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Episode 4: To F8 and back again

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All The Rod & Gary show episodes

Hosted by Rod Drury and Gary Turner

This month Rod and Gary discuss the most memorable keynotes out of Facebook’s recent F8 conference. Highlights include reimagined uses for the humble camera, VR and AR, and sensors that use skin for sound – allowing you to hear through your skin. Incredible takeaways that show Facebook is a powerhouse of innovation. And you know Rod and Gary have some strong opinions on that!

The guys also dive into the latest scandal at Uber, and discuss what the rapid move to digitization means for small business – including the massive opportunity it creates for accountants. And what are Rod’s thoughts on Apple after accidentally breaking two iPhone’s in one week? You’ll have to tune in to find out.

Episode transcript

Hosts:

Rod Drury [RD]

Gary Turner [GT]

GT: Hi, Rod. It's been a while. You were down at F8 last week. What did you find out?

RD: Yeah. I had a great time in San Jose. I threw up my video after I finished. There's a few things I sort of talked about the responsibility that Facebook has now for building community and looking for the common ground in people. You can tell that Mark Zuckerberg was feeling the responsibility for some of the political stuff that I think Facebook has contributed too. This confirmation bias where you keep seeing your own stories.

He was really clear on, we need to start finding the common ground for people to work with. What really rammed home for me, the common ground is business. It's lots of small businesses working all over the world together. The common ground is trade and that we have to do it if we want to create jobs. That was pretty interesting.

From a tech point of view, the first day was a lot about I think the threat that Facebook feels about ... what's it called? Snapchat. There was a lot of commentary around Facebook had just kind of ripped off all of Snapchat strategy.

I spent a bit of time with some pretty senior Facebook guys who are in the advertising part of the business, which isn't something I usually have a lot of experience with. But it was really interesting. If you look at it from a technology strategy point of view what Facebook had done is rather than having a closed community, which kind of Snap has, they've really opened up their developer community to make it really easy for people to add all sorts of features and advertising. Get brands into the camera that Facebook is building.

It's really super interesting. They talk about a camera as this new thing, I always thought a camera was just a camera. Now there's a camera app on the phone. What they see is the camera is this portal between individuals and the reality that they want to create and the virtual reality or augmented reality they want to be in.

So, their approach was to open up a whole lot of API's, get all the Facebook developers in there and become ... really get that community to take on Snap. So, there's quite a commentary following that Snap should be looking to sell itself to Disney or think about some other options. It's got a $30 billion evaluation or something like that. Facebook is going right at it.

The other really big thing, the day when keynote seemed to be all about Snap and a camera. Then day two keynote was a whole lot of future vision stuff, which could be five to ten years out. They talked about the pathway to getting to this augmented reality vision of having some glasses and everything working on some contact lenses.

I went through all the technologies that need to be invented. They talked about how they get wifi around cities or put board bank connectivity around cities and that led to flying planes. They had this amazing super like jet that was half the weight of a Toyota Prius but had the wingspan of Boeing 737, and they could fly.

Then they talked ... this one was the one that they got most sort of coverage about was building sort of sensors using skin for sound. They talked about some really big bits. I think, my take away, from the day two keynote is sort of Facebook saying, "Look, we're just like Google. We're making so much money that we can invest in some of this big long-term things." It was quite inspirational seeing those.

But I think the audience wasn't the audience that was sitting in the room. The audience was really Facebook saying, "Hey, look, we are one of those big tier one technology companies as well." So, it was a very worthwhile few days.

GT: I wonder, I might be a big cynical here. But I wonder if ... I get the whole AR, augmented reality. Whether it's Snap or Facebook is going to copy it. At the surface level, when it's just this additional capability that you're giving your camera phone and it's cool, and it's fun, and it's social, and you can share photos with your friends.

I actually wonder if the byproduct of that is that Facebook is going to see more photographs because you're going to be sharing many more photographs than you normally would. And Facebook, if they're smart enough about it, will be able to scrape a lot more information from those photos. They already do things like facial recognition and the photos that you take with your smartphones these days have GPS and have lots of other metadata. Like time of day, GPS, they can do facial recognition to work out where you are. They could possibly look for branding in the background. What your favorite restaurants are.

I wonder if there's kind of like a subplot here that absolutely is great fun taking all these cool photos and augmented reality. There is definite value there, whether that's Google glass or some other kind of information delivery medium. I wonder if this is just getting even more granular information about your preferences so that they can just learn more about you. So, about even more kind of appropriate advertising. I wonder if there's a subplot here. But I may be reading too much cream fiction in my diet.

But the point is well made. Who would have thought that ... And what we're even getting into, imaging and machine learning. Just taking a photograph of receipts and invoices and uploading them to your accounting tool. Who would have thought a camera would have been an essential piece of accounting technology 20 years ago? Nevermind where it goes next.

