The FTC accuses Amazon of ‘monopolistic practices’ in long-expected antitrust suit

The Federal Trade Commission (FTC) filed an antitrust lawsuit against Amazon today in Western Washington district court, with 17 states joining the federal agency. The case isn’t surprising (the FTC was reportedly nearly ready to file in late August), but its specifics weren’t yet known.

The FTC accuses the online retailer of monopolistic practices, including preventing merchants from offering lower prices on other platforms and forcing them to use Amazon’s logistics service if they wanted to be included in customers’ Prime shipping perks. Those anticompetitive practices allegedly led to higher prices and an inferior shopping experience.

The suit describes “Amazon's one-two punch of seller punishments and high seller fees” that forces vendors to “use their inflated Amazon prices as a price floor everywhere else.” The complaint reads, “Amazon's punitive regime distorts basic market signals: one of the ways sellers respond to Amazon's fee hikes is by increasing their own prices off Amazon.”

“Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition,” said FTC chair Lina Khan, according toThe New York Times.

“Amazon is a monopolist,” the lawsuit reads. “It exploits its monopolies in ways that enrich Amazon but harm its customers: both the tens of millions of American households who regularly shop on Amazon's online superstore and the hundreds of thousands of businesses who rely on Amazon to reach them.”

The 17 states joining the FTC include New York, Connecticut, Pennsylvania, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island and Wisconsin.

The FTC has had its eye on Amazon for several years. This is the fourth action the agency has taken against the company this year. Amazon settled a previous lawsuit (for $30.8 million) filed in May over Alexa children’s privacy concerns and snooping with Ring cameras. In June, the FTC sued the retailer again, claiming the company tricked customers into signing up for Prime subscriptions and then made it hard to cancel them.

Amazon claimed that the FTC’s actions are out of line. “Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” said David Zapolsky, Amazon's Senior Vice President of Global Public Policy and General Counsel. “The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court.”

The media’s narrative about the suit will likely frame it as a long-awaited title bout between Khan and Amazon. The FTC chair gained prominence by publishing a 2017 Yale Law Journalpaper arguing US antitrust laws fell short of adequately reining in the tech giant. That helped begin a national conversation about whether the nation’s anti-monopoly laws were prepared to handle modern Silicon Valley behemoths. 

But more important than one-on-one championship fight framing, the showdown will serve as a test for Washington regulators and Amazon, as the federal agency tests its authority and the retailer faces its most consequential political fight to date.

This article originally appeared on Engadget at https://www.engadget.com/the-ftc-accuses-amazon-of-monopolistic-practices-in-long-expected-antitrust-suit-165035712.html?src=rss

EU reinstates $400 million fine on Intel for blocking sales of competing chips

The European Commission has imposed a €376.36 million ($400 million) fine on Intel for blocking the sales of devices powered by its competitors' x86 CPUs. This brings one part of the company's long-running antitrust court battle with the European authority to a close. If you'll recall, the Commission slapped the chipmaker with a record-breaking €1.06 billion ($1.13 billion) fine in 2009 after it had determined that Intel abused its dominant position in the market. ye

It found back then that the company gave hidden rebates and incentives to manufacturers like HP, Dell and Lenovo for buying all or almost all their processors from Intel. The Commission also found that Intel paid manufacturers to delay or to completely cease the launch of products powered by its rivals' CPUs "naked restrictions." Other times, Intel apparently paid companies to limit those products' sales channels. The Commission calls these actions "naked restrictions."

The case has gone through several European courts since then, with either side lodging an appeal, depending on what the decision was. In 2017, the highest court in the European Union ordered the fine to be re-examined on the basis that the Commission didn't conduct an economic assessment on how Intel's activity impacted its rivals' ability to compete against it. 

Europe's second highest court, the General Court, then decided last year that the Commission indeed failed to perform analysis of the company's rebate scheme. As a result, it came to the conclusion that it couldn't determine how the incentives Intel offered affected its competitors. It also scrapped Intel's €1.06 billion fine, explaining that it's not in a position to determine how much it actually has to pay, but it upheld previous courts' decision that the company's naked restrictions violated EU laws.

In its announcement, the European Commission gave a few examples of how Intel hindered the sales of competing products. It apparently paid HP between November 2002 and May 2005 to sell AMD-powered business desktops only to small- and medium-sized enterprises and via direct distribution channels. It also paid Acer to delay the launch of an AMD-based notebook from September 2003 to January 2004. Intel paid Lenovo to push back the launch of AMD-based notebooks for half a year, as well.

The Commission has since appealed the General Court's decision to dismiss the part of the case related to the rebates Intel offered its clients. Intel, however, did not lodge an appeal for the court's ruling on naked restrictions, setting it in stone. "With today's decision, the Commission has re-imposed a fine on Intel only for its naked restrictions practice," the European authority wrote. "The fine does not relate to Intel's conditional rebates practice. The fine amount, which is based on the same parameters as the 2009 Commission's decision, reflects the narrower scope of the infringement compared to that decision." Seeing as the rebates part of the case is under appeal, Intel could still pay the rest of the fine in the future.

