Tag Archive | Facebook

Facebook, OKCupid, and Applied Social Science

The chief data scientist at OKCupid, Christian Rudder, has published a response of sorts to recent news about Facebook experimenting on its users.  The response is, basically, that all web sites experiment on their users.  As a question of fact, this is obviously correct – the modern art of website management and digital media in general is best understood as a practical application of modern social science.  As a question of norms, it doesn’t seem particularly troubling either.  While the Facebook experiment was in an ethical grey area, the experiments Rudder outlines would easily pass muster with an IRB.*  OKCupid didn’t get informed consent, but also posed no potential for physical or emotional harm to human subjects.

One thing the inter-academia Facebook kerfluffle has overlooked – nowadays more and more social science is taking place outside of the university.  Places like OK Cupid and Facebook are accumulating some of the most useful and illuminating data on human behavior, and it’s all locked up in proprietary databases.  They have adopted social science methods, but their insights aren’t getting out to benefit society as a whole.  None of it is peer-reviewed or shared amongst themselves, either – I have to wonder how many tech companies have internally validated “insights” that contradict what’s known by others.

As time goes on, a smaller and smaller share of social science will take place in the academy.  If you’re a psychologist or behavioralist and really want to dive into the mysteries of human motivation and interaction in 2014, would you want a job at a university or OK Cupid?

 

*: Institutional Review Board, a university body that approves experiments on human beings.

Data-Driven Discrimination is Coming Whether We Like It or Not

The availability of data makes discrimination easier.  The example the authors start with, of bus schedules, is a pretty trivial example, but it gets real pretty quickly.  Health insurance is the most famous example of this, as it is a business governed solely by adverse selection.  The ideal business model for health insures is to provide exactly zero healthcare reimbursement, and they would achieve this by denying coverage to anyone who might need it. This type of concern is gradually permeating most of the spheres characterized by information asymmetry – those where individuals are dealing with businesses or individuals who would like to know more about them than the individuals would like to put forward.  There’s a spectrum of reasonableness here – at the top is a criminal record, which is why employers conduct background checks.  At the bottom is political or religious beliefs, things that are immaterial to almost any purpose other than discrimination.  But much of what’s in between is characterized by a fair amount of dispute over what might be considered a reasonable subject of interest, and that ambiguity should concern those of us interested in preventing unfair discrimination.

Some of these categories might well have valid applications.  For example, let us imagine a world where the vast majority of white-collar criminals are middle-aged straight white males.  Suspend your disbelief for a moment, please.  If that’s the case, presumably an employer would be justly cautious when hiring a middle-aged straight white male and would wish for further information to assuage their confidence.  They could use the vast amount of publicly available data to look for high-risk predictors of white-collar crime – past convictions, criminal head shapes, degrees from Harvard Business School, etcetera.  The argument can be made that the innocent have nothing to hide, and indeed that’s true – in fact, because of the same logic, poor black men actually benefit on net from mandatory drug testing by employers.  More information only helps the innocent.  And yet it is a hop, skip, and a jump from that logic to the logic of redlining.  It’s not even a particularly slippery slope, but rather an application of the same logic that underlies price discrimination in many of the areas where “Big Data” is applied today.

I think the political economy of this is unsustainable.  The use of personal data in ways that today seem highly inappropriate will only continue and will become even more personal and intrusive over time.  It’s not just bus schedules – it’s car insurers trawling Facebook to see whether you’re high-risk, and even worse, once Facebook figures out the algorithm for high-risk driving they will be happy to sell that data to whoever has the cash.  People resist the intrusion of the market into their lives, and the monetization of people’s being will eventually trigger intense political backlash and a desire to declare certain uses of data out of bounds.  “Privacy” is just the tip of the iceberg – people will demand protection from the precise measurement and metering of their souls that Silicon Valley is out to create.

I wish I had the answers for what policy might serve these goals, but I suspect policy responses will mostly be inadequate to the scale of this societal change.

Code is the New Capital

Albert Wenger points out that in the 21st Century, “capital” is increasingly information.  I’d agree with that, and specifically look at code.  What is the value of Facebook?  Its real estate and server farms are real enough, but form a trivial portion of its market capitalization.  Its user base is real enough, but it doesn’t have users without a product (and vice versa).  And its productive assets are its codebase.  That is the productive capital Facebook has.

Code is quite different than traditional capital, but has some similarities.  The biggest similarity is depreciation, believe it or not.  While there’s no wear-and-tear on a codebase, anyone who’s worked at a software company will tell you that the value of the codebase decays over time – databases exceed their scalability limits, incompatibilities with newer software arises, and the volume of quick “fixes” makes finding errors or building new functionality impossible eventually.  Maintenance is also another commonality, for the same reasons.

