Category: Digital Economy

Madmen and the Godless Algorithm

tukaglobal672 Comments

FB-vs-Google

This article from The New Yorker.

Good overview history of the advertising model that has dominated our commercialism for decades. It’s now gone on digital steroids. The disruption of ad technology has interesting implications.

How the Math Men Overthrew the Mad Men

By Ken Auletta

Once, Mad Men ruled advertising. They’ve now been eclipsed by Math Men—the engineers and data scientists whose province is machines, algorithms, pureed data, and artificial intelligence. Yet Math Men are beleaguered, as Mark Zuckerberg demonstrated when he humbled himself before Congress, in April. Math Men’s adoration of data—coupled with their truculence and an arrogant conviction that their “science” is nearly flawless—has aroused government anger, much as Microsoft did two decades ago.

The power of Math Men is awesome. Google and Facebook each has a market value exceeding the combined value of the six largest advertising and marketing holding companies. Together, they claim six out of every ten dollars spent on digital advertising, and nine out of ten new digital ad dollars. They have become more dominant in what is estimated to be an up to two-trillion-dollar annual global advertising and marketing business. Facebook alone generates more ad dollars than all of America’s newspapers, and Google has twice the ad revenues of Facebook.

In the advertising world, Big Data is the Holy Grail, because it enables marketers to target messages to individuals rather than general groups, creating what’s called addressable advertising. And only the digital giants possess state-of-the-art Big Data. “The game is no longer about sending you a mail order catalogue or even about targeting online advertising,” Shoshana Zuboff, a professor of business administration at the Harvard Business School, wrote on faz.net, in 2016. “The game is selling access to the real-time flow of your daily life—your reality—in order to directly influence and modify your behavior for profit.” Success at this “game” flows to those with the “ability to predict the future—specifically the future of behavior,” Zuboff writes. She dubs this “surveillance capitalism.” [I question whether this will really work as anticipated once everybody is hip to the game.]

However, to thrash just Facebook and Google is to miss the larger truth: everyone in advertising strives to eliminate risk by perfecting targeting data.[This is the essence of what we’re doing here – reducing the risk of uncertainty.] Protecting privacy is not foremost among the concerns of marketers; protecting and expanding their business is. The business model adopted by ad agencies and their clients parallels Facebook and Google’s. Each aims to massage data to better identify potential customers. Each aims to influence consumer behavior. To appreciate how alike their aims are, sit in an agency or client marketing meeting and you will hear wails about Facebook and Google’s “walled garden,” their unwillingness to share data on their users. When Facebook or Google counter that they must protect “the privacy” of their users, advertisers cry foul: You’re using the data to target ads we paid for—why won’t you share it, so that we can use it in other ad campaigns? [But who really owns your data? Even if you choose to give it away?]

This preoccupation with Big Data is also revealed by the trend in the advertising-agency business to have the media agency, not the creative Mad Men team, occupy the prime seat in pitches to clients, because it’s the media agency that harvests the data to help advertising clients better aim at potential consumers. Agencies compete to proclaim their own Big Data horde. W.P.P.’s GroupM, the largest media agency, has quietly assembled what it calls its “secret sauce,” a collection of forty thousand personally identifiable attributes it plans to retain on two hundred million adult Americans. Unlike Facebook or Google, GroupM can’t track most of what we do online. To parade their sensitivity to privacy, agencies reassuringly boast that they don’t know the names of people in their data bank. But they do have your I.P. address, which yields abundant information, including where you live. For marketers, the advantage of being able to track online behavior, the former senior GroupM executive Brian Lesser said—a bit hyperbolically, one hopes—is that “we know what you want even before you know you want it.”[That sounds like adman hubris rather than reality.]

Worried that Brian Lesser’s dream will become a nightmare, ProPublica has ferociously chewed on the Big Data privacy menace like a dog with a bone: in its series “Breaking the Black Box,” it wrote, “Facebook has a particularly comprehensive set of dossiers on its more than two billion members. Every time a Facebook member likes a post, tags a photo, updates their favorite movies in their profile, posts a comment about a politician, or changes their relationship status, Facebook logs it . . . When they use Instagram or WhatsApp on their phone, which are both owned by Facebook, they contribute more data to Facebook’s dossier.” Facebook offers advertisers more than thirteen hundred categories for ad targeting, according to ProPublica.

Google, for its part, has merged all the data it collects from its search, YouTube, and other services, and has introduced an About Me page, which includes your date of birth, phone number, where you work, mailing address, education, where you’ve travelled, your nickname, photo, and e-mail address. Amazon knows even more about you. Since it is the world’s largest store and sees what you’ve actually purchased, its data are unrivalled. Amazon reaches beyond what interests you (revealed by a Google search) or what your friends are saying (on Facebook) to what you actually purchase. With Amazon’s Alexa, it has an agent in your home that not only knows what you bought but when you wake up, what you watch, read, listen to, ask for, and eat. And Amazon is aggressively building up its meager ad sales, which gives it an incentive to exploit its data.

Data excite advertisers. Prowling his London office in jeans, Keith Weed, who oversees marketing and communications for Unilever, one of the world’s largest advertisers, described how mobile phones have elevated data as a marketing tool. “When I started in marketing, we were using secondhand data which was three months old,” he said. “Now with the good old mobile, I have individualized data on people. You don’t need to know their names . . . You know their telephone number. You know where they live, because it’s the same location as their PC.” Weed knows what times of the day you usually browse, watch videos, answer e-mail, travel to the office—and what travel routes you take. “From your mobile, I know whether you stay in four-star or two-star hotels, whether you go to train stations or airports. I use these insights along with what you’re browsing on your PC. I know whether you’re interested in horses or holidays in the Caribbean.” By using programmatic computers to buy ads targeting these individuals, he says, Unilever can “create a hundred thousand permutations of the same ad,” as they recently did with a thirty-second TV ad for Axe toiletries aimed at young men in Brazil. The more Keith Weed knows about a consumer, the better he can aim to target a sale.

Engineers and data scientists vacuum data. They see data as virtuous, yielding clues to the mysteries of human behavior, suggesting efficiencies (including eliminating costly middlemen, like agency Mad Men), offering answers that they believe will better serve consumers, because the marketing message is individualized. The more cool things offered, the more clicks, the more page views, the more user engagement. Data yield facts and advance a quest to be more scientific—free of guesses. As Eric Schmidt, then the executive chairman of Google’s parent company, Alphabet, said at the company’s 2017 shareholder meeting, “We start from the principles of science at Google and Alphabet.”

