Week 3: Online Monopolies
The Case Against Google
Charles Duhigg, New York Times, 20 February 2018
Shivaun Moeran and Adam Raff met, married and started a company — thereby
sparking a chain of events that might, ultimately, take down this age of internet
giants as we know it — because they were both huge nerds. In the late 1980s, Adam
was studying programming at the University of Edinburgh, while Shivaun was
focused on physics and computer science at King’s College London. They had mutual
friends who kept insisting they were perfect for each other. So one weekend, they
went on a date and discovered other similarities: They both loved stand-up comedy.
Each had a science-minded father. They shared a weakness for puns.
In the years that followed, those overlapping enthusiasms led to cohabitation, a
raucous wedding and parallel careers at big technology firms. The thing is, though,
when you’re young and geeky and fall in love with someone else young and geeky, all
your nerdy friends want you to set them up on dates as well. So Adam and Shivaun,
who took Adam’s last name after marriage, approached the problem like two good
programmers: They designed a dating app.
The app was known as MatchMate, and the idea was simple: Rather than just pairing
people with similar interests, their software would put together potential mates
according to an array of parameters, such as which pub they were currently standing
in, and whether they had friends in common, and what movies they liked or
candidates they voted for, and dozens of other factors that might be important in
finding a life partner (or at least a tonight partner). The magic of MatchMate was that
it could allow a user to mix variables and search for pairings within a specific group, a
trick that computer scientists call parameterization. “It was like asking your best
friend to set you up,” Shivaun told me. “Someone who says, ‘Well, you probably think
you’d like this guy because he’s handsome, but actually you’d like this other guy
because he’s not as good-looking, but he’s really funny.’ ”
Within computer science, this kind of algorithmic alchemy is sometimes known as
vertical search, and it’s notoriously hard to master. Even Google, with its thousands
of Ph.D.s, gets spooked by vertical-search problems. “Google’s built around
horizontal search, which means if you type in ‘What’s the population of Myanmar,’
then Google finds websites that include the words ‘Myanmar’ and ‘population,’ and
figures out which ones are most likely to answer your question,” says Neha Narula,
who was a software engineer at Google before joining the M.I.T. Media Lab. You don’t
really care if Google sends you to Wikipedia or a news article or some other site, as
long as its results are accurate and trustworthy. But, Narula says, “when you start
asking questions with only one correct answer, like, Which site has the cheapest
vacuum cleaner? — that’s much, much harder.”
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For search engines like Google, finding that one correct answer becomes particularly
difficult when people have numerous parameters they want satisfied: Which vacuum
cleaner is cheapest but also energy-efficient and good on thick carpets and won’t
scare the dog? To balance those competing preferences, you need a great verticalsearch engine, which was something Adam and Shivaun had thought a lot about.
Soon the Raffs began daydreaming about turning their idea into a moneymaker. They
didn’t have the funds to compete with huge dating sites like Match.com, so they
applied for a couple of patents and began brainstorming. They believed that their
vertical-search technology was good — better, in fact, than almost anything they had
seen online. Best of all, it was built to work well on almost any kind of data set. With
just a bit of tinkering, it could search for cheap airline tickets, or great apartments, or
high-paying jobs. It could handle questions with hard-to-compare variables, like
what’s the cheapest flight between London and Las Vegas if I’m trying to choose
between business class or leaving after 3 p.m.?
As far as they could tell, their search technology performed better on such problems
than Google did, which Adam discovered when he tried to buy an iPod online. “I
spent half an hour searching Google for the lowest price, and it drove me completely
mad,” he told me. It was impossible for him to figure out which sites were selling
iPods and which were selling accessories, like headphones or charging cords. Or
Google would show Adam one price, but then the actual price was completely
different. Or there was an extra charge for shipping. It seemed to Adam his
technology would do a much better job.
Google executives, had they known of Adam’s frustrations, probably wouldn’t have
been surprised. For years, Google had been trying to build a tool for comparing online
prices. “The idea was you should be able to input any item, and we’d show you the
best place to buy it,” says Brian Larson, a technical lead for what was then named
Froogle and today is called Google Shopping. Larson’s team was small — just himself
and one other programmer at first, and roughly a dozen people at its height — and
Larson would regularly test how Froogle compared with other online pricecomparison services. “Sometimes we were neck and neck; sometimes, not so much,”
Larson said. “We had a hundred million product listings, which was better than
competitors.” But they were often outperformed by sites like PriceGrabber.com,
which had many more employees devoted to price comparisons.
Froogle’s limitations tended to pop up particularly when users included too many
search parameters. For a while, Larson had a specific test search that Froogle kept
failing, something like “white running shoes and cheap and free shipping.” Inevitably,
the first result would be a Christmas elf wearing running shoes that some guy was
selling online. No matter how Google’s engineers fiddled with their coding, they
couldn’t stop the elf from appearing as the top link. Eventually, a manager bought the
elf so it wouldn’t appear in the search results anymore. “We made elf T-shirts,”
Larson told me. “It became our mascot.”
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Adam and Shivaun’s technology was good enough to tell the difference between an elf
wearing running shoes and an actual pair of running shoes. It was good enough, in
fact, to figure out which websites charged hidden shipping fees and which offered
truly good deals. So the Raffs quit their jobs, hired a few programmers, spent months
perfecting their technology and, in early 2006, unveiled Foundem.com, a verticalsearch engine for finding cheap online prices, to a small group of friends and
associates. Each time someone used Foundem to buy something, the Raffs would
receive a small payment from the website making the sale. Adam and Shivaun weren’t
sure their company would succeed — there were already a couple of other big pricecomparison search engines, like PriceGrabber, NexTag and, of course, Google itself —
but they figured this was how the internet was supposed to work: Two people with a
new idea can take on giants and, if their technology is good enough, grow into colossi
themselves.
The Raffs knew they would have to rely on Google to find customers. For one thing,
as evidenced by the name Foundem, they weren’t marketing geniuses. (“It’s like we
found ’em for you, you know?” Shivaun explained.) But early tests indicated that
Foundem usually came up high in Google’s search results whenever people submitted
queries like “compare prices xr-1000 motorcycle helmets.” Six months later, they
opened Foundem to the world, and initial traffic was encouraging. “Search engines
liked the site,” Shivaun told me. “That’s supposed to be the recipe for success.” As
long as their vertical-search technology was strong, the Raffs figured, Google would
guide shoppers to their door.
Google has succeeded where Genghis Khan, communism and Esperanto all failed:
It dominates the globe. Though estimates vary by region, the company now accounts
for an estimated 87 percent of online searches worldwide. It processes trillions of
queries each year, which works out to at least 5.5 billion a day, 63,000 a second. So
odds are good that sometime in the last week, or last hour, or last 10 minutes, you’ve
used Google to answer a nagging question or to look up a minor fact, and barely
paused to consider how near-magical it is that almost any bit of knowledge can be
delivered to you faster than you can type the request. If you’re old enough to
remember the internet before 1998, when Google was founded, you’ll recall what it
was like when searching online involved AltaVista or Lycos and consistently delivered
a healthy dose of spam or porn. (Pity the early web enthusiasts who innocently asked
Jeeves about “amateurs” or “steel.”)
In other words, it’s very likely you love Google, or are at least fond of Google, or
hardly think about Google, the same way you hardly think about water systems or
traffic lights or any of the other things you rely on every day. Therefore you might
have been surprised when headlines began appearing last year suggesting that Google
and its fellow tech giants were threatening everything from our economy to
democracy itself. Lawmakers have accused Google of creating an automated
advertising system so vast and subtle that hardly anyone noticed when Russian
saboteurs co-opted it in the last election. Critics say Facebook exploits our addictive
impulses and silos us in ideological echo chambers. Amazon’s reach is blamed for
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spurring a retail meltdown; Apple’s economic impact is so profound it can cause
market-wide gyrations. These controversies point to the growing anxiety that a small
number of technology companies are now such powerful entities that they can
destroy entire industries or social norms with just a few lines of computer code.
