 So we're gonna do two panels first. We're gonna discuss the policy implications of this work And then we're gonna discuss what it means for companies big and small and you're gonna find that discussion particularly interesting I think because there's a lot of bifurcation So let me start. Let's see. We're gonna need I think five chairs here And let me start by introducing our panelists and as I call you you can just come up and take a seat Alan Davidson As the first director of the digital economy at the US Department of Commerce and senior advisor to the Secretary of Commerce Rob, thank you You can say the clapping till the end. They're they're all big wigs Robert Atkinson is the founder and president of ITIF And each Chopra is the former US chief CTO and co-founder and executive vice president of Hutch analytics and also an author himself the innovative state How new technologies can transform government and finally Rebecca McKinnon whose director and ranking digital rights Excuse me director of ranking digital rights at New America's open technology Institute so thank you all for being here and The goal of this panel really is to kind of continue to wet everyone's appetite for clearly What are the opportunities and and challenges big challenges of this new era of digitalization and global digitalization? So I'm gonna just fire away a few questions and then we'll have time at the end and you all can Ask some of the panel as well and Alan, I think I'm gonna start with you And I'll just sort of frame this by saying Susan shared some sort of amazing big figures outlining what the potential economic benefits are And you know, we all feel this we all carry smartphones in our pocket We see this whether we tabulate the data correctly is another topic perhaps for another panel entirely But there's also some huge challenges To this new era and just as a journalist. I'm gonna put front and center the story We've been reading about for the last few weeks Apple versus the FBI, you know, this is This is one of the potential areas of challenge a lot of the big technology companies in particular Have become targets certainly around privacy. There's been conflict Around around tax issues around different kinds of regulation And I think what it underscores is this idea that you've got Companies and countries playing on an entirely new field So tell us where that's going and perhaps, you know, maybe touch on this Apple case and what it might pretend for the future First of all, and let me say first of all, thank you. Thank you to New America to McKinsey It's so wonderful to be back here at New America in this incredible space I will say thank you to McKinsey for for both of these reports because They are they are illuminating for all of us who are following these issues and we rely a lot on them to help us Understand what's happening out there and part of what's happening out there is something like you said that we all understand and and you know I won't quote McKinsey's numbers back to McKinsey, but we you know, we see just Commerce Department numbers $400 billion worth of digitally delivered Goods coming out exports out of the United States and that's a big number for us That was in 2014 and so we you know, we feel this and I think that A couple of ways to answer your question one is Obviously these flows are incredibly important They raise huge new issues and one of the big issues they raise is that we can't take them for granted right that there are many forces out there that now are That may throw some of these flows into jeopardy, especially the model for under which they've taken place a relatively free and open digital economy that's allowed for innovation and allowed for a lot of interaction around countries and and The the kinds of issues that you're that you're mentioning with the Apple case are Basically part of a set of issues that are going to come How do we as we kind of try to figure out how to protect these data flows and allow for them around the world? I think it fits squarely in there because people are not going to participate in this digital economy if they don't feel like their Privacy and security is protected. So it's actually one of the core issues in making sure that data flows can happen Rob, I want to bring you into the conversation now and let's hit particularly on the issues around trade Because this is a this is a huge thing. I know you care a lot about this. We were speaking a little bit earlier At lunch about how this new area changes the conversation around trade The kinds of companies that we should be talking about including that conversation. Why don't you give us your top-line views there? Well, I think the top-line view is that we're at risk of a new digital Mercantilism in the world that we had a physical mercantilism where companies try to protect their physical production What you're seeing your country after country today Nigeria of Vietnam China I mean you can just name name go down the list who have put in place rules that basically require data localization You cannot send the data outside the country Now why do they do that? Most of them do it because they're just mercantilists. They think they're going to get some data center jobs Sort of fanciful they're not going to aren't a lot of data center jobs are much more about the use of data But the justification they don't they don't go to the WTO and say We're mercantilists. Okay. They they say we have to have this exception from the WTO principles and Philosophy because we're trying to protect our citizens privacy And I think this is the single most important point that people have gotten fundamentally wrong in the debate and I think we Didn't quite get it right in TPP and I risk I think we're going to risk getting it not quite right in teaser And that is that there is absolutely no increase in privacy or security by keeping data in a country We wrote a report last year called the false promise of data localization And when you think about it, let's just think Citibank or General Motors or whatever a company doing business in Europe And they're collecting data on European citizens and they move the data that is in Bob way Where has no privacy laws? They are still subject to European law They can't avoid European law by moving the data and I think that's really a simple and fundamental point You don't have to governments don't need to worry about where the data are They just need to worry that they can hold companies accountable and if a company wants to put data in a place that has bad security Then they will get sued and they should