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The Techlash Paradox - Love and loathing of America's Tech Industry


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A look at America's evolving attitudes toward the tech industry and how they may affect the future of innovation and regulation.

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The Techlash Paradox - Love and loathing of America's Tech Industry

  2. 2. 2 THE NEW NORMAL? 2
  3. 3. 3 The Old World For 30 years, America’s tech industry has enjoyed an unparalleled reputation among Americans and policymakers across the political spectrum. Consumers were in love with the powerful new internet services and happy to accept the terms of services and privacy policies they didn’t even read, let alone understand. Meanwhile, policymakers and regulators were careful to give companies the freedom to innovate and avoided imposing significant burdens that might slow investment or limit startup activity.
  4. 4. 4 The New Normal? But tech is no longer the underdog. Today, seven of the top ten most valuable firms in the world are tech companies. Tech's favorability is plummeting and distrust is growing. The result is that policymakers and regulators are more skeptical than ever. They have shifted from removing red tape to holding tech companies and their leaders more accountable. How tech deals with this moment will determine whether it will return to the role as America’s darling or be scrutinized and potentially regulated.
  5. 5. 5 America Loves Tech (Still) 81% INTERNET & INNOVATION MADE LIFE BETTER MADE RELATIONSHIPS WITH FAMILY/FRIENDS MORE IMPACTFUL 42% Americans are still in love with the internet and smartphones, and all the amazing tools and services that they enable. POSITIVE/NEUTRAL OPINION OF TECH INDUSTRY 81 % The survey of 1,040 U.S. consumers was conducted by Survey Monkey from May 15- 22. The survey has a margin of error of +/- 3.5 at a 95 percent confidence level.
  6. 6. 6 51 % INTERNET AND SOCIAL MEDIA HAVE A NEGATIVE IMPACT ON SOCIETY POLICYMAKERS NOT KEEPING UP WITH PACE OF TECH CHANGE 72 % NEED MORE REGULATIONS ON INTERNET AND NEW TECHNOLOGIES 41% TECHNOLOGY MAKING THE GAP BETWEEN RICH AND POOR WORSE 38% Americans are increasingly fearful about the impact of new technologies like AI and self-driving cars. Recent scandals have spurred criticism and concerns about internet companies and other existing technology. But Fears Are Emerging
  7. 7. 7 Distrust of Tech Companies Growing 49 % PACE OF CHANGE TOO FAST AI, AVS AND ROBOTS WILL REDUCE JOB OPPORTUNITIES FOR AMERICANS 60% WOULD NOT PROVIDE HIGHLY PERSONAL INFORMATION TO REDUCE COMMUTE 67 % At the same time, recent revelations about Fake News and privacy breaches show Americans and American regulators have lost trust in tech companies to protect their data, their jobs or their democracy.
  9. 9. 9 2017 U.S. VENTURE CAPITAL SPENDING $17.6 Billion Invested REGULATED & TRUST-CRITICAL INDUSTRIES • Robotics, Drones and Automation • Transportation • Smart Cities and IoT • Digital Health • Blockchain • Augmented Reality 30 % The trust gap is a threat to the future of the entire industry. Tech Betting its Future on Trust Based on Crunchbase data for Venture Capital in 2017 as analyzed by Vrge Analytics.
  10. 10. 10 6 Major Investment Trends Blockchain $883 M Transportation $1.3 B Smart Cities $2.24B Robotics $2.4 B Digital Health $6.342 B Augmented Reality $538 MIn 2017, six of the largest areas of investment by VCs and large tech firms were in technologies that are either highly regulated or raise significant policy and social issues. Based on Crunchbase data for Venture Capital in 2017 as analyzed by Vrge Analytics.
  11. 11. 11 Disruption Threat Vectors SOCIAL ANGST Truly innovative technologies and business models often run up against existing social and cultural norms and expectations. POLICY CHALLENGES As tech seeks to disrupt highly regulated industries, the policy hurdles grow more challenging. BUSINESS CONFLICT New businesses models are likely to face litigation, negative media and other types of business conflict.
  12. 12. 12 Robots with Jobs Will robots create or destroy jobs? Policymakers want the answer to this question and could regulate the industry away if they don’t like what they find. BUSINESS CONFLICT – MEDIUM These challenges will primarily comprise of smaller battles over technology standards, IP and use of public goods. SOCIAL ANGST – HIGH Robots, drones and AI are already meeting massive social and cultural challenges that are unlikely to let up anytime soon. POLICY CHALLENGES – HIGH Regulatory battles are well underway, and the industry will be mired in long term challenges on the regulatory and policy front.
