Category Archives: Big Tech

Cory Doctorow: The Monopoly Web Is Already Here

Cory Doctorow doesn’t buy the hype. 

While many critics of Big Tech ascribe diabolical genius to the dominant internet firms of today, Doctorow sees a collection of mediocre sociopaths. 

This article is part of CoinDesk’s “Internet 2030” series, an examination at the technologies developed today that will power the economy of tomorrow.

The polymorphous Canadian-British tech blogger, science fiction writer and co-editor of the blog Boing Boing is out with a new book called “How to Destroy Surveillance Capitalism.” Therein, he pushes back on the premise offered by Shoshana Zuboff’s influential tome “The Age of Surveillance Capitalism,” and argues that today’s tech monopolies are not inevitable, invincible or impervious to change. 

Doctorow doesn’t think the web of 2030 will necessarily be as monopolized as it is today. When we spoke in September, he continually brought our conversation back to the present. As a science fiction author, he is distinguishes the way things happen in stories from the way things happen in the world. But science fiction, to him, is reflected in our reality. And none of it is far-fetched – it’s already happening today. 

We talked about how monopolies came to dominate today’s economy, why he disagrees with the orthodoxy of tech criticism, and why Disney’s live action remake of Mulan costs $30 to stream. 

It was a hot summer day, weeks before wildfires began to ravage the western U.S. Doctorow sat outside his house in Burbank, California, above a high-speed fiber optic loop that his tax dollars had subsidized to serve the major movie studios in the area. He did not have access to it, though, all because Burbank, California has an exclusive contract with internet provider Spectrum, whose CEO is one of the highest paid in America. 

Early in “How to Destroy Surveillance Capitalism,” Doctorow asks a loaded question:

“What if the trauma of living through real conspiracies all around us – conspiracies among wealthy people, their lobbyists, and lawmakers to bury inconvenient facts and evidence of wrongdoing (these conspiracies are commonly known as “corruption”) – is making people vulnerable to conspiracy theories?”

This question is one way into examining the harm he thinks monopolies are causing today, and the distrust they breed in institutions, rather than conceiving of tech firms easily being able to manipulate us into believing falsehoods. 

The monopoly web is already here, even if we don’t see it yet, it seems. 

The following conversation has been edited for length and clarity. 

You recently published “How to Destroy Surveillance Capitalism.” For those that haven’t read it, how would you lay out your arguments?

There is an incompatible account of what’s going on with the concentration of power on the internet. My book is a challenge to the kind of orthodoxy of surveillance capitalism that Big Tech uses data to manipulate us, and it’s so successful that we just don’t even try to find competitors for them. There is this idea that the data forms this competitive wall that makes challenging them impossible. 

That traditional theory is a powerful one because it explains a lot of stuff. If Big Tech is really good at manipulating us, then maybe that’s why people believe all kinds of crazy things. Maybe the reason flat-earthers and birtherism and all the other kinds of conspiratorial modes are on the rise is that this ‘big tech convincing machine’ has convinced people of crazy stuff. My shorthand for this idea is that Facebook and Google built some mind-control way to sell you a fidget spinner, and then Cambridge Analytical stole it and made your uncle a racist. 

I think that this gives the tech companies too much credit. 

So now we’re getting into the difference between that orthodoxy and what I believe. I think that critics of big tech are absolutely right when they say they’re really untrustworthy, they lie all the time, they lie about when they’re spying on you, they lie about what they do with the data and so on. The problem is that they don’t go far enough. 

My belief is that the companies are just old-fashioned monopolies. Their growth is not because of the magical properties of data or network effects or whatever. It’s just because they bought all their competitors. Which is a thing that used to be illegal and is now legal. They created vertical monopolies, and they did all kinds of scummy things, but the reason that people believe outlandish things is because we had a collapse of trust in our institutions. 

Read more: ‘Digital Mercenaries’: Why Blockchain Analytics Firms Have Privacy Advocates Worried

The reason we have a collapse of trust in our institutions is because we’re living in an age of monopolies in which all of our institutions have become really corrupt and they cease to become a reliable source of information about what’s true and what isn’t true. Sure, sometimes they’re reliable.But when the Center for Disease Control (CDC) wakes up one morning and says, ‘Oh, by the way, nobody should get tested for coronavirus because the Trump administration says so,’ you question these institutions. I don’t know how to evaluate whether I should or shouldn’t get a test, I’m not an epidemiologist, so I have to rely on the CDC. And I can’t. 