Those four companies, plus Microsoft, make up America’s largest sources of
aggregated news, advertising, online shopping, digital entertainment and the tools of
business and communication. They’re also among the world’s most valuable firms,
with combined annual revenues of more than half a trillion dollars.
In a rare display of bipartisanship, lawmakers from both political parties have started
questioning how these tech giants grew so powerful so fast. Regulators in Missouri,
Utah, Washington, D.C., and elsewhere have called for greater scrutiny of Google and
others, citing antitrust concerns; some critics have suggested that our courts and
legislatures need to go after tech firms in the same way the trustbusters broke up oil
and railroad monopolies a century ago. But others say that Google and its cohort are
guilty only of delighting customers. If these tech leviathans ever fail to satisfy us, their
defenders argue, capitalism will punish them the same way it once brought down
Yahoo, AOL and Myspace.
At the core of this debate is a question that is more than a century old: When does a
megacompany’s behavior become so brazen that it violates the law? In the early
1900s, just after the Industrial Revolution, the federal government provided an
answer by suing one of America’s largest companies, Standard Oil, on the novel
theory that big becomes bad when a giant uses its dominance not only to defeat its
competitors but also to extinguish the possibility that competition might occur.
In its technological innovation, Standard Oil was the Google of its day. The
company’s founder, John D. Rockefeller, had become the richest man in America by
spending millions of dollars hiring scientists to transform how oil was refined and
transported. And those innovations earned the public’s admiration. In 1858, before
Standard Oil was founded, lighting a home required whale oil, which cost up to $3 a
gallon, putting illumination out of reach for all but the wealthiest of households. By
1885, after Standard Oil figured out how to refine kerosene, it cost just 8 cents a
gallon to brighten the night. “Let the good work go on,” Rockefeller wrote to a
partner. “We must ever remember we are refining oil for the poor man and he must
have it cheap and good.”
Standard Oil’s technological discoveries gave the company huge advantages over its
rivals, and Rockefeller exploited those advantages ruthlessly. He cut secret deals with
railroads so that other firms had to pay more for transportation. He forced smaller
refineries to choose between selling out to him or facing bankruptcy. “Rockefeller and
his associates did not build the Standard Oil Co. in the boardrooms of Wall Street,”
wrote Ida Tarbell, a muckraking journalist of the day. “They fought their way to
control by rebate and drawback, bribe and blackmail, espionage and price cutting,
and perhaps more important, by ruthless, never slothful efficiency of organization.”
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In 1906, President Theodore Roosevelt ordered his Justice Department to sue
Standard Oil for antitrust violations. But government lawyers faced a quandary: It
wasn’t illegal for Standard Oil to be a monopoly. It wasn’t even illegal to compete
mercilessly. So government prosecutors found a new argument: If a firm is more
powerful than everyone else, they said, it can’t simply act like everyone else. Instead,
it has to live by a special set of rules, so that other companies get a fair shot. “The
theory was that competition is good, and if a monopoly extinguishes competition,
that’s bad,” says Herbert Hovenkamp, co-author of a seminal treatise on antitrust
law. “Once you become a monopoly, you have to start acting differently, and if you
don’t, then what you’ve been doing all along starts breaking the law.”
The Supreme Court agreed and split Standard Oil into 34 firms. (Rockefeller received
stock in all of them and became even wealthier.) In the decades following the
Standard Oil breakup, antitrust enforcement generally abided by a core principle:
When a company grows so powerful that it becomes a gatekeeper, and uses that
might to undermine competitors, then the government should intervene. And in the
last century, as courts have censured other monopolies, academics and jurists have
noticed a pattern: Monopolies and technology often seem intertwined. When a
company discovers a technological advantage — like the innovations of Rockefeller’s
scientists — it sometimes makes that firm so powerful that it becomes a monopoly
almost without trying very hard. Many of the most important antitrust lawsuits in
American history — against IBM, Alcoa, Kodak and others — were rooted in claims
that one company had made technological discoveries that allowed it to outpace
competitors.
For decades, there seemed to be a consensus among policymakers and business
leaders (though not always among targeted companies) about how the antitrust laws
should be enforced. But around the turn of this century, a number of tech companies
emerged that caused some people to question whether the antitrust formula made
sense anymore. Firms like Google and Facebook have become increasingly useful as
they have grown bigger and bigger — a characteristic known as network effects.
What’s more, some have argued that the online world is so fast-moving that no
antitrust lawsuit can keep pace. Nowadays even the biggest titan can be defeated by a
tiny start-up, as long as the newcomer has better ideas or faster tech. Antitrust laws,
digital executives said, aren’t needed anymore.
Consider Microsoft. The government spent most of the 1990s suing Microsoft for
antitrust violations, a prosecution that many now view as a complete waste of time
and money. When Microsoft’s chief executive, Bill Gates, signed a consent decree to
resolve one of its monopoly investigations in 1994, he told a reporter that it was
essentially pointless for the company’s various divisions: “None of the people who
run those divisions are going to change what they do or think.” Even after a federal
judge ordered Microsoft broken into separate companies in 2000, the punishment
didn’t take. Microsoft fought the ruling and won on appeal. The government then
offered a settlement so feeble that nine states begged the court to reject the proposal.
It was approved.
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What eventually humbled Bill Gates and ended Microsoft’s monopoly wasn’t antitrust
prosecutions, observers say, but a more nimble start-up named Google, a search
engine designed by two Stanford Ph.D. dropouts that outperformed Microsoft’s own
forays into search (first MSN Search and now Bing). Then those two dropouts
introduced a series of applications, like Google Docs and Google Sheets, that
eventually began to compete with almost every aspect of Microsoft’s businesses. And
Google did all that not by relying on government prosecutors but by being smarter.
You don’t need antitrust in the digital marketplace, critics argue. “When our products
don’t work or we make mistakes, it’s easy for users to go elsewhere because our
competition is only a click away,” Google’s co-founder, Larry Page, said in 2012.
Translation: The government ought to stop worrying, because no online giant will
ever survive any longer than it deserves to.
Once Foundem.com was available to everyone, the company’s honeymoon lasted
precisely two days. During its first 48 hours, the Raffs saw a rush of traffic from users
typing product queries into Google and other search engines. But then, suddenly, the
traffic stopped. Alarmed, Adam and Shivaun began running diagnostics. They quickly
discovered that their site, which until then had been appearing near the top of search
results, was now languishing on Google, mired 12 or 15 or 64 or 170 pages down. On
other search engines, like MSN Search and Yahoo, Foundem still ranked high. But on
Google, Foundem had effectively disappeared. And Google, of course, was where a
vast majority of people searched online.
The Raffs wondered if this could be some kind of technical error, so they began
checking their coding and sending email to Google executives, begging them to fix
whatever was causing Foundem to vanish. Figuring out whom to write, and how to
contact them, was a challenge in itself. Although Google’s parent company bills itself
as a diversified firm with about 80,000 employees, almost 90 percent of the
company’s revenues derive from advertisements, like the ones that show up in search.
As a result, there are few things more important to Google’s executives than
protecting the firm’s search dominance, particularly among the most profitable kinds
of queries, such as those of users looking to buy things online. In fact, at about the
same time the Raffs were starting Foundem.com, Google executives were growing
increasingly concerned about the threats that vertical-search engines posed to
Google’s business.