  13. 13. 13 SKIES Aerial drones are hard at work in Australia, New Zealand and Europe, while regulatory roadblocks and safety concerns are keeping them grounded in the U.S. FARMS Across the board, there is increased investment in agricultural robots that monitor crops, manage pests, fertilize and harvest more efficiently. AISLES Retailers and corporate offices are testing robots that work alongside humans to improve efficiency, but this is creating jobs and safety concerns. SIDEWALKS City sidewalks are a major battleground for testing delivery robots with concerns over public space, data ownership and jobs. Growth Trends
  14. 14. 14 ROBOTS TAKING JOBS Companies must demonstrate how these new ecosystems will be net creators of quality jobs by identifying the new opportunities created by connecting customers and services. SKYNET IS NOT COMING Companies have an obligation to explain how humans and robots will work together in a way that does not evoke The Terminator. And please don’t forget to include humans in commercials and marketing. Automated assembly lines might look great on camera, but they don't resonate with consumers. STANDARDIZING STANDARDS Companies must engage with regulatory bodies and policymakers early in the process to ensure constructive dialogue about the technical details of standards. BAN THE BAN In cities and other jurisdictions considering robot delivery bans, it’s key to create a story and a local footprint to demonstrate how a given program helps the community and supports the local economy and jobs. FUTURE OF WORK This is a conversation that goes beyond any one company, and business leaders have to engage in a dialogue about the future of work. Regulatory Flashpoints
  15. 15. 15 2018 GUIDELINES Guidance for managing drones is expected from the FAA & NASA. PRIVACY REGULATIONS California has some 25 privacy bills, and states like Washington, Oregon and New York aren’t far behind. PERMITTING SYSTEM In lieu of a ban, San Francisco has a challenging and time-consuming permitting process that could easily be replicated elsewhere. TAXATION California has already proposed a tax on robots, and more states are considering this option. BANS More bans – like the one that nearly passed in San Francisco – are likely to crop up around the country . 2019 & Beyond DATA GOVERNANCE Privacy issues are already on the table, and in the long term rules will develop to govern the data captured in the connected future. UNIONIZATION “New collar” jobs programming, operating and managing fleets of robots are likely to unionize, just like their less-technical predecessors. REDESIGN OF SOCIAL SERVICES From portable benefits to universal basic income, AI is expediting the need to reimagine government services and the social safety net. PERSONHOOD While civil rights for robots is much further down the road, the European Parliament has already begun considering the “personhood” and legal ethics of robots. Milestones
  16. 16. 16 Transportation How do we ensure the physical safety and privacy of passengers and pedestrians in the era of autonomous vehicles? Policymakers need the answer to this question before they’ll get on board with the transportation revolution. BUSINESS CONFLICT – HIGH The race to have the first mass market autonomous vehicle is already underway with poaching of talent and IP court battles. SOCIAL ANGST – HIGH America is a car culture. Shifting to autonomous, electric and shared vehicles will take years if not decades. POLICY CHALLENGES – MEDIUM High-profile accidents have and will continue to occur, leading to long-term battles on the legal, regulatory and policy fronts.
