Will a Robot Take Your Job? It May Just Make Your Job Worse

The robot revolution is always allegedly just around the corner. In the utopian vision, technology emancipates human labor from repetitive, mundane tasks, freeing us to be more productive and take on more fulfilling work. In the dystopian vision, robots come for everyone’s jobs, put millions and millions of people out of work, and throw the economy into chaos.

Such a warning was at the crux of Andrew Yang’s ill-fated presidential campaign, helping propel his case for universal basic income that he argued would become necessary when automation left so many workers out. It’s the argument many corporate executives make whenever there’s a suggestion they might have to raise wages: $15 an hour will just mean machines taking your order at McDonald’s instead of people, they say. It’s an effective scare tactic for some workers.

But we often spend so much time talking about the potential for robots to take our jobs that we fail to look at how they are already changing them — sometimes for the better, but sometimes not. New technologies can give corporations tools for monitoring, managing, and motivating their workforces, sometimes in ways that are harmful. The technology itself might not be innately nefarious, but it makes it easier for companies to maintain tight control on workers and squeeze and exploit them to maximize profits.

“The basic incentives of the system have always been there: employers wanting to maximize the value they get out of their workers while minimizing the cost of labor, the incentive to want to control and monitor and surveil their workers,” said Brian Chen, staff attorney at the National Employment Law Project (NELP). “And if technology allows them to do that more cheaply or more efficiently, well then of course they’re going to use technology to do that.”

Tracking software for remote workers, which saw a bump in sales at the start of the pandemic, can follow every second of a person’s workday in front of the computer. Delivery companies can use motion sensors to track their drivers’ every move, measure extra seconds, and ding drivers for falling short.

Automation hasn’t replaced all the workers in warehouses, but it has made work more intense, even dangerous, and changed how tightly workers are managed. Gig workers can find themselves at the whims of an app’s black-box algorithm that lets workers flood the app to compete with each other at a frantic pace for pay so low that how lucrative any given trip or job is can depend on the tip, leaving workers reliant on the generosity of an anonymous stranger. Worse, gig work means they’re doing their jobs without many typical labor protections.

In these circumstances, the robots aren’t taking jobs, they’re making jobs worse. Companies are automating away autonomy and putting profit-maximizing strategies on digital overdrive, turning work into a space with fewer carrots and more sticks.

A robot boss can do a whole lot more watching

In recent years, Amazon has become the corporate poster child for automation in the name of efficiency — often at the expense of workers. There have been countless reports of unsustainable conditions and expectations at Amazon’s fulfillment centers. Its drivers reportedly have to consent to being watched by artificial intelligence, and warehouse workers who don’t move fast enough can be fired.

Demands are so high that there have been reports of people urinating in bottles to avoid taking a break. The robots aren’t just watching, they’re also picking up some of the work. Sometimes, it’s for the better, but in other cases, they may actually be making work more dangerous as more automation leads to more pressure on workers. One report found that worker injuries were more prevalent in Amazon warehouses with robots than warehouses without them.

“It would have been prohibitively expensive to employ enough managers to time each worker’s every move to a fraction of a second or ride along in every truck, but now it takes maybe one,” Dzieza wrote. “This is why the companies that most aggressively pursue these tactics all take on a similar form: a large pool of poorly paid, easily replaced, often part-time or contract workers at the bottom; a small group of highly paid workers who design the software that manages them at the top.”

A 2018 Gartner survey found that half of large companies were already using some type of nontraditional techniques to keep an eye on their workers, including analyzing their communications, gathering biometric data, and examining how workers are using their workspace. They anticipated that by 2020, 80 percent of large companies would be using such methods. Amid the pandemic, the trend picked up pace as businesses sought more ways to keep tabs on the new waves of workers working from home.

This has all sorts of implications for workers, who lose privacy and autonomy when they’re constantly being watched and directed by technology. Daron Acemoglu, an economist at MIT, warned that they’re also losing money. “Some of these new digital technologies are not simply replacing workers or creating new tasks or changing other aspects of productivity, but they’re actually monitoring people much more effectively, and that means rents are being shared very differently because of digital technologies,” he said.

He offered up a hypothetical example of a delivery driver who is asked to deliver a certain number of packages in a day. Decades ago, the company might pay the driver more to incentivize them to work a little faster or harder or put in some extra time. But now, they’re constantly being monitored so that the company knows exactly what they’re doing and is looking for ways to save time. Instead of getting a bonus for hitting certain metrics, they’re dinged for spending a few seconds too long here or there.

The problem isn’t technology itself, it’s the managers and corporate structures behind it that look at workers as a cost to be cut instead of as a resource.

“A lot of this boom of Silicon Valley entrepreneurship where venture capital made it very easy for companies to create firms didn’t exactly prioritize the well-being of workers as one of their main considerations,” said Amy Bix, a historian at Iowa State University who focuses on technology. “A lot of what goes on in the structure of these corporations and the development of technology is invisible to most ordinary people, and it’s easy to take advantage of that.”

The future of Uber isn’t driverless cars, it’s drivers

Uber’s destiny was supposed to be driverless.

