A Proposal to Establish the U.S. Digital Progress Administration
By: Hal Plotkin
Tags: Economics, Public Policy, Technology, Government, Biden

President-elect Joe Biden should create the digital equivalent of FDR’s Works Progress Administration to build durable continuously improving public digital assets, restore faith in government, and most importantly, to protect our democracy from the steady encroachment of fascist authoritarianism.

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On his first day in office, President Joseph R. Biden, Jr. should create the U.S. Digital Progress Administration (DPA) and elevate it to a crisis intervention role similar to FDR’s Works Project Administration (WPA). The overall goal of this new DPA: build durable public digital assets that more affordably meet public needs and continuously improve over time. Acting on this recommendation would not only help our citizens believe in our government again, it would also put a halt to the waste of billions of dollars in public funds that are paid annually to a handful of Big Tech firms whose lucrative but unethical business practices would have made many 19th century robber barons blush. We can make far better use of all that wasted cash. Public uses, similar to how FDR’s WPA built much of the pre-computer age physical infrastructure Americans still enjoy today.

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There is no other strategy that would do more to stem the rising authoritarian impulses that have shocked our system in recent years. By making dramatic tech-based improvements to government services that are now easily within reach, by using taxpayer funds more wisely, we can do a lot to rebuild confidence in our government. That is important. It is the current widespread absence of such confidence, a shared faith that our government is working well for all of us, that forms the fertile ground in which alarming fascist and authoritarian impulses have already taken root. The urgency of this recommendation is based on several factors not the least of which is this: the next would-be tyrant to rise up in our dystopian national reality is likely to be much smarter than the moronic Mr. Trump. And that person, we now know, could rather easily bring our entire still-young American experiment in self-government to its end. A government that consistently fails to deliver the goods its citizens pay for will not maintain its citizens’ support forever. That clock is already ticking.

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I make this recommendation as a former federal official, a presidential appointee in the Obama administration and, more importantly, as a veteran Silicon Valley journalist. Because it was during my journalism days when I learned something very important that our government policy makers must now urgently comprehend. I shall explain.

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During decades covering Silicon Valley (for CNBC, Forbes, Barrons, the San Francisco Chronicle, helping create public radio’s Marketplace program, etc.) I was often called upon to write stories about tech firms, tech stocks, and start ups. Not surprisingly, my editors and readers always wanted to know which tech start ups would succeed, which tech stocks were good investments, and what strategies separated high tech’s business winners from losers. The advent of the Internet in the late 1990’s, which I covered, had given birth to an entirely different economy festooned with new firms, new technologies, and new business models. A lot of it seemed mysterious at the time, with wave after wave of new technologies crashing into markets looking less like products and more like magic. We had the initial dot com boom, followed by the dot com crash, and then the subsequent slow but steady growth of the oligopoly of Big Tech firms that now increasingly dominate our economy and, more recently, influence our politics. Based in Palo Alto, I wrote hundreds of articles during this period, learning along the way with my readers as new business realities emerged. No one was an expert at first because nearly everything happening was so new. We were all learning in real time.

But there was one article I wrote early on, for CNBC.com, that became a sort of Rosetta Stone for me thanks to Laird Foshay, an early successful Internet entrepreneur. While researching the story, I had gathered Foshay’s insights into what investors should look for and why the venture capital world was so fired up at the time. Foshay, now a gentleman rancher, focused my attention on how the creation and sale of digital goods would have a world-changing impact on virtually every market over time. The central thesis of that 1999 CNBC article still rings true, even louder, today, not only for business but also for government at all levels, with financial implications that have compounded over time. Over two decades, hundreds of billions, perhaps a trillion or more, dollars have been spent, and in many cases, wasted as funds taxpayers had previously invested in durable goods that lasted for generations got diverted toward purchases of non-durable digital wares that primarily benefit their sellers. These newer digital age government purchasing habits and practices, which see taxpayers increasingly renting software to meet public needs instead of acquiring it, are slowly but steadily impoverishing our increasingly decimated public sector. Renters don’t build equity. American taxpayers have shelled out billions renting software-based technologies while building zero digital equity. What other tenant would make such a deal? In the process, our public sector is also denied the primary benefit, better government services at far lower costs, that new digital technologies would otherwise enable. Instead, when it comes to the delivery of government services the financial savings created by digital modalities are being extracted from the public sector to meet the voraciously high profit margin requirements of a handful of Big Tech firms. As an added benefit, the executive compensation and labor management practices of those firms often make significant contributions to income inequality, as well. The solution is for taxpayers to demand better value for their substantial investments in digital technologies. A properly led and focused Digital Progress Administration would make that possible.

Here is the nut graph of my 1999 CNBC.com interview with Foshay about tech stocks, that puts a spotlight on the digital progress our government is leaving on the table:

“A factor to consider when evaluating an Internet company’s long-term prospects is whether it sells digital or non-digital goods,” Foshay says. “Digital content, which can be manufactured and distributed far less expensively, offers the best chance of high returns. That’s been the secret to Microsoft’s success: huge gross margins. In the future, the [tech] companies that will be most successful are the ones that can use the Internet to not only sell, but also distribute, their products.”

