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Rana Foroohar: It's all part of this complete imbalance between what the private sector is giving and getting. If there's anything the last 40 or 50 years have shown us, it's that the balance of power has swung so wildly towards the private sector, that's why we're having this backlash against globalization. That's why we're having the populism that we're seeing. The idea that a private company can come in and set the rules themselves, I just think that that's completely wrongheaded.
David Skok: Welcome to Big Tech, a podcast about the impact of technology on our economy, democracy, and society. I'm David Skok.
Taylor Owen: And I'm Taylor Owen.
David Skok: Today, we're chatting with Rana Foroohar, a global business columnist and associate editor for the Financial Times and CNN's global economic analyst.
Taylor Owen: And she has a new book called Don't Be Evil: How Tech Betrayed Its Founding Principles and All Of Us. In her book, Rana really takes on the big tech companies, the richest, most powerful companies in the world, and details how she thinks their business models have gone awry, the social and political implications of the product that they're producing, and really tries to make sense of this moment we're in, really the moment that this podcast is also trying to explore.
David Skok: The evolution of Rana's thinking, of how tech companies were first businesses and then became these political, social, and economic powerhouses, is something that was really influential for me when I was starting The Logic. Our publication is about all of these issues. Reading Rana's column in the FT during those early days was an incredibly formative part of developing our voice and who we were going to serve.
Taylor Owen: Rana Foroohar joins us on the Big Tech podcast, coming up.
David Skok: Welcome to the show, Rana.
Rana Foroohar: Thanks for having me.
David Skok:I wanted to start off with an anecdote that you begin your book with. You describe a moment in 2017 when you came home from work, opened your credit card bill, I'm curious if it was paper or digital, and got a surprise. Can you tell us what happened?
Rana Foroohar: Well, for my sins, I do still get paper credit card bills. I hope that doesn't mark me as a luddite, but I like paper. Yeah. I came home and opened the bill. I noticed a bunch of charges that I didn't recognize in very small increments, $1.99 here, $5 there. I started looking down the bill, and there were a lot of them. So, I sat down and tallied them all up, and it came to over $900. I thought, "Oh my god. I've been hacked." Then I looked more carefully, and they were all from the app store. I thought to myself, "Okay. Who has my password?" I realized that my then 10 year old son, Alex, had my password.
So, I went downstairs, and Alex was, as usual, on his phone. I asked him if he knew anything about these charges. He was sort of, "What? Not me." Then I kept drilling down, and finally he said, "Oh. That." I said, "What do you mean?" He had apparently been playing a game, an online soccer game, and he'd almost sort of fallen into the game. This is somebody that is very good generally at asking me about, "Can I buy this or that online?" But it was clear to me, as I began to kind of interview him, that he didn't realize he was spending money in the course of this game.
I don't know how much online gaming you do, but oftentimes you get these apps, they're free, but as you go through the game, you have to buy stuff in order to play better, or get more points, or have better opponents. That's exactly what had happened to Alex. As a mother, I was kind of horrified, but as a journalist, I was fascinated. I wanted to know more about this. It was interesting, because right around that time, I was just starting my job at the Financial Times as a columnist, and a man named Tristan Harris had come to see me. Tristan was a serial entrepreneur, and he had been an ethics officer at Google, working with them in terms of making the technologies better for society or trying to.
During that time he'd had kind of a come to Jesus moment about the business model of big tech, which is essentially attention capture. I started talking to him, and it became very clear to me at that point that what had happened to Alex was not unique. In fact, much of what we were doing online was about attention capture and that there was an entire industry that was deigned to use persuasive technologies to keep us online, harness our attention, monetize it, and that was basically the genesis of this book.
Taylor Owen: So, you mentioned Tristan's come to Jesus moment. I feel like a lot of people who have covered this space, either as journalists or as academics, have had an evolution in their thinking, of either reporting on only the economic upsides of the industry or overlooking some of the harms that were beginning to emerge and sort of populate the public discourse. It feels like, reading your work over the last number of years, you've also gone through that transition, to a certain degree, on how you view the scope, and the scale, and the complexity of the problem, not necessarily the upsides of this space. Can you talk a bit about how you feel that transition?
