How much of your data is Facebook really collecting? What does Netflix take into consideration when recommending movies and TV shows to you? Is Apple really slowing down your iPhone on purpose?
It’s hard to answer these questions definitively because we don’t have all the answers. And we don’t have the answers because big tech companies like these haven’t provided them to us. In a world with more tech transparency, these might be non-issues; we might have full access to all relevant information for how the company works and how it interacts with us.
Transparency is valuable in many contexts, building trust, improving the transmission and understanding of information, and increasing accountability. But is a more transparent tech industry something we really want?
Motivations for Low Transparency
It’s easy to position tech companies as being evil or nefarious for one simple reason: like all companies, they operate in their own self-interest. Google, Apple, Netflix, and other giants don’t particularly care about your wellbeing as an individual – they only care about you to the extent that you can help them generate a profit in the long run.
However, self-interest isn’t the same as malice or bad intent. When companies intentionally hide some piece of information, it isn’t exclusively to disguise wrongdoing or intentionally mislead people.
Take, for example, Google’s hidden search engine algorithm. We’re able to deduce a lot about how Google ranks websites in search engine optimization (SEO); we even have an abundance of tools that can help you figure out your rankings and how to improve them. But Google itself has never fully disclosed how its search engine algorithm works, beyond helpful hints for making a better website from scratch.
Why is this the case? Is Google intentionally sabotaging websites by hiding information? No. Instead, Google withholds this information for the sake of improving user experience. If the algorithm was publicly accessible, companies and individuals could easily find ways to cheat the system, manipulate their rankings, and eventually attain visibility despite not having much actual relevance or authority in a chosen field.
There are several good reasons why tech companies would prefer a low transparency environment, such as:
- Integrity and value. First, low transparency could be critical for preserving the integrity and value of the tech product or service being provided. This is often a hard case to make, especially when the operation in question has no significant impact on the end-user. But in some conditions, this truly is vital. Google Search is the best example; keeping at least some aspects of the algorithm under wraps is a practical necessity to avoid exploitation.
- Security. Security is a top priority for most tech companies, and it’s only going to grow in importance. In the future, when technology becomes even more integrated into our daily lives (such as influencing our vehicle control and navigation), security is going to become an even greater concern. Preserving security is about keeping users happy, saving money, improving efficiency, and maintaining a good reputation with the public. In most situations, opaqueness can be a benefit for your security strategy; if people don’t know how your technology works, they’ll have a harder time getting control over it. However, the reverse can also be true; in open-source communities, security is often robust because more people can discover flaws and correct them before it’s too late.
- Competitive resistance. Some companies undoubtedly resist calls for transparency because they want to guard their proprietary secrets. This is certainly understandable; companies and individuals have the right to protect their intellectual property from plagiarism or infringement. That said, copyright and trademark laws aren’t contingent upon whether or not the information is publicly available; tech companies could presumably reveal how their technology works and still sue someone who tries to copy it to make money.
- Change tolerance and efficiency. Most tech companies pride themselves on constantly updating. They come up with new features, get rid of old bugs, improve security, and streamline things to make the coding more efficient. These changes tend to unfold on an almost constant basis, so if they were always exposed to public scrutiny or some kind of approval process, it could really slow things down. Some companies resist transparency simply to keep things efficient, streamlined, and unimpeded.
- Inaccessibility. Artificial intelligence and machine learning algorithms are notoriously complex. In fact, in many cases, the developers themselves don’t fully understand how they work. AI and ML operations occur in a “black box,” with systems learning to recognize patterns and make judgments without human knowledge. In these scenarios, complete transparency is practically impossible.
Arguments for Greater Transparency
Of course, the arguments for greater transparency in the tech industry are numerous, including:
- Fewer opportunities for exploitation, fraud, and other crimes. Lack of transparency makes it easy to hide controversial or illegal actions. If more information is reported and publicized, it’s harder to get away with these actions.
- Public knowledge and consent. You can sign up for a free account with most big tech providers and start using their products immediately. But do you really know what you’re getting yourself into?
- Inspiration and innovation. Revealing the inner working of major tech platforms could also serve to inspire entire generations of entrepreneurs to take those formulas and use them to innovate further.
Options for Transparency
Transparency may seem like a good idea overall, but its implementation leads to further complications.
- Voluntarism. Transparency does have some natural, inherent benefits for organizations that practice it. Greater public trust, competitive differentiation, and higher employee morale are just the start. Unfortunately, we already benefit from this voluntaristic situation, so it’s simply not enough for many proponents of transparency.
- Governmental pressure or regulations. The most frequently described solution is some form of government intervention. For example, politicians could impose new laws or regulations that force tech companies to disclose certain things to the public, or other items to lawmakers or a regulatory body. But what, exactly, do they have to disclose? Who is responsible for collecting and reviewing this information? What are the consequences of a breach of this arrangement? Are certain types of information, such as information related to security, exempt? This is a complicated route, and one that could have long-lasting consequences – such as limiting the rate of innovation and competition in the industry, spurring stagnation and the formation of monopolies.
- Public pressure. We could avoid imposing new laws by utilizing public pressure. Public pressure itself can come in many forms, including anything from refusing to buy the latest smart speaker to holding a massive protest outside a tech company’s building. Tech companies have proven that they care deeply about public sentiment and will often make sacrifices or reverse former stances to appease the masses. If sufficiently organized and insistent, a loud group of people could motivate tech companies to disclose more information about specific activities – especially if backed by a real threat of boycott.
- Competitive pressure. It’s hard to create competitive pressure artificially, but it can be a natural, reinforcing byproduct of any of the systems referenced above. If more companies opt to operate transparently, the competitive pressure alone could encourage tech brands to take action – just to keep pace with their rivals.
The Bottom Line
So what’s the bottom line here? Should we all be banding together and pushing tech companies to be more transparent in their daily operations? Should we favor governmental policies that put pressure on tech companies to reveal more information?
You’ll find people who insist that “sunlight is the best disinfectant” and that transparency is an inherent good that should be imposed on all tech companies. You’ll also find people who insist that protecting proprietary secrets and preserving both free innovation and operational efficiency are vital.
The truth is that the subject of tech transparency is complex, with few straightforward, simple answers. In light of this, we should avoid making sweeping judgments or blanket changes to the industry.
Image Credit: Ron Lach; Pexels; Thank you!
Fintech Kennek raises $12.5M seed round to digitize lending
London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.
According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.
The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:
“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”
The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:
“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”
The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.
The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.
Featured Image Credit: Photo from Kennek.io; Thank you!
Fortune 500’s race for generative AI breakthroughs
As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.
Goldman Sachs’ Cautious Approach to Implementing Generative AI
In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.
According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.
One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.
To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.
Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.
Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!
UK seizes web3 opportunity simplifying crypto regulations
As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.
Streamlining Cryptocurrency Regulations for Innovation
To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.
The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.
Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.
The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.
Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!