Tag: facebook

Metaverse – Hype of Reality?

Posted on by Steve Sammartino

Why Now?

When a top 10 company by valuation like Facebook, changes its name and focus to the MetaVerse – it is going to generate a lot of attention. A google search of the term now has 141 million results, a more than 100 fold increase on a year ago. The reason that Facebook became Meta, and started its focus on the concept, is that Facebook after being one of the fastest growing companies in history, is now in decline. In terms of both revenue and profit.

Since its launch in 2004, Facebook was the clear winner of social networking. It has 3.6 billion users across its platforms which include Facebook, Instagram and WhatsApp. But now, it is starting to wane as TikTok encroaches and people turn away from its apps. Meta wants to own what it thinks will be the future of social interaction. Meta’s revenue is almost entirely dependent on advertising (97%). Their success in advertising is in no small part due to the information they can gather on their users. Meta knows what you like, do, believe, we’re you’ve been, where you’re going next, who you friends are, what your life history is and of course, and what you spend on. And it’s not just through their sites, rather via the likes and login ecosystem they’ve built on the web which creates such a rich data flow.

BONUS: How observant are you? Have you noticed this?

There is no organisation in the history of the planet who nows more about individuals. They know more about you than your partner or government does. But this information gathering has become far more difficult as the owners of the hardware people access Meta apps on (namely Apple and Google) are starting to restrict Meta’s ability to track users. Likewise, governments the world over are quickly regulating against these privacy incursions, which are the fuel that powers the organisation.

This is a major problem for Meta, as don’t own any significant hardware. The Meta portal device has been discontinued and I don’t know anyone with a pair of their RayBan spy glasses. Because the Metaverse requires the use of goggles like the Meta Quest 2, it could solve this hardware problem and allow Meta to set its own privacy terms. To date they’ve made a massive investment including a $2 billion acquisition of the Oculus company and more than $70 billion in developing Metaverse hardware and applications. Zuckerberg really needs this to work.

BONUS: Start Smart in 2023?: Get the Sammatron in to speak to your team – Special offer for new year bookings to blog readers.

Hype or Reality?

So far, the share market hates it. The Meta Share price has declined more than 60% in the past year, losing investors more than $700 billion since its peak. That’s not a typo. In short, Mark Zuckerberg needs the Metaverse more than we do. But it is hard to see 3.6 billion people going from a ‘free service’ to having to invest $600 plus into a single purpose device (MetaQuest VR goggles) to log into Facebook Horizons.

In my view this is why the Metaverse is getting such attention. The only question is whether the people of the internet themselves will give it as much attention as Zuckerberg wants them to. If the meagre house hold penetration of VR goggles being at 0.03% of Facebook users is any indication – the answer is a clear no. Or at least, not for a long time.

Next Week: MetaVerse – Best use cases.

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Keep Thinking,

Steve.

Peak Facebook?

Posted on by Steve Sammartino

It’s been a bumpy start to the year for Mark Zuckerberg who lost a lazy $30b since ‘Meta’ tanked on the stock market .

I don’t think it is a stretch to say we are past “Peak Facebook”.

So far, the share price decline has been stubborn. Meta no longer has the most downloaded social media application (that crown goes to TikTok) and its abilities in laser-sharp micro-targeting have been curtailed by Apple’s recent privacy shifts. For the first time in its history, Facebook (Meta) has lost users. Since its peak market capitalisation of over $US1 trillion, Meta has lost almost 45 per cent of its market value and is now valued at $US561 billion. This is the biggest single drop in capitalisation of any stock in history – $US230 billion.

As the numbers are enormous, it’s easy to overlook how extraordinary this is. To give you some context – Meta’s loss since its peak is more than the value of BHP, the biggest company in Australia, at $US181 billion, or the combined value of NAB, ANZ, Westpac, Wesfarmers, Woolworths and Telstra.

It turns out investors can tolerate almost daily scandals including spread of misinformation, abuse of market power, threats to the democratic process, tacit support of anti-vax groups, facilitation of teen depression on Instagram and massive privacy incursions – but not an earnings miss.

That said, this has provided the market with an opportunity to recalibrate their viewpoint not only on Meta, but the wider Big Tech cohort.

It is becoming clear who the technology landlords are and who the tenants are. The smart play in this sector is analysing more than top line growth and turning your mind to structural shifts within the sector. It’s increasingly obvious that control is more important than reach and attention. From an investment perspective, structural shifts and access to customers are where we should focus our attention.