So I just end up trying to find someone who sounds like they know what they’re talking about and trusting that. That, I think, is the source of this conspiratorial belief, and the thing that supercharges the trauma of what happens when regulators are not acting as honest brokers. 

When the FDA says, ‘Sacklers, go ahead and sell all the oxys you want; we believe your terrible science that they’re safe’ and 200,000 Americans die in the ensuing opioid epidemic, not only are people like, ‘Wow, our regulators are really bad at their job,’ but also the fact that they’re really bad at their job is why I don’t have a father anymore. Now you’re really looking for answers. 

Read more: Ben Powers – The Web Wasn’t Built for Privacy, but It Could Be

The intersection of trauma and corruption creates conspiratorial thinking. Tech companies are endless founts of both, but not because they’re able to control us, but just because they are absolutely mediocre sociopaths who do exactly the same thing that robber barons used to do, that Vince McMahon did to shrink wrestling from 30 leagues to one league, and Luxottica did in buying all of the eyewear brands, and Disney and Fox did last year when they merged – consolidate into monopolies. They’re just completely normal sociopaths, doing absolutely banal and easy-to-understand crimes. 

When we treat them like super geniuses who have invented incredible machines, we end up with these weird prescriptions. And this is the other place I break with this orthodoxy, because the main orthodoxy that you see in books like Shoshana Zuboff’s surveillance capitalism book is that once the mind-control ray of Big Tech exists, none of this stuff we used to do about monopolies works anymore. 

Is that why Disney’s live-action Mulan costs $30 to stream on its platform?

You’re actually getting into a subject that I deal with in an upcoming essay. The term that we used to use before the term ‘intellectual property’ was ‘authors’ monopoly, and when people who are copyright reformers use the term ‘authors’ monopoly’ people who are actual authors get really pissed off, because they’re like, ‘I don’t have a monopoly. I don’t get to set prices. I don’t have negotiating leverage. I’m at the shitty end of the supply chain and I get squeezed and squeezed and squeezed. Tell me again about how I’m a monopolist.’

When entertainment conglomerates amass a ton of these authors monopoly they have an actual monopoly. They have the market power monopoly, the traditional monopoly, in the same way there are only three movie studios left. Then they’d also have these regulatory monopolies, a monopoly over these copyrights and patents, where they’d get the best of both worlds. Because if you are a regular old market power monopolist, and I try to do something to compete with you, and you stomp on me, I can sometimes sue you or maybe get the DOJ to stir up a criminal complaint against you. But if you have a market power monopoly, that is made up of this basket of authors’ monopolies, where anytime someone tries to do something that is pro-competitive, (like offering a cheaper way to stream Mulan) then the monopolist gets to sue me. 

So spinning this dynamic out 10 years to 2030. You’ve spoken about the resistance that such monopolies would invoke amongst people generally. What might that look like since the route we seem to be on right now is monopolies having more power?

As with a lot of big social problems, the bad news is also the good news. So the bad news is that there are monopolies in every sector. It’s not just that there’s a tech monopoly or an entertainment monopoly. There’s a finance monopoly and there’s a poultry monopoly and there’s a pork monopoly and there’s a grocery monopoly. There’s a soda, monopoly, beer monopoly and a whiskey monopoly. We have these super concentrated markets in every domain. To say nothing of telecoms, when everyone now totally depends on their internet access, for health, education, romance, family, employment, civics and politics. We’re all just starting to really notice just how terrible the phone and cable monopoles are. That’s the bad news. 

Because it’s everywhere and the monopolists are super powerful. When you actually look at their market cap tables, in a lot of industries, all of the companies have common owners. Warren Buffett, for example, owns a big chunk of all of the airlines. There’s lots of economic data that shows that when firms have common owners, when the same money manager is controlling a really sizable chunk of shares in every company in a sector, those companies start to become less competitive. No one knows what the mechanism is. No one knows if Buffet saying ‘hey Delta, United’s got a flight from Chicago to Kalamazoo run, why do you need one,’ or if it’s something subtler than that. We do know that less competition is a reliable outcome. 

