How Google's search algorithm spreads false information with a rightwing bias

Olivia Solon and Sam Levin in The Guardian


Google’s search algorithm appears to be systematically promoting information that is either false or slanted with an extreme rightwing bias on subjects as varied as climate change and homosexuality.

Following a recent investigation by the Observer, which uncovered that Google’s search engine prominently suggests neo-Nazi websites and antisemitic writing, the Guardian has uncovered a dozen additional examples of biased search results.

Google’s search algorithm and its autocomplete function prioritize websites that, for example, declare that climate change is a hoax, being gay is a sin, and the Sandy Hook mass shooting never happened.






The increased scrutiny on the algorithms of Google – which removed antisemitic and sexist autocomplete phrases after the recent Observer investigation – comes at a time of tense debate surrounding the role of fake news in building support for conservative political leaders, particularly US President-elect Donald Trump.

Facebook has faced significant backlash for its role in enabling widespread dissemination of misinformation, and data scientists and communication experts have argued that rightwing groups have found creative ways to manipulate social media trends and search algorithms.




Google alters search autocomplete to remove 'are Jews evil' suggestion



The Guardian’s latest findings further suggest that Google’s searches are contributing to the problem.

In the past, when a journalist or academic exposes one of these algorithmic hiccups, humans at Google quietly make manual adjustments in a process that’s neither transparent nor accountable.

At the same time, politically motivated third parties including the ‘alt-right’, a far-right movement in the US, use a variety of techniques to trick the algorithm and push propaganda and misinformation higher up Google’s search rankings.

These insidious manipulations – both by Google and by third parties trying to game the system – impact how users of the search engine perceive the world, even influencing the way they vote. This has led some researchers to study Google’s role in the presidential election in the same way that they have scrutinized Facebook.





Robert Epstein from the American Institute for Behavioral Research and Technology has spent four years trying to reverse engineer Google’s search algorithms. He believes, based on systematic research, that Google has the power to rig elections through something he calls the search engine manipulation effect (SEME).

Epstein conducted five experiments in two countries to find that biased rankings in search results can shift the opinions of undecided voters. If Google tweaks its algorithm to show more positive search results for a candidate, the searcher may form a more positive opinion of that candidate.

In September 2016, Epstein released findings, published through Russian news agency Sputnik News, that indicated Google had suppressed negative autocomplete search results relating to Hillary Clinton.

“We know that if there’s a negative autocomplete suggestion in the list, it will draw somewhere between five and 15 times as many clicks as a neutral suggestion,” Epstein said. “If you omit negatives for one perspective, one hotel chain or one candidate, you have a heck of a lot of people who are going to see only positive things for whatever the perspective you are supporting.”





Even changing the order in which certain search terms appear in the autocompleted list can make a huge impact, with the first result drawing the most clicks, he said.

At the time, Google said the autocomplete algorithm was designed to omit disparaging or offensive terms associated with individuals’ names but that it wasn’t an “exact science”.

Then there’s the secret recipe of factors that feed into the algorithm Google uses to determine a web page’s importance – embedded with the biases of the humans who programmed it. These factors include how many and which other websites link to a page, how much traffic it receives, and how often a page is updated. People who are very active politically are typically the most partisan, which means that extremist views peddled actively on blogs and fringe media sites get elevated in the search ranking.

“These platforms are structured in such a way that they are allowing and enabling – consciously or unconsciously – more extreme views to dominate,” said Martin Moore from Kings College London’s Centre for the Study of Media, Communication and Power.

Appearing on the first page of Google search results can give websites with questionable editorial principles undue authority and traffic.

“These two manipulations can work together to have an enormous impact on people without their knowledge that they are being manipulated, and our research shows that very clearly,” Epstein said. “Virtually no one is aware of bias in search suggestions or rankings.”

This is compounded by Google’s personalization of search results, which means different users see different results based on their interests. “This gives companies like Google even more power to influence people’s opinions, attitudes, beliefs and behaviors,” he said.

Epstein wants Google to be more transparent about how and when it manually manipulates the algorithm.

“They are constantly making these adjustments. It’s absurd for them to say everything is automated,” he said. Manual removals from autocomplete include “are jews evil” and “are women evil”. Google has also altered its results so when someone searches for ways to kill themselves they are shown a suicide helpline.

Shortly after Epstein released his research indicating the suppression of negative autocomplete search results relating to Clinton, which he credits to close ties between the Clinton campaign and Google, the search engine appeared to pull back from such censorship, he said. This, he argued, allowed for a flood of pro-Trump, anti-Clinton content (including fake news), some of which was created in retaliation to bubble to the top.

“If I had to do it over again I would not have released those data. There is some indication that they had an impact that was detrimental to Hillary Clinton, which was never my intention.”

Rhea Drysdale, the CEO of digital marketing company Outspoken Media, did not see evidence of pro-Clinton editing by Google. However, she did note networks of partisan websites – disproportionately rightwing – using much better search engine optimization techniques to ensure their worldview ranked highly.

Meanwhile, tech-savvy rightwing groups organized online and developed creative ways to control and manipulate social media conversations through mass actions, said Shane Burley, a journalist and researcher who has studied the alt-right.




“What happens is they can essentially jam hashtags so densely using multiple accounts, they end up making it trending,” he said. “That’s a great way for them to dictate how something is going to be covered, what’s going to be discussed. That’s helped them reframe the discussion of immigration.”

Burley noted that “cuckservative” – meaning conservatives who have sold out – is a good example of a term that the alt-right has managed to popularize in an effective way. Similarly if you search for “feminism is...” in Google, it autocompletes to “feminism is cancer”, a popular rallying cry for Trump supporters.

“It has this effect of making certain words kind of like magic words in search algorithms.”

The same groups – including members of the popular alt-right Reddit forum The_Donald – used techniques that are used by reputation management firms and marketers to push their companies up Google’s search results, to ensure pro-Trump imagery and articles ranked highly.

“Extremists have been trying to play Google’s algorithm for years, with varying degrees of success,” said Brittan Heller, director of technology and society at the Anti-Defamation League. “The key has traditionally been connected to influencing the algorithm with a high volume of biased search terms.”

The problem has become particularly challenging for Google in a post-truth era, where white supremacist websites may have the same indicator of “trustworthiness” in the eyes of Google as other websites high in the page rank.

“What does Google do when the lies aren’t the outliers any more?” Heller said.

“Previously there was the assumption that everything on the internet had a glimmer of truth about it. With the phenomenon of fake news and media hacking, that may be changing.”

A Google spokeswoman said in a statement: “We’ve received a lot of questions about autocomplete, and we want to help people understand how it works: Autocomplete predictions are algorithmically generated based on users’ search activity and interests. Users search for such a wide range of material on the web – 15% of searches we see every day are new. Because of this, terms that appear in Autocomplete may be unexpected or unpleasant. We do our best to prevent offensive terms, like porn and hate speech, from appearing, but we don’t always get it right. Autocomplete isn’t an exact science and we’re always working to improve our algorithms.”

Are women evil? - Google, democracy and the truth about internet search

Carole Cadwalladr in The Observer


Here’s what you don’t want to do late on a Sunday night. You do not want to type seven letters into Google. That’s all I did. I typed: “a-r-e”. And then “j-e-w-s”. Since 2008, Google has attempted to predict what question you might be asking and offers you a choice. And this is what it did. It offered me a choice of potential questions it thought I might want to ask: “are jews a race?”, “are jews white?”, “are jews christians?”, and finally, “are jews evil?”

