Apr 12, 2019

Axios AM

Happy Friday!

1 big thing: Tech helps rich get richer ... big get bigger

Illustration: Lazaro Gamio/Axios

The explosion of technology in every facet of life is a big reason that the rich are getting richer, and the big are getting bigger, Axios CEO Jim VandeHei writes.

  • Scary thought: The situation is on track to get worse, because artificial intelligence will make the internet look like the Apple II.
  • Why it matters: The result could be more income inequality, and the creation of vast amounts of wealth, but without corresponding broad prosperity.
  • This, in turn, causes political and social instability.

How we got here: The idea of disruption is that technology enables small, nimble companies to supplant lumbering old giants.

  • But the pre-internet giants — Microsoft, Intel, IBM — are all doing very well.
  • And the ability of those giants to spend enormously on technology has helped them maintain their dominance. The more data they get, the more powerful and valuable they become.

Advocates for Big Tech argue that it democratizes — that code is a meritorious equalizer.

  • Facebook was built without institutional knowledge or legacy backing.
  • Google, too. Ditto Amazon. And Uber.
  • Thanks to the cloud, you can build a better mousetrap without tons of cash.

Be smart: Optimists point out that the tech pendulum has always swung from concentrations of centralized power to periods of decentralizing breakthroughs. But so far that’s mostly swinging wealth and power to the wealthy and powerful.

2. How Big Tech stays ahead

The harsh reality behind Big Tech's power consolidation is clear in these five trends, reported by Axios’ Sara Fischer, Ina Fried, Steve LeVine, Dan Primack, Scott Rosenberg and Felix Salmon:

1. Data begets data, and that begets power.

  • Today's giants have a big leg up on the next wave of tech: Prediction engines built on machine learning are entirely dependent on gobs and gobs of data.
  • In the past, you could usurp incumbents by fundamentally improving on a core technology. Think Google in search, Apple in phones.

2. Size begets more heft and dollars.

  • Big Tech buys up the best AI, quantum, robotics, driverless car tech, and other talent for the industries of the future.
  • The very biggest companies — Microsoft, Google, Facebook, along with their Chinese rivals Baidu and Alibaba — are poised to run away with AI.
  • When a startup does come up with a brilliant new idea, Big Tech often buys the upstart. If the startup won't sell, Big Tech copies the idea.

3. Automation screws a lot of workers.

  • Companies want profits and greater efficiencies so they replace people with machines. The company gets bigger, the person creating the tech gets richer; the worker often gets shafted. Again, AI probably makes this worse, not better.
  • AI and machine learning are poised to replace humans in many tasks in knowledge work, including some functions now performed by lawyers, paralegals and radiologists.
  • Tech also creates new jobs — we have plenty of occupations that didn't exist 30 years ago. The question is how long and deep the in-between chasm is.

4. Algorithms favor the fortunate in big business.

  • The well-connected get tips on lucrative deals. And use (or benefit from) algorithms to get better returns on their investments.
  • They also hold the tech stocks rising fastest in values.

5. Tech is also making big, bigger in media.

  • Yes, Google and Facebook ate a lot of media revenue.
  • But the major media players have the resources to take bigger risks, innovate faster and develop more strategic relationships with the tech platforms.
  • Those relationships help them get ahead of product or algorithm changes before they get crushed by them — like the new smaller players do.
3. Exclusive: Trump administration to unveil big 5G push

Illustration: Rebecca Zisser/Axios

First in Axios AM ... President Trump and his top telecom regulator will announce plans today to unleash the largest-ever swath of radio frequencies in the U.S. — plus a $20 billion fund to help wireless companies to keep pace with China in the 5G race, Axios managing editor Kim Hart reports.

  • Why it matters: Proponents maintain that a significant economic advantage will be won by the first country to broadly deploy 5G networks, which will deliver wireless speeds 100 times faster than today's mobile internet.
  • The U.S. lead in building current 4G technologies led to smartphone ubiquity and apps like Uber and Spotify. The next generation is expected to power self-driving cars and smart cities.

Fears that China has the edge in the global 5G race sparked some (including Karl Rove, Newt Gingrich and Trump campaign manager Brad Parscale) to call for a government-directed national network, similar to China's own approach.

  • The White House disagrees. "The Trump Administration is supportive of a private sector, free enterprise approach," per a White House official.
  • So does FCC Chairman Ajit Pai: "I draw the lesson from the development of the wireless industry over the past three decades, including U.S. leadership in 4G. The market, not the government, is the best way to drive innovation."

At a White House event today, Trump and Pai plan to make two announcements as part of the FCC's "5G Fast Plan" to position the U.S. ahead of global rivals:

1. Airwaves: The FCC will auction off three big slices of millimeter-wave airwaves that are crucial to connecting new devices at high speeds.

  • The auction, to begin Dec. 10, will offer the wireless industry the biggest-ever chunk of airwaves the FCC has ever auctioned for commercial use.

2. Funding: The agency will announce a Rural Digital Opportunity Fund to spend $20.4 billion over 10 years in rural broadband.

  • Subsidies will be available to eligible companies through a competitive auction to build fiber lines in unserved areas.

The bigger picture: Widespread deployment of 5G will happen over the course of a decade, requiring a steady pipeline of spectrum and fiber projects.