  17. 17. 17 FREIGHT Truckers and labor unions have significant concerns about the impacts on jobs and safety. PUBLIC TRANSPORTATION Autonomous technology could change the way cities move people and reduce congestion. LOCAL DELIVERY Emerging and legacy delivery services are investing in AVs to make delivery cleaner and more efficient. PERSONAL MOBILITY Self-driving cars for personal use are rife with safety and technological challenges. Growth Trends
  18. 18. 18 LOCAL INFRASTRUCTURE A 5G network that reaches every corner of the country is necessary to connect vehicles safely and consistently. Companies must work across industries and borders to ensure universal 5G rollout. SECURITY AND PRIVACY Companies have an obligation to ensure privacy and security for passengers. REACTIONARY REGULATION Following recent crashes, companies need to illustrate safety is a top concern and show city, state and federal legislators and regulators data to prove it. TESTING PROGRAMS Companies should also work closely with legislators and regulators to create smart rules for test programs and long-term deployment. Regulatory Flashpoints
  19. 19. 19 2018 2019 & Beyond INFRASTRUCTURE In the coming months, the FCC will issue recommendations on 5G expansion and distribution, and the Volkswagen settlement will provide states with the capital for electric vehicle charging corridors. DATA GOVERNANCE A hackable car is a deadly car. Hacked national transportation networks could be catastrophic. PUBLIC / PRIVATE PARTNERSHIPS As companies partner with cities to test autonomous vehicle programs in urban environments, new battles will crop up between companies – and cities – with different visions. REGULATORY FRAMEWORKS Michigan, California and Arizona have already created regulatory frameworks for self-driving cars, and more states are expected to follow in 2018. NATIONAL SECURITY As the debate over national security in the modern age continues, autonomous vehicles and the electric grid will become a central concern. LABOR CONFLICTS Autonomous fleets have the potential to put an entire class of drivers out of work, which will create a rift with powerful labor unions. DIGITAL DIVIDE 3.0 As self-driving cars begin to supplant traditional vehicles, we’ll have to answer questions related to inclusivity and equitable access. Milestones
  20. 20. 20 BUSINESS CONFLICT – LOW The battles have already begun for contracts to provide the tech infrastructure for smart cities. SOCIAL ANGST – MEDIUM Americans are hesitant to share data for the automation of city functions. POLICY CHALLENGES – HIGH With security and privacy concerns heightened, smart city tech will receive significant oversight. Cities Get Smart Are Smart Cities just a mirage or will government and business work together to build radically different cities of the future? Instead of waiting for organic growth and evolution, technology companies are creating their own smart cities. Whether viable or not long-term, tech clearly sees cities as their next customers and products.
  21. 21. 21 5G 5G is the foundational infrastructure for smart cities, but businesses and government alike are fearful deployment will create a further digital divide. SENSORS Companies are using sensors to collect massive amounts of data, but growing privacy concerns will force businesses to evaluate how they mine and share personal information. SMART GRIDS Smart grids hold huge potential to improve city efficiency, but they may be vulnerable to cyber threats. Growth Trends
  22. 22. 22 DIGITAL DIVIDE Companies must invest in underserved and disadvantaged communities and work with policymakers and city officials to ensure equitable access. GOVERNMENT PROCUREMENT Governments must avoid blunders with procurement where millions are spent on the rollout of new technologies that never go online. CRISIS OF CONFIDENCE Businesses should continue partnering with governments to explain the value of smart technologies to citizens. DATA MANAGEMENT Companies must develop transparent principles for sharing and protecting data while working with policymakers to leverage this data to improve cities. Regulatory Flashpoints
  23. 23. 23 2018 2019 & Beyond WIRELESS UPDATE In the coming months, the FCC will issue recommendations on 5G expansion and distribution. On the state-level, 17 state governments have discussed the quickest ways to deploy 5G in their backyards. INFRASTRUCTURE Federal infrastructure spending, if enacted, could provide a massive boost to the framework smart cities will need in order to thrive. RIGHT TO KNOW Twelve states have proposed legislation that addresses the rights of consumers with regard to the collection and use of personal information by companies. BIG BROTHER 3.0 Does a connected world requiring giving up the right to privacy? Ignoring the privacy implications could lead to significant pressure to regulate. SHARING OF INFORMATION Codifying private-public data sharing and access will be a key policy fight to watch for in the next few years. MACHINE ETHICS & AI The massive amounts of data collected by connected things in cities will result in trillions of data points that need to be processed and understood. Milestones
  24. 24. 24 Digital Healthcare Will digital health disruptors finally gain a foothold in the $3.3 trillion U.S. healthcare industry and force meaningful change? Digital healthcare technologies face significant regulatory and institutional hurdles, but momentum is building through pressure to control healthcare costs, evolving consumer expectations and opportunities to leverage big data and AI in healthcare. BUSINESS CONFLICT – HIGH The largest challenge for digital health is navigating existing institutional interests. SOCIAL ANGST – MEDIUM Digital health tech that relies on big data and AI will face consumer concerns. POLICY CHALLENGES – HIGH The transition from wellness to healthcare requires major regulatory and policy changes.