They believe there is nobility in their quest. By offering individualized marketing messages, they are trading something of value in exchange for a consumer’s attention. They also start from the principle, as the TV networks did, that advertising allows their product to be “free.” But, of course, as their audience swells, so does their data. Sandy Parakilas, who was Facebook’s operations manager on its platform team from 2011 to 2012, put it this way in a scathing Op-Ed for the Times, last November: “The more data it has on offer, the more value it creates for advertisers. That means it has no incentive to police the collection or use of that data—except when negative press or regulators are involved.” For the engineers, the privacy issue—like “fake news” and even fraud—was relegated to the nosebleed bleachers. [This fact should be obvious to all of us.]

With a chorus of marketers and citizens and governments now roaring their concern, the limitations of Math Men loom large. Suddenly, governments in the U.S. are almost as alive to privacy dangers as those in Western Europe, confronting Facebook by asking how the political-data company Cambridge Analytica, employed by Donald Trump’s Presidential campaign, was able to snatch personal data from eighty-seven million individual Facebook profiles. Was Facebook blind—or deliberately mute? Why, they are really asking, should we believe in the infallibility of your machines and your willingness to protect our privacy?

Ad agencies and advertisers have long been uneasy not just with the “walled gardens” of Facebook and Google but with their unwillingness to allow an independent company to monitor their results, as Nielsen does for TV and comScore does online. This mistrust escalated in 2016, when it emerged that Facebook and Google charged advertisers for ads that tricked other machines to believe an ad message was seen by humans when it was not. Advertiser confidence in Facebook was further jolted later in 2016, when it was revealed that the Math Men at Facebook overestimated the average time viewers spent watching video by up to eighty per cent. And in 2017, Math Men took another beating when news broke that Google’s YouTube and Facebook’s machines were inserting friendly ads on unfriendly platforms, including racist sites and porn sites. These were ads targeted by keywords, like “Confederacy” or “race”; placing an ad on a history site might locate it on a Nazi-history site.

The credibility of these digital giants was further subverted when Russian trolls proved how easy it was to disseminate “fake news” on social networks. When told that Facebook’s mechanized defenses had failed to screen out disinformation planted on the social network to sabotage Hillary Clinton’s Presidential campaign, Mark Zuckerberg publicly dismissed the assertion as “pretty crazy,” a position he later conceded was wrong.

By the spring of 2018, Facebook had lost control of its narrative. Their original declared mission—to “connect people” and “build a global community”—had been replaced by an implicit new narrative: we connect advertisers to people.[Indeed, connecting people on a global basis for human interaction really doesn’t make a lot of sense. A global gossip network? Unless, of course, you’re trying to monetize it.] It took Facebook and Google about five years before they figured out how to generate revenue, and today roughly ninety-five percent of Facebook’s dollars and almost ninety percent of Google’s comes from advertising. They enjoy abundant riches because they tantalize advertisers with the promise that they can corral potential customers. This is how Facebook lured developers and app makers by offering them a permissive Graph A.P.I., granting them access to the daily habits and the interchange with friends of its users. This Graph A.P.I. is how Cambridge Analytica got its paws on the data of eighty-seven million Americans.

The humiliating furor this news provoked has not subverted the faith among Math Men that their “science” will prevail. They believe advertising will be further transformed by new scientific advances like artificial intelligence that will allow machines to customize ads, marginalizing human creativity. With algorithms creating profiles of individuals, Airbnb’s then chief marketing officer, Jonathan Mildenhall, told me, “brands can engineer without the need for human creativity.” Machines will craft ads, just as machines will drive cars. But the ad community is increasingly mistrustful of the machines, and of Facebook and Google.[As they should be – the value has been over-hyped.] During a presentation at Advertising Week in New York this past September, Keith Weed offered a report to Facebook and Google. He gave them a mere “C” for policing ad fraud, and a harsher “F” for cross-platform transparency, insisting, “We’ve got to see over the walled gardens.”

That mistrust has gone viral. A powerful case for more government regulation of the digital giants was made by The Economist, a classically conservative publication that also endorsed the government’s antitrust prosecution of Microsoft, in 1999. The magazine editorialized, in May, 2017, that governments must better police the five digital giants—Facebook, Google, Amazon, Apple, and Microsoft—because data were “the oil of the digital era”: “Old ways of thinking about competition, devised in the era of oil, look outdated in what has come to be called the ‘data economy.’ ” Inevitably, an abundance of data alters the nature of competition, allowing companies to benefit from network effects, with users multiplying and companies amassing wealth to swallow potential competitors.

The politics of Silicon Valley is left of center, but its disdain for government regulation has been right of center. This is changing. A Who’s Who of Silicon notables—Tim Berners-Lee, Tim Cook, Ev Williams, Sean Parker, and Tony Fadell, among others—have harshly criticized the social harm imposed by the digital giants. Marc Benioff, the C.E.O. of Salesforce.com—echoing similar sentiments expressed by Berners-Lee—has said, “The government is going to have to be involved. You do it exactly the same way you regulated the cigarette industry.”

Cries for regulating the digital giants are almost as loud today as they were to break up Microsoft in the late nineties. Congress insisted that Facebook’s Zuckerberg, not his minions, testify. The Federal Trade Commission is investigating Facebook’s manipulation of user data. Thirty-seven state attorneys general have joined a demand to learn how Facebook safeguards privacy. The European Union has imposed huge fines on Google and wants to inspect Google’s crown jewels—its search algorithms—claiming that Google’s search results are skewed to favor their own sites. The E.U.’s twenty-eight countries this May imposed a General Data Protection Regulation to protect the privacy of users, requiring that citizens must choose to opt in before companies can horde their data.

Here’s where advertisers and the digital giants lock arms: they speak with one voice in opposing opt-in legislation, which would deny access to data without the permission of users. If consumers wish to deny advertisers access to their cookies—their data—they agree: the consumer must voluntarily opt out, meaning they must endure a cumbersome and confusing series of online steps. Amid the furor about Facebook and Google, remember these twinned and rarely acknowledged truisms: more data probably equals less privacy, while more privacy equals less advertising revenue. Thus, those who rely on advertising have business reasons to remain tone-deaf to privacy concerns.

Those reliant on advertising know: the disruption that earlier slammed the music, newspaper, magazine, taxi, and retail industries now upends advertising. Agencies are being challenged by a host of competitive frenemies: by consulting and public-relations companies that have jumped into their business; by platform customers like Google and Facebook but also the Times, NBC, and Buzzfeed, that now double as ad agencies and talk directly to their clients; by clients that increasingly perform advertising functions in-house.

But the foremost frenemy is the public, which poses an existential threat not just to agencies but to Facebook and the ad revenues on which most media rely. Citizens protest annoying, interruptive advertising, particularly on their mobile phones—a device as personal as a purse or wallet. An estimated twenty per cent of Americans, and one-third of Western Europeans, employ ad-blocker software. More than half of those who record programs on their DVRs choose to skip the ads. Netflix and Amazon, among others, have accustomed viewers to watch what they want when they want, without commercial interruption.