This article originally appeared on Engadget at https://www.engadget.com/eu-reinstates-400-million-fine-on-intel-for-blocking-sales-of-competing-chips-115922364.html?src=rss

Google settles California lawsuit over its location-privacy practices

Google will pay $93 million in a settlement it reached with California Attorney General Rob Bonta, resolving allegations that the company’s location-privacy practices violated the state’s consumer protection laws. The California Department of Justice claimed that Google was “collecting, storing, and using their location data” for consumer advertising purposes without informed consent.

The complaint alleges that Google continued to collect consumer data related to a user’s location even when a user turned the “location history” feature off. The company settled similar lawsuits in Arizona and Washington last year for illegally tracking consumers.

In addition to paying $93 million, Google agreed to “deter future misconduct.” This settlement, which won’t really hurt Google’s deep pockets, is important because the tech giant generates the majority of its revenue from advertising and location-based advertising is a critical feature of its advertising platform.

"Consistent with improvements we've made in recent years, we have settled this matter, which was based on outdated product policies that we changed years ago," Google spokesperson José Castañeda told Engadget.

Moving forward, the California AG is asking Google to provide additional transparency about location tracking by providing users with detailed information about location data it collects. The company must also provide disclaimers to users that their location information may be used for ad personalization.

Update, September 16, 2023, 2:26 AM ET: This story has been updated to add Google's statement.

This article originally appeared on Engadget at https://www.engadget.com/google-settles-california-lawsuit-over-its-location-privacy-practices-190859183.html?src=rss

Google settles California lawsuit over its location-privacy practices

Google will pay $93 million in a settlement it reached with California Attorney General Rob Bonta, resolving allegations that the company’s location-privacy practices violated the state’s consumer protection laws. The California Department of Justice claimed that Google was “collecting, storing, and using their location data” for consumer advertising purposes without informed consent.

The complaint alleges that Google continued to collect consumer data related to a user’s location even when a user turned the “location history” feature off. The company settled similar lawsuits in Arizona and Washington last year for illegally tracking consumers.

In addition to paying $93 million, Google agreed to “deter future misconduct.” This settlement, which won’t really hurt Google’s deep pockets, is important because the tech giant generates the majority of its revenue from advertising and location-based advertising is a critical feature of its advertising platform.

Moving forward, the California AG is asking Google to provide additional transparency about location tracking by providing users with detailed information about location data it collects. The company must also provide disclaimers to users that their location information may be used for ad personalization.

Engadget reached out to Google for comment but didn't receive a response.

This article originally appeared on Engadget at https://www.engadget.com/google-settles-california-lawsuit-over-its-location-privacy-practices-190859183.html?src=rss

Hackers claim it only took a 10-minute phone call to shut down MGM Resorts

The ALPHV/BlackCat ransomware group claimed responsibility for the MGM Resorts cyber outage on Tuesday, according to a post by malware archive vx-underground. The group claims to have used common social engineering tactics, or gaining trust from employees to get inside information, to try and get a ransom out of MGM Resorts, but the company reportedly refuses to pay. The conversation that granted initial access took just 10 minutes, according to the group. 

"All ALPHV ransomware group did to compromise MGM Resorts was hop on LinkedIn, find an employee, then call the Help Desk," the organization wrote in a post on X. Those details came from ALPHV, but have not been independently confirmed by security researchers.

The international resort chain started experiencing outages earlier this week, as customers noticed slot machines at casinos owned by MGM Resorts shut down on the Las Vegas strip. As of Wednesday morning, MGM Resorts still shows signs that it's experiencing downtime, like continued website disruptions. MGM Resorts has not responded to a request for comment, but said in a statement on Tuesday that "Our resorts, including dining, entertainment and gaming are currently operational."

The MGM Resorts homepage on Wednesday morning still says that the website is unavailable.
Katie Malone for Engadget

ALPHV has a reputation in the cybersecurity community as being "remarkably gifted at social engineering for initial access," according to vx-underground. From there, it usually uses ransomware ploys to extort a target into paying up, and it's been going after huge corporate targets. In July, ALPHV and another threat actor Clop listed beauty giant Estée Lauder on their data leak sites

This article originally appeared on Engadget at https://www.engadget.com/hackers-claim-it-only-took-a-10-minute-phone-call-to-shutdown-mgm-resorts-143147493.html?src=rss

The next-generation Einstein AI will put a chatbot in every Salesforce application

AI chatbots are coming to your Salesforce applications and it looks like it'll all of them. Company executives had a lot to show off during Tuesday's Dreamforce 2023 keynote address, including major updates to both its Einstein AI and Data Cloud services. 

