The Digital Rust Belt

The Digital Economy creates jobs, wealth, and drives innovation around the world. Powerful, well-intentioned outsiders are fighting to control its future. Their ignorance of how it works could doom its promise.

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As I write this, the news of Amazon’s HQ2(s) announcement is still reverberating in the news and on the street. Tens of thousands of high-paying tech jobs in NYC and DC are the center of gravity for every story, with tax revenue, construction jobs, and infrastructure spend locked in sympathetic orbits. From the outside, it seems that the prospects for tech workers, both in the U.S. and Europe, have never been better.

In reality, there are deep fault lines spreading in the global digital ecosystem. Careers in software and technology, like the blue collar careers that elevated millions in previous decades, are under threat from forces outside their control. In fact, just like the previous wave of job loss, the threat is largely invisible to those most likely to suffer. The threats come from the outside; from bureaucrats, lawyers, policy-makers and well-meaning social activists intent on fixing an ecosystem without considering those that inhabit it.

The reality is that internet corporations, entrepreneurs, technologists and developers are interdependent across the world. A threat to one risks cascading crises that could cripple the whole. Today’s innovation requires collaboration, and a healthy market for shared ideas, and effort from many different players.

Software and technology do not spring whole from the minds of each new creator. Today’s innovations are built on top of the work of others. The software development community in particular uses a hugely collaborative and incremental system. Software from millions of creative minds is reworked, recombined, reimagined and then shared inside a global network for others to build on. This “open source” community is the driving force of innovation, and is responsible for the vast array of services and applications you use on your computer, your phone, and all your smart devices.

Open source, and the community behind it, is the foundation for modern software development.

Shared software is not without its challenges or its detractors, however. Innovation requires a delicate balancing of rewards and protections to encourage inventors without empowering thieves. The millions of developers inside the open source community have been rigorous in how they collaborate, collectively balancing the system so that the smallest player can compete against the largest. It’s a highly dynamic and informal society with rules and norms tested over time. Open source development is how millions of small developers across the world creating jobs and driving positive societal change. Some of today’s most successful companies have their roots in this collaborative and open environment.

All of which stands balanced like a house of cards in a rising wind.

In the rush to vilify and tame the giants of the digital economy, forces outside the system are searching for ways to reset the balance. Instead of delicate changes, the focus in both the U.S. and in Europe has been to find areas of maximum leverage to minimize the effort of driving big change. This is the lazy man’s approach, and it is being applied with little finesse and too much urgency. It risks the creation of a digital rustbelt and the loss of the engine that powers today’s innovation economy.

Software developers everywhere are under threat because the ecosystem they rely on is under threat. But what is critically important is that it is not the nature of the threats that developers fear, but the ham-handed attempts at addressing them by well-meaning intervenors. The digital ecosystem must evolve with the times, but throwing a wrench into its delicate works is not the way to do it. The physician’s counsel - first, do no harm - would not be out of place in guiding the hands of regulators and jurists. Developers are potential collateral damage in a clash of titans.

Technology workers are not organized. They have no union; they have no super-PAC; and yet they are the most critical component in the digital global economy. In a news cycle where we celebrate and debate the jobs that the digital economy is planting in D.C. and New York, we’d do well to think far less about the one company (or five) whose name is on the buildings and far more about the 50,000 soon-to-be-employed whose names really matter.

If the politicians and power players in the U.S. and in Europe would make that one simple shift, a million tech workers would gladly agree their prospects are looking up.


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Bruce Gustafson
President & CEO

The Real World takes on the Digital World

For the longest time, digital citizens have escaped the two great real-world certainties: death and taxes. Digital life is eternal as long as the power flows and the backup tapes are safe. Taxes follow the flow of money; where there's no money, there’s nothing for the taxman to grasp.

You know where this is going, don’t you.

It’s no accident that the current crop of leading digital companies call the United States home. Whether it’s due to culture, politics, regulations, economics, or that-old-entrepreneurial-spirit, America has seen more than its share of digital success stories. A large measure of that success is due to a system that is generally favorable to business, investment, and risk taking. In America, you reap the rewards of hard work, a bright idea, and a little luck. But what happens if that digital business you’ve built begins to "export" to the rest of the world?

The international trade system relies on the flow of goods & services, measured in money, to fund things through taxes. It used to be that only goods were taxed, but as services became a larger part of the global system, politicians inevitably saw an opportunity to grow their own business by entering a new market.

Taxes inevitably come from only one place: the people.

