For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “Water is the lifeblood of our state” – Gov. Newsom
NATIONAL ISSUES
- Newsom, Trump & California’s Lifeblood – Water
- Governor’s New Plan for Water
- Feds Tentatively Reject California’s $1.2-Billion Medicaid Financing
- Natural Gas Pains – Golden State Cities Lead Nation in All-Electric Mandates
EXPORTS
TECH COMPANY ETHICS – IMPACTS US ALL
FOR THE WEEK ENDING FEB. 7, 2020
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
Stay current daily! For our focused updates via Twitter: @jrgualco / @robertjgore / @gualcogroup
READ ALL ABOUT IT!!
Newsom, Trump & California’s Lifeblood – Water
Sacramento Bee
Two months ago, Gov. Gavin Newsom seemed poised to file yet another suit against President Donald Trump — this time, over a federal plan to pump more water to Trump’s farming allies in the San Joaquin Valley.
Instead, Newsom announced a compromise this week that aims to avoid another protracted legal battle. The Democratic governor outlined a sweeping, $5.2 billion water-sharing agreement that Newsom’s team hopes will put an end California’s never-ending tensions between shipping river water to farms and cities and protecting critically endangered fish species.
A year into his administration, Newsom is grappling with forces nearly every California governor has struggled to control: powerful water interests in Southern California, wealthy farmers in the Valley, entrenched environmentalists and, this time, a combative Republican administration in Washington.
The governor’s newest proposal signals Newsom may be softening his fight against Trump, but opening another battle. Newsom may have traded a court fight with Trump for a legal battle with the very environmentalists the Democratic administration has seen as allies.
“This is a bear hug of the Trump administration extinction plan by the Newsom administration,” said Jon Rosenfield, senior scientist with San Francisco Baykeeper.
Newsom, though, sees his plan as a blueprint for a new way forward in California water — something he’s been aiming for since taking office. “We have to get past the old binaries, like farmers versus environmentalists,” he said at his first State of the State address last February.
Although the state hasn’t been shy about suing the Trump administration over environmental issues — notably air pollution and climate change — Newsom has made a point of reaching out to the Valley farm community and is trying to find a middle ground on water policy.
Broadly, the proposal Newsom outlined this week has something for each side. It would set aside up to 900,000 acre-feet of additional water in California’s mightiest rivers each year — enough to fill Folsom Lake — for the benefit of struggling fish populations such as Chinook salmon and the Delta smelt.
It calls for state taxpayers to pay some $2.2 billion, the federal government to pay $740 million and state agricultural and urban water agencies to kick down an additional $2.2 billion. The funds would go primarily to fund habitat restoration projects and to pay farmers to fallow some of their land and to buy irrigation and drinking water to be used for environmental flows, according to Newsom’s proposal.
The agreements also would need to be signed by the various water agencies that would have to commit to surrendering water and spending billions on restoring habitat.
Newsom’s top environmental aides insisted their new plan is based on rigorous scientific analysis and would restore fish populations through a mix of increased river flows and habitat projects — projects paid with state and federal tax dollars and money kicked in by agricultural and urban water agencies across California.
“It’s very defensible, scientifically and legally,” said Jared Blumenfeld, Newsom’s secretary of the California Environmental Protection Agency. “There’s folks who don’t want a voluntary approach no matter what the scenario. No matter what we do there are people who are going to say we should just regulate. I think those folks are out of step with the realities we face today.”
Wade Crowfoot, secretary of the Natural Resources Agency, said the Newsom plan still faces plenty of legal and regulatory hurdles before it can get finalized. “It’s going to need to stand up to significant scientific scrutiny,” he said.
The state has filed more than 60 lawsuits against the Trump administration over air pollution, immigration and other issues. It’s been mostly successful; a tally by the website PolitiFact last fall showed the state winning 16 cases and losing two. Dozens of cases are still pending.
Water would seem to be an obvious topic for another lawsuit. Trump has pushed his administration to streamline environmental protections to deliver more supplies through the Sacramento-San Joaquin Delta — the fragile hub of the state’s convoluted water network — to farms and cities in the south state. He’s mocked California for letting water bypass the Delta pumping stations and flow out to the Pacific in order to protect the nearly-extinct Delta smelt and other endangered fish.
“What’s happened there is disgraceful,” he said in late 2018 as he signed a presidential memorandum directing an overhaul of environmental protections in California. “There’s so much water, they don’t know what to do with it, they send it out to sea.”