In 2016, former CEO Travis Kalanick told Bloomberg making an autonomous vehicle was “basically existential” for the company. After a deadly accident with an autonomous Uber vehicle in 2018, current chief executive Dara Khosrowshahi reiterated that the company remained “absolutely committed” to the self-driving cause. But in December 2020 and after investing $1 billion, Uber sold off its self-driving unit. A little over four months later, its main competitor, Lyft, followed suit. Uber says it’s still not giving up on autonomous technology, but the writing on the wall is clear that driverless cars aren’t core to Uber’s business model, at least in the near future.

“Five or 10 years from now, drivers are still going to be a big piece of the mix on a percentage basis [of Uber’s business], and on an absolute basis, they may be an even bigger piece than they are today even with autonomous in the mix because the business should get bigger as both segments get bigger,” said Chris Frank, director of corporate ratings at S&P Global. “In addition, drivers will need to handle more complex conditions like poorly marked roads or inclement weather.”

In other words, they’re going to need workers to make money — workers they would very much like not to classify as such.

Gig economy companies such as Uber, Lyft, and DoorDash are fighting tooth and nail to make sure the people they enlist to make deliveries or drive people around are not considered their employees. In California last year, such companies dumped $200 million into lobbying to pass Proposition 22, which lets app-based transportation and delivery companies classify their workers as independent contractors and therefore avoid paying for benefits such as sick leave, employer-provided health care, and unemployment. After it passed, a spokesman for the campaign for the ballot measure said it “represents the future of work in an increasingly technologically-driven economy.”

It’s a future of work that might not be pleasant for gig workers. In California, some workers say they’re not getting the benefits companies promised after Prop 22’s passage, such as health care stipends. Companies said that workers would make at least 120 percent of California’s minimum wage, but that’s contemplating the time they spend driving only. Before the ballot initiative was passed, research from the UC Berkeley Labor Center estimated that it would guarantee a minimum wage of just $5.64 per hour.

Companies say they’ve been clear with drivers about how to qualify for the health care stipend, which is available to drivers with more than 15 engaged hours a week (in other words, if you don’t have a job and are waiting around, it doesn’t count). In a statement to Vox, Geoff Vetter, a spokesperson for the Protect App-Based Drivers + Services Coalition, the lobbying group that championed Prop 22, said that 80 percent of drivers work fewer than 20 hours per week and most work less than 10 hours per week, and that many have health insurance through other jobs.

Gig companies have sometimes been cagey about how much their workers make, and they’re often changing their formulas. In 2017, Uber agreed to pay the Federal Trade Commission $20 million over charges that it misled prospective drivers about how much they could make with the app. The FTC found that Uber claimed some of its drivers made $90,000 in New York and $74,000 in San Francisco, when in reality their median incomes were actually $61,000 and $53,000, respectively. DoorDash caused controversy over a decision to pocket tips and use them to pay delivery workers, which it has since reversed.

Even though Uber is charging customers more for rides in the wake of the pandemic, that’s not directly being passed onto their drivers. According to the Washington Post, Uber changed the way it paid drivers in California soon after Prop 22 passed so that they were no longer paid a proportion of the cost of the ride but instead by time and distance, with different bonuses and incentives based on market and surge pricing. (This is how Uber does it in most states, but it had changed things up during the push to get Prop 22 passed.) Uber’s CEO pushed back on the Post story in a series of tweets, arguing that decoupling driver pay from customer fares had not hurt California drivers and that some are now getting a higher cut from their rides.

In light of a driver shortage, Uber recently announced what it’s billing as a $250 million “driver stimulus” that promises higher earnings to try to get drivers back onto the road. The company acknowledges this initiative is likely temporary once the supply-demand imbalance works itself out. Still, it’s hard not to notice how quickly Uber and Lyft have been able to corner most of the ride-hailing app market and exert control over their drivers and customers.

“When a new thing like this comes on, there’s huge new consumer benefits, and then over time they are the market, they have less competition except one another, probably they’re a cartel at this point. And then they start doing stuff that’s much nastier,” said David Autor, an economist at MIT.

One of the gig economy’s main selling points to workers is that it offers flexibility and the ability to work when they want. It’s certainly true that an Uber or Lyft driver has much more autonomy on the job than, say, an Amazon warehouse worker. “People drive with Lyft because they prefer the freedom and flexibility to work when, where, and for however long they want,” a Lyft spokesperson said in a statement to Vox.

“They can choose to accept a ride or not, enjoy unlimited upward earning potential, and can decide to take time off from driving whenever they want, for however long they want, without needing to ask a ‘boss’ — all things they can’t do at most traditional jobs.” The spokesperson also noted that most of its drivers work outside of Lyft.

But flexibility doesn’t mean gig companies have no control over their drivers and delivery people. They use all sorts of tricks and incentives to try to push workers in certain directions and manage them, essentially, by algorithm. Uber drivers report being bothered by the constant surveillance, the lack of transparency from the company, and the dehumanization of working with the app. The algorithm doesn’t want to know how your day is, it just wants you to work as efficiently as possible to maximize its profits.

Carlos Ramos, a former Lyft driver in San Diego, described the feeling of being manipulated by the app. He noticed the company must have needed morning drivers because of the incentives structures, but he also often wondered if he was being “punished” if he didn’t do something right.

