Category: Digital media

Who’s Watching You?

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

What You Need to Know About Tech

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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?

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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.

Don’t Be Evil?

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The alarm bells keep ringing on the tech quasi-monopolies that rule the Internet. There are two main issues to address: one is the ownership and control over personal data – this data rightly belongs to consumers, not network servers – and two is the positive network effects that drive these cos. to dominance.

How we analyze these tech titans differs along these two issues. Amazon, Apple and Microsoft sell products and product markets are not easily protected from competition. They are middlemen between producers/suppliers and consumers. I expect we will discover new competitive models to deliver goods and services, which will eat into these cos.’ dominance. The promise of blockchain technology is exactly to eliminate the middleman.

Google and Facebook are different animals. Search is starting to appear to resemble a public good, like public libraries. With the positive externalities of network effects, it also resembles a natural monopoly – the more people use a search engine, the better is the information obtained, meaning the search engine becomes ever more valuable. We probably don’t want to destroy this value. To me, this suggests that Google’s search engine eventually will become a publicly regulated utility – because the politics will demand it. We already see this outside the U.S.

Facebook, the ultimate social network, is going through some ups and downs because of issues of how it collects and uses personal information. My impression is that a single social network for all socializing needs is probably not the ideal solution. If correct, competition will eat into FB, which will start to break up into different targeted functions, reducing its value as a one-stop-fits-all OSN.

We shall see.

How Silicon Valley went from ‘don’t be evil’ to doing evil

March 4, 2018

The Google logo is seen at the Google headquarters in Brussels, Tuesday March 23, 2010.
By 

Meet the new boss. Same as the old boss.

– The Who, “We won’t be fooled again”, 1971

Once seen as the saviors of America’s economy, Silicon Valley is turning into something more of an emerging axis of evil. “Brain-hacking” tech companies such as Apple, Google, Facebook, Microsoft and Amazon, as one prominent tech investor puts it, have become so intrusive as to alarm critics on both right and left.

Firms like Google, which once advertised themselves as committed to being not “evil,” are now increasingly seen as epitomizing Hades’ legions. The tech giants now constitute the world’s five largest companies in market capitalization. Rather than idealistic newcomers, they increasingly reflect the worst of American capitalism — squashing competitors, using indentured servants, attempting to fix wages, depressing incomes, creating ever more social anomie and alienation.

At the same time these firms are fostering what British academic David Lyon has called a “surveillance society” both here and abroad. Companies like Facebook and Google thrive by mining personal data, and their only way to grow, as Wired recently suggested, was, creepily, to “know you better.”

The techie vision of the future is one in which the middle class all but disappears, with those not sufficiently merged with machine intelligence relegated to rent-paying serfs living on “income maintenance.” Theirs is a world in where long-standing local affinities are supplanted by Facebook’s concept of digitally-created “meaningful communities.”

The progressive rebellion

Back during the Obama years, the tech oligarchy was widely admired throughout the progressive circles. Companies like Google gained massive access to the administration’s inner circles, with many top aides eventually entering a “revolving door” for jobs with firms like Google, Facebook, Uber, Lyft and Airbnb.

Although the vast majority of all political contributions from these firms, not surprisingly, go to the Democrats, many progressives — at least not those on their payroll — are expressing alarm about the oligarchs’ move to gain control of whole industries, such as education, finance, groceries, space, print media and entertainment. Left-leaning luminaries like Franklin Foer, former editor of the New Republic, rant against technology firms as a threat to basic liberties and coarsening culture.

Progressives are increasingly calling for ever growing tech monolith to be “broken up,” calling for new regulation to limit their size and scope. Many have embraced European proposals to restrain tech monopolies which now resemble “predatory capitalism” at its worse.

The right also rises

Traditionally, conservatives celebrated entrepreneurial success and opposed governmental intervention in the economy. Yet increasingly even libertarians, like Instapundit’s Glen Reynolds, have suggested that some form of anti-trust action may be necessary to curb oligarchic power. The National Review even recently suggested that these firms be treated as utilities, that is, regulated by government.

Conservatives are also concerned about pervasive political bias in the industry. The Bay Area, the heartland of the industry, has evolved as Facebook co-founder Peter Thiel notes, into a “one party state.” Ideological homogeneity discourages debate and dissent, both inside their companies.

