Technological Patriotism

Technology is breaking down barriers throughout the world. Conversely, a form of technological nationalism has taken hold, limiting tech’s rise. Expect such nationalist fervor to become more widespread, more virulent, probably more unfair. 

Technology is the new oil. It’s vital to our lives, our economy, our personal wealth, our national interests. As such, governments believe it is right to be intimately intertwined in the development, use, purchase, promotion and spread of technology.

Government inquiries, embargoes, regulatory barriers and tax disputes with technology companies will become commonplace. Fighting (and/or championing) such affairs will become a standard course of business for tech firms, much like complying with accounting standards are today. VCs, start-ups and well established high tech companies will need to fundamentally reconstruct their focus. I say this all without judgment.

That most of the world’s largest, richest tech companies are American — Apple, Microsoft, Google, Facebook, Amazon, Cisco — makes this new world order that much more combustible.

Should Five Percent Appear Too Small

Big technology companies are sitting atop sizable piles of money. Many governments believe they are owed their rightful share of these piles. The European Union (EU) alleges Apple is concealing taxes duly owed on sales and profits generated throughout Europe. Their allegations rest almost entirely upon the obvious: 

“Multinational corporations have a financial incentive when allocating profit to the different companies of the corporate group to allocate as much profit as possible to low tax jurisdictions and as little profit as possible to high tax jurisdictions.”

apple international

Examine Apple’s European org chart. What does it appear optimized for? If successful, the EU’s action could cost Apple billions. That is why, when Tim Cook told the US Senate “we pay all the taxes we owe — every single dollar,” he is no doubt being 100% accurate and equally irrelevant.

Tax battles are costly for tech firms, but just one fight of many. Regulatory barriers can similarly limit the full and beneficent spread of the world’s most liberating technologies. As famed tech investor Peter Thiel recently remarked:

“It probably would be better for Europe to find ways to be more innovative, rather than ways to regulate.”

This sentiment was echoed by uber-VC Marc Andreessen, an aggressive proponent of Bitcoin, a cryptocurrency that could, in theory, disrupt a core government function and major policy lever:

‘‘The problem with building a new product or service in the existing financial industry is that tens of thousands of pages of legislation and thousands of lobbyists are going to come down on you very quickly. We needed a new technology to have the wedge to be able to enter the market, to be able to justify all the work to rebuild the system.

With bitcoin, we now think we have that wedge.”

Neelie Kroes, the EU’s digital chief, has made it abundantly clear government is not so willing to rebuild its systems:

“I do wonder how many more Valley companies have to get slapped before the rest of them realize it’s time to start investing in better relations with the EU.”

Expect such “investments” to become commonplace. Likewise, add Amazon to that list of companies who apparently need to be “slapped”:

The European Commission is poised to launch a formal in-depth probe into its serious concerns over improper state aid, dragging Amazon into a multi-pronged clampdown on sweetheart tax deals that has already ensnared Apple in Ireland and Starbucks in the Netherlands. 

To absolutely no one’s surprise, Amazon has declared it pays “all applicable taxes in every jurisdiction that it operates within.” As with Apple, the accuracy of this statement is borderline meaningless.

Prediction: numerous governments will alter their tax rules simply to prevent other governments from getting a larger share of any Big Tech monies available. To wit: Why let Europe get a (theoretical) cut of Apple’s bounty when that money could be put to better use in America? Or Brazil? Or China?

Here, There And Everywhere

Tax disputes are certainly not the only concern for tech companies. Just this year:

The Chinese government (blocked) virtually all access to Google websites, instead of just imposing 90-second delays when banned search terms were used. Experts initially interpreted the move as a security precaution ahead of the 25th anniversary of the Tiananmen Square crackdown on June 4. But the block has largely remained in place ever since.

This latest move and previous actions by China have significantly impacted Google’s long term potential inside the world’s largest Internet market. Not surprisingly, China’s own Baidu has a 90% share of search — and not because users prefer its results to Google’s.

