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Podcast: How Mobile Apps Drive Our Economy — and May Determine What Coffee You Drink. Morgan Reed, President, ACT/The App Association

Morgan Reed, President, ACT/The App Association

This conversation is sponsored by StartApp, an insights-driven mobile technology company. StartApp enables its partners to deliver the world’s most fulfilling mobile experiences for their users. Learn more here.

How important – how big and growing – is the App Economy? It’s not just the economic value, estimated at nearly $150B a year. The App Economy has added some 110K software jobs to the U.S. workforce, with 83 percent of those located outside of Silicon Valley.

But how will this growth continue? How can the app economy extend beyond social media and games? How will it balance a reliance on Big and personal data with increasing calls to protect individual privacy? And what about the promise of artificial intelligence and the peril of cyber security?

Morgan Reed is President of ACT/The App Association, which represents more than 5,000 app companies and information technology firms in the mobile economy. The organization advocates for an environment that inspires and rewards innovation while providing resources to help its members leverage their intellectual assets to raise capital, create jobs, and continue innovating

Morgan – and the App Association – sit at the intersection of just about everything interesting that’s happening in the tech and business world today – mobile, cloud, data… and as Morgan points out, given new technologies like AI and the Internet of Things, it’s all only going to speed up exponentially from here.

Here is a transcript of our conversation:

Chris Riback: Let’s start at the very top. You are president of ACT, The App Association. What is that?

Morgan Reed: Well it’s a trade association that represents the more than 5,000 companies out there that are doing all the amazing mobile apps that customers use across the world. Our members do the apps that run behind the business and the enterprise all the way up to some of the games that many of your listeners love to play when they’re not doing their work.

In general, it’s a trade association of software developers. One of the things that we found most fascinating about the move to apps, is how many of these people had a career or started their work behind the scenes in the enterprise layer of software. Now, really it’s just changing the perspective. Are you writing for an internal product? Or are you writing for a consumer. Now we have apps.

Chris Riback: You just hit on the key, what I think, and obviously, you’ll correct me if I’m wrong, but what I think is just a key driver of the growth of apps. But also, I’m imagining one of the challenges for you, so maybe you can talk about both of them. What I’m really getting at is this is an industry, an economy, a series of businesses where an individual can come out of an enterprise and go off and start partnering with others, etc. But really start a business, so one, is that accurate? Is that how and why you would characterize the growth? And then two, as a trade association, how do you deal with that because I’m assuming that the needs of the single person or the small team in Seattle or Florida or wherever, is very different than the needs of the Verizons of the world.

Morgan Reed: The needs of the many outweigh the needs of the few. Are we going to go with that?

Chris Riback: You’ll tell me.

Morgan Reed: What we really are looking at in an industry … Wellseeing an idea, seizing on the opportunity, and putting a product into the market.

What we’re really seeing, the height of growth, is now are moving from a PC-centered world, to one where your sales team needs to be able to do sales presentations on an iPad or a Surface. And the guy on the factory floor wants to report where the inventory control mechanisms are based on the phone or an iPad. The CEO wants to see on-sales production numbers from his tablet.

All of that added up means there’s an enormous pent-up demand for converting legacy systems into something that’s more agile, that’s cloud-based, and is presentable on a mobile screen. That’s meant an absolutely unbelievable growth in job numbers. We’ve added more than 110,000 developer jobs into the workforce in the last two years. What’s more amazing, is we’re sitting on nearly 500,000 unfilled jobs, 250,000 of which are in programming jobs. The average salary’s running about $102,000 a year right now for programmers. I know some of the shops that we work with that are offering signing bonuses of $25,000 or more for high school graduates with the right coding skills that they need to get out the door.

This pent-up demand for the move to mobile is enormous, and we think it’s only the first wave to hit the beach. With IOT right around the corner, we’ve made this conversion to mobile. What happens when that next wave of censored data and information driving productivity and enterprise starts hitting our shores? When that happens, we’re going to see yet another growth wave, yet another opportunity wave, and really one that demands new and innovative products to get to the market quickly.

Chris Riback: You really are at the intersection of everything that’s happening. You described it, that the places where mobile and cloud and needing to see things and interact with data on the devices, where all of that intersects. It sounds like that’s where you’re sitting, and there’s just so much going on there. The stats that you just read off, and they are incredible as well. I don’t know if you hit this one, but I read your most recent state of the app economy report, and in addition to the 110,000+ software jobs, I think it’s even gone up since then, you may just said. And the average salary and that half a billion? No, 500,000.

