Episode 49
November 6, 2017

Public Policy and Net Neutrality

Daniel Sepulveda, Former Ambassador and Deputy Assistant Secretary of State, joins us to discuss net neutrality, public policy, free trade, deglobalization, and basic income.

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This week we dive deep into the public policy that reflects the challenging relationship between commerce, the internet, tech giants, domestic and international policy, fair treatment of employees, and the future of our economy. With the help of Daniel Sepulveda, Phillip and Brian tease out the threads and agree that “we’re going to have to make a communal decision to involve everyone in the modern digital economy or we’ll have a bifurcated society” that falls prey to the wolves of populism.

Daniel Sepulveda, "ambassador of the internet":

  • Involved in commercial technology and policy for 20 years.
  • Politically appointed ambassador on issues of technology and telecommunications.
  • Appointed by President Obama and John Kerry.
  • There is no differentiator between the internet economy and the regular economy.
  • "if you're business doesn't understand that, then you're not long for this world."

On what we take for granted when using the internet:

  • The internet is an amazing act of voluntary human engagement.
  • There is no law that says communications firms have to accept internet protocol.
  • It's a handshake agreement among technologists, engineers and developers who use voluntarily agreed upon rules for the operation of the internet.

A brief summary of ICANN: what it is and how it functions

  • Before there was ICANN there was Jon Postel, and he personally managed IPAs.
  • ICANN is a huge nonprofit multinational organization acting as an internet yellow pages.

Changing US net neutrality policy:

  • Tim Wu was the original thinker around network neutrality.
  • The point of net neutrality is to keep networks from having a gatekeeper function.
  • Ajit Pai, and as an extension, republicans do not believe net neutrality should be a legal mandate.
  • They think companies should manage access as they see fit as a function of commerce.
  • Compromise: Republicans agree that companies cannot block you from access content, attaching a legal device to that content, or charge you on discriminatory terms.

Daniel's Take on net neutrality:

  • The point is to have democratic access for users. No one should come between the creator and participant's interaction online.
  • Ajit Pai's view: letting companies manage their networks as they want could create revenue and regulatory flexibility to build networks out to underserved areas.
  • Consider a compromise for a non-neutral behavior with a large public welfare benefit.
  • Concern: last mile service is still a concentrated market that needs regulation to protect against consumer abuse.

Avoiding internet policy pitfalls:

  • Promote public policies and incentives to maximize public good of tech innovation.
  • Construct public policies to discourage any technology out of fear is a bad idea.
  • Find solutions from tech outcomes rather than create regulatory structures to deny tech innovation.
  • Otherwise we'll have a real political populist problem.

On universal basic income:

  • A primarily gig economy is a challenge: the law and public benefit systems are built for a society in which employers have a responsibility to workers, we have responsibility to each other, and entities have consumer protection responsibilities.
  • We'd need a wholesale revisiting of everything from labor law to education and back to public welfare law if we have a society that is mostly self-employed.

How to develop a modern workforce:

  • Skill development is the cop-out answer. It needs to be much more than that.
  • It didn't work for steel workers or coal miners. They neither relocated to find work, nor gained new skills for different professions.
  • We need to "develop entrepreneurship for people in place, people within geography to create and build community."
  • Communities and cities are embarrassing themselves for the next amazon headquarters.
  • Take that energy and communal cash and use it for an entrepreneurial community.

Brian's 2 Takeaways to building a modern workforce:

  • 1: Invest in your employees. Teach them to be entrepreneurs or at least intrapreneurs.
  • 2: Some of you need to go start a business. Don't hide behind the walls of a corporation.
  • Daniel agrees: as a matter of public policy we have to reward that. We should encourage and reward the risk-taking of investing in your own company.

Phillip's 3rd cynical takeaway:

  • The current administration is not going to be very friendly to these ideals.
  • It likely gets worse before it gets better.
  • Get politically involved to put the right people into office who have the desire to see those policies carried out, or it won't happen.
  • People have to actually be in office to shape public policy.

Amazon and US trade policy:

  • Amazon is the most interesting and strongest company in America.
  • Jeff Bezos is a genius. He's in everything.
  • They have some of the most talented people in the game.
  • They understand the need to spread value to consumers and employees better than most companies. But there is a basic need in competition law, antitrust law, and societal function to understand the degree to which Amazon becomes the Walmart of the internet.
  • Not having a public dialogue on that issue would be a failure of duty for public officials.

