Month: January 2006

AT&T is now jumping on the misinformation bandwagon, in attempting to claim that providers of services over the internet are getting something for free:

I think the comment from AT&T CEO Ed Whitacre in the FT really shows why I said earlier that we shouldn’t consider the internet to be a place:

“I think the content providers should be paying for the use of the network – obviously not the piece for the customer to the network, which has already been paid for by the customer in internet access fees, but for accessing the so-called internet cloud.”

This is taking the piss. Whitacre admits that his company is charging and being paid for the actual physical services it is providing, but says that it should be paid extra for the metaphor – the “so-called cloud”. He’s saying the internet isn’t just the pipes (which he gets paid for), it’s also a place, and Google owes him rent.

He has no relationship with Google. He has relationships with his customers who pay him to connect them to “the internet”. He has peering agreements with other ISPs with whom he exchanges data (as a necessary part of providing his customers with the service they’ve paid for). If he feels he should be paid more for passing on the data – the “movie streaming” or whatever – he can either charge his customers more for sending the traffic to them, or he can charge his peering ISPs for accepting the traffic from them. Why he should be able to directly charge the other ISP’s customers (e.g. Google, or Apple) for the traffic which they have accepted from Google or Apple and are now passing to AT&T makes no sense at all – that transfer of data is what the peering agreement covers.

Yikes! Instalanche!

I’ve dealt with a couple of the anti- google.cn arguments: that they are complicit in the Chinese Government’s oppression, and that there is a clear difference between obeying a bad law and denying basic human rights.

I haven’t addressed the point that, while the behaviour I defend might be OK for your average money-grubbing nasty capitalist goliath, Google has presented itself has having a higher morality.

That’s partly because I never took that idea too seriously in the first place. I instinctively shy away from any product marketed as “fair”, “organic”, “0.01% is donated to…” or whatever. Google’s attempt to distinguish themselves from the likes of Microsoft or SCO was mild enough to be not actually off-putting, but not something that I valued particularly. In fact I believe the offenses of Microsoft etc. are not due to the “evil” of their management, but are the more-or-less inevitable result of bad legal structures.

If I thought what Google was doing was evil, then I would denounce them, whether or not they had publicly expressed an opposition to evil. But I don’t. The grey area for me starts where they start helping the government track down dissidents. Even that is grey, because, even in our own, open, societies, the distinction between criminal, terrorist and dissident is occasionally controversial (I think the Religious Hatred bill here in Britain is as clear a denial of the “human right” of free speech as one could ask for), but like the military action I considered in my previous post, if you’re unsure whether your actions are causing net harm or benefit, the best course is to leave well alone. So, once they find they are stepping into the grey area, I think they should stop. Google have so far been explicit that they believe they are bringing benefit, and, until they start being asked for access logs, I agree with them.

I would like to see an open, democratic China. I would like to see it tomorrow. If some Chinese reckon they can have a go at organising and overthrowing the current government, I would hate to feel I was on the other side. But the Chinese people are in a better position than they’ve been since the Cultural Revolution, and it’s improving, and there is good reason to hope that the end result will be a free society obtained non-violently. To actively help the government against the people would be to work against this end, but to help the country, people and oppressive government together, by trading and providing services, is bringing it closer.

Pamela Jones at Groklaw echoes my sentiments over google.cn Indeed, she goes further, and smells Microsoft PR at the bottom of it.

Not impossible, but there’s a substantial Google-sceptic movement which is not pro-Microsoft – people like Andrew Orlowski at The Register. Google’s size and rapid growth are sufficient to attract considerable scrutiny.

There is a line of argument that accepts Google’s claim that they are providing net benefit to the Chinese, but holds that by compromising with the Chinese government’s authoritarian demands, Google is nevertheless “dirtying” itself – making itself complicit in oppression.

This claim should not be ignored. I have made similar-sounding arguments myself when I have argued that it is usually better to allow atrocities to take place abroad than to commit them, especially if it is in some area you would not otherwise be in contact with. I base that claim on the effect of ignorance: If you drop bombs on people you can be pretty sure they are going to die, but if you stay out it is harder to predict what will happen to them. The better you understand the politics of the problem, the more confidence you can have that humanitarian violence will actually achieve its ends.

The parallel argument in this case would be that if Google participates in China, the Chinese are definitely going to get censored, but if they stay out, the human rights problems might get resolved more satisfactorily. The relative implausibility of that argument, is, I think, down to the difference between denying people certain search results and dropping high explosive on them.