get sued But the location doesn't matter and I think we have to be much more aggressive in that in our trade Negotiations and not even give in I mean a TPP was a good step forward But there were even if you look at the TPP provisions There are provisions in there that say and in unusual circumstances you can do this I Don't think there are very many unusual circumstances. I think we should be very very strict about that You know unless you're like the CIA or something like that or I know at one point the president Was thinking about do putting data, you know this in the cloud and it's like yeah, we don't want the president's data stored in China I get that but For our commercial data we shouldn't care Well, you know, it's it's complicated. I mean definitely countries are trying to wall off The internet and data flows for all kinds of reasons part of it is mercantilist It's also political, you know, you have China trying to exert sovereignty over Everything that crosses its borders on the internet and one of the interesting things I think from from this report Is China is shown as being very connected yet at the same time China sort of exhibit a for how an authoritarian country Sort of adapts to the internet age and doesn't democratize which is a real challenge to us in that, you know there's there's conventional wisdom that commerce brings political liberalism and We're not seeing that in fact. We're seeing models for how a country can avoid that at least Up until now Which brings me to the point? Another organization in this town Freedom House a human rights organization has an annual index called the global internet freedom index and They have found that over the past five years consistently the level of internet freedom worldwide has declined So as connectivity is growing actually the rights of internet users and the protection of internet users rights is declining That is a huge wet red flag in terms of the level of trust out there on the internet and who's benefiting and How power is being exercised? So you're seeing a growth So what what contributes to those figures the growth of censorship? Not just blocking websites or blocking all of Facebook for instance, but requiring Facebook to take down You know requiring companies to take down content requiring companies to assist with all kinds of censorship You know sort of monopolies sort of uneven data flows control over who has access to what? Getting increasingly uneven around the world You have a rash of quote-unquote cyber crime laws and cyber security laws all over the world In many countries where crime is defined to include certain types of religious activity certain types of critiques of the government in Ethiopia terrorism and journalism are equated and Many types of journalism are cyber crime Yeah, you know so you have all of this kind of thing happening you have a growth and intermediary liability you know laws that are placing more and more responsibility on the digital platforms and Carriers for what their users do which then compels the digital platforms and carriers to police and Sensor and monitor what their your users are doing and try and proactively prevent that and those types of laws and those types of trends are not just in authoritarian countries, but because of concerns about terrorism and so on we're seeing that more and more In Europe and in a range of democratic countries and and again that Makes that opens it up to abuse that makes it harder particularly for small players That when you're talking about who is benefiting from the digital economy If you're trying to have open government, you're trying to be you know anti-corruption You're trying to enable people to really you know have open discourse about what types of policies benefit everyone And when those who are incumbents in a particular country can utilize Their power over networks to silence critics or silence aspects of the policy debates including economic policy debates Including regulatory debates about who you know Whether small businesses can thrive You know that's that's a problem And we're gonna come back actually in the next panel to this issue of the kinds of companies that are benefiting and the different players That are benefiting in this new age. I'm reminded actually of that fabulous heat map that I know James loves That that shows from McKinsey data the different industries that are most digitalized and least and government is way down here in this sector So I'm teeing you up What can what can government do? Here's an important we just spent the first few minutes talking about one of three dimensions in the role of government on this issue Regulating and engaging on rules of the road and the internet economy. That's Alan's life He's all over this for the secretary, but there are two others one We're always investing in infrastructure and the modern version of infrastructure is increasingly digital The smart grid electronic health records even mobile broadband and much larger domain So we're actively investing in the assets that are then throwing off or opening up capacity for the digital economy But more importantly We are looking at the ways we solve big problems health energy education and Increasingly you can't solve those problems unless you can connect to digital assets that can make better use I the former deputy secretary of education and I I remember this vividly We had a summit of education technology entrepreneurs I know it was so boisterous and everybody had ideas and learning labs and ways to teach calculus in new ways and Then we got the crickets chirping when they said how many of them got contracts from any, you know US schools and they're like, oh procurement can't get anyone. It's like where are you making any money? How many of you sold your first dollar revenue overseas? every single hand of every education technology Because and I remember vividly going to India in preparation for the president's trip I went to a hut no paved roads no Any modern forms of infrastructure but a hut that got a broad band of fiber connection and the village said I wonder if we could use Khan Academy and other open education resources to complement the absent teacher that doesn't show up for the school to get folks math trained and you if you want to be the president of a country that wants to educate the population to compete in the 21st century you will be begging the Educational technology entrepreneurs the access to open education is you will want that flow while you may get mad at Instagram for Some kind of imaging that you don't want to have propagated in