Podcast. Given the political times that we are in and given the height and stocks of amazon, google, facebook and others, but you normally have a pretty broad scope of your coverage the job for the Financial Times by mandate was to figure out where the worlds biggest business and economic stories that cover them in opinion form which is a rather large mandate. I saw amazing numbers in terms of how well they took conditions to the Technology Sector since the great financial crisis and one of the numbers that really stuck out was the Global Institute figure looking at how 80 of corporate wealth was held at 10 of firm into those are the firms that were purchased in personal data and intellectual property so if you were holding the majority of the wealth they were the ones i profiled in the book there is some overlap with facebook and google making Digital Advertising they look at apple and mostly shined advertising. Its a great question. What they do have in common is the Network Effect and the Network Effect is something i talk about a lot in my book, the idea because you get paid coming to get bigger. The Business Model of these companies and as many in Silicon Valley. Everybody wants to break things, so you get in and do things and in many cases by sacrificing margins. So a company like amazon but also uber. You undercut the Taxi Services and the entire industry and worry about the profits later. This is something that the businesses havent been able to do at scaled in this way until now. That in and of itself has a lot of ramifications. It cuts the competitors and points to the monopoly power. Host its an optimistic and complicit statement about itself and what it was going to adhere to. What is bad about being big and powerful and successful . It was a mantra they came upp with in the 90s when the internet really was a garage industry. Internet was just being born and you have all of these individual smalltime entrepreneurs coming up with these companies and the reason i decided to focus on google and this idea of not being idea is that it was in their beginning. For the election theres been a lot of that on google, but the election manipulation and bad behavior in general. It looks at what is a Search Engine and how would you run the Search Engine and how woul whatu pay for the Search Engine. At the very end of the appendix section they have a paragraph on advertising and they talk about how targeted advertising which is the Business Model. Thats a business modethe busind eventually bring the users of search and advertisers into conflict. Their interest wouldnt be the same. Large entities like russia or iran or rightwing nationalists or whoever might want to reach you to influence you, so this was amazing. One of the things when i see ceos get up on the hill and say we are so sorry we could never have imagined all these terrible things. Go back to that paper in 1998. It was all there. Host in the statement dont be evil in the 90s, mid to late 90s they were seen as an ascendant evil empire and they tried to own everything. Its odd now that bill gates is now this figure in Technology Getting all this money away and why doesnt every billionaire do what he does and its seen as this kinder gentler ceo they dont come under too much fire or scrutiny like the rest of the group. Guest i didnt really focus on microsoft. And i think if microsoft had their way to ensure that they would be happy to have a successful Search Engine, but that goes to the point and everything that youve are saying homes in on what constitutes the monopoly power and anticompetitive behavior. The microsoft antitrust case which actually sort of allowed a lot of people the space for google to be born and grow, that have been over 2had been over 2t this point. That was the last time the regulators into the public looked at Silicon Valley and take took a hard look and said e have competition problems here. Microsoft spent so much time grappling with those issues that they were able to get their leg up and they were trafficking not in software but in beta and surveillance capitalism. They talk about the power of networks in how the Network Effect of surveillance capitalism would become natural monopolies. Host its complicated because while we talk about them being monopolies and having monopoly power in a lot of cases and often times they are competing with each other. But google isnt a lead i is inf your counting operating systems. Look how much competition there is. You are reminding me of an early conversation i had with google when i started thinking about this book and put forth by idea you ar are natural are natural e have an issue here and she looked very surprised and said we look like we are competing against thats the issue at this point you have a handful of players basically three or four companies that have taken over everything and are moving in to entirely new field so looking at the last few months apple, amazon and healthcare like finance weve seen them go overnight into the grocery business. It is an argument because they benefit and they are all using it and increasingly the model that has been pioneered by these businesses harvesting our personal data for free, imagine if gm got all of its steel for creepy but have doubledigit Profit Margins as well. Harvesting our data for free and selling it. Its how the surveillance is all around us now. Its in our smart home. My husband loves it and keeps it in his office and id insist he turned iturn it off every time n there. I cannot imagine. Particularly at the moment we live i do not want a surveillance device in my home. You mentioned that the surveillance capitalism. Lets talk about exactly what that is. The whole Economic System that doesnt necessarily benefit them, but they are the growth. Guest its a wonderful but everybody should read. Ive done my research. She looked in a very academic way almost