More importantly, conservatives seek to curb their ability — increasingly evident as traditional media declines — to control content on the internet. As the techies expand their domain, America’s media, entertainment and cultural industries would seem destined to become ever less heterogenous in politics and cultural world-view.

A clear and present danger

Whether one sits on the progressive left or the political right, this growing hegemony presents a clear and present danger. It is increasingly clear that the oligarchs have forgotten that Americans are more than a collection of data-bases to be exploited. People, whatever their ideology, generally want to maintain a modicum of privacy, and choose their way of life.

The perfect world of the oligarchs can be seen in the Bay Area, where, despite the massive explosion in employment, even tech workers, due to high costs, do worse than their counterparts elsewhere. Meanwhile San Francisco, among the most unequal places in the country, has evolved into a walking advertisement for a post-modern dystopia, an ultra-expensive city filled with homeless people and streets filled with excrement and needles. It is also increasingly exporting people elsewhere, including many people making high salaries.

Of course, technology is critical to a brighter future, but need not be the province of a handful of companies or concentrated in one or two regions. The great progress in the 1980s and 1990s took place in a highly competitive, and dispersed, environment not one dominated by firms that control 80 or 90 percent of key markets. Not surprisingly, the rise of the oligarchs coincides with a general decline in business startups, including in tech.

We have traveled far from the heroic era of spunky start-ups nurtured in suburban garages. But a future of ever greater robotic dependence — a kind of high-tech feudalism — is not inevitable. Setting aside their many differences, conservatives and progressives need to agree on strategies to limit the oligarch’s stranglehold on our future.

Joel Kotkin is the R.C. Hobbs Presidential Fellow in Urban Futures at Chapman University in Orange and executive director of the Houston-based Center for Opportunity Urbanism (www.opportunityurbanism.org).

Who Are We and What Matters?

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Google? Facebook? These two firms alone control roughly 2/3s of digital media advertising revenues.

That’s power. That’s knowledge.

But knowledge of what?

Mostly of how to program computers and deploy algorithms to sort through, organize, cluster, rank, and order vast quantities of data. In the case of Facebook, Zuckerberg obviously also understood something simple but important about how human beings might enjoy interacting online. That’s not nothing. Actually, it’s a lot. An enormous amount. But it’s not everything — or anything remotely close to what Silicon Valley’s greatest innovators think it is.

When it comes to human beings — what motivates them, how they interact socially, to what end they organize politically — figures like Page and Zuckerberg know very little. Almost nothing, in fact. And that ignorance has enormous consequences for us all.

The Trouble With GAFA

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A recent article from US News and World Report on the dominance of technology and the degeneration of political discourse. Zingales co-wrote an interesting book, Saving Capitalism from the Capitalists, that I previously posted about here.

The Trouble With Google and Facebook

Are the internet giants monopolies?

By James Warren Contributing Editor for OpinionFeb. 21, 2018, at 3:30 p.m.

LUIGI ZINGALES PROVIDES a window onto news illiteracy or at least social media’s penchant for the provocative over the reasoned.

Zingales is an economist at the Booth School of Business at the University of Chicago, whose main floor walls are lined with a photographic Murderer’s Row of Nobel laureates (nine, actually) in economics. You can occasionally find a real, live Nobelist at the salad bar in the upscale cafeteria just off an airy lobby atrium where elite students from around the globe (our future tech moguls, Fortune 500 chiefs and perhaps even well-heeled dictators) can be found chatting with an unmistakable aura of privilege and intellectual superiority.

The Padua, Italy native has inspired a nasty kerfuffle by inviting former Trump administration adviser Steve Bannon to campus (date to be determined), prompting both accusations of his promoting a “Nazi” and a sit-in by protesters during one of his classes. The university, where (some joke) fun goes to die, has long been the most honorable bastion of free speech and won’t buckle, as President Robert Zimmer reiterated during a conversation with The Wall Street Journal.

But if the citizenry were less ideologically convulsed, it might pay attention to Zingales’ actual work, which includes questions about more troubling forces than a humbled former Donald Trump Svengali.