Einstein AI has received a slew of updates and upgrades since we saw it integrated with Slack back in May. The new Copilot service will take the existing AI chatbot and tune it to a client company's specific datasets using their Salesforce Data Cloud data. This enables the Einstein AI to provide better, more relevant and more actionable answers to employees' natural language questions and requests. 

"Copilot is a conversational AI assistant for both companies and employees to securely and safely access generative AI to do their jobs better, faster and more easily," Salesforce CEO of AI, Clara Shih, said during a press call monday. "It's going to be available to every Salesforce user across every cloud."

The new Copilot Studio takes that tuning process a step further, allowing customers to "customize Einstein Copilot with specific prompts, skills, and AI models," per a Monday release. This more tightly structures Einstein's behaviors without constricting its generative capabilities. What's more, Salesforce executives announced that Copilot will be available across a variety of mobile platforms, including "real-time chat, Slack, WhatsApp or SMS." 

"We think that there is an incredible opportunity in AI," Patrick Stokes, Salesforce EVP and GM of Platform, said during the press call. "We think that it is creating jobs, we think that it is driving productivity across organizations... we also think that as customers and businesses are driving towards these AI strategies, they may not have the platform that they really want or that they really need."

He notes that much of their customers' data is fractured and split among different applications, data lakes, APIs and vendors. "This is all leading to low productivity, and what they really want, is one connected platform or one that will connect their data," Stokes continued. To address that need, Salesforce also announced that it is integrating the chatbot with its Data Cloud service to create a one-stop platform for building low-code AI-powered CRM applications. Salesforce calls it the Einstein 1 Platform.

"All of these fields coming together from different systems that speak different languages... now speak one language on the platform," Shih said. "Any data from any system can now be used like any other object or field in Salesforce."

One of Salesforce's first big innovations was its metadata framework a system that describes the relationship between, and behaviors of, individual pieces of a company's data. That metadata framework is also an ideal medium for training machine learning models to better understand customer interactions and business operations, thereby improving and refining their performance.

"Much of Salesforce is built on this metadata framework — from our platform to analytics, commerce, sales service and marketing," Stokes said. "Now our Data Cloud and Einstein are really giving you one platform where you can build all of your customer experience in one place with all of the data and AI that you need."

To minimize the rate of hallucination and false responses by the AI, Salesforce has developed the "Einstein trust layer" which we first saw roll out to the company's CRM applications in March. The trust layer both secures data retrieval from the cloud and masks any sensitive or proprietary information before passing it on to the language model with another round of toxicity checks after that. 

The company does not deny that this new generation of generative AI can and likely will lead to job losses, such as coders whose services will be replaced by Einstein 1, but remains confident that there is reason for optimism. "I think it is a it's a big moment in time and there will certainly be impact a certain jobs," Shih admitted. "There's also certainly going to be a new jobs that are being created such as prompt engineer." Oh boy, a prompt engineer, the career every kid dreams of.

This article originally appeared on Engadget at https://www.engadget.com/the-next-generation-einstein-ai-will-put-a-chatbot-in-every-salesforce-application-120004305.html?src=rss

MGM Resorts hit by ‘cybersecurity issue,’ leading to massive outage

MGM Resorts confirmed on Monday that it was hit by a cybersecurity issue, shutting down systems across its suite of casinos. The hotel giant owns a notable swath of casinos along the Las Vegas Strip, where some gamblers reported slot machines being taken offline because of the incident. At MGM Resorts' international properties, hotels are currently taking reservations via phone because of website shutdowns. 

"MGM Resorts recently identified a cybersecurity issue affecting some of the company's systems," the company wrote in a statement. It said the company "took prompt action to protect our systems and data, including shutting down certain systems" in response to the attack. MGM Resorts has not confirmed how widespread the shut down is, what systems have been affected or other details about the incident. 

Customer anecdotes report issues making reservations, using ATM machines, playing certain games and mobile key entry into hotel rooms, but Engadget has not independently confirmed these reports. While MGM Resorts informed the Las Vegas Metropolitan Police Department about the incident, the department said in a statement that these types of incidents are typically passed along to federal agencies. 

This article originally appeared on Engadget at https://www.engadget.com/mgm-resorts-hit-by-cybersecurity-issue-leading-to-massive-outage-215205561.html?src=rss

Hitting the Books: Meet Richard Arkwright, the world’s first tech titan

You didn't actually believe all those founder's myths about tech billionaires like Bezos, Jobs and Musk pulling themselves up by their bootstraps from some suburban American garage, did you? In reality, our corporate kings have been running the same playbook since the 18th century when Lancashire's own Richard Arkwright wrote it. Arkwright is credited with developing a means of forming cotton fully into thread — technically he didn't actually invent or design the machine, but developed the overarching system in which it could be run at scale — and spinning that success into financial fortune. Never mind the fact that his 24-hour production lines were operated by boys as young as seven pulling 13-hour shifts.

