and I've worked at the Institute for a few years. And when there's something particularly interesting, I think I have to open my desk. Ah, very good, well I have your book in my desk. So we had a real eye-opener maybe two, three years ago. You were chairing Jonathan's, a train came in, and he stunned everyone in the room by saying, in preparation for the Olympics in China, the Chinese government had a system where they could identify everyone, at any point in the stadium using their mobile phone. And this was explained to a US congressman who was visiting just his jaw dropped because of the implication. Well, the question I am is, in a sense, when you say what you're saying, you're going up against a very powerful, within the tech world anyway, very powerful consensus of utopianism. And one great thing that's happened is that there's been a lot of publicity around your argument. But behind the scenes, what kind of responses has it elicited?  Or are they being a bit more mature and have things moved on a bit? Well, it's my main, you know, frenemy, if I may use this ill-American term, has been the US State Department, where in part it's not because I fantasize America or think that they're the most important player, but in part because when it comes to internet freedom agenda, as I call it, they've been the only player that has put forward any kind of strategy. Until very recently, European governments have mostly been missing from this space. And now with an exception of maybe Sweden and the Netherlands and partly Denmark, I didn't see anyone entering this space with any sort of forward-thinking internet freedom agenda. I mean, the Brits are doing something, but it's mostly in the cybersecurity domain. It's not at all smart thinking about what should we do to promote the interest of Chinese dissidents or any dissidents or whatnot. So when it comes to the State Department, I've been very critical of certain parts of it and receptive to others. They don't have a monolithic structure. There are, there is a lot of infighting going on there. And some people are more receptive to my message, particularly those working in human rights, than, say, those working on innovation. But just to give you an example of how great that infighting and misunderstanding is, last December, the Department of Dulls with Economic Development and Innovation within the State Department, the Bureau, gave an innovation award in recognition of corporate excellence, the Cisco, the company that the other part of the State Department hates really passionately for supplying censorship technology to China and others and would never recognize its contribution to any sort of corporate excellence. So there is a lot of infighting, but I think the State Department, in a sense, complimented me very nicely by hiring one of my research assistants for the book to become part of the Internet Freedom desk, actually. So I have now a spy. But I'm better than the enemy. But I wouldn't say there are also many other issues here. I mean, there is definitely an intellectual and cultural argument, who is me arguing with many people in Silicon Valley who think about digital culture and technology. But there is also an argument on the policy level. There is an argument within policy makers in Washington. There is an argument with companies and Google and Facebook and others because there are certain policies, not to mention all those companies selling surveillance technology. I mean, I don't get Christmas cards from them either. But with regards to Google and Facebook, there are certain policies that can change there that will definitely benefit dissidents all over. Facebook, for example, has this very tough and to me, inexplicable stance on anonymity or do you sub-sudenance on the site, right?  Which does not exactly help Chinese dissidents. And which happens regularly. Last year there was an interesting and bizarre case when someone complained about the Facebook account of Mikhail Khodorkovsky, you know, the Russian olivar who was in Siberia in prison and Facebook demanded that Khodorkovsky sends the first page of his passport to prove that it's actually him. I'm not sure how he managed that, but there are certain issues, right? Within players who are not as bad as, say, Cisco, that also need to change and some companies are more receptive than others. I found that Google was generally very receptive and they eager to listen and they eager to learn. So is Yahoo, Facebook and Twitter are less so. In Facebook, I don't know for how long they'll be able to get away. It was a very, I think, juvenile stance on this issue. They still haven't joined this thing called the Global Network Initiative, which has a consortium of various groups, companies and players including Google, Yahoo and Microsoft, that basically said we want to abide by a certain set of rules when it comes to freedom of expression and human rights. And Facebook said we can't join it because we don't have the money to pay $250 fee. We know the gravity of almost the bill in a year. So I mean, and they managed to get away with it by telling us how great they are at promoting things and ideas like frictionless sharing and whatnot, which for me is just a nice euphemism for Big Brother, but that's a different point. So I mean, it's hard to say. Different people in different groups have different agendas and some of them find my arguments receptive. Some of them hate them. Some of them would rather I not make that argument because it will result in more regulation on all their businesses. But no, people do return my calls. I mean, you're in a camp with maybe, Jeremy Laney, it's not necessarily, you would say the same thing that he says, but you're kind of traveling in that maybe circle of engineers or engineer like people who tend to be utopian. And when one or two people who should be listened to, Jim Bupendem and say everyone else's wrong, it's a sign of maturity maybe that everyone else is actually receptive and that you're not being frozen out and that your problems with the corpus. So it's actually, this is a better answer than I thought. I thought you said, well, you know, everyone says I'm totally wrong and those relationships have broken down. But if they haven't, maybe. Well, they haven't. I've been surprised as well. I'm not even talking about the popular audience. In Europe, in America less so, but in Europe in certain countries, there is a particular discipline in this message. Some of it may have to do with people's anxiety about privacy, which essentially stems from my broader argument. I haven't talked about it today at all, but I have a very big argument about, say, the future of facial recognition technology, right? About facial recognition technologies and how- Facial hair. No, no, no. Well, that's not used for authoritarian purposes yet. But facial recognition technologies, for example, right? The way in which you can, what the Iranians did in 2010 after the Green Revolution, right, or 2009, right? What they did was to basically should collect all the photos from the protests that were uploaded to Flickr, right? And YouTube and elsewhere. And they would publish those photos from the protests on government-run news sites. And they would circle the faces of people they don't know and read. And they would ask any visitors and any people to identify the people in the photos. And if you believe Iranian news agencies, they identified and arrested more than 40 people based on the tips that they received from people who saw those photos on government-run news agencies' websites. What you can actually do if you're smart enough is, and if you have the right technology and if you happen to be on Facebook, is instead of asking people to do it manually and use the practice of crowdsourcing, as people would call it, you can actually start comparing photos from the protests with the much broader set in the universe of photos that have been uploaded to Facebook from parties, sports events, you name it, and then start comparing faces and those photos with photos in the protests and thus manage to identify who those people are based on the photos that those very people uploaded to their Facebook profiles. Right, again, so there are all sorts of things that can go wrong. And a lot of people who don't think about the future of China or Iran grasp that argument very easily, and they see that there is a huge privacy issue here and they see how it can be abused by the employers, by the insurance companies, so there is generally sensitivity to that passage as well. I was calling it learning in the Irish Times. Really interesting presentation and about surprising people who find it shocking and appalling, you know, shocked that this is happening because it seemed to me to be an obvious counter approach to what's been happening. And just the point that you were making with the facial recognition fits into the question that I have, which is, how would you fit in what happened with the riots in Britain over the summer? Because to me, the initial response out in the lobby sphere was an awful lot of people who had really been the champions of social media saying, oh no, they're not using social media in quite that way. They're just using blackberry texting or something and trying to somehow say it's really only ever used for good causes and it seems to fit into some of that argument that you're making and also the use of the police to identify rioters and posting those publicly fits in kind of status. So there's kind of, it seems to be used on either side. So there are, you know, I had a very short time today, so I didn't really go into all of my arguments at all, but there are two layers to my argument at least as I explain it in the book. One is what I talked about today and it's broadly what the internet does to authoritarian states, right? They're purely engaged with some empirical data and adding those and facts and trying to make