Rana Foroohar: That's very true. I think that that's natural, because you start to go into this rabbit hole, and it is a rabbit hole. You very quickly discover, okay, there's an economic issue here. 80% of the value of corporate America is living in 10% of firms that are very data and IP rich, most of them the big tech platform firms, or many of them. So, that's an economic issue. You start to, in my case, as an economics and business columnist, look at the issue of monopoly, of innovation being squashed. There's all kinds of statistics looking at how the rise of big tech has coincided actually with a decline in entrepreneurial zeal, which sort of belies the myth of these companies as the great innovators.
Then you start, of course, since 2016 in particular, looking at the politics, although the politics and the way in which big tech has been used to manipulate election outcomes, has been with us certainly since 2012, which was really the big turning point there, but it's with us today. This is, of course, a huge debate not just in the US, but in Canada, in the European Union, and many other countries. How are we going to stop disinformation, political disinformation from eroding liberal democracy?
But then, and this is the part that I think unifies almost everybody, from privacy advocates to people who care about growth and innovation to soccer moms, it's personal. It's in our pockets. We are with it every day. I mean, I rode the subway here today to do this podcast with you, and literally everyone is looking down at their phones. That is a huge transition that has happened over the last decade, and it comes with all kinds of social ramifications.
David Skok: We'll definitely want to talk about all of that, but before we do, I'm wondering if we can go back to the heyday of Silicon Valley, when you first arrived in the mid-90s, and what it was like then.
Rana Foroohar: I'm old.
David Skok: Well, we can go back to mainframes, and DARPA, and everything else, too, if we want.
Rana Foroohar: Oh. Okay. You're really old now.
David Skok: But what was it like when you first arrived there in the mid-90s and then thinking about how it is today?
Rana Foroohar: Well, it was different. You know? One of the things my book does is it kind of tries to chart this arc of utopia to dystopia that Silicon Valley has gone through in the last 20 years. Yeah. I was kind of a kid reporter back then, in my mid-20s, going out to the valley to meet these cool, new companies, like Yahoo. You know? Remember them? That was when everybody was excited to have a Yahoo Mail address. I remember going to parties and meeting these up-and-coming entrepreneurs who were just super excited to make the world a better place, and everybody was going to get connected, and it was going to be awesome. It felt very idealistic. It felt much closer in some ways to those kind of hippy, counterculture roots in the 1960s, which just as a side note, I was interested in the last few days to hear Mark Zuckerberg kind of reference the Fifth Estate, which hearkens back to that counterculture, 1960s, hippy era.
The industry is so far from that now. The idea of Facebook with a half a trillion dollars of market cap sort of still thinking of itself as part of the counterculture is just kind of amazing, and it also speaks to the fact that the valley has been in a bit of a bubble over the last 20 years. The rest of the world has moved on, but the ways in which technologists, at least in Silicon Valley, think about their industry, their technologies, what has become of them, the ways they've reshaped the world, it's still very, very siloed.
Taylor Owen: You mentioned Zuckerberg's testimony. One of the things I really took from that is with 50 Congresspeople questioning him, the scope and the diversity of the harms that they raised across the political spectrum was just kind of breathtaking and signaled I think just the number of spaces of our lives and our economies that that company is present in. Right? Do you think we're almost on the harm side, which you detail so well in the book? Do you think we're almost getting lost in the scale and complexity of those harms, there's just so many we can't really wrap our heads around the impacts?
Rana Foroohar: It's a great point. One of the things my book tries to do is to connect the economic, the political, and the social ramifications. I don't think that Washington or regulators in general have come to grips not only with all of those, but the way in which they interconnect. I think Europe has a little better grip on it, but in the US, you have a lot of regulators, a lot of politicians that care about this, but they care about it for different reasons. You know? Some people, on both the far left and the far right, care a lot about monopoly power. Some folks on the right care about issues of censorship, because they're concerned that Silicon Valley is democratic and they're somehow going to get shut out of the political debate. There are folks more in the middle that care about the social issues. What's this doing to our kids' brains? There are defense hawks that care about the innovation ecosystem and the effects of companies, like Google and Facebook, on that. There are other that care about, hey, are we going to allow these companies to do business in China and the US?