Last fall, the White House unveiled its most concrete plan yet for accomplishing Trump’s vision — a rewrite of environmental rules to allow more water to get pumped south through the Delta.
Newsom’s administration initially vowed to sue to block the plan. That was in November. But instead of rushing to the courthouse, state officials have been talking with their federal counterparts about what the Newsom administration believes are flaws in the Trump administration’s plan.
This week, top officials in Newsom’s administration defended their cautious approach.
“The goal of any lawsuit would be settlement,” Blumenfeld said. “Our goal is to settle these issues out. The goal isn’t to have a fight with the Trump administration. … An all-out fight with the Trump administration … is not our intention. Our intention is to solve these issues.”
The effort to find a compromise is driven in part by pressure from agricultural forces. Westlands Water District, the politically influential farm-irrigation agency in Fresno and Kings counties, threatened in December to withdraw from negotiations over Newsom’s water-sharing plan if the governor sued Trump over the Delta.
“The state’s threat of litigation (against Trump) places those far-reaching changes at risk,” Westlands general manager Tom Birmingham said in an email to Blumenfeld and Crowfoot.
This week, Newsom’s administration said it isn’t backing down against Trump.
“We’ll be very clear and have been very clear that we’ll stand up to the federal agencies when we need to and work with them when where we can. If needed, we will file a legal complaint,” Crowfoot said.
Newsom’s new plan expands a tentative water-sharing agreement brokered by his predecessor, Jerry Brown, in late 2018.
But Brown’s plan was met with considerable skepticism from some environmentalists who said the endangered fish species need — and are legally entitled to — considerably more water as well as protection from the harms caused by Central Valley dams and the Delta water-export pumps.
So far, most environmentalists are finding fault with Newsom’s plan as well.
Kim Delfino, the California program director for Defenders of Wildlife, said the voluntary agreements Newsom’s administration outlined Tuesday lack the necessary teeth to ensure the environment is protected.
“An essential ingredient of any successful compromise is that the deal meets existing environmental protection laws,” she said. “This deal will not and therefore will fail.”
Not all environmentalists are opposed to Newsom’s plan. Maurice Hall, of the Environmental Defense Fund, gave the plan tentative support.
“Additional analysis is still needed, and many hurdles still must be overcome before we can support a final agreement,” he said in a joint prepared statement Newsom’s administration released Tuesday. “That said, we are cautiously optimistic … EDF is willing to stay at the negotiating table for now.”
When it comes to water, Newsom has shown a willingness to rile up his traditional allies in the environmental community.
Not long after his election, Newsom ousted Felicia Marcus, the longtime chairwoman of the State Water Resources Control Board. That was after the board moved ahead with regulations to allocate much more water for fish, instead of waiting for the warring factions to sign the earlier compromise plan brokered by Brown.
Newsom then vetoed a bill designed to overturn all of Trump’s environmental initiatives — after key water agencies threatened to pull out of Brown’s settlement plan.
At an environmental conference in Sacramento last week, while his aides continued negotiations on the expanded settlement plan that was just unveiled, Newsom reiterated his desire to find common ground with the Trump administration on water.
“Give us a chance. I don’t need to be told we need to be tough against the Trump administration …. I know that,” he said. “But give us a chance.”
https://www.sacbee.com/news/local/environment/article239967733.html#storylink=cpy
Gavin Newsom
Water is the lifeblood of our state. It sustains communities, wildlife and our economy—all of which make California the envy of the world.
Reliably securing this vital and limited resource into the future remains a challenge, especially with a warming and changing climate.
For more than a year, my Administration has worked to find a comprehensive solution for the Sacramento-San Joaquin Bay Delta—a path to immediately improve the health of these waterways, create certainty for the 35 million Californians who depend on these water sources, and maintain the economic vitality of the Central Valley.
Historically, disputes over water, or what some call “water wars,” have pitted stakeholders against one another: urban vs. rural; agriculture vs. conservation; North vs. South.
Today, my administration is proposing a path forward, one that will move past the old water binaries and set us up for a secure and prosperous water future.
Guided by science, this new framework will provide the foundation for binding voluntary agreements between government agencies and water users with partnership and oversight from environmental groups.
These agreements will require adaptive, holistic management of enhanced water flows and habitats to protect, restore, and enhance California’s largest rivers and the Delta.
