Technology companies in South Korea helped tackle COVID-19. The U.S. government can incentivize U.S. tech companies do the same.
As a resident of Silicon Valley heading into our second week under the shelter in place order, what surprises me is the sudden low profile of the tech companies that dominate this area. Until just a month ago it seemed like these companies were taking over the world - churning out new products, connecting people online, providing information and news, and in turn driving equity and real estate prices to unprecedented new highs. But as the COVID-19 cases explode in the US, we rarely hear about them. Public health workers are at the frontlines fighting the war against COVID-19, and grocery stores and retailers are stepping up to the challenge of trying to maintain normalcy of life and providing for the people.
I wonder whether Apple is still pre-occupied with the development of the next iteration of the iPhone, and Google with the development for better search algorithms. Wouldn’t today’s tech companies with their vast resources, creative minds, and technical skill be able to help minimize the impact of COVID-19?
Tech companies in South Korea have played an important role in containing the spread of the virus and reducing casualties. Soon after the first COVID-19 case was confirmed within South Korea, at least four tech companies have launched apps that provide detailed information of the movement of all people who tested positive for COVID-19 – from which restaurant the person visited at what time, to the seat number the person sat in which movie theatre.
The information was collected from a variety of sources including smartphone location data and credit card transactions. The names were anonymized but providing such detailed information raised privacy concerns. However, the South Korean government was swift to declare COVID-19 a public health emergency, which ultimately gave the people the right to information for their safety, and companies to use such data. Moreover, the government allowed companies to by-pass traditional regulatory hurdles.
When Seegene, a biotech company in Seoul, used artificial intelligence to develop South Korea’s first COVID-19 test kit, it needed to get government approval for use. The approval process typically can take over a year, but the Korea Center for Disease Control approved it in a week. Though COVID-19 cases surged in South Korea soon after its first case, the aggressive testing policy and the information provided through these apps have helped South Korea to quickly “flatten the curve,” that is, slow the rate of new infections.
So why don’t we see U.S. tech companies developing new technologies and innovation that can help contain the spread of the virus, minimize the impact, and develop strategies that help people cope with the crisis? It’s because such actions would not generate immediate returns to the company. Despite the greater societal benefit of slowing down the spread of the virus, unless there are clear private returns CEOs and shareholders will be unlikely to devote their resources to fighting a virus with so much uncertainty.
In simple economics terms, it’s a classic case of market failure; and the standard remedy in cases of market failure is government intervention. The government needs to provide incentives, either through relaxing regulatory hurdles or by subsidizing research and development, to encourage tech companies to help contain the virus and minimize the impact of COVID-19 on our society. It is not an issue of big vs. small government, but governments creating the right incentives when private firms can’t easily make the right call.
The U.S. has finally taken measures in the manufacturing sector to fight COVID-19. The White House after several days of going back and forth, eventually invoked the Defense Production Act to order GM to produce ventilators. But hospitals around the country also need masks and personal protection equipment. Unlike smaller countries without a strong manufacturing base, the U.S. has the manufacturing capacity to produce these goods, if the will is there. These manufactured goods are essential for our doctors and nurses in helping patients and fighting the virus.
However, we need more innovative approaches, beyond traditional public health approaches, to fight COVID-19 and future pandemics. Tech companies, in addition to pharmaceuticals and biotech companies that are developing vaccines and cures, can play a significant role in fighting pandemics. Tech companies can use information and communication technology (ICT) to inform the public and reduce the spread of diseases, use machine learning to diagnose new diseases, predict future outbreaks and the spread of current outbreaks, and predict when and which resources would be in need in different parts of the country. Furthermore, there may be more innovative ways to tackle the virus that many of us have not yet thought of. The government can induce tech companies to actively take action by offering R&D grants and loans, providing access to critical information and data, and reducing red-tape.
The South Korean government recognized the urgency of the situation and enlisted the help of private tech firms allowing them to do what they do best with minimal red tape and access to the necessary resources. The European Union has recently put out a call for startups that are developing technologies and innovation related to COVID-19 to apply for fast-track funding.
Chinese tech giants like Alibaba and Tencent, potentially through explicit or implicit government directive, have been actively involved in fighting the COVID-19 crisis. Alibaba has deployed an AI algorithm that predicts COVID-19 from lung CT scans. The procedure only takes a few seconds, which not only substantially speeds up diagnosis but also reduces the risk of doctors and nurses being exposed to the virus. Tencent has committed over 1.5 billion Yuan (over 210 million USD) to help fight COVID-19, which will be spent on prevention and control but also on funding companies that are developing new ways to overcome the pandemic and help with the recovery.
People are sacrificing their individual rights and income. Small businesses are closing doors. All this for the good of the greater public. U.S. tech companies, together with the right push from the federal and state governments, should be able to put aside private returns and short-termism for the moment and work towards an innovative approach to mitigating the impact of today’s crisis.
Yong Suk Lee is an Economist at the Freeman Spogli Institute for International Studies and the Deputy Director of the Korea Program at Stanford University.