There's just a huge scope of issues, and one of the things I recommend in the solutions section of my book, not to jump ahead, but it's sort of apropos of this conversation, is that we need to get the smartest people in the room on a taskforce to look very soon, over the next year, 18 months, two years, to really tease out not only all the issues, but the interconnections between those issues. Because if you start trying to regulate piecemeal, you're going to end up with a paradigm that's very similar to what's happened in the financial industry, post-2008, where you had Dodd—Frank, a lot of rules being written by eight different regulatory bodies. You end up with this sort of spaghetti bowl that we know we needed more regulation, but it's then easy for the financial industry to push back and say, "Hey. This is ridiculous. This or that rule is having this unintended consequence." We've got to get it right this time. This is too big a deal to get wrong.
David Skok: So, you mentioned the cognitive, economic, and political impacts. Let's unpack each of those individually, if we can, for a second, so that our listeners can understand what we're talking about. On the cognitive side, I have a now five year old son, and I know that if I take that iPad away from him, it's a lot of pain for me and apparently for him as well.
Rana Foroohar: 100 percent.
David Skok: What are some of the cognitive dangers? Tristan may have mentioned some of these as well, but what are some of the cognitive risks that we're now seeing?
Rana Foroohar: Yeah. Absolutely. There's a growing body of work that's being done by educators, behavioral psychologists, looking at the ways in which things, like gaming, or social media, or just online usage in general, effect our brains, and in particular children's brains, which are more malleable. You know this, having a five year old. Just anecdotally, I'm sure you're familiar. You go to any restaurant today and you see that iPad being used as a babysitter. Listen. I am guilty of this myself. At the end of a long day, after the family dinner, I'm sometimes inclined to let my son just kind of go upstairs with his phone, and I don't want to ask any questions, because I'm getting peace and quiet.
But research shows that ... Let's take social media, for example, and its effect on kids and adolescents. It's a bit like the effect of a glass of wine on an adult. You don't want to have a kid that has absolutely no exposure to these technologies. I mean, that would simply put you outside of the real world at this stage. You need to have social contact with peers in this way. Every child is online in some respects. In fact, Google, in the New York City Public Schools is ... You can't go to school without using Google interfaces. But it's in the same way that one glass of red wine, let's say, may be good for you, but then you have two, three, four, and the negative externalities start to kick in. It's like that with social media usage.
There's some strong research showing that as children and teens have been more exposed to these technologies, levels of depression have increased, levels of anxiety have increased, self-harm in girls. It's easy to understand why. Right? I mean, you enter this world in which everyone is putting forward this shiny, perfect, Instagram ready vision of themselves, and it's really difficult to exist in that bubble. I was at an event recently, a conference in which these issues were being discussed, and a teenager came up to me and said, "You know, I feel weird, because it was my dad's birthday the other day, and I just really wanted it to be a private moment. I wanted to celebrate his birthday with him, but I didn't know. If I don't post this on Facebook, is it real? Am I actually having this experience?" I think that that blending of real, unreal, external, internal, it's huge. It's having huge impacts, and we're just at the very beginning of it.
I'll just say one more thing. Sherry Turkle, who I'm sure you all know, who's been a long time critic of technology and its effect on the brain, has made the point recently that too much use of your cell phone in general decreases empathy. There are studies that show just if I were sitting here conversing with you and I put my phone on the table, it would decrease levels of empathy for both of us, because it's no longer a connection between two human beings. There's something in between.
Taylor Owen: Yeah. I like how you framed that as this human experience changing. I give a lot of talks on this broad topic. One of the things I find striking almost always is when there's either teenagers, or undergraduates particularly, you almost always hear this sort of almost existential angst about the way they're using technology and how it's shaping their reality, like you said, their view of reality, their social interactions with their friends. I wonder if there's just a disconnect between how they're thinking about it as this all encompassing challenge and then the way tech companies are kind of starting to give us figures on usage numbers and times. It just feels like we're in two different spheres here.
Rana Foroohar: Well, that's an interesting question. That gets to something quite deep, which is the extent to which the technology companies and the people in the C-suite there really understand the negative implications. I would argue that they understand a lot more than they've been letting on. I mean, you can look at things like a couple of years ago, the famous example of Facebook being able to gauge levels of depression or even to create or predict levels of depression in Australian teenagers, I believe it was teenage girls, and that that information could potentially be sold to say a pharmaceutical company that might want to at points when a teenager's feeling depressed, say run an ad for an antidepressive drug. I mean, these kinds of things happen all the time. That's what surveillance capitalism is. That's a term that was coined by Shoshana Zuboff, who really believes that this is a fundamentally different kind of capitalism and a worrisome one. We can dive more into that, if you'd like.