InBlood in the Machine: The Origins of the Rebellion Against Big Tech — one of the best books I've read this year — LA Times tech reporter Brian Merchant lays bare the inhumane cost of capitalism wrought by the industrial revolution and celebrates the workers who stood against those first tides of automation: the Luddites.

blockprint of two luddites beating on an old timey machine with hammers on a faux aged paper background with red block book title lettering, black author lettering
Hachette Book Group

Excerpted from Blood in the Machine by Brian Merchant. Published by Hachette Book Group. Copyright © 2023 by Brian Merchant. All rights reserved.


The first tech titans were not building global information networks or commercial space rockets. They were making yarn and cloth. A lot of yarn, and a lot of cloth.

Like our modern-day titans, they started out as entrepreneurs. But until the nineteenth century, entrepreneurship was not a cultural phenomenon. Businessmen took risks, of course, and undertook novel efforts to increase their profits. Yet there was not a popular conception of the heroic entrepreneur, of the adventuring businessman, until after the birth of industrial capitalism. The term itself was popularized by Jean-Baptiste Say, in his 1803 work A Treatise on Political Economy. An admirer of Adam Smith’s, Say thought that The Wealth of Nations was missing an account of the individuals who bore the risk of starting new business; he called this figure the entrepreneur, which translated from the French as “adventurer” or “undertaker.”

For a worker, aspiring to entrepreneurship was different than merely seeking upward mobility. The standard path an ambitious, skilled weaver might pursue was to graduate from apprentice to journeyman weaver, who rented a loom or worked in a shop, to owning his own loom, to becoming a master weaver and running a small shop of his own that employed other journeymen. This was customary.

In the eighteenth and nineteenth centuries, as now in the twenty-first century, entrepreneurs saw the opportunity to use technology to disrupt longstanding customs in order to increase efficiencies, output, and personal profit. There were few opportunities for entrepreneurship without some form of automation; control of technologies of production grants its owner a chance to gain advantage or take pay or market share from others. In the past, like now, entrepreneurs started small businesses at some personal financial risk, whether by taking out a loan to purchase used handlooms and rent a small factory space, or by using inherited capital to procure a steam engine and a host of power looms.

The most ambitious entrepreneurs tapped untested technologies and novel working arrangements, and the most successful irrevocably changed the structure and nature of our daily lives, setting standards that still exist today. The least successful would go bankrupt, then as now.

In the first century of the Industrial Revolution, one entrepreneur looms above the others, and has a strong claim on the mantle of the first of what we’d call a tech titan today. Richard Arkwright was born to a middle-class tailor’s family and originally apprenticed as a barber and wigmaker. He opened a shop in the Lancashire city of Bolton in the 1760s. There, he invented a waterproof dye for the wigs that were in fashion at the time, and traveled the country collecting hair to make them. In his travels across the Midlands, he met spinners and weavers, and became familiar with the machinery they used to make cotton garments. Bolton was right in the middle of the Industrial Revolution’s cotton hub hotspot.

Arkwright took the money he made from the wigs, plus the dowry from his second marriage, and invested it in upgraded spinning machinery. “The improvement of spinning was much in the air, and many men up and down Lancashire were working at it,” Arkwright’s biographer notes. James Hargreaves had invented the spinning jenny, a machine that allowed a single worker to create eight threads of yarn simultaneously—though they were not very strong—in 1767. Working with one of his employees, John Kay, Arkwright tweaked the designs to spin much stronger threads using water or steam power. Without crediting Kay, Arkwright patented his water frame in 1769 and a carding engine in 1775, and attracted investment from wealthy hosiers in Nottingham to build out his operation. He built his famous water-powered factory in Cromford in 1771.

His real innovation was not the technology itself; several similar machines had been patented, some before his. His true innovation was creating and successfully implementing the system of modern factory work.

“Arkwright was not the great inventor, nor the technical genius,” as the Oxford economic historian Peter Mathias explains, “but he was the first man to make the new technology of massive machinery and power source work as a system — technical, organizational, commercial — and, as a proof, created the first great personal fortune and received the accolade of a knighthood in the textile industry as an industrialist.” Richard Arkwright Jr., who inherited his business, became the richest commoner in England.

Arkwright was the first start-up founder to launch a unicorn company, we might say, and the first tech entrepreneur to strike it wildly rich. He did so by marrying the emergent technologies that automated the making of yarn with a relentless new work regime. His legacy is alive today in companies like Amazon, which strive to automate as much of their operations as is financially viable, and to introduce surveillance-intensive worker-productivity programs.

