Technology

Modeling Insurance Marketplaces using Contract theory

Modeling-Insurance-Marketplaces-using-Contract-theory

Recently Sheth and Subramanian, published a paper in Managerial Finance, titled “Blockchain and contract theory: modeling smart contracts using insurance markets”. The paper describes smart contracts in light of contract theory. The authors introduce the concept of smart contracts and discuss the implementation of a decentralized insurance marketplaces, using Etherisc an insurance marketplace for smart contracts running on the Ethereum blockchain platform.

The authors employ three methods in this paper. The first one is a design illustration of a live application, namely, Etherisc. The second one is an economic model using demand–supply and equilibrium economics. The third one is an illustration using principal–agent modeling using constrained optimization.

The authors demonstrate the architecture of a live Ethereum-based smart contract system.
Using this economic model, the authors illustrate how decentralized smart contract systems can increase social welfare by shifting demand and supply by reducing transactional costs. In the principal–agent model, the authors show how both the principal and agent are positively benefited by various mechanisms.

The paper can be downloaded from here if you have access to a library in the USA https://www.emeraldinsight.com/doi/full/10.1108/MF-10-2018-0510

Introduction to Cosmos Blockchain Network – Part 1

Internet Of Blockchain

Cosmos Blockchain Network

After 2 years of development, Cosmos team finally launched the Cosmos Network last month on main network. Here is the live launch video from the Cosmos community – Below we present details about the  Cosmos Blockchain Network.

The Cosmos Blockchain Network is the first ever decentralized network which uses proof of stake mechanism. This Blockchain allows us to connect and interact with other blockchain networks. For example, we can use the Cosmos Network to connect Ethereum and Bitcoin blockchains.

The Cosmos Blockchain Network is called the internet of the blockchain because of this functionality. The Cosmos blockchain also solves the Scalability and Interoperability problems in other blockchain networks(i.e Bitcoin and Ethereum Blockchain).

The Cosmos architecture is made up of several independent blockchain networks called zones attached to a central blockchain network called the “Hub”.This Blockchain network is developed with open source software such as Tendermint, Cosmos SDK and IBC (Inter Blockchain Communication) protocol. Below we describe how Tendermint is used to create the Cosmos Blockchain Network.

Tendermint Core

 “Tendermint Core is a blockchain application platform that  provides the equivalent of a web-server, a database, and supporting libraries for blockchain applications written in any programming language. Like a web-server serving web applications, Tendermint serves blockchain applications”

Tendermint core performs with Byzantine Fault Tolerant (BFT) and State Machine Replication (SMR). 

The Tendermint core consists of two technical components.
1. A blockchain consensus engine and 2. Application blockchain interface

tendermint core

Image & Log Credit – Cosmos Network

This Tendermint core acts as a networking and consensus layer of  blockchain into a generic engine and which ensure the same transaction is recorded on all the machines in the same order. Application Blockchain interface enables the transaction process can be in any of the programming languages. As mentioned Tendermint core only handles network and consensus for the  blockchain. With this developers can develop their own public or private  blockchain with their own set of rules for validation. This validator can be elected by how many tokens they holding as stake. This blockchain  works with a proof of stake mechanism.

Advantage of Tendermint

1.High Performance – This network can handle thousands of transaction  per second with block time order of 1 second.
2. Instant finality – Once the block is created user can finalize their  transaction instantly.
3. High  Security – Using BFT algorithm will improve network security.

 

The Cosmos SDK , IBC (Inter Blockchain Communication)  and Cosmos Design will describe in Part 2.

Here is the interesting Podcast from Epicenter with Ethan Buchman( Co-founder of Cosmos Network) and Sunny Aggarwal( Research scientist at All in Bits)

TechMeme, bootstrapping and the Unicorns

Some of  the internet(s)/mobile world(s) most valuable treasures today include large e-commerce firms, sharing economy sites and  other technology ventures. These are valued at greater than $1 Billion.  Aileen Lee of Cowboy ventures coined a term  “Unicorn”  to describe these firms with large valuations and almost no operating profits. The total net worth  of these unicorns is closing in on atleast $500B (according to an estimate here). The valuation technique  employed to value these (and other private equity funding) is known as post-money valuation.