  • "Virtually every sector of the economy is dependent on wireless technologies," Pai said, including areas like ports, mines, manufacturing and agriculture.

Share this scoop.

4. World Press photo of the year
Photo: John Moore/Getty Images

The World Press Photo Foundation, based in Amsterdam, yesterday awarded Photo of the Year to "Crying Girl on the Border," by John Moore, a senior staff photographer for Getty Images:

  • "Honduran toddler Yanela Sanchez cries as she and her mother, Sandra Sanchez, are taken into custody by US border officials in McAllen, Texas, USA, on 12 June," 2018.

See the winners.

5. Hillary: Assange "has to answer for what he has done"
Julian Assange gestures to the media from a police vehicle on his arrival at Westminster Magistrates' Court in London yesterday. Photo: Jack Taylor/Getty Images

Hillary Clinton told an audience in New York last night that WikiLeaks founder Julian Assange "has to answer for what he has done," quipping to the audience that she has some familiarity with his work, per CNN.

  • "I think it is clear from the indictment that came out it's not about punishing journalism, it is about assisting the hacking of a military computer to steal information from the United States government."
  • "I do think it's a little ironic that he may be the only foreigner that this administration would welcome to the United States."

Assange was arrested in London yesterday on a charge, which carries a maximum of five years in prison, alleging that he conspired with Chelsea Manning in 2010 to crack a password on Defense Department computers.

6. Herman Cain tanking

9-9-9 looks bye-bye-bye.

Herman Cain's candidacy for the Federal Reserve Board is collapsing, Axios' Alayna Treene reports.

The bottom line: President Trump hasn't even formally nominated him, but a growing number Republicans are privately saying he’ll be confirmed over their dead bodies.

  • And enough Republican senators — four — have said publicly that they don’t plan to vote for him, virtually dooming his nomination.
  • Republican Sens. Mitt Romney, Cory Gardner, Lisa Murkowski and Kevin Cramer have all said they would oppose Cain.

During a pen-and-pad session with reporters in his office yesterday, Senate Majority Leader Mitch McConnell had some blunt advice for Trump about possible nominees:

  • "The White House ought to take into consideration obviously two things before making nominations: One is the background check ... and second is the possibility of being confirmed," McConnell said.
  • "Several of our members had strong feelings about people who have been mentioned in newspaper articles, and I think that should be helpful to the administration."
  • Asked if he was surprised that Trump was considering Cain, McConnell said with a laugh: "Surprised? On a daily basis ... not totally unusual."

Yes, but: Despite Cain's poor prospects, Larry Kudlow told Fox News yesterday that the White House still wants him.

7. Inside the West Wing
President Trump listens yesterday during an Oval Office meeting with South Korean President Moon Jae-in. Photo: Alex Wong/Getty Images

In the Situation Room, President Trump was meeting about the Mexican border with generals and other military leaders, the WashPost reports.

  • An aide passed Trump a note informing him that Herman Cain — whose possible candidacy for the Fed now looks sunk — was in the building.
  • "Trump summoned Cain to the meeting, and then told the military brass that they needed to come up with a '9-9-9' plan for the border. The joke fell flat."
8. Amazon strikes back

Illustration: Sarah Grillo/Axios

Amazon is mounting a vigorous defense against the charge that it stifles competition, with founder Jeff Bezos pushing back on critics in his annual shareholder letter, Axios' David McCabe reports.

In his annual letter to stockholders yesterday, the Amazon CEO countered two lines of criticism: that his company is strong-arming third-party sellers on its platform, and that it has monopolistic power over the market.

  • "Third-party sellers are kicking our first party butt. Badly," Bezos' letter said. It pointed to Amazon's investment in Fulfillment by Amazon and the Prime program as "the very best selling tools we could imagine and build" for its third-party merchants.
  • "Amazon today remains a small player in global retail," the letter said in another section. "We represent a low single-digit percentage of the retail market, and there are much larger retailers in every country where we operate. And that’s largely because nearly 90% of retail remains offline."

The context: Amazon’s critics have ramped up criticism of its market power in recent years, saying the company uses its scale to muscle out competitors in a growing array of businesses.

9. Varsity Blues: Crew was ideal sport for stowaways

Rick Singer, who bribed colleges to recruit clients' kids as athletes, found that crew (rowing) was a soft target for his scam, the L.A. Times' Matthew Ormseth reports:

  • The sport has "large rosters, little fan or media scrutiny, and wide latitude in recruiting female athletes."
  • "Schools with high-profile football programs use the sport as a Title IX counterweight, allotting women’s rowing programs as many as 20 scholarships. ... As a result, some crew programs have rosters of 40 or more."
10. 1 history thing
Photo: Matt Rourke/AP

This 154-year-old telegram — now for sale — was written inside the home where President Lincoln was rushed after being shot at Ford's Theater, AP reports.

  • Secretary of War Edwin Stanton and Thomas Eckert, the chief telegraph officer, stood watch over Lincoln, who died on April 15, 1865, the day after he was shot.
  • Stanton dictated the telegram to Eckert, who gave it to a runner to take to War Department telegraphers.

The telegram had been in the collection of a Civil War general's family for generations and is valued at $500,000.

  • It is being sold by a documents dealer, Raab Collection in Ardmore, Pa.

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