RID­ING THE DIG­I­TAL LOOP­HOLES

Idealog - - IDEALOG / SIMPSON GRIERSON -

They say the only things you can rely on are death and taxes. But some of the global tech com­pa­nies seem to have done a good job re­mov­ing one of those cer­tain­ties (and, if Peter Thiel’s vam­pire scheme works, maybe they’ll fig­ure out how to avoid the other one too).

In the past, busi­nesses seemed to un­der­stand they played an im­por­tant role in so­ci­ety as a whole. But, in­creas­ingly, the main mo­ti­va­tion of mod­ern busi­nesses seems to be cre­at­ing share­holder value above all else. Large tech com­pa­nies stretch­ing their dig­i­tal ten­ta­cles all over the globe isn’t ex­actly new – af­ter all, IBM alone has op­er­a­tions in more than 170 coun­tries, and has been a global pres­ence for decades. But gov­ern­ments are strug­gling to fig­ure out how ex­actly to reg­u­late global dig­i­tal be­he­moths like Google, Face­book, Ap­ple, Airbnb and Uber.

Reg­u­la­tion has al­ways strug­gled to keep up with tech­nol­ogy. And com­pa­nies that of­fer cus­tomers

what they want, rather than heed ex­ist­ing reg­u­la­tions that are of­ten de­signed to pro­tect in­cum­bents, even­tu­ally tend to win. But while global com­pa­nies of­fer such good con­sumer ser­vices, they’re also good at find­ing ways to get around their du­ties as cor­po­rate cit­i­zens and help fund the so­ci­eties they op­er­ate in.

For many in­di­vid­u­als, the ser­vices that many of these com­pa­nies of­fer – of­ten for free, in ex­change for hand­ing over data – are quite valu­able. And from the com­pa­nies’ per­spec­tive, their goal is to min­imise cost. So, when it comes to tax, fun­nel­ing rev­enue through for­eign coun­tries with le­nient laws makes sense and, in most cases, is still le­gal. But, in the eyes of lo­cal busi­nesses, it’s not eth­i­cal and it’s not a level play­ing field.

Spark man­ag­ing di­rec­tor Si­mon Mout­ter has been out­spo­ken on the mat­ter and says over­seas com­pa­nies need to pay their fair share of tax. As he wrote in The New Zealand Her­ald in June: “I’ve con­sis­tently called on our Gov­ern­ment to take more pro­gres­sive ac­tion and lead the way on end­ing the tax dodg­ing, as has al­ready hap­pened in the United King­dom and Aus­tralia. There is no law that forces them to op­er­ate with thinly cap­i­talised lo­cal com­pa­nies, to route rev­enue through off­shore en­ti­ties, or to have mas­sive lev­els of in­ter­com­pany ex­penses to re­duce their tax­able prof­its in New Zealand. They make a con­sid­ered choice when they use such tac­tics to avoid pay­ing tax here.”

Xero, one of New Zealand’s big­gest startup suc­cess sto­ries, is far more in­ter­na­tion­ally fo­cused than Spark, so CEO Rod Drury is less out­spo­ken on the mat­ter. But he does say there’s a real dan­ger of these huge tech com­pa­nies be­com­ing so large that they’ll be im­pos­si­ble to reg­u­late.

“The big­ger is­sue 30 years out, like an Arnold Sch­warzeneg­ger movie, is you’ll have very large com­pa­nies con­trol­ling very large rev­enue streams,” he says. “You’re al­ready see­ing that a bit with Google and Ap­ple.”

One of the run­ning jokes in the HBO show Sil­i­con Val­ley is that the founders are mak­ing the world a bet­ter place. But the real Sil­i­con Val­ley doesn’t seem to be do­ing a very good job of that, be­cause, while the democrati­sa­tion of tech is meant to be re­mov­ing bar­ri­ers, in many cases it seems to be hav­ing the op­po­site ef­fect.

The di­ver­sity is­sue among the world’s big­gest tech com­pa­nies – put sim­ply: a lot more men than women, very few women in lead­er­ship po­si­tions, and a lack of eth­nic mi­nori­ties – has been dis­cussed of­ten and many of these com­pa­nies have com­mit­ted to re­leas­ing reg­u­lar di­ver­sity re­ports.

Pub­licly, there seems to be a will­ing­ness to ad­dress the is­sue. But there are also plenty of sto­ries about en­trenched bad be­hav­iour in­side tech com­pa­nies, as well as from CEOs and in­vestors.

Take Uber, for ex­am­ple. CEO Travis Kalan­ick re­cently stepped down amid an in­ves­ti­ga­tion into the com­pany’s cul­ture of ha­rass­ment (and while the com­pany proudly pro­motes it­self as an ex­am­ple of the “gig econ­omy”, it has also come un­der fire for ex­ploit­ing work­ers’ rights).

A re­cent New York Times piece de­tailed the sex­ual ha­rass­ment sev­eral fe­male tech en­trepreneurs faced from prom­i­nent ven­ture cap­i­tal­ists in Sil­i­con Val­ley as they at­tempted to raise money. And, as Buz­zfeed’s Doree Shafrir re­ported in early July, women work­ing in VR say they’ve faced per­va­sive dis­crim­i­na­tion and ha­rass­ment at Sil­i­con Val­ley com­pa­nies.

As one anony­mous woman in Shafrir’s story said: “I love VR for its po­ten­tial, but these fuck­ing man-ba­bies are ru­in­ing it.”

In Fe­bru­ary, Magic Leap was sued by its for­mer vice pres­i­dent of strate­gic mar­ket­ing and brand iden­tity, who said she was fired af­ter re­peat­edly try­ing to cor­rect the com­pany’s gen­der im­bal­ance and hos­til­ity to­wards women. The law­suit quotes an IT sup­port lead who al­legedly said the fol­low­ing: “We have a say­ing; stay away from the Three Os: Ori­en­tals, Old Peo­ple and Ovaries.”

This lack of di­ver­sity isn’t lim­ited to tech­nol­ogy, of course. It’s a broader busi­ness is­sue and, speak­ing with

Idea­log on In­ter­na­tional Women’s Day, Xero man­ag­ing di­rec­tor Anna Cur­zon said the fact that there was no fe­male CEO lead­ing an NZX 50 com­pany un­til Kate McKen­zie took over as CEO of Cho­rus this year was un­ac­cept­able.

“There is more than enough ev­i­dence and re­search avail­able to show that di­ver­sity in lead­er­ship teams and boards drive bet­ter out­comes and per­for­mance of the busi­ness. In my ex­pe­ri­ence, change is CEO-led. A fo­cus on di­ver­sity needs to fil­ter down through the busi­ness from the top down, so that it’s pal­pa­ble within the cul­ture of the com­pany.”

Cur­zon says ad­dress­ing is­sues of di­ver­sity and equal­ity is not only the right thing to do. It’s also the smart thing to do.

“It has a huge im­pact on the health and wealth of our econ­omy in New Zealand. If it makes it eas­ier, think about di­ver­sity as a key way to grow GDP. But know that all busi­nesses in New Zealand need to be bet­ter at re­flect­ing the cus­tomers and com­mu­ni­ties they serve, be­cause all the ev­i­dence says this will lead to bet­ter busi­ness out­comes.”

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