental change in approach.

Interesting ideas that were launched or gained traction this year include Kasko, which provides insurance at point of sale; Cytora, which enables analysis of internal and external data both structured and unstructured to support underwriting; and Neosurance, providing insurance coverage through push notifications at time of need.

See also: Core Systems and Insurtech (Part 3)  

Partnerships and alliances critical for success

As discussed above, we believe partnerships and alliances will be key to driving success. Relying purely on internal capabilities will not be enough.

“The fascinating element for me to witness is the genuine surprise by insurance companies that tech firms are interested in ‘their’ market. The positive element for me is the evolving discovery of pockets of value that can be addressed and the initial engagement that is received from insurers. It’s still also a surprise that insurers measure progress in years, not quarters, months or weeks.” – Andrew Yeoman, CEO of Concirrus

We highlighted three key drivers at the start of the year:

  • Ability to dynamically innovate will become the most important competitive advantage.
  • Optionality and degrees of freedom will be key.
  • Economies of skill and digital capabilities will matter more than economies of scale.

The move toward partnership built on the use of open platforms and APIs seen in fintech is now prevalent in insurance.

“We are getting, through our partnerships, access to the latest technology, a deeper understanding of the end customers and a closer engagement with them, and this enables us to continue to be able to better design insurance products to meet the evolving needs and expectations of the public.” Munich Re Digital Partners

Where next?

Key trends to look out for in 2018

  • Established tech players in the insurance space becoming more active in acquiring or partnering with emerging solutions to augment their business models
  • Tech giants accelerating pace of innovation, with Chinese taking a particularly active role in AI applications
  • Acceleration of the trend from analogue to digital and digital to AI
  • Shift in focus to results rather than hype and to later-stage business models that can drive real impact
  • Valuation corrections with down rounds, consolidation and failures becoming more common as the sector matures
  • Continued growth of the digital MGA
  • Emergence of developing-market champions
  • Increasing focus on how innovation can be driven across all parts of the value chain and across product lines, including commercial lines
  • Insurers continuing to adapt their business models to improve their ability to partner effectively with startups — winners will start to emerge

“As we enter 2018, I think that we’ll see a compression of the value chain as the capital markets move ever closer to the risk itself and business models that syndicate the risk with the customer — active risk management is the new buzzword.” – Andrew Yeoman, CEO Concirrus

We’re excited to be at the heart of what will be an unprecedented period of change for the insurance industry.

A quick thank you to our partners and all those who have helped and supported us during 2017. We look forward to working and collaborating with you in 2018.

‘Alexa! Give Us Back Our Freedom!’

“Alexa, can you tell me the impact of the wholesale shift to voice search and voice communication over the internet?”

Amazon’s wildly popular personal assistant, Alexa, probably cannot answer that question for you. And even she doesn’t perceive how she is making us dumber and taking our choices away.

The world is surely moving from text to voice as the primary interface on the internet. The rapid rise of Amazon’s Echo (and its smaller version, the Echo Dot) personal assistant device was the biggest story of the 2016 holiday shopping season. As of September 2017, Amazon had sold 15 million Echos, and Google had sold five million of its own personal assistant device, the Google Home. This is impressive, for a category that just a year earlier had not existed.

Even more significantly, we are switching to voice as the means of communicating with our smartphones. More than 20% of mobile searches were conducted via voice in 2016, according to Google: a roughly a 35-fold increase in voice search since 2008. Google also found that about two-thirds of its users conduct voice search via mobile phone several times per day and that roughly half of its users use voice and text search interchangeably.

See also: Could Alexa Testify Against You?  

Such growth has been enabled by dramatic improvements in voice recognition, through use of powerful artificial intelligence systems that use machine learning. We are now in a positive feedback loop for voice: As more people talk to their smartphones or home assistants, more data become available to companies such as Amazon, Google and Apple to feed to their personal assistant systems. As of May 2017, Google’s speech recognition error rate was 4.9%, down from 23% in 2013.

Businesses have recognized the shift in accuracy and customer engagement, and are piling in. Amazon now boasts more than 15,000 Alexa “skills,” which are capabilities that allow customers to make personalized requests. For example, travel search providers let you plan vacations via Alexa using voice commands; Pizza Hut lets you order pizza; Nissan and Hyundai let Alexa owners start their cars’ engines and set their temperatures; Capital One lets customers check their bank balances; and Campbell Soup Company supplies recipe ideas.

The shift to voice search and voice communication will surely make many things more convenient for us but will dramatically reduce our online choices. The reason for this is simple: When results are spoken back to us, we will receive only a few options, because humans cannot absorb 10 results in succession and adequately choose between them. We can’t remember them all. This switch in information density has profound implications, and voice search can subvert our purchasing choices in subtle ways.

Prior to the advent of the internet, when we looked at the Yellow Pages, we had many pages of options. When we searched online, we had even more options but tended to only react to those on the first page. Increasingly, those first-page results are sold to the highest bidder. On mobile phones, the searches mean even fewer options, and the paid ones utterly dominate the screen.

In the results of a voice search, we are usually down to only two or three options. People just can’t remember more information presented to them vocally. So your search for “best hotel in San Francisco” will yield only a few results. The response to “I want to find a pizza place in Palo Alto” might not show the pizza joint that is the best in town, because it has not bought its spot in the search results.

Most worryingly, the shift to voice will further consolidate power in the hands of the big providers, such as Amazon, Google and Apple.

When we ask Alexa to add olive oil to our shopping cart, we are ceding our choice to Amazon. Maybe we prefer Californian olive oil, because we know it is less likely to be adulterated. Or maybe we would rather buy the lower-priced of two favorite brands. With voice, which olive oil goes into the cart becomes Amazon’s decision. Unsurprisingly, research firm L2 found that Amazon is more likely to put its own proprietary products into your shopping cart.

In theory, we could ask for more voice results to get richer searches. Or perhaps voice assistant systems will eventually be improved to include capacities such as following up to ask us whether we want, for example, a particular type of pizza.

See also: ‘Alexa, What Is My Deductible?’  

But even if that happens, the world of voice is taking us back a century in terms of information density. Talking to a voice assistant is a lot like asking a friend for restaurant recommendations, except that friend is a giant technology company that makes its money from the recommendations it provides us. That doesn’t sound very friendly.

This article was written by Vivek Wadhwa and Alex Salkever.