Despite Baidu’s ubiquity, many users are finding it to be a poor replacement—especially students, academics, researchers, and technicians who need to rapidly find reliable information online. 

It’s not only Google that faces such barriers. Twitter and Facebook are both “filtered” in China. Nor is the problem confined only to American technology companies.

Two popular messaging services owned by South Korean companies, Line and Kakao Talk, were abruptly blocked this summer (by China), as were other applications like Didi, Talk Box and Vower.  

Nor is hardware spared. Despite its stellar reputation for security, China’s CCTV ran a report earlier this year suggesting Apple’s iPhone location tracking could put state secrets at risk. If true, China obviously has no choice but to take swift, decisive action.

Government entanglements can take many forms. For example, Apple was caught off guard last month when regulators did not provide the requisite approvals for the company to begin legally selling its new iPhones in China. This despite Tim Cook’s many visits to the country, Apple’s sizeable third party workforce there, and the fact Apple and its partners had readied a major advertising push, believing they had done everything necessary to satisfy the various interested parties. Not so, apparently.

Surprise! Regulators have now proffered their assent, in large part due to Apple’s latest assurances that the American government cannot “backdoor” access iPhone data and obtain any of those China state secrets as noted above. 

Rules are rules. The costs required to successfully navigate such rules may not always fall the way prices of technology always seems to fall. Nor may such rules prove as leveling. As Bloomberg recently reported, myriad new government rules in China are likely to benefit local companies, such as Xiaomi.

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Moreover, now that users in China can legally purchase iPhone 6, it may cost them more than anticipated. China’s government recently decreed that China Mobile, the world’s largest carrier, must reduce phone subsidies. The effect of such actions are obvious.

“High-end flagship phones will suffer the most from the regulation due to their prohibitive prices in the China market without subsidies.”  

“Samsung and Apple, as the two major high-end flagship phone makers, have the most to lose.”

A Day In The Life

Brazil has demanded Apple delete the Secret app from iPhone. Russia recently seized Bitcoin mining equipment at its border with China. Several US states have taken legal action against Uber and Lyft. The EU wants Google, Facebook and Twitter to help it combat what they view as online extremism — and what others view as free speech. The lesson, once again: Tech company interactions with governments will become the norm. Simply put, because tech touches everything.

No matter what you think of Europol‘s veracity, when Europe’s cybercrime unit writes the following, it necessitates a reasoned, continued and very likely financial response from well-heeled technology companies eager to profit from the Internet of Things:

With more objects being connected to the Internet and the creation of new types of critical infrastructure, we can expect to see (more) targeted attacks on existing and emerging infrastructures, including new forms of blackmailing and extortion schemes (e.g. ransomware for smart cars or smart homes), data theft, physical injury and possible death, and new types of botnets.

Death and botnets are always scary. Fighting them is no doubt expensive.

Technology’s promise carries with it parallel strands of fear, always. Consider how smartphones and social media have deepened our understanding of events around the world, such as the recent protests in Hong Kong. Now consider not everyone is pleased by this.

Tim Cook has spoken publicly about civil liberties. Is it fair to ask him — and Apple Inc — to choose a side in this latest skirmish? Is it fair to ask the same of Twitter? Many will.

You Say You Want A Revolution

I suspect you want me to say these many government interventions are dubious, the product of terminally greedy tax collectors, frightened regulators, and entrenched forces hoping to kill off outland competition.

I won’t. Mostly because such sentiments are not relevant.

The many reasons for these many government actions will grow in number, kind and intensity as technology continues to destabilize and disrupt industry after industry. You must understand: There is no bigger industry than government.

Tech is money. Money is power. All three are quickly spreading around the world and most of us want, at minimum, our perceived fair share. Do understand, however, that what’s right and what’s wrong are just two sides to this proverbial Rubik’s Cube.

Freedom is not a zero sum game. Not all believe the same is true for money and power. This is true everywhere. The really big disruption won’t just be of the established order, but of human nature. 

