Showing posts with label Facebook. Show all posts
Showing posts with label Facebook. Show all posts

Friday, November 8, 2019

Why the US Should Nationalize LIBRA

Mark Zuckerberg’s October 23rd testimony before Congress on LIBRA, Facebook's’ proposed digital currency, has garnered much attention. I attended the hearing (I'm in the blue tie in the picture below) and thought both legislators and Zuckerberg missed the real solution to the problem.

To understand why, let’s start with what’s really going on. Facebook created Libra in response to competitive pressure. Imagine a social networking platform with the four functions of money (store of value, means of payment, unit of account and a means of social control) imbedded. A social media platform with this functionality has the potential to significantly reduce Facebook’s reach, if not immediately, then ten years down the road. 

For more, see: Why the US Should Nationalize LIBRA

Thursday, August 1, 2019

The Internet Governance Forum by Sachin Meier, Impact Investing Intern, Georgetown University.

Last Thursday, the Internet Governance Forum was held at the Center for Strategic and International Studies. Sponsors included Facebook, Amazon, Comcast, the Charles Koch Institute, and ICANN (the Internet Corporation for Assigned Names and Numbers). The conference covered many topics – from blockchain, AI, and 5G to monopoly power and antitrust, privacy, and consumer protection.

Commissioner Christine Wilson of the Federal Trade Commission discussed the myriad problems surrounding Facebook and its "reckless" behavior with respect to user privacy, data collection and targeting. She took a strong stance on the need to directly regulate Facebook and “put a speed bump in front of Mr. Zuckerberg”. She was keen on controlling Zuckerberg’s power within his own company by dictating the composition of Facebook's Board of Directors and regulating other executive powers Zuckerberg holds within the company. She also suggested a more general, industry-wide reform of social media company consumer protection regulations.

Another panel discussed issues rising from new technologies, like Deepfakes and corporate surveillance, which have adversely affected consumers and about which the current laws provide little guidance. Very few of the most important questions were answered, in part because no one currently has the answers. One of the panelists left with the hope that either newer technology, social norms, or governmental regulation will control the malicious use of technology and allow us to find a stable equilibrium for society.

After a break, a panel of lawyers and regulators convened to discuss antitrust regulation and the future of Big Tech. This panel was generally in favor of using antitrust legislation as leverage in order to coerce compliance with rules and to encourage companies not to push their luck with extralegal actions. They discussed targeting Google, Amazon, Facebook, and Apple. The panel noted that, as network effects and economies of scale are the driving force behind these monopolies, breaking them up would not solve the problem, merely destroy a relatively efficient market.

Another issue concerned “the right to be forgotten”. This concept has been seized upon in Europe but remains unacceptable in America. A few panelists pitched the idea.

Despite the pressing nature of many of these issues, and the proclaimed necessity of legislation to fix the problems, many of the speakers and panelists agreed that other, better-publicized issues would continue to have Congressional attention. It is up to the private sector, state and local governments, and society to find solutions to the risks increasingly powerful technology presents.

(Edited by William Michael Cunningham).

Monday, July 22, 2019

Libra Hearings on Capitol Hill. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

On June 18, Facebook released it’s white paper on the new digital currency, Libra.  The news led David Marcus, Chief Executive Officer of Calibra, to appear before the House Financial Services committee on July 17 - a day after appearing before the Senate Banking Committee.

House Financial Services Committee members questioned whether Facebook would have overwhelming control over  the Libra Association’s 27 other members and if they were to be trusted with 2.7 billion users’ financial data, given past privacy violations. 

Facebook’s trustworthiness has been in question since the 2016 Cambridge Analytica data scandal.  Most recently, charges brought in March by the Department of Housing and Development concerning Facebook's alleged violations the Fair Housing Act have not helped the firm gain favor with the public.

Last month, Facebook was removed from the S&P ESG 500 index because of privacy concerns and a lack of transparency as to why certain user information is collected and shared.  These issues earned the company a 22 and 6 in social and governance sub scores, respectively, against an 82 environmental sub score - this last score being easy for a technology company to achieve. 

Marcus pointed out that the social media platform is just one of 28 current Libra Association members - they hope to grow to 100 members - and lists Mercy Corp and Women’s World Banking as groups capable of combating any use of the digital currency for human rights violations.

Michigan representative Rashida Tlaib pointed out that Marc Andreesen, co-founder of Andreesen Horowitz, sits on the board of Facebook; Mark Zuckerburg, CEO of Facebook, sits on the board of Breakthrough Initiatives; Peter Thiel, co-founder of PayPal, sits on the board of Facebook; Ben Horotwitz, co-founder of Andressen Horowtiz, sits on the board of Lyft; David Marcus, the witness, sits on the board of Coinbase. All are founding members of the Libra Association.

These close  relationships do nothing to soothe fears that a nexus of power exists within the Facebook network, controlled by a few individuals. Of course, this also does little to address the problem of diversity in the tech industry. 

As pointed out at an earlier Diversity and Inclusion subcommittee hearing (subcommittee of the Financial Services Committee), a lack of diversity tends to occur when non minorities in positions of power look to fill leadership rolls with those they already know. People tend to associate with those who look like themselves. Predominately white and male organizations inviting other predominantly white and male organizations to have a seat at the table does nothing to bring diverse thoughts and perspectives into new innovations.

As stated in the Libra white paper and subsequent press release, a social driver for Libra has been that it will provide easier access to those who have historically been excluded from using financial institutions.  Marcus cited the example of a young woman sending money from the US  to her loved ones in another country without the wait and fees that might apply to other methods of money transfer. Harping on the 1.7 billion unbanked and underbanked individuals in the world, he returned to the social service that Calibra might bring to a broken system.

Ohio’s Joyce Beatty (pictured with the author at left) pointed out that it “wasn't very unique” to mention 1.7 billion globally who lack access to a bank account without details on how those unbanked would have access to Libra. Many of Marcus’ responses to the lack of clarity that still exists left the burden of clarifying exactly how on this would work on regulators.

Pressley asked how Libra would serve the unbanked, who lacked a bank account to purchase Libra digitally,
 but admitted that “the reason we are here is because the Federal Reserve has failed” to provide a safe and secure system to access and move money.

Facebook’s altruistic intentions aside, the question of how they planned to benefit from Libra was posed. Marcus described two ways Facebook will make money from the new digital currency:
  1. Libra will aid 90 million businesses in transacting with one another. More consumers on the platform will drive small businesses to expand, and as they expand, they will purchase more advertisements with Facebook.
  2. As trust in Libra is earned, services will be offered in partnership with banks at lower cost that will add revenue.
“What would it mean for the world if everyone everywhere could be part of the global economy with access to the same financial opportunities?” Mercy Corps website expressed an optimistic vision of the private, public and social sectors working together to solve the existing problems of inequality.  Many other questions  were left  unanwered after the exhaustive hearings, with more hearings to come.  Questions concerning currency manipulation and social engineering still need to be addressed.

For now, the social benefits of Libra are difficult to verify. Time will tell if Libra leads to a more equitable financial system.

Wednesday, July 3, 2019

Why Regulating Facebook's Libra is a Waste of Time

Facebook’s recently announced cryptocurrency pilot, Libra, claims it will “transform the global economy.”

The company hopes that anyone would be able to send Libra through platforms like Facebook messenger and WhatsApp to act as an intermediary for transferring traditional currencies. The ultimate goal is to have this currency accepted as a (general) form of payment. And other financial services will be built on top of its blockchain-based network, called the Libra Blockchain, a “proof of authority" permissioned blockchain system.