Bright Simons is the technology inventor behind SMS authentication. He is also an activist and social innovator who puts his talents to use trying to directly effect social change. He recently served as a member of the Washington-based Center for Global Development’s Study Group on Technology & Development Prospects. He has published a number of papers based on research conducted during his time in the group. We discuss with Bright the major themes in this work.
Q: Why do we need a new theory of how digital technology is evolving and transforming the world and why is your theory any more useful than the many around.
A: Well, I need to clarify that analysing technology, whether digital or analogue, as a standalone trend is not very useful. Technology has become the main motor of new entrepreneurship and of innovation. So, ideally, a trend worth studying should be one that substantially shapes the New Economy as a whole.
For many people, the new economy is moving too fast and splintered into many pieces. Whether it is how social media is reinventing romantic relationships and democracy or how Uber and Airbnb are changing perceptions of where value in real estate and transport resides, the experience of the trends seem fragmentary and sometimes even contradictory. Then there is the jargon and mix of complex technical ideas with folksy idiom. A broad and coherent theory that ties many observations together to unveil a megatrend is thus anything if not useful.
Q: But in a continent grappling with so many basic issues, from unstable electricity to lack of beds in hospitals, why should anyone care about the “new economy” when we can’t even get our head around the old one?
A: I don’t think we have a choice. Everything is becoming “cyber-enabled”. The turbines we import to provide electricity can now be hacked. The vaccines that we need to prevent people from being hospitalized due to hepatitis are being made through the latest genomic science. If we want to eat more local rice without inflating the price of hollow, we need to distribute the advanced hybrid seeds to more farmers in the North. To monitor the distribution system effectively and prevent corruption we may have to deploy e-mapping and e-supply tools. So both as a result of globalization and the growing demands of the population for a higher living standard, we dont have the “option of backwardness”. We import many of our inputs and they come with new technologies already embedded. We want to achieve complex and difficult objectives with limited resources. That can only be done through innovation.
Q: What are some of the existing theories or narratives about how all these things add up that you are hoping to displace?
A. There are three main ones that I take aim at in my latest paper. The first narrative holds that “Everything is about data”. Companies that can collect data about everyone, everywhere, everytime, are winning in the competition for socioeconomic power and dominance. The evident influence of the giant social media and internet navigation platforms like Facebook and Google have fuelled this narrative. Political developments such as that exposed by Wikileaks and Snowden, and China’s ongoing effort to build a “social credit scoring” system, have all fed into sentiments that data is a homogeneous resource that can be hoarded and used to construct monopoly control over our lives, especially through the structures of a surveillance state or by way of a capitalist dystopia in which everything human is commoditised and sold on digital flea markets.
B. The second thesis focuses on powerful computer programs or algorithms that have advanced cognitive capabilities. That is to say computer code that can make machines and other inert/non-human things think in sophisticated ways with little human input or supervision. Here, the belief usually is that due to the advanced skills needed to build these things, it is only natural that the richest corporations and countries among us will own more and more of these algorithms and that average humans and average countries that have no way of measuring up will matter less and less.
C. The third theory assumes that the future is already here in the form of big platforms that already own many powerful algorithms and are hovering up more data about everyone and everything than any of us can even keep up. These mega-platforms are in only a few of the world’s countries. 46% of them are based in the US. 80% of global profits generated by these transnational digital monopolies go to the US. Only 5% to Europe, 1% to Africa and Latin America, and the rest to the Pacific region. The concentration of power made possible by platforms is, in this view, entrenching old and highly unfair geopolitical divisions and are on top of that breeding a new feudal elite that can operate above institutions. The difference between this view and the other two is that it focuses on the entities: the platforms. Once they are in place, they self-perpetuate not anymore through the development of better algorithms or collection of more data but through direct economic and political power due to their distorting effects.
Q: All of these explanations seem very plausible and lead to rather similar conclusions, how can you possibly improve on them?
A: The thesis of my essay is that these three big lenses are useful and quite insightful, but they are also seriously limiting and incomplete.
I offer an alternative model that explains discrepancies we observe in the real world between what is actually happening and what these theories predict.