Published by

Brian S Hall

Brian S Hall writes about mobile devices, crowdsourced entertainment, and the integration of cars and computers. His work has been published with Macworld, CNBC, Wall Street Journal, ReadWrite and numerous others. Multiple columns have been cited as "must reads" by AllThingsD and Re/Code and he has been blacklisted by some of the top editors in the industry. Brian has been a guest on several radio programs and podcasts.

543 thoughts on “Technological Patriotism”

  1. I remember a few years ago, Charles Schumacher made a comment about Apple not playing ball with Washington (re: financial “support” and lobbying). After that he made a veiled threat that if Apple didn’t, they would soon find themselves having to answer for it. Amazingly the comment has dropped off the face of the planet, even the internet. I can’t find it again for anything. If that doesn’t scare you, I don’t know what will.

    I’ve long argued that the politically partisan “free market capitalism” debate is rather moot. I have yet to find a true free market to know if it would actually be better than not.

    I am ready for a post-monetary economy, but I fear the only thing that will change is the currency of the power. What would happen if Switchfoot’s economy of mercy with a currency of grace were to take hold? What would that power broker look like?

    Joe

    1. I am ready for a post-monetary economy, but I fear the only thing that will change is the currency of the power. What would happen if Switchfoot’s economy of mercy with a currency of grace were to take hold? What would that power broker look like?jfutral

      those who control today economy like Government, Big bank, Big Business, Big association are preparing or ready for a post-monetary economy too, i can even argue that it wont be as different as you may think it will because the problem is not as much the system as it is about our behavior and approach to society

      1. Money is just a unit of value. Shells, beads, coins, paper, cryptocurencies are just different kinds of ledgers. There is no post-“unit of value” world. Anyone who suggests an alternative TO money is just suggesting an alternative FORM of money with smoke and mirrors around it.

        People associate a lot of ills with money that are not actually caused by money. Greed, corruption, etc., all existed before money and in fact were harder for honest people to avoid before money. Money solves the inefficient barter problem and the problems of storing value in degradable and poorly portable forms. Those problems were far bigger than any downside money has ever created.

        1. “unit of value”

          Right, money in any form is simply the currency to measure what we value. Which is why I am not hoping for a different form of money. I am hoping for a different value system, something that money is unable to quantify.

          Joe

          1. “Hoping” is the key word there. We could all hope for a world in which everyone had unlimited resources so we didn’t have to worry about relative valuations of options, but its not happening. Physics ensures that things as disparate as life and candy remain on a continuum of limited resources whose value is arbitrated by our choices. Money is just the units, i.e the language, that helps us communicate our value choices. Removing money would just make it harder to arbitrate good choices.

          2. No, I meant “hoping” not “wishful thinking”. I do believe we are capable of better. Language is everything. Removing money would require a different language. I don’t see that as a bad thing.

            Joe

          3. Don’t worry my friend things has been getting better year over year for very long time in ever imaginable way despite what you saw on the dying press media who want to scare out of watching they news or buy they journal

            Crime, War, hunger, poverty, drogue use, teen pregnancy, child mortality, abuse against children and women etc have seen rapid decline or even collapse and it’s just the beginning.

            don’t let the corrupt press depress you into watching they stuff.

            the 2000th decade was the best humanity has ever seen so will this one

          4. In a certain sense, money _has_ been taken out of much of the equation thanks to the internet. Or at least given a subjugated position. Take print news, for instance. Kind of the interesting thing about this is we get to find out who is a journalist/writer because of the intrinsic value of journalism and reporting vs who is in it for the money. It won’t be a painless process, much like a forest fire. But as I’ve said in other discussions, sometimes what dies off is what needs to die off.

            Joe

          5. I like your positive outlook. I cut the cable cord several years ago because I couldn’t take TV news’ negative focus and tolerance of ignorance. It made me depressed!

