Business Briefing

Justin Lane/AAPWhen Katherine Hunt’s dad asked her whether or not he should invest in Bitcoin, alarm bells rang, first she thought “he’s a musician”. Hunt is a lecturer in accounting at the Griffith Business School, and as someone who knows the five stages of a bubble and crash, she was worried when it seemed everyone was thinking they needed to “get in on” Bitcoin. “The stock market is a manifestation of the psychology of everyone who is investing, so of course there is going to be these crazy stages,” Hunt says. There is a boom, as momentum behind a new stock or asset speeds up and the media starts to cover it, fuelling its price rise. Then the euphoria sets in, the value of the asset skyrockets and people start to make a profit. But looming around the corner is the panic. Investors feel the last phase of a crash far more than they do the elation of the price rising, Hunt says. Panic breeds more panic and the price falls. Hunt is seeing this pattern play out with the stocks of the more well known gig economy businesses like Airbnb and Uber. These businesses now enjoy the privilege of being the only, or one of a few of their kind, in the marketplace. But Hunt says this can’t last. “In an open market that’s not the case at all, there’s always going to be competition and these companies will fall. It’s just probably that they’ll fall in 30 or 40 years, not necessarily tomorrow,” she says. Of course this is all easier to see in hindsight. Remembering the global financial crisis John Crosby, now a senior lecturer in finance at the University of Technology Sydney, was once working as an investment banker at Lloyds of London in 2007 when he noticed a news story on losses financial services company HSBC was reporting from its subprime mortgages. “I thought, that could be quite bad,” Crosby recalls. At the time volatility was low and it seemed like everything was going along fine. But Crosby overheard a coworker who looked after the banks’ various branches asking people to move any sums to deposit to London. “That wasn’t normal right? It was perfectly normal that you did business with anybody you wanted to, unless there was a real credit risk issue with the bank,” he says. Crosby realises now that his coworker knew other banks were carrying toxic debt that would eventually kick off the global financial crisis. When it came to 2008 the real problems became clear and it was more of a question of which bank would fall next, he says. “People were way too complacent before the crisis and then during the crisis it’s one of blind panic, thinking everyday things are going to get worse. Whereas in reality there was light at the end of the tunnel,” Crosby says. By then Crosby was working at financial services company UBS and thousands of people were being laid off. In 2009 the company decided to hire half of those employees back. Past theories about what causes crashes The benefit of hindsight also shows what sort of speculation leads to market crashes. Before crashes were well understood, economists had to grapple with what they thought might be causing a crash. In the 19th century, economist William Stanley Jevons believed that sunspots (hyperactive radiation on the sun) could be the key to understanding crashes. “He was interested to find out that the cycle of sunspots was very similar…as the trade cycle back on earth,” says Simon Ville, a professor of economic and business history at the University of Wollongong. Of course this theory was later discredited, but there have been bubbles over some very ordinary assets in the past. Ville explains that tulips were at the centre of the first market bubble and crash in recorded history. Tulips became high fashion in the Netherlands, in the early 17th century, but because it took a while for these plants to grow it was very much like the future markets we see today in modern finance. “That inevitably creates a sense of uncertainty and a sense of speculation, ‘what are you actually buying? Will you get the full value of what you’re paying for?’,” Ville says. Of course people started paying more and more for tulips, until it took someone’s life savings to buy one bulb. Ultimately there was a point where euphoria turned to panic and the climate changed from optimism to pessimism. This is when the price crashed, and the bubble burst.

The perimeter fence at Silverwater jail in Sydney's west AAPThere are more than 41,000 daily full-time prisoners in Australia, according to the latest ABS data. Many of them are in private prisons - almost 20% of the prison population according to a 2014 Productivity Commission report. But we don’t really know whether private prisons are more cost effective or produce better results. Private prison contracts are often “commercial in confidence”, and it’s hard to know what exactly we’ve paid for. All this means we have to rely on watchdogs to ensure taxpayers are getting value for money, and it’s tough for companies to really compete. Read more: Private prisons and the Productivity Commission: where is the value for money? Prison job programs are often touted as a way to reduce prisoner recidivism, but again there is little evidence showing a positive impact. Joanne Wodak was a research assistant on a study in the Northern Territory. Despite positive feedback from both prisoners and employers, Wodak says these programs don’t address other, important factors affecting recidivism such as alcoholism and homelessness. Technology could drastically change what a prison is and who is in them - through the use of algorithms that decide who gets bail, for instance. But as the University of Sydney’s Sandra Peter and Kai Riemer discuss, it’s unlikely to have an impact on the jobs prisoners themselves do. Low wages mean that prisoners provide an incredibly cheap source of labour, and the economics of this is unlikely to be drastically changed by technology.