These agreements will be grounded in what is required to achieve scientific and legal adequacy. They will significantly increase the required amount of water flowing through rivers and the Delta. They require a historic addition of 60,000 acres of critical habitat and provide certainty to strengthen the health of our economy and our environment.
If achieved, the voluntary agreements will establish a partnership with environmental conservation groups, water agencies, and governments across jurisdictions.
The water and funding from these stakeholders will provide an unprecedented pool of resources to support the restoration of critical fish habitat and billions of gallons of flow water in our rivers and through the Delta over the next 15 years.
Today, I am committing to achieving a doubling of California’s salmon population by 2050. These agreements will be foundational to meeting that goal.
Over the past year, my administration advanced a number of additional actions that are consistent with this new approach.
Recognizing the urgency of increasing access to clean water, the Legislature last year fast-tracked a bill to my desk that provided emergency relief to communities without access to safe drinking water.
I was proud that this was one of the first bills I signed as governor, and even prouder to have created with the Legislature a first-of-its-kind fund to support long-term access to safe drinking water.
In April, I signed an executive order directing state agencies to develop a set of recommendations to ensure safe and resilient water supplies across our state, including actions to improve water delivery structures and support regional water security projects.
My administration is also working closely with local communities to sustainably manage our groundwater for the first time in our state’s history, and my budget includes a $4.75 billion climate resilience bond to protect communities and natural habitats from the impacts of climate change, such as drought, flooding, wildfires, heat waves, and sea level rise.
While we are committed to collaborating with the federal government where we can, we have not and will not hesitate to stand up to them when they fall short of their responsibilities.
Stewarding California’s natural resources is a responsibility we share with the federal government, and we will continue to utilize every tool at our disposal, including legal action, to ensure the federal government fulfills its obligation.
California agencies are working in real-time with the federal government to ensure adequate protections of endangered fish populations from water infrastructure in the Delta.
Inaction, recalcitrance, and adherence to the status-quo puts our water future at risk. The alternative to the voluntary agreements is a contentious regulatory process that will take many years and require adjudicating a thicket of litigation in every direction before restoring river flows.
Those years will be critical years for salmon populations, which without immediate intervention will further decline. Access to water for tens of millions of Californians will become less reliable, impacting our people and economy. And our communities and businesses will be further threatened by the impacts of climate change. These outcomes are unacceptable.
The world is changing and we have to change with it. Creating a water future our children can be proud of will require us to reject the old binaries of the past. This time of unprecedented challenge demands unprecedented partnership. Let’s work together to meet this moment.
Feds Tentatively Reject California’s $1.2-Billion Medicaid Financing
Sacramento Bee
The federal government notified Gov. Gavin Newsom’s administration that it is rejecting California’s Medicaid financing proposal, a decision that could cost the state $1.2 billion starting next year.
The decision doesn’t affect this year’s budget, and Newsom’s administration plans to continue talks with the federal Centers for Medicare and Medicaid Services over changes to the proposal that might win federal approval, said Department of Finance spokesman H.D. Palmer.
“Even though there’s a denial of our request from the feds in its current form, it doesn’t mean the door is closed on this issue,” Palmer said.
If those efforts aren’t successful, the Finance Department has projected a $1.2 billion hit to the state’s general fund for the budget year starting in July 2021, Palmer said. Newsom’s budget proposal for this year is $222 billion.
The federal government splits with states the cost of health care for people enrolled in Medicaid. In general, the federal government pays 62.5 percent while states pay 37.5 percent, but the percentages vary by state under special arrangements states can make through waivers.
California’s most recent waiver request proposed a variation on a common Medicaid funding mechanism states use to boost their federal Medicaid payments.
Under the arrangement, the state taxes insurers based on how many people are enrolled in their Medicaid plans. It uses that money to offset the state’s share of the Medicaid spending and reimburses the insurers for most of the money, according to a Legislative Analyst’s Office analysis.
The letter from the Centers for Medicare and Medicaid Services says California’s proposed tax structure creates a system in which health plans that participate in Medicaid are taxed differently than those that don’t, which the letter says runs afoul of the agency’s regulations.
Natural Gas Pains – California Cities Lead Nation in All-Electric Mandates
NY Times
When Berkeley, Calif., became the first city in the country to ban natural gas hookups in new construction last July, no one knew the effects would ripple out so far and so fast.
