ANTITRUST IN TECH, CAPITALISM AND DEMOCRACY

Social justice is frequently the most critical goal for many developed countries, and I will call it the primary goal in this article. And it should not be different as that is the right moral choice. America has chosen democracy and capitalism as its way to create a fair society. The current political winds and the monopolistic trend in the information technology industry are blowing against both and jeopardizing our citizens and our future.

QUALITY DEMOCRACY

In modern times, it makes no sense to generate so much wealth as we are and does not create the means for the youth to succeed in achieving a good living or leave behind homeless and hopeless the ones who did not.

How we organize ourselves to achieve the goal has been a subject of heated discussions since the early Greek Philosophers started dreaming about "demokratia (δημοκρατ?α)." I like a lot Churchill's conundrum - “Democracy is the worst political system, with the exception of all others.” Churchill was probably referring to the difficulties of maintaining a democratic state, the art of making the right decisions factoring in such a plethora of opinions and opposing points of view a society can produce. The other option, left and right dictatorships including forms of fascism and communism, has proven to be a tempting economic shortcut while killing social justice, the right for freedom of speech, creating inequalities, and crushing souls. Churchill has seen it all.

Quality democracies are the ones closer to achieve the primary goal of social justice and good quality of life for their citizens. Data shows that all of them have highly educated societies and low inequality. Those are keys to suppressing populists, feed the American dream, and to achieve efficiently high-quality public policies that promote social justice and long-term sustainability. The Nordic countries are the best examples of quality democracies nowadays, having reduced inequalities dramatically (Norway, Denmark) and portraying the world top educational systems (Finland). Of course, they are not perfect.

CAPITALISM

Capitalism has proven to be a very effective way to generate wealth and offer great support for democratic aspirations. It does create a social platform where anyone can dream about building wealth and ascend socially. The caveat though is that we need "quality democracies" for that to come true. We do need to have highly educated citizens and less inequality to create true equal opportunity - the rest is demagogy. And that means that we must have our capitalistic aspirations in tune with our democratic ones to achieve our primary goal as a society. In times when our central government intentionally ignore that delicate balance, we start to feel the effects of rising inequality and economic concentration - specifically the loss of social justice and the deterioration of our social fabric. More and more we witness the rise of violence in the inner-cities, the growth of our homeless population, the erosion of our public educational system, salaries stagnation and, the astounding wealth growth only for the top 1% of our people. I discourse about those trends in my book [Non] Human Intelligence and talk about our choices to reverse those trends by correctly ruling and applying technology.

ANTI-TRUST

We chose capitalism. Many of us even believe in low-regulated free-markets, as they theoretically could auto-regulate themselves. Most of us believe in a minimalist central government and a more engaged society. But times have proven that auto-regulation is not perfect and does not suffice, and we need additional mechanisms to ensure economic fairness and real competition. Wealth concentration can generate more wealth and leads to more economic concentration, creating a vicious cycle. When it comes to families, a Harvard and Stamford study has shown that the only proven correlation to the ability of children generating wealth is being part of a wealthy family in the first place. Analogically, the same happens in the broader economy if we do not protect competition. That makes so important for us applying anti-trust rules ruthlessly to guarantee the achievement of our primary goal. The business concentration offers a real threat to democracy directly, and it is pervasive to combat inequality. Competition is the central pillar of free-markets and auto-regulation. It is vital to create healthy business ecosystems, drive innovation and ensure prices are set fairly in benefit of the entire population, and so our institutions must act decisively to extinguish monopolies and oligopolies as they are born.

THE DIGITAL REVOLUTION

Every business is transforming into a digital business. My furnace manufacturer now informs me monthly whether I was able to save energy and give me tips. My groceries are re-stocked according to my consumption. I can unlock my car with an app, and soon I will not have to drive it. I work without having to leave my house. But if I do, I order my coffee to be ready for pickup at the precise time I need it. Every business and I mean all companies will depend on information technology and infrastructure to be able to compete. In the new digital era, information technology is the bread and butter of any business, to acquire customers, to offer excellent services and get paid. At that scale globally we understand why some tech companies are reaching the trillion dollars mark. Apple, Microsoft, Google, Amazon are flirting with the line every day, and soon Facebook will re-join the peers. I have no doubts that such concentration was crucial to empower those companies to create new technologies and the infrastructure to support the explosion of data. Gigantic data centers spread across different geographies, and all it takes to build safety and great services levels would not have happened in small batches. The problem now is that the business concentration is starting to stifle competition and reducing innovation. We already see some signs of that. Only 1% of the apps in the Apple marketplace make some money (it is called the app swamp). The venture capital arm of those same companies is taking a bigger slice of the VC market, with more chances of making the right investment decisions and leveraging those acquisitions by integrating with their services. Entire markets have to abide by their competitive rules (try to sell a book without Amazon for example) or establish a new digital service without using the cloud infrastructure of Amazon's AWS or Microsoft.