Advertising through online influencers is shaping consumer law, business models and people's careers. Nico Aguilera/Flickr, CC BY-SAIt sounds like a get rich quick scheme. Amass huge numbers of followers on a social media platform like Instagram and you can get paid like a celebrity to mention or feature products in your posts. But this industry of “online influencers” was worth US$500 million in 2015, and is expected to grow to be worth US$5 billion by 2020, according to Sandra Peter from the University of Sydney. There’s a well documented business model behind it. Even though these online influencers might not be overtly endorsing a product, advertisers will still pay a lot to have something featured, even subtly, in their posts. The relationship online influencers form with their followers is different to a regular celebrity because they have more leeway to talk about their own experiences. When the influencer industry was at it’s peak, about five years ago, the content was more about using your body or life to sell something, says Crystal Abidin from Curtin University. But this is now changing. “Today it’s expanded so much that even in the influencer scene there are hierarchies,” she says. “Big name influencers may not spend as much time investing their own narratives in these products, but they may just do a shout out, that is so impactful that advertisers don’t mind.” This is indicative of a broader change to professionalism in the industry, where big internet companies like Amazon, Reddit and Youtube are starting influencer offshoots, says Abidin. With this growing industry consumers are starting to cotton on to the potential of being led astray. For example online influencers were mentioned in a lawsuit against a festival in the United States, where consumers felt their expectations (including those set by prominent online influencers) weren’t met. “What we saw with the Fyre Festival really does highlight the dangers of the influence that these people wield on social media and if it’s not absolutely made clear that they are promoting something…that has a material effect on consumers,” says David Glance from the University of Western Australia. While there are laws in Australia to protect consumers in Australia from misleading advertising, Glance says social media platforms need to make it clearer when someone is paid being to promote. He says this should go beyond a hashtag to something written on the post, pointing it out to consumers.

How should you signal that you don't want to be disturbed? www.shutterstock.comOur workplaces are becoming less formal as the decor resembles what we have at home, companies relax dress codes, and technology makes it possible to work from anywhere. But the old formality had some advantages, says Libby Sander from Bond University. For example, closed doors used to signal that you didn’t want to be disturbed, and suits are an easy way to look professional. As Sander points out, new forms of office etiquette, such as not disturbing someone wearing headphones, are filling this void. To know how to behave in this new relaxed environment, context matters, says Nicole Gillespie, an associate professor of management at the University of Queensland. This means reading the relationships you have with your co-workers and the wider culture in the office, and being aware of the effect you own actions are having. Never is this more important than in cases of office profanity. It’s not uncommon to hear a bit of swearing in some workplaces, but it could get you fired in certain circumstances. As part of one Fair Work Commission ruling, the difference comes down to swearing in conversation, versus directly at someone. “There’s a big difference between that coarse kind of conversation and aggression in someone’s tone of voice, so you’ve got to ask what the intention is,” says Simon Burgess, from the University of New England. Burgess says it’s up to each of us to hone our communication skills and perhaps improve our office etiquette a bit.

Cricket Australia has been unable to broker a new pay deal with the Australian Cricketer's Association. EPA/DAVID JONESRather than just admiring a good hit or delivery, there’s another way to analyse what’s happening on a cricket pitch. Cricket players are actually business people, in the sense that they’re weighing up how many resources they have, whether it’s wickets in hand or overs remaining, says Steven Stern, a professor of data science at Bond University. Stern is responsible for the Duckworth-Lewis-Stern method, which is used to calculate the score, and even who wins, when rain interrupts play. He crunches the numbers on games that have been played since the 1990s, and uses the resources remaining to decide what the score should be. It’s all about risk and reward, says Stern, and the cost benefit analysis carried out by teams and players. Technology is also changing the business of cricket. On the one hand it provides a useful tool for players to measure how well they are doing, but it can be a double edged sword, this same data can be used in performance indicators. Sandra Peter and Kai Riemer from the University of Sydney point to the example of the International Cricket Council which is using sensors on cricket bats. These can help to develop the skills of players in training but it can also be used to gather data on player performance, to decide what they get paid. Pay is the reason cricketers are currently in a stand-off with their governing body Cricket Australia. The cricketers argue that more needs to be spent at the lower levels of the sport. Judging by what has happened in other sports like rugby league, if money is not spent on the administration and supporting the lower levels, it starts to shows as cracks in the national level of the sport, says Stephen Frawley from UTS.