So, what does this mean for government?

It helps first to understand what it has meant for business. As Foshay accurately observed at the time, the ability to make and distribute digital goods is central to the success of the most profitable high tech firms. In the pre-digital world, the world in which I was born, companies would make physical products one by one, store, ship, sell, and service them, again, all one at a time. If you made tires, for example, you made one tire for every tire you sold. Profit margins were often rather thin, in part, because expenses were so high. Every item sold was also an expense, you needed raw materials, factories, workers, etc. When a customer bought a tire, they got to own the tire, which they could keep or sell if they didn’t need it anymore.

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By contrast, in the new digital world Foshay described, a tech firm could make a product once and sell it millions of times with no additional manufacturing costs and, thanks to the Internet, hardly any added distribution costs either. Imagine how profitable a tire company would be if it only had to make a single tire, which it could then sell to everyone who had a vehicle.

The efficiency of creating and selling digital goods is the reason leading tech firms have been so wildly successful and why, for those who could afford their stock, they have been such outstanding investments. When you can make a product one time, and sell it millions of times at little or no additional cost, you have a license to print money. This also explains why successful tech firms often spend so much money playing around in other lines of business, developing new “skunk works” pie-in-the-sky projects (self-driving cars, eyeglasses with built in sensors, virtual reality devices, special purpose satellites, you name it). When your core business throws off more money than you know what to do with you can spend it on any idea that might capture your imagination, however fanciful. Good for them, you might say, American capitalism at work. And you’d be right, but only up to a point.

Now, think about how our government bought necessary goods before the digital and internet revolutions. If the government needed typewriters, for example, it bought typewriters, which it owned, which it could use until they wore out, or sell to surplus stores when the time came to upgrade to a new machine. Anyone with know how could fix those machines. When it came to buying products that government needs taxpayers money was used mostly to buy durable goods that provided lasting items with tangible value. In many instances, these brick and mortar products allowed government to create vital public services and resources that were noticed and appreciated: public sanitation systems made out of cement and pipes that eliminated excrement in the streets and reduced disease, public roads that facilitated travel and industry, dams that tamed wild rivers and provided affordable electrical power, parks everyone could enjoy, trails, and in the 1950’s, the interstate highway system. Real physical stuff that made everyone’s lives better. Public confidence in government was higher in those days, in part, because our government was steadily improving the quality of our lives in ways that were hard to ignore. In that era, very few voters had reason to embrace the idea that our government should be strangled in the bathtub.

Flash forward to our digital age.

According to its own official figures, our federal government now spends about $100 billion a year on information technology products and services. The real truth however, is that our federal government presently has no idea, none whatsoever beyond that estimate, how much it really spends on IT. This blind spot is not the result of a lack of effort.

Early on during President Obama’s first term I was part of a federal interagency task force organized by the White House Office of Science and Technology Policy that sought to measure actual total annual federal IT spend by agency and category of expense. The leaders of our task force had hoped to identify trends and possible opportunities for efficiencies. We made some limited progress measuring those costs but gave up after a few months after it became apparent we were on a fool’s mission. It turned out that calculating actual total annual federal IT spending was, we discovered, virtually impossible. In many cases, IT costs are bundled into the costs of other items, deeply buried in seemingly unrelated budget line items, or camouflaged in other ways. Only the most obvious expenditures are measurable. As one participant on our task force put it before we gave up, what we wanted to know was “pretty much unknowable.” Our task force quietly dissolved. No results were ever published.

I imagine that must have delighted Big Tech. Concealing that data harms taxpayers but certainly serves the interests of IT vendors. The result is taxpayers spend billions each year renting the same digital items over and over again, word processing software, database software, communications, software, cloud storage, and end up with absolutely nothing to show for it in the end. Public investments in durable goods that generate lasting value have been replaced by public investments in non-durable goods that vanish after the last government check clears. Just recently, the federal government announced a new pentagon cloud storage contract totaling about $10 billion dollars. At the end of that contract, our government will have absolutely nothing to show for it, except another bill. If President Eisenhower had done the same thing when he built our interstate highway system, taxpayers would still be paying annual license fees to the contractors who built Route 66, which would not connect (or should we say “interoperate”) with any other roads.

Here is something we do know: U.S. government agencies, federal, state, and local, are now the single largest and most lucrative customer for many leading Big Tech firms. Take database vendor Oracle Corporation, for example. According to one recent estimate, Oracle generates roughly 5 percent of sales, or approximately $2 billion per year, from the U.S. federal government. Sales to governments of all types generate as much as 25 percent of Oracle’s total annual revenues each year, according to another estimate. Making sure taxpayers keep paying thru the nose is a key reason many high tech firms enjoy such healthy profit margins. It’s also a measure of something else: how much money taxpayers have lost over the years renting software they could own, share with other government agencies, and instead pay to continuously improve. The taxpayer’s loss is Big Tech’s gain.

Job One of a Digital Progress Administration should be to publish an accurate inventory, a federal market survey, of digital technologies that taxpayers could own and continuously improve rather than rent. And then one by one, based on practicality and impact considerations, the federal government should employ new purchasing methods that invite entrepreneurs to bid on contracts that provide those technologies in forms and formats that enable public ownership and continuous improvement. In short, we should build a digital public sector. We should build digital equity for the public sector.