Daniel's 5 year snapshot:

  • We risk an overcorrection in dealing with technology.
  • We haven't had a proactive mechanism for working with silicon valley and undeniably giant companies.
  • With no conversation about their practices, there'll be an overcorrection because people are afraid of how big these companies are becoming.
  • The hope is for a positive and inclusive dialogue that creates reasonable guardrails and authority for consumers and workers relative to tech operators and owners for the assets in their lives: personal identification data and labor.
  • We need a conversation about how our system better and more democratically distributes wealth.
  • We're going to have to make a communal decision to involve everyone in the modern digital economy or we'll have a bifurcated society.

Photo credit: Getty/Politico, 2015

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Brian: [00:00:44] Welcome to Future Commerce, the podcast about cutting edge and next generation commerce, rated as one of Forbes Top Six Tech Podcasts Worth Your Time. I'm Brian.

Phillip: [00:00:52] And I'm Phillip.

Brian: [00:00:54] And as always, don't forget to sign up for our FC Insiders weekly newsletter and find out what's new and what's exciting and what's next in retail. Today, we have quite the guest. Daniel Sepulveda. Daniel is the former ambassador... I think there are a couple or maybe even three administrations... Former ambassador and deputy assistant secretary of state. Welcome to the show, Daniel.

Daniel: [00:01:24] Hi. Thank you for having me.

Brian: [00:01:26] You bet.

Phillip: [00:01:27] Great to have you. And so just to kind of get a frame of reference for people who may not know you. What is your history and maybe give us a little bit of your resume and establish some of your authority in the space. Because I think we're gonna go deep on a couple of topics today.

Daniel: [00:01:42] Right. So I've been involved in the space for now close to 20 years. In the most recent capacity, I was, as you said, a politically appointed ambassador. So I was confirmed by the United States Senate to represent the United States abroad on issues of technology and telecommunications. And originally, the post was created as the primary representative for the United States to the International Telecommunications Union, which was before the International Telecommunications union was created to govern international communications over telegraph. So it's a very old, specialized body of the United Nations, and it has legal authority over international telephone and satellite communications, though historically it's looked at what interconnection arrangements look like, what international contracts look like, termination costs, access to telephone networks, access to space in the nation's or the world's spectrum and the airwaves for the delivery of global communications and satellite communication. So beginning in really 2010, very dramatically in 2012, and ever since, there's been a debate about whether or not the International Telecommunications Union, under the auspices of the United Nations, should have authority over what we call Internet communications, which the United States is staunchly opposed, as has most of the Western world. So that lays out sort of the four corners of the debate. I was appointed to this position by the president. I served in the United States Senate and also by John Kerry, who I also served in the United States Senate. John Kerry was the chairman of the Commerce Committee, the Subcommittee on Technology and Telecommunications, and I was his chief staffer on that, as well as other economic issues. And when he was appointed to state to be the secretary of state, he took me with him.

Phillip: [00:03:33] Wow. So, you know, one or two things about Internet.

Brian: [00:03:38] {laughter}

Daniel: [00:03:38] And one or two things about politics and policy.

Phillip: [00:03:39] Right. Oh, my. Oh, my word. Yeah.

Daniel: [00:03:45] And where those two worlds collide.

Phillip: [00:03:45] I think that's really what I think we'll tease out today, which is really how changes in policy and how really a global economy are being affected by these changes in policy and how they affect retail really. So glad to have someone of your caliber here on the show. Brian, I know that you actually might have found Daniel through a little bit of a digging and found a politico post, specifically calling Daniel the ambassador to the Internet.

Brian: [00:04:14] Yeah. The closest thing the US has to an ambassador to the Internet, which is quite a title, I have to say.

Daniel: [00:04:21] Yeah. It was a very friendly article.

Brian: [00:04:24] Yeah it was. No doubt, no doubt. Yeah. And I think it's probably a good title. And it's such a, obviously the Internet is such a worldwide thing and it almost needs its own ambassador. So I love that. In fact, at this point, how interconnected would you say the Internet and commerce have become?

