Friday, August 23, 2013

The “IT-Industrial Complex”

A while ago we commented on whistleblowing in the context of Edward Snowdon’s revelation of the current practices of the NSA. The entire story though is much bigger and has been ongoing for a while now. Just Monday this week, Glenn Greenwald’s partner got detained at London’s Heathrow Airport in a rather unusual manner. Greenwald, as most of us will know, is the journalist who was contacted by Snowdon and has been publishing the crucial pieces of Snowdon’s material in The Guardian.

While in essence the ongoing revelations have the political sphere as the key target, it now more and more emerges that the role of private businesses is far bigger than so far known. From the perspective of scholars interested in business ethics then this case, as it unfolds, raises some rather daunting questions, which – besides being troubling from a normal citizen’s point of view – offer some challenging questions for further research.

1. A new industry

Ever since the Washington Post published Top Secret America we are aware of the fast growing security industry which was created by the US Government in the aftermath of the terror attacks of 2001. What was not that clear is however how far the reach of this industry has gone.

The fact that phone companies provide their records to the NSA, that in principle all our email traffic is public and stored somewhere - just to name a few aspects - takes the entire debate to a new level. It now emerged that in fact most wireless phone providers, many internet service providers (including Google and Facebook) share data with the NSA, as do many classic IT hard- and software producer such as Apple and Microsoft.

When these revelations were made it was conspicuous to see the rather muted reaction of these companies. For long we thought that Google, certainly in their varied approaches to Chinese censorship struggled for an ethical approach here; with regard to their own government though very little of these, in essence similar, concerns obviously played a role. The main defense of these companies overly seems to be the need of compliance. While that argument might carry some way, it is not understandable how for instance Apple, who as a ‘footloose’ company manages to deal with ‘compliance’ to tax legislation in very creative ways just caves in with regard to the privacy of their ‘users’ when the NSA asks for access to their accounts.

So what we see here is not only the emergence of a new industrial sector, which combines rather diverse set of companies (see the list of companies in Top Secret America); it is also not clear anymore where the lines between private business and public administration/government lie. After all Snowdon himself was employed by a private company many of us would primarily remember as a strategy consulting firm (Booz Allen Hamilton). While the blurring of lines between sectors is nothing new, the level and dimensions of the 'securocracy' currently dismantling in front of our eyes in the context of the NSA takes it clearly to a new level.

2. The business model and its ethical implications

Ethical issues in the IT industry have garnered attention for a while in business ethics. Given the numerous court cases, for instance Google and Facebook had to weather recently in the US and Europe it is clear though, that with the growth of the internet and the degree, to which the internet is morphing into a social space, many more questions will arise.

Given that we now know that Google, Facebook, Apple and others are not only basically supplying the government with information but have been monitoring, searching, and organizing our data all long it raises some new questions. In particular it raises the question about the very essence of their business model from an ethical perspective.

Lets stick to the Facebook example. We are told that basically the company will make its money through advertising. Looking at the pathetically annoying adds on our Facebook feeds, for instance, the question really is whether this is the whole story? $800bn for some potentially ingenious advertising platform?

As Facebook ‘users’ we know that we are not their customers. We are their suppliers. What they ultimately want to ‘sell’ is information. This, rather than advertising, is ultimately the business case. This similarly applies to Google, Yahoo, Apple and other who store and ‘use’ many of the data we create through our various internet usages. Most of it is ‘free’ so far, yet still these companies are worth billions of dollars.

This raises some questions, which admittedly can easily be confounded with conspiracy theories. The most important of which is that under the post 9/11 legislation the ‘harvesting’ of our data which for long had been prohibited, is now in full swing. These companies are not primarily in the business of social media, web search or email hosting – they are sources of data about the most intimate details of our lives. While this was always clear to those who bothered to read the small print of the ‘Terms and Conditions’ of these companies, it emerges more and more that this is not just material of value for marketing purposes.

Just today we read in The Guardian that in fact many IT companies such as Facebook, Google, Yahoo, and Microsoft made millions out of providing the NSA with our data. The euphemistic term for this is to see it as a reimbursement for ‘compliance costs’ – but from the perspective of those companies’ CFOs, what else is this other than ‘revenue’? This is certainly the first hard proof that there are clear financial ties between the US government and these companies. But could this also be another hint at what the real business model of these companies is about?

3. The Political role of business

That corporations are political actors in societal governance beyond their direct economic role is by now well established. Looking at the IT-industrial complex though adds some aspects. First, and very much on the surface, it strikes one to see the close ties between senior executives in the industry and the current US government. Eric Schmidt (Google CEO) had and still has key roles in the Obama administration to the degree Google has been called the 'Halliburton of the Obama Administration'; Sheryl Sandberg (Facebook CFO) worked for years in Washington, most notably with Larry Summers.