sense of what's actually happening on the ground. The other way to my argument is how we talk about what the internet does and why we talk about it in a certain way and why we tend to prioritize some features in disregard others when we talk about the internet, right, and this is a much more intellectually and culturally happy layer because you really have to understand the cultural background in which we understand the internet and try to understand the meaning of the internet. For example, one of the arguments I make in the book is that you could not understand the current excitement about the power of social media in Washington if you do not understand how all of those experiences relate to the similar experiences that senators had when fighting the Cold War with radio broadcasting or the smuggling of propaganda or some is that technology and photocopiers and then fax machines and whatnot. There is simply no way to grasp it because the very metaphors that policy makers in Washington use to talk about the political power of social media, a metaphors that essentially come from that whole world. So they describe blogs in terms of fax machines. They describe bloggers in terms of dissidents. They describe firewalls in terms of the Berlin wall. It's all documented. I have a quote after quote showing that that's the vocabulary that they operate with. So on a broader level, I think the reason why this argument sounds obvious, because I do find it obvious that the internet is primarily a platform for collecting, gathering, sharing information. And if you think about it very, you know, not even very deeply, you will see that say an institution like Stasi or KGB was all about collecting gathering information and manipulating it in one way or another. So it's very obvious, but it's not obvious yet for many people in part because I think they have a certain cultural bias and a certain set of assumptions that guide their thinking about the internet and they immediately prioritize its one feature and that one feature is spreading information by dissidents against powerful structures, right? They don't see all those other features because a certain dominant, I would say, American vision driven strongly by commitment to First Amendment on free expression has taken over our imagination. And if you think about it historically and culturally, most of the thinking that has been done about the political and cultural consequences of the internet in the last 15 years has been done by lawyers, has been done by professors of law, people like Laura Lasek or Jonathan Zittray and Ahoy Benkler or others, who are very smart, but they all come from the legal background and the legal background just tends to stress the questions of First Amendment in America above everything else, right? So, I mean, there are many issues. Why, you know, there are many reasons why I think a certain narrative dominates. That's one of them, but again, there is also duplicity in the very set of the internet freedom agenda as they argue in the book because it's not just pundits or social media experts who tend to see the bright side and not engage with the dark side in the foreign policy context. That's very important to understand. When you listen to Barack Obama address domestic audience, so he would go and talk to high school students or university graduates in America, somewhere in the Midwest, he would say, oh, you know, we are bombarded with information. It's all information junk. We need to make sure that we know how to discriminate against different sources and we know how to understand and we need new media literacy and iPads and Xboxes and the internet and mobile phones. They result in us basically having some kind of overexposure to information and information overload. And it's almost the direct quote from one of his pictures that he gave in 2010. Nine months before Barack Obama went to Shanghai, he painted a completely different picture. You know, the freer information flaws, sooner authoritarian governments will fall. Access to information on the internet allows us to mobilize and organize and hold our government in check. It's a completely different story and the same goes for Hillary Clinton. When she's secretary of state, she talks about internet freedom and how blocks undermine dictators. When as a senator, she talked to her constituents and she talked to people who would elect her, she would say that, well, we need to limit access to the internet to kids beyond 12 because they would see all those horrible things and play computer games and the internet is evil. I mean, that's the kind of mass issue here. So there is definitely a discrepancy there and it's very hard for us to imagine that say people in China or Russia, I mean, not to defend their governments can have similar concerns about the disinformation or overload or all those other issues that Barack Obama and Hillary Clinton have when they speak to domestic audiences. Remember the Atlantic magazine had this cover story two years ago, is Google making us stupid?  I mean, that's not the question that anyone would ask, right? Because the only thing that Google does in China is liberate them, right? But that's what the Chinese would think, right? So there are some very bizarre cultural issues here that need exploring and it's equally unimaginable that we would acquiesce to say, Russian or Chinese internet company driving through our towns and taking photos of every single building in every single three-quarter, right? It would never be acceptable to America. All the senators would just be screaming that it violates our privacy and national security. You know, when an American company goes to China to do essentially the same, it's like, hey, it's great, you know? Promotes economic growth and what's wrong? Hi, I'm Tara in YouTube. I didn't mean that American company. So, I mean, I suppose, the tagging up in the London way of the thing, I guess, I've just spoken about all these censorship, different filtering and cyber-taps and DDOS and everything. And obviously, they're having quite a longer handle than what about things that some Western governments, like London, the UK government, is making the light of the human rights, saying that we're going to look into the possibility of shutting down that free messenger of such an event as to happen again. And I also then had a question, the point raised about what companies could basically do at, you know, a policy level. And I think with the arts brain, what we're still seeing out in Syria, the team I work with see that at the front line as it comes in, like, after two minutes of load, we see that. How are we to know what's the best way to know is this being uploaded by, you know, Assad supporters, or by, you know, unconstruing the truth, or how do we know if it's legitimate activists giving honest account of what's happening. And that's a difficult position for us to be in. Sure, I know it's not an easy position to be in. You chose to be in it, right? So I'm sure we'll figure it out. But to go back, I do want to say a few words about the London riots and sort of the broader question of whether we have a way to turn off social media, the internet and jail. You know, what bothers me within many of the debates I participate about the future of the internet is that there is a lot of, and again, a lot of this happens because, as I said, lawyers have dominated the conversation, but there is a lot of First Amendment extremism on this issue. So people think that if we find a way to turn off the internet, that would just be terrible. And, you know, very well, maybe, but I can imagine many more things that would be even more terrible. I'll give you one little example. So think about the Rwandan genocide, right? And the way in which radio was used by different ethnic groups to communicate with each other, oh, no, no, to spread ethnic hatred, right? And to incite violence, to basically call on their supporters to go and start killing another ethnic group. The debate that emerged during the Rwandan genocide was something around the concept called information intervention. That was very popular in the mid-90s, but people don't really talk about it anymore. And the idea behind information intervention was that, well, if this were to happen again, the West should go and find a way to jam Rwandan radio stations, in part because the conventions and laws guiding and banning the genocide would always overrule whatever laws we have about the free flow of information, which to me seems, by the way, reasonable. I do think that laws that prevent and ban genocide do overrule the rules about the free flow of information. And all of that was fine, and that debate was somehow forgotten, but imagine if this were to repeat today and instead of broadcasting through radio stations, those ethnic groups will be using online text messaging or some other means of communication. And text messaging, by the way, is used to fool ethnic violence in Africa regularly. We saw it in Kenya, we saw it in Nigeria, we see it happen very often where different ethnic groups would start basically asking their supporters to go and murder fellow citizens. And what are we to do then? So if a Rwandan ethnic group starts using online radio, and I know it may seem like a very hypothetical situation, but imagine that that's the case. So they start using this new technology that's advertised in every newspaper, this internet in a box solution, right? Which the State Department has been funding. The idea is that you wouldn't actually need to connect to the program internet, you'll have a mesh network, so people would be able to use gadgets and devices to communicate with each other, even though they may not connect more broadly. Aren't we supposed to investigate ways in which we would actually want to limit those activities? And again, I'm just putting it as a question because once that moment comes and Western politicians