Facebook is here to stay

An interesting thing about being plugged into the startup world is the frequency with which one sees “new ideas”. Many of them, alas, are just old ideas being rebranded or old ideas that the person proposing them is not aware of.

Facebook’s widely documented travails, with legislators inquiring into Facebook’s role in the 2016 US Presidential elections – and possibly more – on both sides of the Atlantic, mean there is once again a swell of entrepreneurs clamouring to make a “new Facebook”. Within just the last week, one tweeted he wanted to make a privacy-first, open source Facebook. Another in a closed founders’ group described a portfolio company, which is a combination of “Facebook and Gmail.. no spying, no ads, secure social platform, where you own the content and the network .. no fake users, ever”.

Which reminded me of another interesting thing about being an old hand on the web: we know what hasn’t worked, exactly why it didn’t work, and all that it may take to make it work.

Anyone remember Diaspora? It was founded on three principles: decentralisation, freedom, and privacy. But as social networks go, how many people do you know who use Diaspora? I admit I know none.

Then there was ‘Ello, which I am somehow still on, though yet to figure out how it adds any value to my life. May be I am in the minority. There are and have been others such as Path (uh!), Google+, MySpace, and Peach (ok, I admit ignorance).

Successful ones include Whatsapp, which is embroiled in its own version of “fake news” controversy (link may require registration) in the world’s largest democracy. Others are Slack, with its purpose built groups, and Quora, the knowledge community with over a 100 million users.

But none has yet matched Facebook’s near-total control of the conversations among the global user base of connected, mobile, literate people.

An early adopter, I was on SixDegrees.com somewhere around 1997. Many people discussing these networks have not heard about it though a Wikipedia page exists, as it should, for the super early mover in the social networking space. My observations through the years say that we all want privacy, no-ads, control over who sees our content, no fake names or bots, anonymity when we want to overshare or share stuff we should not be sharing, ability to join or leave groups, ability to engage safely, and the freedom to take our data when we leave. However few of us really know what it takes to build something like that. Fewer still know what it takes of us to ensure all of that on the platforms we use.

Let’s take the privacy and control pitch. Facebook has excellent, granular privacy controls. I should know. I operate my Facebook like a walled garden. To work it, however, you have to be alert to how your life is organised, make appropriate lists, and then be diligent about controlling who sees what out of your shared material. As I have written elsewhere, user motivation to figure out your product is a huge – and unhelpful – design assumption. The product and the UI need to be simple to use and easy to figure out.

Google+ made much noise about making privacy and control simpler and easier but Google really did not succeed at converting a sizeable chunk of its Gmail user base into Google+ users. This highlights the importance of switching costs and network effects in building a successful social network.

Then there is that bugbear of fake names, bots, and anonymity. Quora is by far and away my favourite community since 2010. It started off well. With a “real names” policy. That is how so many of us participate and write there with our real identities. Monitoring and policing real identities is a job and a half. There is a reporting feature, which active users, Top Writers, former moderators, and topic gnomes use heavily. It is difficult for users to keep on reporting if they keep seeing the reported users come back with changed names, or bots and sock puppets returning with a vengeance to vandalise content. It reduces the SNR on the website and can damage the culture of the community rapidly. It takes lots of people. Or machines. To keep bots, fake names, and anonymous usage under control. Oh, and real names mean nothing. On LinkedIn, people use real names and their employer names and yet there is open and inbox harassment, racist remarks, trashy comments on people’s posts.

Which brings me to the problem of “using the web while <insert minority type here>”. Did I say Quora is my favourite community on the web? But I am asocial as hell there. Others cannot comment on my content, nor can they message me. How did that come about? I was enticed to Quora by the purpose of sharing information and learning. At one point, there was a massive growth through influx of users, who did not understand or care about community policies, brought their own cultural artifacts and assumptions, and had a considerable impact on the experience in the community. I was quick and preemptive in battening down the hatches but others continue to suffer – Muslims, Jews, black people both Afro-Caribbean and African American, LGBTQIA persons, and women in general. This is a problem that no social network has licked yet though noises are often made in this regard.

