There’s two things here. One, I’m very passionate about the fact that markets function best when people are well informed and they’re free. So keeping a market free means removing things that harm the market. I think people have to have a willingness to see harm. So cognitive blindness is a real, real problem. For example, I’ve written recently about how the African Prince phenomenon, which we researched for a long time or advanced fee fraud from Africa, the people who fall for that tend to be very intelligent. They’re not stupid, but they fall for it because they’re racist, or they have no idea how Africa operates. They believe something to be true because they’re ignorant in a very, very particular narrow way.
cognitive bias is one of the biggest problems I see
Antifa has the same effect. Very, very intelligent people believe antifa exists and is a threat when it is not. It is basically a non-threat, and they ignore all the real threats because again, they have ignorance about a particular, very narrow sector. So cognitive bias is one of the biggest problems I see. So for example, if you’re raised in a racist household, you have a lot of strange ideas about fairness in the market. You won’t hire a person of color different than yourself because you are, and this is global, right, not just the United States with whites not hiring blacks, but this is… People have opinions about others because they’re not exposed to reality. So their blindness harms the market.
So the first thing is really to get people to a place where they can accept information that will be accepted in a way that they can really make the market freer. The second thing is government exists and needs to get involved in regulation because it is the lack of regulation that allows for these cognitive biases and harms to manifest into oligopolies and to huge, huge, dangerous corporations. A lot of people mistake the Boston Tea Party as somebody rebelling against taxation. But it is not. What the colonists really objected to was that there’s this super powerful middlemen who is taxing and regulating their ability to function in the market. They were rebelling against the Facebooks and the Microsoft’s. That’s such an important understanding of history because what we’re seeing today, like the railroads, like all through history is people getting upset that there’s this private individual who’s taking out of their pocket without representation.
Now, I say that because so many times in Silicon Valley, I’ve been here two decades, I see young, excited white men come and say, “How can I get my hand into everyone’s pocket?” I just think, “Are you so ignorant of history? Do you not understand the Boston Tea Party? Your job here is not to just find a way to tax everybody.” For example, somebody who said they wanted to take every parking spot in San Francisco and block it and then charge people to use it. Government needs to step in to prevent that from being seen as innovation, that innovation is preventing harms. It is preventing costs. It is lowering barriers. Innovation is not creating barriers.
So that inversion is one of the problems, and that’s why ethics is so essential to changing having a moral sense or a moral code and a grasp of history is so essential to changing the market towards a better functioning one.
Yeah. In your excellent talk at RSA earlier this year, I didn’t get to attend, but I watched this on YouTube. It’s on YouTube for anyone who’s interested in seeing it, breaking bad. We’re seeing frightening conditions today in big tech. By the way, it must cause a complete existential crisis to think that we have a president in power that actually tries to create these conspiracies and who is not doing anything to protect our economic and political freedoms. You see that whole power equation that’s out of balance. In your presentation, Davi, you explored the origins of the term of the use of breaking bad and a pretty grim definition of character flaw. If you can be blunt, are we headed for a actual civil war, or is a civil war going to be fought based upon ideologies in cyberspace? What are the potential future conflicts that you see, A, that can be avoided, and B, that can arise if we don’t have clear heads that prevail?
There are several problems with this topic, and a lot of it has to do with terminology and semantics, right? What is war? Are we already in a state of civil war, for example? Is war simply the continuation of politics by other means, and in particular, information warfare? So I gave an example recently of the 1917 Beersheba Battle, where a saddlebag was dropped with bad information, which the opposing side picked up and then aligned themselves around, which allowed them to be defeated. Or another way of putting it is Arista would be very familiar or Sun Zu would be very familiar with the current state of affairs, the information warfare we’re going through.
The politics weren’t working. So you started waging war.
I mean, this has been my whole study history of understanding the past, understanding the present level. Sure. Not just this information, but the whole concept of war being changing the landscape of morality to where you can do extraordinarily harmful things because you’re trying to get to a different state, right? The politics weren’t working. So you started waging war. I would say the United States in that sense has been in a civil war, is in a civil war. You see people blatantly lying, blatantly saying they’re going to do something and then doing the opposite, which is camouflage or deception.
You see people stating harms about their opposition, which are in fact the things they’re doing themselves. In a sense, it’s like the civil war didn’t end. When you look at the slaughterhouse cases right after the civil war ended, the United States let go people from prison who had fought viciously against freedom who wanted to perpetuate and expand slavery. Once they got out of jail, and the slaughterhouse case is a good example of this, they immediately started trying to undermine the rights of black Americans. So you have literally right at the end of the civil war the rise of the KKK up into 1870s, President Grant gets elected by a landslide by black voters. So immediately the KKK is going around trying to disenfranchise, get rid of black voters.