and policy makers have spent hours and days and months talking about ways in which we need to preserve the way in which the internet functions, and they will set such a high standard for themselves that they will fall short of it because they'll have to make a choice. And that will make them look hypocritical, just like they already look hypocritical when they're trying to promote internet freedom in the Arab world, while at the same time pushing through all sorts of extremely bizarre and silly legislation in America or the West itself to limit piracy or many other things, right? So I just want to debate that issue. And it is the same on the somewhat similar level you have this debate about the use of cyber attacks. You have Hillary Clinton in one of her internet freedom speeches basically say that countries who engage in cyber attacks deserve to be punished and deserve to be condemned. She didn't add a footnote to that speech to say that actually America is one of those countries and has been doing it very systematically. To give you an example, two years ago, the CIA set up an internet forum aimed at Iraqi jihadists. They basically wanted jihadists and Iraq to start communicating with each other and plan and discuss terrorist attacks. And America would of course, as the operator of that website, would have inside knowledge, told the attacks. So in a sense it was some kind of a honeypot where one part of the US government saw that they need that site to function for intelligence gathering purposes. Another part of the US government, people in the defense department were not particularly happy with that website because it was used to plan real attacks on American soldiers. So after two years of squabbling, they actually decided that the only way to take down that website would be to launch a cyber attack. And they launched a cyber attack and removed and damaged that website, damaged many other websites in the meantime, and that site was gone. If we go ahead and start decrying cyber attacks as Clinton did, we are more or less losing that option. If you want to remain credible in the eyes of people in the Arab world or elsewhere, we need to be careful with the language. So otherwise it just makes American and Western governments look like hypocrites. And it undermines their credibility with the Arab bloggers, the Chinese bloggers, Iranian dissidents that they want to defend, as bad as it is. Well, sorry, yes. Dennis Pottsman was my name. And it's the argument you're making. Yes, pretty obvious to me. Just like I'm sure that whatever technology was available before the governments tried to use it to help and control those who are against them. But it's two ways, three. Yes. And one of the examples, for example, you were talking about Belarus a lot. And a couple of months ago, the Russian activists redirected the website of KGB.by to Gestapo LV. And the Russian government wasn't able to do anything with it because it was online itself. And at the same time, like 5S, it's a very short period of time in history. When the printing press was invented, it took like 100 years before the first scientific article was published. And the whole examples, you're talking about those corporations which made aim to make money out of business like Facebook or whatever they are. And of course, like they're talking closely to the governments. My question is, what prevents us from, like right now, for example, from Occupy Wall Street Movement, there is open assembly, I'm sure that you've seen it. Like there is a technology and development which will encourage people to discuss ideas, to organize around issues, and to collectively engage with like different entities. And it's a question like why, what stops us, for example, from developing such a platform which owned by people, run by people, and founded by people? You mean as a means of communicating, as an alternative to Facebook or? Yeah, basically. All right. Several remarks here. I know that it sounds obvious, but you have to understand the intellectual sort of force I'm fighting against. There are lots of people in Silicon Valley and outside who think that the internet is somehow more than the sum of its parts. Who think that it's not just about facial recognition technology or the packet inspection of censorship, but there is a core set of ideas that were embedded in internet architecture that will result in a certain reshaping of political and social norms. And those are people who are basically making an argument that the fact that the internet is built in such a way as to make the information, the passage of information very easy and hard to block, that feature of its design will eventually lead to a certain feature, a new change in how we design our political and social institutions. All right, so what I've been arguing in a sense is saying that that's not bound to happen or that you completely misunderstand the internet and you actually, one of the things I'm arguing at the moment actually is that we need to stop thinking in terms of the internet as this huge cultural phenomenon and start talking about particular technologies. Because I think that when people operate with terms like technology or the internet, they tend to make so many generalizations that and they rely on so many ideological assumptions that are not obvious to them that eventually clouds their thinking and the results in very bad policymaking, right? So for me, to talk about the internet on a such a great scale is misleading because when people do it, they usually start by assuming that the internet is just a collection of various technological things. It's the domain names, the protocols, the tubes, through which information flows and travels. But the argument they end up making is about the internet as a cultural phenomenon, as a collection of all sorts of technologies like facial recognition, like the packet inspection and you name it, to various practices like social networking and chatting to corporations like Facebook and Google. So in a sense, the internet subsumes all of it but it means nothing to be arguing about those technologies as the internet, right? So in a sense, what happens is that people start making columns. In one column, they put all the good sides caused by this huge cultural monster they call the internet and that will be the spread of information, the empowerment of dissidents and bloggers and so forth. In another column, they'll put all the costs at surveillance and censorship and monitoring and cyber attacks. They will try to sum up whatever it is in each column and then they will arrive with an answer whether the internet is a little bad for promoting democracy. I just think that's a very intellectually bad and harmful way to go because you never know what exactly is on those columns, you would never come up with a definitive answer. But once you arrive at an answer and that's where the real problem begins, you go back and start re-evaluating each of those components in each column individually and you start thinking that, hey, as long as the internet is good and as long as it empowers people, we can overlook surveillance and propaganda issues and I don't want to do that. I would rather go and examine each of those technologies, work on them individually and actually have a moratorium on using the word internet for the next five or 10 years until we resolve all the issues. On the question of platforms, the easy answer here is that unless you ban a nationalized Silicon Valley and ban private actors to build social networking sites or to build video sharing sites, the private sector will do a much better job in terms of innovation and in terms of providing everything else, there are alternatives to Facebook. I mean, you have this diaspora site which people, but again, they're not taking off in part because you already have this huge entrenched players which satisfy many of the needs, but in part because you just don't understand the amount of resources you need to operate them effectively. I mean, just ask Google how much money they pay for their electricity bills. It's probably more money than GDP of some countries, right? So again, that's not something that you can do in a decentralized manner. I mean, there are certain uses to such commonly shared platforms and Wikipedia would be one of them as an example of a project that's not driven by commercial ethic and logic that managed to survive and do good. I just don't think that it will work for projects that require heavy use of data, individual profiles, that require things that the private sector is generally good at. So, I mean, I'm all for alternatives and equivalents. I'm just skeptical as to whether they will pose a real challenge. It's a little difficult with this kit, but it's not about today. It's about tomorrow it's going to be better. It's a younger generation who is now studying in school and going to university who are much more comfortable with technology to connect with each other, to organize with each other, to mobilize. Yeah. Well, you see, that's the kind of critique that falls under my cyber-utopian chapter book. Because I start, a lot of my arguments and a lot of the stuff in my book is driven by very real existing policy mega concerns. I know that there is a current policy in the State Department, say, on Iran or China. And I don't think that policy is terrifically effective, but I think it can get much worse if the thinking about technology is not skeptical enough or is not realistic enough. And this is where, you know, I would deal with different, different slides. I mean, I'm all for experimenting and thinking positively. I just don't think that those are the right attitudes you want to look for in a policymaker. That's skeptical as it sounds. But in a private life, sure, you know, let's be as you're talking as possible.