The Berkeley ban was part of an effort to wean developers off buildings that consume fossil fuels, a cause of global warming, and promote cleaner electric power. And it spurred other communities in the state to enact ordinances to encourage all-electric construction.
The effort has spread to other parts of the country. The Massachusetts town of Brookline passed a prohibition on new gas connections, and municipalities near it are poised to do the same.
Now major cities, including Los Angeles, San Francisco and Seattle, are in various stages of considering pro-electric legislation as part of the “electrify everything” movement.
As interest quickly blossoms, real estate and construction industries are scrambling to keep up. Some national organizations that represent builders and developers have yet to formulate a position.
Their members are not of one mind, however. Some developers and builders are already heading down the all-electric path in an effort to meet their own goals for reducing carbon dioxide emissions, even if not legally required to do so. But others are balking at the fast rollout, saying they want to retain the option of using gas or simply believe the new rules are being put into action too quickly.
“Builders call up asking: ‘Is this legal? What are the costs? What do I have to do?’” said Robert Raymer, technical director of the California Building Industry Association, a trade group with 3,100 members.
And for residential developers, there’s the question of whether the homes they build will appeal to buyers if they are not equipped with gas stoves. In the Southeast, nearly 45 percent of homes use only electricity, according to the federal Energy Information Administration, so people there are accustomed to electric stoves. But in many parts of the country, Americans have a choice, and more of them prefer cooking with gas, according to recent data from the National Multifamily Housing Council.
“It’s a major sticking point,” said Aaron Fairchild, the chief executive of Green Canopy, which installs induction stoves, which are high-tech ranges that use magnetic waves for cooking, in the all-electric houses it builds in Seattle and Portland, Ore. Mr. Fairchild has hired chefs to do cooking demonstrations at open houses to introduce the appliances.
The emergence of legislation that bans natural gas hookups or promotes all-electric construction is not hard to understand. In the absence of a federal commitment to addressing climate change, states and local communities have adopted their own carbon goals, which often cannot be reached unless emissions decline in the building sector.
Globally, buildings generate nearly 40 percent of greenhouse gas emissions, but in densely developed American cities, the rate can be substantially higher.
For years, natural gas has been promoted as a cleaner alternative to coal-fired electricity, and its use has surged. But carbon emissions from natural gas use have also grown.
The Global Carbon Project, a climate science group, estimates that carbon dioxide emissions added nearly 37 billion metric tons of emissions to the atmosphere last year, driven by increased use of oil and natural gas.
Experts say gas must be phased out and electric power increased in development, especially now that the electric power system, known as the grid, is becoming cleaner, thanks to the addition of renewable energy such as wind and solar power.
Kate Harrison, the councilwoman who introduced the Berkeley ban, said that dozens of public officials from around the country had contacted her for advice about how to enact similar legislation.
The 22 other California cities and counties that followed Berkeley’s lead, including San Jose, the country’s 10th-largest city, have done so with building codes that encourage electric wiring and appliances rather than ban gas outright.
Brookline’s ban, which applies to new construction and gut renovations but makes some exemptions for buildings like research laboratories, awaits review by the Massachusetts attorney general before it can become law.
In nearby Cambridge, Mass., city officials have already held hearings on an ordinance that would block natural gas connections in new buildings and those being substantially renovated.
Some real estate companies, however, are already experimenting with all-electric construction, prompted by their own environmental goals or goaded by investors who “want to know what they are doing to address climate risk in their portfolios,” said Billy Grayson, executive director of the Center for Sustainability and Economic Performance at the Urban Land Institute, a real estate think tank.
Kilroy Realty, a large commercial developer in Los Angeles, has a portfolio that includes 17 percent all-electric buildings, said Sara Neff, the company’s senior vice president for sustainability. Ms. Neff expects that figure to grow.
Prominent all-electric projects are in the works:
Adobe, the software company, is erecting an 18-story all-electric office building at its headquarters in San Jose, Calif.
Alloy Development plans to break ground this summer on a 38-story all-electric mixed-use tower as part of a five-building project in Downtown Brooklyn.
And a massive development under review in Toronto was proposed by Sidewalks Labs, an Alphabet company, and Waterfront Toronto, a public agency. It will be an all-electric project, averting the need for any gas infrastructure.