Often called the grandfather of the factory, Arkwright did not invent the idea of organizing workers into strict shifts to produce goods with maximal efficiency. But he pursued the “manufactory” formation most ruthlessly, and most vividly demonstrated the practice could generate huge profits. Arkwright’s factory system, which was quickly and widely emulated, divided his hundreds of workers into two overlapping thirteen-hour shifts. A bell was rung twice a day, at 5 a.m. and 5 p.m. The gates would shut and work would start an hour later. If a worker was late, they sat the shift out, forfeiting that day’s pay. (Employers of the era touted this practice as a positive for workers; it was a more flexible schedule, they said, since employees no longer needed to “give notice” if they couldn’t work. This reasoning is reminiscent of that offered by twenty-first-century on-demand app companies.) For the first twenty-two years of its operation, the factory was worked around the clock, mostly by boys like Robert Blincoe, some as young as seven years old. At its peak, two-thirds of the 1,100-strong workforce were children. Richard Arkwright Jr. admitted in later testimony that they looked “extremely dissipated, and many of them had seldom more than a few hours of sleep,” though he maintained they were well paid.

The industrialist also built on-site housing, luring whole families from around the country to come work his frames. He gave them one week’s worth of vacation a year, “but on condition that they could not leave the village.” Today, even some of our most cutting-edge consumer products are still manufactured in similar conditions, in imposing factories with on-site dormitories and strictly regimented production processes, by workers who have left home for the job. Companies like Foxconn operate factories where the regimen can be so grueling it has led to suicide epidemics among the workforce.

The strict work schedule and a raft of rules instilled a sense of discipline among the laborers; long, miserable shifts inside the factory walls were the new standard. Previously, of course, similar work was done at home or in small shops, where shifts were not so rigid or enforced.

Arkwright’s “main difficulty,” according to the early business theorist Andrew Ure, did not “lie so much in the invention of a proper mechanism for drawing out and twisting cotton into a continuous thread, as in . . . training human beings to renounce their desultory habits of work and to identify themselves with the unvarying regularity of the complex automaton.” This was his legacy. “To devise and administer a successful code of factory discipline, suited to the necessities of factory diligence, was the Herculean enterprise, the noble achievement of Arkwright,” Ure continued. “It required, in fact, a man of a Napoleon nerve and ambition to subdue the refractory tempers of workpeople.”

Ure was hardly exaggerating, as many workers did in fact view Arkwright as akin to an invading enemy. When he opened a factory in Chorley, Lancashire, in 1779, a crowd of hundreds of cloth workers broke in, smashed the machines, and burned the place to the ground. Arkwright did not try to open another mill in Lancashire.

Arkwright also vigorously defended his patents in the legal system. He collected royalties on his water frame and carding engine until 1785, when the court decided that he had not actually invented the machines but had instead copied their parts from other inventors, and threw the patents out. By then, he was astronomically wealthy. Before he died, he would be worth £500,000, or around $425 million in today’s dollars, and his son would expand and entrench his factory empire.

The success apparently went to his head — he was considered arrogant, even among his admirers. In fact, arrogance was a key ingredient in his success: he had what Ure described as “fortitude in the face of public opposition.” He was unyielding with critics when they pointed out, say, that he was employing hundreds of children in machine-filled rooms for thirteen hours straight. That for all his innovation, the secret sauce in his groundbreaking success was labor exploitation.

In Arkwright, we see the DNA of those who would attain tech titanhood in the ensuing decades and centuries. Arkwright’s brashness rhymes with that of bullheaded modern tech executives who see virtue in a willingness to ignore regulations and push their workforces to extremes, or who, like Elon Musk, would gleefully wage war with perceived foes on Twitter rather than engage any criticism of how they run their businesses. Like Steve Jobs, who famously said, “We’ve always been shameless about stealing great ideas,” Arkwright surveyed the technologies of the day, recognized what worked and could be profitable, lifted the ideas, and then put them into action with an unmatched aggression. Like Jeff Bezos, Arkwright hyper-charged a new mode of factory work by finding ways to impose discipline and rigidity on his workers, and adapting them to the rhythms of the machine and the dictates of capital — not the other way around.

We can look back at the Industrial Revolution and lament the working conditions, but popular culture still lionizes entrepreneurs cut in the mold of Arkwright, who made a choice to employ thousands of child laborers and to institute a dehumanizing system of factory work to increase revenue and lower costs. We have acclimated to the idea that such exploitation was somehow inevitable, even natural, while casting aspersions on movements like the Luddites as being technophobic for trying to stop it. We forget that working people vehemently opposed such exploitation from the beginning.

Arkwright’s imprint feels familiar to us, in our own era where entrepreneurs loom large. So might a litany of other first-wave tech titans. Take James Watt, the inventor of the steam engine that powered countless factories in industrial England. Once he was confident in his product, much like a latter-day Bill Gates, Watts sold subscriptions for its use. With his partner, Matthew Boulton, Watts installed the engine and then collected annual payments that were structured around how much the customer would save on fuel costs compared to the previous engine. Then, like Gates, Watts would sue anyone he thought had violated his patent, effectively winning himself a monopoly on the trade. The Mises Institute, a libertarian think tank, argues that this had the effect of constraining innovation on the steam engine for thirty years.