David Skok: Well, we'll come back to some of the Shoshana stuff. We'll definitely dive into that, but before, I just want to jump back to the economics. The next phase in this is the economic piece. I don't think I can get away with not asking you about WeWork. I know when we think about big tech and we think about the innovation economy, we naturally have gravitated towards Silicon Valley, and Facebook, and Google, but now, we have Saudi Arabia and its Sovereign Wealth Fund, We have SoftBank, and we have this distortion of capital that seems to be happening in the valley, as a result. I'm wondering if you can talk a little bit about how you see, as an economic columnist, how you see the shift in capital over the last decade or so.
Rana Foroohar: Yeah. It's such a great question. In fact, one of the chapters in my book, I go back to 1999, when I actually briefly worked in a high-tech incubator as a venture capitalist scouting, if you can believe it, B2C Pan-European media deals, which decoded into English means I was looking for media businesses that could be brought to scale across Europe that would produce content for consumers and make their money mainly through advertising. So, I did that for a year, before just kind of becoming incredibly discouraged about how much we were selling something that really wasn't anything. We can come back to that.
But the frothiness of the market today reminds me very, very much of the dot-com bubble era, but it's bigger, because the context is there's just so much money sloshing around the markets right now. So, just a little bit of history. You go back to the Great Financial Crisis in 2008, and you had central banks coming in, dumping a lot of money into the global economy, pushing interest rates down. Those two things encouraged the buildup of debt. One of the areas that debt has really taken off is in the tech and media sector.
In part, this amount of easy money, these giant venture capital funds, like SoftBank, which you mentioned, which is one of the companies that helped create the bubble that is WeWork, which is now collapsing and bringing down property prices in New York and London with it, that money allowed a number of unicorns, those high valuation tech startups, to grow to these really unprecedented sizes before they even go public. So, if you think about what that means, that means that you have a huge amount of money going into this bubble economy, where there's very little transparency financially, before a company goes public. It also supports a business model that is essentially about making a land grab.
If you think about how some of the biggest tech platform companies work, it's all about growth, rather than profits. Look at Uber, for example. Uber goes out into every possible market, breaks whatever regulation it can, grabs market share, doesn't worry about making money, is allowed to continue that business model with private investors just pumping it up, pumping it up. Cash flows in. But then you get this company going public, and finally, oops. People want to actually see some profits, and they're not coming, and so the stock starts to sink.
Now, when you look at how technology companies in general now make up such a larger percent of the overall equity markets, you start to think, okay, we could be headed for another tech led crash, and already you are seeing signs of that. In fact, I would not be surprised that between the taping and the airing of this podcast that we could see a major tech led market correction in US equities and possibly even in global equities.
David Skok: The thing that I find unique about this, and maybe I'm wrong, is the role that institutional investors are playing in this here in Canada, pension plans, OMERS, Teachers', these are big pension plans that are starting their own VC fund and setting up shop in Silicon Valley. Now, we're dealing with people's pensions. You talk to the asset managers, and they would say, "Well, it's a way for us to diversify," but are we walking into a risky path?
Rana Foroohar: Yeah. Absolutely. Again, I go back to my own experience in tech in the late 90s, which made me very, very wary of the sector in general, but in any kind of private company business model, you just don't know what's going on. Alternative investments are risky, but we've been globally, certainly in the US, but really globally in such an easy money environment for such a long time that risks have built up in the system, and you get exactly what you're talking about, Teachers' Pension Funds investing in what are really quite speculative stocks in some way.
I mean, just like in the 90s, everybody hypes tech. My own mother, who is a first grade teacher, was dabbling in biotech stocks back then, which was an experiment that actually ended up shaving off about 30% off her retirement. Everybody thinks, "Oh. Tech's the future," but go back to the auto industry, for example, turn of the last century. Yeah. We knew that cars were going to replace horses, but we didn't know which car company was going to be the big hit. That's why a lot of big investors, Warren Buffet, for example, are wary about tech stocks, because whilst the vectoral trends we can see, yes, the digital transformation is happening, yes, this is our future, you don't really know who the winners and loser's going to be.
