Hal Varian – Data, Like Oil, Needs to be Refined to be Useful





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Jul 11, 2018
by Maryam Ghaddar
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Hal Varian – Data, Like Oil, Needs to be Refined to be Useful

Chief economist at Google explains what he believes the Fourth Industrial Revolution will look like and the effects of big data and robotics on education, labor, research, and demographics Hal Varian speaking at Salzburg Global Seminar

For decades, science fiction films and books have foretold of a future where robots dominate the world, where human action becomes obsolete, and subsequently, human intelligence dwindles into oblivion. Hal Varian, the chief economist at Google, is of a different mindset. He believes technology will set its own course.

“My theory is,” he jested, “we want to make sure robots think humans are cute - kind of like doggies and puppies and kitty cats… because if they think we’re cute, then they’ll take care of us.”

Varian, who attended this year’s program of the Salzburg Global Forum on Finance in a Changing World on the recommendation of a friend, has worked at Google since 2002 on algorithm designs for auctioning and marketing systems, as well as policy-related issues, like privacy and intellectual property.

During the Finance Forum, titled The Promise and Perils of Technology: Artificial Intelligence, Big Data, Cybercrime and Fintech, he presented a keynote speech on the economics of artificial intelligence (AI). More specifically, he explained the economic implications of data on education, the workforce, research and development, and demographics. Varian later elaborated on this point, saying data needed to be turned into information, knowledge, and action to be coined as meaningful.

“I think there’s a mystical belief in the power of data,” he said. “Data is like oil in one respect… namely, it needs to be refined in order to be useful. So the data itself is not the important components, the know-how to refine it into something that’s useful. It’s the same [when] we talk about oil or data – it’s just the raw material, it’s not the finished product.”

When it comes to considering what the Fourth Industrial Revolution will look like, it’s easy to fall into the trap of fearing the unknown. The societal response to this radical revolution, whether it concerns technology, big data, or mass industrial change, is one massive question mark. Varian suggested past industrial revolutions occurred gradually, and then all at once, adding there were challenges and risks involved but then also a plethora of opportunities. He suggested it will be similar this time around.

“In Silicon Valley, they always say you overestimate what can be done in a year; you underestimate what can be done in ten years. So a lot of technology that looks so exciting and so obvious today will probably take many years to deploy… The mobile phone has come up as an example. The first working mobile phone was in 1970; the first commercial version was in 1980 – it cost over a thousand dollars, it weighed several [kilograms], it was the size of a brick. So, that technology took… more than a decade to really disseminate in a meaningful way.”

The chief economist offered another example that cropped up several times over the course of the Finance Forum: autonomous vehicles. For years, companies worldwide have been endeavoring to circulate driverless cars more widely. It is, as Varian underlined, “a trillion-dollar industry” that works on a mobile and a technological level, but human error and human behavior have thus far been too strong a poison against its operational and marketing advancement.

Preserving the human spirit in the face of such technological developments is essential to maintaining the situation in the future. “Demography is destiny,” Varian said. He described a concept of “Bots & Tots,” which essentially pins automation against procreation. Whereas age distribution is indicated through demographics, technology is not as widely understood.

“We don’t really know where we’ll go, even in three [or] five years; it’s hard to forecast what will happen in that time period. But, based on the estimates that I’ve developed using the demographic data and various forecasts of the technology data, it looks like the demographic data is the bigger effect, at least for the next ten or 15 years.”

Regarding education and labor, he said, “We are a long way away from truly intelligent robots, but at the same time… we’ve seen tremendous advances in just the last five years about tasks that were thought to be extremely difficult, like image recognition and automatic translation and voice transcription… I think that within the next two years, your mobile phone will be able to translate in real time… that doesn’t mean that translators would entirely disappear because there are still cases where the translator might need to know special vocabulary, technical work, physics, chemistry, mathematics, or specific literary skills.”

So how do we prepare for this new industrial revolution adequately and in a purposeful way? With the Finance Forum taking place directly after the Salzburg Global Board of Directors Gala Weekend titled Who’s Afraid of Artificial Intelligence?, Varian offered his input on the topic, stressing both the benefits and dangers of these changes.

“You certainly shouldn’t be blasé,” he noted. “You should recognize that every technology can be misused… There are tremendous possibilities for improvement in how people live, but they also can be used as weapons, and that’s not even thinking about the technological advancements. That’s simply taking ordinary devices that you would use every day – a car, a truck, a drone perhaps.”

His time at Schloss Leopoldskron provided Varian with the opportunity to exchange ideas and viewpoints with others in the field of economics and finance. “You learn things here,” he concluded. “Having these meetings… plus government meetings, plus institutional meetings, that’s what makes the world go round.” If Varian could leave his fellow participants with one piece of wisdom, what would that be? “Keep an open mind.”

The Salzburg Global Forum on Finance in a Changing World convenes an internationally representative group of leaders from financial services firms, supervisory and regulatory authorities, and consultancies, auditors, law firms and other professional service providers in a small and intimate setting. The annual gathering at Schloss Leopoldskron offers private and public sector leaders an opportunity for in-depth, off-the-record conversations on the issues affecting the future of global markets. For more info please click here.