The first misunderstanding is about Facebook itself and the competitive dynamics in which we operate. We are a large company made up of many smaller pieces. All of our products and services fight for customers. Each one has at least three or four competitors with hundreds of millions, if not billions, of users. In photo and video-sharing, we compete against services like YouTube, Snapchat, Twitter, Pinterest and TikTok, an emerging competitor.
In messaging, we’re not even the leader in the top three markets — China, Japan and, by our estimate, the United States — where we compete with Apple’s iMessage, WeChat, Line and Microsoft’s Skype. Globally, the context in which social media must be understood, China alone has several large social media companies, including powerhouses like Tencent and Sina. It will seem perverse to people in Europe, and certainly in China, to see American policymakers talking about dismantling one of America’s biggest global players.
In this competitive environment, it is hard to sustain the claim that Facebook is a monopoly. Almost all of our revenue comes from digital advertising, and most estimates say Facebook’s share is about 20 percent of the United States online ad market, which means 80 percent of all digital ads happen off our platforms.
That is in the NYT, to be clear Clegg now works for Facebook.
Kroszner and I wrote about related possibilities in our 1994 book Explorations in the New Monetary Economics. Here is a not very informative WSJ article. Here is Ben Thompson speculating from his email newsletter:
This, then, is what I suspect is the overall motivation for Facebook’s efforts: having its own currency will allow for transactions on Facebook’s terms, not the credit card companies, which should, in turn, allow for both more kinds and more total transactions. Consider a Facebook currency on a theoretical level: if there were no fees attached to a transaction, micropayments suddenly become much more viable; peer-to-peer payments are simple — for both users and Facebook — as clicking a button; tipping models actually make sense.
None of these benefits are new to be sure, the question, though — and this is always the question generally, but with payments especially — is how you get from here-to-there. Remember, payments is a multi-sided network: users have to be one board, merchants need to be on board, and there has to be some sort of liquidity in the market. From a user perspective, how do you get them to buy into the network? Then consider merchants: how do you prevent them from taking money out of the market, killing liquidity?
In fact, Facebook is well-equipped on both fronts, particularly the merchant side: remember, merchants are the most likely culprits when it comes to killing liquidity in a market. They are going to transfer a cryptocurrency to fiat as soon as possible. Merchants, though, are also paying Facebook a lot of money for ads: that is, they are already putting money into the system. To that end, it is easy to see Facebook giving a discount to merchants willing to leave their money in the system and simply buy advertising using their Facebook tokens.
Users are trickier: certainly Facebook will push things like peer-to-peer payments to get users to connect up their bank accounts or debit cards to Facebook’s network, but I also suspect this is where the rumors about Facebook paying for ad-viewing comes in. This is not, in my estimation, some sort of genuine acknowledgment that user attention is worth compensating directly, but rather a plausible way to seed user accounts such that they are motivated to use Facebook’s currency; ideally, at least for Facebook, there will end up being lots of ways to use that currency.
…I don’t think that Facebook wants to impose any fees at all: thinks about it — what could possibly be more valuable to an advertising-based business than knowing exactly what customers are spending their money on?
You have to pay for Ben, but it is worth doing so, you can subscribe here.
Here’s a good video discussing why tech companies like UBER hire economists.
José Luis Ricón, for blogging and to develop further platforms for information dissemination.
Arun Johnson, high school student in the Bay Area, to advance his work in physics, chemistry, nuclear fusion, and for general career development.
Thomas McCarthy, undergraduate at Dublin, Trinity College, travel grant to the Bay Area, and for his work on nuclear fusion and running start-up programs to cultivate young Irish entrepreneurs.
Natalya Naumenko, economist, incoming faculty at George Mason University, to study the long-term impact of nuclear explosions on health, and also more broadly to study the history of health in the Soviet Union and afterwards.
Paul Novosad, with Sam Asher, assistant professor at Dartmouth, to enable the construction of a scalable platform for the integration and dissemination of socioeconomic data in India, ideally to cover every town and village, toward the end of informing actionable improvements.
Alexey Guzey, travel grant to the Bay Area, for blogging and internet writing, plus for working on systems for improving scientific patronage.
Dylan DelliSanti, to teach an economics class to prisoners, and also to explore how that activity might be done on a larger scale.
Neil Deshmukh, high school student in Pennsylvania, for general career support and also his work with apps to help Indian farmers identify crop disease and to help the blind interpret images.
Here is my previous post on the third cohort of winners, with links to the first and second cohorts. Here is my post on the underlying philosophy behind Emergent Ventures. You can apply here.
Julia interviews me, definitely recommended.