from Austin, Texas. Extracting the signal from the noise. It's theCUBE, covering Dell World 2015. Brought to you by Dell. Now your host, John Furrier. Here at SiliconANGLE, this is our flagship program at theCUBE. We go out to the events and extract the signal and noise. With here is Mark Lewis, former CTO of EMC. Now the CEO of Formation Data Systems, a hot startup, funded by Dell Ventures. Coincidentally, all this stuff's kind of coming together and you have no knowledge of whatsoever what happened. No, no, it was a surprise to me, but you can clearly see why it would happen in the market today, John. You know, there's incredible amount of, I think, need for consolidation in certain industries and certain things and getting scale and whatnot. Dell clearly wanted to be a bigger enterprise player and I think it's the big move for him and I think it's really cool. And you also have experience, we're at Silver Lake, we're working with KKR with Marius Hobson going to be on at one o'clock. You also were the CTO at EMC, so you know the wall of road map, you know the inner workings, you also ran and booted up EMC Ventures in California, which was a huge success with Props2U. Always like to highlight that great, great job you've done there. So you've seen a lot of the inner workings from a company standpoint at EMC, the technology, the products out in the market as a VC, you've looked at all the investments, you've looked at Nasira, Big Switch, all that stuff. What is their take here? Because there's a lot of products being jammed into one. EMC had product overlap to begin with. Now Dell has product overlap, technology's shifting as Michael Dell's pointing out. What's your take on this? Yeah, it's a lot of moving parts. So they're going to have a lot to get their arms around in all the moving parts. You have software, you have security, you have Nasira, new things, older things. If I break it down to kind of the one big thing that I took away was Dell really wanted to have be a force in the enterprise and wanted to have that diversity. And I think there's going to be great things and good things and things that'll have to get shook out. But what the one really thing does, it's very hard to build an enterprise business from scratch. And I think that's a transformational move to get them there. And yeah, I think there's a lot of things that are going to have to work out. And the one other thing I would say, though, is that when you look at companies like ours and companies that are trying to do next generation stuff, the Dell EMC gets them a bigger company in more breadth and clearly gets Dell more enterprise focus. It does not get them the revolutionary technology, say, to go up against Amazon or go against the next generation of technology. That still becomes a need that they have to have to move forward. So I saw Brian Gallagher two weeks ago, and I had a cocktail with him kind of late in the night. And I said, because he's not doing all the dev ops about EMC. Brian Gallagher at AWS. Now come on, that's... You're swimming upstream, what do you feel like? A salmon trying to get home. I mean, it's a hard, that was a hard nut to crack for EMC to get into that dev ops game. And with Amazon crushing it, he and I were just having that casual conversation. I mean, it's a lot of work to your point. Here with one move, Dell gets an amazing set of management capabilities. H.R. and H.R. people. So it's kind of like a salary cap problem, right? I mean, you've got Jeremy Burton, you've got Pat Gelsinger, Joe Tucci's kind of going away. You've got Goulden, Howard Elias, Gallagher. I mean, the list goes on and on. I mean, you know the management team. It's all a lot of senior people there. I mean, some companies would love to have just two or three of those guys. So is that a problem? They, well, they clearly got a great team. They have to figure out how to organize that team. The thing that I've always, I've done a lot of startup technologies and whatnot. And one thing I learned early on was that go-to-market is a lot harder than people think. You know, technology in some ways can be very easy to build. And go-to-market is tough when you have, if you're a network company and you try to sell storage or if you're, you know, computing companies for a long time have had trouble selling storage again. So Cisco's doing a good job. They're storage, oh yeah. Well, I mean, Jim McHugh, UCS, no one thought they'd do anything in the server. UCS did well, but so far, Cisco's foray into storage has been what I would consider to be less than stellar. Well, it's on the storage front. Yeah, server is tough. And my point is that it's tough. They did a good job with UCS. They made it and they built it ground up. Tough job. So that's why I think the secret to this acquisition is really the go-to-market capabilities of EMC. Well, that's some of the pre-existing market. VCE, for instance. I mean, does that like, who's going to buy V-Block? You know, I guess I have a unique opinion there. VCE is kind of an artificial solution.  There was, there obviously was an affinity there, group there that bought. It's hard to say how much of that revenue would not exist, you know, if you just had the three companies. So I got to ask you the question straight up. Is this the end of the federation as we know it? Dismantling as we speak, or is it going to be a... Well, I guess, I guess merely because of the fact of this amount of change, it's the end of the federation as we know it, but there could be the federation too. There could be a number of things. I saw Virtue Stream got spun out. Hey, Star Wars is our new director, you know, J.J. Ambram. It could be federation, the next generation, what is federation, the sequel. We got all sorts of things that could be, I guess. So classic federation. Let's talk about the glue. Glue is a critical part for these deals. Glue and technology standpoint. You need middleware, you need database, a lot of these things. Storage needs to be operationalized to be more internet of things friendly. A lot of stuff you're doing. What is the glue to hold all this together, or is it simply the play as, hey, we're one big portfolio of Lego blocks, Mr. Customer, you put it together. Well, I think you have to, I assume Michael will take this in a couple of phases. The first is, yeah. How do we put the pieces together and come up with a kind of a rational set of building blocks and a rational set of components? And that becomes phase one. Just give me a complete solution or give me the pieces. And then more and more it has to be, how do I integrate that solution? How do I have a more competitive together than not, right? Clearly, I think for these existing environments, classic legacy client server computing, it's going to get more and more about complete solutions as that market actually starts to wane a bit. Talk about Dell Ventures, because Jim Lucia I've known from Northwest, great guy, now he's heading up to Dell Ventures. You were one of the first investment, not one of the first investment. Early. They did an early investment in your company and also did the B round. What's it like working with Dell Ventures and Jim Lucia and Team? I have to say, because I will even mock my own self a little bit here. We had nothing at EMC Ventures that competed with what I saw with Dell Ventures in the sense of support and access to customers. We have formation as its first booth here at Dell World. Courtesy of Dell Ventures. They built the solutions showcase, offered us a space, and when you're a poor struggling startup, that's a big deal. I love the line of the keynote, big borrow and steal.  You're in that phase, you're in startup formation data systems, you're beg, borrow, and steal, but you're on your B round. You're rich compared to us in terms of cash flow, money in the bank, well-funded. No, but seriously, you are at that stage now where you have to start beg, borrowing, and stealing, if you will, because now you have to deal with the noise of the EMC acquisition, so where does formation fit in this? Is there a strategic deal in there in the works? Are you independent of Dell? I have no idea of that, but I got to tell you, the Dell EMC deal, personally speaking, the Dell EMC deal is the best thing that ever happened to formation. Best thing ever. Why? Because it's signaled to the entire world that a change was coming, and so it sent this big message to me that if EMC was growing 20 to 30%, storage was still on fire in the legacy environments, not declining year-over-year, quarter-over-quarter, that this deal never would have happened. There never would have been act as investors. It never would have happened. It happened because the market is maturing, and the legacy market's going away. I got to ask, so that's a great point. I want to go to another point. So you know theCUBE, we'd love to talk to people and get the insight and share with the audience. And one of the things we did early on was we saw the big data movement, we saw the DevOps movement, and that became now history in the cloud, but the DevOps movement showed that the developers are in charge. The developers are driving the bus. They're dictating agile, continuous innovation. Now what you're talking about with the shifts in the markets on the enterprise side, the customer's in charge. So for the first time, the signaling to a shift where the customer, so the insight in theCUBE this week and last week, certainly at Grace Hopper and other places, is that the vendors aren't in charge anymore. The customers are, meaning I want agile solution deployment. I got to provide solutions. So are the customers in charge? And John, the reason they're so insistent about these needs is it's not the vendor in charge, it's not the customer in charge, it's their users are in charge. And so the head of IT or the VP of Operations is not going to get another chance to support their customers if they don't build modern systems inside because the shadow IT will build, they will go to AWS. So you see this