Daniel: [00:04:47] Oh, they're completely interconnected. And it's not just what you think of as the Internet or what most people think of as the Internet, which is their understanding of it as the World Wide Web and the consumer facing applications that we're all used to, like Facebook and Google. But beyond that, the Internet is the interconnection of communications networks around the world built on Internet protocol, and that is communicating everything from supply chain management to now the Internet of Things to multinationals management of their human resources activities around the world. So it really isn't just one thing now. There is no differentiator between what we call use to call the Internet economy and the regular economy. It's just the digital economy. It's just one big thing.

Brian: [00:05:36] Yeah, I totally agree. I think at this point, you know, the Internet and commerce... There's no such thing as eCommerce. It's just commerce.

Phillip: [00:05:44] Right.

Brian: [00:05:45] Commerce and digital are so intertwined at this point that you can't separate them.

Daniel: [00:05:50] Right and if you don't understand that, if your business doesn't understand that, then you're not long for this world as a matter business.

Phillip: [00:05:59] That's a wonderful pull quote.

Brian: [00:06:03] We're going to tweet that one.

Phillip: [00:06:03] But what's funny is I found, you know, a little clip somewhere in amongst all of the Whole Foods/Amazon hubbub with the acquisition recently, and somebody said something to the effect of, or quoted that US eCommerce is only 8% of all retail transactions in the United States. You sort of recharacterize that as well, it may be 8% of consumer retail activity, but none of those businesses really could exist in the modern world without the support of the Internet as the backbone by which we transact all kinds of exchanges, not just the payments and the catalogs. What do you think are other sort of fundamentals that go into how the Internet works that we've also come to depend on, but are sort of not visible or top of mind every day that we sort of take for granted?

Daniel: [00:06:54] I think that the vast majority of people, including myself before I was really active in the space, were oblivious to how amazing the Internet is as a voluntary act of human engagement. There is no law that mandates any network to connect to any other network. There is no law that says that communications firms have to accept Internet protocol as the technology by which to connect networks. This was all born organically out of a DARPA contract from long ago that ended up, you know, by 1998 becoming the commercial internet through what became the International Corporation for Assigned Names and Numbers or the Internet Corporation for Assigned Names and Numbers, which is called ICANN. So there is really a handshake agreement among technologists and engineers and developers to use voluntarily agreed upon rules for the operation of the Internet. And it is built on top of international telecommunications networks. So we as governments, to the degree that we had a role in the creation of the Internet... It was as a function of funding, research and development through the Department of Defense. But it was really organically created first as a network for academics. And then eventually Commerce saw its potential and has turned it into the baseline mechanism for the communications. I mean, it's the basis of business to business communications and the basis of internal business communications and the basis of external business communication. There really is no differentiator between what we call the Internet and what we've historically known as communication.

Brian: [00:08:46] Whoa. You mentioned ICANN. Maybe you could give our listeners a brief summary. A lot of them all know what it is, but maybe a few won't. Just give a brief summary of what that is and how that functions. And since it is sort of a handshake agreement, as you call that, maybe give some of the main cause of thought around how the Internet should function and maybe some positives and negatives on different schools of though.

Daniel: [00:09:10] Right. So ICANN manages the top level domain names of the Internet. So it makes sure that what is your Internet protocol address matches up with the common language usage for an internet web site. So if you go to www.coke.com, it takes you to that particular internet protocol address. That dot com is what they manage as well as what is dot net, dot org, dot defense and then the country codes. So dot us, dot fr for France, etc.. Now that again, that was all organic. Before there was an ICANN, there was a gentleman named John Postel, who is a famous academic out of USC and ICANN is based out of Los Angeles, largely because it descended from him, and he personally managed what were then the internet protocol addresses and ensuring that the internet, what it was then, worked. So we have now this what is ICANN, which is really now a huge nonprofit, multinational organization that functions, a lot of people don't like to use this analogy, but as as sort of the yellow pages of the Internet. It lets you know how a number connects to a name and a particular device or computer to ensure that you get international interconnection. Now, that is outside the norm of really any form of international commerce. Almost every other form, every other form that I'm aware of, of international commerce requires some degree of international agreement and regulation. So you can't send a package, a physical package across a border without paying a tariff, without ensuring that there is a customs agreement for how that package is sent and at what rate and at what tax level. You can't physically walk across a border without having that country's agreement to enter and exit. The only thing that enters and exits a country without anybody having any regulatory control over it is data. Outside of that, I guess you could say climate. The air does the same thing, but we do have international agreements on how to treat climate. I apologize. Those are my dogs.