Are Jews evil? It’s not a question I’ve ever thought of asking. I hadn’t gone looking for it. But there it was. I press enter. A page of results appears. This was Google’s question. And this was Google’s answer: Jews are evil. Because there, on my screen, was the proof: an entire page of results, nine out of 10 of which “confirm” this. The top result, from a site called Listovative, has the headline: “Top 10 Major Reasons Why People Hate Jews.” I click on it: “Jews today have taken over marketing, militia, medicinal, technological, media, industrial, cinema challenges etc and continue to face the worlds [sic] envy through unexplained success stories given their inglorious past and vermin like repression all over Europe.”

Google is search. It’s the verb, to Google. It’s what we all do, all the time, whenever we want to know anything. We Google it. The site handles at least 63,000 searches a second, 5.5bn a day. Its mission as a company, the one-line overview that has informed the company since its foundation and is still the banner headline on its corporate website today, is to “organise the world’s information and make it universally accessible and useful”. It strives to give you the best, most relevant results. And in this instance the third-best, most relevant result to the search query “are Jews… ” is a link to an article from stormfront.org, a neo-Nazi website. The fifth is a YouTube video: “Why the Jews are Evil. Why we are against them.”

The sixth is from Yahoo Answers: “Why are Jews so evil?” The seventh result is: “Jews are demonic souls from a different world.” And the 10th is from jesus-is-saviour.com: “Judaism is Satanic!”

There’s one result in the 10 that offers a different point of view. It’s a link to a rather dense, scholarly book review from thetabletmag.com, a Jewish magazine, with the unfortunately misleading headline: “Why Literally Everybody In the World Hates Jews.”

I feel like I’ve fallen down a wormhole, entered some parallel universe where black is white, and good is bad. Though later, I think that perhaps what I’ve actually done is scraped the topsoil off the surface of 2016 and found one of the underground springs that has been quietly nurturing it. It’s been there all the time, of course. Just a few keystrokes away… on our laptops, our tablets, our phones. This isn’t a secret Nazi cell lurking in the shadows. It’s hiding in plain sight.

Are women… Google’s search results.

Stories about fake news on Facebook have dominated certain sections of the press for weeks following the American presidential election, but arguably this is even more powerful, more insidious. Frank Pasquale, professor of law at the University of Maryland, and one of the leading academic figures calling for tech companies to be more open and transparent, calls the results “very profound, very troubling”.

He came across a similar instance in 2006 when, “If you typed ‘Jew’ in Google, the first result was jewwatch.org. It was ‘look out for these awful Jews who are ruining your life’. And the Anti-Defamation League went after them and so they put an asterisk next to it which said: ‘These search results may be disturbing but this is an automated process.’ But what you’re showing – and I’m very glad you are documenting it and screenshotting it – is that despite the fact they have vastly researched this problem, it has gotten vastly worse.”

And ordering of search results does influence people, says Martin Moore, director of the Centre for the Study of Media, Communication and Power at King’s College, London, who has written at length on the impact of the big tech companies on our civic and political spheres. “There’s large-scale, statistically significant research into the impact of search results on political views. And the way in which you see the results and the types of results you see on the page necessarily has an impact on your perspective.” Fake news, he says, has simply “revealed a much bigger problem. These companies are so powerful and so committed to disruption. They thought they were disrupting politics but in a positive way. They hadn’t thought about the downsides. These tools offer remarkable empowerment, but there’s a dark side to it. It enables people to do very cynical, damaging things.”

Google is knowledge. It’s where you go to find things out. And evil Jews are just the start of it. There are also evil women. I didn’t go looking for them either. This is what I type: “a-r-e w-o-m-e-n”. And Google offers me just two choices, the first of which is: “Are women evil?” I press return. Yes, they are. Every one of the 10 results “confirms” that they are, including the top one, from a site called sheddingoftheego.com, which is boxed out and highlighted: “Every woman has some degree of prostitute in her. Every woman has a little evil in her… Women don’t love men, they love what they can do for them. It is within reason to say women feel attraction but they cannot love men.”

Next I type: “a-r-e m-u-s-l-i-m-s”. And Google suggests I should ask: “Are Muslims bad?” And here’s what I find out: yes, they are. That’s what the top result says and six of the others. Without typing anything else, simply putting the cursor in the search box, Google offers me two new searches and I go for the first, “Islam is bad for society”. In the next list of suggestions, I’m offered: “Islam must be destroyed.”

Jews are evil. Muslims need to be eradicated. And Hitler? Do you want to know about Hitler? Let’s Google it. “Was Hitler bad?” I type. And here’s Google’s top result: “10 Reasons Why Hitler Was One Of The Good Guys” I click on the link: “He never wanted to kill any Jews”; “he cared about conditions for Jews in the work camps”; “he implemented social and cultural reform.” Eight out of the other 10 search results agree: Hitler really wasn’t that bad.

A few days later, I talk to Danny Sullivan, the founding editor of SearchEngineLand.com. He’s been recommended to me by several academics as one of the most knowledgeable experts on search. Am I just being naive, I ask him? Should I have known this was out there? “No, you’re not being naive,” he says. “This is awful. It’s horrible. It’s the equivalent of going into a library and asking a librarian about Judaism and being handed 10 books of hate. Google is doing a horrible, horrible job of delivering answers here. It can and should do better.”

He’s surprised too. “I thought they stopped offering autocomplete suggestions for religions in 2011.” And then he types “are women” into his own computer. “Good lord! That answer at the top. It’s a featured result. It’s called a “direct answer”. This is supposed to be indisputable. It’s Google’s highest endorsement.” That every women has some degree of prostitute in her? “Yes. This is Google’s algorithm going terribly wrong.”

I contacted Google about its seemingly malfunctioning autocomplete suggestions and received the following response: “Our search results are a reflection of the content across the web. This means that sometimes unpleasant portrayals of sensitive subject matter online can affect what search results appear for a given query. These results don’t reflect Google’s own opinions or beliefs – as a company, we strongly value a diversity of perspectives, ideas and cultures.”

Google isn’t just a search engine, of course. Search was the foundation of the company but that was just the beginning. Alphabet, Google’s parent company, now has the greatest concentration of artificial intelligence experts in the world. It is expanding into healthcare, transportation, energy. It’s able to attract the world’s top computer scientists, physicists and engineers. It’s bought hundreds of start-ups, including Calico, whose stated mission is to “cure death” and DeepMind, which aims to “solve intelligence”.

FacebookTwitterPinterest Google co-founders Larry Page and Sergey Brin in 2002. Photograph: Michael Grecco/Getty Images

And 20 years ago it didn’t even exist. When Tony Blair became prime minister, it wasn’t possible to Google him: the search engine had yet to be invented. The company was only founded in 1998 and Facebook didn’t appear until 2004. Google’s founders Sergey Brin and Larry Page are still only 43. Mark Zuckerberg of Facebook is 32. Everything they’ve done, the world they’ve remade, has been done in the blink of an eye.

But it seems the implications about the power and reach of these companies is only now seeping into the public consciousness. I ask Rebecca MacKinnon, director of the Ranking Digital Rights project at the New America Foundation, whether it was the recent furore over fake news that woke people up to the danger of ceding our rights as citizens to corporations. “It’s kind of weird right now,” she says, “because people are finally saying, ‘Gee, Facebook and Google really have a lot of power’ like it’s this big revelation. And it’s like, ‘D’oh.’”

MacKinnon has a particular expertise in how authoritarian governments adapt to the internet and bend it to their purposes. “China and Russia are a cautionary tale for us. I think what happens is that it goes back and forth. So during the Arab spring, it seemed like the good guys were further ahead. And now it seems like the bad guys are. Pro-democracy activists are using the internet more than ever but at the same time, the adversary has gotten so much more skilled.”