One neat aspect of “code-as-capital” is infinite scalability, which is really different.  A given piece of computer code can be replicated easily for zero marginal cost.  This doesn’t matter so much if you’re Facebook or another web app, because it doesn’t make sense to compete against Facebook by directly ripping off their codebase.  However, it matters a lot if you’re either buying or selling software!  As a producer, once your capital is in place, you can produce more at zero marginal cost.  As a consumer, it’s fabulous – because prices tend to drop towards marginal cost of production, software is getting cheaper.  If you’ve ever thought even casually about launching a business, you know this fact well – using off-the-shelf software and Amazon Web Services, you can acquire a full suite of business capabilities for basically nothing, including accounting and logistics software.

One under-appreciated aspect of “information as capital” is that thanks to the zero marginal cost of production, it massively increases the capital stock available to everybody.  As an individual, you can easily acquire a tremendous amount of productive capital that people a hundred years ago had to buy at great expense.  Actual machines for mass production aren’t getting any cheaper, but the costs of mass production always involved much more than just the expense of buying machines.  And the cost of production for producing goods (other than heavy machinery) is dropping every day thanks to the falling price of informational capital.  It’s not immediately clear to me whether this will be a force for greater or less inequality.  But it’s worth noting that informational capital, which has some very big differences from traditional capital, is only becoming more important in the 21st century.

Keeping The Internet’s History Alive

Dr. Greg Brannon is running for Senate in North Carolina.  Dr. Brannon has some unorthodox beliefs. Those beliefs include some unusual opinions about flouride and brain-implanted microchips.  Dr. Brannon used to expound those beliefs on his website.  Dr Brannon no longer wishes these beliefs to be public. Now, he has the much more reasonable belief that his other beliefs might be a hindrance in a Republican Senatorial primary.  So Dr. Brannon has a problem and he would like FoundersTruth to go away – the website is down, but caches are forever.  So Dr. Brannon requested that the Internet Archive (a private nonprofit) take down the cached copy of his site.  The Internet Archive has, apparently, complied.

There is a serious and unresolved policy question here – as more and more keeping of “public” records devolves to private firms, what is the public interest here?  It seems that keeping Internet history both stored and generally available is a matter of public concern, yet right now this isn’t done.  I understand the Library of Congress does some of this, but not in a easily-searchable desktop version or anything like that.  And the question is even more pressing as the internet is increasingly accessed through apps and other closed services.  Twitter is mostly on the public internet, Facebook somewhat less so – but in either case, the information’s accessibility and retention is dictated entirely by private companies.

It would be nice to see Internet archival and accessibility treated as a matter for public concern and thus public funding.  Surely we all need to know about Dr. Brannon and his bold ideas. However, it seems more likely that information accessibility will either go unaddressed or be a topic for heavy-handed government regulation of internet firms.  It’s kind of a shame, because the costs of this are so low compared to feeding the hungry, caring for the sick, or launching ill-advised military interventions abroad.

Healthcare.gov – The Zero Percent Solution

Silicon Valley has correctly heaped scorn on the implementation of Healthcare.gov.  Part of it is the general anti-government bias of Valley types, but it is basically correct in this case!   Kevin Roose hits the mean streets of the Peninsula and rounds up some choice quotes, and Eric Ries reads my mind:

“You could take any engineer on the street here and ask them, ‘I have a friend who works for a private company — don’t mention the government — who’s thinking about a five-year, $100 million Oracle installation, and they’ve hired an outsourced contractor to build it for them. It’s going to be proprietary, hosted in their own data center, Oracle-based, with waterfall management. What are the odds that it’s working on Day One?’ And everyone here will tell you: zero percent.”

He’s absolutely devastatingly correct, and this isn’t even the sum of what’s wrong with the implementation.  On top of the factors Ries mentions, it’s got some other wonderful aspects.  It’s not an outsourced contractor, it’s many.  There’s no one at our hypothetical company with the required project management experience, but they don’t have the budget to hire a lead systems integrator.  Oh, and because of the states declining to run their own exchanges, they’ve had a massive scope change without any more time or budget.  And and top of all of this you have several actively hostile stakeholders working to undermine the project.

In any software implementation, when you have a big scope or requirements change, that is very bad.  You have three choices – you can bring on more people, you can take more time, and it will break.  There was no budget to bring on more people, and besides that there are diminishing returns to bringing on more people late in the game – with the code base basically already built, it will take a long time to get new people up to speed.  They couldn’t take more time, because they were pledged to launch on October 1st.  So they went with the third option, which was launching a broken piece of software.