“What is the real threat if we don’t execute on verticals?” one Google executive
emailed his colleagues in 2005, according to internal documents later shared with the
Federal Trade Commission. “Loss of traffic from Google.com because folks search
elsewhere for some queries,” he wrote, in answer to his own question. “If one of our
big competitors builds a constellation of high-quality verticals, we are hurt badly,” the
internal documents continued. Another executive put it more bluntly: “Google’s core
business is monetizing commercial queries. If users go to competitors such as
Amazon to do product queries, long-term revenue will suffer.”
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Google executives began holding battle-plan meetings for the vertical war. Shortly
after Foundem.com went online, one executive issued an order: Henceforth, Google’s
own price-comparison results should appear at the top of many search pages, as
quickly as possible, even if that meant disregarding the natural results of the
company’s search algorithm. “Long term, I think we need to commit to a more
aggressive path,” a high-ranking Google employee wrote to colleagues. Eventually, a
mandate came from the chief executive: “Larry thought product should get more
exposure,” a senior official wrote.
One way to get that exposure was to influence the rules governing how Google
displayed search results. In 2006, Google instituted a shift in its search algorithm,
known as the Big Daddy update, which penalized websites with large numbers of
subpages but few inbound links. A few years later, another shift, known as Panda,
penalized sites that copied text from other websites. When adjustments like these
occurred, Google explained to users, they were aimed at combating “individuals or
systems seeking to ‘game’ our systems in order to appear higher in search results —
using low-quality ‘content farms,’ hidden text and other deceptive practices.”
Left unsaid was that Google itself generates millions of new subpages without
inbound links each day, a fresh page each time someone performs a search. And each
of those subpages is filled with text copied from other sites. By programming its
search engine to ignore other sites doing the same thing that Google was doing, critics
say, the company had made it nearly impossible for competing vertical-search
engines, like Foundem, to show up high in Google’s results.
Shivaun and Adam sent email after email to Google executives, but no one responded
with anything useful. So the Raffs started making phone calls. Those didn’t help
much, either. Adam and Shivaun had worked in technology for decades. They were
well known and had connections to important people inside Google and at other big
firms. But none of that seemed to matter.
As the months went by and Foundem’s bank accounts dwindled, the Raffs, desperate,
began approaching other websites, offering to adapt their technology to power those
sites’ internal search engines. Soon they were providing back-end technology for a
popular motorcycle site and a large magazine publisher. Eventually, about 2.5 million
people were seeing Foundem’s search results each month. Foundem was named one
of Britain’s best travel comparison sites by The Times of London and celebrated on a
popular British gadget show. But without traffic from Google, the Raffs were barely
holding on.
Three years passed this way. Some nights, Shivaun would sit at her computer,
exhausted, Googling phrase after phrase — How do you lift a Google website
penalty? Who at Google reviews mistakes? Google and deindexed and phone
number and help — hoping that some magic combination of words might yield a new
solution. “It just felt so unfair,” Shivaun told me. “We had great technology. It was
winning awards. But we couldn’t even get an explanation from Google about why we
weren’t showing up.” Eventually, they sought out a public relations firm, in the hope
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that a newspaper article might get Google’s attention. The P.R. firm had an additional
suggestion: Why not file an antitrust complaint? To Adam and Shivaun, that seemed
like a waste of time. If Microsoft had been able to shrug off the antitrust attacks of the
United States government, why would Google care about a complaint filed by some
small firm?
But they didn’t see many other options. So Adam and Shivaun pulled out their
laptops and began assembling a long document detailing everything they had
experienced. Then they went to Brussels, to the headquarters of the European
Commission, the agency charged with regulating competitive behavior, and filed a
complaint accusing Google of violating antimonopoly laws.
As the years passed, Shivaun and Adam got into the habit of visiting message
boards where people obsessively discussed Google’s many peculiarities. They began
to notice an interesting pattern among companies complaining about the search
giant: Often, the aggrieved parties had, in some way, posed some kind of threat to
Google’s business. And they seemed to have suffered dire consequences.
There was, for instance, Skyhook Wireless, which had invented a new navigation
system that competed with Google’s location software and had signed major deals
with the cellphone manufacturers Samsung and Motorola. Skyhook’s accuracy “is
better than ours,” one Google manager speculated in an internal email later revealed
in a lawsuit filed by Skyhook against Google. Not long after that note was written,
according to the lawsuit, a high-ranking Google official pressured Samsung and
Motorola to end their relationships with Skyhook — and implied that if they didn’t,
Google could make it impossible for them to ship their phones on time. (Google has
denied doing anything inappropriate.) Soon, Samsung and Motorola canceled their
Skyhook contracts. Skyhook sued Google, and though one suit was dismissed, Google
ended up paying $90 million to settle a patent-infringement claim. But by then it was
too late. Skyhook’s founders, bereft of other partnership options, had been forced to
sell their company at a large discount.
Then there was Yelp, a website with millions of user-generated reviews of local
brewpubs, auto-body shops and other businesses. Yelp grew quickly as local queries
— like “best nearby steakhouse” — became a third of all online searches. For years,
Yelp appeared near or at the top of millions of Google searches. Google, hoping to
capitalize on that traffic, tried to buy Yelp in 2009, but Yelp’s founders rejected those
advances. Then Google started pulling Yelp’s content into its own results, which
meant many users didn’t have to visit Yelp’s website. Yelp complained — to Google
and later to the F.T.C. — but Google said the only alternative was for Yelp to remove
its content from Google altogether, according to documents filed with federal
regulators. The same thing happened at other fast-growing review sites like
TripAdvisor and Citysearch, which also complained to the F.T.C. “We still exist,” says
Luther Lowe, a vice president at Yelp, “but Google did everything it could to ensure
that we’d never present a threat to them. It’s bullying, but they’re the 800-pound
gorilla.”
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The more Adam and Shivaun looked, the more examples they found. Getty Images
had created a popular search engine to help users comb through the firm’s 170
million photographs and other visual art. Then, in 2013, Google adjusted how it
displayed images so that rather than directing people to Getty’s website, users could
easily see and download Getty’s high-definition images from Google itself. “Our
traffic immediately fell 85 percent,” says Yoko Miyashita, Getty’s general counsel.
“We wrote to Google, and said, Hey, this isn’t cool. And their response was, ‘Well, if
you don’t agree to these terms, we’ll just exclude you’ ” — by letting Getty remove
itself from the search engine entirely, Miyashita said. “That’s not really a choice,
because if you aren’t on Google, you basically don’t exist.”
TradeComet.com, which operated a vertical-search engine for finding business
products, initially prospered by buying ads on Google, but as the site grew, Google
“raised my prices by 10,000 percent, which strangled our business virtually
overnight,” the company’s C.E.O. at the time, Dan Savage, said when he filed an
antitrust lawsuit in 2009. KinderStart.com, a vertical-search engine for parents, sued
Google after it received a “PageRank” of zero, making it essentially unfindable.
(TradeComet.com’s suit was dismissed on a technicality; KinderStart.com’s was
dismissed for insufficient evidence.)
Shivaun and Adam filled notepads with the names of companies that had complained
about Google’s tactics — eJustice, a vertical-search engine for legal information;
NexTag, the fellow price-comparison site; BDZV, a group of German newspapers.
They printed out lawsuits and regulatory complaints until their living room was a
maze of paper.
Eventually the Raffs reached out to the F.T.C., which, they knew, was the American
equivalent of the European Commission’s antitrust office, and the U.S. regulators
invited them to visit. The F.T.C.’s staff, it turned out, had been quietly collecting
complaints about Google for years. In 2012, those officials wrote a confidential 160page report that said Google had “adopted a strategy of demoting, or refusing to
display, links to certain vertical websites in highly commercial categories.” That
memo, about half of which was accidentally sent to reporters at The Wall Street
Journal after they submitted a Freedom of Information Act request, said that
“Google’s conduct has resulted — and will result — in real harm to consumers and to
innovation.”
