Financial Times - Release Big Tech’s grip on power
the media pirate
June 18, 2017. Rana Foroohar.
Silicon Valley is defending a business model that looks a lot like rent-seeking.
Silicon Valley has dominated recent news, from disgraced Uber chief executive Travis Kalanick’s leave of absence to work on “Self 2.0”, to the threat of massive antitrust fines against Google in Europe, to Amazon devouring the upmarket grocer Whole Foods.It will this week too, as the leaders of Big Tech gather at the White House for a summit on how private sector technology companies can help government tackle its largest digital dilemmas.
The CEOs will give President Donald Trump ideas for how to use Big Data, adopt cloud computing and make procurement more efficient. But our biggest technology conundrum — what to do about the fact that Silicon Valley holds too much economic and political power — isn’t on the agenda.
No wonder. Over the past few years, Big Tech has quietly become the dominant political lobbying power in Washington, spending huge amounts of cash and exerting serious soft power in an effort to avoid regulatory disruption of its business model, which is now the most profitable one in the private sector.
Companies rich in intellectual property like those that sit in Silicon Valley now control about 80 per cent of the global corporate pie.
Over the past few years, they have begun spreading that money liberally around Washington. According to the Center for Responsive Politics, the internet and electronics industry together spent a record $181m on federal lobbying in 2015 and $178.5m in 2016, making them the second-largest corporate lobbyist, behind Big Pharma. Alphabet, Google’s parent company, is now the tenth-largest individual corporate spender in the country.
That’s only what we can see. Silicon Valley also funds any number of unrelated non-governmental organisations or interest groups that then help argue the corporate case, either explicitly or by not pursuing agendas that could be harmful to tech.
Google alone has thrown money at more than 140 such third-party entities, from the American Library Association to the American Association of People with Disabilities, the National Hispanic Media Coalition and the Center for American Progress, as well as funding several academic institutions and media fellowships.
Google, Facebook and other major tech firms also have their own revolving door between Washington and industry, regularly hiring influential government officials who then move in and out of business and policy circles, pushing tech-friendly notions like the idea that privacy is somehow a civil liberty infringement, or that cheaper prices should be the key metric for consumer good.
Exactly how and where technology companies push their legislative agendas is hard to know — Alphabet, for example, scored only 52.9 per cent on the most recent CPA-Zicklin Index of corporate political accountability (a spokesperson for the company says they are “committed to transparency in all areas of our business” but tally the metrics differently). By contrast, Microsoft, which was under regulatory scrutiny much earlier, was top of the CPA-Zicklin tech pack with a score of 95.7 per cent.
Big Tech is trying desperately and in myriad ways to avoid the “m” word: monopoly. That is increasingly difficult, not only because they so clearly are natural monopolies with network power — Google has 88 per cent of search advertising, Facebook owns 77 per cent of mobile social traffic and Amazon has a 74 per cent market share in the ebook market (and perhaps soon groceries) — but also because consumers themselves are becoming uneasy about how such corporations behave.
As Google’s Eric Schmidt himself once put it, his firm has had an explicit “policy to get right up to the creepy line and not cross it . . . We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you’re thinking.”
Heaven knows they can monetise it. But should our data be their revenue stream? That’s the question the White House, and the public, really should be asking. These IP-rich companies are getting wealthy from the data that we all create.
Meanwhile, they pay lower than average corporate tax rates (since it is easy to domicile IP wherever it is most tax advantageous to do so) and create far fewer jobs than similarly valued corporate giants of the past. Seen from that perspective, their business model looks an awful lot like rent-seeking.
There are ways to fix things. Consumers might own the rights to their own data streams. Labour laws could be revised so that tech firms cannot deny benefits to workers who are clearly full- time (another interesting idea being floated in policy circles is that independent contractors should own IP they create on the job). Portable healthcare and pensions not tied to full-time employment would make it a little easier for the new freelance workforce to “always be hustlin’,” as Mr Kalanick put it.
Ultimately, the Silicon Valley monopolies should be broken up, as every other natural monopoly, from railroads to telephones to utilities, was before. It won’t happen soon. But tomorrow’s White House meeting should at least remind everyone that these firms are no longer upstarts, but the ultimate political insiders.
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