The Myth of Artificial Intelligence

In the present age of fascination with computer technology, there is an inordinate amount of attention being paid to the phenomenon of "artificial intelligence" - and the misinformed belief that computers are capable of thinking.   The faith that uninformed individuals place in computers' intelligence is in many ways similar to a belief in magic - and its truly amazing how many people who seem otherwise intelligent subscribe to this belief.

The irony is that there was a time, a few centuries ago (and in certain circles of developed nations even today) in which people strongly believed in the supernatural, and many very important decisions were made based on the belief in otherworldly forces that control anything that cannot be adequately explained.   Diseases were attributed to evil spirits in the blood and human behavior was guided by angels and demons whispering in our ears - and such nonsense was proffered and accepted with just as much earnestness and conviction as people believe in the inner workings of computer technology today.

Individuals who are knowledgeable about technology recognize that computers do not think - they merely execute programs, which is to say that they follow processes that implement the intelligence of the human being who wrote the programs.   In effect, they are mindlessly following their instructions, much in the way that a person might blindly follow orders.  Any intelligence a computer system seems to exhibit was instilled in it by the person (or persons) who wrote the instructions that the machine executes - and much in the way that a person who merely does as he is told is not regarded as a thinker or decision-maker, the machine does not think or make decisions because it is merely doing as it is programmed.

By its nature, any computer program is designed to solve a problem.  When a problem is narrowly defined (identify which number is largest or add two numbers together and report the sum) the program is not regarded as intelligent.     There may once have been a time when people regarded a simple calculator as a mathematical genius, but most people are now sophisticated enough to recognize it is dumbly performing specific functions and is remarkable only for the speed and precision with which it does so - which is valuable and a bit amazing, but nothing like "intelligence."

As the program gains complexity (subtract the smallest prime number in a set from the square root of the largest number in the set and report the difference as an absolute value) it becomes difficult for human beings replicate the process of logic that has been performed.   We appreciate that the computer is more accurate or faster at preforming a task than is a human being, but still do not consider it to be intelligent because we can perceive the very simple logic by which it operates even if we cannot match its speed or accuracy

However, when relationships among a large set of data are evaluated in more complicated ways (consider the return and risk of various investment options along with the resources and risk tolerance of an individual to provide him with an investment plan for retirement) if is difficult for human beings to conceptualize how the programming works - and they regard it as being intelligent simply because they do not understand how it does what it does.   It would require reading tens of thousands of lines of code in order to comprehend the way in which it evaluates input and arrives at a conclusion - but ultimately, the instructions are individually quite simple, though tedious and convoluted in aggregate.

So in the end, the belief in artificial intelligence reflects a failing in human intelligence: if we do not understand the way in which a computer is able to evaluate data and arrive at a solution, we proclaim it to be intelligent - much in the same way that a person in the Medieval era would have proclaimed to to be the result of magic or the will of the gods.   The two are essentially no different.

It also doesn't help that the definition of "intelligent" is problematic.  Cognitive psychologists have argued for decades and have no firm agreement of what constitutes intelligence in a human being, and some of the definitions are loose enough that a computer (or even a calculator) might satisfy the criteria.   And the best that has been offered for assessing computer intelligence is Alan Turing's principle of AI, which loosely suggests that a computer can be considered intelligent if it can trick a person into thinking they are interacting with another human being- a gut-check as to whether seems to have a quality we are unable to clearly define.

A Turing test measures the perception of the person who is making the assessment as well as the predictive ability of of the person who programmed the system - and as such the machine is merely a channel.  We do not think a telephone or a typewriter is intelligent because it has said something clever or profound, but recognize that it is a (dumb) device by which we are receiving the message created by a human being - yet we fail to apply the same logic to realize that a computer or digital device is merely a delivery mechanism for a message created by its human programmers.   And just as a typewriter cannot deliver a message unless a human being works the keys, so does a computer fail to deliver a response unless a human being has provided instructions.