Phillip: [00:11:35] Oh that's ok.

Daniel: [00:11:35] So it is a brand... Well, it's not brand new, right? I mean, the Internet, like I said, the commercial Internet originates around 1998, the late 1990s. But as it relates to governing and international commerce, it is a brand new phenomenon. And we're trying to wrap our hands around that in large part because it respects no physical borders. And our international legal regimes are built on international borders, and that creates real challenges.

Phillip: [00:12:09] Right. And some of those international borders don't necessarily follow geographic borders either. I feel like that's where some of the complication comes in, especially with regard to trade is especially as global policies and economic policies are changing so dramatically here recently. I think it's hard to get a grasp on really even the state that things are in. And so I know you speak a lot about net neutrality, and I'm guessing that's sort of where this all heads is that there is a big push to formalize a lot of these handshake sort of understandings. And a lot of people, I think probably rightly so, would like countries like the United States to have more say than less in how we move forward. And so maybe you can talk a little bit about how the U.S. policy around net neutrality might be changing.

Daniel: [00:13:11] Sure. Well, the U.S. policy around network neutrality... There's a long history now in this space. Tim Wu, the academic from Columbia University, is the original sort of thinker around network neutrality. And the idea of network neutrality is that the network operator, so your cable or your telephone company, is neutral as to how you use your connection to the Internet. So they provide you a connection to the Internet. But once you get to the Internet, you go and you use the services available on the Internet as you wish. And that's where the neutral in network neutrality comes from. And networks, at least last mile networks to your home, are either local or national networks, depending on where you live. So where I live, I have two options. I can either have Comcast or Verizon. But in those two, under current regulation, network neutrality regulation and under common practice just as a general rule, before Mr. Wheeler made it a rule, they don't tell me or encourage me to go anywhere on the Internet or deny me access to anywhere on the Internet. They don't have a gatekeeper function. That's the point of network neutrality, is to keep them from having a gatekeeper function. So my bosses, first Barbara Boxer, then Barack Obama, and then John Kerry were all strong supporters of the concept of network neutrality in law and regulation. Ajit Pai, who is now the chairman of the Federal Communications Commission and the president and generally the Republican Party, do not believe that network neutrality should be a legal mandate. They believe that companies that deliver the access to the Internet should, as a general rule, be free to manage that access as they see fit as a function of commerce. There has been some conversation about a compromise in which Republicans would agree that the rule would say that the companies cannot block you from accessing content. They cannot block you from attaching a device, a legal device to that connection, and they cannot charge you on discriminatory terms. The one point on which there is still a debate domestically between the parties is on whether or not someone should be able to pay the company that gives you access to the Internet, privileged access to you. So that's a very emotional debate. There's a lot of debate around that question. When we came up with the concept of network neutrality, it kind of was exported and adopted abroad in multiple, multiple markets. And the degree to which we are now reversing as a government our position on network neutrality or if Chairman Pai changes his position or the position of the country, we'll see what that does around the world and how other people feel about changing their positions as well.

Brian: [00:16:18] What do you think it will do?

Daniel: [00:16:19] What do I think? Obviously, I've served in this capacity for a long time, so I believe particularly when we first had this debate that there were a large number of nascent services, including podcasting, but a number of other nascent technology services that could not compete and did not have the money to overcome a barrier to entry that a change in network neutrality would bring. So that was the point. The point that the point is to have democratic access to users, to have the ends of the network, either you as a podcast or creating a service and me as a listener or participant in this case using the service and having no one come between us in that interaction, that there's utility in that. I still believe that their strong utility in that. I know my party strongly believes that there's utility in that as a rule. Now, out of fairness, I've known Ajit Pai since we were both young men serving in the Senate. He worked for a Republican senator. I worked for a Democrat senator. I don't believe that he is... There are people who are activists on our side who have called him a lot of names. And I don't agree with that. His fundamental view is that if we allowed these companies to manage the networks as they saw fit and extract additional profit from the ability to charge companies or people to reach you on a preferential basis, that they would then have the revenue and the regulatory flexibility to build those networks out to more rural communities, more poor people that they could in turn maybe even provide some services for free. So like Facebook has this Free Basics program intended to provide a portion of the Internet to people for free. And there's been some question about whether or not that violates network neutrality. From my perspective, it does. But I'm not sure it's terrible. So you know where I am more ambivalent today than I was 20 years ago about network neutrality. I still think as a general rule, the lack of competition in last mile service to your home requires a rule of network neutrality. But I could foresee a situation in which you allowed some degree of experimentation with that last mile management if it had an overwhelming... Free access to the internet for the poor or if it had a...