Woodrow Wilson removed all the blacks from government. He was elected on the principle of representation. The blacks voted for him because he promised them better representation and then turned around and took it all away from them, blatantly. He restarted the clan again. So I think civil war needs to be expanded by definition into not just muskets of the 1860s, but back to the Jacksonian times, 1830s, he waged all-out war on America to perpetuate slavery. Andrew Jackson was a terrible, terrible human, and he’s the role model for the current occupant of the White House.
So that should tell you everything, that we’re trying to continue the harms of the 1830s, which as an information security exercise is useful because encryption really took off in the 1840s in America and then was used extensively in the civil war. So we’re just repeating the mistakes of history.
The tools in the battlefield have changed. So your background in economics is I think not only fascinating. It’s interesting to bring to bear on this conversation. You’re no doubt familiar with the economist, Milton Friedman who argued that monopoly is a concentration of power by a firm that has sufficient control over a particular product or service to determine significantly the terms on which other individuals should have access to it. So today we have talked a lot about oligopolies that actually act like monopolies, right? So with that tacit collusion, or in some cases, they may act like cartels, and it occurs right in front of our very eyes out in plain sight, it’s illegal tacit collusion that has been normalized and rational today.
Yeah. One of the weird inversions though you see, the telegraph, for example, would be a natural monopoly in theory, because you have to lay physical lines the way fiber is being laid today. But isn’t really a monopoly when you look at the way telegraph works. Right? Barbed wire fences, a few people realize were made from the same metal as telegraph wire. That’s where barbed wire came from. That’s why it became so inexpensive was because telegraph wires becoming so plentiful and galvanized wire. So the ranch and farm operators just undid their barbed wire fences and connected them to the telephone lines, and they could literally become their own providers. They were hacking into the lines.
So if you have the same sort of freedom in 1968, example was the Carterfone. Here’s a rancher. Again, rural communities tend to be the most prolific innovators out of necessity. He connected wireless to the phone lines, and the monopoly said, “Hey, you can’t do that. We’re supposed to be a monopoly.” The courts, the government stepped in and said, “This is good for the market.” And thus, the internet was born out of the Carterfone because you can attach things like modems and faxes to the monopoly.
So when you look at the 1880s, and you see that the railroads and the telegraph and all this stuff is being laid down, I think a better way of looking at it is… I love the way urban studies work, transportation in particular, because they talk about the last mile. What you really want is a flourishing last mile, which is like the ends of the bell curve. Think about a bus that takes your or a train that takes you on a standard route. But then the last mile is completely open to innovation, and that feeds back into the sort of standardized shared network that you’ve put down out of necessity.
In my book, I actually found this breaks down in every form of science I’ve researched or studied. You either have an easy routine, a minimal judgment path, which everybody benefits from because it’s so ERM, if you will. Or you have one that’s taking a lot of information and acquisition. It’s storing all sorts of data. It’s constantly evaluating, constantly adapting. I think a lot of people think the big firms are supposed to do the latter. But in fact, you find it’s the small innovators, it’s the small startups that are doing it. So again, if you think about the Boston Tea Party, if you think about the railroads, if you think about the telegraph, what you find is that the natural monopolies that start to form actually try to prevent the individuals by unfair practices, which comes from… Right.
The artificial nature of power is used in a cognitive bias way to disadvantage people that could be innovative. So what you find is white men running Lyft, for example, refuse, apparently to hire any blacks. Lyft is supposed to be a transportation network that’s innovative, but it copies black communities. I mean, it’s literally doing what black communities have done for generations, including in the South of the United States and then removes all the blacks from the picture. So that’s not innovation. That’s just appropriation, and then trying to position themselves as a natural monopoly is false. That’s where government has to step in. By not stepping in, government allows this. Facebook wouldn’t exist if Harvard had held Zuckerberg accountable when he committed his first crimes.
That’s such a great point. What makes it even harder, Davi, you have people like Warren Buffet who say in business, I look for economic castles protected by unbreachable moats. That’s his investment strategy.
Yeah. Well, this is a pet peeve of mine that a lot of Silicon Valley talks about investing in things that have moats that keep people inside. That’s not what a moat is. The prisons by water with alligators. A moat is meant to defend people inside against outside attack. So I really bristle when I hear people misuse history in that way, they’re describing a prison and trying to make it sound like a castle.
