The GiD Report #123 — Balkanization and what that means for the future of the internet

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GlobaliD

12 min readAug 18, 2020

Welcome to The GiD Report, a weekly newsletter that covers GlobaliD team and partner news, market perspectives, and industry analysis. You can check out last week’s report here.

Hello, hello!

What we have for you this week:

Why a more balkanized internet is a sign that we’re entering a new chapter of decentralization (according to Peter Thiel)
Real demand for new solutions from mega corporations and individuals alike
It’s full circle for Apple circa 1984–2020
The EU version of a balkanized internet and the unintended consequences
An open question about moderation
Closing remarks from Peter Thiel on the state of innovation and progress in the U.S.

1. The biggest fear of a balkanized internet is that it means we’ll be more closed off and less connected. But the fear itself doesn’t mean it will become a reality.

Because one reason we have this fear is because we’re looking at today’s events through the lens of today’s frameworks — which are grounded in a centralized approach.

China wants control so it won’t let in centralized Big Tech. The U.S. doesn’t trust China so ditto state-connected enterprises like ByteDance and Tencent.

But hey, email still works.

What that means is that a balkanized internet will only accelerate the transition toward new approaches so that we can continue to connect even as the rules of the game shift.

Anyway, that’s what Peter Thiel is betting on. (Always the contrarian and often controversial, but never disappoints with his insights.)

Here’s Peter speaking at the Discovery Institute’s technology summit in July:

If we’d been assembled in 1969, the future of computers was going to be massive centralization. It was giant databases, giant AI-like computer intelligences that would run everything. IBM was HAL transposed in the movie The Space Odyssey, one letter off. It was one of the early Star Trek episodes. They come to the planet Beta, where thousands of years earlier, somebody had unified the planet and left a computer program that ran the whole planet and all the people were peaceful, but very docile — nothing ever happened. But the future of the computer age circa 1969 was centralization — a few large companies, a few large governments, a few large computers that controlled everything.
Fast forward to 1999, the future of the computer age was going to be massive decentralization. It was sort of libertarian and anarchist. It was the corollary to the end of the Soviet Union, that information had this decentralizing tendency, and the internet was going to fragment things and it was going to be this anarchic libertarian place.
If we fast forward to 2019, the consensus view of the future today, I would submit, is that the pendulum has somehow swung back all the way to 1969. And the consensus view again is that it is about large centralization — Google like governments that control all of the world’s information in this super centralized way.
The Life After Google thesis that I agree with and endorse is that if we look at this past — and people got it terribly wrong in ‘69 — and things were going to go to decentralization in ’99, it actually started going back the other way from the point of view of 2019. Even if I’m hesitant to talk about the absolute future and where this all ends, ultimately, perhaps the contrarian thing is to say maybe the pendulum can swing back towards more decentralization, more privacy, and things like that. This is what seems to be at least contrarian and at least something we should always take more seriously.
If you want to frame it in terms of the buzzwords of the day, if it were in terms of crypto and AI, it is easily understood by people. It’s always understood that crypto is somehow vaguely libertarian, but we never are willing to say the opposite, which is that AI is communist. It’s because it’s centralized. The computer knows more about you than you know about yourself. It’s totalitarian.
Communist China loves AI and dislikes crypto. We should at least consider the possibility that Silicon Valley is probably way too enamored of AI, not just for technological reasons, but also because it expresses this sort of left wing centralized zeitgeist.
The first sort of contrarian idea I have is that perhaps it’s time for the pendulum to swing back and Life After Google, at its core, means that we are going to go back from this very centralized world today towards a more decentralized one. That seems to me to be the correct thing to bet on.

Going by Peter’s timeline, 1999 might have felt like the height of the decentralization movement but it was also the beginning of the cycle for the rise of Google, Amazon, Apple (again), and later Facebook.

Those companies are now among the most valuable on earth.

So even if today feels like peak centralization, it’s reasonable — particularly if you’re feeling contrarian — that this only means that the pendulum is about the swing the other way. The forces are already in motion.

2. It’s unclear that things will play out as cleanly as Peter Thiel’s proposed logic. What’s clear is that there’s suddenly ample demand for new solutions.

