2017, Digital Horribilis

Frédéric LASNIER

CEO & Chairman (Founding Partner)

2016 was a hectic year, both in terms of mindsets and geopolitical risks. No decision-maker can afford to ignore the world’s turmoil. But here I will focus on what lessons the digital sector should learn from the tech-related events of 2016. From social debates to politics and diplomacy, everything is now digital, even war.

Casa_Presei_Libere_Bucharest_2016

photo: Matthäus Wander – House of the Free Press (Casa Presei Libere) in Bucharest


Putin invites himself to the US presidential elections

2016 was, first of all, the first year a US presidential election was hacked by a foreign nation.

Simultaneously, US computing power also proved to be incapable of predicting the election of Donald Trump. Populism, supported by social networks and digital agencies specialized in misinformation, triumphed over the political, media, statistical and technological establishments of the world’s first economic and military power, shaking its very democratic foundations. This is a bad time for those who thought they were credible in their field. At no time did the US administration measure up to the level of aggression it faced. This failure in a digital war operation should normally be followed by some dismissals in the US Department of Defense.

Three years ago I said 2 things: that digitization was a global war and that politics was next in line. Unfortunately, I hit the nail on the head. During elections, all democracies are threatened by foreign governments hoping to choose the next king. These foreign governments are capable of using, on the one hand, system security breaches and, on the other hand, startup growth hacking techniques to fabricate rumor spreading machines. In the 21st century, even digital war is asymmetrical. On one side we have the CIA, CISCO, Plantir and billions of dollars. On the other we have a mission, a lot of nerve, unreported financial means and small teams. The analogy with terrorism, other than the lack of bloodshed, is perfect.

It should also be noted that the entire US software economy heavily relies, at all levels, on Russian, Belarusian and Ukrainian developers, who are either immigrants working in the US or part of offshore production teams working from abroad. People are immensely naive about these topics. Back doors have been prepared all over the place to be activated on request, for commercial blackmail operations and now for political reasons. The technology embargo NATO is threatening Russia and its satellites with, even if it is an economic heresy, remains a strong weapon, even in the context of the flirtation between Putin and Trump. And since one of our production units lies in the Republic of Moldova, let me tell you this doesn’t make me laugh at all! US intelligence agencies and the Pentagon were not the least bit happy about disclosing their weaknesses to the world.

I fear that the same mechanisms will be used in France and Germany in 2017, according to scripts written by Moscow. MLP and Fillon have self-appointed themselves, taking advantage of the Putin-idolatry and Christian 2.0 islamophobia. The first category is clearly admiring Putin and the second one is more than open about it. The least I can say is that I am barely impressed by Vladimir Putin’s benevolent humanistic intentions. Such positions leave me speechless. This is the man that put the Caucasus to fire and the sword, annexed a part of Ukraine with no regard whatsoever for international law, rigged the US elections, starved his country, played with the national constitution, and killed people at his discretion. Yet the 2 French favorites see him as a potential partner. Fortunately, Europe has a boss called Angela. There is no doubt that she will be the Russian president’s next no. 1 target. Will she have the means to defend herself?

In France, Fillon and MLP SHOULD be monitored closely if we do not want to be taken completely by surprise like the Americans were. The New York Times is warning us daily about how the Russian president’s infernal digital political machine works. It is up to us to read between the lines and realize that this is really a war.

Uber, more becomes less

2016 was also the year of the Uber crisis almost everywhere in the world as well as a year of an increasing number of tax controls against GAFA in Europe.

I often wonder how useful is what we, digital pros, produce, and whether it is good or bad for the world. Whatever way you look at it, less and less people are posed to defend Uber. The American company continues to develop, but its cause is failing to inspire sympathy.

And what interests me the most here is the angry, outraged reactions of the political class towards the practices of this vehicle rental giant. But who is to blame after 20 years of mass Internet and the last 10 years of GAFA models? And I’m thinking in particular of the need for a real tax system in the digital sector. This is a major gap, an intellectual laziness that may be extremely harmful to those states that call themselves modern, but which haven’t done their homework.

GAFA’s efforts to attract commercial inflows to structurally monopolistic ends should find an adapted solution in the European political mindset. Hollande’s France (will you forgive my instigation?) has managed to fill in part of its digital gap. In many fields, startup creation in particular, France has proven to have well understood the turning point imposed by the marriage of globalization and digitization. One cannot say the same about other countries, Germany among many others. We are in the same situation as in the beginning of the 20th century. Either we choose to travel by train, car and plane, or continue to ride horses and step in horse dung. Once again, the same as in the beginning of the 20th century, France and England are doing better than the other European countries.