Amazon – Search and Advertising?

When we think of Amazon, we don’t think of advertising. However, for the first time ever in the earnings call, they separated out their advertising revenue. It came in at $US31 billion. This number is more than the combined advertising revenue for Twitter, Snapchat and Microsoft.

Let’s also not forget that the margins for this business would greatly exceed their traditional ecommerce business division. Running warehouses and shipping products is expensive – while putting ads on your site comes at near zero marginal cost. While the advertising earnings were only 7 per cent of Amazon’s revenue for 2021, it is deep in the purchasing funnel – right after consumers have searched what they want to buy, inside Amazon’s ecosystem. It’s hard to have a more powerful offer for brands wishing to sell something than being there at the moment of truth for the consumer. Amazon now has the advantage of owning a quasi-search for internet shopping, and they get to advertise on top of it.

On the other hand, Meta has a more indirect business model for advertising, rendered vulnerable by Apple’s new requirement that their users ‘opt in’ to tracking. This has an estimated cost of at least $US10 billion in revenue to Meta in 2022 alone. This move has impacted Meta’s ability to target consumers as accurately. It pushes them further out in the purchasing funnel.

That is just the start. We can expect Alphabet’s Android mobile operating system to move in a similar direction and get ahead of privacy regulation.

Rail Wars

The new battle in Big Tech isn’t about user base or engaging, addictive products – it’s about owning the rails of commerce. Google, Apple and Amazon are beginning to flex some muscle and leverage their structural advantage over Meta.

First, Apple gets to make the rules. Meta may have nearly 3 billion users, but Apple controls the devices 30 per cent of them use. Apple decides what information gets shared within their iOS ecosystem and its decisions can change the fortunes of apps overnight. Their brand positioning has always been one of privacy as a fundamental human right. It would be prudent to think that Apple’s structures within this realm will only strengthen and align with prevailing consumer and regulatory sentiment.

Both Amazon and Google are using search as a positive advertising mechanism. This is based on desire, rather than interruption. Facebook has historically relied on going deep into psychographics and behaviour profiling (now frustrated by privacy controls) and being compelled to worsen their platform experience because of their advertising business model.

In contrast, search-based advertising is based on direct and immediate consumer feedback, powered by consumer desire. The platforms Amazon and Google operate extremely close to the point of purchase. Amazon controls the audience inside their ‘store’, while Alphabet (Google’s parent) can respond to direct queries inside their maps, Android OS, searches and Chrome browser. Outside of Facebook marketplace and Instagram commerce, Meta is not proximate to the ‘moment of truth’. 

Meta faces two tough challenges. Despite the incredible reach of their platforms (2.9 billion users), Meta does not:

  1. Own the rails of commerce like other Big Tech firms do.
  2. Go deep into the purchasing funnel.

The most expensive shelf space in Coles and Woolworths is right next to the cash register, where we often see impulse purchase items. The cost of this real estate is justified because it’s where a purchase is about to take place – when we have our credit cards ready.

It’s also true that brands spend more on cooperative advertising directly with supermarkets (“trade spend”) than they do on brand messaging within consumer markets. If I type “treadmill” into Amazon or “new car finance” into Google, you can be sure I’m ready to buy. Being in a group about fitness on Facebook or following a retro Porsches page on Instagram could be more about hope than intent to purchase. In the supermarket of the internet, money will increasingly flow towards the point of purchase.

Facebook is where people congregate for socialising, news and entertainment – it’s not where they go to buy. While it is a great place to generate brand awareness and build associations, that’s going to be harder to achieve with privacy shifts and those who control the rails shutting them out. We are also entering a more competitive market for attention in social and entertainment realms.

The Metaverse Hallucination

Facebooks’ rebranding to Meta and subsequent investment in the metaverse is strategically the right path to take. Their investment in the metaverse – more than $US15 billion to date – could build out an ecosystem they own and control through their own device, the Oculus. It’s just unlikely to work as well as Mark Zuckerberg hopes. It already exists in a multitude of gaming contexts with well established players. Turns out having billions of dollars and yes people surrounding you can cause a person to lose touch with humanity.

The problem is that it’s already a hyper-competitive market, and Meta’s offering lacks the ‘reality’ that has been the core proposition of Facebook and social media generally. Social media is inextricably linked to what we do in the physical world. Despite the filters we add, it is a mirror for our lives and relies on real world connections. It builds connections and FOMO, while the metaverse forces people into wormholes.