By the way, a lot of the valuations of these firms are predicated on two things, one, a very loose regulatory environment, which is absolutely going to change, and two, being extremely global and scalable and being able to cross borders very easily, and I think that's changing too. I think that North America, the EU, and then China, and some of the emerging markets are probably going to go different direction in structuring the rules for the digital economy. That's going to make it a lot harder for these companies to jump borders or regions, and that's in turn going to make it harder for them to grow, and that could depress valuations.
David Skok: We've had a lot of companies go public this year, after that period of what seemed a lot of concern that companies were not going public. But, as we've seen, not all of them have performed very well. Do you think we will see more companies stay private longer?
Rana Foroohar: You know, it's funny. I would like to say no, because to me the valuations are just so inflated as they are, but the truth is, yes. Already, in the last few weeks, you see big investors raising even more gigantic funds to continue to inflate the value of these companies. It's a bet on the idea that a handful of players are going to sort of be in a winner take all environment, and they're going to be the next Googles, the next Facebooks, the next Amazons. I'm just not convinced that that's the case. I think that there is a real disconnect still between market valuations and the political reality on the ground in Washington and Brussels. I think that companies and investors really haven't landed on the fact that the trade environment is changing, and that will continue even beyond 2020 or whenever, fingers crossed, President Trump is out of office. This is not just a Trump driven trade war. We are in a new, big tech trade environment that I think is going to be fundamentally more regional and more fragmented.
Taylor Owen: You mentioned a potential tech driven market downturn, similar to what we've seen before, but is another analogy a broader financial crisis, in that an unregulated sector of the economy with financial incentives against reforming the negative externalities sort of run amok? If that's the case and if sort of you say in the book that the 2008 financial crisis led in some ways to this populist backlash that led to Trump, what's the backlash to a tech driven downturn look like?
Rana Foroohar: Well, it's really interesting. If 2008 bred Occupy Wall Street, I do think that the current moment is going to breed Occupy Silicon Valley, because you talk about a financial crisis. I think it's very possible we could see this huge tech driven debt bubble popping. Now, that would be different in nature from say the toppling of a Lehman Brothers and a systemic banking crisis, but the way I think about it is that the big tech companies have been the largest beneficiaries of what I call financialization, which is a topic I covered in my last book, Makers and Takers. That's the way in which financial engineering has been used by companies and countries to essentially create artificial growth.
A good example of that would be the 2017 Trump tax cuts, which we were told, "Oh. All these companies, if we just make taxes lower, they're going to bring back the $2 trillion that they've offshored in overseas bank accounts, and they're going to invest it in Main Street businesses. Jobs are going to be created, and people are going to get wealthier. Yahoo." Well, what happened was to the extent that money did come back, it went straight into share buy backs, which is when a company comes in and buys up their share on the open market. It's kind of an artificial way of pushing up stock prices in the absence of any kind of real, underlying growth story or investment story. The biggest beneficiaries of that, the folks that did the most buy backs and benefited most from the Trump tax cuts were the big tech companies, Apple, Google, others, Cisco, Oracle, some of the hardware companies, too.
These companies are ... It's funny. They have more engagement with the financial markets at a time when most of them haven't needed money for ... actually to raise money on the financial markets for operating expenses since the 1990s. So, it's this really kafkaesque system, where theses supposed innovators, which many of their innovations were years ago, and they've become really monopolists or utilities that should be regulated as such, they are pushing up asset prices, but not really creating a lot of innovation at the ground level. So, that in itself is creating the wealth disconnect, which a lot of economists feel is the real, underlying problem with growth globally.
Taylor Owen: I want to touch briefly on the political sphere that you talk about too when you detail out these harms. I mean, this is something that was clearly, poignantly demonstrated in 2016, in Brexit, and a host of elections since. We actually just had an election in Canada. I was actually part of a big research project trying to monitor foreign interference and disinformation in the election. We actually thought we were going to see similar things to what we saw in these previous elections, and we didn't really. We didn't see this kind of acute, foreign intervention by foreign governments or real manipulation of disinformation domestically. But what we did see really clearly was a deep, deep fragmentation of the political discourse.
