Slate has published an adaptation from my recent book *Big Business: A Love Letter to an American Anti-Hero*, here is one excerpt:
Advocates of splitting up the big tech companies have a utopian vision of what will replace them. Whether you like it or not, we now live in a world where every possible idea (and video) will be put out there in some fashion or another. Don’t confuse your discomfort with reality with your assessment of big tech companies as individual agents. We’re probably better off having major, well-capitalized companies as guardians and gatekeepers of online channels, however imperfect their records, as the relevant alternatives would probably be less able to fend off abuse of their platforms and thus we would all fare worse.
Imagine, for instance, that instead of the current Facebook we had seven smaller companies all performing comparable social networking services, perhaps with some form of interconnectability or data portability. The negative sides of social media, which are indeed real, probably would be worse and harder to control.
It is unlikely that such a setting would result in greater consumer privacy and protection. Instead, we would have more weakly capitalized entities, with less talent on staff and weaker A.I. technologies to take down objectionable material. Probably some of those companies would be more tolerant of irresponsible user behavior as a competitive lure. Fake accounts would proliferate, and social networking sites such as 4chan—often a cesspool of racism and rhetoric that goes beyond the merely offensive—would comprise a larger and more central part of the market.
As for privacy, these smaller Facebook replacements would be more susceptible to hacks, foreign surveillance and infiltration, and external manipulation—the real dangers to our privacy and well-being.
There is much more at the link.
…we suggest that this division of innovative labor has not, perhaps, lived up to its promise. The translation of scientific knowledge generated in universities to productivity enhancing technical progress has proved to be more difficult to accomplish in practice than expected. Spinoffs, startups, and university licensing offices have not fully filled the gap left by the decline of the corporate lab. Corporate research has a number of characteristics that make it very valuable for science-based innovation and growth. Large corporations have access to significant resources, can more easily integrate multiple knowledge streams, and direct their research toward solving specific practical problems, which makes it more likely for them to produce commercial applications. University research has tended to be curiosity-driven rather than mission-focused. It has favored insight rather than solutions to specific problems, and partly as a consequence, university research has required additional integration and transformation to become economically useful. This is not to deny the important contributions that universities and small firms make to American innovation. Rather, our point is that large corporate labs may have distinct capabilities which have proved to be difficult to replace.
That is from Ashish Arora, Sharon Belenzon, Andrea Patacconi, and Jungkyu Suh, “The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth,” recommended, an excellent paper spanning several disciplines. I would myself note this is further reason not to split up the major tech companies.
Lots of fire! Here is the podcast link.
The proportion of students studying fully online who are enrolled within 50 miles of their homes has risen from under half to fully two-thirds, a new study finds.
Here is the longer piece.
Perhaps the biggest complaint about tech companies today is that they do not respect our privacy. They gather and store data on us, and in some cases, such as Facebook, they charge companies for the ability to send targeted ads to us. They induce us to self-reveal on the internet, often in ways that are more public than we might at first expect. Furthermore, tech data practices are not entirely appropriate, as for instance Facebook recently stored user passwords in an insecure, plain text format.
This entire debate is overblown, and the major tech companies are much less of a threat to our actual privacy than is typically assumed.
For most people, gossip from friends, relatives, colleagues, and acquaintances is a bigger privacy risk than is information garnered on-line. Gossip is an age-old problem, and still today many of the biggest privacy harms come through very traditional channels. And unlike false charges planted on social media, often there is no way to strike back against secretive whisperings behind one’s back. In the workplace, one employee may tell the boss that another employee does not work hard enough, or high school gossip may destroy reputations and torment loners and non-conformists, to give two common examples of many.
If anything, the niche worlds made possible by the internet, and yes by Facebook and Google, are giving many people refuges from those worlds of public scrutiny and mockery – you can more easily find the people who and like respect you for what you really are.
Life in small towns and rural areas is another major threat to privacy – too often everybody knows everybody else’s business. In contrast, if you live in a major city or suburban area, you have a much greater ability to choose whom you interact with, and you are more protected from the prying of your neighbors and relatives. And it seems that so far, contrary to some initial “death of distance” predictions, the internet has encouraged people to move to major urban centers such as New York and San Francisco. To that extent, internet life has boosted privacy rather than destroying it.
There’s also evidence that young Americans are having less sex these days and they are less likely to be in a serious relationship. The internet is likely one cause of that isolation, and in my view those changes are probably social negatives on the whole, and they represent a valid criticism of on-line life. But is the internet in this regard boosting privacy? Absolutely. The internet makes it much easier to be in less contact with other people, whether or not that is always wise or the best life course overall. It strikes me as odd when the same people blame the internet for both loneliness and privacy destruction.