To compete with those behemoth companies, we will need further regulation. In the USA of the '20s and '30s, we had to go into a regulation wave in the communication industry to enable competition and to ensure a balanced display of the political debate. The Communication Act of 1934 empowered the FCC to enforce those principles and since them, a great number of public hearings and arbitrations has brought the public interest above the businesses' ones, favoring healthier capitalism and social justice. The FCC and the DOJ together have regulated broadcasters, content producers, telecommunication companies, among others.

A NEW REGULATION

With the on-going digital revolution and the growing importance of information technology (IT), the need for further regulation in this industry is vital to keep building a healthy society with social justice. I think we should even create a new federal commission focused in the IT industry with similar principles and mandates of the FCC. It is vital to understand competition at a Global level, especially with the Chinese counterparts, and the impact of regulation in the USA considering both the internal and external markets. The impact of tech is so essential for the future of nations that Denmark has appointed a Diplomat to Silicon Valley, stating that today the Valley has more influence in their economy than many other small countries. To put in perspective, the top five tech companies in the US account for practically four trillion dollars in annual revenue, what pairs with Germany GDP, the fourth largest economy on the planet.

The question now is how to regulate the IT industry and enforce anti-trust laws. I want to offer one possible solution although the conversation becomes a little more technical. Those big IT companies work in three different layers of solutions, depending if they offer digital infrastructure services (IaaS), platform services (PaaS) or software services (SaaS). The software services are the simplest - every time you run software or apps in their servers, you are consuming software as a service. It is the case when you use Word, Grammarly, Instagram or Slack. The next layer is for platforms. Every company willing to develop or commercialize its digital services need a digital platform to do it. The apple marketplace, I-Tunes, the Microsoft store or Facebook app store are all platform examples from the same companies. And if you need to build your store, you will end up working with them. The top layer in this stack is infrastructure. Only bigger businesses will need it. In simple terms, instead of buying all equipment (servers, data storage devices, etc.), you can hire the same infrastructure from those companies according to your usage level. You make all fixed costs, variable in the magic of the cloud — amazing services, developed by amazing companies.

Things start to get complicated when a company manages the three of them altogether. Companies selling SaaS, PaaS, and IaaS at the same time, get a privileged view of the market and can stifle competition to others. The Facebook (FB) role in the last presidential election is an excellent example of the attractive forces to favor its growth over ethical behavior. Facebook is a Software and a Platform at the same time. Making privacy rules more flexible for apps like Cambridge Analytica helped to generate more revenue to the platform and advertisement on the FB app. The privileged market view of a SaaS and PaaS company derailed its moral conduct. Another example, the monopolist position of Amazon in book sales makes it impossible for publishers and writers to negotiate their royalties. We can only imagine what a company offering IaaS can see in terms of marketing trends and so guide its R&D and Venture Capital arms. Microsoft acquisition of LinkedIn brings similar concerns over competition annihilation in the corporate market. Crossing users and Corporate data in the workplace market will drive the creation of new services that no one else will be able to compete. What we learn in all those examples is that the dominance in two or three layers is what threats competition and the new capitalism itself. There is a big call for regulation and one aspect the DOJ should consider whether the same company could act in the three layers of technology. Break them apart in different businesses and ensure fair treatment for every competitor, granting equal access to aggregated data in each level.

It is time to act. Regulation can promote competition, more innovation, more opportunity for small businesses and foster more social justice because of better wealth distribution. The DOJ anti-trust division started last November hearings on the monopolist aspect of tech companies. Just in time. The ample discussion of such topics and timely regulation in IT is necessary to the health of capitalism and democracy itself.