Virtual reality (the metaverse, according to Meta) is the domain of games and fantasy. It’s hard to show off how great your life (and car, house, garden, holiday) is when it’s only pixels.

Even if Meta manages to pull off its metaverse miracle, virtual consumption will never rival actual consumption. For most people, their biggest expenses are food, transport, shelter and healthcare, which are unalterably physical.

Speaking of physical, success in the sector will compel Meta to get better at making hardware. The much-heralded Facebook Portal hasn’t exactly set the world on fire, with fewer than 0.02 per cent of their consumer base investing in one. In comparison, Oculus has fared a little better, with purchases by 2.4 per cent of Facebook users.

It may be that Meta has maximised what it can be – it has peaked. We an only hope.

Or maybe I’m wrong and Zuckerberg is such a brilliant strategist that he has deliberately stumbled to stave off threats of regulation and splitting up what is still the biggest audience any organisation has managed to garner in the history of Earth.

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Keep Thinking,

Steve.

Technology Externalities – Q&A

Posted on by Steve Sammartino

Last week I did a rare keynote for a key regulatory body where I was asked to go deep into technology externalities. After it we had a Q&A session and over email I got asked a number of additional questions. Many of which I’m sure you’ve wondered about. So here they are!

  1. What would be the “Vaccine” for a digital pandemic? For me this would be global implementation of BlockChain based technology. This is for two reasons: (1) BlockChain could allow for cold storage (offline) of each block and (2) also is the only fully distributed data storage system which has the highest levels of cryptography. If everything went off line we’d have a rational starting point to reboot from. But in truth we need an off switch. Digital Security is not possible without analogue optionality. True digital security requires physical replication and or isolated mechanical (non-digital) operational ability.
  2. What technology that we currently rely on- do you think is most at risk at becoming redundant? The Energy Grid. With the exponential improvement in renewables and battery storage (Graphene & other emerging storage solutions) we will very soon move to a localised energy generation / storage systems. In this instance each home, office, building, factory will generate and store its own energy on premise. Like we have without own computer systems. However, an energy trading system will emerge where we can generate and sell energy across wires directly to other places that need it immediately. Like our computers we will have the equivalent of ‘hard drives’ – batteries – and some ‘cloud storage’ but mostly we’ll have enough storage locally and only big industry will need big storage solutions and trading of KwHs. We’ll buy and sell energy directly with each other, in the same way we trade content / information today.
  3. As we move further into the shiny new digital world and digital twinning, are we more likely to de-prioritise the physical world? No – I think it will facilitate and create more attention to physical spaces – COVID also reminded us that the physical world is vital and we can’t operate in pure isolation or without certain physical realities. By not trying to replace– but augment our physical world it will equalise attention and maybe bring physical back as a focus because all physical things will be augmented digitally. Digital wont’ be a place we go to but like an atmosphere we will under.
  4. We influence but don’t make policy. What penetration have you had in Canberra? Policy is a function of prevailing social sentiment and narrative. As we’ve seen with diversity, climate policy and other social issues it sometimes takes decades before issues are acted upon. The most important function of a society is to share concern and raise the profile of issues which are important to our collective. That is the first task of change – in some ways ‘markets evolve from conversations’. I’ve worked with Government of some issues at a Sate and Federal level but big tech power seems low of the priority list at present. My personal view is that this is because many policy makers don’t understand the potential longer term consequences, and we haven’t had many local industries directly upended by it. We can see that it has only been prioritised so far with News. This was because we have a powerful lobby here wanting to protect that industry and its advertising revenue. To this point powerful lobbyists have been more effectual – than consumer intrusion or longer term surveillance risk. I’d also add that Governments having access to the data and tools big tech have in every consumers pocket could provide a perverse incentive to turn a blind eye to other downsides.
  5. What are your thoughts on big tech self-regulating on issues such as dis and misinformation? No for-profit industry has ever self-regulated out of the goodness of their heart in the history of capitalism. Wow – I said it. We should not expect it to happen now. To date, their efforts have been to maintain control by ensuring their own AI systems are the solution to the misinformation spread – which to date has been largely ineffectual, and it seems clear the problem can never be solved in this manner by AI in isolation which is reactive in nature and needs training for every new problem. Their strategy (Big tech – eg Facebook) has been to delay and obfuscate and sadly, it is working. ‘We need to do better’ gets rolled out with every hack. Big tech and all self-publishing platforms need to be responsible for all the content of their sites, just like McDonalds needs to ensure the teenagers making their burgers don’t poison anyone. Profitability and their business model should not matter in making this decision. A simple solution would be having an onboarding process where all publishers / people need to be verified with 100 points of ID and all corporate advertisements in said channels approved by an actual person and not an AI. These companies only became so big because of their lack of regulator restriction or over site. They should be treated the same as any publisher.
  6. How do we get ourselves unhooked from devices and back to reading books? Discipline. It’s not easy and no different from choosing the right food out of our fridges and cupboards. The depth of the crisis although obvious now, won’t be acted on for a generation, as per obesity.
  7. Gig economy, work from home, virtual companies. Hard to regulate loose affiliation of people, eg: Bitcoin. We are used to regulating companies, what do you think? Just like the Taxation system, we need to develop regulatory models which are designed for individuals & corporations as we enter the new economy. As we’ve had expansions of how individuals and companies and can participate in the market – we need to regulate accordingly – some of which will afford the populace protections from Corporations, for example gig workers; Here we might be able to do something like provide mobile employee benefits on all work regardless of employment status. We could possibly do a percentage loading on money paid for every individual task or gig where for all forms of work completed in a freelance oriented marketplace get money paid into a systems which administers annual leave, sick leave, health benefits super etc. We may also need protect individuals from themselves with emerging industries like Fintech (Buy Now Pay Later and Crypto Gambling – yes it is gambling). What is certain is that we need regulate loosely affiliated people based on intention and outcome of activities and not define it into industrial era corporate structures. New eras need new definitions, and matching regulations to cope with structural shifts. It won’t be easy, but it will be necessary.
  8. What’s your view – does social media do more harm than good? I think social media does more good than harm. But the ratio is of harm is far too high. A very large percentage of the content of the platform is fake, untrue, sensationalist, enraging, divisive and often other peoples content which was stolen without permission and monetised. The corporate loophole is that results of social media interactions is often two or three steps removed from the social media forums themselves. So consequences and their responsibility for what happens after the digital interaction has plausible deniability. Take for example the correlation of increases in teenage female suicide and social media usage with this cohort. Even if the ratio of good to evil was say 90% – at this scale (Facebook has 2.3 billion members) that could be a very real problem for society. The Antivax movement has used these tools to gain a lot of traction and has a real impact on Covid Vaccine hesitancy, which is having an immediate impact on rollout. I’d hazard a guess at least 20% of content on social is bunk – it is very difficult to determine this as algorithms and data is an internal corporate secret. For Social Media to not have a negative societal impact it would need to be 99.9% without misinformation. That could only be achieved with very clear ‘road rules’ / auditing and regulation. We’d need something like forensic data inspectors similar to OH&S inspectors in a factory. In addition to that, the business model of Free Services – creates a market of Surveillance Capitalism, which will not end well I’m certain.