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Fortune ran a recent post regarding top Unicorns in today’s economy here. Almost all of these firms are focused on one single thing – acquiring large customer bases in the hope of monopolizing market segments they serve. That being said, operating profits at this point do not seem as concerning as they ought to be.

In contrast to the above said phenomenon – where everyone wants to hit the 1B$ valuation, TechMeme (www.techmeme.com) is a true internet treasure. According to this blogpost by AVC , they never raised any money from investors. Not because the founder(s) had problems with the investment community, but just because they thought they could keep it that way, without outside involvement in their vision of things. They were bootstrapped  with revenues  self made and continue to operate this way. The high quality, relevant content almost sourced in real time around the technology industry brings them this viewers (estimated to be greater than 10 million unique views per month).  Ofcourse, it has taken them 10 years to get there…. I know that www.zoho.com is also one more of the bootstrapped firms serving in the CRM space. Zoho’s bootstrapping story is absolutely inspiring…and their hiring mechanism is also so unique and unconventional.

Online E-commerce

Last month my cousin in India – mentioned that he wanted to extend his wholesale-retail cloth business online. He asked me what I would do, if I were to advice him—–

I realized “online” is no more a single channel game. In the  days, while the web was still new, people would spend time writing code for shopping carts, checkout systems, front end web pages in languages like Java, Php or PERL. Gone are those days.There are even portions of software subsystems such as shopping carts available for free.

The next generation of web commerce software consisted of webstore extensions to popular content management systems such as wordpress, Drupal or Joomla.

Today however, e-commerce is a very different game. There are a few big platforms who sell everything e.g. Amazon , ebay, flipkart ,snapdeal, alibaba , etsy and kelkoo. All other traders, manufacturers and wholesalers become suppliers on these platforms. The rules of quality, shipping time, etc. are set by these big online firms. Small business owners (traders)  have an option to set up stores on these big platforms. However, the order in which their stores and items get visibility is controlled by these platforms.

In this realm, one viable option for a retailer to expand his business online is to  either list his good online (as a supplier) or to setup a small store. Such a mode  will bring these folks the web-traffic, the audience and sales. In exchange these sellers pay a fixed commission for every item sold.

A more recent option has been cloud based platforms such as bigcommerce.com, shopify.com and americommerce.com. These websites allow sellers to set up an online store, with minimal effort. These platforms integrate with backend business tools such as inventory management, marketing and sales dashboards and payment systems and CRM systems.  BigCommerce.com and shopify.com  helps entrepreneurs extend their sales channels by integration with  Amazon, Alibaba or Ebay.  On the client side too bigcommerce and shopify optimize for devices, enable auto-integration with Google/FB sign-on systems and take care of Search Engine optimization.

Online E-commerce has reached a level where the business man does not have to worry about hosting, managing or controlling the online experience. It is all taken care off – in the cloud..  “List once and sell anywhere” seems to be where these platforms such as Bigcommerce or Shopify are reaching.

A small businessman can now setup an online store on Bigcommerce – have an extended sales channel on both alibaba (or amazon) and ebay. He can track inventory via salesforce/intuit and manage his payment through paypal/intuit. He can track his customer calls with CRM online- all integrated into Bigcommerce.  With very little effort, and almost no code written or maintained on his side, the businessman can focus on his Core competence i.e. improving his product line and offerings..

Such innovation on the cloud has made sophisticated software and services available to the ordinary businessman. It  also makes selling so much more fun.

Will Robots Take Over Human Jobs?

Robote

This video by CGP Grey, fortells one of the largest challenges facing the workforce, in the next 10 to 50 years. This video in some ways restates the research from MIT Sloan in the book Race Against the machines.

As terrifying as it may seem – machines aided by artificial intelligence and learning systems are going to replace most of human “work” as we know of it today. The video estimates that 45% of today’s jobs will no longer exist in the future.  Jobs such as driving  (taxis or trucks), farming, manufacturing, computer programming, legal transcriptions and medical diagnostics will  be performed by machines in future.