That is the question I raise in my new Bloomberg column, here is one excerpt:
Another reality of the contemporary automobile is that Tesla has managed to rethink the entire design. The dashboard and interior are reconfigured, the drive is electric, software is far more prominent and integrated into the design, voice recognition operates many systems, and there are self-driving features, too. Whether or not you think Tesla as a company will succeed, its design work has shown how much room there is for improvement.
You might object that cars have numerous negative features — but that’s where there is much of the potential for major transformation. Cars cause a lot of air pollution, but electric cars (or maybe even hydrogen cars) are on their way, and they will lower noise pollution too, as hybrids already do.
Cars also create traffic congestion, but congestion pricing can ease this problem significantly, as it already has in Singapore. Congestion pricing used to be seen as politically impossible, but the Washington area recently instituted it for one major highway during rush hour. The toll is allowed to rise as high as $40, but on most days it is possible to drive to work for about $10 and home for well under $10, at speeds of at least 50 mph. Manhattan also will move to congestion pricing, for south of 60th Street in Midtown, and the practice will probably spread, both within New York and elsewhere, partly because many municipalities are strapped for cash. As for building new highways, transportation analyst Robert W. Poole Jr. argues in his new book that there is plenty of room for the private-sector toll concession model to grow, leading to more roads and easier commutes.
In other words, the two biggest problems with cars — pollution and traffic congestion — have gone from “impossible to solve” to the verge of manageability.
There is much more at the link, and here is the closer:
Right now there are about 281 million cars registered in the U.S., and they have pretty hefty price tags and demand many hours of time. The basic infrastructures and legal frameworks are already in place. So, despite the current obsessions with robots and gene editing, it should be evident that the biggest tangible changes from technology in the next 20 years are likely to come in a relatively mundane area of life — namely, life on the road.
But Ms McRae is also concerned that programmes like Lambda School, though well-meaning, risk undermining existing educational institutions by offering a quicker route to work.
That is from The Economist coverage of Lambda School.
A three-hour drive north of the Philippine capital Manila, local leaders have drawn a line in the sand against a swelling tide of scuttlebutt and innuendo.
They outlawed gossip.
In a world awash with fake news and online rumors, more than half a dozen neighborhoods in Binalonan have introduced an anti-gossip ordinance to put an end to too much idle chitchat. Town Mayor Ramon Guico III says the worst time is during the summer, when the scorching heat pushes people to huddle beneath the broad branches of century-old acacia trees, sipping soft drinks or munching on snacks in the shade.
“That’s how it starts,” he complains.
The chin-wagging usually revolves around who might be cheating on their spouse or running up debts. Facebook and messaging apps worsened the problem, but Mr. Guico says the really damaging stuff is gossip— the sort of thing your mother might have warned you about…
The first offense starts with a fine of 500 pesos, or around $10, followed by an embarrassing afternoon spent picking up trash.
She also said Ms. Gardner had ranked reporters in job interviews according to how negative they were regarding tech companies, viewing that as a favorable trait, and had urged Ms. Angwin to run headlines on future stories like ‘Facebook is a dumpster fire.’ Ms. Angwin said her objections had led Ms. Gardner to seek her removal as editor in chief.
Here is the source (NYT), via Tom.
That is the subtitle, the title of this very interesting book is News from Germany and the author is Heidi J.S. Tworek. Here are a few things I learned:
1. “News agencies became the central firms collecting international news from the mid-nineteenth century. The “Big Three” news agencies were all created in this period: Agence Havas in the early 1830s, Telgraphisches Bureau (Wolff) in 1849, and Reuters Telegram Company in 1851.”
2. There were very high fixed costs in telegraphic news gathering, and the telegraph was essential to being a major international news service. Those costs included financing a network of correspondents abroad and the expense of sending telegrams.
3. The three companies colluded, in part to lower the cost of news collection, and maintained a relatively stable cartel of sorts, running from 1870 up through the outbreak of World War II. World War I was a hiatus but not a break in the basic arrangement. The AP was added to the cartel in 1893.
4. These news agencies, being well-identified and somewhat monopolistic, were susceptible to political control, especially from Germany. But note that the British censored information coming from the Boer War.
5. The post WWII era was an exception, and throughout most of modern history it has been difficult to turn a profit by selling news coverage.
She requires no introduction, this conversation involved a bit of slapstick, so unlike many of the others it is better heard than read. Here is the audio and transcript. Here is the opening:
COWEN: Just to start with some basic questions about Canada, which you’ve written on for decades — what defines the Canadian sense of humor?
MARGARET ATWOOD: Wow. [laughs] What defines the Canadian sense of humor? I think it’s a bit Scottish.
COWEN: How so?
ATWOOD: Well, it’s kind of ironic. It depends on what part of Canada you’re in. I think the further west you go, the less of a sense of humor they have.
ATWOOD: But that’s just my own personal opinion. My family’s from Nova Scotia, so that’s as far east as you can get. And they go in for deadpan lying.