Phillip: [00:18:51] I'm so sorry to cut in there. We're having a little bit of trouble hearing you at the microphone. Could you just repeat the last thing that you said?

Daniel: [00:18:58] Yeah. So, the question now is is there a zone of agreement, an area of compromise? And where I would say that we should be looking at compromise is in structuring an agreement around what would constitute non neutral behavior that would have very large public interest benefit or very large consumer welfare benefit. So, for example, the idea that the sender would be willing to pay access to the Internet for the poor on the basis of a pure advertising revenues. Is that a model that you could see as having such a public interest benefit that you should think about supporting it? I think that we should at least be considering a portion of that conversation. My concern remains that the last mile service to your home is a highly, highly concentrated market, and we should have rules of the road that protect against the abuse of that last mile access to you.

Brian: [00:20:51] That's good. That's good. I mean, as we've mentioned, I think there's a lot of different types of technology that rely on the Internet. And, you know, we're talked about commerce. You mentioned Internet of Things ahead. And there are other technologies that are going to really rely on the Internet as well, like virtual reality and interactions and virtual reality and augmented reality and AI and, you know, and the big data that's associated with that and even robotics. As we kind of step in to how the Internet's being governed, do you see one road leading towards advancement and adoption and another of road sort of... What are the pitfalls ahead there? What could we avoid as a as a nation, as a world, to ensure that adoption of tech happens at the fastest possible rate?

Daniel: [00:21:41] I think that there are a multitude of both public policies and commercial incentives that you can create to maximize the public good of advances in technology. I am generally pro technology and I am generally pro... I guess I'm a dying breed, but I'm pro-technology, pro-trade, pro-immigration pro general openness of the nation. And so the degree to which that we stand or construct public policies that would discourage the development really of any technology because we fear it is a bad idea. So there's a lot of talk about what robotics and artificial intelligence and the automatization of certain activities or even, you know, driverless cars, what they're going to do to the ability of working people to find work, to be able to have a living wage or for entrepreneurs that don't come from California, Massachusetts, and New York to start businesses. Those are real concerns. And I would separate the concerns from the technology and try to find solutions to the outcomes of the development of technology rather than create regulatory or legal structures to deny the ability to build technology and services. The problem with that, the challenge with that is that we've had much of a very similar debate in the globalization arena or in trade. So those of us who are pro-trade argued for many, many years, "Look, globalization is generally good. Generally it creates more wealth and it costs us. There are people who find challenges with shifting creation of commercial flows. But we can create programs to help those people, or they can move to where there is opportunity." That proved to be an inadequate formula to deal with people's concerns, and it resulted in a populous uprising against trade. And what I fear is that if we do not help manage both the commercial changes, so what happens to small businesses in the space that you all care about, in retail, or what happens to workers when their particular services are no longer necessary, for example, if Amazon is successful at removing the cashier from the commercial experience, OK, what happens to those cashiers and what do we do about that? If we don't have real solutions to those challenges, if we don't create public policies that change the incentive to concentrate investment in three states, we're going to have a populist problem, a real political problem that will result in an overcorrection much the same way we had an overcorrection in trade and are seeing an overcorrection in trade now.

Phillip: [00:24:28] I'm gonna take a little detour because it's just top of mind, and you mentioned something there which sort of sparked my thought process, but there was a blog out on Medium recently, which I am not going to assume that you have read by Scott Santens, who actually speaks a lot about basic income and basically goes a long way to try to prove out a theory that we hit peak labor sometime around 1999 or 2000. And really everything that we've seen since then is really leading to more automation and you know, less participation in the workforce. And I wonder if there's someone out there who might draw a correlation to automation and freedom of information exchange as the kind of thing that not just sends jobs overseas, but creates less job opportunity for many people overall. Do you feel like that that's an argument or a sentiment that needs to be combated? And is that something that you think is a fair criticism?

