Hugh Logue – November 9, 2016
The clean up after the storm is now under way, as Americans emerge from a grueling election campaign. What does Trump’s startling win mean for the Information Industry? Read on.
In one of the most improbable election results in modern America, Donald Trump has defied the opinion polls to win the presidential election. In doing so, the most relentlessly vicious US election campaign in living memory is now in the rear-view mirror, and we can finally get back to work and prepare for a new White House administration. Many companies have held off finalising plans for 2017 until after the election, and will be looking to do so in the next couple of weeks as they anticipate the new president’s policies and priorities, free from the fog of the election campaign and as President Obama’s tenure downshifts.
Despite the gloomy rhetoric during the campaign, recent economic data shows that the US headed into the election in a healthy state. The US inflation rate is pacing less than 2%. As of September, the US unemployment rate is 5%, the Global Purchasing Manager Index was at a two-year high in October 2016, US gas prices remain under $3 a gallon, and US real GDP grew at an annual rate of 2.9%, in Q3 2016, as compared to 1.4% in Q2 2016. Recent market volatility, therefore, is not a result of weak corporate fundamentals, but rather the uncertainty on how the healthy economy will change, post-election. At the same time, Trump’s win points to a deep current of frustration that goes beyond these numbers.
President Trump’s protectionist views, if translated into policy, could be generally bad for trade of all kinds. In our industry, digital products want open borders, yet they are strangled by regulation that perhaps this regime can remedy. His macroeconomic policies aren’t very clear. As for global politics, Trump is the great unknown and there will be uncertainty as leaders try to uncover his international policies. In the end, however, the world learns to live with whoever is elected because the alternative of not engaging is simply not an option. And so the story unfolds.
President Trump rose to power on an anti-establishment campaign that promised to unwind eight years of the Obama administration’s legislative and economic reforms, and in the process may cause businesses great uncertainty unless promised tax simplification and focus on jobs and infrastructure investment come to pass. However, with a Republican-controlled House of Representatives and Senate, the legislative and political deadlock that has characterised the Obama presidency will likely end. As the wheels of government slowly start to turn again, information businesses may gain a little more certainty, especially those selling to public libraries and government departments and businesses that may perceive a friendlier environment.
Why This Matters:
No matter who won, the US election was going to change lives and businesses far beyond the US. The election was also going to have an indirect impact on many industries that the presidential candidates never fully considered. Closer to home, in the information industry, we see the following implications.
B2B & Media
The effects of the U.S. presidential election on media, advertising, and marketing will mainly be long term ones in the areas of net neutrality, consumer privacy, and cybersecurity. All three areas are becoming increasingly intertwined, and harder to tease out as separate policy areas.
On October 27, the FCC, in a split 3-2 vote, passed a stringent set of online privacy regulations ahead of US elections, which will go into effect next year. It requires internet service providers (ISPs) to obtain individual consent to use data from consumers’ online activity. The new law favors consumers as well as big internet companies like Google and Facebook, while putting more burdens on brand advertisers and ISPs like AT&T, Comcast, and Verizon. This decision touches both net neutrality and consumer privacy thinking in the US. Proponents argued that the new laws throw out the FTC’s long-standing self-regulated standards. These standards applied to children’s online activity and data, consumer personally identifiable information (PII) data, and certain types of financial and health data.
The ANA, IAB, the DMA, the 4A’s, and other advertising trade groups have all railed against the new legislation, while consumer rights organizations have come out in support of it. The question came down to whether the US advertising industry’s self-regulated approach really protected consumers’ right to privacy. Democrats strongly favor more consumer rights when it comes to data and tracking while Republicans strongly favor self-regulation largely driven by advertisers and ISPs. The split 3-2 FCC vote bore out the stark political differences. The Trump presidency may impact this decision further down the road. And we cannot forget that in the land of advertising spend this election has been a boon, and those coffers are going to dry up in 2017. We predict slower growth rates overall with continued decline, perhaps accelerating, in print.