“In Toronto, it makes sense to design for electricity because the grid is so green, from hydro and nuclear power,” said Charlotte Matthews, director of sustainability for Sidewalk Labs. “The trick is how to do it and not increase utility costs, and part of this is educating the market and showing that it can be done affordably.”
Members of the real estate industry are not the only ones stunned by how rapidly the all-electric movement has caught on.
Even environmentalists are surprised, said Rob Jackson, a professor at Stanford University who leads the Global Carbon Project. He said that “dozens for sure, likely hundreds” of jurisdictions would pass gas bans and pro-electric legislation this year, though lawsuits challenging them may also proliferate.
And at any rate, keeping gas out of new building construction is one thing; dealing with the 70 million structures already standing in the United States is quite another, said Bruce Nilles, director of the building electrification program at the Rocky Mountain Institute, an energy research organization.
“We’ve barely started,” Mr. Nilles said.
https://www.nytimes.com/2020/02/04/business/all-electric-green-development.html
California Exporters Navigate Tarif War
Beacon Economics
Exports of California-made products edged up slightly in December, according to Beacon Economics’ analysis of the latest U.S. trade statistics released this morning by the U.S. Census Bureau.
“Probably the most intriguing finding to emerge from today’s trade numbers is just how successful California exporters have been in navigating the tariff war between the United States and China,” said Jock O’Connell, Beacon Economics’ International Trade Advisor. “Despite what news headlines might lead us to believe, California’s merchandise exports to China in the last quarter of 2019 were up 12.6% over the same quarter one year earlier.” Comparatively, total U.S. exports to China rose by 3.6% over the same period.
California businesses shipped a total of $14.03 billion in merchandise abroad in December, a nominal 0.4% increase over the $13.98 billion in exports recorded in December 2018. Shipments of manufactured goods rose 2.8% to $9.11 billion from $8.86 billion one year earlier. However, exports of non-manufactured goods (chiefly the state’s agricultural products and raw materials) declined 6.7% from $1.95 billion. And, as has been the case in recent months, the state’s export numbers were also pulled down by a 1.9% dip in re-exports, which fell to $3.10 billion from $3.16 billion.
California accounted for 10.3% of the nation’s overall merchandise export trade in December, up from 10.7% in the previous year. For all of 2019, the state’s exports totaled $173.33 billion, down 2.8% from the $178.40 billion recorded in 2018. Manufactured exports slipped by 0.4% from 2018, while shipments abroad of non-manufactured goods, valued at $112.11 billion, were off by 1.0%. Re-exports tumbled 10.0% to $38.97 billion.
“On net, the United States has experienced remarkably little difficulty adjusting to the trade conflict with China and to a weaker global economy,” said Christopher Thornberg, Founding Partner of Beacon Economics. “This isn’t too surprising given the strong brands and large buyers that operate in the U.S. and give us an edge during trying times.”
https://beaconecon.com/publications/california-trade-report/
Anywhere But Here…California’s Exodus & Consequences
The Atlantic
Hey, where did all these Californians come from?
Talk of a “California Exodus” is sweeping the country—and so are anxieties about its effects on the rest of the West. In October, Boise mayoral candidate Wayne Richey proposed at an election forum to build a $26 billion wall to keep out people moving from the Golden State. (His backup plan to stop the invasion of Boise? “Trash the place.”) A viral Wall Street Journal article recounted the plight of a small Idaho town buckling under the stress of thousands of inbound Californians. And this month, Texas Governor Greg Abbott issued a warning on Twitter to Californians moving to his state: “Remember those high taxes, burdensome regulations, & socialistic agenda advanced in CA? We don’t believe in that.” The sentiment was echoed in various warnings in Dallas newspapers about the awful “California-ing” of North Texas.
But is the California Exodus real?
From one perspective, the answer is very clearly yes. In 2012, California gained 113,000 people on net through domestic and international migration. Last year, California lost 40,000 people on net to migration, according to its own demographers. The state still grew, thanks to births, but at the lowest rate on record. Now the U.S. state most synonymous with all varieties of growth—vegetal, technological, and human—is at the precipice of its first-ever population decline.
When you pull back the lens a few decades, however, the “exodus” doesn’t look quite so biblical. The number of outbound Californians in 2018 was no higher than it was in the mid-2000s—or the mid-1990s. “After the Cold War ended, there were huge federal cutbacks in the defense and aerospace industry, and the economy dried up in parts of Southern California,” says H. D. Palmer, the deputy director for external affairs at the California Department of Finance. “Exodus is a freighted word, but if anything was an exodus, it was the mid-1990s.”