So you have these monopolies, not just within sectors but within capital, and then cross sectoral monopolies. The same investors that own big stakes in all the major airlines also own big stakes and all the major hotels. Recall that Marriott and Starwood merged last year or the year before. So we’ve got this super concentrated hotel sector. That super concentrated hotel sector has the same major investors as a super concentrated auto rental sector and a super concentrated aviation sector. You have this unbelievable market power in the hands of just a very small number of people. That’s the bad news. 

Read more: How a Hacker Launched a Decentralized Network to Track Internet Censorship

The good news is that it means that everybody in every walk of life, doing every kind of endeavor is suffering at the hands of monopolies. Though they don’t know it yet, they all have the same cause. There are university professors and students who are pissed off that they’re having to assign a different Pearson textbook every year and that textbooks are up 10,000%, over 10 years and there’s only three companies producing university textbooks. They don’t really know it, but they are angry about the same thing that Frontier internet customers are pissed off about. Frontier just went bankrupt. From their filings, we learned that one of the major assets they actually booked as a line item and their balance sheet was 1 million households that had no choice but to buy internet from them. They value that as an asset and the way they calculate the value of the asset is how badly they could gouge them and how poor their service could be before they would just say I guess I don’t need the internet anymore. 

I live in Burbank, California where we raised a bond and built a 100 gigabit fiber loop that connects all the major movie studios. We have Warner, Universal and Disney here. I’ve used that fiber loop because I used to contract for Disney. It’s an amazing fiber loop and it passes underneath my house’s foundation slab. 

Through the city, though, we have an exclusive deal with Spectrum and they will not allow the city to use the fiber optic cable under my house, paid for with a bond that my city raised and my taxes are servicing the interest on. I can’t access that fiber. I have to pay monopoly rents to Spectrum. 

Spectrum’s CEO was the fourth-highest paid CEO in America last year. They provided no PPE or hazard pay for their technicians in the first few months of the pandemic. Instead they gave them, by way of a thank you gift, coupons for restaurants that weren’t open and may not survive. They were sending technicians into our houses. So they weren’t just killing their own technicians. They were killing their customers too. 

We have the same fight as people who are pissed off that they want to be part of the conversation on Facebook, but every time they try they’re hounded by Nazis. We have this mass movement in potentia, of hundreds of millions of people who are all angry about the same thing, but they just don’t know it yet. 

What we think is that we have 1,000 causes. What we actually have is a movement with 1,000 ways to get involved. When that moment happens, it’s going to be seismic.

So what do you want to see? Borrowing from your book, how do we get out from under the boot of tech monopolies?

As a novelist, I am capable of distinguishing the way things happen in stories from the way things happen in the world. Anyone who tells you they have a plan that gets you from A to Z is kidding themselves or kidding you. Instead, I think the best that we can hope for is some rules of thumb, some heuristics for a program for change. 

I think about this like I think about parallel parking, which is a chore that I’m incredibly bad at. My version of parallel parking is I torque the wheel all the way over and get like a quarter of an inch of space. And then I turn it all the way back and get another quarter of an inch. I get closer and closer to the curb and I inch my way in because I’m not capable of finding my way across four lanes of traffic to get into a spot. I’ve got to go iteratively. You can think about there being four directions that we can try and find some slack in to advance a pro-competition program. 

So there’s markets and starting businesses that challenge monopolies and create commercial stakeholders for pro-pluralistic, anti-monopoly policies. Those stakeholders are both the employees and owners of those companies and the customers who love their services. So that’s that’s one thing: markets. 

Read more: Zephyr Teachout: Take Back the Economy From Economists

The next thing is the laws. Better enforcement of existing laws, the passage of new laws, the creation of new regulations and so on is the second thing. Things that are illegal are hard to have markets for. That’s why the markets for illegal things are super dysfunctional, and why the illegal drug market is full of all kinds of weird things and doesn’t act like you expect a traditional market to act. The more legal reform we get the more markets we can have. 

Then there’s then there’s code, there’s technology. Challenging tech monopolies involves doing things, not just, like, founding alternatives to Mastodon or Diaspora, but also creating these bridges that connect the monopoly platforms with new market entrants. 