Understandably, those dependent on ad dollars quake. The advertising and marketing world scrambles for new ways to reach consumers. Big Data, they believe, promises ways they might better communicate with annoyed consumers—maybe unlock ways that ads can be embraced as a useful individual service rather than as an interruption. If Big Data’s use is circumscribed to protect privacy, the advertising business will suffer. In this core conviction, at least, Mad Men and Math Men are alike.

This piece is partially adapted from Auletta’s forthcoming book, “Frenemies: The Epic Disruption of the Ad Business (and Everything Else).”

 

I would guess that the ad business will be disrupted further as we find new ways to connect consumers with what they want. This will reduce the power of the Math Men at centralized network servers.

I also suspect search will become a regulated public utility. A free society cannot tolerate one or two private corporations controlling all the information data that flows through its networks.

 

Put The Damn Phone Down and Do Something

tukaglobal506 Comments

This is a good interview with the Ben Silbermann, founder of Pinterest, published on Medium.

Some excerpts:

We’re social creatures. We need to connect with other people.

Pinterest is actually…it’s really about you. It’s about your tastes, your aspirations, your plans. There are other people there. Our recommendations are all curated by other users. The objective is not to do that [seek Likes]. That’s why it’s different than social networks.

…

sure, it’s fun to look at millions of ideas, but eventually, the real satisfaction and joy comes from giving it a shot. It might turn out great. It might turn out poorly. All of that is fine. We want to be the company that motivates you to put your phone down and to go try those things.

So, Pinterest is doing the right things to encourage engagement within the community. The next step of Web 3.0 is to distribute the network value they create back to the community of users. tuka will do that.

What’s Going On?

tukaglobal490 Comments

Vampire Squid
This is an excellent interview with technology culture guru Jaron Lanier, author of some very insightful books on the clashes between technology and humanism. See comments and highlights below…

And then when you move out of the tech world, everybody’s struggling…

It’s not so much that they’re doing badly, but they have only labor and no capital. Or the way I used to put it is, they have to sing for their supper, for every single meal. It’s making everyone else take on all the risk. It’s like we’re the people running the casino and everybody else takes the risks and we don’t. That’s how it feels to me. It’s not so much that everyone else is doing badly as that they’ve lost economic capital and standing, and momentum and plannability. It’s a subtle difference.

‘One Has This Feeling of Having Contributed to Something That’s Gone Very Wrong’

By Noah Kulwin April 17, 2018 New York Magazine

Over the last few months, Select All has interviewed more than a dozen prominent technology figures about what has gone wrong with the contemporary internet for a project called “The Internet Apologizes.” We’re now publishing lengthier transcripts of each individual interview. This interview features Jaron Lanier, a pioneer in the field of virtual reality and the founder of the first company to sell VR goggles. Lanier currently works at Microsoft Research as an interdisciplinary scientist. He is the author of the forthcoming book Ten Arguments for Deleting Your Social Media Accounts Right Now.

You can find other interviews from this series here.

Jaron Lanier: Can I just say one thing now, just to be very clear? Professionally, I’m at Microsoft, but when I speak to you, I’m not representing Microsoft at all. There’s not even the slightest hint that this represents any official Microsoft thing. I have an agreement within which I’m able to be an independent public intellectual, even if it means criticizing them. I just want to be very clear that this isn’t a Microsoft position.

Noah Kulwin: Understood.
Yeah, sorry. I really just wanted to get that down. So now please go ahead, I’m so sorry to interrupt you.

In November, you told Maureen Dowd that it’s scary and awful how out of touch Silicon Valley people have become. It’s a pretty forward remark. I’m kind of curious what you mean by that.
To me, one of the patterns we see that makes the world go wrong is when somebody acts as if they aren’t powerful when they actually are powerful. So if you’re still reacting against whatever you used to struggle for, but actually you’re in control, then you end up creating great damage in the world. Like, oh, I don’t know, I could give you many examples. But let’s say like Russia’s still acting as if it’s being destroyed when it isn’t, and it’s creating great damage in the world. And Silicon Valley’s kind of like that.

We used to be kind of rebels, like, if you go back to the origins of Silicon Valley culture, there were these big traditional companies like IBM that seemed to be impenetrable fortresses. And we had to create our own world. To us, we were the underdogs and we had to struggle. And we’ve won. I mean, we have just totally won. We run everything. We are the conduit of everything else happening in the world. We’ve disrupted absolutely everything. Politics, finance, education, media, relationships — family relationships, romantic relationships — we’ve put ourselves in the middle of everything, we’ve absolutely won. But we don’t act like it.

We have no sense of balance or modesty or graciousness having won. We’re still acting as if we’re in trouble and we have to defend ourselves, which is preposterous. And so in doing that we really kind of turn into assholes, you know?

How do you think that siege mentality has fed into the ongoing crisis with the tech backlash?

One of the problems is that we’ve isolated ourselves through extreme wealth and success. Before, we might’ve been isolated because we were nerdy insurgents. But now we’ve found a new method to isolate ourselves, where we’re just so successful and so different from so many other people that our circumstances are different. And we have less in common with all the people whose lives we’ve disrupted. I’m just really struck by that. I’m struck with just how much better off we are financially, and I don’t like the feeling of it.

Personally, I would give up a lot of the wealth and elite status that we have in order to just live in a friendly, more connected world where it would be easier to move about and not feel like everything else is insecure and falling apart. People in the tech world, they’re all doing great, they all feel secure. I mean they might worry about a nuclear attack or something, but their personal lives are really secure.

And then when you move out of the tech world, everybody’s struggling. It’s a very strange thing. The numbers show an economy that’s doing well, but the reality is that the way it’s doing well doesn’t give many people a feeling of security or confidence in their futures. It’s like everybody’s working for Uber in one way or another. Everything’s become the gig economy. And we routed it that way, that’s our doing. There’s this strange feeling when you just look outside of the tight circle of Silicon Valley, almost like entering another country, where people are less secure. It’s not a good feeling. I don’t think it’s worth it, I think we’re wrong to want that feeling.

It’s not so much that they’re doing badly, but they have only labor and no capital. Or the way I used to put it is, they have to sing for their supper, for every single meal. It’s making everyone else take on all the risk. It’s like we’re the people running the casino and everybody else takes the risks and we don’t. That’s how it feels to me. It’s not so much that everyone else is doing badly as that they’ve lost economic capital and standing, and momentum and plannability. It’s a subtle difference.

There’s still this rhetoric of being the underdog in the tech industry. The attitude within the Valley is “Are you kidding? You think we’re resting on our laurels? No! We have to fight for every yard.”