These are just two examples. Looking at the ferocious reaction to whistleblowers recently, one cannot overlook the commonality of interests between the US ‘government’ and the IT industry. Obama winning a second election was seen by many as a proof that maybe – despite of new campaign financing laws for corporations – business influence on politics is limited and that money alone cant buy campaigns and determine election outcomes. But maybe Obama’s re-election is just THE showcase of what ‘Citizens United’ has done: it got the very president elected whose campaign was crucially supported by Silicon Valley, but whose government now appears to be all long deeply engaged and intermingled with this new industrial network.

As business ethics scholars we see here a new opportunity for research. It is foremost about understanding the structure and value creation models of this industry. But it is also about evaluating the implications of these changes for our democracy, for how society is governed and what the rights and status of citizens in this context morphs into. In short, it is a research field rife with ethical question and issues.

Artwork by Susanne Waldau-te Brake, reproduced under the Creative Commons License

Wednesday, August 14, 2013

The Academy of Management Conference in Disney World: ‘Magical Mystery Tour’ or ‘Back in the USSR’?

Walt Disney, Mickey Mouse and Cinderella Castle

Crane and Matten spent the last 5 days in Disney World Orlando. Which had nothing to do with recent fatherhood or anything like that. Who would have guessed: it was the venue of this year’s Academy of Management Annual Meeting – the biggest conference of management academics in the world, which takes place every August – in five of the Disney Hotels in Orlando.

As if this is not ironic enough, listen to the title of this year’s conference: ‘Capitalism in Question’! Whaow. Questioning capitalism in Disneyworld – for some a joke, for others hypocritical, for most of us simply absurd.

But wait a second. Once I arrived there, it took me only a few hours to think that Minnie & Mickey’s world is actually the best place to understand what is wrong with contemporary global capitalism. And, I love to add, nothing like what you would expect to be a capitalist experience; I rather had vivid deja-vu’s to my frequent visits to communist East Germany before the wall came down in 1989.

To begin with, the treatment Disney gives you as a consumer is rather dismal. I did not have a single meal where I did not had to join a long line. Even if you reserve a table, you are still kept waiting for a good half hour. Where i stayed (Coronado Springs) there was not much choice to begin with. Just one restaurant, and one snack bar. The latter had some 15 items on the food menu – but every lunch we could just chose between two types of pre-packed sandwiches. So, by and large, a pretty socialist experience. Bars closed at midnight sharp, and off it was to bed, just in the same way as you had to rush to checkpoints at midnight when visiting relatives in East Berlin back in the day.

The inefficiency was just hilarious. Even my welcome package arrived by UPS just in time on my return back to home…

The GDR claimed to be the worker’s paradise (‘Arbeiterparadies’), just about the same as Disneyland tells us everywhere that we are in the ‘Happiest Place on Earth’. Trained to be happy, wishing you a ‘magical day’ each and every second – the Disney ‘cast members’ (no workers here) have to push that message and play that role 24/7. Of course it’s mostly fake – and with dismal wages most of these actually rather nice people feel more like ‘mouse trapped’.

Slightly spooky is the extreme focus on security: tight controls and ID-ing at every (gated, of course) entrance. One colleague wanted to just walk between the different conference hotels; no such thing: all of them are heavily fenced in. He was warned that stepping off the main paths would immediately call security to the scene – so he joined the lines for the shuttle buses between hotels.

Now, I could rant on like that. The interesting question is what this all has to do with capitalism. It struck me, that at the end of the day, going to Disneyworld for five days of conferencing gives you a flavor of what it would look like if our life would be completely controlled by private corporations.

Its worth looking into the outline of the Conference to understand what we are talking about: Here is what it says:
“Three features differentiate capitalism from previous economic systems in history: (a) market competition among profit-driven firms, (b) wage employment within these firms, and (c) limited government over them.”
 If we look at (a), Disney shows what large corporations have always tried to do: Once you are lured into the resorts, life is controlled by one monopolistic corporation. That’s why ‘choice’, free competition or freedom of movement no longer exists once you are there. This experience meanwhile is rather ubiquitous, certainly in US style capitalism: fewer brands and chains control growing market shares and choice with regard to our IT software, our air travel or our means of commuting is often only symbolic. Yes, we can chose between different 30 different washing powders. But at the end of the day, it’s all the same thing.

The result is rather surprising: the actual ‘capitalist’ experience resembles life in ‘communist’ times. Of course I know that East Germany (or the Soviet block in the cold war) was more a state capitalist system, but still. Disney – once you are there – gave me snippets of a socialist experience.

Including the ‘regime critique’. How I enjoyed ranting about the place with my colleagues – in the flesh, on facebook or in other ways of making fun of the ‘jail’ in which we all felt trapped. Someone even wrote a little manifesto! Anonymously of course, Disney might share it with the NSA maybe?

It was great for the spirit. Back to the cold, free world out there, I kind of miss it already. Just in the same way ‘Ostalgie’ crept up to many of my fellow countrymen after the fall of the iron curtain…

Photo by gwaar, reproduced under the Creative Commons License