In sum, are Facebook and Google monopolies?

Zingales first broached the matter in a podcast he co-hosts with Kate Waldock of Georgetown University and now goes into greater detail both in a conversation with George Mason University’s Tyler Cowen found in Booth’s magazine and in a phone chat.

Zingales is troubled by their power, but Cowen really isn’t as he noted some obvious realities: Most people love them and the price is right. They have ascended because they’re doing a better job than media competitors. Their growing market share, especially of ad dollars, is a function of being very good during a period where our choice in media has never been greater.

Zingales demurred and contends, for starters, that we pay a greater price than imagined, most notably in the personal data we give up. Oddly, we may not place as great a value on that data as we might and do seem less and less concerned about privacy. We don’t really appreciate all the information we routinely dispense as we google and post on Facebook.

So, to that extent, data is the new oil and Facebook is our new Rockefeller, harkening to the days of Standard Oil’s monopoly. Cowen disagrees, noting that, in his mind, Facebook’s product is free and it doesn’t have a monopoly on his attention, as Rockefeller did on our gasoline.

Zingales countered that the control of data is worse and gives the giant platforms an increasing hold over other sectors, especially as artificial intelligence grows. It’s not quite a traditional monopoly but a dangerously unceasing leverage of influence.

In his very civil debate with Cowen, he said, “I’m not advocating regulation; I’m advocating a reallocation of data ownership. I don’t want to tax them; I want more competition. You want, as you said, a walled garden. In a walled garden, there are two factors at play. One benefits the consumer. The other creates a moat to block competitors from coming in and to build a bigger and bigger monopoly.”

“These companies discriminate on a commercial basis. If you are a competitor, you’re at the bottom of the list,” he added. “If I own the railways, I can’t charge you double the price because you’re my competitor, while my friends get it for free. That’s the law of the land in the U.S.: If you are a public utility with certain characteristics, you must provide service on equal terms to everybody.”

And, while he pointed to the effectiveness of European media and data regulation (and argued that prices have gone down and competition increased for products such as phones), he doesn’t call for immediate regulation but, at the minimum, a more explicit understanding of the giants’ power.

“It’s not a straightforward thing,” he says in a phone chat. “The solution is not saying there is no problem or jumping the gun. In my first line of attack, it’s saying I want to make the market more competitive by introducing rules to make it more competitive.“

Take a look at the increasing Facebook-Google stranglehold on digital advertising. Yes, there is greater access these days to information (including, he jests, people wasting time on academics’ blogs), but really good information has to be paid for. The decline in that lifeblood of a democracy is vivid, especially in local media markets.

“I am not trying to go back to good old days. They weren’t that good and they are not coming back. But saying there is no problem would be excessive. Facebook and Google are extremely good at transmitting information but not at creating information,” he says.

Good information is a public good, he contends, as he was reminded of when watching “The Post,” the Steven Spielberg-Meryl Streep-Tom Hanks movie on The Washington Post’s coverage of the Pentagon Papers.

He recalls how when The Post was concerned about The New York Times’ blockbuster initial coverage, “they go out and buy ten copies of The Times. We are not used to that anymore. Modern technology has made ease of reproduction easier,” and disrupted business models. These days, just find a free digital version of the story.

If the Justice Department’s antitrust division sought his counsel, he’d try to figure ways to increase competition, be stricter with Google in assuring search brings unbiased results from both a commercial and political point of view and try to somehow limit the size of the digital ad market it and Facebook control.

“Maybe put a strict limit that they can’t control more than x-percent in that market,” he says. Some of the very media concentration limits ditched by Trump’s Federal Communications Commission should probably be revived for the internet age, he suspects, with last week’s Robert Mueller indictments of Russian trolls only underscoring the influence of Facebook, especially (not to mention the growing inability of Americans to distinguish real from phony).

“I’m not against [Facebook and Google],” Zingales says. “I just worry about their power.”

And then, of course, there’s that guy, Bannon, and the very harsh public debate that’s included the depressingly liberal use of the word “Nazi.” It’s perhaps more concerning than the role of Facebook and Google.

“We don’t have a date yet. But what’s shocked me is that extremism of some positions. I am actually more worried about the future of the nation as a result,” he says.