We saw conservatives literally only talking to conservatives online, sharing the same information, following the same people, supporting the same candidates. We ended up with this election result that kind of paralleled that fragmentation, where Canada feels more divided than it has been in a long time, along very similar lines as the online discourse. I'm wondering if when you look at the political implications of this infrastructure, is the medium part of why we're seeing this political fragmentation?
Rana Foroohar: Oh, 100 percent. 100 percent. There's all kinds of studies that you can point to looking at how the rise in social media has coincided with a decline in trust in liberal democracy for the very reasons that you're talking about, because people become very fragmented, very siloed in their own sort of capture bubbles, where they're talking to only like-minded people. That's creating not only more extreme views, but interestingly, a perception of more extreme views from each side. If I'm a Democrat, I actually view Republicans now as being more extreme even than they might be, and vice versa.
Again, it's a real rabbit hole. One of the things that worries me a lot and I think about a lot is just the business model of traditional media, like at the FT. I have to check my facts. I'll be fired or sued if things are wrong, but the only way that the FT has been able to survive in this increasingly commoditized world, in which Facebook and Google now take the vast majority of the entire advertising pie for print media, and they're about to disintermediate television as well, the only way we can survive is by having a pretty high priced subscription model. But that then also contributes to the bifurcation, because you have to be pretty rich to read the FT or in a library in a college somewhere, if you're lucky to have ... if they have a subscription, whereas a lot of what's free is the cheap stuff, the fake news, which by the way, there was an MIT study recently showing that fake news on Twitter was six times as likely to be shared as real news.
I think we have got to find some ways to create some sense of liability for these companies. Now, there's a big debate, as I'm sure you're aware, in the US right now about a legal loophole that was carved out in 1996 as part of the Communications Decency Act, which gave online platforms an exemption from anything that people say or do. That was possibly appropriate at the time, because these companies were kind of startups in garages, but I really question at this stage whether you can have no liability for a company like Facebook in which violence, extremism, pornography is being monetized and is just out of control. Even if they've got 35,000 people working as censors, they can't keep up with it. I think that it really raises just one final point. I think it really raises a question of whether a company like Facebook can actually coexist with liberal democracy, whether people have free will, as John Stuart Mill might have put it.
Taylor Owen: Yeah. Those intermediary liability protections are increasingly built into trade agreements.
Rana Foroohar: Indeed.
Taylor Owen: The new NAFTA has that built in, so I'm not sure Canadians can even create a system of liability and impose it.
Rana Foroohar: Absolutely. This goes to the political power of this industry. Silicon Valley is now the single largest lobbying entity in Washington. Google had more meetings with the last president than any other company. Amazon lobbies on more issues than any other company. There is such capture. One of the things, I'm sure you may have found this as well in your own reporting, but as I was reporting this book, I found it very, very difficult to find completely neutral experts to speak to, because so much of the academic community, technologists, business school professors, legal professors that study and talk about the issues in question are actually paid consultants by one side or another, be it Google, or Qualcomm, or Apple. It's really, really hard to find independent voices in this debate. I've never seen this much regulatory capture, even by the financial industry or the energy industry.
David Skok: So, that leads naturally to the US election and some of the candidates on the Democratic side at the moment, particularly Elizabeth Warren, calling for the break up of big tech. Do you think these companies should be broken up?
Rana Foroohar: When Liz Warren says break up big tech, I think that that's a shorthand for regulate big tech. She's come under fire, because a lot of people can argue, and you can argue that if you break up Google or Facebook into pieces, it doesn't necessarily solve all of the problems. I am increasingly thinking that a utility type model is a good first step. There's a legal scholar in the US, Lena Khan, who's now sitting on the House Antitrust Committee. She wrote a paper, she's written a couple of very seminal papers, one looking at Amazon and comparing it to the railroads of old and looking at how these networks, they can own an entire network and yet also compete within the network. So, that gives them sort of just a natural monopolistic position. I think that that makes a lot of sense to me.