The fourth piece of this is norms. So right now, people’s imaginations are so constrained. You see this, for example, in the fight over the copyright directive in the EU last year, which mandated that all platforms would have to install copyright filters, similar to the ones that Google uses for content ID. The idea was that if you could shift a couple of points from Big Tech’s balance sheet to Big Content’s balance sheet, that Big Content would drop a few crumbs on the table of actual performers and creators. I’m 100% here for the performers and the creators but the idea that all you can hope for is a slightly more benevolent dictator, shows you just how constrained our imagination is. 

What if instead we said, ‘Hey, let’s have a competitive landscape, where they actually do have to bargain with us. Well, let’s have blanket licenses where the money goes to us and not to the labels. So companies that do tech, big and small, can offer access to this to music but we get paid directly when it happens because it’s a statutory regime. It’s a new law. So you have a new norm that makes a new law. ‘

Read more: When Corporations Violate Privacy, They Do Concrete Harm

That law says, irrespective of what my contract says with my label, half the money for this music license just goes directly to me. This is like lunch money that bullies can’t take away. So norms allow lawmakers to make laws because lawmakers are leery of doing things that will enrage voters. They don’t necessarily do what voters want but they don’t want to erase voters. 

And laws that are positive to a kind of pluralistic business landscape lead to the creation of more firms, so they change our markets. Those markets create new stakeholders which reinforce the norms, and that also encourages people to write more code and gives you more technology and more things that are technologically possible. 

So between the code, the law, the norms and the markets, we can turn the wheel all the way in one direction and get a quarter of an inch, and turn it all the way in one of those other directions and get another quarter of an inch. We can inch our way in and have these self-reinforcing loops, where the part that you know how to do, which is set norms writing for a magazine or a newspaper, emboldens a technologist which creates a business which changes the law and so on and so on. 

That’s our actual way out of here. It’s not like we paint ourselves like Mel Gibson in ‘Braveheart,’ where we raise our swords and we say, ‘They can take our lands, but they’ll never take our freedom!’ and then we just run at the English. We do a lot of stuff for a long time and according to our proclivities and our capabilities, and we do it in the understanding that we’re all on the same side, that we’re all working for the same cause, and that’s what allows us to emerge victorious. 

2030

What It Means if Companies Like Twitter Are ‘Systemically Important’ to Financial Regulators

When I first suggested Systemically Important Social Media Institutions (SISMIs) were the social media parallel to Systemically Important Financial Institutions (SIFIs), I did not expect the theory to be picked up by financial regulators.

As it turns out, the New York Department of Financial Services (NYDFS) essentially agrees with the argument, as seen by its investigation into the recent Twitter hacks. In the “Twitter Investigation Report,” the department recommended creating a “systemically important” designation for large social media companies, like the designation for critically important bank and non-bank financial institutions. 

Jenny Leung is a blockchain and fintech attorney at Blakemore Fallon PLLC dba Ketsal.

If you’re wondering why the New York’s financial services regulator was directed to conduct an investigation into the hack of a California-based social media platform, recall that NYDFS licenses Coinbase, Gemini and Square – all companies affected by the Twitter hack that resulted in losses of approximately $22,000 worth of bitcoin by their customers.

Considering the complex web that binds social media companies with financial companies, the economy, markets and politics, it ultimately wasn’t all that surprising to see a state regulator thrown into the mix. Even Gov. Andrew M. Cuomo noted, “This type of hack by con artists for financial gain can also be a tool of foreign actors and others to spread disinformation and – as we’ve witnessed – disrupt our elections.”

See also: What Happens if Big Tech Only Gets Bigger?

As the Twitter report highlights, more Americans are getting their news from social media. I originally argued that if certain social media institutions were to fail today, their failure would pose a significant threat to society due to their outsized influence, size, reach, society’s co-dependence on them and “their power to shape the interpretation of public events.” In other words, any changes to the way SISMIs operate could lead to rippling effects across the globe. After all, they are centralized companies with highly distributed users and employees. 