In 2015, Facebook spent a reported $2.5Bn on capex including data centres and other infrastructure. LinkedIn is owned by Microsoft which has almost $90Bn in cash, Whatsapp is owned by deep-pocketed Facebook, Quora is a unicorn valuated at around $1.8Bn. The point is that even if the perfect product is created, and somehow users can be enticed to switch in huge numbers, creating and running a social network at scale is expensive business. One must not forget that users are used to “free”, so promises such as “no ads”, no data mining etc will lead to inevitable questions about the monetisation model.

All this can be summarised as “barriers to entry” in the social networking space.

And yet, every other day, there is an aspiration to create a new social network.

Back to Facebook then. With over 1 Bn users, Facebook is no longer a “social network”. Especially if information — fake or otherwise, and I am including Whatsapp’s challenges in this — is the stock-in-trade, Facebook fits the classical definition of “utilities” and, at the moment, it is also a natural monopoly. It is not a public utility. If, however, its externalities are anything to go by, including its impact on democracy and the information asymmetry created by its machine learning algorithms, it needs to be regulated. Those arguments have been made repeatedly over the last few years. One of my favourite commentators, danah boyd, wrote about it in 2010.

So how might Facebook be regulated? And will that reduce or increase the “barriers to entry” for new networks?

One of the best models of utilities regulation is the British one where regulation is seen as a second choice to a well functioning market. It focuses on consumer choice, competition, and forward-looking incentive regulation. Forward-looking what?

There lies the rub. None of us is paying for using Facebook. In fact, if pricing were introduced at this point, there will be an almighty uproar because, to many, it is like an “essential product” now.

If no consumer is paying to use Facebook, is it really a “market”?

As definitions go, we are in uncharted waters.

More importantly, how will regulating ensure or improve consumer choice or competition?

It is structural barriers, and consumer behaviour challenges, not Facebook, that prevent alternative social networks from achieving the same roaring success it has achieved.

In other words, unless regulators break Facebook up perhaps into consumer and business networks or force Facebook to shut down, or Facebook boldly starts charging fees, eroding its user base and reducing its own power, or an earth shattering paradigm emerges in economics and business regulation, Facebook is here to stay.

It may be forced to become more transparent, and build better governance like other listed entities. But it is here to stay.

 

Governance is no “Indian wedding”

When India hosted the Commonwealth Games in 2010, the then-sports minister compared the event to an Indian wedding, saying that while preparations go on until the last minute, everything comes together on the day. I am reminded of that as I watch the stories coming out of India since the sudden demonetisation of two major currency notes on November the 8th, 2016.

The reasons why the move was made were unclear, and what one could and could not withdraw or deposit changed often. The Reserve Bank of India (RBI) refused an RTI (right to information) request asking about the reasons, and with its response to another RTI request, managed to create an impression that the RBI had no idea how many Rs 2000 bank notes it had printed. RBI is the Indian analogue of the Bank of England in the UK or the Federal Reserve (“the Fed”) in the US. These are not confidence enhancing moves, for citizens or for investors. To cite economist John Maynard Keynes: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.”

That is not the point of this monograph.

With my governance hat on, it is clear that no regulatory impact assessment was carried out before the demonetisation was announced. After all, the lives of so many publics – citizens, small and big businesses, state owned banks, private and multinational banks – were to be upended. If there had been such an exercise, RBI would have been more prepared rather than the ominous silence to which it treated the citizens before the Governor finally spoke nearly 2.5 weeks after demonetisation. (An alternative possibility, simultaneously more benign and more sinister, is that such an assessment was carried out but summarily ignored in favour of an “Indian wedding” type approach, and reliance on calls to nationalism and patriotism.)

Save for a top-down diktat, where was the country’s preparedness for such a massive transformation?

