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Techocalypse | Learning by Proxy

Learning by Proxy is a weekly newsletter that covers things happening around the world, along with some context that helps you understand it better.
This is the 65th edition of the newsletter.

Technology regulation is becoming a minefield of complications. While the internet started out in America but its regulation started in Europe. Finally, the American legislation is catching up and how?

They are going for the jugular! While it might be hard to bell the cat; they have created the bell.

Techocalypse

In 1997, Apple was hanging on to dear life. When Michael Dell was asked what his one advice to Steve Jobs would be, he said, “Take the cash and return it to the shareholders and shut down the company”.

Both Jeff Bezos and Elon Musk were balding. Jeff went one way (shave) and Elon another(implants).

Mark Zuckerberg was probably being a prick to someone in High School and Bill Gates was the worst human to walk the planet, a title he is proud to holds to this day!

Lisa Khan was in primary school.

As the years passed, all of the companies mentioned above grew and as they grew, they made it their business to dominate their respective field. Often this involved buying out any of the up and coming competitors OR intimidating them and their investors to drop the gauntlet. They grew so much that today each of the companies is valued at figures that are comparable to the GDP of various nations. Not small ones – Apple is 70% of the GDP of India.

Between the incredible management of COVID over the past few months and the misreporting of numbers, it might as well be 100%.

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Lisa Khan grew up and went to Yale. Don’t get impressed yet, George Bush also went there. But then she wrote an article while at Yale.

Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.

Source: Yale Law Journal

The Federal Trade Commission (FTC) is a body that adjudicates ‘fair play awards’ for businesses. But instead of using carrots, they like to use sticks. They enforce Anti-Trust laws and are responsible for consumer protection. Under the Trump administration, all of the agencies were skewed towards the businesses. Their staffing reduced by half in many cases and headed by complete jokers. He even dismantled the Consumer Financial Protection Bureau which was Elizabeth Warren’s brainchild under Obama – to rein in banks, you know, who caused 2008.

Biden is making amends and he appointed Lisa Khan the head of the FTC.

Four years ago, Lina Khan was a month out of law school, where she had published a groundbreaking article arguing that the prevailing legal doctrine was allowing Amazon to get away with anticompetitive behavior. Antitrust law was not yet a high-profile issue, and Khan’s suggestion that it might apply to tech companies whose core consumer offerings were free or famously cheap was considered bizarre by much of the legal establishment. This week, Khan, at all of 32 years old, was appointed chair of the Federal Trade Commission, one of the two agencies with the most power to enforce competition law.

[…]

The introduction of the five House antitrust bills and the elevation of Khan to FTC chair, for example, look like two separate stories. But they’re really two parts of the same story: Khan was herself the key investigator behind the House antitrust subcommittee’s investigation of Apple, Amazon, Facebook, and Google, begun in 2019. The bills introduced last week are the fruits of that investigation.

Source: Wired

Lobbyist in Washington DC and lawyers in San Francisco had a busy week and signed several retainers!

Now there are 5 laws that are being pushed through Congress to rein in the Tech Companies. I had written about this piece-meal in my previous editions. Here, here, and here.

The 5 bills that are currently on the floor are –

  1. Merger Filing Fee Modernization Act of 2021 – Essentially supposed to make it a little more costly to acquire.
  2. Access Act – Meant to protect and ensure support for senior citizens – trains its guns on data portability. No more platform lock-in.
  3. American Choice and Innovation Online Act – Self-preferencing of services.
  4. Ending Platform Monopolies Act – Platform companies competing with services on their platform. Apple Music Vs Spotify or Amazon selling the same products that sellers sell on Amazon.
  5. Platform Competition and Opportunity Act of 2021Banning M&A, especially for the Big 4.

Barring the first law, which is a mandatory fee meant to make M&A more expensive, it would certainly not act as a deterrent. A few million dollars are not going to stop Billion dollar deals.