Or take William Horsfall or William Cartwright. These were men who were less innovative than relentless in their pursuit of disrupting a previous mode of work as they strove to monopolize a market. (The word innovation, it’s worth noting, carried negative connotations until the mid-twentieth century or so; Edmund Burke famously called the French Revolution “a revolt of innovation.”) They can perhaps be seen as precursors to the likes of Travis Kalanick, the founder of Uber, the pugnacious trampler of the taxi industry. Kalanick’s business idea — that it would be convenient to hail a taxi from your smartphone — was not remarkably inventive. But he had intense levels of self-determination and pugnacity, which helped him overrun the taxi cartels and dozens of cities’ regulatory codes. His attitude was reflected in Uber’s treatment of its drivers, who, the company insists, are not employees but independent contractors, and in the endemic culture of harassment and mistreatment of the women on staff.

These are extreme examples, perhaps. But extremity is often needed to break down long-held norms, and the potential rewards are extreme, too. Like the mill bosses who shattered nineteenth-century standards and traditions by automating cloth-making, today’s start-up founders aim to disrupt one job category after another with gig work platforms or artificial intelligence, and encourage others to follow their lead. There’s a reason Arkwright and his factories were both emulated and feared. Even two centuries later, the most successful tech titans typically are.

This article originally appeared on Engadget at https://www.engadget.com/hitting-the-books-meet-richard-akrwright-the-worlds-first-tech-titan-205045895.html?src=rss

Hitting the Books: Meet Richard Akrwright, the world’s first tech titan

You didn't actually believe all those founder's myths about tech billionaires like Bezos, Jobs and Musk pulling themselves up by their bootstraps from some suburban American garage, did you? In reality, our corporate kings have been running the same playbook since the 18th century when Lancashire's own Richard Arkwright wrote it. Arkwright is credited with developing a means of forming cotton fully into thread — technically he didn't actually invent or design the machine, but developed the overarching system in which it could be run at scale — and spinning that success into financial fortune. Never mind the fact that his 24-hour production lines were operated by boys as young as seven pulling 13-hour shifts.   

In Blood in the Machine: The Origins of the Rebellion Against Big Tech — one of the best books I've read this year — LA Times tech reporter Brian Merchant lays bare the inhumane cost of capitalism wrought by the industrial revolution and celebrates the workers who stood against those first tides of automation: the Luddites. 

blockprint of two luddites beating on an old timey machine with hammers on a faux aged paper background with red block book title lettering, black author lettering
Hachette Book Group

Excerpted from Blood in the Machine: The Origins of the Rebellion Against Big Tech by Brian Merchant. Published by Hachette Book Group. Copyright © 2023 by Brian Merchant. All rights reserved.


The first tech titans were not building global information networks or commercial space rockets. They were making yarn and cloth. 

A lot of yarn, and a lot of cloth. Like our modern-day titans, they started out as entrepreneurs. But until the nineteenth century, entrepreneurship was not a cultural phenomenon. Businessmen took risks, of course, and undertook novel efforts to increase their profits. Yet there was not a popular conception of the heroic entrepreneur, of the adventuring businessman, until long after the birth of industrial capitalism. The term itself was popularized by Jean-Baptiste Say, in his 1803 work A Treatise on Political Economy. An admirer of Adam Smith’s, Say thought that The Wealth of Nations was missing an account of the individuals who bore the risk of starting new business; he called this figure the entrepreneur, translating it from the French as “adventurer” or “undertaker.” 

For a worker, aspiring to entrepreneurship was different than merely seeking upward mobility. The standard path an ambitious, skilled weaver might pursue was to graduate from apprentice to journeyman weaver, who rented a loom or worked in a shop, to owning his own loom, to becoming a master weaver and running a small shop of his own that employed other journeymen. This was customary. 

In the eighteenth and nineteenth centuries, as now in the twenty-first century, entrepreneurs saw the opportunity to use technology to disrupt longstanding customs in order to increase efficiencies, output, and personal profit. There were few opportunities for entrepreneurship without some form of automation; control of technologies of production grants its owner a chance to gain advantage or take pay or market share from others. In the past, like now, owners started small businesses at some personal financial risk, whether by taking out a loan to purchase used handlooms and rent a small factory space, or by using inherited capital to procure a steam engine and a host of power looms.

The most ambitious entrepreneurs tapped untested technologies and novel working arrangements, and the most successful irrevocably changed the structure and nature of our daily lives, setting standards that still exist today. The least successful would go bankrupt, then as now. 

In the first century of the Industrial Revolution, one entrepreneur looms above the others, and has a strong claim on the mantle of the first of what we’d call a tech titan today. Richard Arkwright was born to a middle-class tailor’s family and originally apprenticed as a barber and wigmaker. He opened a shop in the Lancashire city of Bolton in the 1760s. There, he invented a waterproof dye for the wigs that were in fashion at the time, and traveled the country collecting hair to make them. In his travels across the Midlands, he met spinners and weavers, and became familiar with the machinery they used to make cotton garments. Bolton was right in the middle of the Industrial Revolution’s cotton hub hotspot. 