“Sometimes, if you cancel a bunch of rides in a row or if you don’t take certain rides to certain things, you won’t get any rides. They’ve shadow turned you off,” he said. The secret deprioritization of a worker is something many Lyft and Uber drivers speculate happens. “You also have no way of knowing what’s going on behind there. They have this proprietary knowledge, they have this black box of trade secrets, and those are your secrets you’re telling them,” said Ramos, now an organizer with Gig Workers Rising.

Companies deny that they secretly shut off drivers. “It is in Lyft’s best interests for drivers to have as positive an experience as possible, so we communicate often and work directly with drivers to help them improve their earnings,” a Lyft spokesperson said. “We never ‘shadow ban’ drivers, and actively coach them when they are in danger of being deactivated.”

The future of innovation isn’t inevitable

We often talk about technology and innovation with a language of inevitability. It’s as though whenever wages go up, companies will of course replace workers with robots. Now that the country is turned on to online delivery, it can be made to seem like the grocery industry is on an unavoidable path to gig work. After all, that’s what happened with Albertsons. But that’s not really the case — there’s plenty of human agency in the technological innovation story.

“Technology of course doesn’t have to exploit workers, it doesn’t have to mean robots are coming for all of our jobs,” Chen said. “These are not inevitable outcomes, they are human decisions, and they are almost always made by people who are driven by a profit motive that tends to exploit the poor and working class historically.”

Chase Copridge, a longtime California worker who’s done the gamut of gig jobs — Instacart, DoorDash, Amazon Flex, Uber, and Lyft — is one of the people stuck in that position, the victim of corporate tendencies on technological overdrive. He described seeing delivery offers that pay as little as $2. He turns those jobs down, knowing that it’s not economically worth it for him. But there might be someone else out there who picks it up. “We’re people who desperately need to make ends meet, who are willing to take the bare minimum that these companies are giving out to us,” he said. “People need to understand that these companies thrive off of exploitation.”

Not all decisions around automation are ones that increase productivity or improve really anything except corporate profits. Self-checkout stations may reduce the need for cashiers, but are they really making the shopping experience faster or better? Next time you go to the grocery store and inevitably screw up scanning one of your own items and waiting several minutes for a worker to appear, you tell me.

Despite technological advancements, productivity growth has been on the decline in recent years. “This is the paradox of the last several decades, and especially since 2000, that we had enormous technological changes as we perceive it but measured productivity growth is quite weak,” Autor said. “One reason may be that we’re automating a lot of trivial stuff rather than important stuff. If you compare antibiotics and indoor plumbing and electrification and air travel and telecommunications to DoorDash and smartphones or self-checkout, it may just not be as consequential.”

Acemoglu said that when firms focus so much on automation and monitoring technologies, they might not explore other areas that could be more productive, such as creating new tasks or building out new industries. “Those are the things that I worry have fallen by the wayside in the last several years,” he said. “If your employer is really set on monitoring you really tightly, that biases things against new tasks because those are things that are not easier to monitor.”

It matters what you automate, and not all automation is equally beneficial, not only to workers but also to customers, companies, and the broader economy.

Grappling with how to handle technological advancements and the ways they change people’s lives, including at work, is no easy task. While the robot revolution isn’t taking everyone’s jobs, automation is taking some of them, especially in areas such as manufacturing. And it’s just making work different: A machine may not eliminate a position entirely, but it may turn a more middle-skill job into a low-skill job, bringing lower pay with it. Package delivery jobs used to come with a union, benefits, and stable pay; with the rise of the gig economy, that’s declining. If and when self-driving trucks arrive, there will still be some low-quality jobs needed to complete tasks the robots can’t.

“The issue that we’ve faced in the US economy is that we’ve lost a lot of middle-skill jobs so people are being pushed down into lower categories,” Autor said. “Automation historically has tended to take the most dirty and dangerous and demeaning jobs and hand them over to machines, and that’s been great.

What’s happened in the last bunch of decades is that automation has affected the middle-skill jobs and left the hard, interesting, creative jobs and the hands-on jobs that require a lot of dexterity and flexibility but don’t require a lot of formal skills.”

But again, none of this is inevitable. Companies are able to leverage technology to get the most out of workers because workers often don’t have power to push back, enforce limits, or ask for more. Unionization has seen steep declines in recent decades. America’s labor laws and regulations are designed around full-time work, meaning gig companies don’t have to offer health insurance or help fund unemployment. But the laws could — and many would argue should — be modernized.

“The key thing is it’s not just technology, it’s a question of labor power, both collectively and individually,” Bix said. “There are a lot of possible outcomes, and in the end, technology is a human creation. It’s a product of social priorities and what gets developed and adopted.”

Maybe the robot apocalypse isn’t here yet. Or it is, and many of us aren’t quite recognizing it, in part because we got some of the story wrong. The problem isn’t really the robot, it’s what your boss wants the robot to do.

Source: Will a robot take your job? It may just make your job worse. – Vox

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Critics:

The history of robots has its origins in the ancient world. During the industrial revolution, humans developed the structural engineering capability to control electricity so that machines could be powered with small motors. In the early 20th century, the notion of a humanoid machine was developed.