Morgan Reed: Half a million.

Chris Riback: Half a million. Half a million jobs still unfilled. It’s crazy. Plus, as of the time of the report, maybe it’s gone up since then as well. $143 billion business sector industry, the app economy?

Morgan Reed: Absolutely, and the predictions on it continue to grow. [inaudible 00:07:01] came out with some crazy numbers and Gardner has as well, saying that the size of the market in the end is roughly eight trillion dollars. At first, we laugh, and say, “How is that possible?” When you think about what the IOT revolution means, and the fact that quite literally, every American has access to a device. Right now there are more smartphones that are currently paying bills, smartphones and tablets, than there are Americans. Roughly active pops in the United States is about 350 million, and there are about 315 million people. There are more active devices on the wireless network right now than there are people.

From a smartphone percentage, that number is and from an economics case, at first we scoffed at that eight trillion dollar number, but now we look around the room and say, maybe.

Chris Riback: If my device gets more than your described three feetSilicon Valley. That goes against I think, the clichéd thinking, or what we might think if we just look at it. Well all of these jobs … Okay, great. Let’s help the bay area even more. No. I mean your report shows that this is a nationwide thing.

Morgan Reed: Yeah, we looked at the top 800 apps on both platforms, and it was really apparent quite quickly that if you peeled down the layer at all, that oftentimes the dev. team that put that together wasn’t necessarily in Silicon Valley at all. Now of course, there are some big name companies, the Facebooks and others that are located there.

Chris Riback: I’ve heard of them.

Morgan Reed: You know an interesting story that we see, I remember, this was years ago, but it’s still appropriate that when Conde Nast, the big publisher, had their first app that came out, you’d think, oh well that app and all of the Conde Nast properties, that’s New York, so it’s a big New York company. But it turns out, it was two of our member companies that put it together. One located in the southern part of Virginia and another in North Dakota.

So what you have with cloud computing and kind of always on, always high-speed internet, is development teams can bid on projects, can win bids, and can work collectively across state borders to pull a product together. So we’re seeing a lot of these top apps, especially ones that are built not necessarily a game, but when it’s your banking app or one of those, you’re seeing a lot of the dev. teams behind those, aren’t located in the valley at all. Oftentimes, they’re party contractors that are brought in to build the user experience, build the UX or build some of the underlying middleware technology that makes it go bang.

Chris Riback: So why is President Trump talking about coal mining jobs. We’ve got to get him talking about the app economy and the software jobs. Don’t we?

Morgan Reed: It’s interesting that you mention that. In fact, there are currently active operations right now to retrain coal miners in West Virginia to do exactly that. In fact, one of the ones that we’ve talked to and worked with a lot is a company called Project Hosts out of … I can never say the name, Connellsville, Pennsylvania. And their entire purpose is to do on-ramp training programs for coal miners and others in that heartland of Pennsylvania where their jobs have been depleted. They provide a fully-paid, 90-day apprenticeship. They do testing and education on cloud and programming skills. Their entire business model is based on look, there aren’t enough programmers, so let’s make some.

You’re seeing that all around the United States rightIt’s what was the structure behind them in high school, in grade school, to give them the skills that they need to take that chance?

Right now, the United States is failing in a lot of wayslearning and understanding and growing in our field. The problem is, has anybody asked them and given them the tools that they need to say, “Yes, I can, and yes, I will.”
That’s where our education system is not doing enough,projects, like Project Host.

Chris Riback: Morgan, I could not agree with you strongly enough. The creating that type of opportunity starting, as you point out, I mean this really smart place to start, at the education level. It also speaks to why ensuring that we have high-speed internet capability and reach, not just in our urban centers, but really across this country. That’s just, to me, central to driving the type of change that you’re talking about. And creating the democracy of opportunity that an industry that you’re talking about, it’s cloud-based. You can be anywhere. You don’t have to be in Silicon Valley. You don’t have to be in New York. It’s mobile. It’s an entire industry, and you stop me when I can get off my soapbox. It’s an entire industry that’s built for the “you can be anywhere” point of view.

Morgan Reed: That’s exactly right Chris, and I think what’s interesting is more than 24 million Americans right now have no access to high-speed broadband.

Chris Riback: Yes.

Morgan Reed: And that’s a huge problem in rural areas. There’s another 11 million that are in more urban or suburban areas, but the fact that we have 24 million people in this country, roughly 10% of the population when you include some of the other areas, that don’t have access to high-speed. It’s not that they haven’t bought it. They can’t get it even if they did want it. So we’re working right now, on some projects to utilize what’s called TV white spaces. That’s the gaps between existing channels.