“Google has strengthened its monopolies over search and search advertising through
anticompetitive means,” which “will have lasting negative effects on consumer
welfare,” F.T.C. officials wrote. They cited instances in which Google seemed
purposely to be privileging less useful information, substandard search results and
suboptimal links. “Although it displays its flight search above any natural search
results for flight-booking sites, Google does not provide the most flight options for
travelers,” the regulators wrote. Whereas a decade earlier someone searching for
steakhouses would have seen a long list of websites, now the most noticeable results
pointed to Google’s own listings, including Google maps, Google local search or
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advertisers paying Google. Some F.T.C. staff recommended “that the Commission
issue a complaint against Google” for copying material and certain advertising and
contract practices, though not search-engine bias.
Google responded to the report’s claims by arguing that the changes it made to the
search engine benefited users. “Our testing has consistently showed that users want
quick answers to their queries,” Google said in a statement when contacted about this
article. “If you are searching for weather, you probably want a forecast, not just links
to weather sites.” And when it comes to online shopping, the statement read, “if
someone is searching for products, they likely want information about price and
where they can buy it. They probably don’t want to be taken to another site where
they have to enter their search again. . . . We absolutely do not make changes to our
search algorithm to disadvantage competitors.” Claims to the contrary, like those
made by Foundem, are untrue, Google maintained. “We make hundreds of changes to
search every year, all with the same goal: Delivering users the best, most relevant
search results,” the company continued. “Each change, large and small, affects
millions of sites, some who see their rankings improve, others who drop.” And,
Google concluded, “our ultimate responsibility is to deliver the best results possible to
our users, not specific placements for sites within our results.”
When the F.T.C.’s politically appointed leadership considered the staff’s
recommendations, they declined to sue Google, surprising many inside the agency.
“While not everything Google did was beneficial, on balance, we did not believe that
the evidence supported an F.T.C. challenge,” the agency’s chairman at the time, Jon
Leibowitz, said when he announced the decision in 2013.
The F.T.C.’s decision, according to agency insiders, was motivated in part by a debate
that has also sparked battles within antitrust courts over the last 40 years: Should the
law protect consumers or encourage competition? They’re not always synonymous.
“It wasn’t consumers who were complaining about Standard,” says Hovenkamp, the
antitrust scholar. “It was the other oil companies.” Similarly, few users are kvetching
about Google; it’s primarily other tech firms. United States judges have increasingly
held that the government must show consumer harm to win in court.
Adam and Shivaun didn’t have to wait for the official F.T.C. announcement to know
that their case was going nowhere. Meeting with officials in Washington, they could
tell: These people were not going to prosecute. They had come to the United States at
their own expense. They had written memo after memo arguing that Google was
treating them unfairly and as a result hurting users. They had done everything they
were asked. Standard Oil controlled 64 percent of the market for refined petroleum
when the Supreme Court broke it into dozens of pieces. Google and Facebook today
control an estimated 60 to 70 percent of the U.S. digital advertising market. And the
F.T.C. seemed happy to let them keep doing it. To the Raffs, it felt as if history was
repeating itself, as if the pointless, ineffectual Microsoft case was happening all over
again. It felt as if nobody cared.
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If you are younger than 29 — which just happens to be the average age of a Google
employee, according to a survey done by PayScale — then odds are good you don’t
remember much about the Microsoft antitrust battles of the 1990s. So, a quick
primer: For almost a decade, starting in 1993, federal and state prosecutors besieged
Microsoft in courtrooms across the nation, arguing that the company had acted in
ways that were predatory and dishonest to preserve its software monopoly. One
Microsoft executive was quoted in court as threatening to “cut off” the “air supply” of
a competitor. “Is Bill Gates the ’90s answer to Don Corleone?” Time magazine asked.
“I expected to find a bloody computer monitor in my bed,” a witness told
investigators.
Along the way, Microsoft was accused of widespread bullying, coercion and general
obnoxiousness. And Microsoft basically said: Whatever. “There’s one guy in charge of
licenses,” Bill Gates told reporters after he signed a consent decree with the
Department of Justice in 1994. “He’ll read the agreement.” Everyone else, the
implication was, would ignore it.
Even when a judge ruled in 2000 that Microsoft was violating antitrust law,
conventional wisdom held that the victory was largely pyrrhic. Microsoft successfully
appealed, and prosecutors eventually threw in the towel, agreeing to abandon their
attacks and settle if Microsoft agreed to token reforms, such as making its products
more compatible with competitors’ software and giving three independent observers
unfettered access to the company’s records, employees and source code. Microsoft’s
executives thought that three observers, versus 48,000 employees, sounded like
pretty good odds.
This was the history the Raffs recalled when they heard the F.T.C. was abandoning its
investigation. But then, they also remembered a discussion they had once had with a
lawyer named Gary Reback, who told them that everything they’d heard about the
Microsoft trials was wrong. Reback is something of a legend in Silicon Valley, both
because of his accomplishments as an antitrust provocateur and because of his
anxious — some might say paranoid — worldview. Reback has been known to call
other lawyers late at night and leave long, obsessively detailed voice mail messages
about legal arguments and economic theories. He was featured on a 1997 cover of
Wired magazine with the headline “This Lawyer Is Bill Gates’s Worst Nightmare,” a
boast that wasn’t far-off: Working on behalf of clients like Netscape and Sun
Microsystems, Reback had browbeaten the Department of Justice into suing
Microsoft for antitrust.
By the time Adam and Shivaun started visiting the F.T.C., Reback had exchanged his
antipathy of Microsoft for a disdain of Google and had accompanied them on their
visits with regulators. There’s a loose coalition of economists and legal theorists who
call themselves the New Brandeis Movement (critics call them “antitrust hipsters”),
who believe that today’s tech giants pose threats as significant as Standard Oil a
century ago. “All of the money spent online is going to just a few companies now,”
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says Reback (who disdains the New Brandeis label). “They don’t need dynamite or
Pinkertons to club their competitors anymore. They just need algorithms and data.”
Reback had told Adam and Shivaun that it was important for them to keep up their
fight, no matter the setbacks, and as evidence he pointed to the Microsoft trial.
Anyone who said that the 1990s prosecution of Microsoft didn’t accomplish anything
— that it was companies like Google, rather than government lawyers, that humbled
Microsoft — didn’t know what they were talking about, Reback said. In fact, he
argued, the opposite was true: The antitrust attacks on Microsoft made all the
difference. Condemning Microsoft as a monopoly is why Google exists today, he said.
Surprisingly, some people who worked at Microsoft in the 1990s and early 2000s
agree with him. In the days when federal prosecutors were attacking Microsoft day
and night, the company might have publicly brushed off the salvos, insiders say. But
within the workplace, the attitude was totally different. As the government sued,
Microsoft executives became so anxious and gun-shy that they essentially
undermined their own monopoly out of terror they might be pilloried again. It wasn’t
the consent decrees or court decisions that made the difference, according to multiple
current and former Microsoft employees. It was “the constant scrutiny and being in
the newspaper all the time,” said Gene Burrus, a former Microsoft lawyer. “People
started second-guessing themselves. No one wanted to test the regulators anymore.”
In public, Bill Gates was declaring victory, but inside Microsoft, executives were
demanding that lawyers and other compliance officials — the kinds of people who,
previously, were routinely ignored — be invited to every meeting. Software engineers
began casually dropping by attorneys’ desks and describing new software features,
and then asking, in desperate whispers, if anything they’d mentioned might trigger a
subpoena. One Microsoft senior executive moved an extra chair into his office so a
compliance official could sit alongside him during product reviews. Every time a
programmer detailed a new idea, the executive turned to the official, who would point
his thumb up or down like a capricious Roman emperor.