Office perks like slides down stairs may not be the best way to motivate good behaviour Scott Beale/Flickr, CC BY-NC-NDResearch shows that when it comes to cognitive tasks, like decision making, paying people more can lead to worse outcomes. If we want to get the best out of our executives, the ideal amount to pay them is “enough to take money off the table”. Anything extra might excite them, but not in a way that makes them better executives. Put simply, giving a CEO one, two or three million dollars might motivate them. But it doesn’t necessarily follow that they will work any harder if offered four, five or six million. That’s because they don’t really need the sixth million. It does not provide upside motivation, and could have the reverse effect. Research shows when you have enough money then you value the next dollar less, and may not work as hard for it. There are other motivations that drive performance, such as the prestige of a particular company or job. Paying someone less may lead to better outcomes when they are motivated by these other factors. In practice, if we want the best decision making, this means we should pay executives enough so they feel rewarded for their efforts, but no more than others would take to do the same job, says associate professor Prabhu Sivabalan. Hear more on what professor Prabhu Sivabalan has to say on decision making, also what Game Theory has to say about the decisions that lie behind where businesses set up shop with academic Stephen Woodcock, in this edition of Business Briefing.

Generation X and Y are equally, if not more aggressive than baby boomers when investing in property. Chris Devers/Flickr, CC BY-NC-NDGenerations X and Y are becoming just as, or even more aggressive, than the baby boomers as investors. An example of this are the “rentvestors”, who still don’t live in their own home, but have an investment property. There’s been a change in culture over the generations when it comes to the property market, says researcher Ilan Wiesel from the University of Melbourne. “It’s the shift from housing as a home, as a right, to housing as a commodity,” he says. This is reflected in that 60% of household wealth is in people’s homes. But for younger people, like Generation Y, there are some who choose to move around for work so tying themselves to one location doesn’t have the same appeal. Looking at the baby boomers, there are two types of security that drive people’s feelings about property. One is a sense of financial security but another is tied to a sense of continuity, in knowing you have a home and how that affects your identity. If you look at the advertisements for properties through the generations, certain aspects of these changing ambitions are highlighted, says researcher Robert Crawford from the University of Technology Sydney. After the war and the great depression, people felt hard done by and that it was time for a reward, that reward was owning a home. “The advertisements really play on this, but it’s a dream,” says Crawford. In the advertisements of the 1980s this changed again as size and location of properties became more of a feature than just owning a home. “As more and more people begin to realise their dreams of home ownership, the next [point] is - owning a home isn’t as much of an achievement, so I'II have to own a particular size of home,” Crawford adds. The rental market is also changing with generations, as more renters have a high income and rent for longer, says Professor Kath Hulse from the Swinburne University of Technology. In comparing this to other countries, Hulse says there is a culture of treating tenants differently too. “Germany has a very stable rental system… there’s a lot more security of tenure and it’s very common if someone sells the house, to sell it with the tenant, they don’t have to get out.” “Whereas in our case it’s almost automatically assumed that if you buy a house with a tenant or if you want put your house on the market, the first thing you do is to ask the tenant to leave,” she says. Over time some policies, like the First Home Buyers Grant, have had some impact on changing the behaviour of people in relation to the property market but with the danger of a flow on rise in house prices. “Part of it is to make the rental sector a better place to live, with better more modern regulation and better quality of service… and then people might have a real choice as to what they want, rather than feeling like they have to move into home ownership,” Hulse says.

Customer-facing roles may soon be taken over by cheaper, friendlier and more knowledgeable robotic retail assistants. Thomas Peter/ReutersWhen you call up a business, you might get an automated customer service giving you options and helping you to do whatever it is you need to. This is a digital robot. It’s common to see digital robots in these types of roles because the technology is getting cheaper and better, says Mary-Anne Williams, founder and director at UTS’ Innovation and Enterprise Research Lab. Williams researches how humans interact with different types of robots, in customer service roles. She says because digital robots can access vast amounts of data about certain customers, these bots can provide a more specialised and customised service, similar to that of the good old days. People have fewer problems dealing with digital robots than humans because machines don’t make emotional or ethical judgements about customers that make them uncomfortable. However, when it comes to physical robots in customer service roles, our reactions can be very different. In research on these robots, there is a concept called “the uncanny valley”. This is where the closer the robot is to human form or face, the more uncomfortable or eerie we feel. So there’s that to overcome. Experiments students at Williams’ lab have conducted in a shopping mall show that these physical robots have to work hard to attract our attention and we’re easily underwhelmed by them, compared to the ones we see on TV or movie screens. The next big frontier for physical robots in business is to get them to empathise with customers, to understand the context around questions and interactions. And with the speed of innovation, this may be closer than we think, Williams says. The business briefing podcast will return with a new format in 2017. If you’ve got any feedback you’d like to pass on, please email it to: ask@theconversation.edu.au