your country So if you look at the role of government in all three of these dimensions, there's an un Wavering trend towards this very goal that we saw Clearly and to me it's the new default for the president president Obama said now by default All data sets held by the government shall be made publicly available in machine readable form Increasingly by API's which is the method by which all these apps shake hands and exchange information How about that Alan Davidson? Anise was blazing the trail for us here, right our path breaker By the way, feel free to interact together and interrupt each other politely All right, let me just continue with yeah, please go ahead to Rob. Yeah, here's an interesting point He kind of hurt a little bit. You guys didn't fight hard on trade. Okay a little friendly friendly banter I will say this when we published our cyber security framework back in 2010 One of the most important provisions on this was we said no state governments Shall hold data localization requirements because we wanted to eat our own dog food because we absolutely agree with what Rob Was saying so when the president spoke clearly in the domestic context It was very clear no lines between states on you have to have a data center in North Carolina versus Virginia, etc So that precedent has been laid. I want to I want to actually put out a big kind of metatopic again around trade But also around the perception of the labor consequences of this new age of globalization So we've all been talking about the incredible opportunities for small business people I mean my father for example is a Midwestern small manufacturing firm owner who has a lot more global business now in part because of what we're talking about yet As we see in the current Political campaigns. There's this perception. This is all kind of scary that it's it's bad for workers in some ways it feels like we are Talking about a previous age of globalization and and trade discussion We don't really know completely what the new age is going to look like How how let me come to you again. How should we be reframing the trade discussion? Based on the opportunity and the challenges now I mean first part is and I'm still in line in some ways from Rob here, too Which is that you know, we have to retool the way we think about trade, right? I mean the fact is that we have huge apparatus That's designed to think about trade in the in these old-world context not thinking about the the trillions of dollars that's now being That's now happening in these in the digital in the digital world and I'll say we see this at the Commerce Department We're kind of racing to try to do this. We have divisions of you know We have a deputy assistant secretary for textiles. We have no deputy assistant secretary for anything digital And we're we're working on it and we will be working on it But I think that's you know That's part of our retooling and that's something that the entire government and this is you know This is where folks like in each other having a chief technology officer a relatively new concept, right now It seems like how could we live without it, right? So I think there's a huge part of that but also to we need to part of that is also though about asking two really hard questions about new technology one is Is this question raised about are we are we building these tools in a way? That really includes everybody right and so part of that is that the access work and All the work that happens to make sure that people are online But part of that is also about skill building the second big question is are we actually is is is our society building? technologies that are actually serving Human progress and that is a much harder question to answer And we're not necessarily the right people to answer it all the time But also the one thing that we can do is as government is try to catalyze a conversation Early on when these technologies are coming out for example, we're doing a project right now on Driverless cars, we're doing another project on the Internet of Things both of these things are things that are going to really have Massive impacts if we can be thinking early on in the development life cycle while these technologies are being built and deployed in the industry How we can start to address the incredible like disruptions that are coming and wonderful things that will come from these things We actually might be able to get ahead of it, but it's a lot of work And you're touching on something important, which is how is government going to compensate from for the disruption the Dislocation that's going to happen not just at the the lower socioeconomic part of the labor Chain, but but the middle and even the upper I mean actually James I'm remembering we were sitting at James I was sitting in in Davos having a conversation together and someone came in we about this topic and someone came in to serve Us coffee and you were saying you know what our jobs are going to be disrupted because our analytical Skills can be done by computers. His job will be harder to disrupt So there's there's a really wide spectrum. Yeah, that's pretty good, right? If there's a wide spectrum of Dislocation what can government do what is government doing? What should government do and maybe you can jump in a niche I would just say earlier this year a year ago what it was if the same technologies were applied to the labor market Then you could actually solve this challenge I mean one of the most frustrating questions that if you look at the articles about minority students in Harlem That were qualified over qualified to get into Harvard But didn't even know or thought to apply because the guidance counselor infrastructure didn't encourage it or The h&r block study that said while I might be aware that I might qualify for subsidies If h&r blocked the study that was referenced here as a digital asset could access my IRS transcript and or could connect digitally to the FAFSA on my behalf the mere fact that they as a Digital coach got me applied with my permission eight minutes of time from the advisor eight percent more people finished college As a result of this one minor intervention according to the you know to the risk well So to me this fundamental question is if every human being lives up to their fullest potential and could be like a GPS router Encourage to pursue this degree and get this certificate and if you want to live in this neighborhood here The jobs that are coming and here's the skills that are demanded and if you want to move this is what you can do Every single day we should be getting