Daniel: [00:25:33] There is a sort of universal basic income and peak employment debate occurring between really, really smart people. So I think actually, like Zuckerberg and Eric Schmidt and Elon Musk have been engaging in this debate on opposite sides for a while now, in which what is universal basic income? Universal basic income is the socialization, this communal acceptance that we have a problem and then the communal pay for for that problem. Ok, so the problem being that in some theoretical world we reach peak employment, there will always be people who can't either get employment or hold employment for an extensive period of time because they don't have the skills or bring the wealth creation necessary to be a participant in the modern economy. So let's just pay them off to not work or ensure that we create a basic universal basic income that ensures they have a stability of wage over time if they are no longer or if we no longer have permanent employers and people are basically self-employed as a general rule. That's one line of thought. It certainly deserves exploration, because if that's where we're headed, if we're headed towards a gig economy where you pretty much just work for yourself and there are a variety of platforms that enable you to do that, everything from being a blue collar worker where you work on, you know, a construction site for a period of time. And then that platform enables you to work on a different one, something like a TaskRabbit but for construction. Then that's a real challenge because our law and our public benefits systems are not built for a society in which people are largely self-employed. It's built for a society which employers have responsibilities to workers. And we as a society have responsibilities to each other. And then also the services delivered by entities that are employers and companies have consumer protection responsibilities. If we are heading to a situation in which that is no longer the structure of our economy, then we need a wholesale revisiting of everything from labor law to education and then back to what we were talking about before as to what public welfare law looks like. To some degree, we have a universal basic income system, because if you become unemployed through no fault of your own, you get a check, you get unemployment insurance. The question... To some degree, through Medicaid we have, you know, health care for the poor and Medicare. We have health care for the old. We have a system, a social safety net, but it is not meant to carry the burden of a significant portion of the population. It is just not designed for that. So there are people who hate the concept of universal basic income. Vice President Joe Biden is one of those people. He thinks it calls for denying people the dignity of work. He thinks that, you know, we need to be working to construct a system in an economy that produces viable living wage work for everyone and that everyone has access to work. OK, I accept that, and I embrace it and believe it. But what does that mean in terms of actual public policy? What does that mean around financial policy? Tax policy? All kinds of challenges.

Phillip: [00:28:58] Yeah, and the reason I bring it up, which I think has it sort of tangentially related to what we were speaking about, which is the sense that a world in which we're living right now and probably one that's developing rapidly in front of us, where there is information, and the access to that information is ubiquitous, is causing people's, you know, specialized professions that used to specialize in the aggregation of information and the delivery of information. Librarian is one that comes to mind, which is probably the worst example. But there were professions that have probably been outmoded by this explosion of access of information. And so my sense is that there is an impact on retail, it's a knock on effect, that creates problems probably economically everywhere. And so I guess I would ask you what do you think? What does a policy look like that that allows us to sort of maximize the labor force or maybe potentially is it... Is it just reinvesting in new skills and trade in labor that are specifically digitally focused rather than trying to stimulate a manufacturing economy?

Daniel: [00:30:16] It has to be much more than just skill development. Thus, to some degree, I think that's kind of the cop out answer. You know, why don't we just give people vouchers to learn coding? And to some degree it was our answer to what was going to happen to steelworkers. You know, or coal miners. Their jobs were going to go abroad. And we would give them training, adjustment assistance. And we have such a program and they would either get up and move out of their community to somewhere where jobs were bursting through the seams like Boston and Orlando, or they would stay there and acquire the skills to remotely work and create their own businesses. Neither of those things have happened. And those challenges are now concentrated in specific places because coal and steel production are very geographically specific, much like fishing or they're very geographically specific things, but like you said, technology is now going to displace workers across the entire spectrum of skills, like patent lawyers, right? There are now artificial intelligence programs to make sure that you don't need a suite of patent lawyers to be able to find the information necessary to produce and apply for your patent. OK. I mean, nobody's crying for patent lawyers and they're generally well educated to find work. The question is really, I think, and I think that actually Steve Case has been doing some interesting work around this. Ross Baird, who is a venture capitalist has as well, who wrote a book called Innovation Blind Spots. We have to find ways to build the skill of entrepreneurship in people, which is a much harder skill than coding. And we have to encourage our financial system to invest. Right now, venture capital spending, 90% of it is concentrated in three states around major universities and is concentrated in businesses that are built to be bought, built to exit. So you invest money for a quick turnaround. So those are just two fundamental things that we need to change. That our investment system... One, we have to encourage longer term investments. And two we have to encourage the development of entrepreneurs, people in place, people within geography to create and build community.

