When Software has Eaten the World (#29)
There is a lot of anguish over what’s happening online these days from the rise of hate groups to media manipulation, the propaganda to interference with elections — are the positives of our digital world even worth it? Well, today, your host, Ben Robinson, digs into this question with Belén Romana García — Spain’s former head of Treasury, and an economist who has worked in both the public and private sectors. Belén is also a board member for several public companies and foundations. She says that people are primarily driven by three things: power, money, and knowledge — and she is especially driven by knowledge and curiosity and a desire to understand the world and its possible future. Today, she and Ben discuss, should our elected officials have to learn how to code to better understand the world that we’re living in? Should we scrap GDP as a metric since it’s not accurately reflecting our service economy? Does democracy mean equal voting? And how does the information and infrastructure of our online world affect our freedom or a sense of freedom in real life? And more. Enjoy the episode!
Podcast also available on:
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Belén recommends:
- One book: A world without work, Patrick Susskind
- One influencer: Azeem Azhar
- Best recent article: The geopolitics of information, by Eric Rosenbach and Katherine Mansted (Belfer Center for Science and International Affairs)
- Favourite brand: Spotify
- Productivity hack: Never waste a chance to learn something new. Listen to podcasts while driving, flying, cooking or having a walk.
Information in itself is a huge good that we have in abundance. Of course, when you have any scientific advances or new ways of creating value or knowledge, that does not come without its flaws, and without its problems. It takes time for societies to understand the real implications — good and bad, by the way — of any advance. It’s sort of trial and error. We are understanding the implications, the advantages, the disadvantages, and it will take some time until we do understand the whole thing.
[00:01:32.14] Ben: Thank you very much for joining us! So, the key thing that we wanted to pick up on today is one that you talk about a lot, which is the notion that software is everywhere, and it’s this idea that, as software’s become more powerful, it’s proliferated, and it’s become much more pervasive in our lives, our communication, our politics, our industry — and I thought maybe a good jumping-off place might be the quote from Peter Thiel, the one where he said, “We wanted flying cars. Instead, we got 140 characters.” So, has this world of pervasive software delivered on its potential? i.e. Do you think that the world is now better for having so much software in it?
Belén: Definitely! I think that we are better off. We can communicate better, we can find more data, store that data, analyze that data, deploy that data. So, I think that information in itself is a huge good that we have in abundance. So that’s a much better world. Of course, when you have any scientific advances or new ways of creating value or knowledge, that does not come without its flaws, and without its problems. It takes time for societies to understand the real implications — good and bad, by the way — of any advance. So, I think that we are better off. It’s sort of a trial and error thing. We are understanding the implications, the advantages, the disadvantages, and it will take some time until we do understand the whole thing. And so, it will take some time until we get the world right. And we will try again and again and again. And finally, at some point, we will have a reasonably good set of rules. So, I think that we are better off but we should be quite modest in terms of we have to understand that this is a journey that started, as societies, and it will take us some time to really get it right.
As human beings, we usually get to understand, control, and react. So, the fact that some advances have dangers, that’s always the case; […] And reality leads us to think that once we get to understand, then things are much better after that advancement than before. The problem, of course, it’s always the transition period.
[00:03:44.01] Ben: If we think about some of the negative applications of digitalization, we might think about, you know, its scope for manipulation, for example, or we might think about, you know, some of the scary things that people say about where AI is headed, right? You know, that we’ll be controlled by software, rather than it kind of being used as a tool by us to improve, almost. But you believe that, on balance, overall, it’s been a force for the good?
Belén: I think so. Of course, it has many dangers. But that happens with anything that you can think of. When the car started, there were so many dangers around that and there were no roads. So, it took some time — decades — to set the rules and understand what is good, what is bad, what should be done, what shouldn’t be, who should be controlling that? How should the authority control that? How can we drive around the world? So there were a number of things that happened over decades. But finally, the car gives us many things — of course, good and bad — and if you understand the real implications in groups, for example, climate change, then you get to have a much better deployment of that advance. You know, as human beings, we usually get to understand, control, and react. So, the fact that some advances have dangers, that’s always the case; that happens with medicine, that happens with pharmaceuticals, that happens with anything you could think of, basically. And reality leads us to think that once we get to understand, then things are much better after that advancement than before. The problem, of course, it’s always the transition period. So, since this is a trial and error, and it will take time for us to get it right, there will be many things that will happen that won’t be good, and people that will be harmed. That’s absolutely the case. And that’s a very difficult point because, as I said, when it’s something new, we don’t fully understand the final implications. So, this trial and error… And you see that everywhere. So, we didn’t know that Facebook could be potentially dangerous for political institutions, the suffering, that outcome to understand, “Yeah, this may happen.” And now we are starting to think, should we do something? What can we do? What are the limits? So, does it mean that social networks should be banned? I don’t think so. They should be here for good. It’s like with cars. I mean, the fact that a car is a dangerous tool doesn’t mean that you shouldn’t control it, you shouldn’t regulate it.