through a marxist lens at the history of capitalism and how this new kind of surveillance capitalism is in some ways the ultimate mission of corrupting society or the citizens into a consumer is now turning to consumer, a person into a brawl material. So, as we are followed around online, these digital patterns are developed. We get none of that resource, so my shopping pattern the fact that i have an issue with buying shoes and at the same kind of dresses over and over again, that is my desire, thats my habits and personal information. Its being harvested by google and amazon and used to sell me more things. We havent even gotten into the time of the political. One of the things that happens online is to get more of what you put on. You are getting a lot of those but if you are clicking on rightwing hate speech that is a filter bubble and death benefits to companies because they monetize us by keeping us online longer. If you think about the power of these titans they have the robber baron said the railroad tycoons. Every ceo and every founder and billionaire when they get to be a certain size, they buy politicians and lobbying power but we have a new system in the world of surveillance where the power comes not just from topdown, and w if we can get iw big it is with the largest lobbying group now in washington but it comes from the bottom up because our behavior is manipulated. These algorithms know us in some ways better than we know ourselves. George soros, the financier and political activist and gave a speech a couple of years ago which you may have heard talking about do we even have free will in this world. Are we in danger of losing the kind of ability to really be free citizens in an open society in a world in which we can control to this level of a algorithm. Host it sounds like some of the original questions. In addition to competition. Guest right. You probably read the attention merchants. Im giving like all of this for other peoples books but its the same game. At columbia in antitrust scholar did a book looking at the similarities, but i do think that this world of digital surveillance capitalism is fundamentally different. It is a everywhere all the time, they are like utilities. Can you imagine having searched or economists were your app pulled its like a new world and we are only at the beginning of it because we talked a little bit about the smart speakers for example. Those singles are going up exponentially three digits per year. That kept my big cognitive power when you hear a suggestion given to you by the ways it is even more powerful in terms of info in your behavior then if you type in a search and go where it tells you to. And weve already seen and we are seeing as more actions rollout the power of these companies. We are not the problem, we are part of the solution. We have this idea come of this concept, differential privacy we are building into the products where we are not taking peoples actual identity data out of their device and using that through our ai we are shielding that and taking general insights and keeping ourselves clean from personal data so that we are not trafficking. Is that true . I think it is largely true. Apple certainly has had more of a commitment to privacy to be fair for its own competitive advantage than google or facebook. It isnt in the same way that google or facebook. Those Companies Make their revenue on Digital Advertising. It wants to create the network and ecosystem into so Many Services as possible so it uses the Network Effect i would point out a couple of things. For starters, it has very much pending on what country youre talking about, apple will capitulate on privacy and china in ways that it wouldnt dream of doing in the u. S. So, it certainly is subject to the political pressure, differences in the way Different Countries regulate data and it isnt going to stand up and fight beijing on these things. I would also say that theres a couple of other problems with apple that overlap some of the problems i see with google and facebook. One is in terms of who gets what part of the innovation pie. One of the arguments right now when regulators and the public say these companies are too big we need to make them smaller maybe make them break up. Its about regulation and innovation. I would argue they are foremost among us they are implementors, not innovators of pretty much other peoples technology. And you can see this playing out. There itheres a great story ine headlines in the google battle. They also have a beef to pick. The small innovator came up with this way to make smart speakers came up with a lo love of technology adopted by both google and apple as they started getting bigger and more powerful they started infringing on those patterns. Apple has had major fights with other Big Companies like qualcomm and in some ways its responsible much more so than the chinese chip maker gets a lot of flack for becoming the new go to company and they were on a three continent battle with qualcomm to biggest innovator in the world infringing on the patents at some point but said we dont want to pay what youre asking so these companies are implementing thousands of technologies. They want them to be inexpensive. They are in some cases just legally taking open Source Information and in other cases infringing on and in order to get rid of competitions of again is getting bigger and using the system i think to raise the innovation environment in ways that are a zerosum game because to make one more point, you cant have an economy in which the companies are taking all the wealth. You have to have a bigger Innovation Ecosystem. Host they would have sued amazon, too but they couldnt afford to take both of them on at the same time. Host guest apple has been taken on by spotted by. Host couldnt you argue implementation in a lot of cases . You have the beginnings of apple and the