The next four are meant to be applied to companies that are considered “Covered Platforms”

This is defined as:

(i) at the time of the Commission’s or the Department of Justice’s designation under section 2(d), or any of the twelve months preceding that time, or in any of the 12 months preceding the filing of a complaint for an alleged violation of this Act –

(I) Has at least 50,000,000 United States-based monthly active users on the online platform; or

(II) has at least 100,000 United States-based monthly active business users on the platform;

(ii) is owned or controlled by a person with net annual sales, or a market capitalization greater than $600,000,000,000, adjusted for inflation on the basis of the Consumer Price Index, at the time of the Commission’s or the Department of Justice’s designation under section 2(d) or anyof the two years preceding that time, or at any time in the 2 years preceding the filing of a complaint for an alleged violation of this Act; and

(iii) is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.

Source: US Congress

The hope is that with the teeth that these laws provide, the FTC will be able to go after very specific companies. How many companies have a valuation greater than USD 600 billion?

In its current form, the bill would not even be pass because it is too tightly defined. This becomes a problem because…

A bill of attainder (also known as an act of attainder or writ of attainder or bill of penalties) is an act of a legislature declaring a person, or a group of persons, guilty of some crime, and punishing them, often without a trial. As with attainder resulting from the normal judicial process, the effect of such a bill is to nullify the targeted person’s civil rights, most notably the right to own property (and thus pass it on to heirs), the right to a title of nobility, and, in at least the original usage, the right to life itself. Bills of attainder passed in Parliament by Henry VIII on 29 January 1542 resulted in the executions of a number of notable historical figures.

[…]

The United States Constitution forbids legislative bills of attainder: in federal law under Article I, Section 9, Clause 3 (“No Bill of Attainder or ex post facto Law shall be passed”), and in state law under Article I, Section 10. The fact that they were banned even under state law reflects the importance that the Framers attached to this issue.

Source: Wikipedia

A law that targets a very small number of companies only will be treated the same way, a law only meant for the blacks would be treated. It is discriminative. The legal experts who get paid tens of millions by the top tech companies would know this. So this language would have to be tweaked. It remains to be seen if it has any teeth left when they are done with it.

The one thing that is clear, is that the anti-trust case against tech companies has bi-partisan support in the US, for vastly different reasons, but they support it nevertheless. With an FTC that is helmed by someone with strong opinions and with lawmakers who are willing to make the required laws, it won’t be too long before the axe starts swinging.

Now you can see why Jeff Bezos could not wait a day longer to quit his role as CEO of Amazon and start dumping Amazon shares. By the time this investigation start delivering blows, the newly retired Jeff Bezos would have formed a “foundation” and “Donated” all of his shares to it which would then have sold it to engage in “Philanthropy”.

Facebook bought Instagram for USD 1 billion and WhatsApp for USD 19 billion. Do you want to know what happens if the company is not allowed to buy another on the cheap like that?

and then,

The United Nations Special Rapporteurs have written to the Government of India expressing concerns about the newly notified IT Rules, 2021, and asked it carry out a detailed review, and consult with all relevant stakeholders.

Source: Inc42

Instead, if these guys could just get the world leaders around a table just like for the climate summit and debate and agree to a single law for the Internet globally, there would not be an IT Rules, 2021.

If we can agree on protocols such as Bluetooth and IEEE 802.11 (WiFi for short); why on earth can’t we agree on a set of protocols for how the internet functions and how things work within it globally?

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The leg that kicked the axe

The leg of course belongs to Britain. And the result – Brexit.

Britain left the EU in the midst of the Covid lockdown and went into stricter lockdown in Jan 2021. As a result of it, consumption declined and the hits that the county has been taking have generally been macro-economic. The fund movement by large banks to the mainland, and such.

Now as Britain emerges from the lockdown (sort of), the real effects are being left.

Agnieszka Bleka has had to work hard in past years to find companies that need workers, spending much of her day reaching out to local businesses in the northern English city of Preston where she is based.

But now, Ms. Bleka, who owns Workforce Consultants, a company that finds jobs in Britain for mostly Eastern and Central Europeans, said that she was fielding several calls a day from companies looking for temporary staff, and that she can’t keep up with the demand.

“The fish pond is getting smaller,” she said. “And people are picking and choosing the jobs, or leaving as well, going to their home countries.”