If we consider "intelligence" to be the ability to follow instructions to the letter, machines may seem to match the definition so long as the user limits himself to acting within certain parameters - that is to say that if you ask a machine that is programmed to calculate income taxes a question about income taxes, it will provide an answer that seems intelligent.  Ask it a question about gardening, and it will fail to provide any response or even an intelligible excuse for lacking that knowledge, but spit out an error message that vaguely indicates that it doesn't understand the question.  

The irony of this is that many would regard such a user as stupid to preserve the reputation of the machine, which cannot think outside of its narrow programming.   When we begin to believe in the power of a physical artifact so strongly that we make excuses, exceptions, and find some other source to carry the blame for its failings, we have clearly departed from the realm of intelligence and have returned once again to religion - and as is all too evident in the present day, the proponents of dogma will stubbornly maintain a failed argument in spite of all evidence to the contrary.

Payday Price Discrimination

An accidental observation has got me thinking - or more aptly, it's got me nervous about what others might be thinking.   Specifically, a multivariate test of a design treatment that gave greater prominence to pricing and payment options had a drastically different conversion ratio during one week than the next.

Specifically, one week there was a large take-rate difference in the design option that made a favorable payment option more prominent, and the following week the take-rate difference was significantly less.   Someone instantly recognized that the second week was a pay week for people who are paid bimonthly, on the first and fifteenth, and reasoned that people are less attentive to cost or financing options when they are flush with cash.

It wasn't long before someone suggested that people might even be willing to pay more for a product after a recent payday than later in the month.   It was one of those things that's said with the kind of smile that suggests "if anyone questions the ethics of this I will play it off as being just a joke, but if nobody glares at me then let's give it serious consideration."  Fortunately, it was set aside, but I have the gnawing sense a seed has been planted.

Ethical Quagmire

There is likely some truth to the matter: that many people fail to budget personal expenses and spend more liberally when they have more money in their bank account.  And as such, it would likely be profitable to increase prices after paydays (as many companies issue paychecks on the first and fifteenth of the month, or every two weeks, it follows a fairly predictable pattern).  Especially in smaller towns with a few major employers who are all on the same pay schedule, local merchants are likely able to predict when they will get a rush of customers whose temporary wealth has put them in a spending mood.

But at the same time, I have the sense that the practice is ethically dodgy.   Payday price discrimination has nothing to do with the value of goods or the cost of supplying them or even the value that customers place on the benefits of ownership, but merely predicting when customers will be less mindful of their budget so that a merchant can take advantage of a moment in which they are cognitively vulnerable to making reckless spending decisions.  It seems to me in the nature of taking advantage of a customer who is drunk or mentally impaired, in that it has nothing to do with the value of the benefits being provided, merely exploiting a moment of inattentiveness for money.

It's particularly disturbing to me in the digital age because it is now much easier to raise or lower prices in an instant without any evidence of the price having been different just days or moments ago.   In the pre-digital world, items carried price tags and sales promotions were done with ink on paper, meaning it would represent considerable cost to change prices (to re-label merchandise in a store or print up a price list) such that there would be some hard evidence that something sketchy was done.   If products have no physical labels and prices are disclosed on a website, they can be changed with a click of the mouse, and unless customers undertake the effort to record price information, they will be unaware of the change or assume it's their own memory that is at fault for having imagined the price was lower yesterday than it is today.

The ability to instantly change prices is compounded by the ability to profile users as individuals, to track their online behavior and gather information from various sources in order to detect a single individual's price sensitivity and predict the moments in which their judgment may be impaired, such that a price may be instantly changed for one specific user, rather than all customers at once, such that the price that is offered to a specific shopper at a specific moment can be based on a very accurate prediction of their vulnerabilities.   To some in the marketing industry, that is highly interesting - but to the consumer, it is highly disturbing.