An interesting video here shows the power of today’s industrial robot.  The robot called Kuka almost beats the world champion ping pong player. Even if the robot hadn’t beaten him in this game, he can continue to play  for days   without getting tired – whereas the human player needs his rest. The robot Kuka can also beat 99.9% of the other ping pong players in the world. It is also not too long before Kuka can learn all of the ping pong player’s tricks.. with proper adaptive learning as shown by this robot at GT

So, what have leading economists and policy makers thought of this transition?

One solution Professor McAfee from MIT Sloan alludes to in the video excerpt from a TED talk below-   can alleviate the economic stress of such a transition. The solution alludes to partially guarantee-ing a minimum income to everyone.

 

This reduces the problem, but , how will mankind create and sustain 45% of the workforce without an employment. What will happen to today’s services based workforce. Will it just reduce to a set of people controlling machines, and profits?

These are larger questions, and only time will tell..

Scary as it may sound, I am hopeful that the economics we have created is much better, and there is hope.

I. During the transition phase –  to a machine world, many new jobs will be created in the automation segment. Such jobs  would enable the creation  and maintainence of machines that replace humans.

A shift from a services based economy to high-tech, high-end engineering economy with computer science, information systems, automation, and robotics will emerge.

This work will continue till robots become fully autonomous – i.e. manufacture, program  and service other robots.  That point of self-sustenance is further away.. into the future (may be beyond 50 years).

II  I am also hopeful that newer forms of work will emerge – especially if and when man succeeds in his quest for interplanetary existence.

Efforts are on 24X7 (link here, spaceX mars) by some of the best and brightest minds in the industry. Human colonizing of Mars will potentially happen atleast before the current work on earth will be replaced by machines.

This is imminent – and will create many more different types of challenges which are probably beyond the comprehension of machines. Human work will be needed when such interplanetary existence happens.

Overall, I am hopeful that before an employment crisis starts to emerge and society starts to feel its impact, mankind will find an alternative solution. This solution will possibly be in human extra-terrestrial existence, which will provide an expansion  of the economy beyond what we know off today.

Competition (or lack off) amongst  “open source” Mobile Platforms

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This week, Microsoft invested in a company called Cyanogen. The CEO of Cyanogen claimed in a press conference that his company’s goal was “to take Android away from Google”. Cyanogen is a new -entrant into the mobile operating system industry which is monopolized by  Google’s Android.

Last year Samsung and Intel released and launched the Tizen mobile operating system. Samsung  adopted the same onto its Galaxy Wear devices and showcased a HDTV. The sole competing point for Tizen is its claim to be a secure mobile operating system which prevents mobile malware. Similarly, Tizen claims to differentiate itself from Android in its ability to support telematics and infotainment systems manufactured by Samsung.

Open Source Platform competition (or the lack of it)

Tizen, CyanogenMod and Android are all built on top of the GNU/Linux kernel. They differ significantly in their architecture and application interface. The other mobile operating systems namely Windows Mobile, Blackberry OS, Nokia’s Symbian are proprietary.

The  Original Android source code base is on github at (https://github.com/github/android) The CyanogenMod source code base is on github at  (https://github.com/CyanogenMod). Similarly the Tizen source code base is on the tizen site (https://review.tizen.org/git/).Tizen is built on GNU/Linux  using GNU/C/C++. However the application development SDK is not Open source. The reason cited by manufactures is to prevent patent litigations in the mobile community – where firms hire trolls to sue other firms.   The figure below shows the lawsuits filed by manufacturers against each other in the mobile devices space.

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Platform Ecosystems

Each mobile operating system can be considered a platform with a multi-sided network.

Multi-sided networks

The first side of the network consists of  manufacturers who manufacture mobile devices and components.The second side of the network- app developers- consists of Application Developers who build applications for the mobile operating system. The third side of the network – core-developers- consist of specialists who develop and maintain the mobile operating system stack. These developers contribute to the development of the base operating system (mostly within  a sponsoring firm  e.g. Google for Andorid, Samsung / Intel  for Network).The fourth side of the network consists of mobile phone consumers who purchase devices and applications. (  Ofcourse, there are other sides of the network like platform evangelists, textbook writers, fan clubs, technology media, etc.).