Source: New York Times

Brexit was supported in Britain because there was a perception that the migrants were stealing local jobs and causing unemployment amongst the British. To say the least, Brexit has been immensely successful. It has chased all those migrants who were doing the hard work, away.

Jack Kennedy, an economist at Indeed, a job search site, said the demand for hospitality workers was outpacing the number of available workers across the sector.

“The job postings have been rising so fast and the supply of candidates just really hasn’t been able to keep up with that,” he said, adding that a reliance by some industries on foreign-born workers who may have left during the pandemic had probably been part of the problem.

But the dearth of employees is also driving up pay, he said, with hourly wages advertised for hospitality roles across the country increasing. That raises the question of whether other industries struggling to fill roles will follow suit, and how big of an impact on the economy the shortages will have.

Source: New York Times

It seems like there is a solution to this problem – Immigrants!

Rebellion

In the show Mosquito Coast, Allie a character played by Justin Theroux walks into a poor neighbourhood. There are several homeless people who are making good with any shelter they can find. He says – you know what their crime is, they don’t consume.

Capitalism stands on the bedrock of consumption and if people don’t consume; capitalism fails. This is also the reason we will never successfully fight climate change till we hang around in this capitalistic paradigm.

China is an authoritarian state but it operates in a capitalistic paradigm. If the Chinese Communist Party is going to clamp down on free speech, the millennials have found a novel way to protest.

During its seven decades of ruling in China, the Chinese Communist Party has become increasingly skilled at crushing street protests such as the 1989 Tiananmen Square student demonstrations. But the government is now facing a new form of resistance that may be a little harder to put down—“Tang Ping” (躺平) or lying flat, a passive approach to life that subtly thwarts the government’s desire to foster a hardworking and productive populace.

The concept advocates an almost monastic outlook, including not getting married, not having children, not having a job, not owning property, and consuming as little as possible. For many, this is almost the only way in an authoritarian country to fight against the growing pressures from long work hours, skyrocketing housing prices, and the ever higher cost of raising children. Lifestyle philosophies based on rejecting ambition, and being a cog in China’s capitalist machine have been spreading in recent years, and “lying flat” is the latest culmination of such trends, explained Wu Qiang, an independent political analyst in Beijing.

Source: Quartz

The Chinese government has treated people like machines. They restricted reproduction to one child when they wanted and now want to turn that knob to 2 since it suits them. They seem to have found the extent to which humans – living in how much ever ignorance – would allow the government to push them around.

What can you do when the rebellion involves doing nothing? Can you really punish them?

“You can’t stand up, but you don’t want to kneel down. Then you can only lie flat,” one Weibo user recently put it.

Source: Quartz

Also

Last week Zoom was a sponsor at the F1 race at Paul Ricard.


I have started a space on Quora as well for those who wish to ask questions pertaining to the things that I write, you can visit the same here.

Also, follow me on Twitter @viveksrn to know when the newsletter drops.

What we think, we become ~ Buddha

You can follow my podcasts here.

Originally published on https://blog.viveksrinivasan.com

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Learning by Proxy

Learning by Proxy | Antitrust – Travel – Economy

Whenever the stock markets have reached historic peaks only one thing has followed – a humongous collapse. Most markets across the world are either past or flirting with historic highs. When will the bottom fall out? 

It is a little more complicated. Apple posted a record quarter, that too in the middle of the pandemic. Amazon is posting sales numbers that would be considered “too good” for Christmas.

I think it is panic buying and the demand caused by work from home. Christmas this year won’t be like Christmas.

When will the bottom fall out? My bet is January 2021, when do you think it will be?

There is a lot of ground to cover this week, let us dive in.

Antitrust

Two years ago, Scott Galloway wrote a book called ‘The Four’; which breaks down the extent to which Google, Facebook, Amazon and Apple had taken over our lives. If you are not into reading watch this video – 90 slides in 15 mins – from the DLD Conference. 

The four companies together are today worth about 4.25 Trillion or about 1.5 times the GDP of India. Being in that position of power is bound to result in some abuse. Acquisitions are their favourite weapon and Shares are their preferred ammunition; issue as many as it takes to absorb the nearest innovator. 

