Members-only post which is open access.
More than a decade ago, Thomas Friedman argued that the world was flat: driven by communications technologies, globalisation helped create a perfect marketplace, flattening the economic playing field. Friedman emphasised the force of technology as the key driver of this flattening world.
He was wrong.
Far from flattening the world, the technologies he refers to have fractalised it. Location matters. Distance is very much alive.
I’ve been thinking about this process of fractalisation.
The ongoing technology decoupling between China and the US is one example. This is driven by the complex considerations of geostrategic competition between China and America in a world where existing institutions, like the G7 or UN, have less impact.
This week alone, we learnt that the Chinese government itself is taking steps to weed the US tech out of its systems. In a move which is likely to be partly driven by retaliation for the trade sanctions, and partly by security concerns, the government has ordered all government offices to replace foreign devices and software within three years, beginning with 30 per cent in 2020, 50 per cent in 2021, and the final 20 per cent in 2022. This so-called 3-5-2 policy could scrap as many as 30 million devices and is likely to be a slow and costly process, especially for smaller and rural government offices.
China and the US have reached the ‘conscious uncoupling’ phase of the trade war. After months of slogging it out against the US trade sanctions, some of China's most profitable tech companies are looking to reduce their exposure to the US. Huawei is planning to develop its own operating system, while Chinese manufacturers are looking to diversify their supply chains. (This is a great read on the details of China’s drive for self-reliance.)
Last week we learnt that Huawei had shipped a phone, the Mate 30, without any American components at all.
The Federal Communications Commission is ‘encouraging’ rural American carries to drop Huawei and ZTE equipment in their networks on the grounds of security. The FCC has pledged $9 billion to help small carriers get in line with the new restrictions but how it will play out in practice remains to be seen - especially with Huawei suing the US government.
Each of these small steps is a sign of the forces of decoupling mobilising. Decoupling isn’t a threat. It is happening in practice. And it arises from this new competition which is as much about economic conflict as it is about conflicts of values.
One consequence of decoupling may well be the rate of innovation. American rural carriers will now spend time cataloguing their networks for Huawei equipment, removing it and then planning to use approved equipment rather than rolling out 5G kit today.
But these consequences could run deeper. They may beget a fragmentation of standards and systems. The tremendous gains from the Internet arose because of open standards. The mail protocol SMTP was SMTP was SMTP, governed initially by RFC-821, wherever you went. Any system adhering to SMTP could deliver messages sent by a similar system. Proprietary tools like Compuserve and AOL needed to invest in weird gateways to interoperate.
Old readers may remember the pain of taking a GSM phone to CDMA America in the 1990s. Still older may remember VHS tapes recorded to the SECAM or PAL rather than NTSC standard. Fragmentation is a pain — expensive and a source of friction.
Pick a side, one of many
Increasingly, I expect nations (and companies) to have to pick a side. Or rather, they will have to pick one of many sides. National governments will increasingly insist on adhering to local laws and standards. (For example, India is insisting that critical data relating to its businesses and citizens reside within India.)
But it isn’t as simple as that. Because we know the vulnerabilities can be engineered at the hardware level, or in software backdoors. So, the richer nations will surely, as China is doing, invest into lower stack technologies, such as the semiconductors themselves.
Where to next?
Here are some questions we could ask around decoupling:
- What entrepreneurial opportunities does it create? One obvious example is tools for vulnerability detection. If you can’t trust the provenance of a piece of technology, perhaps you just need to be able to use it while keeping a watchful eye over it. Another is in the burgeoning business of data governance and localisation.
- Could we create new open standards? Would nations adhere to them? Most internet standards were hatched in the US, stewarded by people such as Jon Postel, through the RFC and IANA process. What might such initiatives look like in the future?
- Can we imagine a time when decoupling goes as far as to end interoperability? (Like trying to play at NTSC videotape in a British video player.)
To dig deeper, listen to:
➡ My conversation with the security expert Mariarosaria Taddeo: we discuss the global security landscape amidst increasingly complex regulatory demands that AI implementation brings forth.
➡ Chinese investor and executive, Kai-Fu Lee, joined me a year ago to discuss the Chinese AI industry and the key differences that are shaping the West-East relationship at the turn of the decade.
➡ One of my favourite discussions in 2019 was this conversation with General Sir Richard Barrons. He offers a much-needed reality-check and questions the readiness of Western societies to deal with the threats of the digital age. Offers words of hope, and advice on building resilience (!), as well!