It's Already Being Done

There is the argument that such things are already being done - again facilitated by technology that reads demand of the moment and adjusts prices accordingly.  A CX practitioner who works for a rental car company openly admitted that his firm flexes the pricing of rental cars according to inbound flights - such that prices are higher at times when flights are arriving and travelers are likely to be in desperate need (anyone who failed to reserve a rental in advance, or whose plans have changed at the last minute, is going to get seriously gouged).  And I have personally experienced fluctuations in airline ticket prices - checking airfares during a break at work, returning home to purchase the ticket at a higher price, then checking the price the next morning to find the price had gone back down.

However, I don't have the sense that these vendors are adjusting price according to my failure to consider value, but merely adjusting to a perceived demand pattern without considering the reason for the pattern itself.   That is, the system that decides when to raise or lower prices is based on the demand of the moment but does not consider what is driving that demand.   That's pretty much how the stock market and commodities exchanges have always done business.   And it's often times done in slow motion - consider that a hotel at the beach does not generally change its prices by the moment, but it is certainly known (and accepted) that prices are higher in seasons when there is elevated demand.

The difference here is that reacting to demand in the market is different to exploiting moments of weakness in individual consumers.   To raise the prices of all automobiles for all consumers during the early months of the year because people often go car-shopping with their tax refund seems like a reasonable business practice - but to raise the price for a specific customer because she is female, uneducated, young, recently divorced, and just got paid last week seems highly questionable.

However, a practice is not to be deemed ethical simply because it's already being done or because people seem indifferent rather than outraged by it.   Common practice and emotional response are poor metrics for ethics.   Likewise, the covert nature of an action does not necessarily mean it is unethical, though such is often inferred.   If anything, the fact that sellers are more knowledgeable should translate into an ethical imperative for them to be more circumspect about their behavior, because they cannot claim ignorance.

***

Even having meditated on the matter, I am still of two minds about the ethics of payday price discrimination.  It seems to me a greasy practice, something that customers would strongly object to were they aware of it - and perhaps that is the more important consideration for customer experience.

Goods, Services, and Products

There are few things quite as annoying as being interrupted in the course of conversation by a persnickety individual, particularly when they interrupt a sentence to point out a "fact" that is completely wrong.   In particular, I abandoned a conversation with a tedious individual who felt compelled to interject "or services" whenever anyone mentioned the word "products" - as exasperating as the experience was, it has caused me to reflect on the terms and reconsider some basic definitions.

The main problem with this individual, aside of making a nuisance of himself, was that his notion of "products or services" is entirely wrong.  "Goods or services" is the distinction between whether a product is a physical object or an action performed by a provider, and both goods and services are comprised within the concept of "products."  

It's a matter of vocabulary, really, and culture does seem to have shifted in the past few decades to be tolerant (and even supportive) of people who are use the wrong words rather than insisting that they learn to speak their own language properly ... but reflecting on this distinction a bit further, the entire notion of classifying a product as a good or a service seems to misdirect attention from the value of products.

Goods

A "good" is a physical artifact like a coat or a car or a can of beans.   The problem is that focusing on the physical object is a superficial consideration of the value that goods provide to their consumers.  With few exceptions, the purpose of buying a coat is not to possess a coat, but to be protected from the cold or to be fashionable - which is to say that ownership of a good is a means to satisfy survival and social needs.  Seen in that way, a good is merely a physical artifact whose importance derives from the benefit derived from using it.

While this seems obvious, it is very often forgotten by producers who obsess over the qualities and features of the goods they produce.  They compare their products to other products, ignoring the needs of consumers, and provide features and functions that increase the cost but do not offer benefits related to consumers needs.   In reality, the physical properties of the product are far less important then their ability to serve needs, which savvy consumers recognize instantly and unintelligent ones learn eventually.

There is some validity to the notion that customers desire seemingly qualities in the products they purchase that serve no functional purpose - some consumers do obsess over the qualities and features of the goods they own.  These people are nerds, plain and simple.  But even the desire for nerd superiority is generally not derived from the self-satisfaction of product ownership, but the social need to feel superior to anyone who does not own a good that has the same qualities and features, which is a defect of consumerism and likely of psychology.