Going back to the Facebook blog posts that you wrote some time back, that now, there are Facebook employees who are leaving taking pictures of their badges but writing sometimes not so friendly letters on their way out arguing for safer, better practices of their employers and including their founder.
An interesting perspective on that would be General Beck left as head of the Nazi Army. He left and said, “This is not right.” 1938, what Hitler’s doing is wrong. He is celebrated less, for whatever reason. I mean, there’s a beer named after him, Beck’s. But he’s celebrated less than generals who stayed on and did all the wrong things. I think we need to celebrate more people who recognize early the wrongs and they move on and try to do rights. But in his case in particular, what’s probably the most insightful for me is he decided not to commit a coup. He decided not to force Hitler out of power because he felt that he didn’t have the institutional support after the Munich Convention. In other words, the lack of British ability to move or the international community to move to support overthrow of Hitler by appeasing him.
Facebook will continue to do massive amounts of harm and people inside will just be facilitators.
That’s another whole complicated topic because I believe Chamberlain was right at the time in what he did unfortunately, and how he positioned it. But the fact that back and Chamberlain didn’t align on removal of Hitler is what we should think about today. Are there people in the Facebook situation that are saying we could make a change and then leaving instead because it’s hopeless. I believe that to be the case. I believe that Facebook will continue to do massive amounts of harm and people inside will just be facilitators. I do believe we need to hold them accountable, at least the people who were running an organizing and showing a predilection for profit over human rights. That’s something that escapes me why we’re not doing more to stop them.
Well, we’ve spent most of the podcast, all of the podcasts up until now talking about some pretty depressing topics, the current worrisome state of politics, of shareholder dominated capitalism and a bunch of other things. I’d like to shift gears maybe to a little bit happier subject, which is some things that your own company, Inrupt is working on and others in the form of decentralization of really rethinking the internet, rethinking the architecture of the World Wide Web, the protection of data and so forth.
Last year, I had a podcast with Dr. Ann Cavoukian who reminded us of a statement of your own CTO and co-founder Inrupt, Tim Berners-Lee what he made regarding how he’s horrified at what he created in the World Wide Web, which is a centralized model that promotes tracking and surveillance of people’s activities, retaining control in the companies that retain it. So in the future, what you’re currently working on today, is the future decentralized, and do you think there’s enough desire for change at a grassroots level for consumers to carry or accept that burden to change and control their own data?
Oh, absolutely. Having lived through the first one myself and been an active participant in, I mean, my career changed dramatically when 1994, I basically just started working on TCP/IP decentralized systems. At the time, there was a lot of pushback from… I mean, I had to work on mainframes. I had to work on VAX/VMS. As a VAR even, I sold a lot of high-end systems to do all sorts of interesting things that were centralized. I see the same thing happening, and I do, I believe history repeats. So I’m a big believer that this is the next innovation cycle. But another take on that is the cable companies are extremely powerful, and I remember very clearly how we saw Netscape rise out of a completely different trajectory saying everybody should have a web server, and everybody should have a web browser, and the natural monopoly of the cable companies isn’t going to give us the innovation we need.
So not only do I see people as ready and willing to take the challenge. It’s pent-up demand. I think so many people are finding that when they get onto them, the platforms, again, it’s the ERM. It’s easy routine and minimal judgment, but that means that everyone gets a white tube sock, and at the point at which the ready to go for a hike and they need wool socks, or they need tall socks or they deed compression socks, and they’re not getting them from their white tube sock, big box, big technology companies, that innovation is ripe.
So that’s where we’re trying to build again, opportunity in terms of the platform for people to be innovators. It’s going to take people a while, I think, to come to terms with it because they are so used to sometimes doing the easy thing. But doing the hard thing is why we’re here. So we make it easier and easier for them by investing our own sweat equity and time, and that’s what I think the transition will be. But to be fair to Tim, I also want to point out that what he created was that opportunity. He takes a lot of blame for himself, and he takes a lot of responsibility because he’s that type of guy. He’s just an amazing human, and that’s why it’s an honor to be working with him and for him on this.
But what really happened I think was there was wealth preservation by massive corporations in the dot bomb. So when the market crashed, a lot of the money ran towards artificial monopolization as a way of preserving value. So that was a trauma response that shifted the web. It proved the web both to be right, as in standards based model, but also due to trauma, reverted us almost in a warlike scenario to nationalization of it. We should have reverted back once we proved it was right and the money was safe, but we didn’t.