Brian: [00:32:48] I love that.

Daniel: [00:32:50] Right now, people, communities and cities are are really embarrassing themselves, trying to get the next Amazon headquarters to come to their city.

Brian: [00:32:59] Yes. {laughter}

Phillip: [00:32:59] {laughter}

Daniel: [00:32:59] The kind of things and spending and in just general begging, that's being done to bring in Amazon headquarters to a community is incredible. If you could take and harness that energy and communal money to be spent on the development of an entrepreneurial community or entrepreneurship programs or skill development or better community colleges or any number of other things, that would make a change now would be a real change. The thing about the Amazon headquarters is that is a sure thing. You give these guys whatever x millions of dollars that come to your community and you know y number of jobs will be created.

Brian: [00:33:39] Yeah. You know, two points I'm hearing here or two points I want to make off this. One, I think there's a really great takeaway for our listeners, which is invest in your employees. Right? And teach them, if not to become entrepreneurs, to become intrepreneurs. Find ways of driving new growth. Teach them how to run their own businesses and take ownership and, you know, think out ahead. And then also, some of our listeners, you need to go start a business and get out there and be that part of the economy and not hide your skills behind the walls of a corporation.

Daniel: [00:34:24] And as a matter of public policy, we have to reward that. So we have a research and development tax credit for companies that to the degree that they're investing in research and development, and usually is more development research, but that's fine. We give them a tax credit toward that end. We don't do that for investment in training. And the reason to do it is the same. The reason we give that tax credit to companies is because once something is invented, it's hard to contain the value of that invention. So the same thing is true for workers. If you train a worker, you invest a bunch of money in them and they leave you a year later or two years later, you lose that money, right? It is hard to contain that investment. And to some degree we should encourage and reward the risk taking that is an investment in your work. And so there's another whole school of thought around that as well.

Phillip: [00:35:11] The cynic in me finds the third takeaway, which is I don't feel like the policies being outlined by the current administration are going to be very friendly to a lot of these ideals. My sense is that we're sort of pulling back the rope on open trade and global trade. And we're looking to... I do think that there's a sense of like a desire there to put cities to work. And I would also like to see venture capital move to literally anywhere except for Silicon Valley. That would be wonderful. And I do think that, you know, Daniel, you have a fantastic point in that cities are falling all over themselves to attract jobs, not just from Amazon, but from a lot of corporations. But my sense is that it likely gets worse before it gets better. And so the cynic in me is if that infuriates you enough or if that ignites something in you enough, maybe, you know, we should get more politically involved to try to put the right people into office who have the desire to see those policies carried out. Because I think it's not just about public action. It's not just about grassroots movement. I think those are valuable. Us getting angry on Facebook and FCC websites don't do anything. We have to have public policy shaped by the... People have to actually be in office to shape public policy.

Daniel: [00:36:40] Yeah.

Brian: [00:36:40] One thing I to make sure we hit on before we close out here, a few more things I'd like hit on, but we might run out of time. But lately we've been kind of dancing around Amazon for a minute. And so, you know, Amazon, kind of exemplifies a company that that I think has kind of pushed, you know, entrepreneurship in some ways. And they're making larger and larger waves in commerce in general. How have you seen them enter the discussion about how the Internet should function and how trade should function? What are they proposing? What policies do you think would actually be most beneficial for them that maybe is like a sub agenda if you well?

Daniel: [00:37:28] Amazon is to me and just in my opinion, the most interesting and strongest company we have in America, because it's not really just an Internet company. Unlike Google and Facebook, which are incredible, amazing companies. And I think had more valuation as a matter of stock than Amazon. Amazon is in everything. They're a physical company. They have employees almost in every state of the union I'm sure. Facebook and Google do not. But Amazon is not just an Internet powerhouse, it's an industrial powerhouse. And Jeff Bezos himself is... He's a genius. I mean, the man is involved in everything from entering space to Washington Post. He's everywhere. And Amazon hires I mean, they go after talent, at least in this space I know very well, which is government relations and political space. They have some of the most talented people in the game, and they know how this game works. And I think that they understand the necessity to spread value both to consumers and employees better than most companies. So I'm saying all of that is very, very positive about Amazon. There is nonetheless a basic need in competition law, in an antitrust law. And just as a matter of a societal function, to understand the degree to which Amazon becomes the Walmart of the Internet. Can it squeeze suppliers and competitors to a degree that hinders productivity and innovation? And that requires some real quantitative analysis and some degree of expertise that I don't have. But it certainly requires investigation and a public conversation. I don't know the degree to which Amazon is open to having that conversation. Obviously, it creates risks for them, but not having that conversation would be a failure of duty on the risk part of both public officials.