There’s this question of whether what you’re fighting for is something that’s really new and a benefit for humanity, or if you’re only engaged in a sort of contest with other people that’s fundamentally not meaningful to anyone else. The theory of markets and capitalism is that when we compete, what we’re competing for is to get better at something that’s actually a benefit to people, so that everybody wins. So if you’re building a better mousetrap, or a better machine-learning algorithm, then that competition should generate improvement for everybody.

But if it’s a purely abstract competition set up between insiders to the exclusion of outsiders, it might feel like a competition, it might feel very challenging and stressful and hard to the people doing it, but it doesn’t actually do anything for anybody else. It’s no longer genuinely productive for anybody, it’s a fake. And I’m a little concerned that a lot of what we’ve been doing in Silicon Valley has started to take on that quality. I think that’s been a problem in Wall Street for a while, but the way it’s been a problem in Wall Street has been aided by Silicon Valley. Everything becomes a little more abstract and a little more computer-based. You have this very complex style of competition that might not actually have much substance to it.

You look at the big platforms, and it’s not like there’s this bountiful ecosystem of start-ups. The rate of small-business creation is at its lowest in decades, and instead you have a certain number of start-ups competing to be acquired by a handful of companies. There are not that many varying powers, there’s just a few.
That’s something I’ve been complaining about and I’ve written about for a while, that Silicon Valley used to be this place where people could do a start-up and the start-up might become a big company on its own, or it might be acquired, or it might merge into things. But lately it kind of feels like both at the start and at the end of the life of a start-up, things are a little bit more constrained. It used to be that you didn’t have to know the right people, but now you do. You have to get in with the right angel investors or incubator or whatever at the start. And they’re just a small number, it’s like a social order, you have to get into them. And then the output on the other side is usually being acquired by one of a very small number of top companies.

There are a few exceptions, you can see Dropbox’s IPO. But they’re rarer and rarer. And I suspect Dropbox in the future might very well be acquired by one of the giants. It’s not clear that it’ll survive as its own thing in the long term. I mean, we don’t know. I have no inside information about that, I’m just saying that the much more typical scenario now, as you described, is that the companies go to one of the biggies.

I’m kind of curious what you think needs to happen to prevent future platforms, like VR, from going the way of social media and reaching this really profitable crisis state.

A lot of the rhetoric of Silicon Valley that has the utopian ring about creating meaningful communities where everybody’s creative and people collaborate and all this stuff — I don’t wanna make too much of my own contribution, but I was kind of the first author of some of that rhetoric a long time ago. So it kind of stings for me to see it misused. Like, I used to talk about how virtual reality could be a tool for empathy, and then I see Mark Zuckerberg talking about how VR could be a tool for empathy while being profoundly nonempathic, using VR to tour Puerto Rico after the storm, after Maria. One has this feeling of having contributed to something that’s gone very wrong.

So I guess the overall way I think of it is, first, we might remember ourselves as having been lucky that some of these problems started to come to a head during the social-media era, before tools like virtual reality become more prominent, because the technology is still not as intense as it probably will be in the future. So as bad as it’s been, as bad as the election interference and the fomenting of ethnic warfare, and the empowering of neo-Nazis, and the bullying — as bad as all of that has been, we might remember ourselves as having been fortunate that it happened when the technology was really just little slabs we carried around in our pockets that we could look at and that could talk to us, or little speakers we could talk to. It wasn’t yet a whole simulated reality that we could inhabit.

Because that will be so much more intense, and that has so much more potential for behavior modification, and fooling people, and controlling people. So things potentially could get a lot worse, and hopefully they’ll get better as a result of our experiences during this era.

As far as what to do differently, I’ve had a particular take on this for a long time that not everybody agrees with. I think the fundamental mistake we made is that we set up the wrong financial incentives, and that’s caused us to turn into jerks and screw around with people too much. Way back in the ’80s, we wanted everything to be free because we were hippie socialists. But we also loved entrepreneurs because we loved Steve Jobs. So you wanna be both a socialist and a libertarian at the same time, and it’s absurd. But that’s the kind of absurdity that Silicon Valley culture has to grapple with.

And there’s only one way to merge the two things, which is what we call the advertising model, where everything’s free but you pay for it by selling ads. But then because the technology gets better and better, the computers get bigger and cheaper, there’s more and more data — what started out as advertising morphed into continuous behavior modification on a mass basis, with everyone under surveillance by their devices and receiving calculated stimulus to modify them. So you end up with this mass behavior-modification empire, which is straight out of Philip K. Dick, or from earlier generations, from 1984.

It’s this thing that we were warned about. It’s this thing that we knew could happen. Norbert Wiener, who coined the term cybernetics, warned about it as a possibility. And despite all the warnings, and despite all of the cautions, we just walked right into it, and we created mass behavior-modification regimes out of our digital networks. We did it out of this desire to be both cool socialists and cool libertarians at the same time.

This dovetails with something you’ve said in the past that’s with me, which is your phrase Digital Maoism. Do you think that the Digital Maoism that you described years ago — are those the people who run Silicon Valley today?

I was talking about a few different things at the time I wrote “Digital Maoism.” One of them was the way that we were centralizing culture, even though the rhetoric was that we were distributing it. Before Wikipedia, I think it would have been viewed as being this horrible thing to say that there could only be one encyclopedia, and that there would be one dominant entry for a given topic. Instead, there were different encyclopedias. There would be variations not so much in what facts were presented, but in the way they were presented. That voice was a real thing.

And then we moved to this idea that we have a single dominant encyclopedia that was supposed to be the truth for the global AI or something like that. But there’s something deeply pernicious about that. So we’re saying anybody can write for Wikipedia, so it’s, like, purely democratic and it’s this wonderful open thing, and yet the bizarreness is that that open democratic process is on the surface of something that struck me as being Maoist, which is that there’s this one point of view that’s then gonna be the official one.

And then I also noticed that that process of people being put into a global system in which they’re supposed to work together toward some sort of dominating megabrain that’s the one truth didn’t seem to bring out the best in people, that people turned aggressive and mean-spirited when they interacted in that context. I had worked on some content for Britannica years and years ago, and I never experienced the kind of just petty meanness that’s just commonplace in everything about the internet. Among many other places, on Wikipedia.

On the one hand, you have this very open collective process actually in the service of this very domineering global brain, destroyer of local interpretation, destroyer of individual voice process. And then you also have this thing that seems to bring out this meanness in people, where people get into this kind of mob mentality and they become unkind to each other. And those two things have happened all over the internet; they’re both very present in Facebook, everywhere. And it’s a bit of a subtle debate, and it takes a while to work through it with somebody who doesn’t see what I’m talking about. That was what I was talking about.