Last week Jonathan Albright, an assistant professor of communications at Elon University in North Carolina, published the first detailed research on how rightwing websites had spread their message. “I took a list of these fake news sites that was circulating, I had an initial list of 306 of them and I used a tool – like the one Google uses – to scrape them for links and then I mapped them. So I looked at where the links went – into YouTube and Facebook, and between each other, millions of them… and I just couldn’t believe what I was seeing.

“They have created a web that is bleeding through on to our web. This isn’t a conspiracy. There isn’t one person who’s created this. It’s a vast system of hundreds of different sites that are using all the same tricks that all websites use. They’re sending out thousands of links to other sites and together this has created a vast satellite system of rightwing news and propaganda that has completely surrounded the mainstream media system.

He found 23,000 pages and 1.3m hyperlinks. “And Facebook is just the amplification device. When you look at it in 3D, it actually looks like a virus. And Facebook was just one of the hosts for the virus that helps it spread faster. You can see the New York Times in there and the Washington Post and then you can see how there’s a vast, vast network surrounding them. The best way of describing it is as an ecosystem. This really goes way beyond individual sites or individual stories. What this map shows is the distribution network and you can see that it’s surrounding and actually choking the mainstream news ecosystem.”

Like a cancer? “Like an organism that is growing and getting stronger all the time.”

Charlie Beckett, a professor in the school of media and communications at LSE, tells me: “We’ve been arguing for some time now that plurality of news media is good. Diversity is good. Critiquing the mainstream media is good. But now… it’s gone wildly out of control. What Jonathan Albright’s research has shown is that this isn’t a byproduct of the internet. And it’s not even being done for commercial reasons. It’s motivated by ideology, by people who are quite deliberately trying to destabilise the internet.”

A spatial map of the rightwing fake news ecosystem. Jonathan Albright, assistant professor of communications at Elon University, North Carolina, “scraped” 300 fake news sites (the dark shapes on this map) to reveal the 1.3m hyperlinks that connect them together and link them into the mainstream news ecosystem. Here, Albright shows it is a “vast satellite system of rightwing news and propaganda that has completely surrounded the mainstream media system”. Photograph: Jonathan Albright
Albright’s map also provides a clue to understanding the Google search results I found. What these rightwing news sites have done, he explains, is what most commercial websites try to do. They try to find the tricks that will move them up Google’s PageRank system. They try and “game” the algorithm. And what his map shows is how well they’re doing that.

That’s what my searches are showing too. That the right has colonised the digital space around these subjects – Muslims, women, Jews, the Holocaust, black people – far more effectively than the liberal left.

“It’s an information war,” says Albright. “That’s what I keep coming back to.”

But it’s where it goes from here that’s truly frightening. I ask him how it can be stopped. “I don’t know. I’m not sure it can be. It’s a network. It’s far more powerful than any one actor.”

So, it’s almost got a life of its own? “Yes, and it’s learning. Every day, it’s getting stronger.”

The more people who search for information about Jews, the more people will see links to hate sites, and the more they click on those links (very few people click on to the second page of results) the more traffic the sites will get, the more links they will accrue and the more authoritative they will appear. This is an entirely circular knowledge economy that has only one outcome: an amplification of the message. Jews are evil. Women are evil. Islam must be destroyed. Hitler was one of the good guys.

And the constellation of websites that Albright found – a sort of shadow internet – has another function. More than just spreading rightwing ideology, they are being used to track and monitor and influence anyone who comes across their content. “I scraped the trackers on these sites and I was absolutely dumbfounded. Every time someone likes one of these posts on Facebook or visits one of these websites, the scripts are then following you around the web. And this enables data-mining and influencing companies like Cambridge Analytica to precisely target individuals, to follow them around the web, and to send them highly personalised political messages. This is a propaganda machine. It’s targeting people individually to recruit them to an idea. It’s a level of social engineering that I’ve never seen before. They’re capturing people and then keeping them on an emotional leash and never letting them go.”

Cambridge Analytica, an American-owned company based in London, was employed by both the Vote Leave campaign and the Trump campaign. Dominic Cummings, the campaign director of Vote Leave, has made few public announcements since the Brexit referendum but he did say this: “If you want to make big improvements in communication, my advice is – hire physicists.”

Steve Bannon, founder of Breitbart News and the newly appointed chief strategist to Trump, is on Cambridge Analytica’s board and it has emerged that the company is in talks to undertake political messaging work for the Trump administration. It claims to have built psychological profiles using 5,000 separate pieces of data on 220 million American voters. It knows their quirks and nuances and daily habits and can target them individually.

“They were using 40-50,000 different variants of ad every day that were continuously measuring responses and then adapting and evolving based on that response,” says Martin Moore of Kings College. Because they have so much data on individuals and they use such phenomenally powerful distribution networks, they allow campaigns to bypass a lot of existing laws.

“It’s all done completely opaquely and they can spend as much money as they like on particular locations because you can focus on a five-mile radius or even a single demographic. Fake news is important but it’s only one part of it. These companies have found a way of transgressing 150 years of legislation that we’ve developed to make elections fair and open.”

Did such micro-targeted propaganda – currently legal – swing the Brexit vote? We have no way of knowing. Did the same methods used by Cambridge Analytica help Trump to victory? Again, we have no way of knowing. This is all happening in complete darkness. We have no way of knowing how our personal data is being mined and used to influence us. We don’t realise that the Facebook page we are looking at, the Google page, the ads that we are seeing, the search results we are using, are all being personalised to us. We don’t see it because we have nothing to compare it to. And it is not being monitored or recorded. It is not being regulated. We are inside a machine and we simply have no way of seeing the controls. Most of the time, we don’t even realise that there are controls.

Facebook and Google move to kick fake news sites off their ad networks



Rebecca MacKinnon says that most of us consider the internet to be like “the air that we breathe and the water that we drink”. It surrounds us. We use it. And we don’t question it. “But this is not a natural landscape. Programmers and executives and editors and designers, they make this landscape. They are human beings and they all make choices.”

But we don’t know what choices they are making. Neither Google or Facebook make their algorithms public. Why did my Google search return nine out of 10 search results that claim Jews are evil? We don’t know and we have no way of knowing. Their systems are what Frank Pasquale describes as “black boxes”. He calls Google and Facebook “a terrifying duopoly of power” and has been leading a growing movement of academics who are calling for “algorithmic accountability”. “We need to have regular audits of these systems,” he says. “We need people in these companies to be accountable. In the US, under the Digital Millennium Copyright Act, every company has to have a spokesman you can reach. And this is what needs to happen. They need to respond to complaints about hate speech, about bias.”

Is bias built into the system? Does it affect the kind of results that I was seeing? “There’s all sorts of bias about what counts as a legitimate source of information and how that’s weighted. There’s enormous commercial bias. And when you look at the personnel, they are young, white and perhaps Asian, but not black or Hispanic and they are overwhelmingly men. The worldview of young wealthy white men informs all these judgments.”

Later, I speak to Robert Epstein, a research psychologist at the American Institute for Behavioural Research and Technology, and the author of the study that Martin Moore told me about (and that Google has publicly criticised), showing how search-rank results affect voting patterns. On the other end of the phone, he repeats one of the searches I did. He types “do blacks…” into Google.