  25. 25. 25 WELLNESS & WEARABLES Wellness allows companies to sidestep gatekeepers and regulation and sell directly to consumers. AI & PERSONALIZATION Big data and AI open up new possibilities for personalized treatment, pharmaceutical innovations and more. TELEMEDICINE Telemedicine can play a major role in addressing healthcare costs and rural doctor shortages. PATIENT ENGAGEMENT Growing consumer expectations are forcing doctors and institutions to modernize the way they work with patients. Growth Trends
  26. 26. 26 INCONSISTENT & INCOMPATIBLE DATA Most healthcare data is locked in incompatible formats. To leverage this data, the healthcare industry and policymakers must implement a standardized format for electronic health records (EHRs). MEDICAL DATA IS HEAVILY REGULATED Medical data is (rightly) regulated under federal laws like HIPAA. The healthcare industry, academia and government still have a long way to go in finding privacy-centric solutions. THE POLITICS OF PAYMENTS In the U.S. healthcare system, the patient is rarely the customer. To be successful, companies must navigate the complex incentive system between insurance companies, hospitals and providers to encourage adoption. VC TIME VS. HEALTHCARE TIME VCs must align their growth expectations to the pace of the more regulated healthcare industry. Regulatory Flashpoints
  27. 27. 27 CHANGES TO CMS REIMBURSEMENT Ongoing initiatives within the Centers for Medicare & Medicaid Services (CMS) will define how doctors are reimbursed for digital health services. MyHealthEData Initiative CMS is pushing a major effort to remove interoperability barriers for electronic health records. CVS & AETNA MERGER The mega merger could help shake up incentives throughout the industry. GDPR IMPLMENTATION The implementation of this international privacy agreement in Europe could impact digital health in the United States. PRIVACY Any major breach in sensitive healthcare data will raise serious questions for the industry and likely force changes to the widely adopted business models that rely on collecting and sharing data . INTEROPERABILITY BATTLES Despite the best intentions of government and nonprofits, major EHR players will likely attempt to thwart adoption of open standards. ETHICAL QUESTIONS The accumulation of massive amounts of medical and genetic data will force a conversation about the boundaries for its use. Milestones 2018 2019 & Beyond
  28. 28. 28 Blockchain Are cryptocurrencies a scam or the next internet? BUSINESS CONFLICT – MEDIUM Blockchain technology and cryptocurrencies threaten many big industry players. SOCIAL ANGST – HIGH Cryptocurrencies require a mainstream change in social and financial behavior to allow for wider adoption. POLICY CHALLENGES – HIGH Rising levels of abuse and the shift from hobbyists to the profit-driven mainstream will put blockchain in the regulatory crosshairs. Most people have never heard of blockchain, but they are familiar with its first and most famous use case: Bitcoin. As more and more cryptocurrencies develop, misinformation, scams and bad actors have dominated the narrative. Can blockchain developers shift public perception to realize the potential of the underlying technology?
  29. 29. 29 INITIAL COIN OFFERINGS (ICOs) ICOs promise access to a future technology platform in exchange for funding blockchain technology projects. BLOCKCHAIN BEYOND COINS Blockchain technology is being explored as a solution to manage everything from real estate titles to defense logistics. CRYPTOCURRENCIES Since the introduction of Bitcoin, more than a thousand coins and tokens have been put into circulation. Growth Trends
  30. 30. 30 SCAMS, HACKS & FRAUD ICO’s have proven to be a powerful potential fundraising vehicle for startups, but the unregulated process has attracted scammers, hackers, con artists and other criminal actors. With increased government scrutiny, there’s a danger that legitimate players get harmed by regulatory overreach. CURRENCY SPECULATION With so much attention on Bitcoin and other currencies, a collapse in the cryptocurrency market could have a chilling effect on blockchain innovation. SECURITIES VS. COMMODITIES How the SEC and CFTC resolve questions of how to and whether to regulate tradable tokens as securities, commodities or a hybrid could determine whether investment and innovation stays in the U.S. or is pushed to unregulated markets overseas. TAX EVASION The IRS treats cryptocurrency as property and has been cracking down on those who don’t pay taxes on their trades/purchases. More clarity from the IRS and a potential exemption for low-dollar holdings is needed. Regulatory Flashpoints
  31. 31. 31 ENFORCEMENT & OVERSIGHT Regulators such as the SEC, CFTC and IRS have ramped up enforcement, oversight and investigations into the blockchain tech and cryptocurrency space over the last six months, a trend that is sure to continue. SAFT CRACKDOWN Startups are experimenting with raising money from VCs through the presale of new cryptocurrency tokens, known as a Simple Agreement for Future Tokens (SAFT). The SEC has publicly questioned whether these agreements are compliant with investor protection laws. STATE LEGISLATION States are also deciding how best to employ blockchain technology and regulatie digital currencies. FEDERAL LEGISLATION Congress is exploring ways to address blockchain and cryptocurrencies including by preventing the illicit use of cryptocurrencies, creating regulatory certainty and opening up new opportunities for blockchain. REGULATORY RULYINGS The Securities and Exchange Commission and U.S. Commodity Futures Trading Commission will determine the final rules for coins and tokens. Milestones 2018 2019 & Beyond
  32. 32. 32 Augmented Reality Will augmented reality go mainstream or remain a niche technology? The AR industry kicked into high gear in 2017 with the launch of several platforms for developers to build apps quickly without extensive coding skills. Long-term, questions about data collection, privacy and security will be of top concern. BUSINESS CONFLICT – MEDIUM Tensions simmer between intellectual property rights and technology standards. SOCIAL ANGST – LOW Concerns about how AR-enabled products collect data. POLICY CHALLENGES – LOW Policymakers will be on the lookout for early case studies on how AR is being used to collect consumer data.