In the early 2000s, Microsoft’s top executives told some divisions that their plans
would be proactively shared with competitors — literally describing what the
company intended to create before software was even built — to make sure it
wouldn’t offend anyone who was likely to sue. Microsoft’s engineers were outraged.
But they went along with it.
And most important, as Microsoft lived under government scrutiny, employees
abandoned what had been nascent internal discussions about crushing a young,
emerging competitor — Google. There had been informal conjectures about
reprogramming Microsoft’s web browser, the popular Internet Explorer, so that
anytime people typed in “Google,” they would be redirected to MSN Search,
according to company insiders. Or, perhaps a warning message might pop up: “Did
you know Google uses your data in ways you can’t control?”
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Microsoft was so powerful, and Google so new, that the young search engine could
have been killed off, some insiders at both companies believe. “But there was a new
culture of compliance, and we didn’t want to get in trouble again, so nothing
happened,” Burrus said. The myth that Google humbled Microsoft on its own is
wrong. The government’s antitrust lawsuit is one reason that Google was eventually
able to break Microsoft’s monopoly.
“If Microsoft hadn’t been sued, all of technology would be different today,” Reback
told me. We’ve known since Standard Oil that advances in technology make it easier
for monopolies to emerge. But what’s less recognized is the importance of antitrust in
making sure those new technologies spread to everyone else. In 1969 the Justice
Department started a lawsuit against IBM for antitrust violations that lasted 13 years.
The government eventually surrendered, but in an earlier attempt to mollify
prosecutors, IBM eliminated its practice of bundling hardware and software, a shift
that essentially created the software industry. Suddenly, new start-ups could get a
foothold simply by writing programs rather than building machines. Microsoft was
founded a few years later and soon outpaced IBM.
Or consider AT&T, which was sued by the government in 1974, fought in court for
eight years and then slyly agreed to divest itself of some businesses if it could keep its
most valuable assets. Critics complained AT&T was getting the deal of a lifetime. But
then start-ups like Sprint and MCI made millions building on technologies AT&T
championed, and AT&T found itself struggling to compete. It’s completely wrong to
say that antitrust doesn’t matter, Reback argues. “The internet only exists because we
broke up AT&T. The software industry exists because Johnson sued IBM.”
It was critical that the Raffs continue fighting, Reback told them. Social
embarrassment and sustained attacks have the power to succeed when courtrooms or
political agencies fail. After their F.T.C. disappointment, the Raffs flew back to
England to consider their options. And then one night they were at home watching
television when the phone rang. Someone they had met in Brussels was calling to
share some remarkable news. The European Commission had issued a decision on
the complaint they filed six years before.
What changed everything was a middle-aged Danish politician named Margrethe
Vestager, who had recently been named the European Union’s commissioner for
competition. Vestager was an unusual choice for the post. She wasn’t a populist
crusader or a pro-business acolyte; she was, instead, a moderate whose claim to fame,
at that point, was having served as an inspiration for the television show “Borgen,” a
fictional series about a Danish politician. But Vestager was awarded the
commissioner’s post in 2014 after arguing that European marketplaces needed to do
a better job of giving everyone an equal chance to succeed. Since assuming her office,
Vestager has become, unexpectedly, the most prominent antitrust official in the
world, invited to speak at conferences and mobbed by autograph seekers.
By the time Vestager took office, Google had already transitioned its pricecomparison service to its present incarnation, which is effectively an advertising
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system that prominently features links only from companies that pay for the
promotion. (Users are notified by a small logo that says “sponsored.”) After reviewing
the complaints submitted by the Raffs and others, Vestager announced she intended
to formally charge Google with antitrust violations. (She has also embarked on
investigations into the European tax practices of Starbucks, Amazon and Apple, as
well as anticompetitive tactics at Qualcomm, Facebook and Gazprom.)
Over the next two years, Vestager’s staff reviewed data from 1.7 billion Google
queries. They scrutinized how people fared when they conducted searches on topics
in which Google had a vested interest, versus those where the company had nothing
to gain. Then, in June of last year, the commission issued its final verdict: “What
Google has done is illegal under E.U. antitrust rules,” Vestager said in a statement
released at the time. “It denied other companies the chance to compete on the merits
and to innovate. And most important, it denied European consumers a genuine
choice of services and the full benefits of innovation.” Google was ordered to stop
giving its own comparison-shopping service an illegal advantage and was fined an
eye-popping $2.7 billion, the largest such penalty in the European Commission’s
history and more than twice as large as any such fine ever levied by the United States.
The verdict rocked Silicon Valley. Some think Europe’s assertiveness makes it more
likely American regulators will act as well. And there’s evidence that’s already
starting. Donald Trump appealed to voters, in part, by attacking the tech monopolies.
In a case of truly odd bedfellows, that puts him in alignment with Elizabeth Warren
and Bernie Sanders, who have long called for greater scrutiny of technology
companies. Last year, a group of Democratic lawmakers in Congress, led by Senator
Amy Klobuchar of Minnesota, sponsored legislation to boost antitrust enforcement
by forcing companies to assume the burden of showing that a merger won’t hurt the
public.
Meanwhile, a bipartisan assortment of state attorneys general have urged the F.T.C.
to reopen its investigation of Google. Most major antitrust battles, including the
federal suits against Microsoft and Standard Oil, have begun as state actions. A
Missouri investigation is particularly notable because the state’s Republican attorney
general, Josh Hawley, who is running for the United States Senate, has subpoenaed
information to see if Google has manipulated searches to disadvantage potential
competitors. “The Obama-era F.T.C. did not take any enforcement action against
Google, did not press this forward and has essentially given them a free pass,” Hawley
told reporters after revealing his inquiry in November. “I will not let Missouri
consumers and businesses be exploited by industry giants.”
As attacks against Google have escalated, the company has tried to limit the damage.
After Yelp complained to the F.T.C. about Google’s stealing its content, Google
promised to make it easier for websites to opt out of automatic copying, a pledge it
reaffirmed a few months ago. And earlier this month, in exchange for Getty Images’
withdrawing its complaint to the European Commission, Google signed a licensing
agreement with Getty promising to more clearly display images’ copyright
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information. Other titans like Facebook are similarly trying to get ahead of criticisms,
voluntarily pledging greater transparency and promising to work more cooperatively
with regulators.
The implication is clear enough: Google and the other tech titans understand that the
landscape is shifting. They realize that their halos have become tarnished, that the
arguments they once invoked as a digital exception to American economic history —
that the internet economy is uniquely self-correcting, because competition is only a
click away — no longer hold as much weight. “When you get as big as Google, you
become so powerful that the market bends around you,” Vestager told me. The notion
that antitrust law isn’t needed anymore, that we must choose between helping
consumers or spurring competition, no longer seems sufficient reason to exempt the
tech giants from century-old legal codes. If anything, Vestager’s verdict and state
investigations indicate that companies like Google may have more in common with
the monopolists of old than most people thought. Silicon Valley’s bigwigs ought to be
scared.
“If Europe can prosecute Google, then we can as well,” says William Kovacic, a law
professor and former Republican-appointed chairman of the Federal Trade
Commission. “It’s just a question of willingness now.”
If the internet’s potentates are frightened, however, they’re doing a good job of
hiding it. Google has appealed the European Commission’s decision and has
vigorously defended itself online. The company’s arguments are the same ones that it
was putting forth on company blogs over the course of the investigation. “We disagree
with the European Commission’s argument that our improved Google Shopping
results are harming competition,” Google’s top lawyer wrote in one post. The
commission “drew such a narrow definition around online shopping services that it
even excluded services like Amazon,” undermining the contention that Google is
dominant. “Google delivered more than 20 billion free clicks to aggregators over the
last decade,” he wrote in another post. Forcing it to “direct more clicks to pricecomparison aggregators would just subsidize sites that have become less useful for
consumers.” Google’s data indicates that users appreciate how the search engine has
shifted over the years. “That’s not ‘favoring’ ” Google’s interests, the company said.