Brian: [00:39:36] Yeah.

Phillip: [00:39:38] That's basically a central topic in every one of our shows. So we can't get away from Amazon. Brian won't let us.

Brian: [00:39:47] {laughter} That's true.

Phillip: [00:39:50] I can appreciate that viewpoint. I share similar sort of the antitrust sentiment is one that sort of comes near and dear to my heart because that's... I am the counterpoint on the show to Brian. So I guess I'd give you, Daniel, if you want to give us just maybe a quick 30 second snapshot of what you think the next five years looks like ahead of us with regard to... Well, I guess whatever. Trade policy. Network neutrality.

Daniel: [00:40:21] So I'm going to step back and tell you what I think about when nobody's paying me to think and what I worry about when nobody's paying me to worry. I think about the next five years as a period of time in which we risk an over a correction to dealing with technology, to the fact that we have not had a proactive mechanism for working with Silicon Valley and companies that have now become undeniably giants. The idea that they are capable of drawing a line in the sand, in keeping us from having what are difficult conversations about competition and about consumer protection and about privacy, about the effects on labor, all modernizing technology... That what will happen to our tech policy is that it will boil, much the same way that you saw in trade, and that you would have an overcorrection, a denial in a distribution of data. A discouragement of the creation of technology. Discouragement of the use of data. Because people are so afraid of how big these companies are becoming. That's not a necessary outcome. And what I would hope for is a positive and inclusive dialog that creates reasonable guardrails and reasonable authority for individuals, consumers, and workers relative to technology operators and owners for the assets in their lives, whether that asset be their personally identifiable information or their labor. That we have a conversation about what that means and how we better and more democratically distribute wealth and how our system more democratically distributes wealth. That is not at this point a welcome conversation in Washington. The current administration is not particularly open to that conversation. The companies fear that conversation. Politicians fear losing the friendship of those companies as a part of leading on that conversation. But I think it is an absolutely necessary conversation and one we're either going to have the hard way, like we're doing on trade, or one that we're actually going to manage and work through as as a community. And the people I've worked for, and my first love is and will always remain public service, is to have a sense of communal responsibility and communal engagement, even on issues that seem technical or seem removes from the lives of everyday people because they have wide societal impacts. And the way that we can make, have an effect at scale is through law and regulation. Now there might be other ways to have an effect at scale like I think what Steve Case is doing with Rise of the Rest is an effort at having an effect at scale on entrepreneurship in localities that haven't historically known entrepreneurship. That's awesome. Right? But I really don't think that a private effort sort of one company at a time or one rich guy at a time is going to do it. We are going to need to make a communal decision to involve everyone in the modern digital economy, or we will have a bifurcated society. More bifurcating, more unequal.

Phillip: [00:43:45] Wow. That's a really thought provoking way to end our discussion. Thank you so much, Daniel Sepulveda, the ambassador to the Internet, the former Ambassador and Deputy Assistant Secretary of State. And thank you so much for joining us. I'll close us out. Thank you for listening to Future Commerce. We want your feedback on today's show, and you can do that best by going to FutureCommerce.fm. And hit down to the bottom of the page and hit that Disqus comment box. If you're subscribed on iTunes, we'd like you to leave us a five star review. It helps us get the show out there. And you can also subscribe pretty much anywhere you can get podcasts, Apple podcasts, Google Play or right from your Amazon Echo device with the phrase "Alexa Play Future Commerce podcast." Thanks for listening. And as always...

Brian: [00:44:30] Keep looking towards the future.

Phillip: [00:44:31] Thank you so much. Thank you, Daniel.

Brian: [00:44:33] Thanks, Daniel.

Daniel: [00:44:33] Take care.

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