We are on a very, very early stage and it’s very difficult for rulers to set the rules. One of the things that I worry about around this — setting the rules — is the fact that Parliaments understand laws, but they don’t understand codes. It turns out that codes are also ruling our lives. So, if we don’t get them to understand code, to understand that language, it will be very difficult for them to set the right rules. And I think that we’re far from that.
[00:06:38.21] Ben: And if we just continue for a second with that analogy of the car, where do you think we are in this transition? You know, it took a long time before cars had seatbelts, it took a long time before cars had emission standards. How far into this digital transition do you think we are? And how good a job do you think the rule setters are doing?
Belén: We are on a very, very early stage and it’s very difficult for rulers to set the rules. One of the things that I worry about around this — setting the rules — is the fact that Parliaments understand laws, but they don’t understand codes. It turns out that codes are also ruling our lives. So, if we don’t get them to understand code, to understand that language, it will be very difficult for them to set the right rules. And I think that we’re far from that. If you had a council of wise men, old men that couldn’t read, and they had to set the rules for the printing press, they would just say, “Okay, whatever is printed that I cannot read should be fair, balanced, whatever.” But they cannot enforce it, because they cannot read the book. I think we are in a similar situation where individuals setting the rules do not speak the language, cannot read the code and hence, all they’re doing so far is giving this open recommendation of should be fair and avoid bias and these things. But then, they are driven by the outcome, and they cannot prevent it from happening, because they don’t understand. So I think that we are at a pretty early stage. We need rulers that understand code.
because of the cyber GDP that we are not measuring, we are not taxing, we are not tracking. So, we don’t know whether we are getting richer or not, we don’t know whether we have a fair tax system or not. Basically, there’s a part of the GDP that is not there.
[00:08:30.29] Ben: I think the EU Cookie Policy is a very good example of a policy that’s set by people that don’t understand the nature of the digital world. What about economists? So, you’re an economist. How good a job do you think economists are doing at understanding the new world and changing their measurement tools? To make it more concrete, we basically live in a world where we don’t think we have any inflation, we think productivity growth sucks. But is that really the case? Because you know, there might not be inflation in the price of streaming music, but there feels like there’s a lot of inflation in other areas — healthcare and such. So, do you think we’re using the right measurement tools for the digital world?
Belén: We, economists are really struggling because we are all educated in an industrial world. So, if you take GDP — GDP nominal versus real is inflation, GDP is a very industrial concept in many ways. I mean, it started as one physical thing times the price, and that is GDP. And the evolution of both the number of physical things and the prices did see it to the GDP real and nominal. We started struggling with services. So, for decades, for example, financial services were not part of the GDP because no one thought it could be measured in terms of any value added. So, with services, which is something in the middle between digital and industrial, we struggle to understand productivity to measure; you don’t have a physical thing — you know, whatever the assets times the price. It’s services. And you know what that means, in a very industrial world. So, we tried to build this bridge with services — did a very good job, but reasonably good, I think. But, if you jump to digital, you don’t have this vertical approach to sector, which has been industrial. And there’s this huge debate now in the economists’ world, around inflation and productivity as you were rightly saying. There are now two camps: some people say we’re heading into a world of no inflation forever, and some people are thinking that we’re heading into a high inflation world because finally, monetary phenomena. But, as I said, I struggle with that, and it’s difficult to get the cyber economy into this, the cyber factor into the GDP.
Belén: Now, I’ll give you one example that I always think of: the value for Google of having Germany, where is it? Is it part of the German GDP? It doesn’t look like that because that value is not the revenue coming from the German part. But more than that it’s network — so, it’s part of the network that increases the value of the whole network. That’s not part of the German GDP. Where is it? My point is that probably it’s part of the Google market cap and that’s why, because of this cyber GDP, we are not measuring, we are not taxing, we are not tracking. So, we don’t know whether we are getting richer or not, we don’t know whether we have a fair tax system or not. Basically, there’s a part of the GDP that is not there. And you see that again, and again, and again. You gave the music industry as an example. That’s a perfect example of something like that. So, we used to have a music industry that could be measured in an industrial way — the number of LPs or the number of stores, or the number of concerts, and then you have tickets times price. Then all of a sudden comes streaming. Basically, in terms of GDP, the music industry has disappeared, because you don’t have much employment, you don’t have tickets, you don’t have LPs. So, you don’t have physical things that you can measure. However, we have never been able to access so much music in our lives. Not necessarily for free. You pay for that — Spotify, you pay for it. But you access a huge store of music that you can choose to confine whatever. That’s not part of the GDP.
The competition policy is basically based on the knowledge that if the prices are low, competition works because the prices are the final signal of a monopoly or oligopoly. It turns out that’s not the case because we’re not paying with money.