an inbox letter that says you are put on this earth to perform these jobs And how exciting would you feel if you got such a message right and and opening up labor market data? Might foster more and more of those technologies to be brought to bear to advance your goals Rob you wanted to jump in on this. Yeah, I get the email every morning. It said you should run a thing Really works for me quite well So I think the issue is here is the difference between perception and reality and perception is the only thing that matters That's what's driving this and there's a perception that we're all at risk We read these stories in any day now there's going to be think tank automation from Google and no more think tanks and The reality though, which I think we have to recognize I haven't read an article about a think tank automation way But I hear you we're working on it. We're gonna we're gonna be the platform that sells it. Yeah I'm sorry new America. I'm just saying Yourself But anyway, reality is there hasn't been an increase in disruption There's been a shift in where it is, but there hasn't been an increase in and I actually think if we're sort of putting a bet on What are we going to worry about more disruption or lack of disruption in other words lack of productivity? I worry more about that I think you know you're that's where your study showed is what you see a bunch of firms a few firms that doing really well They're figuring it all out They put in all the pieces together and doing well and a lot of other firms and a lot of industries not doing that I think that's one of the central questions and then the question for that to me Which is a policy question is how are we going to think about that? So you've got a bunch of firms doing really really well bunch of firms that sort of haven't figured it out If you look at what Europe just announced their approach is there are these digital moors We're going to make the digital moors give some of their digital to the digital lesses Seriously, that's what the Commission now is trying to do They're trying to do antitrust and other competition policy that would force companies to give their data away And it's this notion that we we don't want this kind of thing We want this kind of thing and so we're going to bring down the top So that they're equal kind of Aldrin on Berger on story and Kurt Vonnegut if you remember that I think that would be a huge mistake And I think what we have to recognize in the digital era is it leads to a sort of bimodalism and it's going to lead to scale It's going to lead to firms getting incredible scale And we shouldn't be afraid of that and it's going to lead as Donna will talk about a bunch of Opportunities for really fast-growing globalized gazelles from day one, which is fantastic, but I don't think we should fight that I think we don't want everybody in the middle. I think that's a that's being stuck in the middle is where you don't get the growth Alan punted on at the beginning about Apple But because I think this this relates to sort of corporate interests versus government interests and large firms large global firms I think we're increasingly seeing companies like Apple, but you know, you could create a long list Google Facebook, etc Whose interests are increasingly divergent from those of even their home country governments Let let alone clashing with other other governments that are trying to you know, break them up or make them do this or that But Apple has you know, you increasingly have large multinational digital companies with global constituencies and so they view their interests as More you know, why is Apple standing up to the FBI? Because they're playing to their global user base Right and that's what they're concerned about, you know, there's principle involved as well There's lots of different facets of this, but their interests are not the same as the US government's interests anymore And not the same as the US public's necessarily, you know, and so increasingly you're seeing these big firms that just have these global international interests and in some countries You know when Steve Jobs died in Iran people were out there morning and you know, there was a political cartoonist saying you know We're mourning this guy's death more than we would the passing of so-and-so and so-and-so and and you know The reason is that people see in these technologies Opportunities that their own governments aren't giving them and and so so these cross cutting kind of constituencies for corporate Corporate governed and created sort of communities I think is is a force that both the commercial implications and the geopolitical implications You know, we don't know I actually completely agree with you Alan. Do you want to come back on this? Well, I just want to say I wouldn't overstate the divergence between the interests of the US government and the broader Economy and the firms in the economy because I do think While there might there are local disturbances the fact is that as a first order approximation. We are We work very hard with and with with us firms to try to To promote promote this digital economy and I will say I come back to kind of a point I was making at the beginning about The fact that we can't take the current situation for granted I mean we are out there as Rob was saying every day looking at new data localization rules new kinds of restrictions on On these cross-border data flows We just went through a big issue at the Department of Commerce on the what they call the EU US Privacy shield this agreement about privacy And the transfer of data between the euro between Europe and the US it's ongoing We reached a big agreement extremely important protecting hundreds of billions of dollars of trade between the US and Europe But it just shows that if we don't get these things right right this there's a lot that can jeopardize these flows And there and there's a lot of harm that comes for that And I shall come back to you, but I actually Rebecca This is a I think you've hit on kind of the hot core really of this topic globalization used to be defined as free movement of Goods capital and labor now we're adding digital flows to that But as James was explaining as I think data shows Everybody's feeling pretty good about this except the labor part and possibly some overlap with the citizen part So that's a huge kind of existential challenge that no matter how hard you're working at it It's there and it's not going away. And each do you want to come and I know we're running near the end of the time My only comment would simply be where