The first uses of modern robots were in factories as industrial robots. These industrial robots were fixed machines capable of manufacturing tasks which allowed production with less human work. Digitally programmed industrial robots with artificial intelligence have been built since the 2000s.

Concepts of artificial servants and companions date at least as far back as the ancient legends of Cadmus, who is said to have sown dragon teeth that turned into soldiers and Pygmalion whose statue of Galatea came to life. Many ancient mythologies included artificial people, such as the talking mechanical handmaidens (Ancient Greek: Κουραι Χρυσεαι (Kourai Khryseai); “Golden Maidens”) built by the Greek god Hephaestus (Vulcan to the Romans) out of gold.

Reference:

Japan Is Using Robots As A Service To Fight Coronavirus And For Better Quality Of Life

As societies around the world grapple with the coronavirus pandemic, service robots have emerged as a powerful tool in fighting the virus and addressing social needs. Sterilizing robots using ultraviolet light are disinfecting hospitals and airplanes, delivery robots are carrying out contactless deliveries, and avatar robots are even standing in for university students at graduation. Japan has long been a leading manufacturer of both industrial and service robots, and the pandemic is accelerating development of robots as a service (RaaS) that can both extend human abilities and relieve people of work that is exhausting and repetitive.

Robots to cure loneliness

Avatar robots, sometimes known as telepresence robots, are an emerging field of service robots that allow users to remotely operate interactive machines and project their presence into a distant location. Ory Laboratories, a robotics startup in Tokyo, is building avatar robots that can benefit not only those working from home during the pandemic, but people with chronic health conditions that prevent them from leaving their home or care facility.

OriHime Biz is a desktop communications robot that works via smartphone, tablet or PC. About 20 cm tall and equipped with a camera, microphone and speaker, OriHime has a sleek, streamlined design and can move its head and arms. Children with physical impairments have used OriHime to virtually attend class. In one instance, a teacher suffering from amyotrophic lateral sclerosis (ALS) used it to attend his students’ graduation ceremony.

“Since the pandemic, OriHime has been increasingly used for social distancing applications such as users who want to attend conferences in avatar form,” says Yuki Aki, COO and cofounder of Ory Laboratories. “It has also been used to greet COVID-19 patients recuperating in a hotel in Kanagawa Prefecture.”

Yuki’s background drives her passion for avatar robotics. As a student, she was diagnosed with tuberculosis and was unable to attend school, an experience that made her very lonely. It was through the Japan Science & Engineering Challenge (JSEC), a competition for young science enthusiasts where she won a prize, that Yuki met fellow prizewinner Yoshifuji Kentaro, now CEO of Ory. He told her about his idea to extend human abilities through robots, and after developing a prototype as college students, they set up Ory Laboratories in 2012.

“I wanted to solve the problem of solitude,” says Yuki. “The tool to accomplish that mission turned out to be a robot, but it could also be something completely different.”

The startup now has more than 20 employees, two types of robot and one service. Aside from OriHime Biz, it has developed OriHime D, a mobile robot that stands 120 cm tall, about the size of an elementary school student. Controlled by remote users, it can carry objects such as trays and drinks. OriHime eye, meanwhile, is an eye-tracking communications device for users such as ALS patients who can only move their eyes, fingers, or other body parts. It can be employed to communicate with loved ones or operate robots such as OriHime.

“OriHime D has been used as an avatar waiter in cafés we organize as temporary events, and by controlling it, users can experience what it’s like to work in the service industry,” says Yuki. “One man using it said he was able to earn money for the first time in his life, and decided to buy clothes for his mother, who cares for him because he cannot work.”

Ory Laboratories has collaborated with a regional government in Denmark to provide robots for use by children confined to their homes or in hospital. The company is now focused on expanding the use of its avatars and would like to work with other partners overseas.

“By 2050, we want to have robots for nursing care, for instance eye-controlled avatars that can help people care for themselves in their old age,” says Yuki. “You could take continuing education classes or attend school reunions via your robot. We envision a future world in which avatar robots are an extension of yourself and help you overcome the limitations of the physical body.”

Robot chefs to the rescue

Another Tokyo robotics startup that is expecting increasing demand, even during the pandemic, is Connected Robotics. Founded in 2014, it’s targeting an underserved but potentially huge market: automated food preparation, especially for Japanese cuisine. Its first robot is OctoChef, a machine that can prepare up to 96 takoyaki, a Japanese snack consisting of chopped octopus and other ingredients in a ball of batter. OctoChef can whip them up in 15 to 20 minutes using artificial intelligence, computer vision, and a collaborative robot arm. 

“Japanese industry needs more workers but the labor market is shrinking and aging,” says CEO and founder Sawanobori Tetsuya. “We want to help by providing robots that can take over difficult cooking jobs, working long hours over a hotplate with temperatures of 200 C.”

Sawanobori was born into a family of restaurateurs and dreamed as a child of having his own eatery. But he was also attracted to robotics and computer science, subjects he studied in university. He gained some early momentum by winning top prize at Startup Weekend Robotics, and joining the Kirin Accelerator Program, sponsored by Kirin Holdings, owner of Kirin Brewery. Fast-forward to 2020, and Connected Robotics has installed a number of OctoChef machines around Japan. Earlier this year, it launched another robot that can make soba noodles. Restaurants that rent the machine can save 50% on labor costs for cooking soba noodles, according to the company.