NYDFS points out that because no regulators have the authority to uniformly regulate internet-based social media platforms or to oversee their cybersecurity concerns, they recommended:

  • Creating a “systemically important” designation for these companies; i.e., labeling social media companies that cross a certain threshold so as to subject them to further regulatory oversight
  • Establishing an expert agency to oversee designated SISMIs
  • A new regulatory framework for SISMIs

Some complications arise from the imposition of a new regulatory framework. In the U.S. alone, any novel framework would need to factor in President Trump’s executive order on online censorship, the upcoming Federal Communications Commission rulemaking regarding Section 230 of the Communications Act, considerations around ever-changing state privacy laws and a proposed federal data privacy bill, Securities and Exchange Commission regulations for public companies, antitrust and related laws and regulations enforced by the Department of Justice and the Federal Trade Commission – the list goes on. 

Outside of the U.S., setting standards that work well across borders or even harmonizing the laws of various nations is not easy, nor can it be done in a reasonable amount of time. Just look at the Principles for Financial Market Infrastructures (PFMIs) – a series of global standards that apply to systemically important financial market infrastructures that took over a decade to implement.

The Twitter hack and NYDFS Twitter report highlighted an obvious need for a tailored approach to cybersecurity and social media.

Governments around the world have proven they can respond aggressively to social media: Thailand signed an order last week allowing authorities to ban media deemed threatening to national security in response to pro-democracy protests, and Iran implemented a five-day nation-wide shutdown of the internet last year. New global standards may be both necessary and appropriate for SISMIs, yet the changes were needed yesterday and will not magically coalesce tomorrow.

If a new regulatory framework for SISMIs is introduced, we may see an exodus of companies and businesses from certain regions as they engage in regulatory arbitrage. We saw this occur in 2015 when the introduction of the BitLicense resulted in numerous cryptocurrency platforms leaving New York. Similarly, many businesses chose to block European visitors from their websites, shut down completely or restructured operations in response to the introduction of the European Union’s General Data Protection Regulation (GPDR) in 2018. 

A novel framework risks fragmenting the social media ecosystem where: (1) users are granted different access, rights and protections depending on their location; and (2) users start turning to censorship-resistant alternatives.

We experienced the latter phenomenon this year in the decentralized finance (DeFi) space as significant volumes of liquidity started to move from centralized exchanges onto DeFi protocols and decentralized exchanges. For many, the attraction was the unstoppable, non-custodial and decentralized nature of the platforms, but for the regulators and enforcement agencies they present “new and unique challenges”

See also: Richard Myers – To Beat Online Censorship, We Need Anonymous Payments

The Twitter hack and NYDFS Twitter report highlighted an obvious need for a tailored approach to cybersecurity and SISMIs, but also unearthed a larger issue – SISMIs are not only too big to fail, they may also be too big to effectively regulate on both a domestic level and international level.

Also hidden in the report is the idea that cryptocurrencies like bitcoin may no longer exist solely within the realm of payments, finance, and trade. It may not be long before we realize that cryptocurrencies have also become embedded into society and economy.

The NYDFS proposals are an important starting point for regulators, policymakers and governments around the world to consider. It is also a warning for the rest of us who continue to use and rely on these centrally controlled, soon-to-be-designated platforms, that Big Brother may be coming to town. In the interim, we may have few options except to trust SISMIs to, among other things, act neutrally and protect our data and the security of their platform. As we take a collective leap of faith, I only hope the gap is shorter than it looks. 

Disclosure

What Happens if Big Tech Only Gets Bigger?

Amy Webb, a quantitative futurist and founder of the strategic foresight firm Future Today Institute, thinks the world can, indeed, get worse.

In her most recent book “2020 Tech Trend Report: Strategic Trends that Will Influence Business, Government, Education, Media and Society in the Coming Year,” Webb examines the companies – and the people who run them – that will make the future either a utopia or a new hell.

Webb’s major idea centers around how the G-MAFIA (an invective and acronym of Google, Microsoft, Amazon, Facebook, IBM and Apple) and its Chinese counterpart in BAT (Baidu, Alibaba and Tencent) are becoming increasingly interwoven in our lives.

Digital innovations – from artificial intelligence to payments architectures – are not in themselves dangerous. But decisions made today to serve political or shareholder interests, rather than the public good, could destabilize our shared future.

This post is part of CoinDesk’s “Internet 2030” series.

She’s not the only one who sees a dystopian AI arising from the ether, nor the only person to think the G-MAFIA and BAT exert outsized influence over society and politics. However, despite technological revolts and regulatory hamstringing, she admits these companies are not going anywhere.