But then there’s this other thing about the centralization of economic power. What happened with Maoists and with communists in general, and neo-Marxists and all kinds of similar movements, is that on the surface, you say everybody shares, everybody’s equal, we’re not gonna have this capitalist concentration. But then there’s some other entity that might not look like traditional capitalism, but is effectively some kind of robber baron that actually owns everything, some kind of Communist Party actually controls everything, and you have just a very small number of individuals who become hyperempowered and everybody else loses power.

And exactly the same thing has happened with the supposed openness of the internet, where you say, “Isn’t it wonderful, with Facebook and Twitter anybody can express themselves. Everybody’s an equal, everybody’s empowered.” But in fact, we’re in a period of time of extreme concentration of wealth and power, and it’s precisely around those who run the biggest computers. So the truth and the effect is just the opposite of what the rhetoric is and the immediate experience.

A lot of people were furious with me over Digital Maoism and felt that I had betrayed our cause or something, and I lost some friends over it. And some of it was actually hard. But I fail to see how it was anything but accurate. I don’t wanna brag, but I think I was just right. I think that that’s what was going on and that’s what’s happening in China. But what’s worse is that it’s happening elsewhere.

The thing is, I’m not sure that what’s going on in the U.S. is that distinct from what’s going on in China. I think there are some differences, but they’re in degree; they’re not stark. The Chinese are saying if you have a low social rating you can’t get on the subway, but on the other hand, we’re doing algorithmic profiling that’s sending people to jail, and we know that the algorithms are racist. Are we really that much better?

I’m not really sure. I think it would be hard to determine it. But I think we’re doing many of the same things; it’s just that we package them in a slightly different way when we tell stories to ourselves.

This is something I write about, you know I have another book coming out shortly?

Yeah, that was gonna be where I took this next.

One of the things that I’ve been concerned about is this illusion where you think that you’re in this super-democratic open thing, but actually it’s exactly the opposite; it’s actually creating a super concentration of wealth and power, and disempowering you. This has been particularly cruel politically. Every time there’s some movement, like the Black Lives Matter movement, or maybe now the March for Our Lives movement, or #MeToo, or very classically the Arab Spring, you have this initial period where people feel like they’re on this magic-carpet ride and that social media is letting them broadcast their opinions for very low cost, and that they’re able to reach people and organize faster than ever before. And they’re thinking, Wow, Facebook and Twitter are these wonderful tools of democracy.

But then the algorithms have to maximize value from all the data that’s coming in. So they test use that data. And it just turns out as a matter of course, that the same data that is a positive, constructive process for the people who generated it — Black Lives Matter, or the Arab Spring — can be used to irritate other groups. And unfortunately there’s this asymmetry in human emotions where the negative emotions of fear and hatred and paranoia and resentment come up faster, more cheaply, and they’re harder to dispel than the positive emotions. So what happens is, every time there’s some positive motion in these networks, the negative reaction is actually more powerful. So when you have a Black Lives Matter, the result of that is the empowerment of the worst racists and neo-Nazis in a way that hasn’t been seen in generations. When you have an Arab Spring, the result ultimately is the network empowerment of ISIS and other extremists — bloodthirsty, horrible things, the likes of which haven’t been seen in the Arab world or in Islam for years, if ever.

Black Lives Matter has incredible visibility, but the reality is that even though it has had an enormous effect on the discursive level, and at making the country fixated on this conversation, that’s distinct from political force necessary to effect that change. What do you think about the sort of gap between what Silicon Valley platforms have promised in that respect and then the material reality?

That observation — that social-media politics is all talk and no action or something, or that it’s empty — is compatible with, but a little bit different from, what I was saying. I’m saying that it empowers its opposite more than the original good intention. And those two things can both be true at once, but I just wanna point out that they’re two different explanations for why nothing decent seems to come out in the end.

I want to be wrong. I especially wanna be wrong about the March for Our Lives kids. I really wanna be wrong about them. I want them to not fall into this because they’re our hope, they’re the future of our country, so I very deeply, profoundly wanna be wrong. I don’t want their social-media data to empower the opposite movement that ends up being more powerful because negative emotions are more powerful. I just wanna be wrong. I so wanna be telling you bullshit right now.

So far it’s been right, but that doesn’t mean it will continue to be. So please let me be wrong.

Platforms seem trapped in this fundamental tension, and I’m just not sure how they break out of that.

My feeling is that if the theory is correct that we got into this by trying to be socialist and libertarian at the same time, and getting the worst of both worlds, then we have to choose. You either have to say, “Okay, Facebook is not going to be a business anymore. We said we wanted to create this thing to connect people, but we’re actually making the world worse, so we’re not gonna allow people to advertise on it; we’re not gonna allow anybody to have any influence on your feed but you. This is all about you. We’re gonna turn it into a nonprofit; we’re gonna give it to each country; it’ll be nationalized. We’ll do some final stock things so all the people who contributed to it will be rich beyond their dreams. But then after that it’s done; it’s not a business. We’ll buy back everybody’s stock and it’s done. It’s over. That’s it.”

[Blogger note: this choice between socialism and libertarianism is a highly interesting and crucial question, but I don’t think there’s one answer. Facebook strikes me as a dysfunctional idea from the beginning. Social interaction doesn’t scale, data networks scale. A global gossip network like Facebook makes almost no sense. I suspect FB will be competed down to many different functional social media models rather than one concentrated behemoth. Something like search. or Wikipedia seems rather different in nature. Google Search looks more and more like a public good, which means it is likely to become a regulated public utility. It’s not exactly clear how search works as a public utility, but I think the political imperative is there.]

That’s one option. So it just turns into a socialist enterprise; we let it be nationalized and it’s gone. The other option is to monetize it. And that’s the one that I’m personally more interested in. And what that would look like is, we’d ask those who can afford to — which would be a lot of people in the world, certainly most people in the West — to start paying for it. And then we’d also pay people who provide data into it that’s exceptionally valuable to the network, and it would become a source of economic growth. And we would outlaw advertising on it. There would no longer be third parties paying to influence you.

Because as long as you have advertising, you have this perverse incentive to make it manipulative. You can’t have a behavior-modification machine with advertisers and have anything ethical; it’s not possible. You could get away with it barely with television because television wasn’t as effective at modifying people. But this, there’s no ethical way to have advertising.

So you’d ban advertising, and you’d start paying people, a subset of people; a minority of people would start earning their living because they just do stuff that other people love to look at over Facebook or the other social networks, or YouTube for that matter. And then most people would pay into it in the same way that we pay into something like Netflix or HBO Now.

And one of the things I wanna point out is that back at the time when Facebook was founded, the belief was that in the future there wouldn’t be paid people making movies and television because armies of unpaid volunteers organized through our network schemes would make superior content, just like what happened with Wikipedia. But what actually happened is, when people started paying for Netflix, we got what we call Peak TV — things got much better as a result of it being monetized.