“As collaborative robots that work alongside people, our machines can move smoothly, while being adaptive and flexible,” says Sawanobori. “This is especially important in confined spaces like restaurant kitchens. With our control technology and computer vision, we can achieve smooth, intelligent machines that can help get the job done.”

Connected Robotics has developed a number of other food-related robots, including a machine that produces soft-serve ice cream, another that prepares deep-fried foods often sold at Japanese convenience stores, and yet another that cooks bacon and eggs for breakfast. Along the way, it was selected for the Japanese government’s J-Startup program, which highlights promising startups in Japan, and has raised over 950 million yen ($9.1 million) from investors including Global Brain, Sony Innovation Fund and 500 Startups Japan. 

Connected Robotics wants robots to do more than just prepare food in the kitchen. It is collaborating with the state-backed New Energy and Industrial Technology Development Organization (NEDO) to tackle the task of loading and unloading dishwashers. Under the project, one robot arm will prewash dishes and load them into a dishwashing machine, and another arm will store the clean dishes. The company aims to roll out the machine next spring, part of its goal to have 100 robot systems installed in Japan over the next two years. From that point, it wants to branch out overseas into regions such as Southeast Asia.

“I think we can be globally competitive because while there are some robots that can make hamburgers, spaghetti or pizza, so far there are no other companies that are serious about doing Japanese cuisine,” says Sawanobori. “We want to spread Japanese culture while showcasing our unique technologies and strengths.”

Note: All Japanese names in this article are given in the traditional Japanese order, with surname first.

To learn more about Ory Laboratory click here.

To learn more about Connected Robotics, click here.

To learn more about NEDO, click here.

Japan

Japan

Japan is changing. The country is at the forefront of demographic change that is expected to affect countries around the world. Japan regards this not as an onus but as a bonus for growth. To overcome this challenge, industry, academia and government have been moving forward to produce powerful and innovative solutions. The ongoing economic policy program known as Abenomics is helping give rise to new ecosystems for startups, in addition to open innovation and business partnerships. The Japan Voice series explores this new landscape of challenge and opportunity through interviews with Japanese and expatriate innovators who are powering a revitalized economy. For more information on the Japanese Government innovations and technologies, please visit https://www.japan.go.jp/technology/.

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Al Jazeera English 6.4M subscribers Countries around the world are looking at all sorts of technologies to help contain the coronavirus. And an army of robots is helping to relieve the pressure on health workers treating coronavirus victims Al Jazeera’s Raheela Mahomed explains. – Subscribe to our channel: http://aje.io/AJSubscribe – Follow us on Twitter: https://twitter.com/AJEnglish – Find us on Facebook: https://www.facebook.com/aljazeera – Check our website: https://www.aljazeera.com/

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Enterprise Software CEOs From The Cloud 100 Predict A Massive Upswing In 2021

A GGV Capital survey reveals 94% of private cloud companies expect improved revenue in 2021, while two-thirds do not expect the pandemic to impact their businesses beyond next year.

The Covid-19 pandemic has upended almost every facet of our lives; enterprise software companies, from startups to multibillion-dollar public companies, have not been immune to 2020’s headwinds. Yet this sector also benefited from the mass shift to work-from-home and accelerated digital adoption. For the last decade, companies have been transitioning their business processes, applications, and data to the cloud, and COVID-19 simply sped up this digital transformation.

As an investor in the software industry for over 20 years, I wanted to explore the impact of the pandemic on enterprise companies and what their CEOs predict will happen to their businesses in 2021. So I conducted an informal survey; I polled 25 CEOs of top software companies, from growth-stage to pre-IPO, listed in this year’s Forbes Cloud 100, and 17 responded. It’s hardly a scientific study, but the CEOs’ responses were illuminating, proving the pandemic has hurt many software companies’ 2020 top-lines but also provided unprecedented opportunities for growth.

Survey response showing the impact of Covid-19 on annual ARR for current forecast vs. pre-pandemic plan
ADAM SHARRATT AND STUDIO 96 PUBLISHING

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Nearly 90% of respondents say the COVID-19 pandemic negatively impacted their 2020 top-line results. Seven companies project their top-line annual ARR to come in up to 20% below their pre-COVID plan, while six project results that are 20-50% below their pre-COVID plans. Two companies actually project higher ARR than planned pre-COVID, proving some software business models flourished during work-from-home orders.

Not surprisingly, however, the overall top-line impact of the pandemic for this group was negative in the down 20% to down 50% range. Yet valuations for many private enterprise software companies surged during the pandemic; public market funds and venture investors alike clearly believe organizations will continue their digital transformations via cloud computing, AI, and open source.

Public Company Performance vs. Estimated Internal Pre-COVID Plan
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Interestingly, many public cloud companies also underperformed in 2020 compared to projected guidance, but they seemed to have weathered the pandemic better than private cloud companies. GGV took a look at published financial records for 36 public cloud companies, and, in aggregate, roughly two-thirds of these companies undershot our estimate of their internal, pre-COVID top-line plans for 2020, but they did so by a smaller margin than the 17 private companies I surveyed. Their median underperformance compared to plan was -2.9%.