COWEN: In 1974, you wrote, “The Canadian sense of humor was often obsessed with the issue of being provincial versus being cosmopolitan.”
COWEN: You think that’s still true?
ATWOOD: Depends again. You know, Canada’s really big. In fact, there’s a song called “Canada’s Really Big.” You can find it on the internet. It’s by a group called the Arrogant Worms. That kind of sums up Canada right there for you.
The burden of the song is that all of these other countries have got all of these other things, but what Canada has is, it’s really big. It is, in fact, very big. Therefore, it’s very hard to say what is particularly Canadian. It’s a bit like the US. Which part of the US is the US? What is the most US thing —
COWEN: Maybe it’s Knoxville, Tennessee, right now. Right? The Southeast.
ATWOOD: You think?
COWEN: But it used to be Cleveland, Ohio.
ATWOOD: Did it?
COWEN: Center of manufacturing.
ATWOOD: When was that? [laughs] When was that?
COWEN: If you look at where the baseball teams are, you see what the US —
And from her:
ATWOOD: Yeah, so what is the most Canadian thing about Canada? The most Canadian thing about Canada is that when they ran a contest that went “Finish this sentence. As American as apple pie. As Canadian as blank,” the winning answer was “As Canadian as plausible under the circumstances.”
And a question from me:
COWEN: But you’ve spoken out in favor of the cultural exception being part of the NAFTA treaty that protects Canadian cultural industries. Is it strange to think that having more than half the [Toronto] population being foreign born is not a threat to Canadian culture, but that being able to buy a copy of the New York Times in Canada is a threat?
In addition to Canada, we talk about the Bible, Shakespeare, ghosts, her work habits, Afghanistan, academia, Peter the Great, writing for the future, H.G. Wells, her heretical feminism, and much much more.
Let’s assume, for purposes of argument, that basically all of the complaints about social media are correct. Then let’s also imagine, as Matt Yglesias periodically suggests on Twitter, that Facebook is shut down altogether, toss in Twitter and the others as well.
What would happen?
One possibility is that America would move toward a Chinese-style solution, with heavy censorship of the internet. Still, I think both public opinion and the First Amendment make that outcome unlikely. Furthermore, while the Chinese solution has been relatively practicable (as opposed to desirable) to date, there is no guarantee that will continue to be the case.
Alternatively, without tight censorship substitutes for Facebook and Instagram and YouTube and Twitter will arise, possibly based in other countries if regulation so dictates. They might be less ad-funded, less profitable, and less easy to use, but the basic technologies for “putting every single idea out there” are already out of the box. Furthermore, it won’t be that hard to find and circulate those ideas, including the very bad ones, through a mix of aggregation and search and focused spread and redistribution.
The first question is whether anyone actually thinks that such a world of less heavily capitalized communications entities would lead to greater responsibility. The first cut answer, drawing on basic economics, would seem to be no.
The broader point is the relative popularities of various ideas and sources still will be upended, just as the printing press and radio also had some fairly radical (and not entirely positive) effects in their times. In essence, various intellectual and ideological debates will need to be re-litigated and re-fought over the internet, just as they were redone over television and radio, or earlier through papyrus and also clay tablets, of course with somewhat different results each time.
Many people hate that reality, but a reality it is. Let’s even say you are right to hate that reality (NB: not exactly my view).
a) Go after the companies that make the clay tablets?
b) Go after the clay tablets and try to smash them?
c) Equip yourself to try to win the new intellectual and ideological battles for hearts and minds?
And what should we infer about the spiritual vigor of a society that might so heavily promote options a) and b)?
In fact, recognising a face is only the first step of biometric surveillance, he suggests. “It’s really like an entry-level term to much broader, deeper analysis of people’s biometrics. There’s jaw recognition — the width of your jaw can be used to infer success as CEO, for example. Companies such as Boston-based Affectiva are doing research that analyses faces in real time, to determine from a webcam or in-store camera if someone is going to buy something in your store.”
Other analyses, he adds, can be used to determine people’s tiredness, skin quality and heart rate, or even to lip-read what they are saying. “Face recognition is a very deceiving term, technically, because there’s no limit,” he concludes. “It ends ultimately only with your DNA.”
That is from Madhumita Murgia at the FT.
I develop a method that structures financial market data to forecast economic outcomes. I use it to study the IT sector’s transition to its long-run share in the US economy. The method uses a model which links economy-wide growth with IT’s market valuation to match transition data on macroeconomic quantities, the sector’s life cycle patterns, and, importantly, market valuation ratios. My central estimates indicate that the revolution ends between 2028 and 2034 and that future average labor productivity growth will fall to 1.7 percent from the 2.7 recorded over 1974–2015. I show empirically the IT sector’s price-dividend ratio univariately explains over half of the variation in future productivity growth.