So if Californians aren’t moving more than in previous years, why are so many places suddenly freaking out about the influx of Golden Staters?
Western states taking in new Californians might be more anxious about change than they once were. Texas, for example, has been the most popular destination for outbound Californians for more than a decade, consistently averaging about 60,000 to 70,000 new Golden Staters per year. But now the state is at an inflection point, between its history as a ruby-red conservative stronghold and its future as a more mixed state with blue metros and red rural areas. In this context, the next SoCal family that U-Hauls into North Texas isn’t just some nice couple with different taste in barbecue; instead, they’re potentially the demographic straw that breaks the GOP’s back.
And while California’s overall out-migration isn’t unprecedented, some states and counties are taking in an unprecedented share of newcomers from there. The number of Californians moving to Idaho, for instance, increased by 120 percent from 2012 to 2018. The number of Los Angeles residents moving to Dallas and Houston declined in those years, but the number of Angelenos moving to Plano, Texas, tripled.
California’s population problem isn’t just about adults who are leaving; it’s also about the kids who aren’t there to begin with. The biggest issue, you could say, isn’t exodus, but genesis.
Last year, I wrote that expensive housing in America’s richest cities was pushing away families with children, leading to a “childless city.” California’s biggest metros are on the bleeding edge of this trend. Since the end of the Great Recession, home prices in Los Angeles, San Diego, and San Francisco have increased by 70 percent, 80 percent, and 116 percent, respectively. This has driven middle-class families to either move inland or leave entirely. San Francisco has the lowest percentage of children under 18 of any major city in the U.S., and Los Angeles County has seen a 17 percent decline in the number of kids in the past 10 years.
Births are falling, due to declining fertility among all groups, including Latinos, who make up about one-third of the state’s population. And deaths are increasing as the population ages. The state’s annual natural growth—births minus deaths—has plummeted from more than 300,000 in 2008 to 180,000 today. According to figures shared by the California Department of Finance, the median age is rising 40 percent faster than that of the rest of the U.S. population.
As the state gets older, it’s also getting richer. California’s incoming residents are most likely to be 20- and 30-somethings making more than $100,000 a year with bachelor’s or graduate degrees, while its outgoing residents tend to be less educated and earn less than $50,000. Over time, this trend will make California wealthier in average income—but poorer in electoral power. William Frey, a demographer with the Brookings Institution, has projected that, for the first time ever, the state’s population slowdown will likely cost it a congressional district after the 2020 census. (Texas, he said, could gain three seats.)
California’s crisis isn’t that people don’t want to be there. Lots of people want to live near the Pacific coastline, but expensive housing has drawn a velvet rope around that economy for the richer, more educated, and old. The Golden State is slowly turning platinum—an exclusive and opulent shade of gray.
https://www.theatlantic.com/ideas/archive/2020/01/the-truth-about-the-california-exodus/605833/
Ethics for Tech: Silicon Valley’s “Billion-Dollar Question” &
Protocol
Fifty-two floors below the top of Salesforce Tower, I meet Paula Goldman in a glass-paneled conference room where the words EQUALITY OFFICE are spelled out on a patchwork bunting banner, the kind of decoration you might buy for a child’s birthday party.
Goldman has a master’s degree from Princeton and a Ph.D. from Harvard, where she studied how controversial ideas become mainstream. She arrived at Salesforce just over a year ago to become its first-ever Chief Ethical and Humane Use Officer, taking on an unprecedented and decidedly ambiguous title that was created specifically for her unprecedented, ambiguous, yet highly specific job: see to it that Salesforce makes the world better, not worse.
“I think we’re at a moment in the industry where we’re at this inflection point,” Goldman tells me. “I think the tech industry was here before, with security in the ’80s. All of a sudden there were viruses and worms, and there needed to be a whole new way of thinking about it and dealing with it. And you saw a security industry grow up after that. And now it’s just standard protocol. You wouldn’t ship a major product without red-teaming it or making sure the right security safeguards are in it.”
“I think we’re at a similar moment with ethics,” she says. “It requires not only having a set of tools by which to do the work, but also a set of norms, that it’s important. So how do you scale those norms?”
I ask her how those norms are decided in the first place.