[00:13:06.14] Ben: Yeah, it seems to me that the problem that you talk about translates into consumer surplus, right? Which is, you know, by definition, not captured because it’s surplus. And I often wonder if we were able to better understand consumer surplus, and somehow feed that back into GDP, that might be a way of capturing some of the benefits. But I just wonder, in general, if GDP is just, you know, we should scrap it, if it’s just obsolete. And we should start again. Because you know what I mean? It’s like you’re saying, you know, it’s a bit like inflation — you have RPI minus x, RPI minus y. And it’s like, how many things can you augment a broken metric for, in the end, before you have to just start again.
Belén: But the fact that we are using not a perfect measurement does not mean that we should use none. So, for me, the key thing is understanding. Again, understanding that we’re missing part of the economic evolution, wealth — whatever you want to call that — and that we need to develop other means. We will still have a physical world, we will still have services. But we are missing digital. So I think that one of the key things for, first, universities and probably also statistical authorities, is developing that understanding of how to measure. This is a new thing. It does exist, it does create value. So, this is again, a very old debate: value versus price. And that impacts everything. So I’ll give you another example. It’s the competition policy. The competition policy is basically based on the knowledge that if the prices are low, competition works because the prices are the final signal of a monopoly or oligopoly. It turns out that’s not the case because we’re not paying with money. We’re paying with data, and data has no value, no price. So, they’re for free. So, all of a sudden, you have a competition policy based on a very industrial concept that needs to adapt to something different, which is we’re paying with our souls, so to speak — our data. So, I think that the key thing is for, firstly, universities to start thinking about this — and I think that some have already started — thinking of this concept of cyber GDP. And value versus price happens when you have value, but no price or a price that does not fit much with the value as in the case with data. So, I wouldn’t say, okay, we don’t use GDP anymore. But I think that we should, at once, develop other complementary ways of measuring and understanding the digital world.
when you have a huge concentration of power, you have a problem. And as a state, the concentration of power is always dangerous. So, one of the things that I really wonder is why people — that happens especially with younger generations — do not care about giving away their information to companies but they care about giving information to the state.
[00:16:03.20] Ben: I just wanted to return to that idea of regulating the digital economy, because, as you say, you know, in the past, the litmus test was, you know, our prices going up to the end consumer, therefore, there’s sign that the company has market power, and can manipulate pricing. How do we regulate networked businesses? And how worried are you about the increasing size and influence of some of the largest platforms?
Belén: Over the years, when you have a huge concentration of power, you have a problem. And as a state, the concentration of power is always dangerous. So, one of the things that I really wonder is why people — that happens especially with younger generations — do not care about giving away their information to companies but they care about giving information to the state. And if you live in a democratic state, you do have rules, you have a transparent system where you know your rights, and you have tools to defend your rights. That’s not the case with the large platforms. And there are millions of that; you have Facebook measuring video views and charging for it. So, it’s the same as the judge and the defendant is the same. Or you have no ability to prove that whatever video you’ve posted has been more or less than another one. So, you know, I’m starting to read articles on the corporation as a courthouse, because within the Amazon world, it is much more efficient to solve conflicts within Amazon, than using the courts. That’s, I think, hugely problematic, because, as a citizen, even though you know the rules, those are not the standard procedures. I mean, if you live in a democracy, and you don’t like the Prime Minister, you can vote against him or her, and at some point, the guy leaves. You cannot vote against platforms. So, you don’t have any access to understanding how it works, what your rights are, and how you can defend your rights, what kind of tools you have. Whereas democratic societies have all those things very clear. So for me, as a citizen, I would rather give my information to a democratic state than to someone I cannot access. I don’t know where I am.
The problem with data is that the value comes from the aggregation. So, on your own, you cannot get value from your data because your data or my data have no value on themselves. They have to aggregate and aggregation means something that goes farther than the individual.
Belén: So, these platforms have huge power in economic, financial, political, social, and they have no rules. So, I think that we do need to regulate those platforms. And they basically act as monopolists in different fields. So you have a set of monopolists. And that’s, by the way, nothing new. We had that in the late 19th century, where, in the US there were, again, a number of huge monopolists. And the state, at some point, reacted and they said, “Okay, hold on. We need to do something about the mobile or we need to do something about many different industries — the oil industry and then telecoms” — because the power was too much. I think we are exactly where we were at that point. And, in order to avoid that, the competition policy was born. Now, I think we need to think of another competition policy. But I don’t know whether that’s enough. All the states have a regulation for networked industries, but networked industries are something much more national. This is international, isn’t it? And we don’t have common rules. We have common rules on how do we rule the seas. And that’s similar. So, you know, there’s an international law around these. We don’t have an international law around digital and that means sometimes we don’t even have a national law about digital. So I think that we need to develop that.