The CEOs were called in to appear before the congress. It did not go too well. Some of the evidence presented was damaging.

“If someone came to me with an idea for a website or a web service today, I would tell them to run. Run as far away from the web as possible,” said Celebrity Net Worth founder Brian Warner about Google, which he accused of scraping his information and presenting it as its own. “Launch a lawn care business or a dog-grooming business—something Google can’t take away as soon as he or she is thriving.”

[…]

Mark Zuckerberg had expressed an interest in buying the photo-sharing app. “Will he go into destroy mode if I say no?” Systrom asked. Cohler replied: “Probably.” This chat is one of several exchanges that shed light on the lead-up to Facebook’s $1 billion purchase of Instagram in April 2012.

Source: Wired

And

Google’s promotion of its own content on its search results, or how the price of a box of diapers changed after Amazon acquired the parent company of Diapers.com—but the true target was lack of accountability as an operating principle of these companies. And that has a particular bite during a period of global crisis, during which their digital tools have helped us endure trying circumstances while simultaneously promoting the kind of isolation and misunderstanding that can make emerging from them even harder.

Source: Wired

Not like Apple was faultless. While Apple is not in the data business, they do make app developers bend to their will on the app store and charge them 30% commission to sell on the app store. If you do not agree, you have to get the user to go to your website get an account and pay before coming back to use the app. The trouble is not even that; it is that Apple will not allow you to explain why it is such a pain to use the app as mentioned beautifully by John Gruber.

This was just round one and it is not over. I think the four of them would be mighty relieved that Elizabeth Warren is not the Democratic candidate or even being considered for VP. If this could happen with Republicans in power imagine if a Democrat is elected! 

Wednesday’s hearing was a major milestone for the House’s investigation, but far from the finale. Given the chaotic nature of the four-way hearing, it would be great to see separate one-on-one hearings with each CEO. But that’s unlikely. The next step is most likely the subcommittee’s final report, due out sometime in August or September. Wednesday’s hearing made clear that the report will have some real substance to it. Whether it will fire up the American public—or spur real governmental action—remains to be seen.

Source: Wired

Also, in case you are interested, you can go through all of the evidence that was submitted as part of the hearing at this link.

In the meantime, Facebook would like you to think that they are small fish.

Sure, Facebook is a big deal in social media, this thinking goes, but what about videoconferencing, telephones, birthday cards, backyard barbecues, kickball leagues, and friends who insist on playing matchmaker? They all connect people, too, and if you add up all that activity, surely Facebook makes up a more reasonable share of the market.

Source: Quartz

Also, Facebook has so many large competitors in oil and gas, banking, e-commerce, space travel and even tax collection – those fools call themselves the government. 

Travel no more

Travel is one of the largest industries that creates a lot of employment throughout the world. When you travel to a new city, you create jobs in transportation (airline, railways, bus, cabs), transportation infrastructure (airports, stations), hotels, restaurants (you may not Swiggy or Doordash in a new city), Museums, Guides, Tours, Souvenir shops. 

Tourism alone employs 100s of Millions globally, but if you were to include retail which is a certain beneficiary, probably a Billion jobs are at stake. And they are hurting…

India’s international borders have remained closed since March 22, while domestic travel has been limited since March 25 when the country went into a nationwide lockdown. 

[…]

“The sharp drop in the number of tourists and foreign visitors have already impacted millions of jobs in the hospitality and travel industry as many businesses are going through a severe cash crunch,” said Sudeep Kumar Sen, a spokesperson at HR firm TeamLease Services. “More than 50,000 tour operators have shut shop as there is no hope of revival anytime soon.”

Source: Quartz

When you think of large tourism markets, Africa is not the Continent that first comes to mind. But tourism is a massive employer in Africa and the industry has collapsed.

When the Covid-19 pandemic changed the world earlier this year many African countries were quick to react. Borders were closed and protocols from past or existing epidemics (TB, HIV, Ebola) were rolled out. Of the many industries hit by lockdowns, tourism—an industry that indirectly employs 24.6 million people across the continent (6.8% of total employment)—was hit particularly hard.