market as a one shift moment. If you're tacking, you got to make that ready about, turn that boat. If you're a VP of IT right now, you have to stop dictating what your users use and start asking. You have to make them real customers because they have an alternative and that's going to get harder and harder. As DevOps forms inside of large enterprise, the DevOps guys have a choice. They will go to AWS if they can't get it solved inside. Our argument with formation is you can build the storage systems that AWS has on premise, you can stay in control. That's what we think of the world. And that rings true with Michael Dell was saying about the world could be a better place is ultimately that's going to be the less contentious and more kind of mellow, chill environment for the user if they're happy. Yeah, but it's about here, if you remember the old BYOD, bring your own device era. After a while, once the CEO started carrying an iPhone saying the blackberries were mandatory, no longer became an option. And that whole model of control changed from IT to users. Users in the company. And that's happening now with enterprise IT. DevOps is moving into those big companies and IT either needs to support DevOps or DevOps will go outside. Okay, so I got to ask you the forward looking question. As someone who's been through a lot of cycles of innovation, inflection points, up and down cycles, you and I both lived through some cycles, good and bad. We are in a good cycle right now. Obviously, the bubble conversation is more on the consumer side. There is some rationalization going on within the public markets and private markets. I heard Michael Dell talking about it. But putting that aside, what is the future look like? What are you excited about? I mean, you see this as a once in a lifetime situation. You might mean. Well, I'm so excited about what we call the last time it was on theCUBE, we call it kind of the second game of the double header. I am so excited that Amazon and Google and many of these companies have seeded this new era of computing. And that doesn't happen very often. It's a 30 year change, right? And what I'm really excited about is the first kind of game was played with the cloud natives and all the new people adopting, but you have this huge mass market that is in legacy right now that's going to have to move over the next five years. And it's going to be incredible change and people aren't going to- With a lot of disruption. Ton of disruption. And if I can mention one, my only peeve in storage right now is, we saw this great wired article about walking dead and how all the legacy vendors- Yeah, it was a horrible article. And that was the front part of it. It was hyperbolic, but accurate.  That's what drives me crazy in storage. Flash make this clear. Flash is not disruptive. These little technologies are not disruptive. What is disruptive is the movement to software-defined technologies and the move to this third generation cloud, DevOps-based technologies. It has nothing to do with these lower level things. And that's causing a huge confusion in the storage. All right, so that's a good point. These point releases are these incremental technologies. All-Gran and Flash is pretty damn incremental. So that being said- It's a big deal. But everybody's got it. Yeah, yeah, okay. You see he's got it. I'm with you in the, I'm not going to argue. Disruption there. I agree with you. But let's talk about internet of things. Well, part of the reason why it's not disruptive is because the guys, the new entrants, can't achieve escape velocity because everybody's got it. Right, and it's maybe one company's 10% better than another. Who leaves EMC for 10%? You've got to be 10X better. Dave, welcome to the set. Dave, just came back from lunch. I say Dave. I'm sorry, who was there? I helped jump it in. Good to see you, man. Good to see you, man. Dave, Dave, first of all, you know, you got to ask for permission to talk. I'm not only kidding. Now back to my point, I was trying to get us internet of things. How big is that? Because Michael Dell's leading with that on his keynote and we are seeing massive disruption with IoT. I think it's absolutely huge and enormous and it's going to create this other wave. It just like storage has created waves of big data, but economics drive that wave, right? The internet of things will happen when the economics of IT let it happen. And that's why we want to make storage less expensive so people store more stuff. And that's the way it works. It's an economic based system. But is IoT disruptive in the sense that it's going to create, get a kill old players and create huge new businesses? Or is it the guy who owns the parking meter is going to benefit from IoT? So I don't see IoT as disruptive. I see IoT as a huge wave, bigger than any other wave perhaps we've ever seen. But I'm not sure it's disruptive. Well, they like everything else. I think that it will benefit people. People will have new advantages. Well, it can be see disruptive. They'll take advantage of it. Hugely disruptive. You can argue they were building on mini computers and networks. I think there'll be some losers. I think client server computing is going to be the loser in all of this. When you move to DevOps and agile computing, you need cloud and as a service delivery. Real cloud. I mean, it can be private cloud. Real cloud. It has to be real private cloud. Real cloud. Yes, we're talking real cloud. Do you tell us what real cloud looks like? Yeah, absolutely. Real cloud is real simple. It is not VMware. It is not client server computing. It is not the same old thing with a marketing label on it. It is as a service on demand, instantly available API driven computing. It is the things you have with AWS. It is the fact that if I want storage, I can get it. I get it immediately user driven. All of that should be dynamic. Everything. The only thing, it doesn't have to be public though. That's what we're trying to do. So is this a good time to be a CIO right now or a bad time? Well, it's a changing time. In all disruptions, you're going to have winners and losers. The winner CIOs will be the ones that figure out ways to embrace the disruption, start up new data centers, do things that prepare themselves. And the CIOs that lose will be the guys that stick their head in the sand, like always, right? And say, oh no, no. I love my sand. I love my sand. So I got to get your take on just the economics, because you're a Silver Lake kind of guy. You know the players over there. Numbers. I mean, I think they make sense, cost of a capital is really low right now in the private equity market. They're a private company, cost of capital is good. I mean, the management team is super strong at Dell. They could probably make a good run at this.  You know, as you say, it's very smart individuals. And I'm very confident that if Michael and Egon and those guys have gone through this, this makes sense. You know, they're not going to do something that doesn't annihilate a great deal of respect. Plus the E&C has a good track of your ad managing corporate governance. Yeah, David Gould and financial rock star. So they have some of the best minds there. And that's why I always say the duality of this is, I think it's great for customers. I think it's going to be good economically for a lot of things. There's obviously going to be impact in consolidation and overlap, but good overall. But the one point I try to make is, is you just don't take these two big existing vendors and create innovation out of nowhere. Mark, thanks for doing a drop by a fly by on the lunch segment here. Great to see you guys. This is our cube lunch cast. Just to walk on from the floor. Former CTO of EMC, now the CEO of Formation Data Systems, Mark Lewis, formerly a managing director, ran EMC Ventures, which actually was instrumental in the NACERA deal among others. Congratulations and welcome, welcome to Austin. This is Dell World Live Coverage. I'm going to keep you right back at this short break.


Gosh, this is a great group. Just don't disappoint me for the rest of the week But I want to congratulate you the the first two days are are pretty difficult pretty difficult stuff it's all methodology and theory and For the most part the professors don't really get to policy In their lectures on Monday and Tuesday, there's going to be a lot more of that the rest of the week in terms of policy in applying theory doing economics and related subjects so again, congratulations and But today at the end of this day, we're going to turn our sites to policy and economic analysis per se and and Actually, even social change Both good social change and bad social change as exemplified in the policies of prohibition and legalization so Yeah typically this lecture would be on the minimum wage the sort of most typical most talked about Policy in terms of applying economic analysis of government intervention and that Lecture is still on the schedule and I recommend it to to to be there and and really pay attention to that It's a core issue and it's a very very important issue of our times the minimum wage has actually hasn't been increased in many many years, but at least at the national level, but of course Increases in the minimum wage are surely in the pipeline right now and And so we're going to look at the economic analysis of prohibition and legalization And we're going to look at How economists view that and one reason why I think this lecture might be better suited as the first policy Lecture rather than the minimum wage is because this is an issue where Austrians and by and large most mainstream economists actually Disagree now there are surely a few vocal mainstream economists who oppose prohibition and Support some kind of legalization But you need to look at the dirty details to see that there really is a Big difference and a lot of this Material that I'm going to be drawing on here today is from