The backlash against big tech
It has become fashionable to say that the internet is broken.
In the early days of course it was different; the internet was this wonderful,revolutionary tool for free expression and the democratisation of information.
Now politicians, media hacks and Silicon Valley old hands alike make it painfully clear that the dream has soured: the internet, we’re told, is fundamentally compromised by corporate interests, who merrily invade our privacy to sell ads, propagate falsehoods which undermine democracy and preside over increasingly divisive and fragmented public debates.
Personally, I’m still an optimist. But there can be no doubt that wider attitudes towards technology and technology-driven change are hanging in the balance.
Part of this is bound up with the mood of the times, the feeling that some people have that the pace of change is too fast. Part of it is down to complacency or inaction from some of the tech giants.
But not all of the criticism is justified. Some of it is opportunistic, ill-informed, and fuelled by breathless headlines. This is true across the political spectrum. The left warns of an impending corporate techno-dystopia, while
the right obsesses about the impact of the internet on traditional values and national identity.
This tangling of anxieties about tech and politics is a dangerous mix. A desire to halt or reverse progress is the natural corollary of populism. The danger is that internet angst will give rise to a new wave of Luddism.
Optimism for the future
I retain a firm liberal belief that progress is to be welcomed. We need technological innovation to help solve big global problems, from stopping climate change to mending our democracy.
The biggest threat of all is that technology’s detractors successfully undermine our collective ability to imagine a better future.
Because it is a simple fact that technological progress has benefited humanity. Standards of living across the globe are better than they ever have been in human history thanks to innovations in sanitation, medicine,
agriculture, industry – the list goes on.
True, the ’disruption’ celebrated by many contemporary tech companies can sound callous, not least to those whose jobs are altered or even rendered obsolete. We should guard against change for its own sake. And yet, disruption is the engine of progress. It opens up previously unthought-of possibilities. As Silicon Valley guru Tim O’Reilly observes in his recent book, ‘What’s the Future’:
“[The Luddites] were right to be afraid […]. Machines did replace human labour, and it took time for society to adjust. But those weavers couldn’t imagine that their descendants would have more clothing than than kings and queens of Europe, that ordinary people would eat the fruits of summer in the depths of winter. They couldn’t imagine that we’d tunnel through mountains and under the sea, that we’d fly through the air, crossing continents in hours, that we’d build cities in the desert with buildings a half mile high, that we’d stand on the moon and put spacecraft in orbit around distant planets, that we would eliminate so many scourges of disease. And they couldn’t image that their children would find meaningful work bringing all these things to life.”
Mitigating the short-term fallout from big systemic changes like these is, quite rightly, a big concern.
But technological innovation in the future, just as in the past, will increase productivity and revenues. The question is how can that innovation occur in a way which provides the greatest benefit to society at large, and avoid the increased growth, revenues and productivity from being hoarded by elites.
The writer William Gibson famously said “the future is already here – it’s just not very evenly distributed”.
London’s fintech hub represents one of those pockets of the future. While there are plenty of cities around the world that have strong startup cultures,
London-based fintech companies have a whole series of factors in their favour:
- Access to phenomenal talent, some of it homegrown but much of it international.
- Ready availability of venture capital for early-stage startups.
- Forward-thinking and globally respected regulators – the Financial Conduct Authority and the Prudential Regulation Authority.
- A long-established, £200bn financial services industry, providing a market which is ripe for disruption.
- Sophisticated consumers, many of whom think nothing of managing their money via apps provided by small independent firms.
- And finally, the happy coincidence of our timezone which overlaps with the timezones of the other major financial markets.
For all of these reasons it’s in London that innovative ideas are getting funded and brought to market, challenging the discredited banking system and improving the way that services work, from small business lending to payment processing to insurance.
Europe vs US
Of course there is of course a conventional view that the US is uniquely inventive when it comes to digital businesses. Europe is seen as flat-footed, weighed down by rules and regulations, lacking both the ingenuity and the ecosystem that gave rise to Google, Facebook and the rest.
Whether that is a fair generalisation I will leave to others to judge. It certainly hasn’t always been that way.
In the early days of mobile phones it was European companies – Finland’s Nokia and Sweden’s Ericsson – that developed the GSM standard and persuaded Europe as a whole to adopt it. The European Commission understood that a single standard was a huge advantage for home-grown startups looking for markets at scale to build their businesses. Most importantly they understood that a pan-European communications market would be the petri dish for world-beating businesses.
They were right: by 2005, more than 75% of the global cellular market was using the GSM standard, and Nokia was, for some time, the largest handset manufacturer in the world.
Shortly afterwards, of course, the release of the iPhone signalled a massive pendulum swing towards the US. But the point is this: things can and do change, and we don’t know where the next generation of world-beating companies will come from.