“Look at that. I haven’t even hit a button and it’s automatically populated the page with answers to the query: ‘Do blacks commit more crimes?’ And look, I could have been going to ask all sorts of questions. ‘Do blacks excel at sports’, or anything. And it’s only given me two choices and these aren’t simply search-based or the most searched terms right now. Google used to use that but now they use an algorithm that looks at other things. Now, let me look at Bing and Yahoo. I’m on Yahoo and I have 10 suggestions, not one of which is ‘Do black people commit more crime?’

“And people don’t question this. Google isn’t just offering a suggestion. This is a negative suggestion and we know that negative suggestions depending on lots of things can draw between five and 15 more clicks. And this all programmed. And it could be programmed differently.”

What Epstein’s work has shown is that the contents of a page of search results can influence people’s views and opinions. The type and order of search rankings was shown to influence voters in India in double-blind trials. There were similar results relating to the search suggestions you are offered.

“The general public are completely in the dark about very fundamental issues regarding online search and influence. We are talking about the most powerful mind-control machine ever invented in the history of the human race. And people don’t even notice it.”

Damien Tambini, an associate professor at the London School of Economics, who focuses on media regulation, says that we lack any sort of framework to deal with the potential impact of these companies on the democratic process. “We have structures that deal with powerful media corporations. We have competition laws. But these companies are not being held responsible. There are no powers to get Google or Facebook to disclose anything. There’s an editorial function to Google and Facebook but it’s being done by sophisticated algorithms. They say it’s machines not editors. But that’s simply a mechanised editorial function.”

And the companies, says John Naughton, the Observer columnist and a senior research fellow at Cambridge University, are terrified of acquiring editorial responsibilities they don’t want. “Though they can and regularly do tweak the results in all sorts of ways.”

Certainly the results about Google on Google don’t seem entirely neutral. Google “Is Google racist?” and the featured result – the Google answer boxed out at the top of the page – is quite clear: no. It is not.

But the enormity and complexity of having two global companies of a kind we have never seen before influencing so many areas of our lives is such, says Naughton, that “we don’t even have the mental apparatus to even know what the problems are”.

And this is especially true of the future. Google and Facebook are at the forefront of AI. They are going to own the future. And the rest of us can barely start to frame the sorts of questions we ought to be asking. “Politicians don’t think long term. And corporations don’t think long term because they’re focused on the next quarterly results and that’s what makes Google and Facebook interesting and different. They are absolutely thinking long term. They have the resources, the money, and the ambition to do whatever they want.

“They want to digitise every book in the world: they do it. They want to build a self-driving car: they do it. The fact that people are reading about these fake news stories and realising that this could have an effect on politics and elections, it’s like, ‘Which planet have you been living on?’ For Christ’s sake, this is obvious.”

“The internet is among the few things that humans have built that they don’t understand.” It is “the largest experiment involving anarchy in history. Hundreds of millions of people are, each minute, creating and consuming an untold amount of digital content in an online world that is not truly bound by terrestrial laws.” The internet as a lawless anarchic state? A massive human experiment with no checks and balances and untold potential consequences? What kind of digital doom-mongerer would say such a thing? Step forward, Eric Schmidt – Google’s chairman. They are the first lines of the book, The New Digital Age, that he wrote with Jared Cohen.

We don’t understand it. It is not bound by terrestrial laws. And it’s in the hands of two massive, all-powerful corporations. It’s their experiment, not ours. The technology that was supposed to set us free may well have helped Trump to power, or covertly helped swing votes for Brexit. It has created a vast network of propaganda that has encroached like a cancer across the entire internet. This is a technology that has enabled the likes of Cambridge Analytica to create political messages uniquely tailored to you. They understand your emotional responses and how to trigger them. They know your likes, dislikes, where you live, what you eat, what makes you laugh, what makes you cry.

And what next? Rebecca MacKinnon’s research has shown how authoritarian regimes reshape the internet for their own purposes. Is that what’s going to happen with Silicon Valley and Trump? As Martin Moore points out, the president-elect claimed that Apple chief executive Tim Cook called to congratulate him soon after his election victory. “And there will undoubtedly be be pressure on them to collaborate,” says Moore.

Journalism is failing in the face of such change and is only going to fail further. New platforms have put a bomb under the financial model – advertising – resources are shrinking, traffic is increasingly dependent on them, and publishers have no access, no insight at all, into what these platforms are doing in their headquarters, their labs. And now they are moving beyond the digital world into the physical. The next frontiers are healthcare, transportation, energy. And just as Google is a near-monopoly for search, its ambition to own and control the physical infrastructure of our lives is what’s coming next. It already owns our data and with it our identity. What will it mean when it moves into all the other areas of our lives?

 Facebook founder Mark Zuckerberg: still only 32 years of age. Photograph: Mariana Bazo/Reuters

“At the moment, there’s a distance when you Google ‘Jews are’ and get ‘Jews are evil’,” says Julia Powles, a researcher at Cambridge on technology and law. “But when you move into the physical realm, and these concepts become part of the tools being deployed when you navigate around your city or influence how people are employed, I think that has really pernicious consequences.”

Powles is shortly to publish a paper looking at DeepMind’s relationship with the NHS. “A year ago, 2 million Londoners’ NHS health records were handed over to DeepMind. And there was complete silence from politicians, from regulators, from anyone in a position of power. This is a company without any healthcare experience being given unprecedented access into the NHS and it took seven months to even know that they had the data. And that took investigative journalism to find it out.”

The headline was that DeepMind was going to work with the NHS to develop an app that would provide early warning for sufferers of kidney disease. And it is, but DeepMind’s ambitions – “to solve intelligence” – goes way beyond that. The entire history of 2 million NHS patients is, for artificial intelligence researchers, a treasure trove. And, their entry into the NHS – providing useful services in exchange for our personal data – is another massive step in their power and influence in every part of our lives.

Because the stage beyond search is prediction. Google wants to know what you want before you know yourself. “That’s the next stage,” says Martin Moore. “We talk about the omniscience of these tech giants, but that omniscience takes a huge step forward again if they are able to predict. And that’s where they want to go. To predict diseases in health. It’s really, really problematic.”

For the nearly 20 years that Google has been in existence, our view of the company has been inflected by the youth and liberal outlook of its founders. Ditto Facebook, whose mission, Zuckberg said, was not to be “a company. It was built to accomplish a social mission to make the world more open and connected.”

It would be interesting to know how he thinks that’s working out. Donald Trump is connecting through exactly the same technology platforms that supposedly helped fuel the Arab spring; connecting to racists and xenophobes. And Facebook and Google are amplifying and spreading that message. And us too – the mainstream media. Our outrage is just another node on Jonathan Albright’s data map.

“The more we argue with them, the more they know about us,” he says. “It all feeds into a circular system. What we’re seeing here is new era of network propaganda.”

We are all points on that map. And our complicity, our credulity, being consumers not concerned citizens, is an essential part of that process. And what happens next is down to us. “I would say that everybody has been really naive and we need to reset ourselves to a much more cynical place and proceed on that basis,” is Rebecca MacKinnon’s advice. “There is no doubt that where we are now is a very bad place. But it’s we as a society who have jointly created this problem. And if we want to get to a better place, when it comes to having an information ecosystem that serves human rights and democracy instead of destroying it, we have to share responsibility for that.”

Are Jews evil? How do you want that question answered? This is our internet. Not Google’s. Not Facebook’s. Not rightwing propagandists. And we’re the only ones who can reclaim it.

How to delete yourself from the Internet

Harriet Marsden in Indy100

In our smartphone-obsessed digital age, we effectively live our entire lives online, which makes us increasingly vulnerable to unseen threats.

