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Technology industry’s role in creating the ‘Trump Phenomenon’

October 27, 2016

Donald Trump’s rise to the Republican nomination for President is arguably one of the greatest unexpected outcomes in American politics.

 

As a technology entrepreneur, allow me to humbly provide a few comments on our industry’s role behind the ‘Trump phenomenon.’

 

Whether you love or hate Donald Trump, he has shed light on a key issue in our country. He has brought to the foreground the plight of millions of disenfranchised Americans, who are typically middle-aged, blue-collar white Americans who have not benefitted from having a college education. These workers have been left behind in our society in recent decades.

 

They got left behind as the wave of globalization moved American manufacturing jobs to China, Mexico and other low-cost countries. They got left behind as the wave of new technology disrupted industry after industry and brought efficiencies into corporate America, making their jobs redundant.

 

They are angry. They are frustrated. They feel hopeless. They look back at the ‘good-old days’ of well-paying stable jobs, and want to rewind the time clock to ‘Make America Great Again.’

 

If Trump supporters were the main losers from the waves of globalization and new technology, its main winners were corporate America and college-educated knowledge workers

 

Most economic disruptions leave in their wake several ‘losers.’ These are people who are not equipped to handle the resulting structural shifts in the industries being disrupted. Their jobs either disappear or are replaced by jobs that require different skills.

 

Economic disruptions need to be managed. New technology disruption, by its very nature, can be like a Category 5 hurricane. It can arrive suddenly and run through its course extremely quickly, causing devastation in its wake. It provides affected workers no real chance to adjust and/or ‘survive’ without outside help. As a result, they are unable to participate in the reshaped economic environment that arrives after the disruption.

It is therefore paramount that we help the ‘left-behind’ workers after economic disruptions. We need to provide them a soft landing.

 

Who is responsible for this? Besides our government taking the leadership role, corporations that bring economic disruptions and handsomely profit from them also have a responsibility to assist.

 

Unfortunately, both have failed to live up to these responsibilities. That’s why we’re witnessing a surge in nationalism throughout the world, from Asia to Europe to America. Nationalists are claiming that the status quo is unfair and the system is rigged against them.

 

In America, both Republicans and Democrats have failed to implement mitigating policies to provide soft landings to ‘left behind’ workers. These policies involve: creation of temporary safety nets during the transition period, training workers in new skills to participate in the changing economy, rebuilding communities, and making college education affordable to facilitate upward mobility.

This brings us to the role of the technology industry.

 

Today, five of the ten most valuable companies in the world on the Fortune 500 list are the U.S. technology companies: Apple (#1), Alphabet/Google (#2), Microsoft (#3), Facebook (#5) and Amazon (#9). Let’s call them the Big 5 Tech.

 

In 1995, Google and Facebook were not even born yet. Amazon was a young, one-year old Web site that sold books. And the remaining two, Apple and Microsoft, were young emerging technology companies and a shadow of their current size. Below is a chart that shows the rise in the market value of Apple and Microsoft in comparison to Exxon-Mobile, the former long-standing global leader.

The meteoric rise of the Big 5 Tech coincided with the waves of new technology, including Internet, and globalization over the last twenty years. None of them could have grown so quickly if it were not for these two waves.

 

It’s not a mere coincidence that the ‘left behind’ workforce — the Trump supporters — and the Big 5 Tech are on the opposite side of the line separating winners and losers in America. The latter was not directly responsible for the fate of the former. But the juxtaposition helps raise broader points.

 

I earlier made the case for ‘sustainable capitalism’ to replace the current form of capitalism that is predominantly practiced worldwide. Sustainable capitalism asks corporations to maximize stakeholders’ interests versus maximizing only the shareholders’ interests. Corporate stakeholders in an economic system include all parties who are impacted by the economic operations of that corporation. This covers not just corporate shareholders but also its employees, customers, business partners, the local community and the environment.

 

In this regard, I would have liked the Big 5 Tech to directly fund government programs designed to create soft landings for the ‘left behind’ workers in their own wake.

 

This analysis can be done industry by industry. Leading companies in each industry, aka the ‘winners,’ should create a corporate kitty to directly help the ‘left-behind’ workers in their respective industry.

 

This starts with entrepreneurs. Their business plans should include a point on how will they help any ‘left-behind’ workers that may result from their new disruptive business venture. Almost all disruptive companies start small, so it is understandable that they will not have resources to devote to this responsibility during early days of their journey. However, if they don’t consider early on the adverse ramification of their vision succeeding, it is unlikely they will commit resources later on when they do succeed.

 

For example, ride hailing app companies like Uber and Lyft are on a mission to fundamentally disrupt the transportation industry. Uber has grown to a global corporation valued at US$68 billion within a matter of few years. These companies are already prompting a ‘left-behind’ workforce — taxi/limo drivers who for various reasons do not want to work for ride hailing apps. Furthermore, their plan to automate commercial trucking will put to risk more than 3.5 million jobs of professional truck drivers in America alone. Trucking automation has many benefits. It promises an annual saving of US$168 billion for the U.S. freight transportation industry. More than 40% of which represents savings from eliminating truck drivers.

 

Beneficiaries of the trucking automation disruption, companies like Uber and the freight transportation industry, should develop and fund a plan on how they will work with the regulators to ensure a soft landing for the ‘left behind’ work force that not only includes truck drivers, but the millions more in ancillary industries, i.e., the food and lodging industries strewn along the country’s interstate roadways.

 

Finally, the technology industry needs to reverse its exploitation of the corporate tax loopholes and start paying its fair share in taxes. The Big 5 Tech companies consistently pay taxes at a rate less than the average rate paid by all the S&P 500 companies. See the chart below.

Facebook, youngest of the Big 5 Tech, and the fastest company in history to reach a market cap of US$300Bn, paid less than 4% in total taxes — federal, state, local and foreign combined — between 2007 and 2015. Apple, arguably the most profitable company ever, with a current cash pile of over US$230Bn, paid 16.5% in total taxes during the same period. Apple is also currently fighting a case in Europe where E.U. wants to recoup US$14.5Bn in back taxes due over a period of ten years, some of which years Apple paid almost zero in taxes.

 

President Obama made the case in his now famous 2012 speech ‘You didn’t build that.’ While the speech got politicized during the 2012 election campaign, there is no doubt that the technology industry (and the entire corporate America) relies immensely on the taxpayer-funded public infrastructure to build their businesses at the first place. The Internet itself, which is the backbone of the technology industry, was developed by the U.S. Department of Defense.

 

The least we can do is pay our full taxes when we are profitable. This will ensure investment in 1) public infrastructure for its continuous improvement to support future cycles of innovation, and 2) government programs to cushion imminent shocks from those cycles of innovation.

 

If we do not do our part, we loose any right to wonder, let aside complain, if someone like Donald Trump gets to the top of a major political party in America as a candidate for the leader of the free world. We owe it to our country. We owe it to the world.

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