– – –

Keep Thinking,

Steve.

Don’t Be Evil? – COVID-19 series

Posted on by Steve Sammartino

Don’t be evil…? To your shareholders, at least.

You may have noticed on the homepages of Google and YouTube this week an announcement claiming that the way you search on Google and use YouTube is at risk. The number of alarmed people who forwarded it to me was astounding. If anything, it highlights the importance of Google’s services to our daily lives, how much people love the products, but above all, how powerful Google actually is. Therein lies the problem.

Like everyone, I use their products all day, every day. They are incredible. As far as tech goes, I love it more than most people and have built an entire career around it. In my view, Google is the most powerful organisation in the world by far. Just think about this for a second:

The only thing you never lie to is your search engine.

Really, think about the implications of that for a few moments. It knows all your habits, locations, ideas, proclivities, and your deepest and darkest secrets. I can promise you that none of your searches are anonymous.

Google (owned by Alphabet) is the fabric that holds together modern society. If this power were to be left unchecked, it wouldn’t end well for anyone. Absolute power never does. So you can regard this post as a quasi public service announcement from the Sammatron.

What happened: The ACCC has put forward a new regulation called the News Media Bargaining Code. This code says that Google and Facebook, who collectively control almost 60% of digital advertising revenue in Australia, will have to negotiate and pay news content creators for their contribution. The reasoning behind the mandatory code is to ensure we have a healthy news media sector and that the financial rewards of creating such journalistic content are not redirected towards the gatekeepers.