A lot of actual privacy problems in the public arena don’t seem to attract much attention, unless they are tied into a critique of big tech. For instance, autocratic governments are using Interpol and its police powers and databases (NYT) to track down and apprehend ostensible criminals who are in fact sometimes merely domestic political dissidents. It is likely that many innocent individuals have ended up in jail (can the same be said from social media violations of privacy?) That’s an example of using databases for truly evil ends and, while it was covered by The New York Times (p.A10), it is hardly a major story.
It is striking to me how much the advocates focus on regulating the big tech companies, because a true pro-privacy movement might not have that as a priority at all.
By the way, how do you feel about obituaries? The newspaper collects information on you for years, and then suddenly one day they publish it all and then keep it on the web, whether you like this or not. They’ll even throw in snide remarks, sarcastic tone, or moral judgments about you, depending on the outlet of course.
If the privacy landscape is so complex, why then is there so much anger at Facebook and other social media companies? First, most users of services such as Facebook and Google are actually pretty happy with those services and with the companies. Some of the opposition is coming from intellectuals with core anti-business grudges, politicians looking to get headlines, or often from media itself, who face Google and Facebook as major and far more profitable competitors.
Second, social media themselves create contagion effects, whereby attention is piled on a relatively small number of select victims. For instance, the #MeToo campaign has focused condemnation on a small set of offenders, such as Harvey Weinstein, then magnified by Twitter and other social media. Many other offenders get off scot-free, simply because attention has not been directed their way. Ironically, one of the better arguments against social media is to look at how social media treat and discuss social media itself. On the privacy issue, Facebook rather than say Google has ended up as the main whipping boy, even though it might have gone the other way (who again controls your gmail?). Ironically, perhaps the actual best argument about social media is how social media reflexively covers social media itself.
Third, many of the supposed concerns about privacy are perhaps questions of control. It is correct that the major tech companies do “funny things” with our data which we neither see nor understand nor control.This unsettles many people, even if it never means that some faux pas of yours is revealed in front of a party of your mocking friends. Still, I am not sure the underlying notion of “control” here has been satisfactorily defined. Many marketers, and not just on the internet, do things you do not control or even know about. Furthermore, see Jim Harper on privacy, who covers security, seclusion, autonomy, and absence of objectification as some of the different features of privacy concerns.
Of course, just as privacy violations do not stem mainly from the big tech companies, we have never been in control of what is done with information and opinion about us, again think back on social gossip. This fundamental lack of control is just now being pushed in our faces in new and unexpected ways. In part it is actually unsettling, but in part we also are overreacting.
Privacy is a real issue, but to the extent it can be fixed, most of that needs to happen outside of the major tech companies. Most of what is written about tech and privacy is simply steering us down the wrong track.
The podcast master himself, here is the audio and transcript, here is the opening summary:
What are the virtues of forgiveness? Are we subject to being manipulated by data? Why do people struggle with prayer? What really motivates us? How has the volunteer army system changed the incentives for war? These are just some of the questions that keep Russ Roberts going as he constantly analyzes the world and revisits his own biases through thirteen years of conversations on EconTalk.
Russ made his way to the Mercatus studio to talk with Tyler about these ideas and more. The pair examines where classical liberalism has gone wrong, if dropping out of college is overrated, and what people are missing from the Bible. Tyler questions Russ on Hayek, behavioral economics, and his favorite EconTalk conversation. Ever the host, Russ also throws in a couple questions to Tyler.
Here is one excerpt:
COWEN: Here’s a reader question. “In which areas are you more pro-regulation than the average American?” They mean government regulation.
ROBERTS: Than the average American?
ROBERTS: I can’t think of any. Can you help me out there, Tyler?
COWEN: Well, I’m not sure I know all of your views.
ROBERTS: What would you guess? Give me some things to think about there. In general, I think government should be smaller and regulations should be smaller.
COWEN: I’ll give you–
ROBERTS: Let me give you a trick answer. Then I’ll let you feed me some.
ROBERTS: Many people believe that the financial crisis was caused by deregulation. I think that’s a misreading of the evidence. It’s true that some pieces of the financial sector were deregulated, but government intervention in the financial sector was quite significant in advance of the crisis. In particular, the bailouts that we did of past failed financial institutions, I think, encouraged lenders to be more careless with how they lent their money, mainly to other institutions, not so much to people out in the world like you and me.
Deregulation’s a little bit tricky, so I wanted to get that in. I’m not sure how that pertains to the question. It does, probably, in some way. So give me something I should be more regulatory about.