[00:20:28.23] Ben: Yeah, I suppose the only good precedent there, you know, whether we think is a good piece of legislation or not, something like GDPR, even though it’s a law that’s imposed within one sovereign area, which is the EU, it does tend to have ramifications outside of that sovereign area. Because if you want to do business in the EU, you have to treat customer data in a certain way. And what tends to happen is those policies then tend to become globally applied. But I just wonder, in general, I think you said earlier on that we have politicians that understand the law, but they don’t understand code — I think is what you said — and that was never more evident than in the times that the big platforms are brought to Congress, for their annual grilling, right? And I’m just wondering, you know, if it’s difficult to impose regulation cross border, and if it’s difficult for our current generation of politicians to impose the right kind of regulation at all, is the answer maybe to devolve more responsibility down to us as individuals, and in some way try to give us more transparency so that we make better-informed decisions about the platforms we use and what we share with them and so on? So, i.e. you know, put more responsibility in our hands.
we are clearly moving into a world of fragmented internet
Belén: For a number of reasons. One is they are monopolists. So that’s the first point. The second point is the nature of data. The problem with data is that the value comes from the aggregation. So, on your own, you cannot get value from your data because your data or my data have no value on themselves. They have to aggregate and aggregation means something that goes farther than the individual. So, the combination of the two things makes it very difficult for individuals to really be responsible. So, you would be asking them for something they cannot do because they don’t have the means. I’ll give you one example. For me, GDPR is the first step. But I’d really like the right to be forgotten because that’s something that, you gave away your information, or someone gave away your information, in a situation when we didn’t really know the consequences of that. And then, you suffer those consequences. You know, the right to be forgotten was a concept that was born in Spain — it was a Spanish case that led to this thinking of ‘this is unfair’ because someone did something three decades ago, and the guy is suffering from it again, and again, and again. And the problem is, I’ll give you one example. If you have a public appointment in Spain, your number gets published. And, at the same time, it looks like that should be private. And, you know, years ago, I had an attack, and the police told me, “Everyone knows where you live, and your number.” And I said, “Yeah, but that came from the fact that I was a public official.” So, all of a sudden, you have something that was ruled thinking of a different world, and now all of a sudden becomes a threat. And you cannot do anything because that is not part of the right to be forgotten. That’s nothing wrong, but it’s part of my privacy. And even then, it’s there. So, as an individual, I cannot do much. I need infrastructure or authorities, courts, that help me protect my rights — understand and protect my rights. So I don’t think that individuals are the way out.
[00:24:18.08] Ben: So regulations are still a thorny issue. And the other issue I wanted to talk about was your idea of policing the seas, right? Because what are the seas? I think we’re getting lost slightly in the analogy, but like, you know, what’s the landmass? What’s the sea? And if Europe is a landmass and we don’t have any really large platforms, where do we stand? I mean, for example, for how long can Europe impose regulations like GDPR when it doesn’t have platform companies of its own? Because it’s a bit like, you know, we’re imposing legislation on companies that aren’t even in our jurisdiction.
This dream of an open Internet for every country I think it’s over
Belén: But that’s why I like the analogy of the seas because, in the international law, you do regulate companies that are not part of your jurisdiction. And I think that the internet has been almost a global ocean. I think it’s not anymore. The exception being, of course, China. Right from the beginning, the Chinese thought, “Oh, if this is an ocean, I want to control my ocean, I want to set the rules.” And I think that we are clearly moving into a world of fragmented internet, where we, again, have not an ocean, but different oceans or seas if you want. And you said that the Russians announced that at some point, they wanted to close their internet and have a sort of a narrow channel into their internet so that they can control both — their internet and the channeling. The Chinese, of course, control that. I think that the US is thinking also, we need to think of how we control and have a walled garden — that we know what’s going on, who’s doing what, and we can react to that. So this dream of an open Internet for every country, whatever, I think it’s over. And, of course, that worries me in terms of Europe. So Europe has advantages and disadvantages. The disadvantage is that, of course, we lack any sort of platform. That’s a huge disadvantage. The advantage is that we still are the largest market in the world. We are interesting. The problem is when you’re not interesting at all — then you’re done. But when you can add value, then you have some tools to regulate that value that you are creating. So I think that Europe has that right and that ability. And also, the tradition. I think that we do have the tradition. We may over-regulate sometimes, but we know how to regulate and we think of the individual as someone that has to be protected. That comes from a long, long tradition of European thinking, philosophy, political science, sociology, anything you can think of. So, from that point of view, Europe has a chance.
in the 21st century, those countries or regions or companies, for that matter, that will rule the world will be the ones that will be able to do the three things: produce, store, and analyze data, move around those data — the platforms — and then set the right rules.