Source: Quartz

and nobody is being spared

Aside from obviously tourist-dependent businesses such as hotels, a number of retailers are feeling the effects. Among them are high-street fashion chains, luxury boutiques, watch and jewellery shops, and department stores such as France’s Printemps and Selfridges in the UK, says Vinod Paul, Planet’s head of business and market intelligence.

Source: Quartz

Also, there is no end in sight.

Keep Trying

If you keep trying to do something, you will eventually be successful.

Indian businesses were so resilient that a shock and awe demonetisation did not kill them. The introduction of GST was a source of pain for a lot of small businesses that were previously not on the tax regime. Even worse, making businesses operate with improper data. Last year, the government was still claiming that the GDP was growing at 6.7% only to revise it closer to 3% once the pandemic started. COVID did what all of these could not – went for the jugular. 

Hit by a stringent lockdown, 57% of micro-enterprises have zero cash reserves and 65% will have to turn to their personal savings for operational cost, the report further stated. Also, around two-thirds of them have reported a fall in orders, the report said. 

[…]

It’s clear that merely supporting MSMEs through an indirect route like the infusion of credit and equity isn’t enough. The Indian government needs to realise this if it wants to pull small and medium-sized businesses out of a deep and prolonged mess.

Source: Quartz

When the GST bill was signed into law, to push it through, the centre agreed to provide a 14% tax growth year over year for the first 5 years. It must have been a tightrope act already given that the GDP growth was not in line with what was being told. Given the current circumstances, the government is also broke! The centre has been falling behind on compensating the states and now the centre is throwing them under the bus. 

The impact of the virus and lockdown on the economy can be clearly seen in the GST collections, with the first-quarter revenues down 41 per cent over last year, despite signs of an improvement in June, when the lockdown was eased. This has impacted the Centre’s revenues as well as GST transfers to the States, which have fallen below the mandated 14 per cent annual growth rate as promised under the GST law for five years

Source: Business Line

The centre transferred the GST owed in March ’20 to the states in July. The states are already 4 months behind and are struggling to make payrolls. The attorney general has opined that there is no obligation under the law. The states have been asked to try and borrow from the markets.

Twitter 

I had argued a couple of weeks ago that no company should have the power to start a world war. Twitter does. 

Trump spews all kinds of nonsense on all platforms but it is from twitter that it is reported. Turns out that the hack that was run on twitter was the handiwork of teenagers who registered the Bitcoin wallet to their own name! This was not sophisticated sovereign hackers.

A 17-year-old, Graham Ivan Clark, was charged separately with 30 felonies in Hillsborough County, Florida, including 17 counts of communications fraud. Together, the criminal complaints filed in the cases offer a detailed portrait of the day everything went haywire—and how poorly the alleged attackers covered their tracks. All three are currently in custody.

Source: Wired

Guess what might have been possible if it was the Russians or the Chinese who were running the hack. Or perhaps a White Supremacist? Oh! 

On that note

Duke’s account “has been permanently suspended for Twitter Rules on hateful conduct,” a Twitter spokesperson said in a statement. Twitter’s policy, revised in March, prohibits posts that promote violence or threats of violence against people based on their religion, race or ethnic origin.

Source: CNET

Also, when the advertisers had started withdrawing ads from Facebook, Mark Zuckerberg had scoffed. Many outlets had reported that those brand spent only $10 Million a month. I had argued that 8 brands spending 10 Million a month would mean a Billion dollar hole in the topline.

Facebook and Twitter on Wednesday took extraordinary action against President Trump for spreading coronavirus misinformation after his official and campaign accounts broke their rules, respectively.

Facebook removed from Trump’s official account the post of a video clip from a Fox News interview in which he said children are “almost immune” from Covid-19. Twitter required his Team Trump campaign account to delete a tweet with the same video, blocking it from tweeting in the interim.

Source: Washington Post

Facebook is, after all, a company and capable of growing a conscience when kicked where it hurts.