Ascertaining Donald Trump’s plans on net neutrality, consumer privacy, and cybersecurity has been difficult in the absence of any concrete plans. Most of the views on these subjects come from speeches while campaigning, which often contradicted previous statements.
Impact on Net Neutrality: Donald Trump’s stance on getting government out of business is one of his campaign’s central tenets. ISPs and big media worried about technology companies having an advantage over them will feel more like the White House is on their side in a Trump presidency. Overturning the FCC’s recent ruling will take considerable political effort, though.
Impact on Consumer Privacy: A Trump presidency will increase intelligence agencies’ data collection and analysis capabilities at the expense of citizens’ privacy. Based on past comments, Trump may be willing to put national security ahead of people’s privacy. This will sharply conflict with Apple’s stance, which has so far resisted any attempts to create a back door for US intelligence agencies. The company was faced with Trumps’ call for a nationwide boycott of its products during the election. A Trump presidency may put pressure on other brand marketers who side with Apple and consumer rights organizations rather than complying with US intelligence agencies’ requests. A mandate by a Trump presidency may result in a wider divide between the US technology industry and government. Perhaps too the opening of consumer technology platforms to intelligence surveillance will lead to products and services that are less safe. They will instead be open to hackers because of the new back door.
Impact on Cybersecurity: Donald Trump’s thoughts around cybersecurity only emerged recently, during the presidential debates. Still, he views cybersecurity as an important issue, and one in which the U.S. needs to play a leading role in, especially in offensive cyber weapons. Cybersecurity enhancements may roll out more swiftly under a Trump presidency, especially since it’s an area of speciality for his mentor Giuliani who has been active in the field of late.
AT&T’s Acquisition of Time Warner: Donald Trump has stated that he will block the deal and the concentration of power that is creating media oligopolies. His stance though appears to come from his personal disdain of the media, acquired particularly during the election cycle. Previously he was less critical of media while enjoying celebrity status and before the scrutiny of running for President hit him. His stance on government staying out of business and letting the market take care of things itself contradicts with his statement on AT&T/Time Warner. So it’s unsure how the deal approval may play out in a Trump presidency.
Financial, Credit & GRC
Under Trump, Wall Street expects current economic stability to shift into a period of uncertainty, triggering a temporary correction, followed by sustained market volatility — where the S&P 500 would experience the same fallout as the FTSE 100 after the Brexit announcement. At the time of this writing, today’s Dow is moving opposite of expectations but certainty will need to be the order of the day for this to continue. That remains debatable given patterns with Trump up to the election, and only time and his 100 day transition plan will show if he can engender positive stability when it comes to the economy and investor sentiment. Wall Street likes certainty, and he provides anything but. Perhaps he’ll surprise us as he did with last night’s win.
The US dollar could fall, thus, a blessing for global companies that make up the majority of the S&P 500 — offsetting the fear of protectionist retribution from Trump’s proposals on trade. If potential budget cuts emerge among financial institutions, as a result of market volatility or revenue drops, the demand for financial solutions could fall across the board for most asset classes.
Impact on Credit Segment: We believe the demand for consumer and commercial credit scoring and reports will see a modest increase, as lenders will conduct higher scrutiny on borrowers to minimize default risks, which will be across the board on all consumer segments (automotive, housing, etc.) as well as the commercial segments (supply chain finance).
Impact on GRC Segment: It is unclear if Trump’s plan to manage global relations will deter the growth of terrorism. We expect the demand for risk & compliance solutions will maintain its growth trajectory, particularly in areas of third-party screening/know-your-customer (KYC) initiatives that identify money-laundering, terrorist-funding, corruption, bribery, and information technology (IT) governance, risk & compliance (GRC) management that address cyber-attacks, and country-risk assessments that enable global risk visibility. If he is influential in loosening regulation, we’ll see continued need for updated solutions, and either way, we see GRC still a sector on the rise.