The other one-third of the public companies we examined actually exceeded our estimates of their internal, pre-COVID top-line plans. Why did public cloud companies perform better than private ones in 2020? We don’t think public cloud companies are necessarily higher quality than private ones, but, more likely, they were not growing as fast as their private counterparts leading into COVID, so they didn’t have as high a hill to climb to maintain planned internal growth assumptions.

It has also been easier to sell new business into existing accounts than to find new accounts during the pandemic, giving public companies with a large installed base an advantage.

[Note: To identify the public companies’ internal pre-COVID growth plans for 2020, we took the simple average growth rate from the full-year 2020 public guidance these companies offered when reporting their Q4 ’19 results, just prior to the pandemic, and the full-year growth these companies sustained in 2019. Although not perfect, this seems a pretty good proxy for most public companies’ pre-COVID 2020 plans.]

Survey response on the level of optimism for the 2021 vs. 2020 business climate
ADAM SHARRATT AND STUDIO 96 PUBLISHING

Private cloud companies are already recovering and confident regarding the future. Almost all of the software CEOs we surveyed are more optimistic about 2021 than they are with the reality of 2020. Out of the 17 respondents, 16 believe their businesses will improve in 2021. Seven said their businesses would perform significantly better in 2021, and nine thought business would be mildly better next year. Additionally, while no one knows how the pandemic will play out, two-thirds of the CEOs surveyed believe the pandemic will not impact their businesses beyond 2021. 

Survey response showing the expected impact of the pandemic on business beyond 2021?
ADAM SHARRATT AND STUDIO 96 PUBLISHING

Many of the CEOs we surveyed believe that, with vaccines becoming widely available, the world will return to some semblance of normal in mid-2021. “I see a massive upswing in in-person experiences such as entertainment, travel, and social engagement beyond pre-COVID levels as people ‘make up for lost time’, and with that, I see corresponding success for tech platforms enabling these,” said one CEO.

“2021 will be the perfect storm for enterprise software—massive IT budget increases, paired with a distributed workforce,” said one CEO. Seeing strong demand for remote workforce technologies, security infrastructure, and data capture and analytics software, the CEOs were confident revenues would improve. “There will be a sustained momentum in digital transformation even as we move past COVID,” predicted one CEO, while another expects an “acceleration of technology that connects people and teams and that creates more business agility.” 

As demand for enterprise software booms in 2021, the CEOs believe a shakeout may come later in the year. “Competition between cloud providers will lead to lower margins, with each cloud trying to differentiate themselves with exclusive software,” said one CEO. Another commented that we should expect to see “much higher volatility between the winners and losers, and if the model is right, business will accelerate; if it is not, there will be no room for error and companies will collapse.”

I believe the enterprise software companies that will succeed post-pandemic will fall into three broad categories: those that serve developers with offerings that win their hearts and minds utilizing open source and API-driven models such as Hashicorp, Confluent, and Stripe; those enabling knowledge workers through low-code or no-code apps, such as SmartSheet and Notion; and those helping organizations extract value from massive quantities of data, including Snowflake, Databricks, and MongoDB.

Of course, these companies are already success stories, and many startups will emerge in an ecosystem around these winners in the next few years. With 2020 in the rearview mirror, I’m sure I speak for everyone in that I can’t wait to see what 2021 brings.

Follow me on Twitter or LinkedIn. Check out my website or some of my other work here

Glenn Solomon

Glenn Solomon

I am a Managing Partner at GGV Capital, a global venture capital firm focused on local founders. I invest in Enterprise Tech startups across seed to growth stages and across key areas including Open Source, cloud, infrastructure and cyber security sectors. I have been a VC for the the past 20+ years and in the last decade helped nine companies complete IPOs. I write about the trends and companies driving the next $1 trillion enterprise market and host the Founder Real Talk podcast, where I interview founders and startup executives about about the challenges they face and how they’ve grown from tough experiences.

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http://goo.gl/WPKt5w The world is divided in many different ways. We’re divided by invisible national boundaries, which carve up the land into different countries. We’re separated by seas and continents, which force us to live apart. Aside from that, we’re also separated by religion, and culture, and language. Because of all this, it’s sometimes hard to remember that we’re all one human race, and we all need to work together to deal with some of the issues that could change the face of the whole planet.

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The Pandemic Plutocrats: How Covid Is Creating New Fintech Billionaires

n 2015, Nick Molnar was living with his parents in Sydney, Australia, and selling jewelry from a desktop computer in his childhood bedroom. Hocking everything from $250 Seiko watches to $10,000 engagement rings, the 25-year-old had gotten so good at online marketing that he had become Australia’s top seller of jewelry on eBay, shipping thousands of packages a day.

That same year, he teamed up with Anthony Eisen, a former investment banker who was 19 years his senior and lived across the street. They cofounded Afterpay, an online service that allows shoppers from the U.S., U.K., Australia, New Zealand and Canada to pay for small-ticket items like shoes and shirts in four interest-free payments over six weeks. “I was a Millennial who grew up in the 2008 crisis, and I saw this big shift away from credit to debit,” the now 30-year-old Molnar says today. Either lacking credit cards or fearful of racking up high-interest-rate debt on their credit cards, Molnar’s generation was quick to embrace this new way to buy and get merchandise now, while paying a little later.