Services

With services, the connection between the product and the benefit is more closely connected, such that there is a decreased tendency to become distracted by its intrinsic qualities.   A barber is paid to cut hair because the customer wishes to be fashionable and a doctor is paid to treat a condition because the customer wishes to be healthy, such that the need a service addresses is fairly obvious.   There is in most instances little argument that the customer is paying someone to go through the motions for their amusement (though hiring a performing artist is an obvious instance in which that is the entire point).

This is not always the case, especially when considering a luxury service.  There are many aspects of a beauty salon that cause the experience of getting a haircut to render pleasure to the customer, aside of the final result.  The entire leisure industry is built around providing services that are intrinsically pleasant to the consumer, even if there is no final result except a brief lingering sense of relaxation and pleasant memories.  And in those instances there is the tendency to become distracted by the qualities of the service provided.

But in an economic sense, the line between good and service becomes blurred.   When a person purchases a chair, they are paying for the service of the carpenter to build it (and the service of a woodsman to harvest the wood, a metal-worker to make the nails, a miner to harvest the ore, etc.)   On the income statement of virtually every business, the cost of labor far exceeds the cost of materials - so it could rightly be suggested that any "good" we purchase is in fact a bundle of services that are performed in a remote location and previous time, the value of which are evident in a physical artifact, and the cost of the performance of action is greater than that of the physical materials on which services were performed.

Products

The concept of a "product" relates to benefits rendered by whatever is provided, be it a good or a service.    When the ultimate end is considered, the means by which a service is rendered seem entirely incidental: a customer who has a need to be served is largely indifferent to the mechanisms so long as the need is satisfied.

That is to say that a customer looking to satisfy the need of hunger can address it by purchasing groceries (goods) or visiting a restaurant (service), or a person with a wound can address his need by purchasing a bandage (good) or visiting a clinic (service).   The distinction between good or service pertains to the means by which a need is satisfied - but the satisfaction of the need relates to a product that could be either good or service.

Thus considered, producers of products would be well advised to consider the need for which their product is purchased rather than the qualities and features of the product itself, which are largely incidental and may in some instances be completely irrelevant to the customer's motivation.

This also speaks to the need to broaden the horizons of the competitive arena, and to recognize that the producers of goods must compete with the producers of services, and vice versa, because their products are interchangeable for a customer in search of a solution to a need.

The Luxury Strategy

I recently read Kapferer and Bastien's book on Luxury Strategy, which started off dismally enough: a couple of snotty Europeans insisting that no-one born outside of France, Italy, or England quite grasps the concept of luxury accurately, particularly Americans.   A couple of chapters into the book, I found myself in complete agreement with them.

Their definition of "true" luxury pointedly excludes providers who are merely better than average or those which have a level of quality that is not strictly necessary to accomplish the basic function.   Luxury is a very small and highly exclusive group of brands, the superlative items that are affordable only to the top one percent (or even less) of the population - and in that regard there is definitely a distinct difference, though the point is largely moot for anyone who works outside of the fifty or so firms worldwide that produce goods in this category.

What is of interest to the rest of us, who work in the lesser strata of the hierarchy of consumer products, is that the notion of quality on any level (except the rock-bottom of the economy goods market) derives from some of the basic principles that define the luxury market, but executes them far less effectively.   And more importantly, the factors that lead to a impression of quality cannot be sustainably faked, but must derive from practices that genuinely follow at least some of the laws of luxury.