How Google responded: This week Google put out an Open Letter to all Australians to scare them into believing this proposal would fundamentally change their services for the worse. Which, quite frankly, was propaganda.

The letter: The appeal from Google Australia’s CEO Mel Silva was placed on the homepages of Google services search and YouTube. This reached 95% of Australian internet users. Google has more reach to Australians than any other media organisation, or commercial entity, in our country’s history. Of course, the irony is that the placement of this call to arms was on the homepages of its key services – an archetypal demonstration of their absolute power. The letter claims that the proposal for Google to pay news content creators is unfair!

The letter is incredibly misleading and in my opinion, deceptive conduct – a view echoed by the ACCC.

Here are my rebuttals to verbatim quotes from Google’s open letter:
  • “Dramatically worse search results” –  Not true. A lie. (News is a tiny percentage of search. In fact, only 20% of Google search terms is new, ie never been searched for before by anyone.
  • “Data being handed over to big news business” – Not true. A lie. Nowhere in the proposed regulations states that Google is required to hand over user data. By comparison, Google is now valued at $1.3 trillion (AUD), while Australia’s two biggest news organisations have a combined value of only $13 billion (AUD). They are not even 1% of the size of Google. It turns out Google is the big news company trying to trick people into thinking it is a cute little startup. (See financials below.)
  • “Free services at risk’ – Very unlikely. Google chooses to its own usage policy and decides whether its services are free. Their entire business model is built around data surveillance to sell to advertisers. I’d bet my net worth that this won’t change.
  • “Artificially inflate news rankings” – Well, it’s their search engine. They control the algorithms to decide their rankings. This is a classic red herring.

Since Covid, the power of big technology firms has only increased. Alphabet’s share price is actually up 50% since April. As I’ve said before, opting out isn’t an option any more.

The world is watching: Google fired such a heavy-handed response because the world is watching. What happens here could influence policy around the world and further focus regulatory scrutiny on the behemoth. This is an important global play for Google, as the issue of dematerialising news resources is being raised in every democracy. Rather than caring about the citizens they purport to serve, they’d rather maximise their short-term profits. We should be very suspicious.

Monopoly power: The real issue of course is that the internet is broken. The web we grew up to love and believed would make the world more equal has become very unequal indeed. It’s essentially become five giant websites with screenshots from the other four, each with monopoly powers in their dominant sectors. Not only are they monopolies, they contribute little to our country as corporate citizens. Google has earned more than $5 billion (AUD) revenue from the Australian market place, yet only contributed $40 million to our tax coffers last year. That’s right, not even 1% of their revenue. A reminder here that the corporate tax rate in this country is 30%. At their global gross margins of 19%, its tax bill should’ve been closer to $1 billion (AUD). That would build a few new hospitals and schools.

Is the ACCC code the right action? I am of the view that the ACCC has got it wrong here. If they believe there has been a monopolistic abuse of power, then they should act to prevent that power. The shape of the Australian news ecosystem, while affected by Google’s revenue redirection, shouldn’t be propped up by transferring money from one behemoth to a select number of local news arms. The real solution should be anti-trust action and other forms of data and algorithm regulation.

Digital sovereignty: Australia lacks sovereignty over the most important technology in the modern era – digital infrastructure. If we want to remain a sovereign nation, then we must hold corporations to account, by having a thriving news sector and not permitting monopolies mislead consumers. We need to get better at ensuring all companies pay their fair share of taxes like we residents do.  To go one step further, our country needs to start investing in its own digital infrastructure for key products like search, social, maps and video platforms.

If we don’t own and control the connecting fibre of our modern economy, then we sure as hell should not be afraid of regulating it. If there’s anything this country doesn’t like, it’s a bully – and Google is being one. At times like this, we should never confuse services we like with the behaviour from the companies who provide them. Stand tall and push back. We need you to speak up.

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Keep Thinking,
Steve. 

The Age of Digital Colonialism

Posted on by Steve Sammartino

For the first time in Australia’s history, we no longer own or control all of our critical infrastructure. And to that list we can add any country which isn’t the USA or China. Welcome to the age of digital colonialism.

Show me a rich country and I will show you a rich infrastructure. For anyone who has travelled to a less developed economy, we see it right in front of our eyes. Electrical wires scrambled like spaghetti linking up houses. Water only the locals will dare to drink. Roads that scare the most adventurous driver. Hospitals that make you want a helicopter lift out after an accident and education which isn’t a right, but a bonus for the fortunate few. The simple and clear difference between wealthy and poor countries is their infrastructure. It’s the platform which invents the economic possibilities of its people.