“In some sense, it’s the billion-dollar question,” she says. “All of these issues are extremely complicated, and there’s very few of them where the answer is just absolutely clear. Right? A lot of it does come down to, which values are you holding up highest in your calculus?”
In the wake of the Cambridge Analytica scandal, employee walkouts, and other political and privacy incidents, tech companies faced a wave of calls to hire what researchers at the Data & Society Research Institute call “ethics owners,” people responsible for operationalizing “the ancient, domain-jumping, and irresolvable debates about human values that underlie ethical inquiry” in practical and demonstrable ways.
Salesforce hired Goldman away from the Omidyar Network as the culmination of a seven-month crisis-management process that came after Salesforce employees protested the company’s involvement in the Trump administration’s immigration work. Other companies, responding to their own respective crises and concerns, have hired a small cadre of similar professionals — philosophers, policy experts, linguists and artists — all to make sure that when they promise not to be evil, they actually have a coherent idea of what that entails.
So then what happened?
While some tech firms have taken concrete steps to insert ethical thinking into their processes, Catherine Miller, interim CEO of the ethical consultancy Doteveryone, says there’s also been a lot of “flapping round” the subject.
Critics dismiss it as “ethics-washing,” the practice of merely kowtowing in the direction of moral values in order to stave off government regulation and media criticism. The term belongs to the growing lexicon around technology ethics, or “tethics,” an abbreviation that began as satire on the TV show “Silicon Valley,” but has since crossed over into occasionally earnest usage.
“If you don’t apply this stuff in actual practices and in your incentive structures, if you don’t have review processes, well, then, it becomes like moral vaporware,” says Shannon Vallor, a philosopher of technology at the Markkula Center for Applied Ethics at Santa Clara University. “It’s something that you’ve promised and you meant to deliver, but it never actually arrived.”
Google, infamously, created an AI Council and then, in April of last year, disbanded it after employees protested the inclusion of an anti-LGBTQ advocate. Today, Google’s approach to ethics includes the use of “Model Cards” that aim to explain its AI.
“That’s not anything that has any teeth,” says Michael Brent, a data ethicist at Enigma and a philosophy professor at the University of Denver. “That’s just like, ‘Here’s a really beautiful card.'”
The company has made more-substantial efforts: Vallor just completed a tour of duty at Google, where she taught ethics seminars to engineers and helped the company implement governance structures for product development. “When I talk about ethics in organizational settings, the way I often present it is that it’s the body of moral knowledge and moral skill that helps people and organizations meet their responsibilities to others,” Vallor tells me.
More than 100 Google employees have attended ethics trainings developed at the Markkula center. The company also developed a fairness module as part of its Machine Learning Crash Course, and updates its list of “responsible AI practices” quarterly. “The vast majority of the people who make up these companies want to build products that are good for people,” Vallor says. “They really don’t want to break democracy, and they really don’t want to create threats to human welfare, and they really don’t want to decrease literacy and awareness of reality in society. They want to make things they’re proud of. So am I going to do what I can to help them achieve that? Yes.”
The Markkula center, where Vallor works, is named after Mike Markkula Jr., the “unknown” Apple co-founder who, in 1986, gave the center a starting seed grant in the same manner that he gave the young Steve Jobs an initial loan. He never wanted his name to be on the building — that was a surprise, a token of gratitude, from the university.
Markkula has retreated to living a quiet life, working from his sprawling gated estate in Woodside. These days, he doesn’t have much contact with the company he started — “only when I have something go wrong with my computer,” he tells me. But when he arrived at the Santa Clara campus for an orientation with his daughter in the mid-’80s, he was Apple’s chairman, and he was worried about the way things were going in the Valley. “It was clear to us both, Linda [his wife] and I, that there were quite a few people who were in decision-making positions who just didn’t have ethics on their radar screen,” he says. “It’s not that they were unethical, they just didn’t have any tools to work with.”
At Apple, he spent a year drafting the company’s “Apple Values” and composed its famous marketing philosophy (“Empathy, Focus, Impute.”). He says that there were many moments, starting out, when he had to make hard ethical choices, but “fortunately, I was the guy running the company, so I could do whatever I wanted.”
“I’d have a heck of a time running Apple today, running Google today,” he says. “I would do a lot of things differently, and some of them would have to do with philosophy, ethics, and some of them would have to do with what our vision of the world looks like 20 years out.”