Cross-Industry

Do you know a position that almost every company has?

Think.

Accountant.

There may be a lot of fancy names that they are called, but the position exists in every company. It looks like AI is something that almost all companies will end up having. I do not suppose this should come as a great deal of surprise. 

If AI had to have a tagline, it should be – Use this to reduce your salary bill. And what kind of capitalist would say – “Nah! I don’t want to do that.”

The list also includes 11 graduates who went to brick-and mortar-retailers Walmart and Target, nine who went to defense contractors Lockheed Martin, Northrop Grumman and Raytheon, and five who went to office supplier 3M, a conglomerate perhaps best known for making Post-it notes (and, more visibly during the pandemic, masks and respirators).

Source: Quartz

The Elephant turns into an Ant

A couple of weeks ago I had written about the Arm IPO that Softbank wants closed. Also, how the US government has been handing Billions to TSMC to get them to move their fabrication to the US and reduce the dependence on China. Exploiting Arm and TSMC has enabled Apple to leapfrog the industry and delivery products that its competitors can’t keep up with. Intel, on the other hand, has been struggling to ramp up newer processes. This has further moved Apple towards adopting Arm architecture for their laptops and computers as well. Given this, Intel’s announcement does not augur well for the company.

“The company’s 7nm-based CPU product timing is shifting approximately six months relative to prior expectations. The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately twelve months behind the company’s internal target.”

Source: Tom’s Hardware

Intel can’t afford this.

New Oil Order

In the 1970s there was the Oil Crisis. The Saudi’s refused to supply oil to the US and petrol pumps ran dry in the US. Henry Kissinger went to the Kingdom with an offer to put an air force base in exchange for energy security. America brought the only thing Americans continue to make in America – Weapons – to the middle east and the place has never been peaceful thereafter. They helped flame the Shia Vs Sunni fight and half a century later the region still burns.

Lately, Americans have sought to take energy security into their own hands and pushed shale oil extraction. This has resulted in the USA becoming a major oil producer and a thorn in the sides of Saudi Arabia and Russia. COVID was sort of a godsend. Oil prices crashed. Shale extraction requires prices to be north of USD 60 per barrel for it to be profitable.

The major oil producers have been tactfully adjusting supply to keep prices in a narrow range around USD 40 per barrel locking out American oil companies. This is causing much soul-searching.

One of the world’s largest oil companies just announced it would cut 40% of its oil production. During an investor presentation on Aug. 4, BP announced it would roll out the dramatic cuts over the next decade, while limiting future exploration for new sources of petroleum.

[…]

BP says it will invest as much as $5 billion annually in low-carbon technologies by 2030, a ten-fold increase over current levels. If implemented, the cuts put BP on track to bring oil production down to zero by 2043, according to energy engineering researcher Arvind Ravikumar of Harrisburg University of Science and Technology, well before the mid-century target established by the Paris climate accords. 

Source: Quartz

Exploring new lands

When explorers used to land on new land, they would set off with their machete to learn more about the land and find its riches. Would it not have been easier if they had choppers and could fly over the terrain and determine what was of interest and what was not? 

Our exploration of other planets has been akin to the former. We have sent rovers to the Moon and Mars. These can cover a limited surface area and are slow-moving. Would it not be easier to fly over the land and see it. We have done that through satellites traditionally. While satellites cover massive ground, they are not close enough and can only be so detailed. But what if we could fly a chopper and determine what was of interest? NASA is sending an experimental chopper to Mars!

Perseverance will boot up a mission to collect samples of Martian dirt that might have traces of ancient life so that they can be returned to Earth by another mission later this decade. It will also carry a payload, unlike anything that’s ever been boosted into space: a small autonomous helicopter called Ingenuity. Sometime next spring, probably in April, Ingenuity will spin up its rotor blades and become the first spacecraft to go airborne on Mars.

Source: WIRED

Also Read

Meat consumption in America has gone down for the first time in perhaps forever.

A misunderstanding between two brothers during the World War II bombing raid resulted in the Dassler Brothers Shoe Factory turning into two competing brands – Adidas and Puma. A thread.

Signing off…