In my approach, the most versatile analysis of the impact of technology on the economic and political changes we see today, including on the future of employment, business and social relationships, is the one that focuses on how the concentration of data and growth of algorithmic power within platforms have accelerated and/or slowed in the history of the new economy and especially in the expansion of the digital industries into old economy sectors like health, education and manufacturing. I argue that the real meat is in how algorithms access valuable data. They do so through what can simply be referred to as, integrations. My central argument is that contrary to some perceptions we are seeing more specialisation of algorithms and more fragmentation of data sources as more parts of the economy that have limited exposure to digital slowly become digitalised. Integrations stop being uniform and become more heterogeneous. At the same time more integrations are required for any transaction. The combined effect of these shifts amount to a process I call, Hyper-integration.
Q: Who are the gainers/winners and losers in this hyper-integration megatrend?
A: Winners are somewhat harder to identify than losers. But old economy entities with solid economic fundamentals are likely to benefit because they have a lot of sites in their operations that can serve as “nodes” or points for integration needed by other economic actors. That is to say, they can build what I call, lattice power. Think of big health management organisations with major contracts with big employers. Many companies seeking to penetrate healthcare want to, and need to, integrate with such companies. If they are smart they can treat these integrations in themselves as portfolio assets and generate returns from them with very limited investment. Successful, large, airlines are already doing this by leasing integration points to financial services companies. Examples abound.
Q: And the losers?
A: Startups and small players with a business model based on a vision of “disrupting” major industries of all types are under serious pressure and suffering from low profitability.
The reason is what I have already explained as the need to integrate into multiple sites of the same ecosystem they are trying to disrupt and the cost of maintaining these integrations. Whether one has to integrate into banks, telcos, hospitals, schools, agencies or utilities, in order to disrupt large domains in health, education, agriculture or energy, risk adversity, fraud control, existing lattice power and other factors raise the burden on these upstarts, bogging them down, reducing their degrees of freedom and lowering their capacity to innovate. It is not surprising that both entreneurship and innovation have been dropping in the United States, the heart of the global new economy. Disruption is being disrupted.
Hyper-integration forces everyone to think and act around alignment instead of disruption. The days of small entities upending the status quo are going to be few and far between for a while.
But it is not only startups with a disruption agenda that are suffering. Medium-scale platforms that have not amassed sufficient lattice power like travel booking platforms are also struggling because old world actors like airlines are discovering the real value of the integrations that have so far enabled these mega-platforms to gather the data and build the inventory that they have been retailing to consumers.
Q: Is it correct to say then that countries like Ghana have low aggregate lattice power and many small companies seeking to grow big by global standards so this hyper-integration trend is quite problematic for us?
A: Yes and no. True, countries like Ghana are full of economic actors with low lattice power so it is even more unlikely that they can act to disrupt hyper-integrated industries. For example, most Ghanaian business process outsourcing companies have collapsed because the BPO space has grown more hyper-integrated.
However, the tools and skills for integrating highly diverse algorithms and datasets across highly heterogeneous economic sectors are getting better and better worldwide allowing different parts of the economy to work more seamlessly together.
The pensions, insurance, banking, investment, leasing, logistics, modern retail and other adjacent industries all increase their productivity when linkages are seamless. This can lead to productivity growth at an aggregate level even if individual companies have to endure the pressures that comes from the tough demands of synchronisation.
Governments can seriously enhance these positive hyper-integration prospects by building “public resource integrations” that small companies can plug into at low cost to enable them introduce innovations and competition within these emergent converged “meta-industries”. Governance and regulation can be enhanced by plugging in civil society actors to enable better transparency and accountability. Imagine a banking regulatory system that is not composed entirely of bureaucrats, for instance? Maybe some of the episodes of regulatory capture would not have occurred. In many ways, these new models might be the only way to reconcile the need for innovation and experimentation with the concurrent need for stronger governance and accountability.
Q: Clearly, it would require very forward looking leadership to be able to do some of these things. Are you hopeful about Ghana’s ability to get it right?
A: “Hope springs eternal in the human breast,” says the bard!