Belén: The thing is, for me, that if we use another analogy, and we think of the late 19th century, and how the industrial power was built — and that means power or states or companies — there were three things: the ability to produce things, the ability to move those things — so you needed a physical infrastructure — and then the rules of the game. And if you look at the industrial world, the industrial powers what they did is, Okay, I produce, I build infrastructure — the train being the first one; if you look at how the trains were designed in the 19th century, you knew who was powerful in terms of countries, and who was losing the battle. And only looking at that map is clear. And then, the rules of the game, which is free trade. That, coincidentally only applied to industrial goods, not to agricultural goods. Okay, 100 years have gone, so then digital power — who can produce, store, and analyze data? Very few countries or companies. The infrastructure is the platforms — we lack the infrastructure. And then the rules. So far, we haven’t got any rules. No rules at all, not even this free trade rule. We didn’t have a rule because we didn’t think we needed it. So, in the 21st century, those countries or regions or companies, for that matter, that will rule the world will be the ones that will be able to do the three things: produce, store, and analyze data, move around those data — the platforms — and then set the right rules.
[00:29:14.16] Ben: So how worried are you about Europe? Because at the moment we’re trying to set the rules to some extent — you know, GDPR, for example, PSD2 — but we don’t produce or move the goods, right? Or we don’t have the infrastructure, so we won’t be able to set the rules very long in that case. So, where does that leave us? And do you think the game is over in terms of creating the infrastructure?
The European Union, as a project, is built on conflict, it has always evolved out of problems. It’s not when everything works, and it’s peaceful. Whenever there’s a problem and a crisis, right from the beginning, the inception, the European Union evolves and tries to build on that.
Belén: I think we’re really far behind but it doesn’t mean that we have to say, “Okay, we give up.” I think we should fight. And fighting means a number of things. One is if we could understand how to rule this right — how to read the code — we would have a huge advantage. And that’s something that we could develop. Another thing that for me is hopeful is the fact that we’re starting to listen to the European Commission talking about digitization, which is quite a new thing, in a much more thoughtful way. And I’ll give you one example. So the European authorities came to the conclusion I think — that’s my understanding, I have to say — they came to the conclusion that “Okay, we have lost the war on personal individual data, but there’s a huge wave of data coming, which is data coming from systems, physical things. We are an industrial power, why don’t we build on that?” I think that is great because, by the way, physical things you get to personal data. So even though we lack the platform for personal data, which is the case, we could build platforms around non-human data, if you want. It has stemmed from good systems. I thought this is good, because instead of wasting resources fighting something that’s going to be very difficult, because you’re on late, let’s try to build something that is not built anywhere else, and then we won’t be late.
Belén: So, for me, that’s a very useful way of understanding that. And I think that with COVID-19, that the European Union is using it in a positive way, so to speak. The European Union, as a project, is built on conflict, it has always evolved out of problems. It’s not when everything works, and it’s peaceful. Whenever there’s a problem and a crisis, right from the beginning, the inception, the European Union evolves and tries to build on that. I think that now is starting to happen that. I mean, Europe has a soft power, and Europe has someone that understands that there are two huge giants rising, which is the US and China and thinking that they don’t like each other as much as they did in the past — and Europe is in the middle; that could be a potential advantage if we are smart enough. So, for me, the worst part of it would be if we thought of it as when you have a castle on your right, another castle in your left, and you are on the plain, then whoever comes, you’re done. That is not the way to understand that, I think, because then we’re done. If we build on our chances, I think — and we do have chances — I think that’s quite clear. You know, with the cloud, we’re late, but still, Germany and France are thinking or are starting to create a cloud. Will it be like that? Will it be as competitive? We’ll see. But I think that’s the right move. We should have done that move long ago. But at least we’re starting. So, in relative terms, we are behind the US and China, but we are ahead of the rest of the world. So, I’m hopeful. And I think that Europe is built on this notion of the individual has his rights, which is differential, I think.
[00:33:34.17] Ben: It’s quite interesting what’s happening with Tik Tok because I think, you know, is probably a good way of thinking about this, which is you’ve got this Chinese castle, the US castle. Do you think what we’re now seeing is, you know, those two citadels are trying to now establish and define their spheres of influence? And so, you know, Tik Tok was a case of… That’s almost like an invading army and we’re not going to allow that into our Citadel. And then everything that’s happening with Tik Tok in India seems to be a bit like, you know, India’s kind of aligning around the US castle. And then, I think your current comparison of Europe as kind of no man’s land is quite accurate because Europe hasn’t yet, I don’t think, really decided which castle is going to align itself with. And, as you said, maybe, for a short period of time, that gives us a position of influence because we can arbitrage between those two castles. Is that the way you think about the world, which is that that’s where we are now? The idea of this, you know, Pax Americana kind of world that was global is over, and increasingly nations are gonna have to choose between which of these two castles they align themselves to — or do you think they’ll be more castles like the Russian castle, the African castle?