Superannuation's influence on the Australian financial sector mostly balances out. www.shutterstock.comThe total of superannuation assets in Australia is a staggering A$2 trillion and contributions to this are rising. But despite this significant influence, a new study shows the effects of superannuation on banking and finance mostly balance out. A researcher who was presenting the study, Robert Waschik from the Centre of Policy Studies in Melbourne, says the study found super funds hold more offshore assets than most households, so any increase in the guarantee for superannuation would increase demand for foreign assets leading to some depreciation in the Australian dollar. However this could be offset by the Reserve Bank raising interest rates, he notes. Another aspect of the study tried to see whether the common gripe of bankers that an increase in superannuation could reduce the banks’ access to capital (through bank customers) could actually happen. The modelling found the banks could access more money through a few other measures, the study showed, including equity and bonds. Waschik says the modelling points to potential threats to financial stability through an increase in the debt to equity and debt to income ratios of households, though these should be balanced out by a deepening of the market for corporate bonds in banking and strengthening of the current accounts balance.

The Modi government is getting rid of RS500 and RS1,000 notes to try and combat the black market and corruption. STR/EPADoing away with big currency notes is a movement that is picking up all over the world, says Kaushik Basu, a professor of economics at Cornell University. While it may be a good idea in theory for tackling tax evasion and the black market in Australia, he says policymakers have to be cautious in implementing it. Basu, a former economic adviser to the Indian government and chief economist at the World Bank, says the policy is an ineffective tool in India. India’s Modi government recently decided to demonetise RS500 and RS1,000 notes, giving citizens until December 31 to change them. It was designed to target corruption, the black market and tax evasion, but Basu says it could potentially hamper the country’s growth and have a disproprtionate negative effect on the poor and lower middle class. Basu also weighed into the ongoing debate on addressing inequality in various economies around the world while still looking for economic growth. While growth is still important for economies catching up like India, some growth can be sacrificed to redistribute profit, he notes. He argues policymakers, including in Australia, need to stop tinkering around the edges and come up with big ideas. Basu uses the example of profit sharing, where a pool of some share of all profits, for example 10%, goes straight to the workers. Also in this podcast, economist Richard Holden answers a question about Trump’s borrowing in business and in government for Ask an Economist. If you’ve got a burning economics question you’d like to ask, write it down or record it and send it to ask@theconversation.edu.au – and be sure to include your name and where you’re from.

Commonwealth Bank of Australia CEO Ian Narev attends the parliamentary inquiry into the banking system. AAP Image/Lukas CochAustralian banks have been under intense scrutiny this year after various scandals called into question the culture of the industry. But it seems there’s no easy answer to improving culture. Professor Paul Kofman from Melbourne University was a panellist at an event discussing this exact issue. He says the heart of the problem is the lack of evidence for what types of cultural interventions translate into good business outcomes. Kofman says bank executives can’t ignore culture anymore because their jobs are on the line, but he also notes they aren’t trained sociologists, so they might not notice problems in culture when they occur. Instead of looking at the conduct of employees when trying to improve culture, the focus should instead be on the customer and if they are being best served, most of the panellists at the event agreed. In an industry that has changed a lot over time, Kofman isn’t convinced “big data” on its own will necessarily provide deeper insights into bank culture. He says as long as we’re not sure how to measure culture, having more observations won’t help. Kofman notes much of the exciting data analytics are in fact generated by new financial operators (for example in financial technology and offshore operators) that are currently outside the scope of our regulators. Also on the podcast this week, Richard Holden tackles a question about how low borrowing rates affect demand and investment for Ask an Economist.

The majority of 457 visa holders are skilled workers AAP/Alan PorrittPeter McDonald, a professor of demography at the University of Melbourne, says a 457 visa worker is more likely to take the job of a young academic than that of a blue collar worker. Labor and the Coalition government are suggesting changes to the 457 visa workers scheme to ensure these workers aren’t taking jobs that would otherwise be filled by Australians. However Labor’s plan is misguided because the majority of 457 visa holders are skilled workers who are more specialised and experienced compared with those who are unemployed in Australia, McDonald says. In fact, often if 457 visa workers weren’t employed, these jobs wouldn’t exist in the first place, he says. This is because employers specifically need the skills of these workers and, in general, these workers create jobs in Australia. McDonald says there is a case for targeting the scheme so that 457 visa workers take certain jobs in the workforce and in certain locations, where there is demand. However, he says most of the recommendations from an earlier inquiry to improve 457 visa workers program have not been implemented by the government yet.