I would make one observation Which is your favorite map James's map of these sectors that are failing us It moves from the abstract to the practical. Why is healthcare near the bottom of your list? Utilities etc. It's because we haven't quite unified the rules of the road on data liquidity in this environment I literally just came from the president just literally might drop the mic around a story around patients having access to their own data So in this case they could contribute to research to find new cures and diseases But what's amazing now is that the regulatory structure is thinking of this as a new muscle They'll I would leave you with this final final digital economy. What's the least understood? But has the most potential impact part of Dodd-Frank on the digital economy the regulatory authority Given to the Consumer Protection Bureau to regulate how consumers can get machine readable access to their transaction level data in financial services James And we do not yet have consensus in the community as to what Record what regulations and standards the CFPB should promulgate on the banks in our system Could you imagine a more important topic on the digitization of the global economy than to get the financial flows moving through the consumer? Right, and I think in health and energy and education We're consistently describing the knack that the new default and regulation is to the consumer and then to the consumer's designated Applications and that's this new chapter, which I think this is all coming on the right And if one were to go to the Department of Commerce website and see the digital economy agenda That's recently been posted about our forward-looking agenda You would see four parts to it one is protecting cross-border data flows But the other three are promoting trust and security and privacy Promoting access and skill building and promoting innovation in new technology and the reason is you can't have the first one without getting the other ones Right, so I totally agree. We got to look at it as in a global environment. Okay, lots of interesting stuff here We have time for literally two questions gentlemen here Mike Nelson with Cloudflare. I learned a new word last week. It's called Incumbation it's what incumbents do to stop innovation Love it waiting that later. I would challenge McKenzie to do a study on this and then correlate how Incumbation compares to growth in digitization in different countries around the world So my question for the panel is what are the most important things we could do to prevent Incumbation My favorite is stopping some of the lawsuits and maybe doing something about IPR But I'd just like to see what you would think we could do a flash round quickly Alan do you want to start? I would just say I Think promoting this openness on online that makes it easy permissionless innovation Is the starting point and that's really the motivator for a lot of us So I think it's a mythology out there that in the income Whatever it is our are the big firms against the little firms actually in most cases It's actually little firms protecting their little thing against big e-commerce players who have scale You see that over and over and the biggest place that plays out on our economy is at the state legislative level in the state Regulatory barred level and I think federal government could at minimum you can do now start a scorecard a scorecard of Regulate regulatory I like to joke that the commission is doing a digital single market We need a digital single market in the US and that's one of the barriers do it are these state laws at least begin a scorecard The consumer has the data rights on any sector that's regulated gives us a default So even if I'm held by an incumbent I can pull it out and get a second opinion by someone I trust If we're trying trying to change the narrative and we have if you can argue that The benefits of globalization and digitalization are huge But diverse where the the risk to an individual is very personal and very painful So it is difficult. It seems to fight kind of protectionist Tendencies in the US these days to go for globalization and go for digitalization How do you deal with? Diverse but massive benefits and communicating with individuals who they lost their job and they don't think globalization is good Yeah, how do you balance kind of the data points with that the touch factor of hey This doesn't feel great to me right now this disruption and each do you want to start first principles? Rebuilding the social safety net we have disruption I lived in Virginia served in the governor's cabinet the North Carolina Virginia border has been decimated by textile and other You know outsourcing to China and our inability to build any thoughtful response We've given people some short-term benefits cash benefits But to really think about how they can leapfrog in to build a better life for their families We've weakened their capacity on broadband. We've weakened that weakened their ability to access Advanced placement courses we've weakened the capacity for them to get access to telemedicine services So my opinion is you got to reimagine the social safety net for those who are dislodged and make sure that they have every chance To the income mobility question through digitization I think is a faster path to the other end As opposed to the source of the disruption Anybody else want to have a final word on this? One is we should just stop the the sort of pundits of which I would put myself in that category Should just stop the narrative that that automation destroys jobs on net. It does not It doesn't I mean I just know how many McKinsey studies have shown that Thank you. It just doesn't okay. It does not destroy jobs on that it destroys particular jobs It doesn't lead to and I think that's number one Let's just get that in our consciousness in our dialogue number two It's just a real simple thing if you look at unemployment insurance the amount that people get as a share of their wages It is way way down from what it was 30 years ago So if you lose your job and you have a UI for six months You're gonna get very little and there are some states that are just like they give you pennies almost and I think I Know the president's tried to do that You can't do it with the Congress right now But a sort of federal floor on unemployment insurance would be I think a really important step forward Well, we haven't solved the future of the nation-state in the era of digital globalization But I think you've wet everybody's appetite for more so thank you to all of our panelists