Cyber crime, fraud and identity theft are exponentially growing concerns. Our personal lives, locations, and increasingly our passwords are made public online for anyone to find.

If the highly invasive Investigatory Powers Bill (AKA the Snooper's Charter) isn't blocked, then every single digital move you make will be recorded for up to 12 months.

Also, infinite junk mails.

But erasing your digital trace from the World Wide Web can seem overwhelming, especially since each person has on average 1,000,000,000 preferences, passwords, subscriptions and linked accounts. So how would you go about tracking them all down?
In step two Swedish developers, with the easy-assemble, Ikea-style approach.

Wille Dahlbo and Linus Unnebäck have created Deseat.me, which allows you to log in with a Google account, and immediately see which apps and services are linked to it.

The genius part is, instead of having to search all those accounts separately, the site links you directly to the relevant unsubscribe page for that service. It's easy, efficient, and free.

Unfortunately, thusfar the service is only available for accounts and subscriptions linked to Google, which leaves your Hotmail, Yahoo and AOL-related content untouched.

For a similar service, you can use Just Delete Me or Account Killer, both massive directories of links to delete account pages. However, these are only effective when you know the accounts you have. 

Here are some other helpful hacks to help ease your digital footprint:


Change your passwords - billions are now available online, and letter-only English-word passwords are the easiest to crack


Consider using symbols and numbers, as well as different passwords for different accounts


Delete unnecessary social media accounts - this could also benefit mental health and productivity


For any accounts you deem necessary, check privacy settings (also consider whether your Instagram page needs to be public)


Since 2013, every tweet posted from your Twitter account from 2006 onwards is archived, even if you delete your account. Consider converting your privacy settings so only approved followers can read your tweets


​For undeletable accounts such as Evernote and Pinterest, change your name to a pseudonym, create a random email address to reassign, and delete all the information


Go to 'My Activity' section of your Google account, wipe all search/location history and change account preferences


Similarly, delete all activity from other search engines such as Yahoo and Bing


Consider using a search engine that doesn't track your activity (e.g. DuckDuckGo) rather than Google or Bing


Make sure you click 'unsubscribe' at the bottom of each spam email, before blocking it


Request that search engines delete certain results about you (e.g. via a URL removal tool)


Consider employing the services of a data clearinghouse - although this can be a lengthy and time consuming process

• Check with your phone company to make sure your number isn't listed online, and request that they do not post your details in future
• Remove yourself from data collection sites such as Spokeo, Whitepages and PeopleFinder - this can be difficult, so consider paying for a service like DeleteMe

Who will save us from Silicon Valley?

Evgeny Morozov in The Guardian


 
Mark Zuckerberg and Priscilla Chan have given $3bn to help cure all disease. Photograph: Jeff Chiu/AP



A world where billionaires were blunt and forthright, where they preferred pillaging the world to saving it, was far less confusing. The robber barons of the industrial era – from Carnegie to Ford to Rockefeller – did eventually commit some of their riches to charity but there was no mistaking one for the other. Oil and steel brought in the cash; education and arts helped to spend it.

Of course, the eponymous foundations were neither neutral nor apolitical. They pursued projects that were rarely at odds with US foreign policy and often shared many of its key ideological biases and presuppositions. From modernisation theory to democracy promotion, the civilising imperative behind them was not so hard to discern. Some of these foundations have eventually come to regret many of their dubious advocacy campaigns; the Rockefeller Foundation’s imprudent support for population control in India is just one example.

Today, when five of the world’s most valuable companies are technology firms, it’s very hard to see where their businesses end and their charity efforts begin. As digital platforms, they power diverse industries and sectors from education to health to transport and thus have an option that was not available to the oil and steel magnates of yesteryear: they can simply continue selling their core product – mostly hope, albeit wrapped up in infinite layers of data, screens and sensors – without having to divert their funds into any nonproductive activities.

The Chan Zuckerberg initiative, a limited liability company (a somewhat unusual format for a charity), was set up by Mark Zuckerberg and his wife, Priscilla Chan, in December 2015, ostensibly to share their wealth with the rest of us. It has recently been in the news thanks to its founders’ ambitious commitment – to the tune of $3bn – to cure all disease.

Zuckerberg can surely afford this, given how little tax his company is paying: in the UK, its tax filings for 2015 show revenues of £210.7m, on which the company paid just £4.17m of taxes – an effective rate of 2% (itself a 1,000-fold increase on what it paid in 2014). Facebook, however, also managed to generate a tax credit of £11m, which it can use to reduce its future tax burden. The disease of tax avoidance is unlikely to be cured by the Chan Zuckerberg initiative.


  Henry Ford in his first car, built in 1896. Photograph: Library of Congress/Getty Images

To speak of “philanthrocapitalism” here – as many have done, either to praise or bury it – seems misguided, if only because such projects bear so little resemblance to philanthropy proper. One doesn’t have to admire Ford or Rockefeller to notice that their philanthropic endeavours, whatever their real political goals, were not supposed to make extra cash. But is it really so with our new tech barons?

While Zuckerberg’s commitments in the health sector are still too recent and ambiguous to judge, he has a more extensive history in education. Following Zuckerberg’s personal commitment of $100m dollars to schools in New Jersey – an investment that is yet to bring the desired results – the Chan Zuckerberg initiative has invested in companies that supposedly help expand educational opportunities in the developing world.

Thus, it has poured money into Andela, a Lagos-based startup that trains coders, joining the likes of Google (via GV, its venture fund) and Omidyar Network, a similar philanthropic investment firm belonging to another tech billionaire. A few weeks later, one of Andela’s co-founders left to found a payments startup: apparently, there are a lot of arbitrage opportunities in saving the world.

That one can never fully understand what drives these investments, a profit motive or a genuine desire to help out, is a feature, not a bug. If the logic driving the Fords and the Carnegies was to atone for the sins of rapacious capitalism, the logic of the Zuckerbergs and the Omidyars is to convince us that rapacious capitalism, fully unleashed on society, will do lots of good.

The Chan Zuckerberg initiative also invested in BYJU, an Indian company that has developed an app that teaches students science and maths. A noble endeavour, but what attracted Zuckerberg to the firm was, by his own admission, its heavy reliance on personalised learning, which, of course, is only possible when large troves of user data are recorded and analysed. Does that remind you of any giant tech company?

This celebration of personalisation is also present in another educational project supported by Zuckerberg – a learning software made by a company called Summit Basecamp. The company has the luxury of having 20 Facebook staffers, from engineers to product managers, helping it with growth and expansion – the result of Zuckerberg touring one of its schools in 2013. And expand it did: according to the Washington Post, its software is now used by 20,000 students in more than 100 schools.



The Chan Zuckerberg initiative has poured money into Andela, a Lagos-based startup that trains coders. Photograph: Mohini Ufeli/Andela

Parents of these students can hope that Summit Basecamp will keep its word and that no personal data will ever leave the company. Such promises won’t be any more reassuring than those of the founders of WhatsApp, who, on being acquired by Facebook, promised to defend their users’ personal data, only to announce, a few months ago, that it will be shared with Facebook.
Zuckerberg also joined the rest of the Silicon Valley elite, from Bill Gates to Laurene Powell Jobs, the widow of Steve Jobs, in investing in AltSchool, a startup founded by a former Google executive, which takes personalised learning to a whole new level. In a good Taylorist fashion, its classrooms feature cameras and microphones so that any glitches inherent in the learning process can be analysed and engineered away. AltSchool now wants to expand by selling licences to its software to other schools.