It’s easy to forget that wealthy countries didn’t just click their fingers and get their wonderful infrastructure. They had to invest billions of dollars over decades and centuries. When new technology arrived they had to embrace it, and very often build out the projects using government funds in large capital works, and at times, even take over private firms who got too powerful (antitrust). This is only ever possible in a moderate democracy. A country governed by people with its constituents’ best long-term interests at heart. It’s very difficult indeed to build the physical structure required for a wealthy economy in a corrupt state.

The infrastructure we so often take for granted is what businesses and the populace have danced on top of for the past 200 years. And in this time we’ve also had the greatest ascendancy in living standards in human history.

But now in this digital age we are building a new form of infrastructure. I like to call it the metastructure.

Metastructure: The data and algorithms which now preside over how we organise people, infrastructure and physical assets in the post-industrial era.

Some ‘non-exhaustive’ inclusions would be:

  • Search and Artificial Intelligence (Google is really just an AI engine)
  • Social Media – tools of connection with the general population.
  • Transport and logistics organisation platforms
  • Large data centres

China and the USA are the only countries that we know of on the globe who are building these pieces of metastructure at a Nation State Scale. In fact, they are going well beyond their own boundaries and are now deeply ensconced in a period of Digital Colonialism. Every other country it would seem is now renting their metastructure from the new overlords.

The funny thing is that we can’t really blame anyone or any Government for being complacent. This happened a lot faster than anyone expected, and unlike other infrastructure – it doesn’t reside in the country in physical form. The nature of data is that it doesn’t need a passport to enter a country and can colonise a market by stealth – a little like a virus would.

Its easy to say here – how is this any different to Coca-Cola becoming a global corporation or General Motors selling their cars around in every market the world over? The difference is simple. These things can’t swing an election, lead to ethnic cleansing or influence how your population thinks, feels or acts 200 times a day – but the metastructure can.

I think the smartest country in the world right now is China. They had the presence of mind to remove Google, Facebook (and their digital business units) from operating in their country so they could build out their own versions of them. They also understand that the new arms race is in Artificial Intelligence – rather than explosive fire power which defined the 20th century military industrial complex.

Any country that wants to maintain its sovereignty in the coming decades needs to invest heavily in the Structural Digital tools which will define the next 50 years. Not owning or controlling your own infrastructure can only every mean you’ll be subservient to those who provide it.

 

Algorithmic Bias

Posted on by Steve Sammartino

It’s easy to think machines have some kind of impartiality to them given they are, well, machines. But anything built by humans has a human inside it. Algorithms are no different, and just like us, they are filled with bias.

Algorithm – a word once confined to University mathematics departments and computer labs – now takes pride of place in every second tech news article, determines what you see online and why you received this email at 7am Australian Eastern Standard Time. So it pays to understand what they are, the impact they have and the biases they’re so often driven by.

So let’s go back to the start – what are algorithms in simple terms?

Algorithms 101 – An algorithm is a set of step by step instructions used to do something or make a decision.

With a definition this broad you can see that we humans use them everyday. Even sorting the laundry into darks, colours and whites, and washing them each separately is technically an algorithm. The steps to cook something (a recipe) is an algorithm. Where computers come in is that they can follow a very large number of steps, on a very large data set, and make decisions quickly and precisely. (In the clothing example above – the data set is the clothes and their colours, and the steps are where to sort each piece of clothing).

Algorithmic bias occurs when a computer system reflects the implicit values of the humans who are involved in coding, selecting and collating data to execute the algorithm. The emergent problem with the algorithms in big tech is that they’re designed to achieve corporate outcomes, not societal ones. Their values are simple: to make as much money as possible.

Algorithms now run so deep and cross-reference so much data that what we input has little to do with the outputs we receive. What we now have on the web is ‘the illusion of choice‘. It isn’t just our feeds on social forums which are decided by algorithms. Even what we search for is biased towards corporate algorithmic design parameters. Just search for anything on google you want to buy, in any category and the first bias is plain to see – it assumes you are after the cheapest version possible of every item: clothing, sneakers, airline tickets, hotel rooms, you name it. Apparently we all want to cheapest version of everything no matter what it is. Even if you put the word ‘high quality‘ before the primary search term you’ll still be guided by price. It’s not before we get very specific with words like expensive or search specific brands before we can find what we might need. Another in search is recency bias. Search will always show the latest version, or story of anything and anyone unless a clear time stamp is included.