COWEN: Well, one answer —
ROBERTS: Baseball? Baseball, of course. [laughs]
COWEN: I would say animal welfare — government should have a larger role. But also what counts as a tax-exempt institution, I would prefer our government be stricter.
ROBERTS: Well, I’m with you there. Yeah, okay, kind of.
COWEN: Well, that’s more regulation, okay?
ROBERTS: I guess.
COWEN: Kind of.
ROBERTS: Yeah, kind of. It’s different standards.
COWEN: Higher capital requirements for banks.
ROBERTS: I’m okay with that. Yeah, that’s a good one. I’d prefer a laissez-faire world for banks, more or less. If we can’t credibly promise not to bail out banks — if that’s the case, we live in a world where banks get to keep their profits and put their losses on taxpayers — bad world. A more regulated world would be better than the world we live in; not as good as my ideal world, though. But there’s a case where I would be in favor — like you just said — more capital requirements.
You’re on a roll. See what else you can come up with for me.
COWEN: Spending more money for tax enforcement, especially on the wealthy.
ROBERTS: Not the worst thing in the world.
COWEN: You can spend a dollar and bring in several times that, it seems.
ROBERTS: I don’t think rich people cheat on their taxes. Do you? [laughs]
COWEN: “Cheat” is a tricky word, but I think we could spend more money.
ROBERTS: We could probably collect more effectively.
COWEN: And it would more than pay for itself.
ROBERTS: Yeah. That’s probably true.
COWEN: We’re actually big fans of government regulation today.
ROBERTS: Yeah, we’ve really expanded the tent here. [laughs]
Do read or listen to the whole thing.
As incentives to take higher actions increase—due to higher stakes or more manipulable signaling technology—more information is revealed about gaming ability, and less about natural actions. We explore a new externality: showing agents’ actions to additional observers can worsen information for existing observers. Applications to credit scoring, school testing, and web searching are discussed.
That is from a forthcoming JPE paper “Muddled Information,” by Alex Frankel and Navin Kartik.
In this paper, I estimate the causal effect of increased exposure to online social networks during college on future labor market outcomes.
Using quasi-random variation from Facebook’s entry to college campuses during its infancy, I exploit a natural experiment to determine the relationship between online social network access and future earnings.
I find a positive effect on wages from Facebook access during college. This positive effect is largest in magnitude for female students, and students from lower-middle class families.
I provide evidence that this positive effect from Facebook access comes through the channel of increased social ties to former classmates, which in turn leads to strengthened employment networks between college alumni.
My estimates imply that access to Facebook for 4 years of college causes a 2.7 percentile increase in a cohort’s average earnings, relative to the earnings of other individuals born in the same year. This translates to an average nominal wage increase of $3,000-$5,000 in 2014.
To be clear, some of that could be a wage distribution effect. Still, this paper points to the possibility of some very real networking and matching gains from the use of Facebook, and perhaps those gains do not favor traditional elites.
For the pointer I thank the excellent Kevin Lewis.
Here is just one segment of an excellent piece:
Compliance costs are astronomical
- Prior to GDPR going into effect, it was estimated that total GDPR compliance costs for US firms with more than 500 employees “could reach $150 billion.” (Fortune)
- Another estimate from the same time said 75,000 Data Protection Officers would need to be hired for compliance. (IAPP)
- As of March 20, 2019, 1,129 US news sites are still unavailable in the EU due to GDPR. (Joseph O’Connor)
- Microsoft had 1,600 engineers working on compliance. (Microsoft)
- During a Senate hearing, Keith Enright, Google’s chief privacy officer, estimated that the company spent “hundreds of years of human time” to comply with the new privacy rules. (Quartz)
- However, French authorities ultimately decided Google’s compliance efforts were insufficient: “France fines Google nearly $57 million for first major violation of new European privacy regime” (The Washington Post)
- “About 220,000 name tags will be removed in Vienna by the end of , the city’s housing authority said. Officials fear that they could otherwise be fined up to $23 million, or about $1,150 per name.” (The Washington Post)
And another part:
Unseen costs of foregone investment & research
- Startups: One study estimated that venture capital invested in EU startups fell by as much as 50 percent due to GDPR implementation. (NBER)
- Mergers and acquisitions: “55% of respondents said they had worked on deals that fell apart because of concerns about a target company’s data protection policies and compliance with GDPR” (WSJ)
- Scientific research: “[B]iomedical researchers fear that the EU’s new General Data Protection Regulation (GDPR) will make it harder to share information across borders or outside their original research context.” (POLITICO)
Do read the whole thing.
We also find that stronger peer effects are exerted by more price-sensitive individuals. This positive correlation suggests that the elasticity of aggregate demand is substantially larger than the elasticity of individual demand. Through this channel, peer effects reduce firms’ markups and, in many models, contribute to higher consumer surplus and more efficient resource allocation.