Arkwright took the money he made from the wigs, plus the dowry from his second marriage, and invested it in upgraded spinning machinery. “The improvement of spinning was much in the air, and many men up and down Lancashire were working at it,” Arkwright’s biographer notes. James Hargreaves had invented the spinning jenny, a machine that automated the process of spinning cotton into a weft— halfway into yarn, basically— in 1767. Working with one of his employees, John Kay, Arkwright tweaked the designs to spin cotton entirely into yarn, using water or steam power. Without crediting Kay, Arkwright patented his water frame in 1769 and a carding engine in 1775, and attracted investment from wealthy hosiers in Nottingham to build out his operation. He built his famous water-powered factory in Cromford in 1771. 

His real innovation was not the machinery itself; several similar machines had been patented, some before his. His true innovation was creating and successfully implementing the system of modern factory work. 

“Arkwright was not the great inventor, nor the technical genius,” as the Oxford economic historian Peter Mathias explains, “but he was the first man to make the new technology of massive machinery and power source work as a system— technical, organizational, commercial— and, as a proof, created the first great personal fortune and received the accolade of a knighthood in the textile industry as an industrialist.” Richard Arkwright Jr., who inherited his business, became the richest commoner in England. 

Arkwright père was the first start‑up founder to launch a unicorn company we might say, and the first tech entrepreneur to strike it wildly rich. He did so by marrying the emergent technologies that automated the making of yarn with a relentless new work regime. His legacy is alive today in companies like Amazon, which strive to automate as much of their operations as is financially viable, and to introduce highly surveilled worker-productivity programs. 

Often called the grandfather of the factory, Arkwright did not invent the idea of organizing workers into strict shifts to produce goods with maximal efficiency. But he pursued the “manufactory” formation most ruthlessly, and most vividly demonstrated the practice could generate huge profits. Arkwright’s factory system, which was quickly and widely emulated, divided his hundreds of workers into two overlapping thirteen-hour shifts. A bell was rung twice a day, at 5 a.m. and 5 p.m. The gates would shut and work would start an hour later. If a worker was late, they sat the day out, forfeiting that day’s pay. (Employers of the era touted this practice as a positive for workers; it was a more flexible schedule, they said, since employees no longer needed to “give notice” if they couldn’t work. This reasoning is reminiscent of that offered by twenty-first-century on‑demand app companies.) For the first twenty-two years of its operation, the factory was worked around the clock, mostly by boys like Robert Blincoe, some as young as seven years old. At its peak, two-thirds of the 1,100-strong workforce were children. Richard Arkwright Jr. admitted in later testimony that they looked “extremely dissipated, and many of them had seldom more than a few hours of sleep,” though he maintained they were well paid. 

The industrialist also built on‑site housing, luring whole families from around the country to come work his frames. He gave them one week’s worth of vacation a year, “but on condition that they could not leave the village.” Today, even our most cutting-edge consumer products are still manufactured in similar conditions, in imposing factories with on‑site dormitories and strictly regimented production processes, by workers who have left home for the job. Companies like Foxconn operate factories where the regimen can be so grueling it has led to suicide epidemics among the workforce. 

The strict work schedule and a raft of rules instilled a sense of discipline among the laborers; long, miserable shifts inside the factory walls were the new standard. Previously, of course, similar work was done at home or in small shops, where shifts were not so rigid or enforced. 

Arkwright’s “main difficulty,” according to the early business theorist Andrew Ure, did not “lie so much in the invention of a proper mechanism for drawing out and twisting cotton into a continuous thread, as in [. . .] training human beings to renounce their desultory habits of work and to identify themselves with the unvarying regularity of the complex automation.” This was his legacy. “To devise and administer a successful code of factory discipline, suited to the necessities of factory diligence, was the Herculean enterprise, the noble achievement of Arkwright,” Ure continued. “It required, in fact, a man of a Napoleon nerve and ambition to subdue the refractory tempers of workpeople.” 

Ure was hardly exaggerating, as many workers did in fact view Arkwright as akin to an invading enemy. When he opened a factory in Chorley, Lancashire, in 1779, a crowd of stockingers and spinners broke in, smashed the machines, and burned the place to the ground. Arkwright did not try to open another mill in Lancashire. 

Arkwright also vigorously defended his patents in the legal system. He collected royalties on his water frame and carding engine until 1785, when the court decided that he had not actually invented the machines but had instead copied their parts from other inventors, and threw the patents out. By then, he was astronomically wealthy. Before he died, he would be worth £500,000, or around $425 million in today’s dollars, and his son would expand and entrench his factory empire. 