 Platform success and network effects

For an Platform to be successful, each side of the network should consist of large number of loyal members who actively engage with each other. For example OpenhandsetAlliance.org, an alliance consists of handset manufacturers and developers who use android. Similarly http://androidforums.com/ consists of forums for supporting android development. Members of each side of the network  affect the work and revenue of  the other sides of the network. For example, Handset manufacturers can lobby with the core developers to release a version that supports these devices. In this context, Google recently released Android One to support hardware which enabled the release of sub-100$ smart phones in India.

Recently, the Android platform recorded about 1.3 million global activations per day. The graph below from an analyst here shows the growth curve of android activations and predicts the growth till August 2015. ie. about 4.0 daily million activations till August 2015.

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Such massive growth shows that all sides of the network. i.e. core-developers, manufacturers, app-developers and consumers are significantly entrenched in the eco-system. The platform eco-system now operates like a well-oiled machine giving economic benefits to all its participants. The network participants have reached a level of specialization in their behaviors with respect to the Product.   Switching becomes extremely difficult, considering both the opportunity cost (- ie. time and effort spent in adopting their behaviors to android ) and the learning cost( ie. time and effort spent on learning a brand new system).

Here’s what happens when an Android user tries to switch his phone to Apple’s Iphone. Read this user’s experience of switching over here>>. Similarly, an Android  application developer would find it very hard to rewrite his application for Apple’s iOS and maintain it for ever.

The inter-dependencies amongst various sides of Android’s platform eco-system have reached a level of maturity over the years. This level of maturity in the platform’s ecosystem benefits any newer adopter, who finds it so much more easier to adopt.  These inter-dependencies between the various *networked* sides of the platform become impossible either replace or recreate.

Unless…Google decides to deprioritize the platform – it is highly unlikely that anyone in the near future can replace Android or garner any significant market share from them. Such a fight does not even exist at an open source platform OS level

Health Apps in Wearables and the miniaturization of health data stacks

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At the recently held CES- 2015 many companies showcased their hardware based technology solutions. Amongst all different categories of hardware showcased, wearable technology probably had the most variants. Here’s one enthusiast wearing 56 different wearables.

Wearable technology, mostly in the form of watches  use either Linux, Android  or custom Real Time operating systems. They host multiple applications, many of which cater to sensor based data analytics. For example, by using accelerometers and  parameters such as height, weight and age some applications can calculate the amount of calories spent. Similarly, using other sensors these devices can in real time calculate heart rates, run distance, calories spent, Body Mass Index, etc.

Not only in the wearable technology industry but also in smart phone accessory industry there are significant applications evolving. For example, smart blood sugar monitoring accessories such as this, this and this provide increasingly smarter, miniaturized  and inexpensive results. These devices provide affordable and convenient health measurements to the masses which originally needed a visit to the hospital. Health sensors based applications use miniaturized versions of data (and analytics) stacks. tweet this

These specialized software stacks can run mathematical models on data from sensors, in real time. Often, these stacks can run accurate predictions on any physical activity. For example, imagine a wearable that can predict the additional time you need to run in order for you to meet your calorie burn target. Over a period of time, complex mathematical software which can perform statistical analysis would migrate onto chips and to the hardware layer from the current application layer . Such powerful miniaturization – driven by the market need in the health space will give rise to increasing “ machine learning”, “deep-learning” and other AI based applications which will lead to drastic improvements to the quality of life.

Theranos, a medical diagnostics company is revolutionizing medical diagnostics. They use a small  fraction of the blood needed for traditional pathological tests. They  provide about 250 tests for a fraction of the cost of regular hospital based tests. Theranos also claims increased accuracy for these tests, by providing  statistical variance of these measurements. Imagine a world where someone is able to build smart sensors which can perform multiple tests either on a mobile accessory or on a wearable and provide the end user accurate measurements. This will significantly transform the way medical diagnosis is done today, which needs a visit to the hospital or a clinic.

I forsee a bright future for medical devices  –  where Data Analytics  and Artificial Intelligence will create conditions for intelligent self-prognosis, monitoring and prediction of health conditions.

Enterprise Social Networks and “hooked”

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Last week, Facebook launched its “Facebook at Work” platform, targeting corporates. Salesforce already sells the widely popular enterprise social network called “Chatter”. Similarly, other corporates such as IBM have used SocialBlue for connecting employees within the corporation.