Australia and Poland could adopt similar policies to protect against economic shocks from China and the EU, respectively. Kacper Pempel/ReutersAndrzej Rzonca, a Professor of Economics at the Warsaw School of Economics and member of the Monetary Policy Committee at Poland’s central bank, is visiting Australia at the moment. He’s here to learn more about our monetary policy woes but to share his views on Brexit and the ever growing tension between the United Kingdom and other members of the European Union. Despite the differences between Poland and Australia, Rzonca says there are a lot of similarities: both countries managed to get through the financial crisis without too much damage but both are now vulnerable to external economic shocks, Poland through its open economy and Australia from its exposure to China. Rzonca’s advice on improving Australia’s resilience to economic shocks is for the government to return public finances to a situation similar to that of before the global financial crisis. His says the type of unconventional monetary policy that some countries have come to expect (such as quantitative easing) was helpful during the global financial crisis to support banks, but it’s now stifling the productivity and innovation needed for growth. This low growth is contributing to inequality between EU states because poorer countries have been growing slower than richer ones, Rzonca says. While this requires policy reforms, thepolitical environment in Europe is not conducive to this. In this podcast Rzonca refers to the Australian federal reserve, this is the Reserve Bank of Australia. Also in this podcast in Ask an Economist, Richard Holden answers a question on what unemployment figures really tell us.

Joking around with customers can improve satisfaction, as long as its the right jokes! Zeetz Jones/Flickr, CC BY-SAAs part of a research team, Christine Mathies from the University of New South Wales Business School stood outside a suburban retailer (who had volunteered to be part of the study) and quizzed customers who came out on their experience and satisfaction. They knew one of the employees was a bit of a joker, and were trying to see whether humour made a difference to customers. It turns out humour can be useful in increasing customer satisfaction, even if your customer is a grouch. But it’s only certain types of humour, Mathies says. If an employer jokingly brags or jokes about something else like the weather, that has better outcomes than making self-deprecating jokes. In separate research, they also found humour can be good for the employees themselves, as it relieves tension in difficult situations and the stress of constant interaction with customers. However, when it comes to service failures, they discovered employees should steer clear of using any jokes when offering apologies or compensation, as it comes across as inappropriate.

Mortgage tracker rates follow the cash rate. www.shutterstock.comIn the ongoing debate about the transparency of Australia’s big banks, the idea of rate tracker mortgages has been gaining traction. This is a mortgage that is tied to the cash rate set by the central bank (in Australia, the Reserve Bank of Australia), with an additional fixed margin set by the lender (usually a bank). The rate follows the ups and downs of the cash rate, similar to what already occurs in short term lending markets like the bank bill swap rate (the rate at which banks lend each other money), says Professor Milind Sathye, from the University of Canberra. When it comes to applying this same idea to mortgages, customers have more certainty because they know when the Reserve Bank moves rates, their rate will also move in line with this, Sathye says. The risk lies in the parameters banks may put around these types of loans, with additional fees or a floor rate. Even though Australia’s big four banks haven’t been too keen on the idea, Sathye says this type of mortgage would provide a solution to the problem of trust in the banks. In addition he says it would force banks to be more efficient, to contain their costs given that the margin charged on top of the tracker mortgage rate remains fixed. Listen at the end of this podcast for our first “Ask an Economist” segment, where Vital Signs’ Professor Richard Holden answers any economic questions you want to ask.

Machines are set to take over all of our jobs in the near future, author Tim Dunlop predicts. Franck Robichon/EPAWhen Tim Dunlop, from the Centre for Advancing Journalism at the University of Melbourne, started to research the future of work, his economist friends pointed to all the research showing there will still be jobs. A few years later and Dunlop isn’t so sure. His book, “Why the Future is Workless”, unpicks the research into everything from machines learning to do our jobs to the idea of governments paying us all a universal basic income. Dunlop outlines three possible scenarios off the back of all this evidence but he is most convinced that the economy, as we know it, will change dramatically. Costs will be lower, machines that learn will be able to do the jobs we do now, and, if we get the politics right, people will be free to pursue any endeavour they want to. Rather than fear this future, Dunlop suggests there may be value in embracing it.

Businesses need to consult customers to work out what is reasonable when it comes to using and securing their data. www.shutterstock.comFormer ACCC chief Graeme Samuel is calling on businesses to take a closer look at their data management practices in a bid to increase public trust in their ability to handle it. Samuel says if they don’t take the lead on data use, companies risk more government regulation, with the potential for overreach. He is the new head of a not-for-profit industry body, Data Governance Australia, that wants to produce a code of conduct for how businesses handle data. The aim is to improve internal auditing and compliance with regulation on data use. High-profile cases of businesses handling data incorrectly damage public trust in businesses, says Samuel, as consumers start to worry if it’s a systemic problem. It also means governments introduce regulations as a result that inhibit the ability of business to innovate. Part of handling data correctly is being aware of community expectations when it comes to managing their data, says Samuel. But it’s also the responsibility of industry to educate the public about what is unreasonable and will inhibit business.