When we look at social feeds – it’s clear that their algo-game is built on emotional leverage: birthdays, parties, engagements, births, deaths, family events and of course, controversy. These stimulate engagement and keep us on the site longer. Our desire to feel loved, important and often enraged are all that matter to them.

While these examples seem innocuous enough, the proliferation of an algorithm-based society is reinforcing many social biases such as gender, race, ethnicity and economic status to name a few. The canary in the coal mine is dead, the miners are still digging, and yet Silicon Valley are still making bank unfettered. So what should we do?

Like all technology, algorithms are neither good nor bad – they’re just tools. Tools that need to be civilised with some metaphorical workplace health and safety guide rails. They are here to stay, and so our best bet is to make them better. I see two paths forward:

  1. Change – We need to push for transparency on algorithms. Know what’s in them and have to ability to turn them off on demand. I don’t care if the algorithm owners are for-profit corporations – we can and should be able to regulate their output as much as we can a box of cornflakes. No company ever made a decision which reduced its profit until society made it so. It’s time we pushed for big tech to air their dirty laundry.
  2. Opportunity – We need to remember that every flaw in an industry, every broken promise or self-serving design leaves the door ajar for a nimble entrepreneur to make a more respectful version of the product we’ve got little choice on. Algorithm-based tech is no different. Maybe it’s just me, but I think the world is waiting for a social platform we can trust that isn’t designed around extracting unlimited hours and outrage from the people it’s supposed to serve.

Above all, we should never forget that capitalism works best when it is guided by society, not the other way around.

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If you like this blog post – forward to a friend who will dig it.

Why we need to rebuild the internet

Posted on by Steve Sammartino

In life and in business I believe in a few guiding principles. Two I like in particular are very common across cultures:

  1. Create more value than you extract.
  2. Treat people the way you’d like to be treated.

I imagine everyone reading this would agree. Now let’s consider this juxtaposition:

What a CEO says: “We want to build a more open and connected society”

What a CEO does: Buy the 4 houses surrounding his in order to protect his own privacy.

Someone who sells privacy for a living, often without permission and tricks his customers into giving up more than they understand, wants to protect his own. The fact that I don’t need to mention the person’s name is telling. Well, you might say it’s not a fair comparison between how someone behaves in their digital and offline lives. Fair call, but consider the fact that up until last week the person in question could delete private messages from another person’s private inbox, after the messages had been sent to and received by the other party. A privacy feature he wasn’t generous enough to give to his users. Oh, by the way, I can think of another industry where ‘dealers’ call their customers ‘users’. We both get our minds messed with in ways we can’t understand and end up addicted and worse off.

It’s a well known technological trope that data is the new gold, an entirely new class of asset. And that’s where the problem lies. This asset class is so new, few people understand it. We could liken this to the age of discovery when imperialists took control of abundant natural resources, resources which were viewed by the conquered as something no one could really own or control.

The net result is that the greatest wealth creation event in the history of humanity. The Internet has resulted in a massive centralisation and control, and spawned the era of the data imperialist. Even those who understood the power of data have far less chance of leveraging it on their own, because of the dramatic impact of network effects, and zero cost digital transfers both have in creating a winner takes all economy. To quantify: the net worth of the 4 founders of the top 3 technology companies since the dot com era have a collective net worth of $281 billion dollars as of today.

The internet needs saving.

What started out in all probability as altruism – the dream of a free web funded by advertising, has become a nightmare panopticon and it’s time we pushed back. Hard.

Technology stalwart and all round good guy Jaron Lanier says we can no longer call these companies Social Networks, but ‘Behaviour Modification Empires’. Services which use algorithms to make us stay longer by giving us sugar hits of fear, jealously and other powerful negative emotions. Lanier also says that we can’t have a society where if two people want to communicate, it can only happen if it is financed by a 3rd party or corporation selling advertising. It’s worth investing 15 minutes of your time to hear him talk about it here.

But I will add a little more to his talk… the missing piece.  Personally, I hope Facebook isn’t fixed. It’s only when something stays broken that we get a chance to put something better in its place. For me that would be a social network that no one owns or controls – something funded by the people using it, without a financial corporate imperative shaping our most valued human asset – our interactions.

We need each other, Steve.