a little article I did last year called death to prohibition and it's a very short article It touches on all the points. I'm going to be touching on here today, but it also gives you links to Several things that I've written in others on this topic to sort of drive the main lessons home one of the things That's important to know is is that economists back in the 19 teens and 20s Actually fully supported alcohol prohibition so Gordon Tullick who's a Famous modern economist Wrote a textbook one and he wrote in there. He said, you know, if the prohibitionist had only Consulted with economists, they would have been persuaded Not to pursue the policy of alcohol prohibition The problem with his statement it was it was absolutely false all major economists supported the policy of Prohibition back in the 19 teens and 1920s Irving Fisher who was really the most famous American economist of that era Was a really vocal Proponent of alcohol prohibition he actually wrote three books in support of alcohol prohibition at the time even though it was on a rocky road of Real failure from the very beginning I've done a survey of economists on the topic of the war on drugs and again Very few economists supported outright legalization and I could trace their roots to that small number who actually Advocated legalizing drugs in the modern context to the Austrian school and when you look at the entire survey The views of economists really didn't differ very much from the general population So Economists were really not much Help back in the days of alcohol prohibition and they're not really of much help here today As a matter of fact Gary Becker the Nobel Prize-winning economist from the University of Chicago Who's considered the biggest critic for mainstream economics in terms of the war on drugs? Well, he didn't really favor legalization what he wanted was a system of excise taxes very stiff excise taxes to raise the price of illegal drugs various forms of fines on producers and consumers for you know consuming too much or inappropriate Regulations all sorts of government interventions to bolsterize what he called legalization but of course a lot of these supports for legalization would cause Much of the same results as prohibition itself and no one in The economics profession is actually asked the most important question which is What causes all of these social problems medical problems? With the war on drugs, what is causing so many people to die from overdoses? What is causing so much addiction? What is causing so much drug addict crime? Organized crime That's really infected America in the world Certainly urban areas and cities You know, I think ultimately maybe somebody in here will write a dissertation Not necessarily in economics, but maybe in sociology or something related to that or some health discipline Where you look at the impact of government? on drug use and addiction War which we know is linked to addiction Empire building tax slavery the welfare system and just hardcore government intervention in general we know that there are some linkages to all of those things with drug abuse and Nobody in economics has really tied all that together in terms of looking at the real problems rather than just the analytics that we're going to discuss here now Mises himself didn't really deal with the problem of Drug prohibition or prohibition in any great detail That was beyond his topics he even said that These were problems beyond catalatic catalectics or economics But he did raise some important considerations of political economy for example Would it work? He didn't think so But he said if it did work Then why not expand the use of these prohibitions to all sorts of other things that we might disagree with like bad books hateful newspapers and media You know harmful foods sugary foods and drinks You know all sorts of things why stop with just alcohol and Narcotic drugs why not expand it to nicotine and all sorts of other things? Murray Rothbard Also didn't spend a great deal of time on the topic of prohibition But I'm very glad that he wrote pages 40 to 43 in power and market Because only after the fact that I realized that Those three and a half pages were essentially my 300 page dissertation on the subject So again Murray. Thank you. I did cite him on many things, but The whole story of product prohibition he discusses in a very few pages and really gets the story correct and really complete as well, so You really can never go wrong with reading either one of those two economists, but Rothbard is a great source of inspiration Just in general on his own research in his own writing and rhetoric But also a great source of ideas of things that he couldn't necessarily solve himself but Things that you can solve And so he leaves lots of hints lots of tantalizing hints about things that need to be solved But he couldn't do everything so And also I included this year in the title the way forward Because I think that when we analyze prohibition when we analyze legalization and we take the topic of ideology Into account we really have an understanding of how to move Society forward now if you looked up ideology on Mises.org and You looked at all the recent articles on ideology They're all attacks on one form of ideology or another progressivism statism internationalism You know welfare ism There's just an endless list of these articles and most of them are attacking these emerging Ideologies and with good reason, but in general Ideology is something that really does move society So we should be leery of these bad ideologies But we should also be hopeful in the sense that we can play a part in building a positive more free market ideology and Apply that in such a way as to create positive social change so We're gonna obviously stress economics here this afternoon And we're also going to stress the fact that Austrians Lay a great deal of importance of not just methodology not just theory And but applying the theory to real-world cases and coming up with real-world Solutions we're coming up with the right solutions not halfway Solutions not modified solutions, but the solutions that will actually work To create positive social change and to make improvements in people's lives So this is sort of a general Look at what we're going to be doing today here in Austrians do view ideology is a critical is of critical importance to social change So it's not just Supply and demand. It's not just Analysis of government intervention that is very important and Ideology is not an empty set. It's not just a Particular point of view ideology is a is a set of ideas that people hold together As large groups or as groups that can become large and can become dominant and can influence the political process but part of ideology is There's going to be some scientific content and so Austrian economics applies This or provides I should say the scientific content For a positive ideology and then of course, there's ethics Of what's right? What's wrong? What's helpful? What's harmful those basic sort of categories? There are also guiding features of our lives personally our family lives and things that we hope are Built into our social lives in our governments that they should Have policies They should practice things that help people in their own personal self-improvement so Things aren't going too well right now most policy issues That are going to be discussed here this week and I've listed things like taxes budget deficits the national debt money inflation Interest rate control the central bank regulations health care welfare All these things are generally considered to be getting worse in today's climate Along with the political process being somewhat broken that's a Sort of a statement that sort of Minimizes the actual damage that's being done and all of this is taking place during the Austrian revival the revival of Austrian economics which starts in the 1960s and You know, we went off the gold standard and we've The budgets have gotten much much higher the central bank has much more power The national debt is much higher Now we are experiencing Tremendous success in terms of legalizing cannabis. It's going from state to state and Medical marijuana and so on and so forth. So in my personal area of research things are going great But in all your other professors here Things are going right downhill so I just want you to remember all that and To top it off, of course in the United States socialism has become Very popular You know, there's 20% of a yeah, I guess it's young Americans believe that socialism is the way of the future that socialism is the solution to our problems and There's another big segment that Doesn't believe and is repelled at the idea of full-scale socialism But it's still They're not directly opposed to it and this is a very dangerous thing for socialism To be very popular particularly amongst the young Because of course those ideas tend to stick with that generation and they tend to grow over time as young people become middle-aged and older in fact, I've the bright side of that is I have a paper where the advent of AOC and Bernie Sanders and discussions of all these socialist policies in America are Actually driving a lot of social media contact to the Austrian school of economics So we can see that the rise of AOC and Bernie Sanders in social media hits Coincides with a big increase in hits and traffic in Social media for the Austrian school. So all is not lost in other words a large number of people are learning The wrong lessons and there are a lot of people who are learning the right lessons and are driven in our direction Again as I mentioned Policy change is driven by ideological factors This is something that many of the great thinkers David Hume the philosopher for example believe that Ideology of the people of the masses is what actually determines Policy it's not the king. It's not the parliament. It's not You know all of those things. It's