Health Insurers should be offering insurance that covers primary care, Paolucci argues. www.shutterstock.comAustralia’s private health insurance industry has come under scrutiny over what is covered by the products it sells, how it sells them and high premiums. This all means consumers are left questioning the value of buying health insurance, says Associate Professor Francesco Paolucci, head of the health policy program at Murdoch University. Paolucci argues all of this is a symptom of the way Australia’s health insurance system is set up. The government uses various incentives, including the the Medicare levy surcharge, to encourage people to use health insurance even though Australians already have universal health care coverage. However, this means people are choosing to purchase private insurance based on tax incentives rather than exposure to health risks. Another structural distortion is created by community rating regulations, where individuals pay the same premium for same product of the same insurer, regardless of their risk profile. He says while this is well-intentioned, it encourages insurers to market and provide products to low risk customers while discouraging high risk customers. What’s the alternative? Paolucci says insurers should be allowed to offer insurance for primary care (including general practice) and more importantly the system needs to change in response to health policy shifts to treat the growing number of people with chronic health conditions.

Business leaders don't have a crystal ball to predict future disruption but they can have a stake in it. www.shutterstock.com“Disruption” and “disrupters” have become buzz words in the business community and are often used to describe any change or evolution in a sector. However businesses shouldn’t dismiss it as a fad says the University of Sydney’s Professor Kai Riemer, who has been studying disruption for the past five years. Disruption is actually a fundamental change in the way we view and use products and what we understand and take for granted about an industry, not just an improvement brought about by a new product or player. Take the businesses that have recently been dubbed disrupters as examples. Uber is changing the taxi industry, but it could just be a passing phenomenon in a greater shift towards a world where driverless cars are the norm and roads and carparking as we know it won’t exist. Trying to predict this sort of disruption is almost impossible with what we know, says Professor Riemer, but businesses can have a stake in creating it.

Australian startups are trying to develop better algorithms to offer financial advice. Tracey Nearmy/AAPAutomated financial advice has been around for quite some time. Usually a bank or a broker will type your details into computer software and rely on algorithms to advise you, especially if you’re a small time investor. However these days, more and more investors are digital natives, savvy when using online platforms and more trusting of computer generated financial advice, says Marco Navone from UTS. So startups in Australia are now offering these consumers direct access to the algorithms, cutting out the middle man. In the United States, a growing number of smaller firms are working on better platforms for automated financial advice and their market share is also growing. In such a crowded space both Australian and US startups will have to develop better algorithms and machine learning applications (for example, based on investors on-line behaviour, analysed in real time) to be unique, Navone says. This also presents some challenges for regulators who now have to figure out the best way to test the quality of these algorithms.

Australian companies need to except the disruption from digital platforms is here to stay. Dan Peled/AAPAustralian companies should better manage the expectations of shareholders who increasingly expect dividends and focus more on meeting the needs of global consumers, says UNSW Adjunct Professor Paul X. McCarthy. That’s his advice for companies dealing with the disruption brought on by digital platforms. Aside from the price of iron ore affecting the big end of town in this year’s results, the major disrupter is the movement of advertising dollars to online global channels and marketplaces, such as multinationals like Uber, Google and Facebook. He explains that sectors that were previously thought to be sheltered from the forces of digital disruption, such as legal services and real estate, are now facing the same challenges as other sectors. Read more analysis on the bigger picture of what is happening in Australia’s business sectors, in our company results wrap series.

Cybersecurity risks increase with the amount of outsourcing a company does. Dave Hunt/AAPThe first thing business gets wrong in understanding cybersecurity is assessing the value of the information it holds. Businesses need to know the information they are trying to protect. Is it information about the business that would be shared via marketing? Information that is commercial in confidence? Or does it have a high security risk, such as defence information, intellectual property for a new drug or customer’s financial information? It’s important to know the difference, says Craig Horne, chairman of the Australian Computer Society in Victoria, who is also completing his PhD in information security strategy in organisations. Another aspect to cybersecurity is having the right people, hardware and software to manage risks. Companies could be doing better by sharing information on known threats and employing people with real world skills, rather than just “STEM” (science, technology, engineering and maths) graduates, to tackle future risks.