“That’s giving customers and advertisers what they find most useful.”
Some legal theorists think that Google might have a point. “To what extent are
consumers, rather than competitors, being harmed by Google?” says Hovenkamp, the
antitrust scholar. “If the answer is ‘not much,’ then I’m suspicious of an antitrust
remedy.” Others say the risks are too high. “There are very real costs associated with
suing a company like Google,” says Geoffrey Manne, executive director of the
International Center for Law & Economics, a nonpartisan research center. “You’re
potentially impairing a firm that provides vital services to millions of people, and
potentially benefiting competitors who don’t deserve that support.”
Those are fair arguments. But they are also, in some ways, beside the point. Antitrust
has never been just about costs and benefits or fairness. It’s never been about
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whether we love the monopolist. People loved Standard Oil a century ago, and
Microsoft in the 1990s, just as they love Google today.
Rather, antitrust has always been about progress. Antitrust prosecutions are part of
how technology grows. Antitrust laws ultimately aren’t about justice, as if success
were something to be condemned; instead, they are a tool that society uses to help
start-ups build on a monopolist’s breakthroughs without, in the process, being
crushed by the monopolist. And then, if those start-ups prosper and make discoveries
of their own, they eventually become monopolies themselves, and the cycle starts
anew. If Microsoft had crushed Google two decades ago, no one would have noticed.
Today we would happily be using Bing, unaware that a better alternative once existed.
Instead, we’re lucky a quixotic antitrust lawsuit helped to stop that from happening.
We’re lucky that antitrust lawyers unintentionally guaranteed that Google would
thrive.
Put differently, if you love technology — if you always buy the latest gadgets and think
scientific advances are powerful forces for good — then perhaps you ought to cheer on
the antitrust prosecutors. Because there is no better method for keeping the
marketplace constructive and creative than a legal system that intervenes whenever a
company, no matter how beloved, grows so large as to blot out the sun. If you love
Google, you should hope the government sues it for antitrust offenses — and you
should hope it happens soon, because who knows what wondrous new creations are
waiting patiently in the wings.
For the Raffs, however, it’s probably too late. By the time Vestager announced her
verdict and record-setting fine last year, it had been 12 years since Adam and Shivaun
started Foundem.com. During that time, their lives slowly but inexorably became
devoted to battling Google. They had spent thousands of hours corresponding with
regulatory agencies across the globe. They had filed a civil suit against Google in
British court, a case that is ongoing. They basically shut down Foundem, creating
more time for them to give advice to other companies and regulators fighting Google.
This consulting work, some of which was funded by Google’s competitors, has helped
to keep the Raffs afloat. And if the Raffs win their lawsuit against Google, it could be
worth millions. “But it’s a different business model than we expected,” Adam told me.
“It’s also deeply frustrating, because we became technologists in order to build new
technologies. We never intended to be professional plaintiffs or antitrust crusaders.”
One of the most difficult things for the Raffs over the past decade has been figuring
out how to explain this journey to themselves and others. Even friends and family
didn’t fully understand what was going on. “It feels really good to be validated like
this, to be told we were right,” Shivaun told me, referring to Vestager’s verdict. “But
that doesn’t turn back the clock and give us another chance. Even if we win in
Brussels, or win our lawsuit, in some ways, we were still defeated. We were still
beaten by Google.”
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Beware the Big Five
Tamsin Shaw, New York Review of Books, 5 April 2008
The big Silicon Valley technology companies have long been viewed by much of the
American public as astonishingly successful capitalist enterprises operated by
maverick geniuses. The largest among them—Microsoft, Apple, Facebook, Amazon,
and Google (the so-called Big Five)—were founded by youthful and charismatic male
visionaries with signature casual wardrobes: the open-necked blue shirt, the black
polo-neck, the marled gray T-shirt and hoodie. These founders have won immense
public trust in their emergent technologies, from home computing to social media to
the new frontier, artificial intelligence. Their companies have seemed to grow
organically within the flourishing ecology of the open Internet.
Within the US government, the same Silicon Valley companies have been considered
an essential national security asset. Government investment and policy over the last
few decades have reflected an unequivocal confidence in them. In return, they have at
times cooperated with intelligence agencies and the military. During these years there
has been a constant, quiet hum of public debate about the need to maintain a balance
between security and privacy in this alliance, but even after the Snowden leaks it
didn’t become a great commotion.
The Big Five have at their disposal immense troves of personal data on their users,
the most sophisticated tools of persuasion humans have ever devised, and few
mechanisms for establishing the credibility of the information they distribute. The
domestic use of their resources for political influence has received much attention
from journalists but raised few concerns among policymakers and campaign officials.
Both the Republicans and the Democrats have, in the last few election cycles,
employed increasingly intricate data analytics to target voters.
Private organizations, too, have exploited these online resources to influence
campaigns: the Koch brothers’ data firm, i360, whose funding rivals that of both
parties, has spent years developing detailed portraits of 250 million Americans and
refining its capacities for influence operations through “message testing” to
determine what kinds of advertisements will have traction with a given audience. It
employs “mobile ID matching,” which can link users to all of their devices—unlike
cookies, which are restricted to one device—and it has conducted extensive
demographic research over social media. Google’s DoubleClick and Facebook are
listed as i360’s featured partners for digital marketing. The firm aims to have
developed a comprehensive strategy for influencing voters by the time of the 2018
elections.
Only in recent months, with the news of the Russian hacks and trolls, have Americans
begun to wonder whether the platforms they previously assumed to have facilitated
free inquiry and communication are being used to manipulate them. The fact that
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Google, Facebook, and Twitter were successfully hijacked by Russian trolls and bots
(fake accounts disguised as genuine users) to distribute disinformation intended to
affect the US presidential election has finally raised questions in the public mind
about whether these companies might compromise national security.
Cyberwarfare can be waged in many different ways. There are DDoS (distributed
denial of service) attacks, by which a system is flooded with superfluous traffic to
disrupt its intended function. The largest DDoS attack to date was the work of the
Mirai botnet (a botnet is created by hacking a system of interconnected devices so
they can be controlled by a third party), which in October 2016 attacked a company
called Dyn that manages a significant part of the Internet’s infrastructure. It
temporarily brought down much of the Internet in the US. There are also hacks
designed to steal and leak sensitive materials, such as the Sony hack attributed to
North Korea or the hacking of the DNC’s e-mail servers during the 2016 election. And
there are attacks that damage essential devices linked to the Internet, including
computing systems for transportation, telecommunications, and power plants. This
type of attack is increasingly being viewed as a grave threat to a country’s
infrastructure.
The military once used the term “information warfare” to refer to any cyberattack or
military operation that targeted a country’s information or telecommunications
systems. But the phrase has come to have a more specific meaning: the exploitation of
information technology for the purposes of propaganda, disinformation, and
psychological operations. The US is just now beginning to confront its vulnerability to
this potentially devastating kind of cyberattack.
This is the subject of Alexander Klimburg’s prescient and important book, The
Darkening Web: The War for Cyberspace, written largely before the revelation of
Russian interference in the 2016 election. With its unparalleled reach and targeting,
Klimburg argues, the Internet has exacerbated the risks of information warfare.
Algorithms employed by a few large companies determine the results of our web
searches, the posts and news stories that are featured in our social media feeds, and
the advertisements to which we are exposed with a frequency greater than in any
previous form of media. When disinformation or misleading information is fed into
this machinery, it may have vast intended and unintended effects.