when we all have access to information, that does not give us knowledge
Belén: A long list of things, as you mentioned. One is India. I don’t think that India is aligning with the US. I think that India is thinking, “I’m large enough and I’m advanced enough, and I have the knowledge and human capital needed to build my own castle. So, what I think that they are doing is, “Okay, let’s create our own apps.” So then it’s much more the understanding of, this is exactly a backdoor that you can use to look around and I want you to have that. It’s not only the influence, but it’s also the information that you get. One of the things with digital, it looks like the network effects come with a huge amount of data and that huge amount of data, if we’re talking about personal data comes from large populations. India, which is a very large country has the means to create its own network effects. They don’t need to have anyone else. As it happens with China. They are large of their own, they don’t need to have anyone else to create network effects. So, I think that they have understood that and they want to build on that. And from that point of view, neither the US nor Europe, on our own, I don’t think we are large enough in terms of that sort of pool of population. Probably, we need to think of something that combines both, otherwise is very difficult. If you think of if the US thought, “Okay, I’m closing my castle, it’s only us”, that’s not enough. That’s clearly not enough. They need to think of other pools of population. And probably we will see, at least, I think that large countries will try to build their own castle. Brazil is another example of a country that thinks that they are large enough, that they have the means, they have the knowledge to do something on their own. And so, we will have that as it happens with it. If you think of the industrial world, of course, the first superpower was the UK, but then Germany reacted pretty soon and then the US. So, you end up having a short number of industrial powers, but a number of industrial powers. So I think that Google sees something similar. I think we will have a number of powers. And I hope that Europe will use that as a chance.
[00:37:36.17] Ben: I think what’s interesting about India is with Geo. They’ve almost sort of separated infrastructure from production, which is to say, “You know, since we own the infrastructure, we’ll allow foreign companies or American platforms to operate on the infrastructure, but we own the infrastructure.” So, they have a certain level of sovereignty, that Europe, for example, doesn’t have, because we need to have the platforms or the infrastructure, right? So, I wonder if that might be the model. You referenced Brazil. I wonder if that might be the model that is followed by others. At least, then, you have a stake in the digital world, whereas if you own neither the infrastructure nor the platform you have, nothing.
Belén: I agree. I think that at least you need to control the highway. And then, you get to decide which car can go through that highway and whether you have to charge or not and the whole thing. If you lack everything — if you lack the highway and the car, you’re done. So, as it was the case in the industrial world, you needed to have infrastructure for the trains that you built, controlled. Otherwise, if we didn’t have the money to build our own infrastructure in the 19th century, the British companies that built it, they did it for their own, not for the Spanish people. It was more to extract value out of mines, basically. So, we had exactly the wrong infrastructure that we did not own, not control, not design. You’re done. You cannot succeed in the industrial world, with those weaknesses.
[00:39:16.15] Ben: I want to speak of something that you talk about, which is that democracy does not equal voting. What do you mean when you say democracy does not equal voting and how is that sort of relevant to this digital shift?
Belén: People tend to think that if I vote, that’s fine, then I can defend my rights. But that’s not true. For example, you have certain rules to control propaganda or financing in a democracy or what kind of information you can give or how long — are you always in campaign or can you be bombarding people again and again and again, do you give them one day they have to think? Whatever. So a number of things that complement the voting. But I think that we have completely forgotten that that infrastructure of rules is key — and if you don’t have that, then voting doesn’t… Any dictator can organize voting. And, quite coincidentally, is always to his advantage, it’s always 95%. It’s not the voting. It is the whole thing that comes before the voting, that grants that that voting will be a legitimate exercise in terms of democratic access. So, that, for me is key. You can opt-out Facebook — that’s voting; you vote with your feet, which does not change much, perhaps, because you’re out, but that’s not much.
when information is for free, we tend to vote out of emotion
[00:41:02.27] Ben: So you’re arguing almost we’re succumbing to this illusion that because we get to vote more often and there are more referenda that we’re somehow more empowered and we have more control over our affairs, whereas you’re saying the opposite is true? Because if I understand what you’re saying, rightly, you’re saying a lot of the underpinnings of democracy as we think about it are being washed away or eroded by digitization. So, can we just delve slightly into that? So if we think about some of the things that are critical to a democracy, such as having accurate information, is that principally on information that you think that democracy is being eroded? Or do you see other areas where the waves of digitization are washing?
COVID-19 was the rise of nation states. They were reborn, and all of a sudden, people turned to them to be protected, in many ways — limiting the movement of citizens, offering healthcare, buying vaccines. So, the nation state has, again, become a key player in the economic and social world, which means that people, when in danger or in a difficult time, and in various situations, they turn to those that are closer to them and have the size to protect them
Belén: I’ll give you one example. I can access a lot of information. Does it mean that I can self-diagnose my illness? That’s completely wrong. I have information but not knowledge. So, the difference between information and knowledge now is quite clear. It has never been the case over centuries in human history. So, we need to understand this difference. And, you know, there was this very interesting exercise. IBM has this Project Debater and they created a machine that can debate with a person and they had this public exercise that you can watch on YouTube, of a guy debating with a machine.