RD: Absolutely. That's some of the things that's so exciting. All the AI and machine learning that they're putting into the camera now. They can basically take a traditional flat photo and map out the three dimensional services. Even sort of photos taken from, essentially dumb cameras, they can then impost and fill a whole lot of things around the objects that are in that photo. The three dimensional services.

The reason they want to solve that as well is that allows them to put brands into the photos. Which is, of course, a major revenue stream for them. There's a clear thing, there's a clear reason that they're doing all of this.

GT: What else is interesting? What's caught your eye in the last couple of months?

RD: Just in the last day, the Uber scandal, like Uber scandal number 365 that Uber continues to track users after they delete the Uber app. There's been howls of outrage around the internet about it. Just to balance that out though, it's interesting because people are saying, "Well, how can you do that?"

What they seem to have done is they're tracking, they're creating some unique identifier for people on their phone. Then they must link that back to that person visiting websites and they can continue to track that person how they use things through the web. This is actually a technique that a lot of the major advertising companies do as well. There was a few articles that came out later in the day, explaining that this was quite normal.

But it was super interesting that it looked like Travis got summoned into the headmaster's office had Tim Cook there at Apple for a please explain. And some fascinating articles in the New York Times today around character and values of Uber. And their founder, particularly, which were a pretty compelling reading.

GT: I've stopped using Uber. I'm usually for a couple of months now. I think there's a number of, unfortunate for Uber, press stories in the last couple months just about the culture and issues or in diversity. Which is always difficult to kind of reflect on external stories. And you never get the full detail. But there seems to be enough there that points to there being, certainly, some kind of questionable philosophical values at Uber when it comes to diversity and treating their employees well.

It's not like I say direct, that's it, I'm not using Uber. I think just think subconsciously, that there's been enough around that service that just makes me a little uncomfortable. Getting them any of my business at the moment, at least until they clean their act up.

I have to say that's been helped by the fact that, actually, in London it's not easy pretty much to get a cab with credit card payment terminals in them. If anything else, wherever Uber goes from here, I wonder if their legacy at least in London has been to move the black cab industry into the modern age.

I'll happily use a black cab if I can tap my credit card and pay that way instead of paying with cash. There's a couple of other things that it would be great if it then emailed me a copy of the receipt and some of the other polish that you get with Uber. But I think Uber is in a really interesting phase where they're going to have to convince people like me that they are kind of an outstanding company and they respect values of equality and diversity and are a great employer.

I think one of the big advantages they had, in London at least, is gone. And that taxi cabs now take credit cards. So, it'd be interesting to see where that goes. Then see if they have a new CEO at some point in the next few months.

RD: It is all sort of pointing to this sort of perfect storm of stuff that's happening in the UK isn't it? With all the innovation that we're seeing with the FinTech providers. Some of them who started off as being really working on a debit card model and finally becoming banks, PSD2, making text digital, auto enrollment. All those sort of things. It does feel like there's a perfect storm, which what you've just described is a key part of.

GT: On the subject of London, a lot of stuff happening in the UK. I think we've seen anything like the scale of unprecedented change in legislation and disruption. So, we have Brexit obviously, which is huge. We're right in the middle of the kind of political ramifications of that. That's now created the need for a general election in the UK, in June, which again is just like huge disruption. And kind of huge debate.

We have making tax digital. So, the UK's tax authority, HMRC, Her Majesty's Revenue and Customs is effectively mandating that all tax is going to become digital. Not just digital but you go into a web browser and upload it but literally digital at the point of capture, collation, and filing. Which if you're one of the UK's three and a half million self-employed, sole proprietor, or partnership businesses and you're not using digital tools or software in any kind of meaningful way to run your business today is a huge thing you have to accept in the next two years.

It's not just the small guys, it's everything. So, VAT's going to get overhaul and become completely digital, corporation tax, personal self-assessment tax. Huge digitization of the tax system, in a way that I don't think any other, certainly any other kind of Western developed economy has gone for it the way that the government and the UK are going for it at the moment.

So, we have that digital. That has implications not just for the businesses but obviously for the accounting profession. All small businesses that employ people in the UK have to have a pension scheme in the next 18 months. Again, there's like a million of them. Having to roll out new pension schemes.

It's just all coming together. The next three years in the UK combined with the boom we've seen and FinTech activity in London. So, London obviously huge financial kind of crucible of businesses and of capital and of talent. There's now kind of being mixed with this kind of cocktail of technology since we started government support for silicon roundabout back in 2011. Huge boom in technology.

Startups in London, they've all started hanging out in the same coffee shops as all the bankers. We have this knew FinTech boom. Where I think it's safe to say that London now represents, early days yet, but this kind of capital over the planet for FinTech. We see lots of new disruption in terms of challenger banks. Monzo, Starling, Tied, Loot, Coconut, Atom Bank, just to name a few. All completely coming from nowhere. Completely digital banks, offering a completely differentiated solution to traditional banking.