China has obvious advantages, not least its scale and access to vast troves of data. But Europe has serious assets too.
For example, politicians and regulators on both sides of the Atlantic are looking at the effect of the enormous size and overweening market dominance of existing tech incumbents, but in many ways it is Europe that has the stronger attachment to the idea of competition. Our anti-trust laws are based on the idea that diversity and competition are good things in themselves in contrast to the US whose legal framework is based on a pre-internet focus on price distortion and the effect on consumers.
A healthy startup ecosystem operating in a market of 500 million consumers, under a sensible regulatory framework where the competition authorities have teeth – who knows, in the right circumstances, in the years ahead it could be Europe that ends up stealing a march on Silicon Valley.
But that success also depends on a sensible and balanced system of regulation at the national, EU and international level. When it comes to Brexit, I share many of the concerns of the UK FinTech industry.
Nearly two years on from the referendum you are still waiting for clarity from the Government concerning the regulatory framework in which you will be operating post-March 2019. You have no idea how you will be able to go about hiring talented workers from the EU, or how much red tape is going to be involved. And in an industry which is heavily dependent on venture capital, you have no idea what the environment for investors will be like. Where you do have some clarity, it’s a mixed picture: a commitment to stick like glue to the GDPR, little hope of an equivalence regime for financial services, and no seat at the table as the digital single market develops. Notwithstanding the dynamism of this industry, there are undoubtedly clouds on the horizon.
My own view remains that we should keep an open mind as a country about whether we should go ahead with Brexit at all. The world is already a very different – and in many respects more dangerous – place than it was in the Summer of 2016. None of the Utopian commitments made by Brexiteers to the British people at the time of the referendum have materialised.
As David Davis once wisely observed, “a democracy that can’t change its mind, ceases to be a democracy”. That is why I hope MPs will grant the right to the British people to change their mind about Brexit when the Government
finally submits its Brexit deal to Parliament towards the end of this year.
But fundamental challenges remain, even if Brexit is paused or reversed: will tech be swept up in the wider populist backlash? How can public trust be won back? Can technology serve the common good? How can sensible
multilateral regulation be put in place? These are questions that are poorly served by the current debate.
In the meantime, the big US titans are coming under increasing pressure.
In Brussels, there is a determination that the tech sector should play by the same rules as any other sector, and the market-shaping effects of big US firms should be challenged where justified.
In the US, moves are also afoot in Congress to tighten anti-trust laws. Some are already calling for the big 5 to be broken up in the same way as Standard Oil and AT&T in the 20th century, or to open up access to their data to competitors.
And yet let’s remember how young this industry is. Google is 20 years old; Facebook only 14. Their extraordinarily rapid growth from small beginnings has been amazing to watch. They too are on a learning journey. And the harshest critics of Silicon Valley are, surprise surprise, the old media who rarely declare their own vested interest in attacking their competitors who are proving more effective at attracting advertising revenue.
To blame social media for all of society’s ills is lazy thinking. In truth, fake news, information bubbles, and the malign influence of money on politics are all problems that have been around for a long time and pre date the rise of Silicon Valley. The National Rifle Association, or unaccountable and immensely wealthy media proprietors, or Big Oil remain, in my view, more deliberately intrusive players in American democracy than Mark Zuckerberg, notwithstanding the all-pervasive presence of social media.
But it is also true that the big technology and social media companies have all too often appeared aloof and disengaged while the debate about the social impact of their products rages around them.
It should be clear by now that the dominance of social media imposes wider social and ethical duties on the social media giants themselves. If Silicon Valley executives want to avoid an increasingly damaging clash with the world of politics, they need to combine humility with a new determination to help solve the problems that are, rightly or wrongly, deposited at their door.
Over the coming years, we’re likely to see concerted attempts to regulate the internet, starting with a new – and much needed – international tax regime, and moving into increasingly sensitive and complex areas.
The worlds of tech and politics face a choice. They can choose to engage with each other, to work collaboratively to avert the growing ‘tech lash’, and shape sensible rules that support innovation.
Or they can choose to diverge. For the industry, that would mean being constantly on the back foot, reacting to criticism from politicians and a sceptical public, unable to move as quickly as it has in the past. For the politicians, it means pursuing a war of attrition against big tech, with the risk that the public mood will turn against the very idea that technology can bring about progressive change in their lives.
If we don’t overcome the current antagonisms, we will be running grave risks for the future. Progress is neither inevitable nor unstoppable. It can be halted, or even thrown into reverse.
Fear is an understandable reaction to a fast-changing world, and so it is not surprising that the current internet angst carries echoes of the Luddites’ rebellion. Yet if we get this right, and work together to address those fears, technology will unlock opportunities for future generations that are greater than we can imagine.