So, what is being contemplated? The United Kingdom is looking at non-monetary digital services such as search, social networks, etc., and targeting the tangential real-money transactions between the digital property owners and third parties. For example, a tax proportional to platform advertising revenue, payable to the country where the eyeballs are at any given moment. Or a tax per email, perhaps based on where recipients sit, what their profiles are worth, and who uses ad blockers versus who doesn’t.

There are two fundamental problems with taxing digital services: First, the digital world is incredibly complex and does not map neatly onto the physical one; people move about, change devices, connect and reconnect, have multiple personae, and interact in thousands of different ways across multitudes of apps. Some of the interactions are purposeful, some are accidental, some are simply the result of how systems manage traffic and route messages. Figuring out the who, what, where and why of a digital interaction is amazingly complex. Perhaps too complex (and costly) to measure.

Second, the value of any single interaction is a complex equation based on timing, mood, attention, context, content, and a myriad of other factors which today no one even tries to unravel. While in the non-digital real world we force every transaction into a common measure - money - in the digital world there is no such baseline to work with. Worse still, the data that users share is infinitely replicable and reusable. This means the worth of the data itself has an array of values amongst an array of data-driven entities. Picking a single one, like advertising revenue, as a proxy would be a completely arbitrary decision. This reveals this plan for what it really is: nothing more than a quick cash grab.

This goes beyond just grousing about a tax increase, or pointing out the absurdity taxing a few named digital platform an arbitrary amount divided by a random large number which represents the unknowable value of an uncertain number of U.K. citizens. All taxes are paid by consumers. A digital tax is a consumer tax, and it will result in increased prices for things only notionally connected to the digital services that consumers use.

In the best-case scenario, services like advertising, reporting, and compliance costs more, meaning product prices must increase somewhere to compensate. If health datasets cost more, then health services will cost more as well.

In an alternative, but plausible, scenario, free services might simply no longer be free. By placing a reporting and tax burden on free services, the U.K. government is implicitly stating that free is not allowed (at least not for U.K. citizens anyways).

It’s tempting to see this as a simple tax on a few big American companies to easily bring some free money to a foreign shore. The complex reality is that the global group of shareholders, employees, and suppliers being taxed are not going to eagerly absorb the loss; they’re going to push it back to where it came from, one way or another. Just as free services must enable a digital company to generate revenue somewhere, free tax money from overseas must eventually drive cost increases at home, if for no other reason than that once one country does this, everyone will.

Put simply, a digital tax is unworkable, expensive, and inevitably leads to increased consumer costs with no net benefit to anyone but the bureaucracy it pays for. 

 


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Bruce Gustafson
President & CEO

Android Chronicles: From Walled Gardens to Gardens Run Amok

Once again, government breaks everything it touches

You may have seen the announcement from Google on the new Android rules (and our formal press release). With the EU government-driven deadline looming, the plan for the Android ecosystem has been released. It’s less than ideal for developers, but there’s at least some hope.

You’ll remember the situation: complaints came in to sympathetic regulators asking for less restrictive licensing of the Android OS, and for greater freedom on pre-loaded apps. The government agreed and asked for changes. Google is now telling us how it plans to comply.

On Android licensing, the plan is to free device manufacturers to use the OS in its pure Google form or to allow forked variants. The tradeoff is that licenses will no longer be free. On preloaded apps, Google will also eliminate license terms requiring its suite of services to be installed, and shift to a paid license for various combinations with search and browser capabilities being treated uniquely. You can read more about these options on Google’s web page and in the press.

For developers, the obvious impact will be the emergence of Android forks - meaning more product variants and more help desk calls. Over and above this, we can expect handset prices to rise and pressure on app developers to help support the rising cost of deployment. More costs, and a smaller, more complex market. Not good.

On the helpful side, Google is only going to allow the “Android” label on its own version of the OS. This should reduce consumer confusion. However, we all know that people will try and run “Android complaint” apps on non-Android OSs, and that device makers will encourage them with claims that systems they sell are compatible. It’s going to be confusing while things shake out.

For those of you that already have hugely popular titles, expect to get some love from rival device makers looking to bring you into their ecosystem. For those still working on that first big breakthrough, expect things to break frequently as the market fragments.

The next round of this game will take place in court, where Google is still challenging the rules that are forcing the new model. The Developers Alliance is hopeful that the concerns of developers will be aired as the two sides square off.

Rest assured we’ll tell anyone that will listen these two things: that platform fragmentation has costs throughout the ecosystem, and that developers are among those most impacted by this ham-handed regulation.