Then you've got the big banks, the traditional kind of top five banks in the UK. So, RBS, Barclays, Lloyds, HSBC, all how do you deal with that. It's all going off in the UK in the next couple of years. It's just fascinating have a front row seat in that and being involved in lots of really interesting conversations with all the stakeholders and protagonists.

I think the UK will be the kind of reference model for how you digitize banking and digitize engagement with government. I think it's going to be incredible year ahead.

RD: That kind of ties into some of what we're doing on this side of the planet. In Australia over the last year or so, they've created electronic invoicing as a standard. But it's super interesting, and I chicken out of actually doing anything making it mandatory.

Some of the work we've been doing with our New Zealand government is to pack up all of the work the Australian government did in invoicing. Make sure the standard works for here but we're progressing with government to try to get it mandatory that all government departments both send and receive electronic invoices over the next two years.

With the market share we have here and with government getting on board and the work we're doing with some of the large corporates. We should be out to really get the automation connection of transactions from large to small businesses. Between small businesses, we should be able to make some really positive steps here.

It's interesting, the business case looks great. The work that you guys are doing around the UK, around banks making themselves digital, we're also trying to get other parts of the economy sending all of their trading documents in the digital format as well.

It's really interesting how things are happening on both sides of the planet but we're trying to pull those things together.

GT: There's a lot of heat. Sorry, obviously, anything that's new and technological in terms of innovations or new ways of working. But not everybody is a fan of, particularly making tax digital was a huge amount of heat and resistance from the accounting profession.

The business community hasn't really heard of being taxed digital yet because it's still being built. The people that are closest to our practicing accountants who obviously are representing those small business clients today when it comes to their tax. That's hugely controversial.

Many accountants are up in arms about the fact that government are even considering doing this, nevermind the time frames on which they're basing it. So like, two years to my great three and a half, four million SMB's to digital tax filing. There's massive, massive undertaking.

There's definitely some merit in the voice and the concern that's been raised around this. Just in terms of the sheer ambition of it. But, equally, I think that if you're an accountant and you apply traditional kind of technological thinking to the problem. Then you are going to be concerned about it because one of the areas of friction will be how do we get what is largely kind of analog paper based bookkeeping world and get it digitized. And do that for all of my clients.

I could have 10 clients, I could have 100 clients, I could have 5,000 clients. Many of them are not using digital tools today. I think part of the challenge that is clearly there's a huge job of work to be done to my great knowings of people across the digital systems. But, actually, the filing to the government agency, the creation of tools to enable you to do that is the easy part.

The difficult part is actually changing the back end processes that lead up to filing. I think there's a really interesting opportunity for the job of bookkeeping to become more digital. Not just to facilitate the filing to the government tax, API's. But actually to drive efficiency into bookkeeping as well.

Now, I'm going to say that because I'm a technologist and if there's an accountant listening into this they might think, well obviously you have a kind of vested interest there. But I think that this is an opportunity in the next five years to remodel and rethink what it means to how you run a business. Machine learning should be capable of doing a lot more of that stuff. It shouldn't be a case of taking photos of invoices and receipts.

You made a great point the other day that if you're trading with somebody electronically, it's most likely the case that it's top down. So invoicing or electronic data interchange, EDI rails are generally being topped down. So, if you want to deal with a large retailer then you have to deal with them digitally on their terms and on their platforms. Very literal, lateral trade between people further down this supply chain as digital and electronic.

You made a great point the other day, in a conversation. It's just unbelievable that if you're trading with somebody and they're running ACP or Oracle or some large enterprise financial management system. And they're created a transaction kind of purchase order.

They're effectively taking that structured data, flattening it down, to effectively a photograph or a purchase order. Sending it to somebody, how then has to kind of take that photograph of a document and then kind of transpose that back into their own digital systems. Whether that's top down or lateral, that just doesn't seem to make much sense in this day and age.

While I think there is a lot of appropriate kind of concern around just the scale and the speed at which government is moving to digital. You have to think in 10 years, if we're still doing that, then we've missed a trick. I think it's going to be challenging but also really exciting in terms of rethinking some of those old models that have been around for like 40 years.

RD: Yeah. This gets right to this discussion that's happening around AI and machine learning and the accounting industry at the moment. We're starting to see a few articles saying accountants are going to go out of business and that sort of stuff. Which we just don't think it's true at all.

When we look at it, you look back, desktop software has been around for 25 years. And only ever got to 10% - 15% market share in the markets that it's been in. Then you look at Cloud accounting software, in New Zealand now are about 1/3 of all businesses. So maybe sort of 50%, you could probably get to 50% of a total market who can use Cloud software. But there's still a lot of people where even well designed Cloud software is still too hard.