the ideology of the masses Ludwig von Mises Believe that ideology was a source of social change and so did Murray Rothbard and many other great thinkers in terms of economics in terms of sociology philosophy historians They believe it. They can see it. Okay, so it's not the political system Directly that we're battling here and again prohibition is a policy where that we have had some Libertarian success there was a 21st amendment to the Constitution which repealed the 18th amendment of alcohol prohibition and then of course the marijuana legalization movement in recent times Okay, so on to prohibition It's important to note the time element and I think that was brought up in maybe one of the very first lectures on Monday Is that in neoclassical and mainstream economics? There's no Role for time to play. There's really nothing more than before Now and after and there's very little of that taken into account Where Austrians and good historians believe that you have to look at things in terms of time and with respect to prohibitions prior to Narcotics being prohibited alcohol being prohibited and cannabis as well There was actually very little in the way of medicine in America in America was more advanced Along with the European countries in terms of medicine in terms of doctors in terms of Medicines in terms of even hospitals which were relatively new and patent medicines may have heard of patent medicines. They were You know unregulated concoctions that very often Contained opium or narcotics alcohol most of them contain some amount of alcohol and Cannabis or marijuana prior to prohibition alcohol Including very heavy consumption of alcohol was an integrated part of American life So if a new preacher was coming to town and it was going to be set up in the church, of course They'd roll out barrels of Alcoholic cider and beer and bottles and bottles of rum because after the ceremony there was going to be a Citywide or a villagewide or whatever Giant block party essentially and alcohol was the beverage of choice So all of those things were an integrated part of American life In the early days of the Republic there was very little intoxication Even though people drank all day long it was more of a food and beverage thing than it was an intoxication thing And we didn't really have a concept of addiction Which was only realized in the late 19th century so all of these things are very new and so Analyzing the situation and developing policies was very hazardous that should have Prompted some caution on the part of policymakers, but this was the progressive era where Americans in particular thought that they could accomplish anything that they were the great people that they were the city on the top of the hill the city of light and that they were going to perfect American society and they were going to do so By removing alcohol and narcotics and other things from society and Also, these drugs caused very little in terms of social problems With respect to patent medicines for example, they think about 30% at least were actually effective for things like pain So you can imagine if you had a really serious back injury or you had your spinal cord had been broken at some point You know, there was no surgeries for that kind of thing. There was no Medicine or therapies or anything like that. So opium turned out to be really their only choice and So patent medicines were very helpful for some and of course They had the placebo effect which Which was about 30% It's about 30% today for most things as well You take something it really doesn't have any way of helping you But just taking it makes you feel better and then of course about another third We're we're actually harmful if you took it it actually made you worse But at least there was something for some people Prior to the prohibition and So what we're going to look at here first of all is the naive model of prohibition and this is the model that Prohibitionists think of in terms of what they think prohibition does and this is also the way mainstream economists from the early part of The 20th century to now they have a similar mindset in terms of thinking of prohibition In terms of supply and demand now supply and demand is supposed to be something we use to analyze the simple analytics Of a market of a free market and so on this model We give a supply and demand the demand is Downward sloping the supply is upward sloping. It's more difficult to produce more and then prohibition is added We need a battery here Then prohibition is added to this marketplace and What they're really thinking of here is in terms of adding a tax to this now prohibited market and so in in their mind the prohibitionists and the mainstream Economist is that prohibition is just adding a tax and so the increase with the increase in tax of course The price is going to go up here from the previous equilibrium level Up to the new prohibition price. So we measure an increase in price along the vertical axis and We also see that from this previous equilibrium point To the new equilibrium with the prohibitionist tax. There's going to be a decrease in the quantity Of whatever's being transacted here alcohol narcotics cannabis and so forth So that's what they have in their mind when they look at prohibition It's just an application of things that they've already been doing So prohibition does reduce supply it eliminates actually in the case of prohibition it eliminates all Producers and a new set of producers comes into the marketplace. It does increase price It does decrease the quantity demanded And in their minds therefore prohibition must be beneficial Because we're reducing the amount of alcohol being consumed or reducing the amount of drugs being consumed And so therefore all of the problems that go along with consuming those things must also go down Of course, there's also an increased government budget and there's higher taxes that go along with that But this all comes down to a for them a marginal cost equals marginal benefit type analysis it comes down to simply a trade-off and So for them prohibition or the more modern approaches of excise taxes it's just a trade-off between letting the free market go wild or trying to prohibit it and restrict it and then looking at the benefits of reduced Consumption versus the cost of enforcing the prohibition Itself, so it's just a simple trade-off to them. There's obvious benefits and And so they don't really see a problem with it the problems that they see are easily dealt with one by one The problem with this analysis is that it doesn't really apply to the real world in the real world everything changes Everything changes. It's not just a matter of price. It's not just a matter of Quantity And this really goes along with the hidden agenda of the progressives Which was not so much trying to solve this problem and use and drunkenness and so forth but was really at their core mission, which was to build a Christian white Anglo-Saxon Empire of the city on the hill of this miraculous Type of society where they could weed out all forms of Evil or sin and So when we look at their overall structure and what they actually did and how they actually talked It's a little different With the Harrison narcotics act for example, there was a long string of restrictions taxes regulations prohibitions that went way back into the 19th century and they were all basically aimed at the Chinese immigrants Chinese mostly Chinese but other immigrants as well With alcohol prohibition it wasn't so much to get rid of Consumption and drunkenness it was to get rid of the drunks So it was the policy was really identified within the progressive movement is to get rid of the Catholics Stop the stop the Catholics from drinking on Sunday Stop giving the Irish and the Italians You know reason to to come to this ideal at place So it was to smash particular groups. It was really racism the marijuana tax act if it had any justification at all At least in terms of its propaganda. It was against blacks and his particularly Hispanics to keep them out And reefer madness the movie the B movie it particularly Says some really awful things about these groups And patently untrue These were all B movies. They were only a meant meant to scare young people Apparently some adults actually watched it and got very concerned about the whole thing So there were outrageous claims about minorities raping people about being impervious to the police's Bullets that they would be shot with you know, and that cocaine was like a Magic bulletproof vest and that Bullets couldn't stop them and that was actually used As a way of getting police officers higher caliber guns In order to stop these drug Menaces out there in society and then the marijuana gateway theory that's worth mentioning Here because it came up during the legislative hearings for the marijuana tax act every Industrial and health group opposed that legislation But the director of the drug agency at the time came up with this gateway theory Which says if you try it you buy it you're hooked and you're only going to get using higher and more potent drugs, so if you took a puff of Marijuana you would end up being a heroin addict and I was at the Oxford Union debating this subject and the director of the British drug policy Actually said that they said that if you know, we we can't legalize drugs because people would try Marijuana, but if they tried it pretty soon the entire nation The entire nation would be heroin addicts and would be dropping left and right and overrunning the public support system So Prohibition really does change everything it changes the legal and economic framework Austrians are Number one in terms amongst economists of Paying heed to and tension to and maybe even trying to learn something about the legal system The Austrian economists and and this is true today in the Spanish program in Spain You know, they you do learn about the the legal system and law you learn about the rule of law In prohibition does away with all this stuff.  