We thus need adapted administrative solutions

Since the nature of my job requires me to attend to sophisticated tax issues such as transfer prices in different countries, I’m frankly surprised that no one has thought of the digital tax system in terms of a global value chain granting a production role to users of a free service.

Let me explain myself. According to OECD’s recommendations, the reference in case of tax disputes between different nations, a flow should not be fiscalized based on the user’s nationality at the end of the service (as all the critics of the Socialist Party or idlers would want) but rather based on a sharing process related to the added value generated in the territory of each country. Thus, in the case of a Google Adword invoiced from Ireland to a French e-trader, Google could be fiscalized given that it needed a French user to click on the link to be able to deliver and invoice the concerned service. Hence the role of “free of charge producer” played by the user on French soil. Of course, it is not simple. It involves real tax innovation efforts but it is compatible with the international standard. Countries would thus rely on means that allow them to continue to levy a fair tax, exactly where local traditional communication sectors are regularly becoming smaller (advertising revenues from the audio-visual or communication agencies… that GAFA is happy to feed on). Between us, I’m not that stressed when it comes to digital agencies.

Find solutions for Uber

In the case of Uber and other unicorn sharing platforms, breaches are more and more open. This is how big the Californians’ appetite for monopoly is! But let’s continue to focus on Uber. Users from everywhere in the world have the same feeling. First of all, quality has decreased, one of the well-known consequences of any monopolistic situation. Secondly, the number of excessive billings has increased in all cities. In big cities like NY, the real-time processing algorithm has begun to show its limits more and more frequently and users often have to wait longer than predicted. In NYC, some drivers break the rules and ask for tips. Some even go as far as putting signs in the car. The knowledge of the surroundings covered by the driver is pretty much equal to that of the GPS, which lacks the animal intelligence of a real taxi driver. Finally, the way I see it, Uber is provoking more and more anxiety in NYC. Airbnb has also played a dirty trick on me. And since it’s not the first time they have done that I think I can manage without them. I will simply stop using their services.

In short, all these confusing situations, especially those related to Uber, are blending with a generally negative political and social image. The number of those defending Uber on Twitter has also considerably lowered. The debate over the eventual concealment of work ended up leaving its mark. In Paris, the trial of the Heetch startup has stirred less passion than a few months ago. As I was telling you 2 years ago, these topics have become political in nature and a company like Uber seems to be mature enough for a discussion on the evolution of its model.

In France, Uber is cornered, forced to talk. First of all because despite what most of you might think, France is one of the only two paradises where Uber makes profit. Secondly, because its brand image has been tainted. There are plenty of solutions for them that may be applied to others as well. One cannot play forever with double standards. If a driver works for Uber 70% of his day, dependence has been established. The same goes for disciplinary power. France is not the only country having this problem with Uber. The former anti system Jedi of American tech desperately needs solutions to leave the dark corner it has pretty much put itself into.

The entire sharing economy and part-time service provision will have to rely on a minimum social protection level if they want to operate in Western European countries.

2017 will be a tough year for the digital sector

Whether people realize it or not, the digital world will play a very important role on the international political and diplomatic stage in 2017. Journals will mostly write about cyber-attacks but people will not necessarily understand their risks and what is really at stake. Some rogue states are close to using unconventional weapons and soldiers. The gentle Anonymous is no longer a novelty. There are many more hackers on the market. The same goes for terrorism. There are already many under the radar organizations besides commandos and highly operational companies.

In the private sector, American clouds will equally question the security of companies and even of states. Simultaneous coordinated attacks on many of them can lead to a brutal economic and legal chaos. This potential is a weapon particularly adapted to the new cold war context.

The web itself, as a network, is prone to attacks, and its nodes can represent a target for military operations to cut off communications for an important period of time.

In short, the Internet is facing its first maturity exams, both from an economic and a political point of view. It’s the countries’ laxism and their inability to trust progress that have led to this fragile economic, social and defense context. Even the most developed countries are defenseless in front of GAFA’s power and maybe no longer able to guarantee a future to their entrepreneurs, whose margins are trapped, with no tax return. Countries should be very inspired to quickly reconsider the social and sovereignty challenges they have disregarded for so long. The weakest of them are probably already dead but just don’t know it yet.


Tag: digitization, startup