Belén: And that exercise was arranged by Intelligence Squared US. And they have this mechanic whereby the public first says that they are against or for whatever proposition and then after the debate, they vote again. The party that has moved more wheels, if you want, or more opinions, wins. They did exactly the same. And their proposition was, “Should states finance, pre-schooling education?” And the machine was told to say ‘yes’, and why and the individual, ‘no’ and why. And the exercise was, for me, quite telling, because, of course, the machine came with hundreds of examples, of data, if you want. And the individual less, but some. But he, even though he voted he was against that proposition and most of the public was for the proposition at the beginning, he could move more opinions, because he could understand emotion. All of a sudden, when we all have access to information, that does not give us knowledge. That means that we can look at things that we would like. And, of course, you can always find data that justifies your prejudice. That’s always the case. You can look at part of the information, and that leads you to say, “Yes, I’m right!” Or the other part, which is, “I’m wrong.”
Belén: Finally, when information is for free, we tend to vote out of emotion. And when I saw that exercise that I found so interesting, I thought, “Now I understand Brexit.” So finally, is it, “Do I trust you or not? Do I think that you have an intention or not?” So, one of the things that I find quite interesting is that there’s this crisis in democracy, at least democratic states, that people are losing trust in institutions, being those private or public. And then comes COVID-19. And for me, it was quite a surprise because COVID-19 was the rise of nation states. They were reborn, and all of a sudden, people turned to them to be protected, in many ways — limiting the movement of citizens, offering healthcare, buying vaccines. So, the nation state has, again, become a key player in the economic and social world, which means that people, when in danger or in a difficult time, and in various situations, they turn to those that are closer to them and have the size to protect them. If it’s tiny, if it’s only a city, they don’t have the size to give me what I need. I need something larger. I think that’s good for democracy, of course. Any economic crisis raises the danger of populism and all these things. So, I’m not naive from that point of view. But the way I see it, I think that democracies with this huge crisis, have a chance to rebuild themselves. And, for example, the fact that the European Commission is now trying to get to buy enough vaccines, I think that increases their legitimacy. The problem was, in the beginning, the European Commission did not react at all. So it’s not only they lacked legitimacy, they lacked action. The fact that you need someone that can protect you, I think that gives a chance to democracies to react and rebuild themselves. But of course, they need to develop an understanding of the code, to control the rules. So, all these things that we have been mentioning, and of course, build your own infrastructures, as well.
[00:46:55.29] Ben: You often talk about how the conception of democracy is bound up with industrial age concepts, that I suppose the other question is, you know, if democracy depends on nation states, and nation states are with a long term view in trouble, and if democracy depends on the institutions of the industrial age, then is democracy in trouble from two sides?
Belén: The key distribution of wealth comes through wages to work, which is quite an evolution in terms of the history of the humankind. So if you work more, you get the chance to be wealthier. And that means that we are basically all the same because we can become the same over time. And so, why can you vote and not me? And you being first a landowner, then a man or a white man. So, if I am a woman, and black, and I am poor, I can become what you are. So, why can’t I vote? Now, with the digital world, it’s, again, if we find the way to assign prices to value, that can bring us again, to a situation where I can earn my living in a reasonable way, and hence, this whole structure can survive. If that’s not the case, if we cannot understand how value is created and distributed, and therefore, how fair our economies are — we don’t know how fair they are, because we don’t have the right measurement, again, so we will measure part of the fairness or unfairness; but the rest does not exist. So, if democracy is a key to grant fairness, then we need to have those tools. Some people will be helped by training. Some people won’t. So you need to think of how can you protect and help people that won’t be able to be retrained. You know, with COVID-19, I found quite interesting the fact that live sports have suffered so much, and then eSports are thriving. So, all of a sudden, you have a whole sector of eSports that is growing, and that entails employment, in many ways.
[00:49:25.12] Ben: Is that a positive? Because I absolutely 100% share your view. I’m an optimist, I believe that the world that awaits us will be more positive than the world that we leave behind. But I’m worried, like you are, about the transition, because this transition is now happening so much faster on the back of COVID-19. Does that somehow reduce the scope for wars or civil unrest or whatever nastiness that could normally come to because it’s happening now just, you know, at an accelerated rate?
Belén: In terms of the COVID-19 I’m worried about the short term economic effects it brings. That’s absolutely true. And it’s also true that is somehow accelerating these trends. But the positive side of it is that they’re becoming visible. If a problem exists, and it’s visible, you can tackle it. The problem that we have is that these trends have been there for 10 years, 20 years, and they weren’t visible at all. So, there was no public debate, public worry, nothing at all. Remote working has been there for a number of years and some companies were very good at using remote work, and some specific groups of people wanted to only work remotely. But it was sort of a lateral and receivable, but it was clear that it was a trend that at some point would affect many others. Why don’t we have an industrial organization with a service economy? That’s exactly the case. Now, all of a sudden, we have found that, indeed, we didn’t have an industrial organization. Well, now it’s visible. Now everyone is thinking of, “How can we do this? Should it be five days a week? How can we really apply this technology that we already had, but we didn’t use?” So, from that point of view, COVID is making many of these trends visible. I think that is, a tree that falls in the forest — is it falling? No one hears or sees it. It’s exactly the same with problems. And we only look at problems when they are big enough, as societies. Now they have become big enough. So, I think that that will also accelerate the transition in terms of their reaction.