Five years later, Molnar and Eisen, who each own roughly 7% of the company, have become billionaires—during a pandemic. After initially tanking at the start of lockdowns, shares of Afterpay—which went public in 2016—are up nearly tenfold, thanks to a surge in business tied to ecommerce sales. In the second quarter, it handled $3.8 billion of transactions, an increase of 127% versus the same period a year earlier.


Buy Now, Pay Later

After a steep drop in Afterpay’s stock in March, the ecommerce boom and credit card-weary Millennials have propelled the installment payment company’s stock to record highs, nearly doubling its value in six months. 

They are not the only ones whose fortunes have taken off in the last few months. According to Forbes’ analysis, at least five fintech entrepreneurs including the two Aussies have been vaulted into the billionaire rankings by the pandemic. Others include Chris Britt, founder of digital bank Chime, and Vlad Tenev and Baiju Bhatt, the co-CEOs of “free” stock trading app Robinhood. Several other founders from such companies as Klarna and Marqeta have also gotten boosts and are suddenly approaching billionaire status. 

As in other sectors, the Covid recession has created both fintech winners and losers. For example, LendingClub, which offers personal loans to higher-risk consumers, laid off 30% of staff; small business lender On Deck was sold in a fire sale.

But for a sizable crop of consumer-facing and payments-related fintechs, the virus has delivered a gust of growth, just as it has for e-commerce behemoth Amazon and work-from-home players Zoom, Slack and DocuSign. 

“Consumer fintech adoption was already strong pre-pandemic, especially among the 20s to early 40s age group,” says Victoria Treyger, a general partner who leads fintech investing at Felicis Ventures. “The pandemic has become a growth rocket, fueling the rapid acceleration of adoption across all age groups, including 40- to 60-year-olds.”

Several Covid-driven developments are helping specific types of fintech players. For example, consumers’ shift to more online spending and delivery services is a boon to certain companies powering payments. Marqeta, a specialized payments processor whose clients include Instacart, DoorDash and Postmates, has been in talks to go public at an $8 billion valuation, four times what it was valued at in March of 2019. That would give CEO Jason Gardner, who owns an estimated 10% of Marqeta, a stake worth $800 million.

Meanwhile, the $2 trillion-plus CARES Act Congress passed in March, with its $1,200 per adult stimulus checks, student loan payment holiday and (now expired) $600 a week unemployment supplements, helped many Americans keep financially above water—and some digital banks like Chime to prosper. 

Debit It!

Spending on the travel and luxury items U.S. consumers typically put on credit cards has fallen with the pandemic, while spending on debit card necessities is up.

In the second quarter of 2020, amid Covid lockdowns and fears, consumers slashed spending on travel, restaurants and luxury items they usually put on their credit cards, but continued to spend on necessities and smaller items—the sort of things they’re more likely to pay for with debit cards. During that quarter, Visa credit card transaction volumes were down 24% from the year before, while debit card transactions were up 10%, according to research firm MoffettNathanson. And debit cards (rather than checks or credit cards) are the spending vehicle most frequently offered by fintech neobanks like SoFi, Dave and MoneyLion.

San Francisco-based digital bank Chime, in particular, has used the stimulus payments to its advantage. In mid-April, about a week before the $1,200 government-stimulus checks started hitting Americans’ accounts, the company advanced customers that money, eventually extending over $1.5 billion. “Following the stimulus advance, we had the largest day for new enrollments in the history of the company,” CEO Britt reports.

The pandemic has depressed total consumer spending, and the unemployment rate remains at a high 8.4%—two factors that affect Chime’s middle-income customer base. Yet on a per-user basis, “average spend per customer is up over last year,” Britt says. “Part of the reason for that is the government programs around stimulus payments and unemployment.” 

Today, Chime’s annualized revenue is running at a $600 million rate, according to a person familiar with the private company’s numbers. At its eye-popping new valuation of $14.5 billion announced along with a $485 million fundraise in mid-September, venture capitalists are valuing the company at 24 times its revenue. Some investors are asking if Chime should get such a lofty value when Green Dot, a publicly traded fintech that offers checking accounts and prepaid debit cards for low-income customers, trades at two times revenue. “We really look more like a payments-processing business,” answers Britt. That’s because virtually all of Chime’s revenue comes from interchange—the fees merchants pay when Chime’s users swipe their debit cards. The company doesn’t make money on interest through its new secured credit card (that’s a starter card where the holder puts up money to cover his or her credit limit), although Britt says he doesn’t rule out lending in the future. 

Now Britt himself has sailed into the “three comma club.” Forbes estimates his Chime stake is at least 10%, meaning his holdings are worth $1.3 billion-plus (Forbes applies a 10% discount to all private company holdings). And he’s planning an IPO. “Over the next 12 months, we have a number of initiatives to get done to make us even more IPO-ready,” he says. 