The WSJ reports:

More than a dozen major U.S. multinational companies raised concerns in a call with White House officials Tuesday about the potentially broad scope and impact of Mr. Trump’s executive order targeting WeChat, set to take effect late next month.
Apple Inc., Ford Motor Co., Walmart Inc. and Walt Disney Co. were among those participating in the call, according to people familiar with the situation.
“For those who don’t live in China, they don’t understand how vast the implications are if American companies aren’t allowed to use it,” said Craig Allen, president of the U.S.-China Business Council. “They are going to be held at a severe disadvantage to every competitor,” he added.
Other participants in the call Tuesday included Procter & Gamble Co., Intel Corp., MetLife Inc., Goldman Sachs Group Inc., Morgan Stanley, United Parcel Service Inc., Merck & Co. Inc. and Cargill Inc., according to the people.

That’s the long game.

There’s ample demand from individuals, too, BTW:

Americans using digital services would gladly switch to companies that are more committed to data privacy, according to survey results shared exclusively with Axios’ Kyle Daly.
Why it matters: It’s the latest sign people are frustrated with the digital status quo, even as companies make efforts to give users more control over how their data gets collected, stored and used.
Details: The survey of 1,018 Americans, conducted in June, found people want more control over what happens with their personal information and think existing tools seem outdated and should be easier to use.
93% of Americans would switch to a company that prioritizes their data privacy.
91% would prefer to buy from companies that always guarantee them access to their data.
88% are frustrated that they don’t have more control over their data.
73% reported finding the process of downloading their data from a company “outdated”; 32%, “hard”; 32%, “confusing.”
About two-thirds said they want to be able to choose what data companies can and can’t collect.

They’re also just waiting for an alternative.

3. And just to point out the swings of the pendulum — there’s Apple, complaining about the WeChat ban. Back in 1984, Apple released that iconic Super Bowl ad about IBM referencing George Orwell.

Now they’re getting a taste of their own medicine with Riot’s Fortnite spoof.

Of course, Facebook sees an opportunity:

Between the lines: Facebook is trying to position itself as friendlier to small businesses than Apple, which also faces a lawsuit from Fortnite maker Epic Games over its commission and in-app payment restrictions.
What’s happening: Facebook said Friday that it will launch “Paid Online Events” for small businesses in 20 countries around the world to charge Facebook users to attend their classes, instructions and other events.
The feature could be useful for any small business or individual offering a service, such a preacher, musician, yoga teacher or cooking instructor.
Facebook asked Apple to either waive its 30% cut or let Facebook go around it and process event payments via Facebook Pay, in either case letting event hosts keep all the revenue they generate. Apple declined, according to Facebook.

4. The other thing about technological balkanization is that it’s not always going to be black and white. A lot of the time it’s gray. That’s a good way to describe what’s been happening in Europe in terms of how they’ve dealt with the influence of American Big Tech. Rather than ban anything outright, they just force companies to play by their rules.

That’s well and good in theory. In practice, it’s really messy with a lot of unintended consequences.

For instance:

Some businesses fear growing liability while others worry that small and mid-sized firms will get hurt as the U.S. and Europe begin work to replace Privacy Shield, the pact that let thousands of firms transfer data across the Atlantic without breaking EU privacy rules, Axios’ Ashley Gold reports.
Why it matters: Without a replacement in place after the EU’s high court struck Privacy Shield down last month, thousands of businesses will be stuck complying with an agreement that no longer applies in the EU while scrambling to figure out how to get data over from Europe without exposing themselves to legal risks.
What’s new: This week, the Department of Commerce and European Commission announced they have started discussions to come up with a new framework to govern data transfers between the EU and the U.S.

5. We’ve talked about balkanization. We’ve touched on regulation. One of the missing pieces that’s become a pivotal question of the day is moderation, which is understandably a controversial topic of the day. If you listened at all to the recent antitrust hearings, then you know that Republicans have their collective pitchforks out about platform censorship.

And it’s easy to think about moderation negatively particularly with what’s going on in China.

But just as not every habit needs to be labeled an addiction — there are good habits, after all — not all moderation should be labeled censorship.

Good moderation is helpful in creating the right incentives that align with a community’s core values — whether that’s a small group of friends or an entire country.

And good moderation will mean different things for different people.

A big part of why there’s such a negative slant to the idea of moderation with today’s status quo isn’t moderation itself, it’s the issue of centralized power and the lack of transparency and accountability.

Here’s the New Yorker (via /gregkidd):

In a 2018 article published in the Harvard Law Review, “The New Governors: The People, Rules, and Processes Governing Online Speech,” Kate Klonick, who is now a professor at St. John’s University Law School, tallies the sometimes conflicting factors that have shaped the moderation policies at Twitter, Facebook, and YouTube. The companies, she writes, have been influenced by a fundamental belief in American “free speech norms,” a sense of corporate responsibility, and user expectations. They’ve also reacted to government requests, media scrutiny, pressure from users or public figures, and the demands of third-party civil-society groups, such as the Anti-Defamation League. They have sometimes instituted new rules in response to individual incidents. There are downsides to this kind of improvisational responsiveness: a lack of transparency and accountability creates conditions ripe for preferential treatment and double standards.