[00:51:47.14] Ben: I almost feel like the furlough scheme, or you know, whatever it’s called in the country. Is, in some way, almost like an experiment in the universal income in a way, which is, how do we compensate people whose jobs are not going to exist in a digital world?
Belén: Yeah, yeah, absolutely. And instead of having the finish with this experiment, now we are all making it. And there will be things that won’t work, but we will find which ones do. So I think that’s another example of things that I think are accelerated. You will get to see that. If you use that analogy of the COVID and digital, some populations are suffering more than others. And so, they get isolated, so you need to protect them more, because they are isolated, because they need to be isolated.
we have the chance to understand better the world that we are already living in. I think that societies have stopped and are thinking — which is really, really helpful because it’s not just the elite thinking
[00:52:38.13] Ben: A lot of people use the war analogy for what we’re going through, which is, the enemy is the disease, it’s not another country. And that’s interesting in a couple of ways, right? One, because the government’s taking an unprecedented or warlike intervention into the economy to boost aggregate demand, and so on, which is interesting. But then, what a lot of people say is that won’t be the rebuilding exercises necessary after a war, which then sustains aggregate demand. But in a way, don’t you think that might also force governments to figure out how to redefine the tax base?
Belén: Not only the tax base but also the economic structure. If you look at the European Union Fund, it talks about two things. One is green, and the other one is digital, which is we need to rebuild the societies thinking of those two things, which is quite a novelty, I have to say. So, we have an enormous amount of money to rebuild the economic structure. And that, I think, is a unique opportunity. So, we don’t have physical infrastructures that have been damaged, as is the case in a war, but we have indices that have been damaged by the digital world, and they have not been able to react. And so, I think that’s a huge chance. It’s sort of a Marshall Plan effort in a different way. So, it’s not bridges and buildings, but it is platforms and data. I think that there’s no clear answer to that. It will depend on the society and how they feel that they need it and whether they have someone that will finance that.
[00:54:35.16] Ben: But that Marshall Plan, if I’m not wrong, that Marshall Plan is something that Europe is thinking about, but it’s not something… You know, whether we consider the UK in Europe or not anymore, I think in four months we’ll find out but the UK doesn’t have an equivalent of the green new deal or the digital Marshall Plan, and the US may or may not, depending on elections in November. So, do you think many countries will take this once-in-a-generation opportunity to rebuild?
Belén: Again, I think about that, and it depends on the country. But in terms of the nation states, we are seeing, again, states are not only regulating but owning and managing a large part of the economy. So, that’s more sort of the ’70-like situation where you had the state doing two things: doing things and regulating those things. And I think that model that looked completely over is back, and it has advantages and disadvantages. So, back to the network effect, much of the technological revolution in the US came from the collaboration between private and public institutions. We never had that in Europe. Now, I think we’re going to have that. And it’s a precondition. But you need to have both sides of the world collaborating. I think that’s key. When you lack both, you lack size or the ability to combine private and public forces, that country will struggle, I think. It’s not only the quality of the politicians, which is key, but also the tools that they have. Probably they won’t have the same tools.
[00:56:29.29] Ben: I want to finish on, if we can, on a really positive note. I think you started by saying that digitization has been a force for the good, right? We may not see it in our GDP statistics or our productivity statistics but we feel it. We feel it in particular as consumers. But then we got on some slightly more negative topics. So we talked about how democracy is struggling in the face of digitization, we talked about how digitization is kind of dissolving the global world into nation states, we talked a bit about how the transition is going to be tough. Maybe we started to get into more optimistic ground with how the pandemic may find a route to faster transition. But I just wanted, if you would, to finish by giving us your most optimistic projection of the future.
Belén: It’s difficult for me because, by nature, I’m not an optimistic person. I think that the problems that you don’t identify, you don’t solve. So, I tend to focus more on the problems than on thinking that there won’t be problems. So that depends on how you define an optimist. But, in my view, I think that we have the chance to understand better the world that we are already living in. I think that societies have stopped and are thinking, which is really, really helpful because it’s not elite thinking. I think the whole society is thinking. It happens — this crisis — at a time when we have already suffered some of the negative impacts of the digital world. So, we have either Facebook political things and things like that. So I think that awareness is higher and I think that’s very good at all levels of society. So, for me, an optimistic or a positive — much more than optimistic, a positive outlook into the future, would be democracies get stronger, because they understand the rules of the game. We get to measure track, and if needed, to control the value and impact of digital and hence, we really create abundance and give it away to us. I think that Europe has the size, the human capital, and now the understanding. So, we have the tools, so let’s use them.
[00:59:19.08] Ben: Belén, thank you very much for your time!
Belén: Thank you! Thank you so much!