Those who want to work longer should be given the option to, McKeon argues. www.shutterstock.comFormer Treasurer Joe Hockey did not get a warm reception when he confirmed the retirement age would increase to 70 by 2035. But Monash University Chancellor Simon McKeon thinks its not such a bad thing. He argues if Australians are productive well into their later lives, why should they be stuck with a label of being incapable of working past a certain age? After all, older age is a meaningful part of many people’s lives. McKeon says business, government and not-for-profit all need to take a different view of the usefulness of older people. The changing nature of jobs, including a bigger role for technology, shouldn’t be an excuse not employ older workers.

Better office design is not just about shaping space around tasks we do. www.shutterstock.comA lot of Australian building codes don’t actually refer to the maximum number of people a building should fit. That’s what researcher Agustin Chevez found when he started to delve into how a better office might look. As the type of work we do changes, it becomes less about the tasks you do and more about your reactions to and relations with those you work with, Chevez says. So you need to be able to tell how many people should ideally fit in a space, but that’s not all. Offices also need to take into account what makes us human, and our varying personalities.

A TV cameraman shoots a Madame Tussauds Museum figure of US Olympic gold medal swimmer Michael Phelps at Banneker Pool in Washington, to coincide with the opening of the Rio Olympics on August 5. Gary Cameron/ReutersSince the first telecast of the Olympics in 1936 from Berlin, television has been a major part of the games. The first time broadcasters paid for the rights to show the Olympics was in 1960 for US$1.2 million (about US$10 million today). Research shows media companies lose money on the broadcasting rights. But it also seems there is no limit to what these companies will pay for them, says Hunter Fujak, who is completing a PhD looking at broadcasting rights at the University of Technology Sydney. Viewers are the currency of broadcasting rights and Fujak explains how the games are changing to reach the maximum audience available.

Japanese people are losing faith in Prime Minister Shinzo Abe's fiscal policies. FRANCK ROBICHON/AAPNew moves by the Bank of Japan (BoJ) to modestly extend its monetary policy appears to suggest the country is running out of measures to combat its sluggish economy. Earlier in 2016, the bank introduced negative interest rates and will continue its bond buying program. But Shino Takayama, research fellow in economics at the University of Queensland says the effect of monetary policies don’t last long in Japan, as the debt to GDP ratio remains high. The BoJ’s moves are supposed to work in tandem with the fiscal plan of Japan’s Prime Minister, Shinzo Abe (known as “Abenomics”). But the strategy hasn’t seemed to help so far and Takayama says its time for the government to address the root of the problems - income inequality and an ageing population hesitant to spend money.

original Australia is facing an income recession warns economist Janine Dixon from Victoria University. To fend it off we need to increase different types of productivity. Income per capita, one way to measure living standards, is 3% below the peak of 2012 and this is tied to slow growth in Australia’s economy. This not necessarily a big problem for richer nations like Australia but low income earners will still feel the pain of slower growth in their incomes, Dixon explains. One of the ways to improve productivity is not just via investment but infrastructure, things that facilitate a better workforce, like good roads and fast internet.

A typical street business in Jakarta, Indonesia. Michelle Robinson/Flickr, CC BY-NC-NDAs Indonesia’s middle class grows, so too does demand for services and products, such as education, health and processed food. Australia is well placed to supply these, however businesses must first tackle layers of regulation and bureaucracy. There are signs Australia and Indonesia may be moving towards a free trade agreement but this won’t address the problems not related to tariffs like specifications on labelling, marketing and competing with local firms. What many Australian investors and businesses don’t understand is that there isn’t much rule of law in Indonesia, says Matthew Busch, a PhD candidate at the University of Melbourne who has been studying the country’s political economy. So if there’s a problem, the courts can’t be relied on to fix it. However there are ways to avoid the pitfalls of doing business in Indonesia, as Busch explains.

Disputed: Taiping Island, in the South China Sea. Office of the President of TaiwanChina is on the defensive after an international court ruled it had no claim to historic rights to resources within its so called “nine-dash line” in the South China Sea. This decision is the latest in a long running dispute between the nations that border the South China Sea over ownership of the islands in the sea and maritime jurisdictions. Professor Clive Schofield, from the University of Wollongong, explains that the reason for the dispute is not only sovereignty but also economic, as the area provides much of the fish consumed in South East Asia. Although he is doubtful of the claims of the estimates of oil and gas in the South China Sea (due to lack of exploration). The area is also of great importance economically to Australia, due to the amount of resources and other trade shipped through the area. Positioned between China and the United States, Australia is in a tricky situation, as this latest ruling won’t resolve the ongoing tension in the area.