CoinDesk corresponded with Webb over email. The conversation has been lightly edited and condensed for clarity.

What do you suppose will happen to the “G-MAFIA” in a decade? Will they continue to consolidate power and if so, what happens to the rest of the internet? 

The G-MAFIA will continue to consolidate power. Even if antitrust measures pass in the United States, and that’s a big if, it’s unlikely the companies will accept the findings of the investigations and agree to be broken apart. 

So the question is really about how do the G-MAFIA evolve? Amazon, Google and Apple are making bold, decisive moves into health care. From Amazon’s Halo wristband to Apple Fitness+ to Google’s acquisition of Fitbit, big tech players are working now to collect and analyze our health data. 

See also: Zephyr Teachout: Take Back the Economy From Economists

But those are just devices you wear on your wrist – what about the biometric detection algorithms that mine, refine and optimize us? Or the move into electronic health data and records? And insurance in the case of Amazon, and outpatient care in the case of Apple’s employee clinics? 

If we zoom out, big tech getting into health care is just one of many areas where we’re seeing disruptive change happening at a relatively fast clip. Microsoft is building the future of smart agriculture. Facebook is, as you know very well, working on the future of cryptos and DLTs. IBM is always ignored, but it’s making important strides in open enterprise architecture for AI

They’re all vying for cloudshare. Power will be consolidated in a way that will be difficult to see if you’re not intentionally gathering data and working to connect dots across products, services and industries. They are amassing more power and influence than our governments.

What might the cultural or political effects be of an ever-greater consolidated and extractive web? 

We talk about privacy a lot, and journalists certainly write a lot of stories about data sharing, privacy and consolidation within the tech sector. But when it comes to everyday consumers and business leaders, it just doesn’t seem like these are priority issues. We’ll feel the effects when there is litigation, new policy or sweeping policy enacted.

You write about the tech giants of America and China as competitive and cooperative forces. What do you expect will happen to the “splinternet” – will the divide between east and west grow wider? 

Unfortunately, with China’s provocative moves to achieve cyber sovereignty, we’re going to see a deeper splinternet. 

See also: China Aims to Be the World’s Dominant Blockchain Power – With Help From Google, Amazon and Microsoft

There are greater forces at play here. China’s Belt and Road Initiative, which swaps infrastructure development in emerging markets for debt, could lead to BRI countries being coerced into using the Chinese internet rather than the existing internet, which to be fair relies on data transfer for monetization. 

Projects like Tim Berners-Lee’s Solid are an interesting example of emerging decentralized approaches to the web, applications and data use. Similarly, I think we’ll see more distributed networks like Golem and Morpheus. 

But it will take a long time for Web 3.0 initiatives to move from the fringes to the mainstream.

Do you see a genuine way out through distributed technologies that may give people control over their own data? 

I worry about people who never update their passwords – should we entrust them to manage sensitive data? There are complex questions about data hygiene, data governance, compliance, risk. Distributed tech solutions solve some of our problems, but not all.

Few people have an understanding of how data are collected, by whom, for what purpose. There are lots of organizations proposing some kind of “ownership” model, where we individually would “own” our data. What does that mean? 

I want consumers to be much better aware of what data they are generating – that includes the digital emissions they’re releasing without realizing it. Think of all the metadata being generated by our connected devices, the ambient sounds in our homes and offices, our movements and gestures. All of those digital emissions, plus the PIIs collected now by contract tracing apps and biometric scanning systems – I mean, we’re swimming in data. 

How can we become better at predicting the future?

As a futurist I’ll be the first person to tell you that I can’t predict the future. The math doesn’t work out. If I’m dealing with a limited quantity of variables, then yes, I might be able to make a prediction. The reason we’re continually surprised is because we’re only thinking tactically about what matters right now, or we’re thinking fancifully about the deeper future. The hard work is finding signals in the present and modeling their next-order impacts using data and rigorous frameworks. Predictions are brittle. The goal of any good futurist is preparation. 