As I've spoken to companies, both small and big, it's impossible for them to have an equal playing field when the network provider has so much more information than they do. That kind of brings me back to this bigger question of how these companies fit into a functioning free market system. If you go back to Adam Smith, the father of modern capitalism, he would have said that you needed equal access to information, a symmetric transaction on both sides of a market system, and kind of a shared moral framework for capitalism to work. I don think any of those things are in effect when you think about say Google's targeted advertising model and how much more information Google has than its customers or its users, or Amazon and the way in which it can preference its own products online without anybody really understanding what's happening, because of the algorithmic black box.
David Skok: I thought it was interesting, David Marcus, the head of Libra Digital Currency that Facebook is a part of creating, framed it in very binary terms, geopolitical terms, saying basically if you don't let us do this, China will win.
Rana Foroohar: Oh. I find that so disingenuous. It's funny. I'm actually in the midst of writing a column railing against that very point of view, because frankly these companies are dying to be in China. The only reason Facebook isn't in China is because the Chinese are actually ring-fencing their own digital economy and creating more limitations about western companies going in. I find it fascinating that the line that various companies take on China is very much in sync with their own interest. For a long time, until there was incredible political pressure, you saw Google pushing to be in China in a deeper way.
Then regulators began asking questions. All right. If you're going to be helping with government security and defense programs, if you're going to be doing AI, should you also be working with the Chinese, when there's absolutely no assumption of privacy and this is a state run economy? All right. Let's think about that. On the other hand, you have companies like Amazon. Amazon's completely cut out of China, because Alibaba, its Chinese competitor, has a hold on that market. So, Amazon is trying to ring-fence US government procurement and kind of playing this little bit of a nationalist card, which is so ironic, given that Jeff Bezos and Donald Trump really don't seem to be collaborators. The whole US/China nationalism, big tech, don't regulate us, because we need to compete in the war against China, is I think incredibly disingenuous and cynical for multinational companies that have been all about crossing borders for their entire existence.
Taylor Owen: Yeah. The idea that there's a binary between free speech or Chinese control of the American discourse is a bit false.
Rana Foroohar: There's also the question of the larger innovation ecosystem. I've argued that nobody's going to out-China China. If you're trying to win in centralized planning, guess what, you're not going to win. But I think that what the US can do, and what other rich, liberal democracies can do is have a more robust free market system. One of the things I look at in my book is how a lot of small and mid-sized companies, they can't even compete. There are entire black zones around big areas of innovation, biotech, certain kinds of data analytics, AI, areas that Google, or Facebook, or Amazon would be in. Nobody can go into those areas, except to create companies that are essentially talent farms that will eventually be bought. Again, it's this winner take all environment. If we want free market capitalism to work, we're probably going to need to regulate these companies.
Taylor Owen: At the same time though there are geopolitics playing out here.
Rana Foroohar: 100 percent.
Taylor Owen: GDPR in many ways is a European economic border or a wall of some sort. There's commercial geopolitics going on there. Chinese tech expansionism is a pretty powerful force, particularly in liberal markets. Right? Is it inevitable that the US sort of promotes regulated monopolies in response to that?
Rana Foroohar: I hope not. What I would hope is that the US comes up with a set of digital values of what it would like the digital economy, which by the way, this is an industrial revolution type change, what it would like that economy to look like, how the rules can serve all stakeholders, not just make the big bigger, because that's a losing game. I mean, these companies, if you look at them even taken not just one by one, but if you look at the whole high-tech sector, it creates far fewer jobs relative to market cap even than the previous generation of tech companies, like say a Microsoft or an IBM, and certainly fewer than the previous generation of industrials. If it's all about just enriching four companies, that's not a way to run a large economy.
David Skok: Here in Canada, in Toronto in particular, there's the Alphabet Sidewalk Labs project that has gotten a lot of attention. We've reported on it extensively. It really has become a fascinating choice or paradox for people in this community to decide on which side of the fence they're on. The general framing that you hear from those that are very pro-Sidewalk is for Canada to succeed as a small entity on the world stage, we need to embrace innovation, and we need to embrace the foreign, direct investment that we get from a company like Alphabet, Google, choosing to set up shop in Canada. Then if we don't let that happen, Canada will be viewed as a backwater by the rest of the world. I'm curious what you would tell those supported of Sidewalk Labs.