So I think if we had a situation where people were paying for something like Facebook, and being paid for it, and advertising was absolutely outlawed, the only customer would be the user, there would be no other customer. If we got into that situation, I think we have at least a chance of achieving Peak Social Media, just like we achieved Peak TV. We might actually see things improve a great deal.

So that’s the solution that I think is better. But we can’t do this combination of libertarian and communist ideology. It just doesn’t work. You have to choose one.

You’ve written this book, Ten Arguments for Deleting Your Social Media Accounts. I don’t want to make you summarize the whole book, but I want to ask what you thought was the most urgent argument, and to explain why.
Okay. By the way, it’s … For Deleting Your Social Media Accounts Right Now.

Right now! So the whole thing is already urgent, so which of these urgent pleas do you believe to be the most pressing?

There’s one that’s a little complicated, which is the last one. Because I have the one about politics, and I have the one about economics. That it’s ruining politics, it’s empowering the most obnoxious people to be the most powerful inherently, and that’s destroying the world. I have the one about economics, how it’s centralizing wealth even while it seems to be democratizing it. I have the one about how it makes you feel sad; I have all these different ones.

But at the end, I have one that’s a spiritual one. The argument is that social media hates your soul. And it suggests that there’s a whole spiritual, religious belief system along with social media like Facebook that I think people don’t like. And it’s also fucking phony and false. It suggests that life is some kind of optimization, like you’re supposed to be struggling to get more followers and friends. Zuckerberg even talked about how the new goal of Facebook would be to give everybody a meaningful life, as if something about Facebook is where the meaning of life is.

It suggests that you’re just a cog in a giant global brain or something like that. The rhetoric from the companies is often about AI, that what they’re really doing — like YouTube’s parent company, Google, says what they really are is building the giant global brain that’ll inherit the earth and they’ll upload you to that brain and then you won’t have to die. It’s very, very religious in the rhetoric. And so it’s turning into this new religion, and it’s a religion that doesn’t care about you. It’s a religion that’s completely lacking in empathy or any kind of personal acknowledgment. And it’s a bad religion. It’s a nerdy, empty, sterile, ugly, useless religion that’s based on false ideas. And I think that of all of the things, that’s the worst thing about it.

I mean, it’s sort of like a cult of personality. It’s like in North Korea or some regime where the religion is your purpose to serve this one guy. And your purpose is to serve this one system, which happens to be controlled by one guy, in the case of Facebook.

It’s not as blunt and out there, but that is the underlying message of it and it’s ugly and bad. I loathe it, and I think a lot of people have that feeling, but they might not have articulated it or gotten it to the surface because it’s just such a weird and new situation.

On the other hand, there’s a rising backlash that may end the platforms before they have the opportunity to take root and produce yet another vicious problem.

I’m in my late 50s now. I have an 11-year-old daughter, and the thing that bothers me so much is that we’re giving them a world that isn’t as good as the world we received. We’re giving them a world in which their hopes for being able to create a decent, happy, reasonably low-stress life, where they can have their own kids, it’s just not as good as what we were given. We have not done well by them.

And then to say that observing our own mistakes means that you’re old and don’t get it is profoundly counterproductive. It’s really just a way of evading our own responsibility. The truth is that we totally have screwed over younger generations. And that’s a bigger story than just the social-media and tech thing, but the social-media and tech thing is a big part of it. We’ve created a scammy society where we concentrate wealth in ways that are petty and not helpful, and we’ve given them a world of far fewer options than we had. There’s nothing I want more than for the younger people to create successful lives and create a world that they love. I mean, that’s what it’s all about. But to say that the path to that is for them to agree with the thing we made for them is just so self-serving and so obnoxiously narcissistic that it makes me wanna throw up.

This interview has been edited and condensed for length and clarity.

Surviving the Digital Economy

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This will be a crucial issue for a free society going forward…giving away your data is like giving away your labor.

Want Our Personal Data? Pay for It

The posting, tagging and uploading that we do online may be fun, but it’s labor too, and we should be compensated for it

By Eric A. Posner and Glen Weyl

WSJ, April 20, 2018 11:19 a.m. ET

Congress has stepped up talk of new privacy regulations in the wake of the scandal involving Cambridge Analytica, which improperly gained access to the data of as many as 87 million Facebook users. Even Facebook chief executive Mark Zuckerberg testified that he thought new federal rules were “inevitable.” But to understand what regulation is appropriate, we need to understand the source of the problem: the absence of a real market in data, with true property rights for data creators. Once that market is in place, implementing privacy protections will be easy.

We often think of ourselves as consumers of Facebook, Google, Instagram and other internet services. In reality, we are also their suppliers—or more accurately, their workers. When we post and label photos on Facebook or Instagram, use Google maps while driving, chat in multiple languages on Skype or upload videos to YouTube, we are generating data about human behavior that the companies then feed into machine-learning programs.

These programs use our personal data to learn patterns that allow them to imitate human behavior and understanding. With that information, computers can recognize images, translate languages, help viewers choose among shows and offer the speediest route to the mall. Companies such as Facebook, Google, and Microsoft (where one of us works) sell these tools to other companies. They also use our data to match advertisers with consumers.

Defenders of the current system often say that we don’t give away our personal data for free. Rather, we’re paid in the form of the services that we receive. But this exchange is bad for users, bad for society and probably not ideal even for the tech companies. In a real market, consumers would have far more power over the exchange: Here’s my data. What are you willing to pay for it?

An internet user today probably would earn only a few hundred dollars a year if companies paid for data. But that amount could grow substantially in the coming years. If the economic reach of AI systems continues to expand—into drafting legal contracts, diagnosing diseases, performing surgery, making investments, driving trucks, managing businesses—they will need vast amounts of data to function.

And if these systems displace human jobs, people will have plenty of time to supply that data. Tech executives fearful that AI will cause mass unemployment have advocated a universal basic income funded by increased taxes. But the pressure for such policies would abate if users were simply compensated for their data.

The data currently compiled by Facebook and other companies is of pretty low quality. That’s why Facebook has an additional army of paid workers who are given dedicated tasks, such as labeling photos, to fill in the gaps left by users. If Facebook paid users for their work, it could offer pay tied to the value of the user’s contribution—offering more, for example, for useful translations of the latest Chinese slang into English than for yet another video labeled “cat.”

So why doesn’t Facebook already offer wages to users? For one, obviously, it would cost a lot to pay users for the data that the company currently gets for free. And then Google and others might start paying as well. Competition for users would improve the quality of data but eat away at the tech companies’ bottom line.

It’s also true that users simply aren’t thinking this way. But that can change. The basic idea is straightforward enough: When we supply our personal data to Facebook, Google or other companies, it is a form of labor, and we should be compensated for it. It may be enjoyable work, but it’s work just the same.

