May 21, 2019
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1 big thing: Big data, attention and wealth
A core obsession of internet reformers is to loosen Big Tech’s stranglehold on the financial spoils from the data they vacuum up, and spread the riches around. But some economists say the payoff to ordinary Americans will be much less than many imagine.
What's happening: Economists say we live in an age of income inequality not seen since before the Great Depression — and possibly since the Gilded Age at the end of the 19th century. But they struggle to identify precisely why it's happened.
- What they do know: A growing proportion of the nation's wealth is concentrated at the very top. In the 1920s, more than 20% of U.S. wealth was held by 0.1% of the population. The figure plunged over the subsequent decades, but now is back near 20%, according to a January paper by Gabriel Zucman, a professor at UC Berkeley.
- And the tech-led economy appears to be a big reason for the gap, with wealth concentrated among a few companies and billionaires who gather up our data, organize it and turn out products like perfectly targeted ads.
In her new book, "The Age of Surveillance Capitalism," Shoshana Zuboff says power over this data has eclipsed the traditional economy "as the fountainhead of capitalist wealth and power in the twenty-first century.”
- But, speaking with Axios, Zuboff says no one knows the size of what she calls the "surveillance economy."
- And she and economists queried by Axios say that big data — while a powerful force in the economy — is still not the center of the inequality problem.
David Autor, a much-cited MIT economist, says that not data but attention is at the core of Silicon Valley's wealth:
"Remember that Google and Facebook are in the business of selling your attention to their advertisers, i.e., you are the product. Whatever allows them to hold your attention is what makes them so valuable. It could be their ownership of your (and everyone else's) data, but I don't think that's the heart of it."
Breaking it down: Carnegie Mellon's Lee Branstetter says that, together, the big four tech companies that rely on huge stores of collected data — Facebook, Amazon, Netflix and Google — earned about $63 billion profit in 2018. If you add Apple (the second 'A' in the FAANG companies), you get to about $123 billion.
- The most-cited recent study of inequality, Thomas Piketty's "Capital in the Twenty-First Century," says the share of the income pie earned by the bottom 50% of earners has dropped by some 10 percentage points since the 1970s.
- If it had not done so, an additional $2.1 trillion in national income would have gone to the bottom 50% (10% of last year's $21 trillion in GDP).
- This means that combined, Big Tech profits were less than 6% of the total drop in the income pie. "94% of the income gap is other causes. You could obliterate their profit entirely and it would not make a dent in this income gap," Branstetter tells me.
"The technological change over the last few decades has been much larger than Big Tech and its control over data, and it's been going on much longer than they've even been around," says Branstetter.
The bottom line: The economy has shifted with the ability of companies of all types to collect and marshal data free of charge. Economists are wrestling with how to measure it. But, given its scale, the push to widen the capture of the riches is only likely to grow.
2. The new bully pulpit
JFK went on a public tirade against steel companies, as did Harry Truman. Woodrow Wilson nationalized the railroads. Dwight Eisenhower went after the "military industrial complex." And Teddy Roosevelt and FDR were aggressive populists.
- But President Trump may eclipse all his predecessors in terms of tapping and stirring public anger in service of his policies, historians say.
What's happening: Last week, the White House opened a web portal and urged people to use it to lodge complaints of censorship and political bias. The backdrop is a claim by Trump and other conservatives that the big social media platforms are prejudiced against them.
- There is a long, colorful history of presidents leaning on the "bully pulpit," as Teddy Roosevelt called it.
- But I wondered how common it has been for them to mobilize public opinion on behalf of their pet peeves.
Meg Jacobs, a Princeton professor, tells Axios that prior presidents have stirred public action in support of their policies, "but mostly at times of war."
- Teddy Roosevelt famously whipped up public antipathy toward oil companies, railroads and the meat industry on behalf of his cases against trusts. He was not asking the public to do anything.
- But "under FDR, the Office of Price Administration recruited half a million housewife volunteers to make sure the local butcher, etc., were complying with price controls. If not, this 'gestapo kitchen' brigade as its enemies called it, could report businesses to local OPA boards," Jacobs said.
"TR was willing to mobilize the public for the creation of new government agencies to then regulate business," Jacobs said. "Today, we have government agencies, but Trump is not actually interested in using them or empowering them as much as doing this kind of PR stunt."
The big picture: Richard John, a professor at the Columbia University Journalism School, said presidents routinely attack industrial sectors (including the media), and "jawbone" against companies not in their favor. But Naomi Lamoreaux, a professor at Yale, said such episodes often are simply not recorded. "I often find that things like this drop out of the standard accounts and so get lost to historical memory."
Read this: One thing that Trump has not done is to detail or jail corporate targets.
- Under FDR, Sewell Avery, head of Montgomery Ward, was carried out of his office by the National Guard.
- Under Eisenhower, seven electrical equipment executives served 30-day jail sentences for price fixing.
Go deeper: Trump bullies the refs
3. Billions proposed for AI
A new proposal in the Senate would set aside $2.2 billion for artificial intelligence R&D over the next five years, Kaveh reports.
The bill, introduced today by Martin Heinrich (D–N.M.), Rob Portman (R–Ohio) and Brian Schatz (D–Hawaii), would add fuel to the Trump administration's AI strategy, for which the White House has so far requested about $850 million.
- The Artificial Intelligence Initiative Act would give the National Science Foundation $500 million to fund research and new educational standards and institutions.
- $40 million would go to the National Institute of Standards and Technologies, which would be tasked with setting up benchmarks for AI algorithms.
- The Department of Energy would set up five AI research centers with $1.5 billion.
- New inter-agency groups would coordinate strategy and R&D efforts.
Background: The bill joins another proposal in the House and Senate that would boost coordination on AI inside the federal government.
Our thought bubble: Experts have been calling on the government to drastically expand funding for AI R&D. This money would be a step in that direction.
What they're saying: In a statement, Portman said,
"Right now, China is engaging in a full court press to unseat the United States’ dominance in AI. By coordinating and synchronizing our country’s research and development efforts, this bill ensures not just that the United States remains an AI leader, but that it does so by developing AI technology that prioritizes American values."
4. Worthy of your time
5. 1 wild stat: The flooding crisis
Weeks of relentless rain in the Midwest has flooded cornfields, preventing farmers from sowing huge swaths of land, Erica writes.
According to Bloomberg's Javier Blas, U.S. farmers have only sown 49% of corn acreage as of Sunday. That's the lowest in at least four decades — and dramatically lower than the five-year average of 80% sown.
The big picture: The impact of floods, low commodity prices and trade war pressures have put U.S. farmers in the worst economic crisis in 30 years, reports Axios' Courtenay Brown.