Tech, Inequality, and the ‘Industrial Complexes’

on June 18, 2020

Many of us have been doing a lot of thinking over these fraught past couple of weeks. Certainly there have been calls on corporations to do more. Several companies in the tech sector have pledged significant sums, promised to increase diversity in hiring, and reexamine compensation structures.

Laudable as these intentions might be, I think we need to take a closer look at the root of the problem. I’ll refer to a theme Senator Elizabeth Warren has been espousing for many years, which is that the ‘cards are stacked against’ many in the middle class and below, disproportionately affecting people of color. This is a trend that has accelerated during my thirty-year professional lifetime.

One strand of this economic repression has been the rise of what I refer to as several new ‘industrial complexes’ in our economy. To refresh your memory, the term ‘Military-Industrial Complex’ described the “informal alliance between the military and the industry that supplies it, seen together as a vested interest that influences public policy”. This term gained popularity when President Eisenhower spoke of its detrimental effects in his farewell address in 1961.

I believe that modern-day ‘industrial complexes’ in areas such as health care, education, and taxation have played a significant role in expanding inequality (and endemic racism), erecting barriers to racial and economic progress. Let me describe each of these in a brief paragraph, and then prescribe some ways tech might help break these down and create new opportunities for those outside today’s privileged class.

A June 16 Wall Street Journal op-ed comparing the health care systems of the United States and Singapore illustrates the failings of the U.S. if what I call the ‘Health Care-Industrial Complex’. The U.S. spends 18% of its GDP on health care, compared to 5% in Singapore, with inferior outcomes across nearly every metric. Common medical procedures cost 5-10x here what they do in Singapore (and most other OECD countries). Why? Our inefficient health care system has a massive ‘middle sector’ unparalleled anywhere else in the world, mainly orbiting insurance companies with tentacles expanding to billing and other parts of the medical bureaucracy. This is compounded by the ‘fee for service’ approach, which incentivizes treatment rather than prevention. Here’s a coronavirus example: hospitals are now spending billions of dollars in advertising begging people to come in for treatments and procedures they might have skipped during the lockdown. The fact that hospitals are desperate for revenues reveals the structural failings of our system. It’s similarly dispiriting that the high-profile health-care venture Haven, led by Atul Gawande and funded by Amazon, Morgan Stanley, and Berkshire Hathaway, has not, so far, shown any success in its objective of “simplified, high-quality and transparent health care at a reasonable cost” (Gawande stepped down in May).

This ‘health care industrial complex’ is a huge contributor to today’s economic disparities. Even if low-wage workers get health care through their employer, the miasma of deductibles and copays is ridiculously burdensome. Privileged white collar workers might be able to spend two hours on the phone fighting with their insurance company, but what about the factory worker or person for whom English is not their first language?  Those living paycheck-to-paycheck, or the 40% of Americans who would struggle to come up with $400 for an unexpected bill (according to a recent study) are massively vulnerable to the failings of the health care-industrial complex.

The system of higher education has remarkable similarities to the health care system. We all know that the cost of attending university  has risen at several times the rate of inflation over the past 20 years. This ‘Education-Industrial Complex’ benefits the privileged few. At universities, the pay of tenured professors and the ranks of well-compensated deans and senior administration have mushroomed, built on the backs of growing numbers of adjunct faculty who can barely make a living. To pay for this increasingly expensive education, a massive student loan industry, with its usurious rates, fees and hard-edged tactics, has become the education-industrial complex’s version of the health care industry’s insurance companies. So, higher education, a major ticket out of poverty, is increasingly out of reach, and/or saddles students with such debt that they are behind the eight ball from the day they graduate — which inhibits their ability to afford the middle class trappings that so many take for granted.

One more example is what I call the Tax-Industrial Complex. In many developed countries, taxes are done automatically, or, at best, take an hour for the average person to complete. Not here. The increasingly complex tax system has spawned a huge industry of tax accountants, preparers, companies, and software programs who exist merely to help you do your taxes. Or, for the privileged, to help find creative ways to pay less taxes. No other country has a bureaucracy akin to the IRS and a ‘middleman’ sector that exists to demystify it or, for the privileged, do war with it. It’s another example of an institutionalized structure that’s designed to protect the ‘haves’ and the status quo.

The more deeply entrenched these ‘industrial complexes’, the more impervious they are to reform. A mini industrial complex of lobbyists, consultants, and lawyers spends billions annually to resist structural change in the very sectors that desperately need it.

So, where does the tech sector come in? With its collective capital, brainpower, and entrepreneurial spirit, I’m hoping there’s an opportunity for tech to play a role in disrupting some of these industrial complexes. Perhaps some of the same appetite and avarice that’s been used to disrupt some industry sectors — some for good, others less so — can be applied to the health care and education industries, changing lives for the better by narrowing the gaps between the haves and have-nots.

The coronavirus era has provided a glimpse of what could happen, only because the pandemic’s disruption was so sudden and far-reaching that there wasn’t time for the usual coterie of resistors, bureaucrats, and lobbyists to get in the way. So you had remote health care, for example, arise almost instantly, and with largely satisfactory outcomes. What might have taken ten years to happen took ten weeks. Even if a coronavirus vaccine were to happen tomorrow, the new reality is that a meaningful percentage of doctor visits going forward will be online.

Or take education. The move to remote/virtual learning was by no means perfect and remains very much a work in progress. Nothing fully replicates the experience of a classroom, or the full ‘college experience’. However, we’ve seen that for some subjects, quality instruction can be delivered virtually. This certainly opens our eyes to the possibility of educating more people and for less cost.

Notable tech entrepreneurs such as Reid Hoffman and Peter Thiel have called on big tech companies to think more broadly about the impact they have on the world, and for entrepreneurs to think about bigger problems than the next micro-segmented dating app.

Some of the most important categories of business opportunity right now reflect broader global challenges: dealing with a pandemic; addressing climate change; reinventing transportation. Perhaps it’s time to add the objective of reversing systemic inequality, which is one form of racism, to this ambitious list. Deconstructing some prevalent ‘industrial complexes’ in areas such as health care and education is one way to start, and areas where tech can make a tangible difference.