Before I describe some of the things a more viable adequately supported digital public sector would make possible let me emphasize one item that is not part of this proposal. I am not proposing the federal government take over the tech industry. Far from it. I think an even more viable, competitive, open, and progress-driven commercial tech industry will evolve in tandem with our federal government becoming a more discerning and sophisticated consumer. Instead, I am talking about building what is essentially a public option for many technologies that are now only available from proprietary sources. In cases where that public technology option is better, it will win public use and displace more extractive business models. In other areas, perhaps including newer uses of technology, more nimble private sector actors may be more likely to prevail. Public roads and private jets both exist at the same time. Technology that is owned by the public and technology that is owned and sold by the private sector can likewise coexist. A commercial tension between the two will be healthy for our economy, lend itself to the delivery of more efficient public services, and also be good for smaller, start up businesses.

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Take, for example, the present controversy over Apple Computer’s app store, which charges application developers an extortionary 30 percent commission on sales, which can only be processed through Apple’s system. Most app firms, which is to say virtually every form of business imaginable, would go out of business if they don’t cough up the cash to Apple. Imagine if that was how business worked in the analog world. Imagine if just one (or two, if you count Google’s android app store) for-profit firms could demand a 30 percent commission on every sale before anything could be sold in any physical store. One chokepoint on all forms of commerce. We’d have a revolution on our hands. And yet, because we are talking about software and technology (its like magic! We don’t understand how it works!) Apple gets away with it. Some hope that enforcement of antitrust rules will solve this problem, and those efforts might help. But it also could become a case of whack-a-mole, where one unfair business practice is replaced by another as smartly run tech firms stay one step ahead of the regulators in much the same way many of those same firms have avoided taxes they would otherwise owe.

The solution is to build a practical public alternative.

A Public App Store

A Digital Progress Administration could oversee the creation of a public app store where app developers could offer their wares to the public over all smart phones for a reasonable annual fee, and where apps would be free to process payments from any vendor they select. This would create the digital equivalent of a public square where everyone can bring their goods to market free from thuggish extortionary demands. In this environment, our markets would move toward venues where freedom was maximized and we all know that freedom, with proper regulations, is good for markets.

Here are a few thumbnail descriptions of just some of the other progress a Digital Progress Administration could bring within reach:

Shared continuously improving software to more affordably manage public contacts and interactions with government agencies. Why is it so hard, in 2020, to get information about social security issues, military service records, available federal benefits, IRS rules, etc.? Why can’t the state of California, for example, deliver unemployment benefits in a timely way to millions of qualified desperate individuals? Why is it taking California’s DMV months to process a simple change of ownership? Proprietary software vendors, who always seek to “lock in” government contracts in ways that lock out competitors, have no reason to make things simpler, less expensive, or more transparent. Unless we demand those features.

Shared continuously improving software that manages parking, traffic patterns and enforcement, and transportation services including so we can more reliably determine when the bus or train will arrive. Ditto with shared public software that can track and monitor climate change inputs and outputs.

Shared publicly-owned software that finally enables a real start on the dream of Smart Cities, which has foundered here in the U.S. but which is happening more quickly in many other countries, including in China, primarily because U.S. tech vendors insist on owning Smart City software solutions and charging royalties in perpetuity, rather than selling software solutions that other vendors can service and improve.

Software that citizens can use to register their employment status, availability for work, and the amounts they spend on items such as food and housing, to replace the inaccurate statistics on which so many wrongheaded government policies are based.

Software that provides candidates for public office a reliable way to present their platforms and pitches to voters without having to pay huge sums to intermediary for-profit media companies.

A public social network that enforces basic standards of accuracy, decency, and fairness as an alternative to social networks driven entirely by profit motives (think the social networking equivalent of how public broadcasting lives side-by-side with commercial broadcasting).

Something I have been calling for for years: more public investments in the creation and continuous improvement of open educational resources as substitutes for proprietary K-12 and college textbooks, which unnecessarily consume billions of dollars a year in public resources and student financial aid. The government can, today, right now, make free online textbooks available to students at a tiny fraction of their present cost, much of which the public already shoulders. Open educational resource textbook passages can be printed out as needed for just the cost of paper and ink.

If I can come up with these ideas in five minutes off the top of my head, imagine the other opportunities a well-run Digital Progress Administration would bring into focus. The key is to focus this new DPA on a very simple question: how can our government use digital technologies to improve the cost-efficient delivery of the goods and services taxpayers need?

Over the past few decades government tech policy at the state and federal levels has primarily focused on helping tech companies succeed. Those policies have worked too well. (I explain how the public interest was sacrificed in service of narrow private special interests at the dawn of the digital age in California here). The time has now come for our policy makers to design and develop tech policies that don’t make the rich richer but instead focus on how our government can use digital technologies to help all our citizens, our government agencies at all levels, and our democracy itself, succeed.

That is why President-elect Biden should create the Digital Progress Administration. I hope and pray it is not already too late.