Does the “leadership” have experience of massive transformations involving both businesses and citizens? The committee to oversee it was announced nearly three weeks after the demonetisation. Other than Chandrababu Naidu, and possibly BCG’s Janmejaya Sinha, it is difficult to feel confident about the execution experience of the rest. Not least because the expensive failures presided over by some on the committee  are not easy to ignore.

What is the objective for this transformation? No, not the ones that changed daily, one increasingly jingoistic than the next! Minimising the black money in circulation? Reducing corruption? Making India a digital, cashless society?

For the sake of this argument, let’s assume a “digital, cashless India” was the goal.

Did anyone ask who will pay for the infrastructural investments needed? The National Payments Council of India’s (NPCI) Unified Payments Interface (UPI) is in the news but there is understandable confusion especially as different banks put out their own branded apps and the government adds to the confusion by launching its own app BHIM. The consumer-side apps are not the only solution needed. The government has asked banks to roll out 1 million POS terminals. No, nobody yet asking who will pay and how it will dent their profitability. Meanwhile, surcharges on the use of card payments have been introduced and withdrawn hastily.

(I am reminded of a friend’s wedding where a last minute Pashmina shawl purchase was made for over Rs 35,000 in 1996 money. Her mother told me, at weddings, expenses aren’t questioned. The “Indian wedding” analogy is still holding.)

Who thought ahead about the hundreds of millions of illiterate users who now not only need smart phones but also the magical ability to work their way through these apps to access and spend their own money? Apps to serve an illiterate user base will need inclusive design thinking, which is absent in the Indian public discourse, as I have written elsewhere.

What is the short and medium term impact on quality of life of citizens? Where is the mitigation for their loss of income or business? I am struggling to find any proof these questions were even asked.

There is no discussion whatsoever of who is benefiting the most at whose cost. My brief monograph on that question has remained on fire since it was published, suggesting I touched a nerve.

There is no evidence that the demonetisation was a considered policy move. There is plenty evidence that this is a case study for poor governance no matter how one looks at it. There was no clear goal, no plan. The leadership has no experience of delivering large transformations. Nobody has done any cost analysis or indeed asked who will pay. Citizens’ docility is assumed.

Governance is joined-up thinking. Absent that, it is just another “Indian wedding”.

[PS: About that Brexit thing ahead of us here in the UK, I am still looking for a culturally apt metaphor. Meanwhile, let’s go with “a giant omnishambles”.]

The real story in India’s demonetisation saga

“Who benefits if we all go cashless?”,  asked a friend* of mine. This is indeed the money question in India’s demonetisation saga with its moving goal posts. “I am not here for the enrichment of Visa, MasterCard etc.,” she added.

Apart from convenience and fraud protection, the economic case for an individual consumer is near impossible to make. Many problems solved by card issuers are those related to card usage, not arising from the transaction or commerce itself.

The benefits of consumers going cashless accrue variously to businesses, who can reduce the cost of cash handling; to various players in the payments ecosystem — card makers, technology providers, POS terminal makers, card issuers and acquirers, wallets, and schemes such as Visa, MasterCard and RuPay — who make a fraction of a basis point on each transaction; and to society at large, in aggregate and in the long run.

My friend* remains suspicious of ideas where consumers were required to participate without having any agency, since, she argues, we do have agency in using cash e.g. when hoarding cash as vulnerable women do.

This is a fair concern. But consumers accept the notion of a state-sanctioned currency as a widely accepted means of value exchange within a territory. Consumers make trade-offs to get things they desire while accepting certain loss of agency even if they do so holding their noses.

As it stands, the state has unfair power in determining whether the currency has the value it is supposed to have. It is a power imbalance where the consumer’s agency is considerably less than the state’s. Consumers begin first and foremost with the belief that the state won’t mess with them and their stash of wealth. This trust is essential to exercising the consumer’s agency in stashing away hoards of cash. Acts such as the overnight demonetisation and the cack-handed execution of it destroy trust. The cash hoards of those vulnerable women have been destroyed in value overnight. Their agency is hugely reliant on the state’s benevolence in this instance.