The success apparently went to his head— he was considered arrogant, even among his admirers. In fact, arrogance was a key ingredient in his success: he had what Ure described as “fortitude in the face of public opposition.” He was unyielding with critics when they pointed out, say, that he was employing hundreds of children in machine-filled rooms for thirteen hours straight. That for all his innovation, the secret sauce in his groundbreaking success was labor exploitation. 

In Arkwright, we see the DNA of those who would attain tech titanhood in the ensuing decades and centuries. Arkwright’s brashness rhymes with that of bullheaded modern tech executives who see virtue in a willingness to ignore regulations and push their workforces to extremes, or who, like Elon Musk, would gleefully wage war with perceived foes on Twitter rather than engage any criticism of how he runs his businesses. Like Steve Jobs, who famously said, “We’ve always been shameless about stealing great ideas,” Arkwright surveyed the technologies of the day, recognized what worked and could be profitable, lifted the ideas, and then put them into action with an unmatched aggression. Like Jeff Bezos, Arkwright hypercharged a new mode of factory work by finding ways to impose discipline and rigidity on his workers, and adapting them to the rhythms of the machine and the dictates of capital— not the other way around. 

We can look back at the Industrial Revolution and lament the working conditions, but popular culture still lionizes entrepreneurs cut in the mold of Arkwright, who made a choice to employ thousands of child laborers and to institute a dehumanizing system of factory work to increase revenue and lower costs. We have acclimated to the idea that such exploitation was somehow inevitable, even natural, while casting aspersions on movements like the Luddites as being technophobic for trying to stop it. We forget that working people vehemently opposed such exploitation from the beginning. 

Arkwright’s imprint feels familiar to us, in our own era where entrepreneurs loom large. So might a litany of other first-wave tech titans. Take James Watt, the inventor of the steam engine that powered countless factories in industrial England. Once he was confident in his product, much like a latter-day Bill Gates, Watts sold subscriptions for its use. With his partner, Matthew Boulton, Watts installed the engine and then collected annual payments that were structured around how much the customer would save on fuel costs compared to the previous engine. Then, like Gates, Watts would sue anyone he thought had violated his patent, effectively winning himself a monopoly on the trade. The Mises Institute, a libertarian think tank, argues that this had the effect of constraining innovation on the steam engine for thirty years. 

Or take William Horsfall or William Cartwright. These were men who were less innovative than relentless in their pursuit of disrupting a previous mode of work as they strove to monopolize a market. (The word innovation, it’s worth noting, carried negative connotations until the mid-twentieth century or so; Edmund Burke famously called the French Revolution “a revolt of innovation.”) They can perhaps be seen as precursors to the likes of Travis Kalanick, the founder of Uber, the pugnacious trampler of the taxi industry. Kalanick’s business idea— that it would be convenient to hail a taxi from your smartphone— was not remarkably inventive. But he had intense levels of self-determination and pugnacity, which helped him overrun the taxi cartels and dozens of cities’ regulatory codes. His attitude was reflected in Uber’s treatment of its drivers, who, the company insists, are not employees but independent contractors, and in the endemic culture of harassment and mistreatment of the women on staff. 

These are extreme examples, perhaps. But to disrupt long-held norms for the promise of extreme rewards, entrepreneurs often pursue extreme actions. Like the mill bosses who shattered 19th-century standards by automating cloth-making, today’s start‑up founders aim to disrupt one job category after another with gig work platforms or artificial intelligence, and encourage others to follow their lead. There’s a reason Arkwright and his factories were both emulated and feared. Even two centuries later, many tech titans still are.

This article originally appeared on Engadget at https://www.engadget.com/hitting-the-books-blood-in-the-machine-brian-merchant-hachette-book-group-143056410.html?src=rss

X is suing California over social media content moderation law

X, the social media company previously known as Twitter, is suing the state of California over a law that requires companies to disclose details about their content moderation practices. The law, known as AB 587, requires social media companies to publish information about their handling of hate speech, extremism, misinformation and other issues, as well as details about internal moderation processes.

Lawyers for X argue that the law is unconstitutional and will lead to censorship. It “has both the purpose and likely effect of pressuring companies such as X Corp. to remove, demonetize, or deprioritize constitutionally-protected speech,” the company wrote in the lawsuit. “The true intent of AB 587 is to pressure social media platforms to ‘eliminate’ certain constitutionally-protected content viewed by the State as problematic.”

X is not alone in its opposition to the law. Though the measure was backed by some activists, a number of industry groups took issue with AB 587. Netchoice, a trade group which represents Meta, Google, TikTok and other tech companies, argued last year that AB 587 would help bad actors evade companies’ security measures, and make it harder for them to enforce their rules.

At the same time, AB 587's backers have said it’s necessary to increase the transparency of major platforms. “If @X has nothing to hide, then they should have no objection to this bill,” Assemblyman Jesse Gabriel, who wrote AB 587, said in response to X’s lawsuit.

This article originally appeared on Engadget at https://www.engadget.com/x-is-suing-california-over-social-media-content-moderation-law-233034890.html?src=rss