Then there’s the Robinhood phenomenon. The boredom of being stuck at home, wild stock market swings, and government stimulus checks have turned some Millennials and Generation Zers into day traders and options players. Robinhood’s most recent fundraising round in September gave it an $11.7 billion valuation and its cofounders a paper net worth of $1 billion each. But considering Morgan Stanley’s $13 billion February acquisition of E-Trade and Schwab’s earlier purchase of TD Ameritrade for $26 billion, some think Robinhood could garner a $20 billion valuation if it went public or were acquired.  

If there’s one fintech segment that has been an unalloyed pandemic winner, it’s the business Afterpay is in: online point-of-sale installment financing. It’s benefitting from both consumers’ shift to online buying and their reluctance, in these uncertain economic times, to take on new credit card debt.

While Afterpay’s Nick Molnar and Anthony Eisen hit billionaire status in July, their competitors aren’t far behind. Take Klarna, which was founded in Stockholm in 2005 and entered the U.S. market in 2016. Two of the three founders, Sebastian Siemiatkowski and Niklas Adalberth, met while flipping patties at a Burger King in Sweden. They pioneered the buy-now, pay-later model in fintech, calling it “try before you buy” and letting people own products for 30 days before making their first payment. (That’s a lot more attractive than old-fashioned layaway, the store system once popular for Christmas gifts and large appliance purchases, in which buyers had to make all their installment payments before getting an item.) 

Klarna charges retailers 3% to 4% of each transaction—slightly lower than the 4-5% Afterpay charges—to offer its service. One key difference that separates the two companies: Klarna is becoming a full-fledged financial services business. It became a licensed bank in Sweden in 2017 and offers longer-term financing of up to 24 months, with interest charged, for high-ticket items like laptops sold through a small number of retailers. Siemiatkowski has already turned Klarna into a digital bank in Europe with a debit card for spending on everyday purchases. He’ll likely do the same in the U.S. soon.

The pandemic has catapulted Klarna’s business onto a steep trajectory. By the end of 2020’s first half, its U.S. customer base hit nine million, up 550% from the same period the year before. Globally, 55,000 consumers are downloading the Klarna app every day, more than two times last year’s pace. Klarna is now available in 19 countries, has 90 million users and expects to bring in more than $1 billion in revenue this year. When it raised a new round of funding last week, its valuation nearly doubled from a year ago, hitting $10.7 billion.

Cofounder Victor Jacobsson has a 10% stake, while Siemiatkowski’s has 8% in the still-private company. (Niklas Adalberth retains just 0.4% after selling some shares to fund his philanthropic organization and investing in startups. Neither he nor Jacobsson are still involved in Klarna.)

Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, whose sales have surged as affluent young consumers, missing the motivation of group exercise classes, have flocked to buy the $2,000-plus stationary bikes with their streaming workout classes. Affirm also now finances purchases of Mirror, the hot $1,495 in-home fitness coaching device acquired by Lululemon this summer. 

Of course, the fintech companies’ current lofty valuations depend on consumer spending staying strong and consumers retaining some of the online shopping habits they’ve developed over the past six months. With a pre-election agreement between Congress and the White House on a new stimulus package looking unlikely and the future course of Covid-19 unknown, there are no guarantees. But for now, these fintechs are riding high.

Jeff Kauflin

Jeff Kauflin

I cover fintech, cryptocurrencies, blockchain and investing at Forbes. I’ve also written frequently about leadership, corporate diversity and entrepreneurs. Before Forbes, I worked for ten years in marketing consulting, in roles ranging from client consulting to talent management. I’m a graduate of Middlebury College and Columbia Journalism School. Have a tip, question or comment? Email me jkauflin@forbes.com or send tips here: https://www.forbes.com/tips/. Follow me on Twitter @jeffkauflin. Disclosure: I own some bitcoin and ether.

Eliza Haverstock

Eliza Haverstock

I’m an assistant editor at Forbes covering money and markets. I graduated from the University of Virginia with degrees in history and economics. More importantly, I covered breaking news for its student paper The Cavalier Daily, while also writing for the school’s underground satire magazine. Since then, I’ve worked at Bloomberg and Pitchbook News, writing about everything from plastic straws to pizza robots. 

What are FinTech startups up to during Covid-19 lockdown? Smartphones becoming the primary means by which people access the internet lead to mushrooming of several FinTech players who brought about disruption in financial services. So, even as everyone is holed up in their homes but seamlessly connected through internet, how deeply are FinTech startups really impacted?

The answer is not as simple as it may look. Over the years, FinTech has become an umbrella term for a host of tech-enabled financial companies—digital payment platforms, online lenders and financial product companies—with starkly different business models. On one hand, insuretech startups are witnessing a sharp increase in demand during the COVID-19 crisis, but on the other hand online lenders are starting to worry about default in loan repayments.

Moreover, like most sectors, FinTech startups too are grappling with business challenges ranging from fundraising to employees to customer engagement. Through this webinar, we aim to learn how FinTech startups should look at ways to connect, innovate and disrupt the financial services industry further. For regular updates on entrepreneurship & business trends, follow us on: Facebook: https://www.facebook.com/Entrepreneur… Twitter: https://twitter.com/EntrepreneurIND LinkedIn: https://www.linkedin.com/company/entr… Instagram: https://www.instagram.com/entrepreneu…

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