See also: Don Tapscott – A New Social Contract for the Digital Age

The question really is: How can we reduce uncertainty? We should all try to get better at confronting cherished beliefs and accepting chaos and chance as drivers of change. Ultimately, strategic foresight isn’t about making predictions. It’s about creating a state of readiness and knowing when to act. This includes being ready for a sudden chaotic event, like a natural disaster or a global pandemic. The best strategic foresight work results in insights, internal alignment, and faster, data-driven decision-making. I like to use a flywheel analogy. With some pushing and persistent effort, the effect is a reduction in surprise and uncertainty.

I do not believe in “Black Swan” events, which are unpredictable events that come as a total surprise and have severe consequences. Nothing is truly instantaneous. When people talk about the pandemic as a “Black Swan” event, they are wrong. The virus emerged, governments made poor choices, and now we’re dealing with the aftermath. Plenty of models predicted we’d be in this situation back in December if good, disciplined choices were not made. 

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Disclosure

Zephyr Teachout: Take Back the Economy From Economists

When I answer the phone, Zephyr Teachout quickly explains our call might be shorter than planned. Both she and I are at the whim of her two-year-old toddler, who is sleeping and could wake at any time.

Teachout, a law professor at Fordham University in New York, is best known for her runs for governor of the state and for Congress from New York’s 19th district (both races she lost). She has also written numerous books, including her latest, “BREAK ‘EM UP: Recovering Our Freedom from Big Ag, Big Tech, and Big Money.” Our discussion comes the day after historic Big Tech antitrust hearings in Congress. 

Teachout sees the antitrust discussion as a flashpoint for understanding how democracy and corruption collide. To her, concentrations of private power, as with the Big Tech companies, can’t be fixed with, say, campaign finance reform. These companies are a threat to the public sphere and our ability as individuals to make decisions about the future.

We discussed the antitrust hearings in Congress, what she means by a “f–k-off economy,” and the “parallel governments” that massive companies have created for users of their services. She is not currently knowledgeable about blockchain and cryptocurrency, but sees them as potentially useful tools for achieving economic decentralization.

Our conversation has been edited for length and clarity. 

zephyr-teachout-author-photo-credit-jesse-dittmar-1
Zephyr Teachout
Source: Jesse Dittmar

What was your reaction to the six-hour antitrust hearings yesterday?

Wow. It was a beautiful thing. Congressman David Cicilline [D-R.I.]was totally clear: “This is about democracy versus monopoly. You guys work for us. We’re serious. We’re going to do serious things. And we have some questions.” He had this totally electrifying tone. 

And the committee came prepared. They had documents and they focused on the evidence at hand. It couldn’t have been more different than the Mark Zuckerberg Senate hearing after the Cambridge Analytica scandal, where senators were impressed with his earnestness and just made polite requests of him. 

See also: Why We Need a Federal Privacy Law

We have to see the documents to see whether actions these companies took are in fact illegal under current antitrust law. But there is evidence that suggests violations of existing antitrust laws and evidence of things that aren’t violations of laws but are deeply disturbing, for example where platforms use their power to copy or bully other companies.

What’s a striking example of that bullying power?

Amazon. [CEO Jeff] Bezos’ first answer as to whether they used their access to data to launch and boost their own competing products was “No.” And then there’s great reporting that said the answer should be yes. So Bezos said, ‘Well, our policy is no, but I can’t promise you it’s not done.’

Everybody understands that to sell online, you need to go through Amazon. Sellers truly do not have a choice unless they happen to start with a million dollars and want to make one. Now there’s a growing understanding that Amazon has this data insight into the companies that depend on it, and is directly competing with them. Bezos then was forced to make the concession that seemed clear all along: that these companies are competitors rather than partners. 

There is no such thing as no-governance regimes.

He always talks about the great partnerships, and I was reminded of the mob. Partnership can be a very loaded term depending on whom you’re talking to.

Obviously, the best way to stop companies like Amazon from doing that is by mandating that you’re either the platform or you’re competing on the platform. You can’t be both. You need structural responses like that, otherwise, you’re just playing whack-a-mole.

How do monopolistic companies create parallel government structures? 

There are clearly forms of private government that are smuggled inside our current public government and growing in power. If you ask somebody who is an Amazon seller what judicial system they care about, they care a lot about Amazon’s system and their own mechanisms for delisting sellers.

These companies have their own intellectual property regime, their own punishment regime, and that is as important if not more so than the public one if you are caught within the web of one of these private, growing governments. 