Facebook estimated that 11.4 million Americans saw advertisements that had been
bought by Russians in an attempt to sway the 2016 election in favor of Donald
Trump. Google found similar ads on its own platforms, including YouTube and
Gmail. A further 126 million people, Facebook disclosed, were exposed to free posts
by Russia-backed Facebook groups. Approximately 1.4 million Twitter users received
notifications that they might have been exposed to Russian propaganda. But this
probably understates the reach of the propaganda spread on its platform. Just one of
the flagged Russian accounts, using the name @Jenn_Abrams (a supposed American
girl), was quoted in almost every mainstream news outlet. All these developments—
along with the continued rapid dissemination of false news stories online after the
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2016 election, reports by Gallup that many Americans no longer trust the mainstream
news media, and a president who regularly Tweets unfounded allegations of “fake
news”—have vindicated Klimburg’s fears.*
Klimburg argues that liberal democracies, whose citizens must have faith in their
governments and in one another, are particularly vulnerable to damage by
information warfare of this kind. And the United States, he observes, is currently
working with an extremely shallow reservoir of faith. He cites Gallup polls conducted
prior to the election of Donald Trump in which 36 percent of respondents said they
had confidence in the office of the presidency and only 6 percent in Congress. We
have no reason to believe that these numbers have subsequently increased. The civic
trust that shores up America’s republican political institutions is fragile.
Klimburg gives a fascinating diagnosis of how this situation has been inflamed. He
describes a growing tension in the US over the last twenty years, coming to a head
under Obama, between the perception of the Internet and its reality. The Silicon
Valley corporations have attained their global reach and public trust by promoting
the Internet as a medium for the free exchange of information and ideas, independent
of any single state’s authority. Since almost all trade in and out of the US now relies
on the information transfers that these Silicon Valley companies facilitate, this
perception of independence is economically essential. The country’s largest trading
relationship, with the European Union, is governed by the Privacy Shield agreement,
which assures EU companies that data transfers will be secured against interference
and surveillance.
In Obama’s International Strategy for Cyberspace, released on May 16, 2011, he
described the Internet as a democratic, self-organizing community, where “the norms
of responsible, just and peaceful conduct among states and people have begun to take
hold.” When Edward Snowden’s revelations about NSA surveillance and the
collection of metadata threatened to compromise this agreement, Obama issued
Presidential Policy Directive 28, which set out principles for “signals intelligence
activities” compatible with a “commitment to an open, interoperable, and secure
global Internet.”
Martin Libicki, a researcher at the RAND corporation, the global policy think tank,
has had an important part in restraining offensive initiatives at the Department of
Defense. His aim is to restrict America’s capabilities to what is required for defense
against cyberattacks. Klimburg himself adheres closely to Libicki’s general view,
expressed in several RAND reports, that the US needs to maintain a perception of
itself as one of the “free Internet advocates”—in contrast to “cyber-sovereignty
adherents” such as Russia and China, which aim above all to control cyberspace and
its influence over their citizens.
But Klimburg’s book warns us that the facts too frequently contradict this view. In his
account, America’s military and intelligence agencies have always considered
cyberspace a site of potential conflict and sought global dominance over it.
Throughout the 1990s, the US military had intensive discussions about the various
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ways in which these new technologies might be applied to traditional forms of
warfare. They were particularly concerned with psychological warfare, which might
be used, for example, to weaken an enemy army’s resolve to fight or to bring down
national leaders by eroding their popular support.
Only a year before the release of Obama’s International Strategy for Cyberspace,
Russia’s Kaspersky Lab had discovered the Stuxnet virus, a malicious worm originally
built as a cyber-weapon by the US and Israel. It was intended to disrupt Iran’s
nuclear program (by infecting the control systems used to operate its centrifuges,
causing them to malfunction and explode), but subsequently spread across the globe.
This attack, along with Obama’s establishment of US Cyber Command alongside the
National Security Agency in 2009, signaled to other states that the US intended to use
the Internet for offensive purposes.
What concerns Klimburg most, though, is the extent to which US government
agencies are prepared and willing to mislead the American people about its own cyber
initiatives. Such disinformation creates exactly the kind of confusion that liberal
states vulnerable to psychological and information warfare urgently need to avoid.
This sort of deceit is now a crucial aspect of US policy and defense strategy. Klimburg
suggests, for example, that the details about America’s extraordinary intelligencegathering programs, which Bob Woodward disclosed in his book Obama’s Wars
(2010), had been deliberately leaked to him as a warning to adversaries—an attempt
on the government’s part to impress the extent of US cyber power upon the rest of the
world.
At the same time, other government agencies have sought to maintain a view, both
domestically and internationally, of the Internet as a domain of cooperation, not
conflict. The language employed in official cyber strategy documents, Klimburg tells
us, is deliberately obfuscatory. The 2015 Defense Department statement of its cyberstrategy used terminology such as “Offensive Cyber Effects Operations” but gave no
indication of what that term included or excluded. Fred Kaplan, in his book Dark
Territory: The Secret History of Cyber War (2016), has also claimed that even in the
early days of cyber-operations at the NSA, under Michael Hayden’s command, the
already tenuous distinction between defensive and offensive operations was
deliberately elided.
Klimburg suggests that a healthy democracy needs much greater transparency about
its cyber-policy. The government could provide its citizens with clear, unambiguous
principles concerning the collection of signals intelligence, the development of
offensive and defensive cyber-capabilities, their relation to traditional military
strategy, and the evolving relationship between the intelligence community and the
military. The American public might come to have more trust in the government, for
example, if it only used psychological cyber-operations to win over “hearts and
minds” in military zones—such as the locally informed and culturally specific
influence campaigns used as counterinsurgency measures in Afghanistan—rather
than manipulating popular beliefs more broadly and in less controlled ways.
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Klimburg is not greatly concerned by the burgeoning power of the private
corporations, like those in Silicon Valley, that run the online platforms on which the
government’s influence operations take place. In his view they are independent and
have purely commercial interests. But if we want to understand the growing
imbalance of power in online persuasion, we might ask more questions than he does
about the carefully guarded lack of transparency with which the titanic Silicon Valley
companies operate. The interests that now guide what technologies they produce are
not entirely commercial ones. The national security community has exploited the
private sector to help develop America’s immense cyber-capabilities. In doing so it
has placed an extraordinary array of potential cyber-weapons in the hands of
unaccountable private companies.
The Internet, as is well known, owes its origins to DARPA (the Defense Advanced
Research Projects Agency), the agency responsible for establishing and cultivating
new military technologies. According to the “free Internet” narrative encouraged by
Obama, Silicon Valley, and the Defense Department, the Internet technologies we
use, from software to social media platforms, are controlled by the private sector.
However, when DARPA boasts online about the technologies whose research and
development it has sponsored, it lists, along with the Internet, the graphical user
interfaces that allow us to interact with our devices, artificial intelligence and speech
recognition technologies, and high-performance polymers for advanced liquid crystal
display technology. These technologies encompass every aspect of the smartphone.
Our online lives wouldn’t be possible without the commercialization of military
innovations.
DARPA offers early funding, often to academics and researchers rather than private
corporations, to develop new technologies for national security purposes, but the
economic relationship between Silicon Valley and the national security community
extends much further than that. One aspect of that relationship is detailed in Linda
Weiss’s America Inc.?: Innovation and Enterprise in the National Security State
(2014). Weiss describes the development in Silicon Valley of a hybrid public/private
economy in which the government assists in the creation of new technologies it needs
for national security operations by investing in companies that can also
commercialize these technologies.
Government agencies have mitigated risk and even helped to create markets for
companies whose products, while ostensibly strictly civilian and commercial, satisfy
their own needs. The driverless car industry will incorporate, test, and improve
technologies devised for missile guidance systems and unmanned drones. Facial
recognition software developed by intelligence agencies and the military for
surveillance and identity verification (in drone strikes, for example) is now assuming
a friendly guise on our iPhones and being tested by millions of users.