            But the world is getting better. Peer-to-peer technology has a lot of potential for resolving political and economic issues more fairly and democratically by letting strangers coordinate reliably but without giving central (and therefore corruptible) control to anyone. Bitcoin is the first success in that area, but many other kinds of economic or political coordination could take advantage of that, and reduce the need for government accordingly.

          6. imagine what will happen when the next 5 billion is connected to the internet

            imagine the next wave of company that will come from them in response to they own problem, they own challenge

            imagine the impact environmentalist have had on the way company behave today because of the power of the internet.

            imagine how many start that has been born from YouTube, or even one Youtuber can bring panic to a Multi billion dollars company.

            imagine the conversation that we have today which is about solving the wold problem instead of thinking only about one country.

            the world is getting better so will the people that live in it.

          7. The world is becoming a better place, but the idea that fair and efficient trade can happen without units of value that both sides understand is incoherent.

      2. I don’t think they are interested in a post-monetary economy. That is too disruptive for those who hold the power. But should a post-monetary economy result, I agree that it likely won’t be much different. Thus my comment about the only thing changing is the currency, agreeing with the article that what needs disrupting is human nature. That’s what would make a mercy/grace economy so disruptive.

        Joe

  2. very Good analysis

    you forget something I think is very important, which could become a problem in the Future.

    while Apple is advertising their build in encryption as a mean to keep government out of our IPhone, i am willing to bet my money with anyone that the IPhone is not and will never be encrypt in China.
    there is no way in hell the Chinese government would’ve let Apple selling his IPhone in china without the ability to spy on their activist,

    but the problem is, Apple does not say that the iPhone is not encrypted in China, hence when the Chinese government bust and imprisons an activist after spying in his IPhone he though was encrypted, Apple may receive a huge Backlash from the western media and be press to choose side just as they did to Google in 2006.

    1. Hopefully the Chinese government would rather have secure phones that the US cannot access than be able to access the phones themselves. Given the NSAs resources, either phones are accessible by China/US or be neither. I think given that reality they will chose inaccessible.

      They have different views on the value of privacy in China but their government is very well educated on realities of technology (in contrast to our politicians).

      1. if you knew about the Chinese unpredictable political system and society you will know that the Chinese government would rather the IPhone be accessible by the NSA than not be able to spy on the million of their activist and Muslim minority who want to challenge the CCP, because the threat pose by the NSA from an IPhone is nothing compare the threat from their own activist to the stability to the their system

        1. Secure messaging and data on iPhones is not the same as encrypted private internet access. China can continue filtering and surveilling internet access without giving themselves and NSA access to private data on a phone.

          Apple has intentionally put their worldwide reputation on the line by stating clearly that private data on an iPhone is not accessible through a back door. That would be an extremely foolhardy thing to do if security experts were going to inevitably find a back door.

          1. China is a communist country and Apple is a for profit foreign company not an organisation hence it is not logical to expected them not to respect the rule of the country they operated.

          2. Perhaps not logical, but the evidence is Apple has put their worldwide reputation on the line that private data is actually private.

          3. with good build in encryption there is no way for the Chinese authority to have access to their activist Data to spy on them

            is not about controlling the internet access, web site or App is about knowing what they activist are doing and saying on their phone hence Apple either gave them a back door key of the IPhone is simply not encrypted in China because they would never be allow to sell it there otherwise

  3. I think taxation, security and regulations (especially but not only re: privacy) are relatively different topics, though they all involve government. Hopefully lobbying will not be the deciding process to address those issues.
    I do find the tax situation egregious. While taxes are not good per se, and often misused, gaming the system is even less acceptable. As for taking advantage of regulatory voids to create billions of dollars of vulnerabilities with no liability, that’s probably not a good thing either. How much safer would the Internet be if companies were liable for security breaches ?

  4. Thought about your article quite a while,and you are absolutely right. The more tech gets entangled with our everyday life, the more important it gets for politics. You could have mentioned the cultural aspect some more. Contrary to the US in continental Europe control over economy is desired by the public.

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