See also: Thibault SchrepelBlockchain Code Can Fill In When Antitrust Law Fails

This is a very old idea that we just forgot in 1980, but understood for most American history. It’s that private power always tends to form into a government of itself. And all governments have judicial systems. Sometimes systems are internal to the company, like Amazon’s appeals processor or Facebook’s content moderation system, about whether you get to be on the platform or not.

They also use the tool of arbitration, where a company is paying judges (or employees) who then don’t have to follow the rules of making evidence public. These mechanisms of arbitration and secret decision making make it really hard for people to tell stories about what’s actually happening inside these private regimes.

Mark Zuckerberg has said Facebook is now more like a government than a traditional company.

The funny thing is these guys basically tell you they want to be a government all the time. It’s like Oprah Winfrey used to say, “If you listen really closely, people tell you who they are and who they’re going to be.” They all say, “We want to govern you,” and because they are in an economic sphere, we don’t hear that as “Alexander the Great is coming for democracy.” But that’s what they’re doing.

You bring up decentralization a lot in the book. How might cryptocurrencies play a role in that?  

I think of these systems as incredibly important, but it all depends on what the governance mechanism is. When Amazon recently applied for a patent to use blockchain technology, which would basically require every seller to keep a ledger of where all their supplies come from, then basically the technology itself isn’t doing a lot of decentralization. The technology is in service of a centralized power. 

There is no such thing as no-governance regimes. When I talk to crypto advocates, they’ll often frame it as if it is a world with no governance. But there is never an absence of governance. In the end, someone controls supply. 

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Technology itself can’t do quite as much work as I think some of the advocates think. But again, let’s have that discussion, because I think there’s just unbelievably powerful ways in which it can be used for the good. 

My question for everybody is, really, when push comes to shove, who holds the trump cards? Who makes the decision? It’s never nobody. 

A core question about privacy is “Privacy from whom?”

You talk about developing a “f–k-off” economy. What do you mean by that?

I’m trying to take the economy back from the economists. They’ve been acting like priests for 40 years and telling us that we, as mere residents of this society, have no business messing with economic terms like monopoly or antitrust, and we should just trust their assessments of efficiency. When you take the economy back for people and not economists, then things like wages matter again.

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We need an economy where people have the knowledge that if their boss is really awful, they can say “f–k off” walk away. For that to happen, you need there to be actual competitors you could walk away to. Sometimes people say, “Well, there’s plenty of competition. There’s five companies that do this thing.” But there isn’t a real sense that there are meaningful options. And people should have that. I want to reclaim the idea that freedom in the workplace is essential.

How do you see privacy being affected by a handful of companies controlling so much of our economy?

There’s good research that our privacy controls got a lot worse after Facebook merged with Instagram, because they no longer needed to compete to actually protect us better than the other. There’s a nice paper on this, “The Antitrust Case Against Facebook” by Dina Srinivasan, which argues that merger was followed pretty quickly by Facebook no longer keeping its old promises towards its users. I don’t think that antitrust is going to do everything for privacy, but I think antimonopoly more broadly and a concern about power should. 

Privacy means different things to different people. If you see Facebook and Amazon as forms of government, then Facebook or Amazon saying they’re protecting your privacy isn’t a really great comfort. Your government already knows everything about you. 

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A core question about privacy is “privacy from whom?” There is a privacy relationship between an individual and centralized power that isn’t just about an individual but the public at large or the formal forms of government.

We should move, as people are with facial recognition, towards an arena where some stuff just can’t be collected at all. We say you cannot just take out your spleen and give it to somebody or sell it. There are certain things we should have an absolute ban on collecting and are not governed by contract law. 

My fear is any privacy regime is trumped by contract law, because when people can individually contract stuff away you have asymmetries of power. Right now the existing tech behemoths have a huge incentive in maintaining a business model whose goal is to maximize the information they have about people and we need to be moving towards an opposing model. 

So what’s the path forward? 

We’re in this exciting moment where there’s a lot of new antitrust energy, but it’s pretty new. I have particular solutions, particular things that I think we should do. But more important is to change our overall politics to make them more fundamentally about antitrust. I bet you haven’t asked your lawmakers about what they think about power. We have to recognize that we’re not going to get to the policy solutions until we get the power dynamics in politics that we want.

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