For your listeners under a certain age, you may not know this, but there are things that you stick on top of a television set called rabbit ears that allow you to get your VHF and UHF channels. Those signals go incredibly far. They penetrate walls. That’s why you can watch TV in your house.

There’s a project right now around TV white spaces tohigh-speed. So we’re looking at the next way, the 5G wave to try to give 24 million Americans plus access to high-speed internet.

Chris Riback: I’ll have to learn more about that project. Yeah, that’s like the same thing.

Morgan Reed: Yes, the Rural Electrification Project. Yep.

Chris Riback: Exactly right. I’ve got Lyndon Johnson going through my brain. Let me switch topics. One of the challenges I think, from my point of view, to all of the positives of technology and the positives that the apps bring us, and this is the whole question on the benefits of data versus the what can be scary aspects of data and the privacy questions. On the one hand, and you’re talking about it, it’s only going to get more intrusive and extensive, I would think, as the internet of things, as the IOT it comes more into play. On the one hand, we know it. It’s the key to business growth. Data, you know, it gives us targeting. It lets us know when we’re out of soap, and we push the button, so that we can get it in our Amazon basket or any basket. It drives everything for advertising, customer experience.

Morgan Reed: I will give you an example that you haven’t even thought of.

Chris Riback: Yes.

Morgan Reed: For your listeners, if you think about it, if you’ve ever been to Starbucks, you may not know this, but Starbucks has a partnership with AccuWeather. They use data algorithms that have been put together by AccuWeather to look at the predicted temperatures over some time around stores. You may say, “Why would Starbucks care about the weather?” Well it turns out, it takes longer to make cold drinks than it does hot drinks at Starbucks. They know, by using data analytics, when they’re going to need to have a greater staff at the store so that when you get to your Starbucks, you don’t have to stand in line so long.

So right now, Starbucks is actually using data from AccuWeather and machine learning to do a better job in predicting the staffing numbers in their stores across America. So when you think about the obvious uses of big data, you’ve only begun to scratch the surface. We are seeing that kind of overlay. The best example I can think of where the positives are, and we’ll get to the obvious things we need to discuss.

But here’s the most obvious. If you see a physician, andthat have the same symptoms and same conditions that you do.

She’s going to make the decision on your treatment,The idea that we’re not giving physicians, the tools to say, “Hey, I’d like to know how this medication affects 10 million people who are that age, that genotype, that gender, have the similar diseases and co-morbidities and situations.”

It’s insane to me that we essentially practice 19th century medicine, where we’re hopeful we get the smart doctor, who works hard and has seen a few cases just like me to make the right decision. When you think about the power of big data and the power of the cloud, to me, it’s the power of helping physicians make the right decision, so that we don’t take the wrong medication, and we get the treatment that’s most effective for us.

Chris Riback: No doubt. Now talk to me about the negative side. Talk to me about the scary side. Talk to me about … Because look, I love the benefits of this data, but I also, I have two minds myself. The point you’re talking about, medical data, it’s hard to get more personal than that.

Morgan Reed: Exactly.

Chris Riback: So what’s your kind of personal point of view? What’s your association’s point of view? How do we get all of the good without one ounce of bad?

Morgan Reed: Well, I think a lot of it becomes what do we determine as bad. One of the problems that we run into is surprise. The element of surprise is one of the biggest problems from a consumer perspective, meaning that if you say to them, “I want to use your data for targeted behavioral advertising.” That’s the Google model. They might say in the abstract, “That sounds fine.” But then they start seeing ads or get a phone call or some other information that is very clearly based on something about them that they may not be comfortable sharing.

So they’re surprised, like, “How do you know thisand getting folks comfortable with it. We’ve done a decent job of giving people opportunities to opt out, but oftentimes, we make it hard to get to that and hard to see it.

Moreover, it gets into another weird problem. People willing to pay for not sharing your data?” The dimes and pennies that people are willing to put on the table to have access to information paid for directly rather than advertising just doesn’t add up.

I think part of the problem we’ve got on kind of that expectation’s problem. I think that’s one that the industry is solving over time, but I’m not pleased with where we are. I think on the question of medical data, and what we’d all think of as far more sensitive data, I think there’s two common approaches that you’re seeing. One of which is using data in the aggregate or doing what sometimes is referred to as d-identifications, meaning stripping enough away or adding enough noise, making it hard to determine that it’s exactly you. But yet leave fundamentally important parts of the data there to be utilized when the time comes.