That is from a new NBER working paper by Michael Bailey, Drew M. Johnston, Theresa Kuchler, Johannes Stroebel, and Arlene Wong.
The plain language of the GDPR is so plainly at odds with the business model of surveillance advertising that contorting the real-time ad brokerages into something resembling compliance has required acrobatics that have left essentially everybody unhappy.
The leading ad networks in the European Union have chosen to respond to the GDPR by stitching together a sort of Frankenstein’s monster of consent,a mechanism whereby a user wishing to visit, say, a weather forecast page 4 is first prompted to agree to share data with a consortium of 119 entities, including the aptly named “A Million Ads”network. The user can scroll through this list of intermediaries one by one, or give or withhold consent en bloc, but either way she must wait a further two minutes for the consent collection process to terminate before she is allowed to find out whether or it is going to rain.
This majestically baroque consent mechanism also hinders Europeans from using the privacy preserving features built into their web browsers, or from turning off invasive tracking technologies like third-party cookies,since the mechanism depends on their being present.
For the average EU citizen,therefore, the immediate effect of the GDPR has been to add friction to their internet browsing experience along the lines of the infamous 2011 EU Privacy Directive (“EU cookie law”) that added consent dialogs to nearly every site on the internet.
The GDPR roll out has also demonstrated to what extent the European ad market depends on Google, who has assumed the role of de facto technical regulatory authority due to its overwhelming market share. Google waited until the night before the regulation went into effect to announce its intentions, leaving ad networks scrambling.
It is significant that Google and Facebook also took advantage of the US-EU privacy shield to move 1.5billion non-EU user records out of EU jurisdiction to servers in the United States. Overall, the GDPR has significantly strengthened Facebook and Google at the expense of smaller players in the surveillance economy.
The data protection provisions of the GDPR, particularly the right to erase, imposed significant compliance costs on internet companies. In some cases,these compliance costs just show the legislation working as intended. Companies who were not keeping adequate track of personal data were forced to retrofit costly controls, and that date is now safer for it.
But in other cases, companies with a strong commitment to privacy also found themselves expending significant resources on retooling. Personally identifying information has a way of seeping into odd corners of computer systems (for example, users will sometimes accidentally paste their password into a search box), and tracking down all of these special cases can be challenging in a complex system.The requirements around erasure, particularly as they interact with backups, also impose a special burden, as most computer systems are designed with a bias to never losing data,rather than making it easy to expunge.
Here is the full Senate testimony, there are many interesting points in the piece. I thank an MR reader for the pointer.
For a forthcoming Conversations with Tyler, no associated public event. Your counsel and extreme wisdom are appreciated as always.
As gang wars drive Brazil’s homicide rate to historic highs, evangelical pastors — long revered in the nation’s slums and prisons — have come up with a new way to protect members looking for a way out.
Gang leaders say the only way to leave the business alive is to convert to Christianity. So Barros, a televangelist popular here in western Brazil, memorializes a gang member’s embrace of the ancient articles of faith using the most modern of tools: He records the conversion on his smartphone and posts the videos on YouTube, Facebook and WhatsApp. The converts gain immunity against retribution by rival gangs and their own.
Gang leaders and law enforcement officials say it works.
“We aren’t going to go against the will of God,” a local leader of the powerful Comando Vermelho, the gang that was pursuing Viera, told The Washington Post. “God comes first, above everything.”
And there is an enforcement mechanism:
When his attackers saw it [the deconversion video], they dropped their pursuit. But they monitored him for months, checking to see if he was going to church or had contact with his former leaders.
“If I do anything wrong, they will kill me,” Cunha said. “I have to take the video seriously. They don’t tolerate regressions.”
Here is more from Marina Lopes at The Washington Post, interesting throughout.
Taking logs of computer activity, or even screenshots, and running them through big data analytics programs allows these firms to create detailed reports for executives about productivity, they claim. How employers use the data, they add, is up to them.
According to Gartner, more than half of companies with over $750m in annual sales used “non-traditional” monitoring techniques on staff in 2018, while the workforce analytics industry will be worth nearly $2bn by 2025, according to San Francisco’s Grand Review Research.
Products developed by companies such as Activtrak, which raised $20m in a series A funding round in March 2019, allow employers to track which websites staff visit, how long they spend on sites deemed “unproductive” and set alarms triggered by content considered dangerous.
If combined with personal details, such as someone’s age and sex, the data could allow employers to develop a nuanced picture of ideal employees, choose whom they considered most useful and help with promotion and firing decisions.
Here is more from Camilla Hodgson at the FT.