Barnaby Joyce of the Nationals and Senator Nick Xenophon and his team may have more influence post election. Alan Porritt/AAPProtectionism and nationalism may be the order of the day, judging by the recent federal election results. Picking up seats are Pauline Hanson from One Nation and Nick Xenophon and his team (NXT), but it’s also a strong result for the Nationals. If the Coalition forms government, the Nationals might ask for the trade portfolio and lend their support to national procurement (a focus on locally produced goods and services), also supported by the NXT, says Geoff Cockfield, professor of government and economics at the University of Southern Queensland. Senators such as Hanson will still have to form alliances to have any influence on certain business and economic policies. But not all the crossbenchers see eye to eye, Cockfield says. Additional music by Dave Depper

The uncertainty in financial markets from Brexit throws a spanner in the works of the election campaign in its final week. Dan Himbrechts/AAPThe last week of the long election campaign started with the leaders of both major parties reinforcing their ideas for Australia’s economy, in the face of the volatility created by the UK’s exit from the European Union. The international instability may be playing to the Coalition’s strengths, while also calling into question Labor’s plan to increase the budget deficit, explains Saul Eslake, economist and Vice-Chancellor’s Fellow at the University of Tasmania. Australia needs it’s AAA credit rating now more than ever. However the Coalition’s clamouring about the need to reduce the amount of tax as a percentage of GDP may not be as crucial to economic success as it makes out.

ASIC hopes it will lure fintech startups from Australia and Singapore to its innovation program. www.shutterstock.comThe Australian Securities and Investments Commission (ASIC) is working with its regulatory counterpart, the Monetary Authority of Singapore (MAS), to attract financial technology (fintech) startups by offering them a deal. ASIC and MAS will offer fintech startups from both countries a chance to be a part of a “sandbox.” This is a safe space where the regulators waive some of the usual harsh penalties for mistakes, in exchange for learning more about what regulations are needed to keep up with this fast developing area of the digital economy. This deal comes as questions are raised about the security of the using technology like the Blockchain in finance, which is yet to fall under international standards. The risks are clear but will ASIC’s collaboration bring rewards?

Reuters/Lucy NicholsonThe nightclub shooting in Orlando, Florida, which has killed 49 people and injured 53 others, has shocked the world. Details are still emerging about the shooter and his possible motivations but it has been described as both an act of hate, and terrorism. Michael Jetter is a political economist who is studying both the way the media reports - and feeds into - the actions and aims of terrorists, as well as the socio-economic environment which fosters such individuals. The emerging picture is not what we may think. A warning, this episode contains news reports of the shooting with graphic details. If you are upset and need to talk to someone, call Lifeline on 13 11 14 Additional music in the podcast from Kai Engel.

Australia PBO could be more politically active. Mick Tsikas/AAPAustralia’s Parliamentary Budget Office (PBO) has only been in operation since 2012, but been used to cost the policies of the federal government, the Opposition and minor parties alike in this election campaign. While the results are often fuel for the political fire, the PBO attempts to remain resolutely above the fray. But should it be aiming to be more politically active? Its Canadian equivalent has courted controversy by weighing in on debates such as the war in Afghanistan, while in the US, the Congressional Budget Office is routinely co-opted by politicians to help carry legislation. Usman Chohan, doctoral candidate at UNSW argues Australia’s PBO could have a larger voice.

The information in credit histories can affect a bank's decision to loan money. Stephanie Flack/AAPOne of Australia’s major credit reporting agencies, Veda Advantage, is under investigation amid allegations it misused personal financial information and in some cases provided incorrect information. This isn’t the first time a reporting agency has been scrutinised for doing the wrong thing, as Justin Malbon, Professor of Law at Monash University, explains. At the moment it’s up to consumers to check if their credit history information is correct. Malbon says credit reporting agencies have found a way to make money out of what is a consumer right under the Privacy Act. So is it time the whole credit reporting industry was put into government hands? That and more on this episode.

Westpac is one of the banks where ASIC alleges traders rigged the bank bill swap rate. Mick Tsikas/AAPAs more titbits of detail come to light in the rate rigging case made against Westpac and ANZ, Pat McConnell, Honorary Fellow at the Macquarie University Applied Finance Centre, unpacks the allegations. McConnell explains what how the bank bill swap rate, or BBSW, is left open for manipulation by traders, comments on the response from the banks and calls for more regulations like those in place overseas. The podcast also features some colourful comments from the traders in question.

Unemployment figures don't always tell the full story when it comes to the state of jobs in Australia. Joel Carrett/AAPBoth the government and opposition are campaigning hard on their abilities as economic managers and jobs and growth have been the Coalition’s election cry. But is creating jobs really all that simple and what kind are needed in the Australian economy? Principal Research Fellow and Deputy Director at the Melbourne Institute, Roger Wilkins explains what a healthy level of unemployment is in our economy. He also has some bad news for all those depending on election cash splashes to create jobs.