Op-Ed: How Big Tech lost its way, with products and business models that damage democracy and public safety

For 65 years, the United States has relied on its digital technology industry to create amazing products and economic growth. For most of that time, the industry has exceeded expectations. Over the past decade, however, the tech industry has lost its way, with a culture, products, and business models that undermine democracy, public health, and public safety.

Recent global events present an opportunity for the industry to readjust, and it is crucial to do so. America needs its tech industry to solve problems, not exacerbate them. But we cannot expect the industry to transform itself without the right incentives, which must come from the government and the voters.

Today’s technology industry, most of which only dates back to the early 2000s, has been allowed to operate without regulatory restrictions. Entrepreneurs and investors have focused their energy on growing as quickly as possible to scale and huge profits, without regard to societal values ​​such as consumer safety, democracy, public health, and human autonomy.

For more than a decade after the 2008-09 financial crisis, the global economy was stable with inflation and ultra-low interest rates. Stability in international trade made supply chains optimized for short-term cost. As a nation, we may have used this environment to tackle the biggest challenges facing humanity, such as climate change and income inequality. Instead, we let companies set their own priorities. They sought wealth and power, with strategies that exacerbated every problem in society. No industry suffered as much as technology.

Some new technologies, such as facial recognition, were funded without productive use. Other new industries, such as ride-sharing, ignored existing rules and regulations, consumed vast amounts of capital, and incurred staggering losses, all in pursuit of monopolies that might eventually turn a profit. In artificial intelligence, entrepreneurs claimed that massive data sets—even those composed mostly of garbage content—would make our lives better, despite overwhelming evidence of bias and bad results.

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Low interest rates and inflation encouraged investors to take more risks, so they kept throwing money at tech startups. The bigger the promise, the higher the valuation. Entrepreneurs responded with even crazier ideas. Finally, investors funded business plans that depended on suspending the laws of physics or finance. The autonomous vehicle division claimed it does not require special lines or lights at standard barriers for autonomous planes and ships. They assert that the artificial intelligence and sensors in the car are good enough, despite overwhelming evidence to the contrary. The crypto industry created a Ponzi scheme on top of bad computer science.

Each of these ideas was met with skepticism, but their warnings were not enough to overcome the enthusiasm of investors determined to own a piece of the next big thing. At its peak earlier this year, more than 1,000 startups were valued at $1 billion or more, many with little or no revenue.

The covid epidemic and Russia’s invasion of Ukraine have shaken global stability. Interest rates and inflation have increased and geopolitical tensions are forcing changes in the international economy. Governments are no longer willing to subordinate other concerns to economic growth. Supply chains built on low labor costs are being restructured. This may be the beginning of a new economic era.

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Despite booming in the early days of the pandemic, the tech sector has hit a wall. The Nasdaq is down nearly a third in 2022, while 448 individual stocks are down 70 percent or more. It could get worse, as few new tech companies have generated material revenues. Of those that have gone public in the past decade, only one has made the Fortune 500, Coinbase, at #437. It remains to be seen what, if any, social benefits will accrue from the last decade of the tech industry.

The transformation of the global economy creates great incentives for a technological reset. Consumers are facing shortages for many products. Companies should shift production locations closer to demand. Climate change requires new energy solutions, new power grids and new approaches to transportation. The extremely expensive health care system of the United States is failing to meet the needs of this country. The education system does not prepare children for adulthood.

The lesson Americans should learn from the past decade is that failure to regulate technology leads to catastrophic harm. Policy makers and voters sat back while this happened.

We stuck to five myths: There’s only one path to the tech industry. New technology is always better. Markets are always the best way to allocate resources. Industries will be regulated in their public interest. And there is no meaningful role for the government as an arbiter of capitalism.

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In fact, the current path relies on perverse incentives – change the incentives to change the direction of the technology. New technology is not necessarily better. As the pandemic has shown, markets are not always good at allocating resources. Companies cannot be expected to regulate themselves if they can make more money by not doing so. If capitalism is to function in the public interest, the government must act as arbiter.

The way forward should require compliance with the same safety standards as food and drugs, and new agencies such as the Food and Drug Administration certifying safety as a condition of market access. We must accept that the use of personal data undermines human autonomy and must be prohibited. In order for new products and business models to emerge, we must break the monopoly power of today’s tech giants.

This path will be a transformation in culture, business models and industrial structure. What seemed impossible a year ago has become more plausible as technology advances. California has most of the tools if the federal government doesn’t do its job.

Of course, entrepreneurs and tech investors are fighting change. They are understandably reluctant to abandon the approaches that have made many of them rich and powerful. But market forces have started this process. Now it’s up to policymakers and voters to drive change.

Roger McNamee is co-founder of Elevation Partners and author of Zucked: Waking Up to the Facebook Catastrophe.

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