What happens when the state does mess with consumer trust such as by demonetisation or overnight devaluation of the currency?

This is where the conversation veers into virtual currencies such as Bitcoin that remove state as the holder of power and distribute power to the two or more parties transacting. It would be the subject of an altogether different essay on why we are happier trusting an algorithm than we are trusting elected representatives whom we can bring to account.

The chatter about the demonetisation of certain currency notes and going cashless — the latter being some ways off in India, given the lack of infrastructure needed to make cashless work — is just a sideshow.

The main game is data.

When the economy goes cashless, a lot of data will be generated and the aggregate economic case for society will begin to emerge. At the very least, there will be new money brought into the system with convenience reducing the friction in commercial transactions and money.

Professional — and armchair pro-am — economists have wondered a while how India’s GDP would change if the unorganised sector, including the vast cash economy of domestic and unskilled workers, quotidian daily purchases like cigarettes and paan etc were to be recorded formally. The probability of such aggregation will increase with more data collection, though it remains to be seen whether this newly counted GDP growth will weather, balance or exceed the drop in GDP predicted by many due to the demonetisation.

“Who benefits if we all go cashless?”.

The key beneficiary of India going cashless will be whoever can make sense of the gazillions of exabytes of data that these transactions will generate, and that will enable the study of deviation from patterns to identify funds that may fail ATL/AML scrutiny. In an ideal scenario, the money that otherwise goes unnoticed while transacting in cash will be noticed and people in possession of it brought into the tax net, netting more money into the state’s coffers.

Money in all this is still the distraction. The real story is data.

As consumers, this real story should worry Indians because Indian citizens have no guaranteed right to privacy and India has no data protection laws to speak of. Despite a massive universal ID programme, named Aadhar, the government appears to have very little appetite for change in this regard. The Government of India’s open government data platform was launched in 2012 but is rightly criticised for incomplete thinking. A consultation on it  was opened to the public in July 2016.

My advice to my friend and to those watching the demonetisation story in India is quite simple:

If you want agency, watch the main game of data — and what unfettered, unregulated  access to data might enable — not the sideshow — of moves towards cashless society.

If this be the only lesson of 2016, so be it.

Here’s to not fearing the anomie of 2016 and to rebuilding in 2017!

*(Thanks are due to my friend, whom I do not name, for asking the vital question that sparked the conversation on November the 27th and 28th, 2016, and for permitting me to use her words in this post.)

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Stanford University announced its new President this week. Marc Tessier-Lavigne is a “pioneering neuroscientist, former Stanford faculty member and outspoken advocate for higher education”. More importantly, in keeping with Stanford’s reputation as a crucible for entrepreneurial creativity, he has been executive vice president for research and chief scientific officer at Genentech, leading work on disease research and drug discovery for cancer, immune disorders, infectious diseases and neurodegenerative diseases.

In a conversation with Ruth Porat, a member of Stanford’s board of trustees, Tessier-Lavigne he talks about how, as a Rhodes Scholar, he chose philosophy and sharpened his critical thinking, and learnt to appreciate the importance of a broad-based education encompassing both liberal arts and the sciences. He talks at length about his research philosophy and interdisciplinarity. “Greatest advances are often made at the interfaces of disciplines,” he says, thus underscoring a crucial aspect of innovation for human betterment.

This week’s links are all about the role of liberal arts in education, research, and scholarship.

India is stereotyped in the west as a country of maths and engineering nerds. Creating a broad base of technocrats was what India needed after it gained independence from British rule. But this has created lopsided development. In a recent essay on the importance — and timeliness — of creating a liberal arts university in India, the founders review the history of higher education in India and ask crucial questions while outlining the form liberal arts education is taking in India under their watchful gaze.

