The Political Backlash Against Tech: Good, Bad and Ugly
April 04 2018 - 1:16PM
Dow Jones News
By Greg Ip
In the libertarian rules-breaking culture of Silicon Valley,
Washington is the enemy of progress. The last two weeks seem to
confirm that as a wave of regulatory and political backlash
hammered the stocks of Tesla Inc., Facebook Inc. and Amazon.com
Inc.
But to lump all Washington backlash together is too simplistic.
Public scrutiny can be good, bad or downright ugly for
technological progress and recent events provide stark examples of
all three.
-- The good: Autonomous vehicles could make transportation
cheaper, more efficient and safe. But on March 18 a driverless car
operated by Uber Technologies Inc. killed a pedestrian in Tempe,
Ariz. Five days later in California a driver died when his Tesla
crashed while in semiautonomous mode. Arizona Gov. Doug Ducey
suspended Uber's testing and the National Transportation Safety
Board launched investigations of both accidents.
Experience suggests these investigations won't shut down
progress but instead could help identify and correct flaws in the
technology and thus ease the way to commercialization. State and
federal regulators are eager for progress in the technology because
its benefits are so tantalizing. On regular cars autonomous
features such as collision avoidance and lane-departure warning
systems and automatic braking have already reduced accidents.
Francesca Favaro, a transportation technology professor at San
Jose State University, says states are steadily opening roads to
autonomous vehicles. She notes that California, which is typically
more demanding in its regulation, has now allowed the public to
apply to deploy driverless cars that meet the highest standard of
autonomous capability. "I think the technology is here to stay,"
she says.
Ms. Favaro compares current driving technology to fly-by-wire,
which in the 1970s helped computers to control aircraft flight;
ad-hoc certification of the feature came along later. Even now,
with rigorous federal certification requirements, plane mishaps can
be aggravated because of flaws in the software or in its
interactions with pilots. But she says it has still helped make
flying 10 times safer since the 1970s.
-- The bad: The uproar over how Facebook user data was used to
target political ad campaigns exposes an uncomfortable reality: The
collection of such personal information is precisely what makes
Facebook so valuable to advertisers and thus shareholders.
Until now the conventional wisdom was that this was win-win: in
return for sharing their information, users get connections,
targeted features and ads, and free services such as photo sharing.
"In the space of a few months, we've started challenging something
that seemed unassailable: the value proposition of the win-win,"
says Alessandro Acquisti, an economist specializing in data privacy
at Carnegie Mellon University. Lost privacy, political manipulation
and social media addiction may not carry a dollar sign, but the
cost is nonetheless real.
At some point regulators and perhaps Congress may have to enact
tougher measures to address these concerns. Some critics propose
blocking Facebook from acquisitions that expand its dominance of
online advertising; others advocate something similar to the
European Union's General Data Protection Regulation, which takes
effect next month. Users must give explicit consent to their data
being harvested, can demand that their data be deleted, and be able
to move their data to competitors. Violators face heavy fines.
That could come with costs. A study co-authored by Catherine
Tucker of the Massachusetts Institute of Technology found that in
countries with stricter data protection laws, display web ads
became much less effective, especially on news sites. In a separate
study, she and her co-authors predicted certain data protection
rules would disproportionately hurt small and new firms.
But Mr. Acquisti said the total economic effect is more
ambiguous. By constraining Facebook's monopoly power, data
protection may transfer profits to competitors such as traditional
publishers, and it may increase confidence in Internet content and
thus usage, he says.
-- The ugly: There are reasons to worry about the power of
Amazon but President Donald Trump's Twitter attacks have
highlighted the wrong ones. He says Amazon package delivery costs
the U.S. Postal Service money, while a former postmaster general
said in fact the service benefits from their relationship, and the
president says the company pays too little tax, something Mr. Trump
once said was a sign of business acumen.
He also reportedly wants an antitrust investigation of Amazon
because it has put so many traditional retailers out of business.
But this isn't illegal, it's what innovators do: attract customers
with a superior or cheaper service, as Sears Roebuck Co.'s catalogs
and Walmart Inc.'s superstores once did. It's turned retail into a
lonely bright spot in U.S. productivity growth: according to J.P.
Morgan, online sales per employee last year averaged $1.4 million,
nearly five times the level at brick-and-mortar stores.
The Supreme Court long ago ruled that antitrust law is meant to
protect competition, not competitors. "The coherence and integrity
of antitrust require that successful firms not be attacked simply
because they obtain dominant positions," Carl Shapiro, an antitrust
economist at the University of California at Berkeley, writes in a
recent paper.
If the Justice Department or the Federal Trade Commission
pursued Amazon, it would raise suspicions of subverting this
principle to satisfy Mr. Trump, who holds a grudge against its
chief executive Jeff Bezos, who also owns the Washington Post. That
could hurt in several ways: by punishing the most competitive
companies, both productivity and innovation would be set back.
Politicized regulation would add to the uncertainty that businesses
regularly complain deters confidence and investment.
Write to Greg Ip at greg.ip@wsj.com
(END) Dow Jones Newswires
April 04, 2018 13:01 ET (17:01 GMT)
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