interface. How could you have this just sitting here someone has to bring it out to the world, that is one thing and that is the allegation but could one argue bringing that innovation into life come into the economy and getting to people . A lot of people would argue that. I guess i would say i dont see a Consumer Electronics product that really lets face it hasnt had a Game Changing innovation since the smartphone which was 2007. Everything else had been more iterative and its been about apple being extremely clever at the marketer as a brand creator. Value at this point lives in three places, globally, data and big brands they are able to create the kind of linear and the desirability and then in real estate. Thats kind of where the value lives. I think in the new world that we are moving into, i think that theres going to be an environment of deflation, commoditization of everything you see. You see apple is fighting hard to keep the market share. Look at them losing the battle of the big chinese smartphone maker. Apple success being able to continue packaging expensive products and selling them in giant glass boxes is actually not helping to put more americans to work. Its not helping to create the next big productive bubble say in Green Technologies or things that word bring along the Critical Mass of workers and bring our economy to the next big place. Its about selling more expensive stuff. I would argue a company like qualcomm for example, not that its perfect. Theyve done plenty of things that i wouldnt want. But that is a company that came up with the five g. Chip and this is something that makes the smartphone smart. In the current environment they are having to duke it out just to stay alive in three continental legal battles with other American Companies at the same time that you have china for example rulin ruling out ont one road working seamlessly to institute the chips and technologies into an entirely new ecosystem. I think that is a model we should be looking much more carefully at them the sort of was a fair zerosum game keeps margins as tight as you can, put jobs and products help to the supply chains when you can. We see in the last few weeks and im us the number of corporate scandals that kind of zerosum allens sheet financial thinking has led to and i dont think its leading us to a good place. So, if we think about the different systems for dealing with the challenges of Big Companies, the legacy in the u. S. Is very different from europe and in europe it is more about protecting competition. In the u. S. Its been more about protecting the consumer. It seems like in this digital era that kind of distinction doesnt work in the same way it used to because when we talked about facebook or google, they are often the Companies Want is a look at the consumer, they are paying nothing. So, this is good for the consumer. Other people say that is in the consumer. The customer for them is the advertiser, that is the consumer and they are just seeing more than nothing. As the old model for antitrust and dealing with Big Companies and competition, does that work still in the u. S. . The european model is it any better or does it all needs to change . These are great questions. Two or three points i would make one of the things google likes to say is competition is a click away. Eric schmidt, they say all the time lets be serious to go back to your question about microsoft, if you were doing a Google Search into your computer stopped working for a minute, would you go to being o nor hava cup of coffee and try google in five minutes, i would guess you do the latter. I do use that sometimes. I use google will sometimes. I did shopping on walmart as well as amazon. My data is all over the place. Equal opportunity surveillance. [laughter] the deeper point is the rules of the free market capitalism to stop working. The law of gravity but okay as long as both sides know what the transaction is into the prices are going down, then what is the problem . In this world in which you are paying not in dollars but in your data, neither of these things hold so you dont know what you are giving up for what youre getting. You know you were getting the search but you dont know how much the data is worth what you gave them for the search, so its a very asymmetrical transaction. Also, when you are doing barber and you are not paying in dollars, that isnt a free market. Thats in the way that adam smith would have envisioned the market working. He would have said ps, you need equal access to data, transparency and a moral framework for the markets to function properly. You do not have that in any of these things and you are dealing with a digital giant. It also calls in a very technical way into question this 1980s robert bork school of thought that is just Consumer Prices that matter. The fiscal path that allowed walmart to get this big and destroy the squares. Fair enough, w get our cheap stuff, thats fair i guess. There are a lot of negative externalities in math. You get less choice. But in this world of freedom, and i put quotations around because when you download these apps and do these searches, you think its free but you are paying you just dont know how much. That model really doesnt work anymore so i think you have to look at two things. You can look at the Innovation Ecosystem which is the way the europeans do it, they look at they almost look at markets like biological systems like youre looking at a petri dish and theres all these different things, the plants and frogs and fishermen. How do we make sure the system is working for every one . Is a very european way of doing things, its complicated and timeconsuming it is antitrust cases that take years and decades. The outcomes are questionable. Interestingly there is an academic who just did a wonderful book looking at how by many measures they work better and are free in terms o