In today’s workplace, in almost all industrial sectors – desk jobs allow employees to connect to the internet 24X7. This trend is bound to increase over a period of time. Policies to artificially restrict internet access will not work effectively anymore, because of the ease with which people can get online using mobile devices and cheap subscription plans.

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In this recent book called Hooked – Nir Eyal – describes how social media websites engineer consumer behavior. Nir Eyal explains that social media websites alter consumer behavior sublty, and over a period of time these changes make the user “addicted”.

Users who spend a lot of time online, increase advertising dollar based revenue of these websites. Also, once people start actively using  a particular social network, it becomes increasingly difficult for them to migrate. A term “Switching cost” is used by economists describes this phenomenon.

Unless, ofcourse another social networking website manages to replicate the incumbents functionality and/or a user manages to move his entire network to the other website. This is almost impossible to achieve by a single user.

Orkut and Myspace are exceptions. Both these popular social network websites were acquired by larger companies, in whose plans they were not prioritized. Software if not maintained – dies…like any machine, and forces users/customers to move on. Tweet this

Many firms that need employees to be connected online, have realized that social networks, while being addictive can also be used productively – to increase collaboration,  communication and to develop a work culture of informality.

Enterprise social networks are the way to go in today’s connected workplace. They serve a dual purpose – help employees to satisfy their emotional needs, and, enable firms to productively engage employees.

However, a lot is yet to be understood about how internal – enterprise social networks can repurpose productive office time. Tweet: A lot is yet to be understood about how enterprise social networks can repurpose productive office time. http://ctt.ec/3y139+ A question remains – are enterprise networks another productivity killer? Only time will tell.

The problem of many Social Networks

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On the internet there are many social “media” networks where one can participate. Twitter, Facebook, LinkedIn, Tumblr, WordPress, Pinterest, Google plus, and Whatsapp are a few in which I participate. Each one  serves some particular purpose and provides a unique value proposition to me.

With Facebook, I keep in touch with my friends and family and a few professional contacts. With LinkedIn, I connect with my professional contacts. With Twitter, I keep in touch with influencers in areas such as Economics, Finance, Technology and Entrepreneurship, and , I try to build an audience for my work. On google plus, there is no particular preference. Anyone whom I choose to email using gmail, or, anyone who happens to be in my adddress book automatically connects to me on google plus. With Tumblr, I try to maintain an active blog on technology, products and entrepreneurism.

While social media participation can be a big time and productivity killer, it is also possible to use this powerful technology to promote to one’s ideas (or business). On social networks, it is possible to actively and passively solicit feedback for your work. Tweet: Some of these thoughts and ideas, which could be converted into

For example, your blog post about a book – could help someone make a purchase decision. A photo that you share on Facebook could inspire someone to visit the gymnasium. An article you write and share via tumblr, could influence others to read it.Some of these thoughts and ideas, which could be converted into “posts”,“comments” or “tweets” could help other people to make real life decisions of economic value. With whatever action you take on social media, the reach is so much more, and the impact is so much higher – given the time you spend to make the impactTweet: With whatever action you take on social media, the reach is so much more, and the impact is so much higher - given the time you spend to make the impact. http://ctt.ec/8eRdV+.

Social networks give ordinary voices the “Power”, if used properly. That is why technology is so empowering. Ofcourse, as with any *fair use* technology, there are also negatives to this, which I shall post in  a later article.

One problem I see with maintaining an active status on multiple networks, is the ability to update myself of happenings on all of these networks at once. I have to login to each one separately and use different UI flows to get to updates on my networks.

It may be time to have a service that enables a user to track one’s activity across networks, and, be able to optimally promote one’s work – virtually free of cost. No single service exists today to do this. Is it time for a “ Network of networks” which could give users seamless visibility into their networks?

Today, there are services which accomplish parts of  such a grand plan.For example IFTTT.com – an acronym for “If This Then That”  creates a mechanism for users to share their posts across networks. Another service Klout.com (which was recently acquired for 200 m$) tries to create an “Influence” score for each individual based on social media activity across networks.

I find these efforts interesting – since they are baby steps attempting to unify one’s network identity on the internet. There might be more *unifying services* that  I am unaware off too.

