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.

 

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.)

The design challenge called Indian traffic [2]

An earlier, admittedly ranty post documented the weirdness that is Indian traffic. Though it focused more on vehicular traffic than on pedestrians, any good traffic system design should enable peaceful co-existence of both vehicles and pedestrians.

I have spent some time thinking about traffic systems since I have been able to observe traffic in several countries outside India, especially the UK, for a few years now. I’d say it largely works well in the UK. Except when it does not, say, when we have the wrong type of snow. Roads don’t work, trains don’t work, almost nothing works.

Yet, some sincerely wonder if traffic in India can be improved to the level it is in developed countries.

Jokes apart, traffic in developed countries, when it flows, has mainly three component parts, although not all developed countries are created equal in their traffic discipline. These component parts exist in a Nash Equilibrium, which keeps the traffic flowing.

Rules

Unlike India — where most people with driving licences have done few, if any, lessons, and most driving licence owners have never been subjected to a rigorous examination of car knowledge and driving skills — it is near impossible to get a driving licence in most developed countries without passing multistage tests of road rules, car knowledge, and driving skills.

As far as I know, road rules — that would cover speed limits, lane discipline, overtaking procedures, use of indicators and other functioning lights on the vehicles, driving behaviour during egregious weather or road conditions, prioritisation of emergency vehicles, required civic behaviour during emergencies — aren’t even fully documented in India. Documenting them and then making them available in the many Indian languages would have to be the step that precedes training and testing for licensing purposes.

Licensed trainers and an incorruptible testing procedure would be the next essentials.

Then the state of the roads. It shouldn’t be down to a High Court to pronounce that citizens have a right to good roads. Because, so what?

Rule followers aka the social contract

Then comes the harder part. Of making a citizenry — of whom many are accustomed to saying “do you know who I am?” and “ok, do my work first, here is the cash!” — follow the process of learning and being tested to obtain a licence, with knowledge and humility, and not by sending someone else to get the paperwork done.

Some positive change, led by citizens themselves, is in evidence so there is hope on this count.

Enforcement and punitive measures

The third crucial part of a functioning traffic system is a traffic police force that catches, penalises and prosecutes if necessary the violations, no matter how minor, of road rules. This is helped by clear rules, along side specification of punitive measures for breaking them. This is further supported by a judicial system that lets traffic violation cases be tried swiftly instead of dragging them on for years, as Indian courts often do with many court cases.

So to return to the question, whether road traffic in India ever be improved to the level it is in developed countries, the answer is both Yes and No.

Yes, if India can arrive collectively at a new Nash Equilibrium of the above-mentioned factors.

No, if any of the above is missing.

The challenge for India is where to start.

Four For Friday (17)

This week’s eclectic, interesting reads:

At the cusp of technology and regulation, Matthew C Nisbet argues why scientists must join food activists in examining regulation. This in the context of GE crops.

The designer of all things i – Sir Jonathan iVe, oops, Ive – on his quest for simplicity, and why simplicity isn’t simple.

This is the week when the inventor of the remote control, Eugene Polley, died. Have you ever thought of remote control as subversive technology? If not, do read the link.

Finally in the week of Facebook’s IPO, read Doc Searls’s post questioning much including the advertising-will-make-us-free (excuse the pun!) model being funded all over the planet. If you have never heard of him, I’d suggest you get a clue and read The Cluetrain Manifesto. He is one of those who wrote the book. Literally and figuratively.

A Passage To India (2010 ed) and the other R-word

When EM Forster wrote A Passage To India, the Indo-British relationship was one of the ruler and the ruled, of imbalances in power. Things are different now in 2010. Britain lags behind and grapples with an economic crisis of monstrous proportions, while India’s economic growth gallops along at 8.5%.

Naturally, all eyes are on David Cameron and his 90-strong high-powered ministerial and CEO delegation to India, billed as a “jobs tour” to which Cameron is bringing a “spirit of humility“.  The delegation led by Mr Cameron confirms how India remains, despite all its frustrations, a potentially strategic customer, partner, supplier and sometimes a competitor to British businesses. As such India’s growth has direct implications for British business, as we in Britain seek growth markets and profits to deal with the continued chill in our home economy.

Earlier this week, the Financial Times, in its editorial, argues that India needs to go for stronger growth (registration required). Among other points, the FT argues for improved infrastructure and productivity, liberalisation in retail sector, furthering liberalisation in the banking sector, and investment in basic health and education.

All valid points indeed.

A fundamental requirement to enable such business is that businesspersons from both countries are able to travel to meet with each other, and not just on high profile trade delegations. Not least because both the UK and India  are nations thriving on the back of the SME sector and their chief executives rarely get to join ministerial trade delegations.

Travel between India and the UK is hamstrung: by the increasingly onerous requirements for an Indian to obtain a British visa in India, and by the sheer volume of visa applications being made by British persons in the UK for travel to India. One area ripe for quick and major reform in both countries is enablement of business travel.

In doing so, the other R-word – reciprocity – is as important as any reform. It would not be remiss of Mr Cameron’s and Dr Singh’s governments to take bold steps to make it easier for British and Indian businesses to travel, and then to trade and collaborate.

Starting with a mutually cooperative visa regime. One that makes it easier for British businesses to find their passage to India in the modern times.

Other links:

Nitin Pai writes: Cameron comes with a different mindset

BBC’s Economics editor Stephanie Flanders: Osborne in India

Dean Nelson on the whys and the what-fors of Indo-British links