It’s also the type of problem inherent to huge centralized organizations and platforms. The more decentralized, transparent, and flexible moderation is, the less oppressive moderation feels.

I mean I get it. Why should Mark Zuckerberg decide the rules for billions of people? Who made him king? (And I get Mark’s side — when you have your own employees protesting because you won’t take stuff down because they don’t like it.)

It’s like that thing that Aristotle said: That dude that has a lotta friends basically has no friends.

Mark gets it, too. That’s why he created an independent (supposedly) subcommittee to decide that stuff.

As a solution, though, it’s still kind of a bandaid. When you’re as big and as powerful as Facebook, any solution to the problem will be a bit cumbersome.

When you don’t have a system built on real trust and real identities, it’s impossible to delegate that responsibility to your users or your communities. If you never trusted them in the first place, how can you provide them agency.

It’s a point that we touched upon a couple weeks ago.

Vitalik Buterin:

If you don’t have any notion of persistent identity, then you can’t have positive incentives because there’s no persistent thing for those incentives to hook onto. There’re a lot of ways you can have persistent identity, persistent reputation — even in ways that are very strongly privacy preserving.

Anyway, this was more of an open question. Something to think about.

To Head Off Regulators, Google Makes Certain Words Taboo — The Markup

6. OK. I’ll leave you with a little more Peter Thiel on the state of innovation and progress in the U.S. from that same talk. (Sorry, Chamath is pushed back again.)

If we look at the rate of progress in Silicon Valley, it was charismatic because it was the one place where things were still happening relative to the rest of the U.S., and it’s become a lot less charismatic in the last five years.
We think about the vibe in 2014, it was this place where the future was being built. In 2019, the big tech companies are probably as self hating in some ways as the big banks were in 2009.
There’s a sense of, “uh, it’s not quite working.”
If you pick on Google a little bit here, the Google propaganda of the future was that it was all going to be more automation. The story in 2014 were things like Google Glass so you could identify anybody you looked at at any time. It was the self-driving car. I would say these aren’t that big of a set of innovations — a self-driving car is a step from a car but not as big a step as a far from a horse.
So we can debate quite how big these things are and how to quantify them. But that was still the narrative that was very intact in 2014.
When you fast forward to 2019, it’s striking how there’s absolutely no narrative of the future left. Google doesn’t even talk about the self-driving car very much. There’s a sense that it may still happen, but it’s further in the future. The expected time seems to be getting further away.
So there’s sort of the sense that perhaps there’s this danger that we have slowed progress even in tech, even in the world of information technology.
….
Somehow Silicon Valley has consolidated into larger companies. It’s gotten harder for new companies to break through, and it’s gotten harder because new companies or small companies are good at doing new things and people are doing fewer new things. Then the big companies are more dominant.
….
The stagnation idea is that at the end of the day, technology is about people. It’s not about inanimate forces. It’s not some kind of Marxist historicism about the way things are inevitably going to happen. The stress is always on individuals, small teams that start companies, new projects that do new things.
It’s a question of human agency. It’s not deterministic. We have every possibility to do these things, but at the end of the day, it is up to us to make it happen. And it’s not set in stone that it’s going to happen one way or another.
In conclusion, I think one other gloss in Life After Google is that perhaps you should have the title with “life” being italicized or stressed or put in bold.
The critical thing is there is life, life goes on and in particular, human life, humanity goes on. Even though the dominant narrative in tech is about inanimate forces or Marxist historicism — it really is, at its core, about human beings and we should always bet on the indomitability of the human spirit.

The GiD Report #123 — Balkanization and what that means for the future of the internet

1. The biggest fear of a balkanized internet is that it means we’ll be more closed off and less connected. But the fear itself doesn’t mean it will become a reality.

2. It’s unclear that things will play out as cleanly as Peter Thiel’s proposed logic. What’s clear is that there’s suddenly ample demand for new solutions.

3. And just to point out the swings of the pendulum — there’s Apple, complaining about the WeChat ban. Back in 1984, Apple released that iconic Super Bowl ad about IBM referencing George Orwell.

6. OK. I’ll leave you with a little more Peter Thiel on the state of innovation and progress in the U.S. from that same talk. (Sorry, Chamath is pushed back again.)

7. Stuff happens

Written by GlobaliD