The Markkula Center for Applied Ethics is one of the most prominent voices in tech’s ethical awakening. On its website, it offers a compendium of materials on technology ethics, including a toolkit (“Tool 6: Think About the Terrible People”), a list of “best ethical practices” (“No. 2: Highlight the Human Lives and Interests behind the Technology”), and an app (“Ethics: There’s an App for That!” reads a flier posted at the entrance).
Every one of these tools is an attempt to operationalize the basic tenets of moral philosophy in a way that engineers can quickly understand and implement. But Don Heider, the Markkula center’s executive director, is quick to acknowledge that it’s an uphill fight. “I’d say the rank-and-file is more open to it than the C-suite,” he says.
Even at Salesforce, practitioners like Yoav Schlesinger, the company’s principal of ethical AI Practice, worry about imposing an “ethics tax” on their teams — an ethical requirement that might call for “heavy lifting” and would slow down their process.
Under Goldman’s direction, the company has rolled out a set of tools and processes to help Salesforce employees and its clients “stretch their moral imagination, effectively,” as Schlesinger puts it. The company offers an educational module that trains developers in how to build “trusted AI” and holds employee focus groups on ethical questions. “Our essential task is not teaching ethics like teaching deontological versus Kantian or utilitarian approaches to ethics — that’s probably not what our engineers need,” he says. “What people need is training in ethical risk spotting: How do you identify a risk, and what do you do about it when you see it from a process perspective, not from a moral perspective.”
Goldman agrees: “It’s not not from a moral perspective,” she says. “It’s just more that we’re focused on the practical, ‘what do you do about it,’ than we are about the theory.”
The company has also created explainability features, confidential hotlines, and protected fields that warn Salesforce clients that things like ZIP code data is highly correlated with race. They have refined their acceptable use policy to prevent their e-commerce platform from being used to sell a wide variety of firearms and to prevent their AI from being used to make the final call in legal decision-making. The Ethical and Humane Use team holds office hours where employees can drop by to ask questions. They have also begun to make their teams participate in an exercise called “consequence scanning,” developed by researchers at Doteveryone.
Teams are asked to answer three questions: “What are the intended and unintended consequences of this product or feature?” “What are the positive consequences we want to focus on?” “What are the consequences we want to mitigate?” The whole process is designed to fit into Agile software development, to be as minimally intrusive as possible. Like most ethical interventions currently in use, it’s not really supposed to slow things down, or change how business operates. Beware the “ethics tax.”
“Nobody touches running code,” says Subbu Vincent, a former software engineer and now the director of media ethics at the Markkula center. Engineers, he says, “always want to layer their new effort on top of this system of software that’s handling billions of users. If they don’t, it could end their career.”
And therein lies the problem. These approaches, while well-intentioned and potentially impactful, tend to suggest that ethics is something that can be quantified, that living a more ethical life is merely a matter of sitting through the right number of trainings and exercises.
“What’s notable is that the solutions that are coming out are using the language of, ‘hey, we’ll fit within the things you’re already familiar with,'” says Jacob Metcalf, a researcher at Data & Society. “They’re not saying, ‘hey, maybe don’t be so voracious about user data, maybe you don’t need to grow to scale using these exploitative methods.’ They’re not forcing a change in the diversity of who is in the room.”
With colleagues danah boyd and Emmanuel Moss, Metcalf recently surveyed a group of 17 “ethics owners” at different companies. One engineer told them that people in tech “are not yet moved by ethics.” An executive told them that market pressures got in the way: “If we play by these rules that kind of don’t even exist, then we’re at a disadvantage,” the executive said. The “ethics owners” they spoke to were all experimenting with different approaches to solving problems, but often tried to push for simple, practical solutions adopted from other fields, like checklists and educational modules.
“By framing ethics as a difficult but tractable technological problem amenable to familiar approaches, ethics owners are able to enroll the technical and managerial experts they feel they need as full participants in the project of ‘doing ethics,'” the researchers write. “However, building a solution in the same mold that was used to build the problem is itself a form of failure.”
If and when ethics does “arrive” at a company, it often does so quietly, and ideally invisibly. “Success is bad stuff not happening, and that’s a very hard thing to measure,” says Miller, the acting CEO of Doteveryone. In a recent survey of UK tech workers, Miller and her team found that 28% had seen decisions made about a technology that they believed would have a negative effect upon people or society. Among them, one in five went on to leave their companies as a result.