Big Tech meets Big Gov­ern­ment

Financial Mirror (Cyprus) - - FRONT PAGE -

Im­pres­sive quar­terly re­sults from the big­gest tech­nol­ogy com­pa­nies show that they are nowhere near sat­u­rat­ing their con­sumer mar­kets, ex­haust­ing their in­no­va­tion cy­cles, or reach­ing growth mat­u­ra­tion. Dig a lit­tle deeper, and those re­ports also il­lus­trate the sec­tor’s sub­stan­tial and grow­ing sys­temic im­por­tance. Yet, for the tech sec­tor, there is a dis­tinct down­side to this de­vel­op­ment.

With in­creased sys­temic im­por­tance of­ten comes greater scru­tiny. And, in­deed, to­day’s pros­per­ous and in­no­va­tive tech gi­ants now face the prospect of re­dou­bled ef­forts to reg­u­late and tax their ac­tiv­i­ties. The longer it takes for these com­pa­nies to recog­nise their sys­temic im­por­tance, the greater the like­li­hood of a more pow­er­ful back­lash by gov­ern­ments and the pub­lic, hurt­ing the com­pa­nies and un­der­min­ing their abil­ity to con­tinue pro­duc­ing in­no­va­tions that gen­uinely boost con­sumers’ well­be­ing.

When the tech sec­tor be­gan its evo­lu­tion to­ward sys­temic im­por­tance, it com­prised a col­lec­tion of hun­gry start-ups pos­sess­ing break­through tech­nolo­gies. Be­yond dis­rupt­ing ex­ist­ing eco­nomic sec­tors and ac­tiv­i­ties, these tech­nolo­gies ended up pro­duc­ing new de­mand for the al­to­gether new goods and ser­vices that they en­abled.

Tech com­pa­nies’ track record – time and again prov­ing their ca­pac­ity for ex­cep­tional growth – en­ables them to at­tract mas­sive in­vest­ment. They are thus able not only to strengthen their mar­ket po­si­tion in their core ac­tiv­i­ties, but also to de­velop in­no­va­tive ca­pa­bil­i­ties in new ar­eas, by tak­ing over smaller com­peti­tors, whether ac­tual or prospec­tive. And some are even able to self-dis­rupt re­peat­edly – and thus con­sis­tently to re­main at the tech­no­log­i­cal fron­tier.

Fu­elling Big Tech’s re­mark­able growth fur­ther, many of these com­pa­nies’ ser­vices are os­ten­si­bly free, fa­cil­i­tat­ing quick adop­tion by con­sumers. It helps that these ser­vices of­ten can be pro­vided as seam­lessly abroad as they are within their coun­try of ori­gin, to the point that the very con­cept of “abroad” has be­come rather elas­tic.

Over time, the ma­jor tech com­pa­nies’ rapid ac­cu­mu­la­tion of mar­ket power has led to the rise of oli­gop­ol­ies in some sec­tors, and monopoly play­ers in a few. Their so­cial, eco­nomic, and even po­lit­i­cal in­flu­ence has soared in some cases. Face­book and Twit­ter, for ex­am­ple, played a piv­otal role in gal­vanis­ing pro­test­ers dur­ing the Arab Spring up­ris­ings of 2011.

This raises se­ri­ous risks: as ben­e­fi­cial as Big Tech’s in­no­va­tions are, they can also serve as im­por­tant chan­nels for state or non-state ac­tors to bring about their own dis­rup­tions. In the run-up to last year’s pres­i­den­tial elec­tion in the United States, some so­cial me­dia plat­forms in­ad­ver­tently en­abled the spread of dis­in­for­ma­tion. More men­ac­ing, ex­trem­ists like the Is­lamic State have re­lied on so­cial me­dia for re­cruit­ment and pro­pa­ganda pur­poses.

It should come as no sur­prise that Big Tech firms tend to move much faster than gov­ern­ments and reg­u­la­tors. As such, what be­gan as a lais­sez-faire at­ti­tude of be­nign ne­glect – largely a re­sult of ig­no­rance and inat­ten­tion – is evolv­ing into some­thing more force­ful. As tech firms reach sys­temic im­por­tance, at­ti­tudes to­ward them change markedly.

This shift has be­come in­creas­ingly ap­par­ent in re­cent years, as ma­jor tech firms have faced in­ten­si­fy­ing scru­tiny of their com­pet­i­tive prac­tices, tax be­hav­iour, data uses, and pri­vacy poli­cies. Broader ques­tions about their con­tri­bu­tions to labour dis­place­ment and ef­fects on wage growth have also arisen, even as so­ci­eties in­creas­ingly recog­nise that tech­no­log­i­cal dis­rup­tion im­plies the need for ed­u­ca­tion re­form and im­prove­ments in skills ac­qui­si­tion and re­train­ing.

Yet the tech sec­tor it­self still seems to un­der­es­ti­mate its grow­ing sys­temic im­por­tance. As a re­sult, firms can lag in recog­nis­ing the need to up­date their op­er­a­tions, re­sources, and mind­sets to re­flect their shift from small dis­rup­tor to pow­er­ful in­cum­bent. That means build­ing more com­pre­hen­sive and in­te­grated busi­ness mod­els, in­formed by ex­pe­ri­enced tal­ent with ex­per­tise in a broader ar­ray of ar­eas, in or­der to move be­yond these com­pa­nies’ laser focus on in­no­va­tion.

The longer this process takes, the greater the risk that tech firms will lose con­trol of the nar­ra­tive. Be­yond fu­elling a rise in out­side mon­i­tor­ing, reg­u­la­tion, and su­per­vi­sion, there is the risk of a con­sumer back­lash – or even the fur­ther ex­ploita­tion of in­no­va­tions by ma­li­cious ac­tors.

In an ideal world, ma­jor tech com­pa­nies would rec­og­nize and ad­just to their chang­ing role in step with ex­ter­nal ac­tors, in­clud­ing gov­ern­ments and con­sumers, thereby strik­ing the right bal­ance be­tween in­no­va­tion, con­sumer ben­e­fits and pro­tec­tion, and na­tional se­cu­rity. But this is not an ideal world. And, so far, in­ter­nal and ex­ter­nal forces have been out of sync, in terms of per­cep­tions, ca­pa­bil­i­ties, and ac­tions. Add to that con­scious and un­con­scious bi­ases and con­sid­er­able temp­ta­tion for po­lit­i­cal ma­nip­u­la­tion, and the risks be­come

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