That’s good, and you saw, for example, Apple announced some changes they were doing around similar activities about obfuscating data, and making even Apple unable to see it. That has some benefits, but in the long-term, part of what we love about AI and machine learning is that it’s going to take the data that we give it, and come up with unexpected answers and unexpected uses. I think really it’s going to come down to finding what’s the point at which customers are comfortable with impact.

I think it breaks into some very obvious categories. We have two elements in privacy that are very powerful. Things that have an economic impact, direct monetary harm. And the other is for lack of a better word, sometimes we talk about it in privacy circles as shame or embarrassment. I think that there’s a tendency for the industry and nerds like me and others to not really care about that. Right? Oh well, it doesn’t really hurt anyone, they just feel bad. I think that’s a mistake that we make. I think that finding ways to strip away key elements of the data that reassembled could cause people that level of discomfort is something that we’ve got to work on.

But Chris, if we’re honest, that’s a moving target because I don’t know if you’ve looked at your friends’ Facebook feeds. You see things on Facebook feeds that 10 years ago nobody would have said in public, and certainly not on a broadcast platform of hundreds if not thousands of their closest, air-quotes, friends. I think we’re on a moving target on how we handle the question about embarrassment.

On the other, monetary harm, I think that one’s very straightforward. I think the Federal Trade Commission, the Department of Justice and others need to be more aggressive on cracking down on misuse of data. That includes when it’s used by big multi-national corporations that have either violated terms of service or have certainly broken with customer expectations. Things that affect your ability to get a mortgage, a loan, a job. I think that there are organs of the government that need to do a more aggressive job when it comes to that.

Chris Riback: That’s a very interesting and in my view, open-minded approach. There’s a role for regulation, I guess, in terms of protecting individuals, and obviously any industry, I assume, to a certain extent wants to have obviously as little regulation as possible and would like to be self-regulated and would like to have everybody doing the right thing etc. At the same time, the same customers are voting for our politicians and our government, and there’s pressure on that side to create protections. Do you kind of balance that? Is that one of your roles, helping regulators and businesses understand both sides?

Morgan Reed: Absolutely, and I think, like I said, when there’s a direct physical harm … Think of the FDA, Food and Drug Administration.

Chris Riback: Yes…

Morgan Reed: When there’s a direct harm, meaning that grandma can die cop on the beat, and to say no this isn’t acceptable. I think the place where self-regulation really enters into it is those opportunities where the customer enters into it at least appearances-wise willingly, but down the road thinks to themselves, “Huh, what have I gotten myself into?” That’s where we are on a lot of these privacy discussions right now.

I think, you say self-reg, I think what was most fascinating about the last three or four years on this is the difference in approach between two of the biggest names in technology, and that was Apple and Google. Google obviously, 94% of its profits come from targeted behavioral advertising and aspects of advertising. Apple makes money off of the sale of physical goods.

So it was interesting that Apple pretty clearly decided a business decision to forego money off of the advertising side of the world. Tim Cook had very strong announcements about Apple’s decision to not utilize their customers technology in that way, to not share it, and to frankly, even restrict my members’ ability to have access to that data on the Apple platform. It’s interesting to see how businesses themselves are approaching this question and say, “How do we serve our customers, and how do we stay in business?”

Chris Riback: What you’re describing has really become part of the Apple brand at this point, and they have taken that stand that you described. To close out, Morgan, how do companies connect, or how should companies connect with you? I’m sure that every company that matters already is connected with you, but just in case there are folks in the app economy who think that they ought to be engaged, what should they do?

Morgan Reed: Absolutely. You can go to A-C-T online dot org, and join us there. You can hit our membership button to join. If you’ve got questions, you can find me on Twitter @morganwreed, and of course, you can find us on all the things, whether it’s Facebook or Instagram through ACT Online and all the little buttons at the bottom of the website.

We’re always interested in hearing about the next great thing, and we’re looking forward to assisting our members and the ecosystem on bringing products to market that we didn’t know we need, but once we have them, we can’t live without.

Chris Riback: Morgan, I really appreciate your time. You are clearly, in this industry, you’re at the intersection of most of what’s interesting that’s happening in the business world and the technology world. I appreciate your time and the conversation, and I would really look forward to talking with you again.

Morgan Reed: Absolutely, Chris. This was great. Thank you very much.