What passes for philanthropy these days is often just a sophisticated effort to make money on engineering the kinds of rational, entrepreneurial and quantitative souls that would delight at other types of personalisation. Such learning is, of course, well suited to the needs of consulting firms and technology giants. A recent profile of AltSchool in the New Yorker mentioned that its students read the Iliad armed with a spreadsheet where they mark how many times the theme of “rage” occurs in the text. Such schools can produce excellent auditors; poets, however, might need an alternative, to, well, the AltSchool.

The very same technology elites are also backing the charter school movement – a longrunning effort to bring more competition to the educational sector by supporting privately run but publicly funded educational initiatives. From Gates to Zuckerberg, technology billionaires are vocal defenders of this movement. It won’t be surprising if they deploy their big data weapons to advance the argument that the traditional educational system must be completely overhauled.

We should be careful not to fall victim to a perverse form of Stockholm syndrome, coming to sympathise with the corporate kidnappers of our democracy. On the one hand, given that the new tech billionaires pay very little tax, it’s not surprising that the public sector would fail to innovate as quickly. On the other, by constantly giving the private sector a head start through technologies that they own and develop, the new tech elites all but ensure that the public would rather choose slick but privatised technological solutions over quaint, but public, political ones.

That we can no longer differentiate between philanthropy and speculation is an occasion to worry, not celebrate. With Silicon Valley elites so keen on saving the world, shouldn’t we also ask who will eventually save us from Silicon Valley?

One way to check if your news headline is factually correct?

Dan Swing in The Independent

Internet search giant Google has introduced a new fact-checking feature in its new section to allow readers to determine whether or not a story is true. 

“In the seven years since we started labeling types of articles in Google News (e.g., In-Depth, Opinion, Wikipedia), we’ve heard that many readers enjoy having easy access to a diverse range of content types,” the company said in an announcement. 

“Today, we’re adding another new tag, “Fact check,” to help readers find fact checking in large news stories.”

Through an algorithmic process from schema.org known asClaimReview, live stories will be linked to fact checking articles and websites. This will allow readers to quickly validate or debunk stories they read online.

Related fact-checking stories will appear onscreen underneath the main headline. The example Google uses shows a headline over passport checks for pregnant women, with a link to Full Fact’s analysis of the issue. 

Readers will be able to see if stories are fake or if claims in the headline are false or being exaggerated. 

Fact check will initially be available in the UK and US through the Google News site as well as the News & Weather apps for both Android and iOS. Publishers who wish to become part of the new service can apply to have their sites included. 

“We’re excited to see the growth of the Fact Check community and to shine a light on its efforts to divine fact from fiction, wisdom from spin,” the company said.

Fact checking has become increasingly common for online publishers. Organizations such as the International Fact-Checking Network, PolitFact and FullFact analyse claims by politicians and other public speakers to determine if they are true or not.

Facebook has struggled to prevent fake headlines appearing in its own trending news feature. After the company swapped human curators for an algorithm, a fake story about Fox News anchor Megyn Kelly being fired over allegiances to Hilary Clinton caused controversy. 

While Google doesn’t name Donald Trump or Brexit explicitly, authors such as Ralph Keyes claim we now live in a “post-truth” era, where debates rarely focus on facts or policy but instead on emotion and wild claims. 

Republican Presidential candidate Donald Trump has often been found to make false or misleading statements. Politifact has rated 71% of his statements as false. This week he wrongly advised his supports to go out and vote on 28 November, 20 days after the US elections actually being held on 8 November.

Fifty biggest US companies stashing $1.3trn offshore

Coca-Cola, Walt Disney, Alphabet (Google) and Goldman Sachs all implicated in Oxfam report.

Hazel Sheffield in The Independent


Coca-Cola is among the companies named by Oxfam


The 50 biggest US companies have more money stashed offshore than the entire GDP of Spain, Mexico or Australia, collectively keeping about $1.3trn (£0.91trn) in territories where the money does not count towards US tax, according to a new report by Oxfam.

The revelations come after the European Commission announced plans to make big companies more transparent about where they pay tax. The charity said the Commission's proposals are “almost useless” for identifying where tax avoidance may be happening. It urged the UK Government to push for stronger rules to ensure that companies pay tax in all countries where they do business.

Robbie Silverman, Senior Tax Advisor at Oxfam, said that tax avoidance in the US will have a knock-on effect in countries around the world.

“The same tricks and tools used by multinational companies to dodge tax in the US are being used to cheat countries across the world out of their fair share of tax revenues, with devastating consequences,” he said.

“Poor countries are particularly hard hit, losing an estimated $100bn a year to corporate tax dodgers. This is enough to provide safe water and sanitation to more than 2.2 billion people,” he added.

In its investigation into the US tax system, Oxfam revealed some of the offshore accounting practices of the biggest companies in the US. Fifty companies including Coca-Cola, Walt Disney, Alphabet (Google) and Goldman Sachs keep a total of about $1.3trn in subsidiary companies registered all over the world, Oxfam says.

The Independent has contacted the companies named above for comment. Goldman Sachs declined to comment, the others did not respond.

The 50 companies are believed to have earned $4trn in profits globally from 2008-2014, but paid only 26.5 per cent of this in tax in the US, below the country’s statutory tax rate of 35 per cent. They rely on an opaque and secretive network of more than 1,600 disclosed subsidiaries in tax havens to stash about $1.3trn offshore, Oxfam said. It added that other offshore subsidiaries may be in use but under the radar of the Securities and Exchange Commission, because of weak reporting requirements.

These same 50 companies collectively received $27 in federal aid-like loans, loan guarantees and bailouts for every $1 they paid in federal taxes, amounting to a total of $11.2 trillion, Oxfam said.

Charities including Oxfam and Christian Aid have dismissed European Commission proposals to crack down on tax dodging as “close to pointless”. Christian Aid said new rules would allow “dodgy business as usual”.

Under EC proposals, companies would have to report profits and pay taxes in the EU and certain so-far undisclosed tax havens.While campaigners have lobbied for country-by-country reporting of taxes and profits, the proposed versions is so limited that it would not do the job, charities say.

“Unless companies have to report on their activities in all the countries where they operate, they could continue to dodge tax on a massive scale, using the places still hidden from view,” said Toby Quantrill, Chrisian Aid’s tax justice expert.

An protest by Oxfam outside the European Commission headquarters in Brussels earlier this week (Getty)

Campaigners have long asked for country-by-country reporting of tax affairs but the latest EC proposals are only a limited version of the rule. A previous tax haven blacklist put together by the European Commission in 2015 was withdrawn after it failed to include key countries like Luxembourg.

The latest European Commission proposals come in the wake of a huge data leak from a law firm in Panama that provided evidence of the true scale of offshore banking by the world’s super rich, including many current and former world leaders. Oxfam described the exploitation of tax loopholes as an “integral component” of the profit-making strategies of many multinational corporations.

Tax avoidance comes in many forms. Companies have reported up to $2 trillion of profits as “permanently reinvested” abroad, meaning it is not accountable for tax in the US. Some of the companies The Independent spoke to said that they still pay high taxes in the countries where the subsidiaries are registered. This practice can help them reduce their US tax bill because companies receive a dollar-for-dollar credit for any amount of tax they pay to other countries.

Oxfam, Christian Aid and Action Aid have said that in order to create a fairer tax system, companies must publically report revenues and taxes, publically declare any subsidiaries in tax havens and publically reveal how much money they spend on lobbying politicians.