If companies reject this model of “data as labor,” market pressure could be used to persuade them. Rather than sign up directly with, say, Facebook, people would sign up with a data agent. (Such services, sometimes referred to as personal data exchanges or vaults, are already in development, with more than a dozen startups vying to fill this role.) The data agent would then offer Facebook access to its members and negotiate wages and terms of use on their behalf. Users would get to Facebook through the agent’s platform. If at any time Facebook refused reasonable wages, the data agent could coordinate a strike or a boycott. Unlike individual users, the data agent could employ lawyers to review terms and conditions and ensure that those terms are being upheld.

With multiple data agents competing for users’ business, no one could become an abusive monopolist. The agent’s sole purpose would be managing workers’ data in their interests—and if there were a problem, users could move their data to another service without having to give up on their social network.

Companies such as Apple and Amazon also could get into the act. Currently, their business models are very different from those of Facebook and Google. For the most part, their focus is on selling products and services, rather than offering them without charge. If Facebook and Google refuse to pay users for their data, these other companies are big and sophisticated enough to pay for data instead.

Would the “data as labor” model put the tech giants out of business? Hardly. Their vast profits already reflect their monopoly power. Their margins would certainly be tighter under this new regime, but the wider economy would likely grow through greater productivity and a fairer distribution of income. The big companies would take a smaller share of a larger pie, but their business model would be far more sustainable, politically and socially. More important, they would have to focus on the value that their core services bring to consumers, rather than on exploiting their monopoly in user data.

As for Congress, it could help by making it simpler for individuals to have clear property rights in their own data, rights that can’t be permanently signed away by accepting a company’s confusing terms and conditions. The European Union has already taken steps in this direction, and its new regulations—which require data to be easily portable—are a leading stimulus for the rise of data agent startups. Government can also help by updating labor law to be more consistent with modern data work while protecting data workers from exploitation.

Most of us already take great satisfaction in using social media to connect with our friends and family. Imagine how much happier and prouder we would be if we received fair pay for the valuable work we perform in doing that?

Prof. Posner teaches at the University of Chicago Law School. Dr. Weyl teaches at Yale University and is a principal researcher at Microsoft (whose views he in no way represents here). Their new book is “Radical Markets: Uprooting Capitalism and Democracy for a Just Society,” which will be published on May 8 by Princeton University Press.

https://www.wsj.com/articles/want-our-personal-data-pay-for-it-1524237577 (Paywall)

The Real Scandal?

tukaglobal289 Comments

likenolike

The Real Scandal Isn’t What Cambridge Analytica Did

It’s what Facebook made possible.

By WILL OREMUS

A couple of excerpts:

Sinister as it sounds, “psychographic” targeting—advertising to people based on information about their attitudes, interests, and personality traits—is an imprecise science at best and “snake oil” at worst.

….

If you think of that data, and the ads, as a relatively small price to pay for the privilege of seamless connection to everyone you know and care about, then Facebook looks like the wildly successful, path-breaking company that made it all possible. But if you start to think of the bargain as Faustian—with hidden long-term costs that overshadow the obvious benefits—then that would make Facebook the devil.

What this scandal did, then, was make the grand bargain of the social web look a little more Faustian than it did before.

From that perspective, the real scandal is that this wasn’t a data breach or some egregious isolated error on Facebook’s part. What Cambridge Analytica did was, in many ways, what Facebook was optimized for—collating personal information about vast numbers of people in handy packets that could then be used to try to sell them something.

Yes, the real scandal is that most of us are giving away real value that we need to survive in the digital economy.

Who’s Watching You?

tukaglobal636 Comments

Personal data is the new goldmine. Here’s who’s mining your gold:

What You Need to Know About Tech

tukaglobal510 Comments

Good article.

12 Things Everyone Should Understand About Tech

A couple of good excerpts:

9. Most big tech companies make money in just one of three ways.

It’s important to understand how tech companies make money if you want to understand why tech works the way that it does.

  • Advertising: Google and Facebook make nearly all of their money from selling information about you to advertisers. Almost every product they create is designed to extract as much information from you as possible, so that it can be used to create a more detailed profile of your behaviors and preferences, and the search results and social feeds made by advertising companies are strongly incentivized to push you toward sites or apps that show you more ads from these platforms. It’s a business model built around surveillance, which is particularly striking since it’s the one that most consumer internet businesses rely upon.
  • Big Business: Some of the larger (generally more boring) tech companies like Microsoft and Oracle and Salesforce exist to get money from other big companies that need business software but will pay a premium if it’s easy to manage and easy to lock down the ways that employees use it. Very little of this technology is a delight to use, especially because the customers for it are obsessed with controlling and monitoring their workers, but these are some of the most profitable companies in tech.
  • Individuals: Companies like Apple and Amazon want you to pay them directly for their products, or for the products that others sell in their store. (Although Amazon’s Web Services exist to serve that Big Business market, above.) This is one of the most straightforward business models—you know exactly what you’re getting when you buy an iPhone or a Kindle, or when you subscribe to Spotify, and because it doesn’t rely on advertising or cede purchasing control to your employer, companies with this model tend to be the ones where individual people have the most power.

That’s it. Pretty much every company in tech is trying to do one of those three things, and you can understand why they make their choices by seeing how it connects to these three business models.

10. The economic model of big companies skews all of tech.

Today’s biggest tech companies follow a simple formula:

  1. Make an interesting or useful product that transforms a big market
  2. Get lots of money from venture capital investors
  3. Try to quickly grow a huge audience of users even if that means losing a lot of money for a while
  4. Figure out how to turn that huge audience into a business worth enough to give investors an enormous return
  5. Start ferociously fighting (or buying off) other competitive companies in the market

This model looks very different than how we think of traditional growth companies, which start off as small businesses and primarily grow through attracting customers who directly pay for goods or services. Companies that follow this new model can grow much larger, much more quickly, than older companies that had to rely on revenue growth from paying customers. But these new companies also have much lower accountability to the markets they’re entering because they’re serving their investors’ short-term interests ahead of their users’ or community’s long-term interests.

The pervasiveness of this kind of business plan can make competition almost impossible for companies without venture capital investment. Regular companies that grow based on earning money from customers can’t afford to lose that much money for that long a time. It’s not a level playing field, which often means that companies are stuck being either little indie efforts or giant monstrous behemoths, with very little in between. The end result looks a lot like the movie industry, where there are tiny indie arthouse films and big superhero blockbusters, and not very much else. [This is amplifying the winner-take-all dynamics of technology.]