What we're really fascinated in is this idea of if you have the digital preservation of documents, so that purchase order, the invoice that was sent or received. If the digital information is preserved or if we can, you know, use on of our partners like ReceiptBank or something like that and get the digital information reinstated. Then what we're seeing is that accounting software and the accounting problem we have a massive amount of data and a relatively tight domain structure means that we're getting an incredibly high rate on machine learning and AI.

So, what we see will happen over the next wee while is that business won't have to code their transactions, they just need to get their digital information preserved and thrown at the machine. What we're doing, what we think, that's the secret to getting to 100% of the market. Using the sort of software, they don't have to do accounting at all. All they need to do is get their digital documents inside these new engines.

What that does is it preserves the role of the accountant and bookkeeper. It's crazy that a landscape gardener is sort of good out that and making patio fences and doing those things. But then we ask them to code their transactions, they've never really been formally trained. If we can get a bit of head an individual person on those codings. Then an accountant or bookkeeper can check what's going on, can recode any transactions that need to be.

I think we're creating this place where the market gets a whole lot bigger but the role of an accountant or bookkeeper is preserved and enhanced because they really understand those codings.

GT: Yeah. Fascinating. I think I'll keep a close eye on how this develops and we'll check on a later podcast on some of the things that pop up. Listen, we're going to run out of time shortly but before we finish up. I hear that you'd managed to smash two iPhones.

RD: Yeah. I hadn't cracked a screen for six or seven years. And I've cracked two in three days. Sorry, two in the last couple of weeks. And spent a bit of time, frantically, yesterday trying to work out how the warranty I paid for last time was worked. Just fascinating, this whole industry.

First of all, it's kind of crazy that a consumer device can complete shatter like that. It's so fragile. Both of them have been just as I'm jumping out of a car and the phone sort of slipped out of my grip. The screens have been completely shattered. Interesting to see what they do with the iPhone 8.

But the cost to replace these phones is kind of crazy. Such a fragile device. New Zealand dollars, you're talking about $1,600 for a phone. When I went back and looked at my invoice because when I changed my last one they said, "Do you want to get the insurance in case you do accidental breakage?" $160 sort of base fee to get a three year warranty. Then on top of that, you couldn't have this on its own, there was another $120 for the accidental damage part of it. So, on a $1,600 phone I'd spent $260 with insurance.

Then I thought yesterday, okay, I'll just go in and see if I can change my phone. I pay the money and it goes like a $75 access to change my phone over. They said, "No, I'm sorry sir. You have to leave your phone here and in five days we might get a replacement back." Which, of course, for me would be impossible.

For the first time I'm really seeing Apple gear breaking. Also my touch bar on my 13 inch broke while I was traveling. I had to replace that as well. It's quite frustrating.

You stay dependent on all this technology now, just doesn't seem to be as good as what it was a few years ago.

GT: It is more sophisticated, I guess, there's more to break. I remember kind of cars, when I was growing up as a kid, there was very little that could actually go wrong with them because they were so basic and simple. But over many million lines of code, there in a typical modern car. Nevermind all of the systems and climate control and satin ave and everything else. There's more to break, I guess.

I guess it's inevitable that a device as sophisticated as a mac or a modern smartphone, I guess there's more to break. But doesn't make it any easier.

RD: Yeah. At least everything is backed up on the cloud and within a few hours you're up and running on a completely different device. So, that's all pretty exciting. Hey, just final bit of news, we had lots of compliments from our hitting a million customer milestone.

So, well done to our team in the UK and all over the world for the success that you guys have had. And it's been fascinating how things change. That was a really big milestone for us. You think about all the business software companies that exist, most of them would measure their customers in 10's of thousands and certainly was a big moment for us to hit that milestone. Thinking about a million subscribers, millions of people now depend on using our software.

Thanks everyone for your kind words. It's been a huge thing for us. For us that were around at the start, I remember in our first year, which when we did our IPO our goal was to get to 1,200 customers and we were excited when we got one per day. Then it was three per day. The last few days, sort of hitting up to end of year close, it was thousands.

So, very exciting time. And thanks everybody for your support for that.

GT: Yeah. A huge milestone. I think, as you said at the beginning, we're not quite at Facebook scale with millions of customers on the platform but I think the community that I mentioned is just an incredible part. It's a really enjoyable part of certainly my involvement working in the community. Working with the thousands of thousands of SMB's and accountants and all the people in the ecosystem.

I can't wait until we get to two million and then five millions and see where that goes. And what that community will do. Listen, let's knock out on the head. We should try not to keep it three months before we do the next one.

RD: Fantastic. Thanks Gary, thanks everybody. See, ya.

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