‘Quarterly capitalism’ is short-term, myopic, greedy and dysfunctional

Will Hutton in The Guardian


It has been obvious for years that British capitalism is profoundly dysfunctional. In 1970, £10 of every £100 of profit was distributed to shareholders: today, under intense pressure from short-term owners, companies pay out £70. Investment, innovation and productivity have slumped. Few new companies grow to any significant size before they are taken over.

Exports have stagnated. The current account deficit is at record proportions. The purpose of companies now is not to do great things, solve great problems or scale up great solutions –why capitalism is potentially the best economic system – it is to become payolas for their disengaged owners and pawns in the next big deal or takeover. Not only the British economy suffers – this process has become the major driver of rising inequality, low pay and insecurity in the workplace as management teams are forced to treat workers as costly commodities rather than allies in business building.
Regular readers of this column will be familiar with the refrain, and the stubborn resistance from the British mainstream. There is absolutely nothing wrong at all with the British private sector, runs the Conservative argument: to the extent the British economy does have problems they are rooted entirely in taxation, regulation, unions and government. But in a week when the Financial Times – a great British asset and embodiment of the best of our journalism – has been sold to Nikkei for no better reason than to support Pearson’s short-term share price, powerful and public criticism of the way British capitalism operates has come from an unexpected quarter.

Last year, the governor of the Bank of England, Mark Carney, called on firms to have a greater “sense of their responsibilities for the system”, in particular the social contract on which market capitalism’s long-term dynamism depends. On Friday’s Newsnight, the chief economist of the Bank of England, Andy Haldane, built on the governor’s concerns. He began with the seven-fold increase in the proportion of profit distributed to shareholders in dividends and bought-back shares over the last 45 years, which he said necessarily “leaves less for investment”. The explanation was simple: British (and indeed American) company law “puts the shareholder at front and centre. It puts the short-term interest of shareholders in a position of primacy when it comes to running the firm.” He thought company law that placed shareholders on a more equal footing with other stakeholders – workers, customers, clients – would work better. Dare I say it – stakeholder capitalism?

He damned the way the public limited company has developed. “The public limited company model has served the world well from a growth perspective. But you can always have too much of a good thing. The nature of shareholding today is fundamentally different than what it was a generation ago. The average share was held by the average shareholder, just after the war, for around six years. Today, that average share is held by the average shareholder for less than six months. Of course, many shareholders these days are holding shares for less than a second.”

In New York, at almost exactly the same time Newsnight was transmitting its interview with Andrew Haldane, Hillary Clinton was speaking from the same script, attacking what she called “quarterly capitalism”. “American business needs to break free from the tyranny of today’s earning report so they can do what they do best: innovate, invest and build tomorrow’s prosperity,” the Democratic presidential front runner declared. “It’s time to start measuring value in terms of years – or the next decade – not just next quarter.” She does not want to reinvent the public limited company, but she proposed the most far-reaching tax reforms of any Democrat presidential nominee to change the incentives for shareholders and executives alike. In American terms this is a revolution.

It is long overdue and the argument is beginning to get traction in the US. Free-market apologists insist that the more cash is handed back to shareholders, then the more they have to invest in innovation. The stock market is doing its job: promoting efficiency. The trouble is that everyone can see it’s 100% wrong. The market is hopelessly inefficient, greedy and myopic. When Larry Page and Sergey Brin floated Google, they took care to insulate the company from “quarterly capitalism”: they accorded their shares as Google’s founders 10 times the voting rights in order to protect their capacity to innovate from the stock market – what they considered Google’s real business purpose.

From robots to self-driving cars, from virtual reality glasses to investigating artificial intelligence, Google is now one of the most innovative firms on Earth. Meanwhile the typical US Plc, like its counterpart in Britain, is hunkering down, investing and innovating ever less and distributing more cash to shareholders for the reasons Haldane explains. Far from market efficiency, the whole system is undermining the legitimacy of capitalism.

But bit by bit influential voices such as Haldane’s are having the nerve to declare the Anglo-American system does not work. A rich collection of reflections and commentary edited by Diane Carney (Mark Carney’s wife) was published after London’s Inclusive Capitalism conference last month. Yet, except for former business secretary Vince Cable, no leading British politician has entered the lists. It will be intriguing how George Osborne reacts: one instinct will be to sack Carney and Haldane, as he has done Martin Wheatley, the head of the Financial Conduct Authority, for being too tough on the City. Another will be to co-opt the argument for the one nation Tory cause before the Labour party does.

He needn’t worry too much. One of the reasons that Tony Blair dropped his advocacy for stakeholder capitalism back in 1996 after the publication of The State We’re In was because too many leftwing Labour MPs took the Jeremy Corbyn line that the party’s mission was to socialise capitalism rather than reform it, while too many rightwing Labour MPs such as Peter Mandelson and Alistair Darling were terrified of upsetting business, as today, it seems, is Liz Kendall. He had zero internal political support, business was distrustful and the Tories were accusing him of returning to 1970s corporatism. Today the Bank of England and the likely next US president are supporters. Will one of the contenders for the Labour leadership have the courage to make the case? So far, they have all been mute. If Andy Haldane has done nothing else, he will have dramatised the poverty of today’s thinking about capitalism – in both main political parties.

Taming Monopolies

Editorial in The Hindu

It is usually not easy for laymen to appreciate the work that fetches the Nobel Prize in Economics or, for that matter, the relevance of such work in everyday life. It is not so this time, with the award going to French economist Jean Tirole, the second Frenchman to win a Nobel this year — the other being Patrick Modiano who got the Literature Nobel. Mr. Tirole’s body of work deals with the interesting and complex subject of regulating monopolies or, as a Nobel official put it so well, it is “about taming powerful firms”. The subject has immediate resonance in today’s world where government monopolies in areas such as electricity and transport are being dismantled and privatised and new monopolies are establishing themselves in sectors such as information technology and the Internet. Before Mr. Tirole came up with research using game theory and contract theory that aid regulation in situations of asymmetric information between regulators and the regulated, simple methods were used to regulate monopolies. Capping prices and prohibiting cooperation between competitors in the same market were two such methods used, but Mr. Tirole proved that they were not always effective and in some instances caused more harm than good. Price caps, for instance, can force dominant firms to cut costs, which is good but they could in the process lead to excessive profits for the firm, which is not so good.

Mr. Tirole published a paper in 2006 jointly with Jean-Charles Rochet that dealt with the interesting subject of “two-sided” markets that has direct relevance to today’s buzzing world of e-commerce. These markets bring together buyers and sellers on a platform they own, enable interaction between the two and charge both sides. Amazon and Flipkart are good examples. Or for that matter, taxi aggregator firms such as Ola Cabs or Uber. Mr. Tirole’s work showed that the platforms often favour one side to attract the other. For instance, deep discounts on e-commerce platforms are used to drag in buyers and in the process bring in more vendors who pay the platform for its services. Regulators often do not understand the practices due to asymmetry of information. Mr. Tirole’s work is also important in the context of today’s “Google-world” where the Internet giant strides like a colossus in the search domain and regulators are struggling to understand Google’s strategies and then figure out ways and means to regulate it. This year’s Economics Nobel is remarkable not just because it is the first time since 1999 that an American does not figure in it but also because the Committee has picked a work that has practical value.

Government and Innovation - A much-maligned engine of innovation

Matin Wolf in FT 

Conventional economics offers abstract models; conventional wisdom insists the answer lies with private entrepreneurship. In this brilliant book, Mariana Mazzucato, a Sussex university professor of economics who specialises in science and technology, argues that the former is useless and the latter incomplete. Yes, innovation depends on bold entrepreneurship. But the entity that takes the boldest risks and achieves the biggest breakthroughs is not the private sector; it is the much-maligned state.