And the biggest cost for these big new tech companies? Hiring coders. They pump the vast majority of their investment money into hiring and retaining the programmers who’ll build their new tech platforms. Precious little of these enormous piles of money is put into things that will serve a community or build equity for anyone other than the founders or investors in the company. There is no aspiration that making a hugely valuable company should also imply creating lots of jobs for lots of different kinds of people. [Note: I would add to this last point that the aspiration should be to distribute value more widely across the community, not necessarily create more jobs.]

What are the DApps of the Future?

tukaglobal561 Comments

But how?

DApps, or Distributed Applications, are the force multipliers for blockchain technologies, just like email, Amazon, eBay, Google, and social networks are the applications that have propelled the Internet. The race is on for the development of these Dapps to transform industries and the future of the Internet itself.

In Search of Blockchain’s Killer-Apps

By Irving Wladawsky-Berger, WSJ, Mar 9, 2018

Blockchain has been in the news lately, but beyond knowing that it has something to do with payments and digital currencies, most people don’t know what blockchain is or why they should care. A major part of the reason is that we still don’t have the kind of easy-to-explain blockchain killer-apps that propelled the internet forward.

Blockchain has yet to cross the chasm from technology enthusiasts and visionaries to the wider marketplace that’s more interested in business value and applications. There’s considerable research on blockchain technologies, platforms and applications as well as market experimentation in a number of industries, but blockchain today is roughly where the internet was in the mid-late 1980s: full of promise but still confined to a niche audience.

In addition, outside of digital currencies, blockchain applications are primarily aimed at institutions. And, given that blockchain is all about the creation, exchange and management of valuable assets, its applications are significantly more complex to understand and explain than internet applications.

The management of information is quite different from the management of transactions. The latter, especially for transactions dealing with valuable or sensitive assets, requires deep contractual negotiations among companies and jurisdictional negotiations among governments. Moreover, since blockchain is inherently multi-institutional in nature, its applications involve close collaboration among companies, governments and other entities.

In my opinion, there will likely be two major kinds of blockchain killer-apps: those primarily aimed at reducing the friction and overheads in complex transaction involving multiple institutions; and those primarily aimed at strengthening the security and privacy of the internet through identity management and data sharing. Let me discuss each in turn.

Complex transactions among institutions. “Contracts, transactions, and the records of them are among the defining structures in our economic, legal, and political systems,” wrote Harvard professors Marco Iansiti and Karim Lakhani in a 2017 HBR article.

With blockchain, “every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared… Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction.”

Blockchain holds the promise to transform the finance industry and other aspects of the digital economy by bringing one of the most important and oldest concepts, the ledger, to the internet age. Ledgers constitute a permanent record of all the economic transactions an institution handles, whether it’s a bank managing deposits, loans and payments; a brokerage house keeping track of stocks and bonds; or a government office recording the ownership and sale of land and houses.

Over the years, institutions have automated their original paper-based ledgers with sophisticated IT applications and data bases. But while most ledgers are now digital, their underlying structure has not changed. Each institution continues to own and manage its own ledger, synchronizing its records with those of other institutions as appropriate, – a cumbersome process that often takes days. While these legacy systems operate with a high degree of robustness, they’re rather inflexible and inefficient.

In August of 2016, the WEF published a very good report on how blockchain can help reshape the financial services industry. The report concluded that blockchain technologies have great potential to drive simplicity and efficiency through the establishment of new financial services infrastructure, processes and business models.

However, transforming the highly complex global financial ecosystem will take considerable investment and time. It requires the close collaboration of its various stakeholders, including existing financial institutions, fintech startups, merchants of all sizes, government regulators in just about every country, and huge numbers of individuals around the world. Getting them to work together and pull in the same direction is a major undertaking, given their diverging, competing interests. Overcoming these challenges will likely delay large-scale, multi-party blockchain implementations.

Supply chain applications will likely be among the earliest blockchain killer-apps, increasing the speed, security and accuracy of financial and commercial settlements; tracking the supply chain lifecycle of any component or product; and securely protecting all the transactions and data moving through the supply chain. The infrastructures and processes of supply chains are significantly less complex than those in financial services, healthcare, and other industries and there are already a number of experimental applications under way.

A recent WSJ CIO Journal article noted that blockchain seems poised to change how supply chains work. The article cites examples of projects with Walmart and British Airwayswhere blockchain is used to maintain the integrity of the data being shared across the various institutions participating in their respective ecosystems. Earlier this year IBM and Maersk announced a joint venture to streamline operations for the entire global shipping ecosystem. Their joint venture aims to apply blockchain technologies to the current stack of paperwork needed to process and track the shipping of goods. Maersk estimates that the costs to process and administer the required documentation can be as high as 20 percent the actual physical transportation costs.

Identity management and data sharing. The other major kind of blockchain killer-apps will likely deal with identity management and data security.

As we move from a world of physical interactions and paper documents, to a world primarily governed by digital data and transactions, our existing methods for protecting identities and data are proving inadequate. Internet threats have been growing. Large-scale fraud, data breaches, and identity thefts are becoming more common. Companies are finding that cyberattacks are costly to prevent and recover from. The transition to a digital economy requires radically different identity systems.

A major reason for the internet’s ability to keep growing and adapting to widely different applications is that it’s stuck to its basic data-transport mission.  Consequently, there’s no one overall owner responsible for security, let alone identity management, over the internet. These important responsibilities are divided among several actors, making them significantly harder to achieve.

Blockchain technologies should help us enhance the security of digital transactions and data, by developing the required common services for secure communication, storage and data access, along with open source software implementations of these standard services, supported by all major blockchain platforms, such as Hyperledger and Ethereum.

Identity is the key that determines the particular transactions in which individuals, institutions, and the exploding number of IoT devices, can rightfully participate, as well as the data they’re entitled to access. But, our existing methods for managing digital identities are far from adequate.

To reach a higher level of privacy and security we need to establish a trusted data ecosystem, which requires the interoperability and sharing of data across the various institutions involved. The more data sources a trusted ecosystem has access to, the higher the probability of detecting fraud and identity theft. However, it’s not only highly unsafe, but also totally infeasible to gather all the needed attributes in a central data warehouse. Few institutions will let their critical data out of their premises.

MIT Connection Science, a research initiative led by MIT professor Sandy Pentland, has been developing a new identity framework that would enable the safe sharing of data across institutions. Instead of copying or moving the data across, the agreed upon queries are sent to the institution owning the data, executed behind the firewalls of the data owners, and only the encrypted results are shared. MIT Connection Science is implementing such an identity framework in its OPAL initiative, which makes extensive use of cryptographic and blockchain technologies. A number of pilots are underway around the world.

Irving Wladawsky-Berger worked at IBM for 37 years and has been a strategic advisor to Citigroup and to HBO. He is affiliated with MIT, NYU and Imperial College, and is a regular contributor to CIO Journal.