Industries Transform Using Technology

My Wishlist for 2015

The year 2014 has ended with  several developments in the sharing economy, sustainability  economy and the data economy. Last week I posted an article about the progress made in 2014 on all three fronts.This year will see many of these firms become publicly traded entities.

Given below is my wishlist for progress this year:

1. Applications in Deep Learning – i.e. Artifical Intelligence combined with Predictive Analytics.

a)Natural Language and Speech Processing combined with the power of big data analytics create possibilities in a many fields.

Tweet: Natural Language and Speech Processing combined with the power of big data analytics create possibilities in a many fields.

Though deep learning has been around for at least 50 years – the availability of computing power and advanced software analytic tools in today’s age has made business applications viable. Several applications of this field include autonomic computing, self healing systems, information search and retrieval, robotics, drug discovery, disease prediction and manufacturing.

b)  Machine Intelligence –  Business Intelligence could aid human intelligence by enabling real time decision making, reducing wastage and optimizing business processes. Imagine speaking into your predictive system and asking it to predict demand conditions at a particular location in the future OR  predicting molecular structure for a medicine that could help cure a particular disease. Deep learning could accelerate innovation across industries and has seen extensive development in university labs. Imagine, using 1 billion parameters on inexpensive GPU harware to create a system, created by Andrew NG’s group at Stanford or to  make robots learn and mimic human behavior based on changing environmental conditions as shown in this demo at Georgia Tech. It is time for the industry to adopt the same.

c) The full power of AI + big data analytics will be realized once the internet of things  in which devices communicate with other devices become very common. The internet of things creates large volumes of data.It is possible that such large volumes of data are stored and processed using extremely powerful computing systems in real time.

Tweet: It is possible that such large volumes of data are stored and processed using extremely powerful computing systems in real time

Such processing could lead to variety of insights, affecting all facets of human life – for example driving autonomous vehicles, remote surgical systems used in tele-medicine.

2. Human Transportation

a) Personal transportation despite the ever increasing advances in avionics, space and fuel technologies has remained two-dimensional for over a 1000 years now, except for the aeroplane. I hope that this year will mark the beginning of three dimensional personal transportation, which is technically feasible. It has to be seen whether this is economically feasible. This should significantly ease traffic woes and problems of pollution and overuse of fossil fuel.

Small  beginnings are being made in the form of the Hendo Hoverboard for short distance travel and  the aeromobil for long distance transportation.

Similarly, jetpack technology is about to get its largest push this year when Martin Jetpack goes public. Affordable Mass transportation, is potentially going to see significant prototyping in the form of high speed mass transit systems due to the efforts of Hyperloop Transportation Inc.

3. Sustainable living (and business):

  1. Zero Waste Living – Any consumerist society is waste-producing society. Harmful toxins are commonplace is such societies and chemicals in the form of preservatives, fertilizers and plastics cause much harm to the average health of the individual. Harmful industrial byproducts  are released into the natural habitat also. The true impact of some of these are not fully known or researched, but known effects include cancer and various incurable diseases. Strides are being made to consciously shift toward this form of living. The retail industry is slowly embracing this change, and hopefully over a period of time will see accelerated adoption.
  1. Social Plastic  and metal extraction-  “All the plastic that was ever created is still existing on planet earth somewhere”. Mining from waste plastic using technology has been around. However, arriving at a financial model which makes business sense  (i.e.profitability for firms engaging in it,)  has only recently started seeing traction. Organizations such as socialplastic.org and a profitable business mbapolymers.com have a headstart in this field. Below is an interview with the founders of Socialplastic.org

Similar ventures include mining precious metals from electronic waste. Last year saw the beginning of Venture Capital and private investment into these initiatives. Over a period of time sustainable businesses would make as much financial profits and value to society while making the earth a greener place to live in. I  am hopeful that sustainable use of plastics is here to stay.

  1. Smart Cities and Green Homes – These concepts would get more attention this year, due to the onset of the energy revolution. Many individual houses are slowly becoming energy surplus homes which means these houses would generate more energy than they consume. A good example is GE’s ecoImagination home. Several established industry vendors including Schneider Electric, IBM, Accenture, GE  are creating technologies supporting such projects on the city scale – making cities more liveable and self contained.

Overall, I am hopeful that this year  will see many  more industries transform using technology. This is what makes sustainable living interesting.