In this case, I think the effect on China of becoming “complicit” in the world economy and the world media is greater than any effect on Google of involving itself with China.

There is a line which can be crossed, however. Providing intelligence on users to the Chinese Government (as it is attempting to avoid doing with the US government) would be worrying. But even there it is not clear-cut. Business everywhere is expected to co-operate with authorities in detecting crimes, even crimes that would be legal in the company’s country of origin. For example, a British company in America might face demands to provide details of users of gambling services.

There is a pretence that there are distinct “human rights” that are self-evident and should be respected around the world, but in fact that is just not the case. The fact is that there are some values that are shared by by many of the world’s most powerful societies, and which we believe would bring universal benefit if they were shared more widely still.

I don’t see the problem with Google producing a “censored” version of its search results for the China. After all, Yahoo have a censored version for France.

If you want to do business, you have to meet the legal requirements of the countries in which you do business. Very often those requirements are stupid and evil. Nearly always they mean you can bring less benefit to your customers than otherwise. All you can do is ask whether your business is in total bringing benefit or harm.

Another example – in the USA, Wal-Mart brings a very wide range of goods at low prices to its customers. Here in Britain, it took over Asda and is doing some of the same things. However, it is restricted. It cannot use the same contracts with its workers as it does in the USA. It must obey Britain’s stupid and evil planning laws. It cannot sell firearms. All these restrictions reduce the benefits Wal-Mart can bring to me as a British customer. Should it, therefore, for the sake of morality, refuse to do business in Britain at all? Should outraged Americans boycott Wal-Mart for not stocking shotgun shells in Dunstable? If any are considering doing so, let me say, I appreciate your concern, but I would prefer you to desist.

Of course, there is an enormous difference of degree. Scum that they are, the government of Britain is vastly superior to that of China. And, farce that it always is, the democratic institutions of Britain provide a mechanism of improving the government that is not open to the Chinese. But I do not think these large differences of degree change the equation – Asda brings benefits to me, and Google brings benefits to the Chinese.

That last claim could be disputed – you could claim that in the absence of a censored Google, the Chinese would be forced to search other, uncensored sources for information, and would thereby be better off. But I doubt it.

Update: more 1 2

John Kay has a very provocative new article arguing that what we have now is capitalism without capital: the businesses that make profit very often don’t actually own the capital they use – they rent it from a specialist investment vehicle.

The facia identifies the operator, not the owner, of capital. The name of the airline on the side of the plane and the company logo on the back of the truck today give no clue to the ownership of the vehicle.

What this means is that profits can not be described as return on capital:

They talk of profits as returns to capital, although they are really mostly economic rents – returns to brands, reputations, intellectual property, to corporate knowledge and organisation, and the exercise of market power.

That there is some truth in this is demonstrated by the occasional spectacle of a company being taken over, its staff leaving, and the new owner being left with nothing at all since the new subsidiary didn’t actually own anything.

However, I think Kay overstates things. The piece is a variant of the common error of privileging manufacturing over services. What, for example, is the significant difference between capital in the form of a machine, which produces a return, and capital in the form of a reputation, which produces an “economic rent”? The machine is perhaps more durable than than the reputation, but only quantitively – in fact it can catch fire and disappear overnight, in the same way a reputation can, or it can slowly rust and lose value much as a brand declines.

I think the significant fact is that today, more than in the past, most of what we as a society do, in economic terms, are things that we don’t really know for sure how to do well. If everybody knows more or less equally how to produce, say, cotton cloth, then the only scarce thing you need in order to produce it is the machinery. If the knowledge of how to build and run, say, an efficent search engine, is much more rare and valuable than a pile of computers in an office, then the “corporate knowledge and organisation” is the vital capital, and actually financing the premises and the hardware is a “non-core” activity that might reasonably by subcontracted out.

I agree with John Kay that this is a hugely significant change, but I disagree with the tone of the piece which seems to imply that it is a sinister or harmful one. It is a natural effect of automation that once we really know how to do something, it becomes cheap. The early manufacturers Kay discusses carried out mass production with machines that were expensively hand-built by craftsmen – today not only the consumer goods, but the machines that produce them, and the machines that produce those machines are all cheaply mass-produced – that is the difference. What has real economic value in today’s world are good management and technology – and some old things that have held their value: raw materials (but to a lesser extent than previously) and friendly politicians.