Today, liberal education in India is not just blindly aping the western model. It incorporates the best of content, courses and knowledge that India has to offer and marries it with the best in contemporary pedagogy in terms of experiential learning, use of technology, grass-roots immersion and mentorship. It ensures that the best minds in India are capable of engaging with the toughest challenges we face as a society. This way we ensure that the Indian liberal education aspires to be not just the best in the world but the best for the world. As America worries about its overdependence on liberal education and its rising costs and relevance, India and its Asian neighbours are showing how a rejuvenated model of liberal education is not just an imperative but can be delivered in a high-quality and affordable model at a large scale. As a country we have the opportunity to change the course of higher education not just for India but for the world.

This impassioned essay reproduced in the Washington Post suggests kids need to learn philosophy. The entire essay is worth your time — especially though not only if you have or are in charge of children, in any form. For today’s children are tomorrow’s men and women, and we all have a stake in the matter. An excerpt:

I think most of us realize that society is a necessary compromise, and at least pay lip service to the idea that critical thinking and effective communication are virtues essential for its success. As we get older  many of us tend to be less open to new information, evidence, and arguments — but we can and should instill the requisite virtues in our children via K-12 education.

“It’s easier to build strong children than to repair broken men,” as Frederick Douglass once said in a different context. In that spirit, then, it’s imperative that our kids become philosophers.

As both the founders of Ashoka University in India and Steve Neumann, the author of the essay in WaPo note, liberal arts and philosophy seem to have a poor reputation as something of little “use” to society. To balance that, uh, feeling, here is a utilitarian argument about why digital companies need liberal arts majors. The piece is longer than it needs to be, but it can be skim-read for the main points.

But there will be a limit to how far computers can replace human capabilities, at least in the near long term. What can’t be replaced in any organization imaginable in the future is precisely what seems overlooked today: liberal arts skills, such as creativity, empathy, listening, and vision. These skills, not digital or technological ones, will hold the keys to a company’s future success. And yet companies aren’t hiring for them. This is a problem for today’s digital companies, and it’s only going to get worse.

Vinod Khosla, a leading light in the Silicon Valley, however holds a slightly different opinion. He argues that we need to teach critical thinking and the scientific method first, and humanities later.

To me, the fundamental tools of learning stem (no pun intended) from science, technology, engineering, and math. This updated curriculum should eclipse the archaic view of liberal education still favored by institutions like Harvard and Yale based on a worldview from the 1800s. Critical subject matter should include economics, statistics, mathematics, logic and systems modeling, current (not historical) cultural evolution, psychology, and computer programming. Furthermore, certain humanities disciplines such as literature and history should become optional subjects, in much the same way as physics is today (and, of course, I advocate mandatory physics study).

Finally, English and social studies should be replaced with the scientific process, critical thinking, rhetoric, and analysis of current news—imagine a required course each semester where every student is asked to analyze and debate topics from every issue of a broad publication such as The Economist, Scientific American, orTechnology Review. Such a curriculum would not only provide a platform for understanding in a more relevant context how the physical, political, cultural and technical worlds function, but would also impart instincts for interpreting the world, and prepare students to become active participants in the economy. After all, what is the job of education?

While I don’t fully agree with the “how” of Mr Khosla’s line of thinking, in my own life, I have made choices that have followed a similar path in educating myself as I have written elsewhere.

Studying numerate, “right answer” things followed by studying humanities – Engineering is a good first degree (although I think Physics is better but problem formulation skills acquired in engineering are second to none); but to situate the problem solving in the real world needs an understanding of how resources are allocated and how decisions are made. Studying the “there is no right answer” disciplines helped me become less linear and more able in life in general. It has worked well for my career too (I am now teaching Society & Technology to engineering undergraduates as a choice, and this was a subject I wish we had studied when we were in engineering school).

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As the year draws to a close, reviews of the year appear as do predictions for the future. The latter are inevitably rooted in the former. Without the past and the present, there is no future. This week’s varied links are all about history.