The government has used various mechanisms to fund these projects. The Small
Business Innovation Research program (SBIR), Weiss tells us, “has emerged as the
largest source of seed and early-stage funding for high-technology firms in the United
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States,” investing, at the time of writing, $2.5 billion annually. This investment—the
national security agencies supply 97 percent of funding for the SBIR program—not
only serves as a form of government “certification” for private venture capitalists, it
also provides an incentive for invention, since SBIR asks for no equity in return for its
investment.
Silicon Valley has also been profoundly shaped by venture capital funds created by
government agencies. The CIA, Defense Department, Army, Navy, National
Geospatial-Intelligence Agency (NGIA), NASA, and Homeland Security Department
all have venture capital at their disposal to invest in private companies. Weiss quotes
a Defense Department report to Congress in 2002 explaining the aim of its initiatives:
The ultimate goal is to achieve technically superior, affordable Defense
Systems technology while ensuring that technology developed for national
security purposes is integrated into the private sector to enhance the national
technology and industrial base.
The direction of technological development in the commercial sector, in other words,
is influenced by the agenda of government agencies in ways largely unknown to the
public.
It’s not difficult to trace, for example, the profound influence of In-Q-Tel, the CIA’s
wildly successful venture capital fund, which has sometimes been the sole investor in
start-ups but now often invests in partnerships with the Big Five. In-Q-Tel was the
initial sole investor in Palantir Technologies, Peter Thiel’s software company
specializing in big data analysis. A branch of the company called Palantir Gotham,
which specializes in analysis for counterterrorism purposes, has won important
national security contracts with the DHS, FBI, NSA, CDC, the Marine Corps, the Air
Force, and Special Operations command, among other agencies.
But In-Q-Tel’s achievements are also familiar to us in more mundane forms: Google
Earth originated in an In-Q-Tel sponsored company called Keyhole Inc., a 3-D
mapping startup also partially owned by the NGIA. The cloud technology on which
we all increasingly rely is being developed by companies like Frame, which is jointly
funded by In-Q-Tel, Microsoft, and Bain Capital Ventures. Soon we will be able to use
our computers to interact with 3-D holographic images, thanks to another In-Q-Tel–
sponsored company, Infinite Z. Another of their companies, Aquifi, is producing
scanners that can create a color 3-D model of any scanned object.
Since many of the startups in which government agencies invest end up being
absorbed by the Big Five, these companies all now have close relationships with the
defense and intelligence agencies and advise them on technological innovation. Eric
Schmidt, the former executive chairman of Alphabet, Inc., chairs the Pentagon’s
Defense Innovation Board (Jeff Bezos formerly served on it too), which in a January
2018 report recommended encouraging tech entrepreneurship within the military.
The goal would be to create “incubators” like those used in the business and tech
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worlds that would help develop startups targeted to new defense needs, such as big
data analysis.
The US government has supported the monopolies of the Big Five companies partly
for the sake of the “soft power” they can generate globally. Libicki, in a 2007 RAND
publication, Conquest in Cyberspace: National Security and Information Warfare,
suggested that the government could achieve “friendly conquest” of other countries
by making them depend on US technologies. The “bigger and richer the system, the
greater the draw,” he tells us. Huge global corporations (his primary example is
Microsoft), whose technologies are deeply linked with the domestic technologies of
other nation-states, give America greater soft power across the globe.
It is clearly time to ask whether this hybrid Silicon Valley economy has been a good
national security investment. Weiss points out that after the government funds
research, it gives away the patents to private companies for their own enrichment. We
can find on the websites of organizations like In-Q-Tel and DIUx the kinds of
contracts they offer. The licenses that they acquire are generally nonexclusive. The
technologies that power America’s national security innovations can be sold to
anyone, anywhere. The profits go to companies that may or may not be concerned
about the national interest; Intel recently alerted the Chinese government to a
vulnerability in their chips, one that could be exploited for national security purposes,
before alerting the American government.
Mariana Mazzucato, in The Entrepreneurial State (2013), examined the case of
Apple, which has the lowest research-and-development spending of the Big Five. The
company has succeeded commercially by integrating technologies funded by the
military and by intelligence agencies (such as touch screens and facial recognition)
into stylish and appealing commercial products. The government has shouldered
nearly all the risk involved in these products, while Apple has reaped the rewards. In
other words, taxpayer’s money has helped enrich companies like Apple, and as we
now know from the recently released Paradise Papers (documents concerning
offshore tax havens leaked from a Bermudan law firm), the companies have not
responded with a corresponding willingness to increase the government’s tax
revenues. Apple managed to keep a great deal of its $128 billion in profits free from
taxation by using Irish subsidiaries and only pledged to repatriate its sheltered funds
once the Trump administration dramatically slashed the corporate tax rate.
Silicon Valley companies do not simply have vast amounts of money, though; they
also own vast amounts of data. To be sure, much older corporations like Bank of
America and Unilever, which have been gathering our data for decades, own much
more (approximately 80 percent, compared to Silicon Valley’s 20 percent, according
to a recent study by IBM and Oxford Economics) but the Big Five, Uber, and others
have extremely sophisticated data analytics, and their platforms are designed for the
efficient exploitation of their data for advertising and influence.
This is where Klimburg’s concerns about the development of offensive cyber-powers
by the military and intelligence agencies intersect most worryingly with the problem
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of privatizing our cyber-assets. The US has, since the start of the war on terror,
increasingly outsourced intelligence and military operations to private companies,
particularly those engaged in data analytics and targeting. Government agencies have
offered lucrative contracts to older companies such as Booz Allen Hamilton and
Boeing AnalytX, as well as to new players, such as Palantir, SCL group, and SCL’s
now infamous partner, Cambridge Analytica, whose roles in the Leave EU campaign
in Britain and in Trump’s presidential campaign have both drawn legal scrutiny. In
doing so the government has encouraged these companies to develop the most
sophisticated methods for influencing the public. These kinds of military-grade
information operations may then be applied to their client base.
Government partnerships with such companies make the data owned by the Big Five
exploitable in ways that many of us are only just beginning to understand. But these
immense powers may also be freely employed for ends that threaten national
security. The way in which the Koch brothers have already exploited their resources
to promote skepticism about climate change should serve as a warning.
The problem is compounded by the exceptional form of corporate governance that
the Big Five have been allowed to maintain. Even though Facebook and Google are
publicly traded companies, their founders, Mark Zuckerberg of Facebook and Larry
Page and Sergey Brin of Google, have a more than 50 percent vote on their respective
boards—that is, effectively total control.
In Klimburg’s view, the national security community has irresponsibly overdeveloped
its offensive powers in cyberspace. As far as its pursuit of dominance in military and
intelligence capacities goes, this may be true. But by giving Silicon Valley irresistible
commercial incentives to develop military technologies, the government has, at the
same time, surrendered unparalleled power to private corporations. Extensive control
of information has been handed over to unaccountable global corporations that don’t
profit from the truth. It’s currently laughably easy, as Vladimir Putin has brazenly
shown us, to spread foreign propaganda through the platforms they operate. But even
if they can develop mechanisms to prevent the spread of foreign propaganda, we will
still be heavily reliant on the goodwill of a handful of billionaires. They are, and will
continue to be, responsible for maintaining the public’s confidence in information,
preserving forms of credibility that are necessary for the health and success of our
liberal democratic institutions.
Zuckerberg, in a well-known incident he now surely regrets, was asked in the early
days of Facebook why people would hand over their personal information to him. He
responded, “They trust me—dumb fucks.” We’re finally starting to appreciate the
depth of the insult to us all. Now we need to figure out how to keep the corporations
we have supported with our taxes, data, and undivided attention from treating us like
dumb fucks in the future.
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