Rana Foroohar: Well, I just think that that's such a wrongheaded way of thinking about things. I mean, one of the things that Canada has really going for it is the quality of its human capital. One of the reasons it has such high human capital is that it has a functioning public sector that actually spends on things like education and healthcare. I don't see any need for the government in Toronto, the government in Canada to give away what's being given away to a company like Google in the Sidewalk Project, all of this data in this incredibly asymmetric transaction. This is exactly what the stunt that Amazon pulled when it held its sort of bake off, city bake off for its HQ2 in the US, where it tells all these cities, "Okay. If you're lucky enough, and you give us enough subsidies, and you let us see all your data and all this value, we might put our headquarters in your city. Oh. And by the way, we will then jack up housing prices, because that's what happens when Amazon's in your city. We're going to need you to support infrastructure."
It's all part of this complete imbalance between what the private sector is giving and getting. If there's anything the last 40 or 50 years have shown us, it's that the balance of power has swung so wildly towards the private sector, that's why we're having this backlash against globalization. That's why we're having the populism that we're seeing. This is a time for governments to be saying, "Hey. You know what? We have all this citizen data. Let's not call it consumer data. Let's say this is the data of our citizens. We will protect it. They will own it. We might hold it in say public data banks, which then depending on what X private company is offering, they might get access to," but the idea that a private company can come in and set the rules themselves, I just think that that's completely wrongheaded.
I think you're going to end up, and I hope this doesn't happen, that Canada ends up in a kind of race to the bottom that you've seen particularly in some southern American states, where it's all about what tax subsidies, what resources can we give to a private company? You get good headline job figures for five years, and then you get a net decline in economic growth, because you've given away all the investment money in the public coffers.
David Skok: I think we could talk for hours about all the challenges. I guess, just to close, I'm wondering what institutions or who you have faith in that will help us through this period? Who are you looking to solve some of these challenges?
Rana Foroohar: Well, it's interesting. Just as some of the most articulate critics post-2008 came from the financial sector themselves, people like Gary Gensler, who used to run the CFTC, was a Goldman Sachs banker, I think that some of the most productive and articulate critics are coming from the tech industry. You look at someone like Tristan Harris, which we've already talked about. Jaron Lanier, the kind of father of AI, has been incredibly articulate about the need for individuals to capture the value of their own data. He's one of the folks that's working on the plans for a digital dividend in California, which could even turn into a sovereign wealth fund of data. Tim Berners-Lee, one of the fathers of the World Wide Web in the UK, another great voice. Roger McNamee, one of the seed investors in Facebook and Google.
I think that within the industry there are voices that are becoming more powerful, and these people are testifying in Congress, and they're helping individuals to understand what's happening. As a financial journalist, an economic journalist, and somebody that comes at this not from the tech industry myself, but with a little bit of a broader perspective, I hope that I can play some small part with my own book in that changing of the narrative.
David Skok: The book is called Don't Be Evil. I think you've left it on a nice tone here for people who aren't being evil and who are trying to advance this conversation. Rana Foroohar, thank you so much for joining us and for having this conversation, and congratulations, and best of luck as you embark on this book tour.
Rana Foroohar: Thank you. Thanks for having me.
David Skok: You know, Taylor, it's interesting. Rana's journey of discovery and how she explored these tech companies is something that I think a lot of people have wrestled with over the last few years.
Taylor Owen: Yeah. I certainly feel I have. I think a lot of people who were both either watching, and studying, and reporting on these companies or just living through the daily news on how that world has changed, has been through a similar evolution. It's pretty enlightening to hear someone write about that transition that she went through herself.
David Skok: That's it for now. I'm David Skok, founder and editor-in-chief at The Logic.
And I'm Taylor Owen, senior fellow at CIGI and professor at the Max Bell School of Public Policy at McGill. We hope you enjoyed this conversation. If you did, please subscribe at Apple Podcast, and we'll have more episodes coming soon. Bye for now.
Narrator: The Big Tech Podcast is a partnership between the Center for International Governance Innovation, CIGI, and the Logic. CIGI is a Canadian, non-partisan think tank focused on international governance, economy, and law. The Logic is an award-winning digital publication reporting on the innovation economy. Big Tech is produced and edited by Trevor Hunsberger, and Kate Rowswell is our story producer. Visit www.bigtechpodcast.com for more information about the show.