Impact on Tax & Accounting Segment: Trump proposes lower taxes, both by favoring corporate income tax reductions, while fighting federal income tax increases. This could drive increased spending and productivity, leading to more mergers & acquisitions (M&As), initial public offerings (IPOs), research & development (R&D), and transfer-pricing studies — aspects that are fueling the growth for both tax & accounting consultancies and technology providers along with the needed advisory necessary to implement whatever changes could occur.
Legal & Regulatory
For many voters, the appointment of the next justice of the US Supreme Court was the key factor in this election. Since the death of Antonin Scalia in February, the court is now balanced 4-4 between liberals and conservatives. With three of the eight remaining justices over the age of 70, President Trump could get to nominate more than one justice during his presidency. In the process, the president will establish a conservative leaning Supreme Court, which will have the final say on matters of great political and social consequence for a generation to come.
Donald Trump made very clear in the third debate ahead of the election that, with the approval of the Senate, he will appoint a Supreme Court justice who will support the overturning of the Roe v. Wade ruling on abortion. Whether he does so is questionable, but if that ruling were overturned, each state will have to decide its own abortion laws. Same-sex marriage is also an issue that Donald Trump would prefer regulated at state level. However, one of the clearest impacts of the current deadlock in the Supreme Court is the issue of immigration and the decision (or lack of) in US v. Texas. In June, the Supreme Court announced that it was split in a case in which 26 states, led by Texas, sued the US government, challenging the legality of President Obama’s executive decision in 2014, which plans to shield millions of undocumented immigrants from deportation and grant them the right to work. Donald Trump’s popularity was driven by his hard line on immigration that includes plans to detain and deport millions of undocumented immigrants, and while even conservative Supreme Court justices are unlikely to support his more extreme views, he may be able to appoint a judge that will break this deadlock in favour of Texas. This will see a big spike in demand for immigration law solutions, especially low cost DIY tools.
Aside from the Supreme Court issue, it is clear that Trump’s anti-establishment position could disrupt US legal and regulatory affairs. In his campaign, Trump promised that as president he would require all government department heads to submit a list of “every wasteful and unnecessary regulation which kills jobs, and which does not improve public safety, and eliminate them”. He also called for “a temporary moratorium on new agency regulations that are not compelled by Congress or public safety” in order to support American businesses by eliminating red tape. When it comes to healthcare, Trump has promised to dismantle the Affordable Care Act, without specifying what he will replace it with. Thousands of pages of regulations have come into effect since October 2013 and are due to continue to roll out until 2018. A number of legal information providers, including BLR, LexisNexis, Thomson Reuters, and Wolters Kluwer, have launched or acquired healthcare research tools to support lawyers and healthcare professionals, and these will need to be overhauled.
As on so many other issues, Clinton and Trump have been worlds apart when it comes to science, healthcare, and research funding. Healthcare has been a key, defining policy issue for the Obama administration, and it is clear that the future of the 2010 Affordable Care Act, at least, will be very different. Trump has pledged to ask Congress to immediately deliver a full repeal of Obamacare. More specifically, with regards to research, Trump’s policies have been more “in the moment” promises, light on specific details.
The difficulty for health, medical, and scientific communities is that much of Trump’s policies in this area are unknown, although he has pledged to invest in “science, engineering, [and] healthcare” and to have programs that “serve as incubators to innovation and the advancement of science and engineering in a number of fields”. Unlike Clinton and previous presidential nominees, his advisory network did not include a range of health and medical advisors, which creates uncertainty about whether he’ll be following the Republican’s traditional market-oriented approach here or something different. With his campaign’s focus on issues such as national security, immigration, and infrastructure, funding for science has been much more of an afterthought for Trump than Clinton.
With regards to medical research, Trump’s campaign has been light on this area, and his public comments have sent mixed messages here. Back in the summer, he announced that Alzheimer’s was a “total top priority” for him, but there has been little subsequent detail or follow up with regards to specifics. Whilst he has also provided financial support for research into various other diseases, he has also alarmed the scientific community with remarks and support for theories that are ungrounded in science, including climate change, where he disputes mainstream climate science and has pledged to withdraw the US from the Paris climate agreement in order to focus on “real environmental challenges, not phony ones”, and the now disproven link between autism and vaccines.