  33. 33. 33 HEADSETS AR applications could help the market for smart glasses and headsets finally take off. FACIAL RECOGNITION Facial-recognition on smartphones has exploded - 900 million AR-enabled devices are expected by 2019. RETAIL ADOPTION Retail stores are exploring how to leverage AR to enhance the in-store shopping experience. WORKFORCE TRAINING A wide range of industries - from auto repair shops to hospitals - are leveraging AR for workforce training. Growth Trends
  34. 34. 34 DATA PRIVACY AR has the potential to track and store personally identifiable data. Companies need to develop transparent policies for data collection and be forthcoming with policymakers about how they collect and use data. EFFECTS ON CHILDREN AR has significant potential for education and skills development, but researchers know very little about how AR affects early childhood development. AR product developers must respond by developing safeguards for children. SAFETY AR developers must establish consumer safety best practices and forge partnerships with cybersecurity groups to ensure there are industry-wide security standards. Regulatory Flashpoints
  35. 35. 35 2018 2019 & Beyond PUBLIC PERMITS GUIDELINES Local governments in cities such as Milwaukee are considering legal cases about whether AR publishers need to get permits if their apps spur users to meet in public areas. Think: regulating Pokémon Go! out of cemeteries. PRIVACY REGULATIONS California has 25 different pieces of privacy legislation and other states are following close behind. INTELLECTUAL PROPERTY DEBATES While privacy and safety are front in center in the short-term, long-term issues include how real-world IP rights apply to virtual environments. WORKPLACE POLICIES HR Departments are updating policies and determining how and to what extent employees can use AR products in the office BANS AT PRIVATE BUSINESSES When Google Glass launched, it was banned in many private businesses. With a wave of new AR- enabled products hitting the market, business owners may consider new limitations on AR wearables. Milestones
  36. 36. A PATH FORWARD 36
  37. 37. 37 Innovation Policy Lifecycle EXCITEMENT Innovation captivates the imagination and a company can do no wrong INDIFFERENCE Becomes part of daily life, but may start to accumulate consumer concerns SCRUTINY Singled out for policy scrutiny REGULATION Business practices in crosshairs of regulators, Congress and/or states
  38. 38. 38 Disruption Policy Lifecycle DISRUPTION Interest in disruptive solutions by consumers and media REACTION Legacy industry pushback SCRUTINY Regulators prompted by legacy firms and 3rd parties to scrutinize RETALIATION New rules proposed to hamstring business model and litigation launched by legacy competitors
  39. 39. 39 Move Fast/Break Things is Dead In the past, efforts to sidestep, ignore and push the bounds of law were wildly successful in getting tech companies off the ground. Over time, many in Silicon Valley adopted the strategy for their own disruptive technologies with some success. The recent scooter debacle in San Francisco is evidence that this model for disruption is no longer viable, particularly in highly regulated industries.
  40. 40. 40 A Better Approach 1. MAP YOUR DISRUPTION Get a broader understanding of the regulatory, business and social landscape and potential pitfalls upfront. 2. GIVE A DAMN Tech leaders don’t need all the answers, but they must demonstrate sincere interest and a thoughtful approach to the potential for abuse, criminal activity, and other negative consequences of their products and/or platforms. 3. CRAFT YOUR STORY Build your narrative in a way that demonstrates why your company is helping create jobs and economic opportunities. 4. ENGAGE EARLY, ENGAGE OFTEN The value of proactive engagement and sharing of your story with government, media, investors, partners and other key audiences cannot be overstated. 5. MAKE FRIENDS AND ALLIES Start with trade association and think tanks.