Okay, so those things are completely out of the question the rule of law social contract Excuse me social constructs and So all of these things Add to the negative consequences of prohibition things like violence things like crime bribery and corruption and of course bribery and corruption is what helps establish Organized crime organized crime pays off the political process to go after their competitors And so they become organized in that fashion and of course it undermines civil society We don't talk a lot about that now, but of course in Central American countries right now the war on drugs, which we sponsor they pay the the cost of that in terms of The drug cartels Taking over their countries raping and pillaging Murdering threatening the military threatening the police threatening the mayors and the politicians And they completely undermined Civil society in Central American countries So when we see people kids walking from Central America to our border and wonder what the heck are they thinking? Well, they're thinking that back home is a completely untenable life So one of the things I want to get to here because I think it really makes a lot of important Makes a very important point I'll let that sit up there for a minute is the iron law of prohibition and And This is really what got me started on this topic and ultimately on my dissertation It's based on a very simple notion It's called the Alchin and Allen effect and two economists Alchin and Allen tried to explain why The apples were much better in the stores in places like Florida where there are no apples grown at all and the apples in Western New York and The state of Washington where the best apples in the world are grown why the apples there Tend to be of an inferior quality and it has to do with the transportation cost of Transporting apples from the state of Washington to Florida or from New York to Florida Is that the transportation cost is very high so that if we looked at? good apples in the state of Washington They might cost just to round up everything a dollar for a Good apple and a bad apple would be 50 cents So that when you're looking at the trade-offs as Producers and retailers and consumers in the state of Washington one good apple will actually cost you two bad apples So you really have to think you know, what am I using those apples for am I? Making a painting or am I eating the apple for my lunch or am I just making applesauce or an apple pie? Because if I'm just making applesauce or an apple pie I can go with the bad apples. They don't look as good but They're really inexpensive But if we transport those apples to Florida, there's a heavy transportation cost Okay, and this example I've used a transport cost of one dollar per apple. That's obviously a little high But it makes the calculations a lot easier because now in Florida the The good apple now only cost one and a third bad at bad apples or inferior apples So in Florida in a relative sense if you looked at the apples in the store The good apples are gonna look relatively cheaper and you're you're typically not going to the grocery store on the same day in Florida and in Washington, so you don't really feel That you're getting ripped off or you know, why are these transportation charges? So high So if we extend that and we see this, you know, the the good lobsters are transported out of Maine So typically if we get Maine lobsters transported and sold to Alabama, they're actually very good lobsters The same with Idaho potatoes They're all the exact same size They're hardly any blemishes on them at all or green spots. I Was in Idaho for one day and I ordered a steak and baked potato and The potato was about this big. I'm not kitty It was about that big it had a separate whole plate It was all kind of gnarly looking and there was no way I was gonna be able to get enough butter to butter that potato The same is true with wine typically You know the best French wines the best Italian wines That are the wines that are shipped from say northern Italy or western France are gonna be some of their better want better wines and so if we apply that to cannabis and we look at the price of Pot or cannabis or marijuana in South America, you can buy a pound I'm not sure if these figures are very accurate You can buy a pound of high potency cannabis for this example's sake for ten dollars or a Pound of low potency cannabis for five dollars So the relative prices in South America the high potency Pot is pretty expensive But if you ship that to South Carolina Okay, you're gonna add about a thousand dollars really a lot more than that To the price of every pound and so The price of high potency and low potency pot in South Carolina is entirely driven by the risk transport price of Getting it from South America here so Essentially the price of high potency is the same as the price of low potency Here in the United States. So there's a tremendous economic incentive to grow to ship and to sell and distribute and buy high potency cannabis In the United States and so this is the iron law of prohibition Which is prohibition makes everything more potent and more dangerous Things are obviously less dangerous with cannabis But it still drives the potency higher. So in 1972 the average potency in the United States of cannabis Was point four of one percent the THC content was point four of one percent by 1984 After Nixon and Reagan's war on drugs the average potency was about four point four percent or a thousand times Higher in a pretty short period of time in more recent times before The legalization of cannabis started rolling No, that's not a good Started Accelerating Yeah The potency, you know, you could get some Products that were 10% potent And so there was a tremendous drive for higher potency cannabis and then Markets quickly developed so that cocaine started coming into the country they in the early 1980s crack cocaine developed here As a consequence at the retail level and of course heroin has had a major resurgence New products have come on to the market like crystal meth, which didn't really exist And then the chemical Substitutes like fentanyl which are killing so many people Have become widespread. So the iron law of prohibition, which is basically You know the Driving force here predicts higher potency predicts more dangerous more addictive drugs and that's essentially what we've gotten With respect to cannabis legalization and ideology In 1972 12% of all American adults supported legalized marijuana So the overwhelming majority of people supported the war on drugs at the time today 65% of the American public supports legalization for adults And 90 something percent support medical marijuana legalization. So there's been a complete change over in terms of Support for legalization and opposition to drug prohibition We've got 40 states now that have legalized medical marijuana. We've got 27 in counting That have decriminalized Marijuana so you might get fined And get other punishments, but no prison time no jail time and 11 in counting states That have legalized it for recreational purposes. So there's been a a groundswell of a change in support It's changed from prohibition to supporting legalization and things that have have actually happened now I'm going to take an extra minute because I think this is important because a lot of people point out to me that you know Nowadays in this legal market for cannabis the potency of some of these things are really high Again apologizes. I can't eliminate all these words from my vocabulary So indeed, you know, there are products now Where the cannabis is Getting close to 20% on a regular basis. There are other products that you can get that are basically distilled versions And you can buy them in 60 80% concentrations And there's a this represents a threat for a lot of people And it represents a threat to Thornton's theory here that prohibition drives things to become more potent But what's really going on here because a lot of people have asked this question because they've been Studying, you know, what goes on in these dispensaries apparently Just for their own justification But let's take a closer look at that well Cannabis is now known as a widespread substitute for hard illegal drugs like heroin So heroin users crystal meth users a certain percentage of them will use cannabis To at least temporarily get off of the harder drugs that they've been using Cannabis is also now a widespread substitute for ineffective Prescription drugs so psychoactive drugs pain drugs relaxation appetite a whole variety of things now people are Using cannabis legally or illegally as a substitute for those prescriptions and also even if you look at the market itself Cannabis is now an eight to nine billion dollar Industry whereas hemp flowers which contain no THC but contain lots of CBD Non-psychoactive is only about two billion dollars. So It's definitely tipped in that direction except when you look at the fact that Cannabis is still six or seven times the price of hemp flowers. So if you look at the actual quantity of This plant that's being transacted in the market and you look at the fact that half of the volume of This new legal market is zero percent THC or Point zero one percent THC That the average potency consumption Since legalization in a lot of these states is actually falling So if you look at this the dispensary shelves and what they're advertising you'd think wow that looks pretty potent stuff, but if you look at the market as a whole and you look at what consumers are actually buying the fact that there's a Heavy consumption in terms of these hemp flowers and CBD oil Which has again no THC that the average potency consumption even of cannabis Has been falling so that too stays in line with The theory of the iron law prohibition so out of time. Thank you very much for your attention