As the year that made Bitcoin mainstream and saw the launch of ApplePay draws to a close, some are predicting the end of cash, never mind that 2 billion people in this world remain without access to banking and other more sophisticated financial services. This fascinating history of money, from shells and coins to apps and Bitcoin, explores the evolutionary aspect of money and the divergent narratives of what money signifies, and makes the case for how it is all about human relationships.

Money is a special good, however. It can’t work without the technological and regulatory infrastructures enabling it. The evolutionary story leaves out the regulatory and consumer protection architectures that are necessary to make any new money and payment systems function. The state will enforce the payment of a debt in its money – but you are largely on your own if you want help enforcing a debt in your own private token or, at least, having it treated as a real debt. The state will also usually accept only its own money for the payment of public debts: taxes, fees, tolls and fines. Here we see clearly money in its means-of-payment aspect, indicating the state’s power to create money, trumping its means-of-exchange aspect, and the market’s power to set prices.

The evolutionary story also leaves out the fact that people do all sorts of things with money besides earn it, pay with it and save it, let alone that people are already doing all sorts of things with the ‘latest’ stage in the evolution of money – the mobile phone. Money – and mobiles – are very special items in that they both express relationships and, in a very real way, are relationships. This is what we miss in the evolutionary story, and this is where the action really is in innovations for how we pay. Imagining new moneys, and new payments, is thus simultaneously a reimagination of our relationships with each other. So: how would we like to pay?

Money is of course most valued for its fungibility. Which brings us to things money can buy.

Fashion, for instance. This week I came across a photo essay documenting Chinese women’s fashion over a century. Fashion’s deep links with culture and politics of a time are in evidence.

As the years went by Western influences gradually became more prevalent in Chinese society. Take note of how the short collar has become more prominent, how the clothes hug the body more closely than before. The first women to bring back this new style were individuals who had the opportunity to study abroad. It was readily adopted both by the wealthy and by prostitutes of the era.

Image copyright Sina.com.cnThis NPR interview with author Aja Raden is worth listening to.  Her book Stoned takes a walk through world history using jewellery as the lens.

Aja Raden’s new book, Stoned, is about jewelry, but on the first page she lays out a bold statement: “The history of the world is the history of desire.”

“There’s no more powerful statement than ‘I want,’ ” Raden tells NPR’s Audie Cornish. ” ‘I want that. I wantthem.’ … Even if it’s an issue of survival, you still are driven by what you want and what you are compelled to take or have or maintain.”

As Raden tells it, jewelry is the quintessential object of desire — and it’s the perfect lens through which to view human history. She makes her case through the stories of eight noteworthy jewels, starting with the glass beads a Dutchman used to buy Manhattan from the Lenape Indians in 1626.

The recent weeks have seen one of the GOP Presidential hopefuls sound more and more fundamentalist, some say “unAmerican”, in his speeches that are drawing large crowds in the world’s oldest democracy. This long essay wonders about the history of the religious fundamentalism he is citing and the role of the west in shaping it.

The force at stake here does not stem, in what constitutes it essentially, from the resources of what is called “fundamentalism” or “fanaticism”. Certainly, active, vindictive and aggressive fundamentalism — be it Islamic (Sunni or Shiite), Catholic, Protestant, Orthodox, Jewish, Hindu (even exceptionally Buddhist) — characterizes for a significant part the last 25 years. But how can one ignore the fact that this fundamentalism is a response to what can be called the economical fundamentalism inaugurated at the end of the bipolar separation and the extension of a “globalization” that had already been identified and named almost two generations ago (McLuhan’s “global village” dates back to 1967)? How not to notice also the haste in which the experience of totalitarianisms was erased? As if representative democracy, along with technical and social progress, could adequately respond to the concerns raised a long time ago by modern nihilism, as well as by the civilizational “discontent” mentioned by Freud in 1930?

It would be remiss to not remind ourselves of George Santayana, as we stand at the brink of many political and social changes: “Those who forget history are condemned to repeat it.”