In particular:, consider three of the qualities of luxury borrowed by some premium products:

• A premium product appeals to hedonism rather than functionality, and the focus must be on the pleasure that the consumer derives from the product rather than the specifications and features of the product itself.
• A premium product is merely an artifact in a service experience that is focused on the needs and desires of the customer, such that if those needs and desires are not addressed, the artifact is not regarded as premium
• A premium product conveys a benefit related to the self-esteem of the owner, such that ownership and use of the product is regarded as a kind of privilege to which they are entitled 

There's a great deal more to be said in regards to luxury, as it was rather a lengthy book, but these three examples serve to explain why even a premium product is capable of commanding a price that exceeds the value of the mere functional benefits delivered, and implies the very reason that some brands are unable to sustain the price premium they hope by attempting to instill a sense "luxury" into a product without changing any other of their practices.

Ultimately, this means that there are very few brands that fall into the luxury category, though many claim to be.  But the pretenders are not luxury, are not genuinely attempting to become luxury, and do not have a sufficient understanding of what "luxury" truly is ... but a luxury strategy, like a luxury product, is not for everyone.

In all, it's given me a great deal to meditate upon, and much to reconsider about the notion of quality as I previously understood it.

Eating Cheeseburgers with Toothpicks

I heard a clever analogy about the misuse of the mobile platform: that performing a complex task on mobile is "like eating a cheeseburger with a toothpick."   You can do it, but it will be sloppy and tedious, not to mention disgusting for anyone else to watch.  In essence, it's like being a sideshow freak in that it's the uncanny "talent" to do something that seems impractical and even a bit nonsensical.  It's mildly interesting to see someone else do it, but it's not something you'd care to try at home, and it certainly isn't going to become "the new way" that everyone is going to want follow.

That makes perfect sense to me, but many in the CX profession (or business in general) seem inclined to adopt the opposite perspective.  They are so impressed with mobile that they think it's going to replace the desktop computer as the primary means of accessing the Internet or any digital services in the future - and that we should in effect stop designing silverware because in the near future everyone will be eating every meal with toothpicks.

That is not to say that we should disregard the value of toothpicks, either, because they are the right tool for some jobs, such as consuming an hors d'oeuvre at a cocktail party.   I do think the metaphor can be handily extended that far at least - in that people at a party don't want to break off from their groups to sit down and eat a plate of food with a knife and fork, but just want a quick bite while doing something else ... for which a toothpick is the perfect delivery device.

This corresponds well to what some of my colleagues in customer experience are saying about their own experiments in mobile: they find that customers are using it to reference quick "bites" of information, and that when they place more complex interactions of the smartphone platform, they get very little use and often an increase in the voice channel to undo the damage.   They still feel the need to facilitate these transactions in mobile, but only to the degree that the revenue contributed by the fringe element of mobile enthusiasts who will suffer through an awkward interaction for the sake of using their favorite toy is sufficient to cover the cost of development.

The adoption rate of mobile for all but the most basic transactions is a lot lower than the enthusiasts like to admit, and companies who adhere to the "mobile first" approach are subsidizing the strange behavior of a small segment with profit taken from the majority of customers who do not see fit to undergo the tedium of using an inconvenient platform just because they can.   From a big picture perspective, that's just bad business and makes no financial sense.

In all, there's likely a sensible position to take between the two extremes, and financial results are likely the best way to gauge whether it is worthwhile to accommodate mobile transactions - taking into account the revenue earned in the mobile channel, the cost of accommodating the mobile channel, and the degree to which the latter is merely cannibalizing the former.

Granted, there's also an argument to be made that providing a mobile option is requisite to customer experience - but that is also a vague claim that is not backed by any reliable proof.   If you can demonstrate that customers who use the mobile channel rather than (or in addition to) the Web contribute more revenue or remain loyal to the provider for a longer period of time for a given transaction, rather than in a general sense, then the transaction is certainly worth putting on the mobile platform as well - provided, again, that the marginal increase in revenue covers the additional expense.

I don't have the sense that many people are diligent in their approach to mobile, and are so overcome with excitement about the potential of this new medium that they are leaping into with with wild abandon and the assumption that anything you shovel onto the platform will be a success (someday).   In time, recklessness will come home to roost when they recognize that they have made a very costly and unwise decision.