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Bruce Gustafson
President & CEO

The Specter of Fragmentation is Back

Google’s compliance with the European Commission’s decision on the Android antitrust case risks increasing market fragmentation and costs for developers and consumers

Contact: Michela Palladino - michela@developersalliance.org

 

Brussels – App developers and publishers are an economic engine in Europe and globally. In support of the two million Europeans whose jobs and livelihoods are intertwined with the App Economy, the Developers Alliance is closely following today’s announcement regarding how Google will comply with the European Commission’s Android decision.

The Commission’s decision challenged clauses in Google’s Android licenses. As Bruce Gustafson – President and CEO of the Developers Alliance – explained in July, these clauses have led to an open and accessible platform, which “has strongly benefited developers and consumers over the years.  Thanks to market stability and reduced costs, developers have been able to focus on bringing new and innovative products to consumers.” 

The Alliance understands that Google plans to comply by altering contractual requirements in its partner agreements while seeking to maintain an open and attractive Android ecosystem.  As required by the decision, Google will allow its partner phone makers to develop phones in the EEA based on incompatible versions of Android while also selling similar handsets using compatible versions.  

Google’s compliance with the decision raises anew the specter of fragmentation. There is a risk that diverging versions of Android will lead to devices where apps don’t work for users. Developers may also need to do costly rewrites of apps for multiple incompatible versions. Google’s efforts to limit this sort of fragmentation have led to a better platform for users, developers, and phone makers.

The Developers Alliance hopes that clear labelling will help to reduce the potential for user confusion between compatible and incompatible Android devices.  


Developers are Battling for User Privacy. All They Need Is Some Help

Enough with the blame game already

I’m getting tired of waking up to headlines of another major data security gap. The whole internet economy is getting tired of it. Big platforms, ISPs, regulators, politicians; everyone agrees that something’s broken and that we need to fix it. Where the discussion stalls is on the details, the responsibilities, and the distributed burden that we’ve all got to share - and of course on who’s at fault.

Too often the group that takes the blame are developers. This is likely because they lack the power or the unified voice to plead their own case and fight back. The irony, of course, is that developers are some of the few actually doing anything about this problem. So let me be clear from the start: all the developers I know share your focus on privacy and security, and they are keenly aware of how a few bad actors are destroying their image, their livelihood, and their profession.

This was the impetus that led to the founding of the Developers Trust Alliance, a developer-initiated project that helps users identify trusted developers and educates developers on how to build better privacy controls into their projects. It is no wonder then that developers are frustrated that while they focus on fixing the problems, the ecosystem around them focuses on circling the wagons and leaving them on the outside with the wolves.

Developers are directly responsible for everything we love about the digital economy. Before Facebook, or Google, or Amazon, developers were crafting software to empower us, entertain us, educate us, improve our businesses, and raise our quality of life. Developers - not ISPs or platforms - are the true source of innovation and entrepreneurship that makes the internet great. They are not faceless corporations or mad scientists, but your friends and neighbors and coworkers. Developers are like you and the average people that you meet on the street every day. They care about what you care about - except then they write software to make what we all care about a little bit better.

Developers have every incentive to behave as good citizens and safeguard user data. Incentives matter.  People won’t use apps and services they don’t trust, let alone pay for them. An app that doesn’t get used doesn’t make money. (We like to joke that the term for a developer that doesn’t make money is ‘grad student’).

To the extent that developers ask you to share data with them, it’s almost always to allow them to build something better and more valuable. Developers use shared data to innovate and delight, and to improve their ability to do those over and over again. Developers get rich by creating something users value, not by stealing your data for some nefarious purpose.

It is both unhelpful and unfair when developers get singled out as villains in any data security gap. While developers are free to ask users to share data with them directly, the recent issues have often arisen from platforms that accidentally made available user data they themselves held - via developer tools they themselves provided! While no user data was actually accessed, and developers respected the rules, developers were still mentioned as if they’re the problem. The result is that real people, real businesses, and real futures are being impacted because platforms were lax in how they built the tools they encouraged developers to use.

What our industry needs is a system-wide focus on solving the very real privacy problem. It’s not enough to talk about principles - though that is valuable. What we need now are both goals and action. There are plenty of simple things that can be done today to improve security and transparency. There’s no need to wait. What would help is for the biggest players to empower the developer community in this common fight, rather than needlessly shift the blame.


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Bruce Gustafson
President & CEO