Mazzucato notes that “75 per cent of the new molecular entities [approved by the Food and Drug Administration between 1993 and 2004] trace their research ... to publicly funded National Institutes of Health (NIH) labs in the US”. The UK’s Medical Research Council discovered monoclonal antibodies, which are the foundation of biotechnology. Such discoveries are then handed cheaply to private companies that reap huge profits.

A perhaps even more potent example is the information and communications revolution. The US National Science Foundation funded the algorithm that drove Google’s search engine. Early funding for Apple came from the US government’s Small Business Investment Company. Moreover, “All the technologies which make the iPhone ‘smart’ are also state-funded ... the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.” Apple put this together, brilliantly. But it was gathering the fruit of seven decades of state-supported innovation.

Why is the state’s role so important? The answer lies in the huge uncertainties, time spans and costs associated with fundamental, science-based innovation. Private companies cannot and will not bear these costs, partly because they cannot be sure to reap the fruits and partly because these fruits lie so far in the future.

Indeed, the more competitive and finance-driven the economy, the less the private sector will be willing to bear such risks. Buying back shares is apparently a far more attractive way of using surplus cash than spending on fundamental innovation. The days of AT&T’s path-breaking Bell Labs are long gone. In any case, the private sector could not have created the internet or GPS. Only the US military had the resources to do so.

Arguably, the most important engines of innovation in the past five decades have been the US Defense Advanced Research Projects Agency and the NIH. Today, if the world is to make fundamental breakthroughs in energy technologies, states will play a big role. Indeed, the US government even helped drive the development of the hydraulic fracturing of shale rock.

Mazzucato insists this involves more than state support of research and development, vital though that is (in the US, the government funds a quarter of R&D and nearly 60 per cent of basic research). But the state is also an active entrepreneur, taking risks and, of course, accepting the inevitable failures. America has been a developmental state since the days of Alexander Hamilton. Indeed, the nation’s recent role as the premier promoter of fundamental innovations owes as much to its state as to the get-up-and-go of its entrepreneurs. 

Germany’s failure to remain at the forefront of today’s new technologies, in contrast to before the second world war, may be down to the limited role now accorded its state.

Mazzucato loves puncturing myths about risk-loving venture capital and risk-avoiding bureaucrats. Does it matter that the role of the state has been written out of the story? She argues that it does.

First, policy makers increasingly believe the myth that the state is only an obstacle, thereby depriving innovation of support and humanity of its best prospects for prosperity. Indeed, the scorn heaped on government also deprives it of the will and capacity to take entrepreneurial risks.

Second, government has also increasingly accepted that it funds the risks, while the private sector reaps the rewards. What is emerging, then, is not a truly symbiotic ecosystem of innovation, but a parasitic one, in which the most lossmaking elements are socialised, while the profitmaking ones are largely privatised. Do ordinary taxpayers understand that their taxes fund the fundamental innovations that drive their economy?

This book has a controversial thesis. But it is basically right. The failure to recognise the role of the government in driving innovation may well be the greatest threat to rising prosperity.

----

It’s a Myth That Entrepreneurs Drive New Technology

For real innovation, thank the state.

By Mariana Mazzucato|Posted Sunday, Sept. 1, 2013, at 5:00 AM

Some of our hero worship of tech entrepreneurs like Facebook CEO Mark Zuckerberg would be better directed at the government.

Photo by Justin Sullivan/Getty Images

Images of tech entrepreneurs such as Mark Zuckerberg and Steve Jobs are continually thrown at us by politicians, economists, and the media. The message is that innovation is best left in the hands of these individuals and the wider private sector, and that the state—bureaucratic and sluggish—should keep out. A telling 2012 article in the Economistclaimed that, to be innovative, governments must "stick to the basics" such as spending on infrastructure, education, and skills, leaving the rest to the revolutionary garage tinkerers.

Yet it is ideology, not evidence, that fuels this image. A quick look at the pioneering technologies of the past century points to the state, not the private sector, as the most decisive player in the game.

Whether an innovation will be a success is uncertain, and it can take longer than traditional banks or venture capitalists are willing to wait. In countries such as the United States, China, Singapore, and Denmark, the state has provided the kind of patient and long-term finance new technologies need to get off the ground. Investments of this kind have often been driven by big missions, from putting a human on the moon to solving climate change. This has required not only funding basic research—the typical "public good" that most economists admit needs state help—but applied research and seed funding too.

Apple is a perfect example. In its early stages, the company received government cash support via a $500,000 small-business investment company grant. And every technology that makes the iPhone a smartphone owes its vision and funding to the state: the Internet, GPS, touch-screen displays, and even the voice-activated smartphone assistant Siri all received state cash. The U.S. Defense Advanced Research Projects Agencybankrolled the Internet, and the CIA and the military funded GPS. So, although the United States is sold to us as the model example of progress through private enterprise, innovation there has benefited from a very interventionist state.

The examples don't just come from the military arena, either. The U.S. National Institutes of Health spends about $30 billion every year on pharmaceutical and biotechnology research and is responsible for 75 percent of the most innovative new drugs annually. Even the algorithm behind Google benefited from U.S. National Science Foundationfunding.

Across the world we see state investment banks financing innovation. Green energy is a great example. From Germany's KfW state bank to the Chinese and Brazilian development banks, state-run finance is playing an increasing role in the development of the next big thing: green tech.

In this era of obsession with reducing public debt—and the size of the state more generally—it is vital to dispel the myth that the public sector will be less innovative than the private sector. Otherwise, the state's ability to continue to play its enterprising role will be weakened. Stories about how progress is led by entrepreneurs and venture capitalists have aided lobbyists for the U.S. venture capital industry in negotiating lower capital gains and corporate income taxes—hurting the ability of the state to refill its innovation fund.

The fact that companies like Apple and Google pay hardly any tax—relative to their massive profits—is all the more problematic, given the significant contributions they have had from the government. Thus, the "real" economy (made up of goods and services) has experienced a shift similar to that of the "financial" economy: The risk has been increasingly moved to the public sector while the private sector keeps the rewards. Indeed, one of the most perverse trends in recent years is that while the state has increased its funding of R&D and innovation, the private sector is apparently de-committing itself. In the name of "open innovation," big pharma is closing down its R&D labs, relying more on small biotech companies and public funds to do the hard stuff. Is this a symbiotic public-private partnership or a parasitic one?

It is time for the state to get something back for its investments. How? First, this requires an admission that the state does more than just fix market failures—the usual way economists justify state spending. The state has shaped and created markets and, in doing so, taken on great risks. Second, we must ask where the reward is for such risk-taking and admit that it is no longer coming from the tax systems. Third, we must think creatively about how that reward can come back.

There are many ways for this to happen. The repayment of some loans for students depends on income, so why not do this for companies? When Google's future owners received a grant from the NSF, the contract should have said: If and when the beneficiaries of the grant make $X billion, a contribution will be made back to the NSF.

Other ways include giving the state bank or agency that invested a stake in the company. A good example is Finland, where the government-backed innovation fund SITRA retained equity when it invested in Nokia. There is also the possibility of keeping a share of the intellectual property rights, which are almost totally given away in the current system.

Recognizing the state as a lead risk-taker, and enabling it to reap a reward, will not only make the innovation system stronger, it will also spread the profits of growth more fairly. This will ensure that education, health, and transportation can benefit from state investments in innovation, instead of just the small number of people who see themselves as wealth creators, while relying increasingly on the courageous, entrepreneurial state.