The timeframe to apply for funding grants in science is a long process, and the UK has already found that the Brexit vote has had a negative impact on international scientists willing to collaborate with researchers in the UK. If Trump is not clear on his policies early on in his presidency, the US scientific community may find its international partners similarly distance themselves, affecting scholarly publishing and advancements in basic research.
Education & Training
Education was an important but secondary focus point for both candidates in the 2016 US presidential election. Unsurprisingly, there was little common ground between the candidates, though both targeted a reduction in debt levels for college students. Trump looked to increase K-12 school choice for parents while Clinton focused more strongly on improving all schools.
Trump’s plan to privatize college loans and essentially dismantle the US Department of Education, moving control of education into local hands, appears unworkable at best. An analysis by the Center for American Progress Action Fund, a progressive group, estimated it would result in nearly half a million teachers being laid off and eight million low-income students losing college grants. Plans to raise caps on loan repayment plans, forgive more debt, and target “administrative bloat” at colleges to reduce costs are more laudable, but again few details are available to assess the viability of the scheme, and it is unclear whether these approaches will have an impact on US college enrolments.
In the K-12 space, Trump’s victory may well see the end of the Common Core, since he believes that, “Common Core, No Child Left Behind, and Race to the Top are all programs that take decisions away from parents and local school boards”. This will result in on-going confusion regarding the K-12 curriculum, potentially forcing solutions providers to work at a much more local level, even down to individual school boards. This will require a great deal of system flexibility in order to cost-effectively generate custom solutions for customers.
Staffers in federal offices focused on information management (IM) and knowledge management may have cause to be concerned about their roles and budgets, given Trump’s promise to cut government spending and agencies. Although he has not specifically discussed IM, Trump’s preference for decisions based on gut instinct and experience rather than on research suggests IM might be an area for cuts.
Although he hasn’t said much about specific policies related to science, Trump has referred to the space program as “a luxury,” and a possible roll-back of government investment in scientific research and development under a Trump presidency could impact IM functions within scientific and technical organizations.
Academic libraries may need to be wary of Trump’s plan to push for cuts in administrative costs at colleges and universities, which would likely impact funding for library services.
As we reflect on last night’s outcome we can only say Trump trumped. The US and world will live with this decision for four years, perhaps longer — into decades — depending on the decisions he makes. It remains unclear if either candidate was a good one, whether Clinton could have tamed “the deplorables” or if Trump will be anything but divisive. What we are certain about is that we will only have a rear view lens on the performance of the one who is now President-Elect of the United States.
The US is at a tenuous juncture in history, and its place in the world is in question. Trump and Bernie Sanders tapped into an unspoken upset, and the veins they struck run deep. Many people who disliked both candidates voted for the one who represented change. Others, we believe, “secretly voted” while they couldn’t publically admit who they’d vote for but chose Trump in the privacy of their election form or booth. Still others represent the core of the country and once again the left and right coasts were given a stern reminder that the US is much more than California or New York or Connecticut. Underestimated, they voted to take back their country whether any of us agree with that decision or not.
And in doing so many pollsters got it wrong. So many media outlet did too. The soul searching these institutions must do — two core to the information industry, media and polling — will require they look inward and figure out how they got it so wrong. What biases they built in, what sampling they missed.
Today, this day after the election, whether Clinton could have or Trump can heal the rifts in our country and world is a real and legitimate question, no matter what either has said about “unifying.”
The winner has to tap into creating certainty whether in job growth, infrastructure fixes, immigration policy, healthcare, Supreme Court nominees, international affairs, and streamlining the regulatory and tax morass in which the US now sits.
The one thing this election raised was deep frustration with the status quo, and if the winner persists in more of the same, no matter what party, we are looking at a one-term leader and even more change and uncertainty ahead. Because, in that scenario, the next election looms just 2.5 years away, if as in 2016 running begins 18 months ahead. And for that we must all brace ourselves. It’s going to be an interesting and wild ride. Of that, we are certain.