Instead, we had another financial crisis, which was the mortgage crisis, and that doubled down again in the over centralized market, which was wrong. It then used the web to create the application market, which included a lot of lock-in and moats. That’s where you get a lot of people developing apps on proprietary platforms on the back of the web. So you have two traumatic, almost warlike events that have shifted the technology into the wrong space and the management of technology in the wrong space, and the government has been docile and stood by while Amazon, Google, Facebook and platforms developed these business models that treat people very unfairly and differently that are exploiting that license that is granted them by the government unfairly and that are really just truly… They’re facilitating genocide. They’re disenfranchising women. They’re disadvantageous platforms for people of color.
None of that had to be the case. But because of financial crisis and wealth preservation by elites, we saw the technology shift under that pressure. So it’s not that Tim created a thing that was bad, but it was used for bad. So that’s why we have to try to create something that’s not only innovative again or allows for innovation again at a much more humanist level but also protected this time, try to get government prepared, infuse it with security from the start, infuse it with protections from the start, moral codes, ethics, inherited rights, and then have governments around the world be prepared to protect it, I think, as we understand it better now.
Davi, you’re in California. We have round two of CCPA on the ballot in November in your state. Any thoughts or reflections on that in terms of providing, coming back to this question of, is there enough momentum to take back control over our data and to have better human-centered values and regulations over how companies can use data? Have you had a chance? Any thoughts about what’s now called CPRA that’s on the ballot in November that includes things like data protection by design? I know there are some in the industry that think even within the privacy industry, that because it puts the onus or the burden on users to exercise those rights, that it’s either not doing enough or even causing damage or harm to consumers. I mean, from your perspective, economically, historically speaking, technologically or as a humanist, is CPRA going to be a incremental enhancement, or is this potentially groundbreaking for the future of privacy in California and in the US?
I am more on the side of groundbreaking. I think California has been right. Europe got ahead of us in regulation, which to be very clear, as someone who works inside innovation firms for decades and has released a lot of products and has invested a ton of money and engineering cycles to create new technology, regulation is the engine of innovation. We would not have released end-to-end encryption for databases that was client side if we had not had GDPR. The fact that the Europeans got ahead of California is a bit of an embarrassment.
California’s right to try to rotate the innovation back to this market.
So, I think California’s right to try to rotate the innovation back to this market. It’s really sad that it has to be seen by some as harmful to the market. The people who typically say that tend to be economists or investors who are completely disconnected from the actual work of innovation. What they’re saying is bad regulation can stifle the market, but bad anything can stifle anything. What we have to see is a CEO who says, “I want better product,” is regulation. A CTO who says, “I want a new feature,” is regulation. A third party or a government that says, “I want to preserve privacy of people,” is regulation. They’re all innovation engines.
What’s being protected here is the market in a sense that the freedom to operate, right, the way that people will be able to operate is dependent on their ability to protect or control their data. So I don’t make any bones about the fact that you’re going get a better, larger, more expansive market for technology. It’s going to be so much better the more regulation we have around people’s privacy. Again, it goes back to the concept of the Tea Party. It goes back to the concepts of history.
So the second point is, look at 1386. I was deeply involved in massive technology changes at the time 1386 was passed. I was told repeatedly that this was an ambulance chasing legal nightmare, where people would just be trying to get rich, and it wouldn’t change anything. In fact, it created the breach laws that today drive all of the security investment around preventing breaches. Can you imagine a world where we didn’t measure breaches, or we didn’t even pay attention when everyone’s information was lost versus today where the entire security industry, almost all the money we spend and all the innovation and all the research we do is around stopping breaches?
So that’s the type of history, the regulation. You don’t have to go back to the Tea Party. You don’t have to go back to the train, the Carterfone. You can just go back to 1386. California is behind, I think because of the impact of Facebook in particular, the lobby effort of Facebook or Uber to try to prevent regulation. It’s shameful. I think it’s harmful. A good example of that was Uber told San Francisco that they were going to run cars with no license. Amazon did the same thing, and the city said, “You can’t do that. That’s dangerous.” Uber said, “Trust us. We’re the God.” The fight turned into Uber saying, “Fine. We’re going to move to Arizona.” What immediately happened in Arizona is Uber had a crash, and then Uber after that killed somebody, exactly what regulators feared. San Francisco was right to put their foot down and say, “This is not how it works.”