I wrote about this a few days ago and return to it because it’s just so incredibly frustrating.  The government wouldn’t be having these problems if it could actually pay a decent wage to get people with technical talent working there.  They don’t even have to compete with Facebook or Google – there are plenty of older programmers with family who would love the stability of government work if it paid enough for them to live in the insanely expensive DC area.  The reflexive hatred of many in government – Democrats and Republicans both – to paying employees a fair wage is hollowing out the government’s ability to fulfill basic tasks.

This is nuts.  People in both parties love to talk about running the government like a business, but this would be no way to run a business and it’s no way to run a country.

The Downvote Has No Clothes

A neat study about the dynamics of Internet communication: upvotes beget upvotes, while downvote beget nothing!  Randomized testing on comments found that starting off a post with an upvote led to it collecting greater attention overall – around 25% more upvotes on average than one which started off with nothing.  This makes Facebook’s steadfast refusal to include a “Dislike” button much more sensible – when the only potential interaction is positive, the aggregate sum of interactions (and hopefully usage time) will be higher.

A followon from this:  Facebook either is or should be investing a great deal of time into the lifecycle of updates.  There’s a large upside, in terms of creating the most total interactions, into first getting an update into the newsfeed of the person most likely to click “like”.  At the same time, one doesn’t want to supply them with too much – they would get burnt out.  Ideally everyone should get a newsfeed that’s full either of 1. items that have not yet been liked for which they are the single person most likely to like and 2. items that have already been liked by others.

The really interesting question here is whether this is a new pattern of communication, or whether digital communication accurately reflects how we generally share opinions.  Probably the latter – in retrospect we can recognize lots of stupid things (cf. disco) that we and others only like because they’re already popular.  If the former, perhaps the growing importance of digital communications is actually tilting peoples’ aggregate balance of opinions more positive.  That would be pretty cool – and a very unanticipated result of the use of social networks.

NSA Conspiracy Theories Turn Out To Be Totally Correct

Today the Washington Post ran a story that should (but won’t) finally make government spying a household issue.  Under the name PRISM, the NSA has had a direct line into the servers of leading internet companies – Google, Facebook, Skype, and others.  For years, they have been able to tap into virtually all the information that these companies have collected about people, using cross-connections and logins to track people across the entire internet.  The Post is somewhat unclear on whether the actual content is being collected, or metadata – for example, an email’s timestamp and destination is metadata, whereas the actual subject line and text are the content itself.

This is not only unconstitutional, but very obviously and blatantly unconstitutional.  The Fourth Amendment to the US Constitution reads in full as such:

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Emails and Facebook data very clearly count as “papers and effects”, reading their data without their consent is obviously a “search”, and pulling indiscriminately from all web traffic is an extremely unreasonable search.  Somehow I doubt that the NSA got warrants either.  Their justification is that certain statistical signifiers are used to indicate at least 51% certainty that a target isn’t American – though of course even when they’re spying on foreigners they end up pulling tons of data on Americans as well (e.g., emails sent from Americans to the targets).

To state the obvious: this is illegal behavior from the NSA and horrifyingly shameful behavior from Silicon Valley.  With all their self-righteous talk of privacy and user protection, this is craven and disgusting behavior from companies that aspire to be trusted partners for all Americans.  As for the NSA, those responsible should be fired and preferably jailed.

On the bright side, it’s kind of funny that it turns out all the conspiracy theories about the NSA have turned out to be correct.  For many years, kooky nuts have insisted that the NSA has been watching every electronic communication in America.  It generally focuses on the ECHELON system (the NSA sure seems to be fond of all-caps names, incidentally) but it turned out to be called PRISM.  Responsible adults generally respond by pointing out that such a vast conspiracy would be impossible to keep secret, and furthermore would be so obviously illegal that the NSA’s lawyers would steer clear.  Well, the responsible adults were wrong and the kooks were right.

Of Course Wall Street Hates Facebook

I’ve seen a few articles in the past few days pondering why Facebook is so unloved by Wall Street.  Wired expresses it fairly well: “Wall Street Hates Facebook.  No One Knows Why.”  Is that…actually any sort of mystery?

Facebook is a fast-growing technology company, which is expected to trade at high multiples of earning to reflect its expected future income.  Recently, profit growth has fallen off a cliff (2012), leading many to suspect that earlier expectations of future earnings growth were too high and revising their valuation of the firm downwards.  Growth in new users has slowed down dramatically and time spent on the site has begun dropping, suggesting that expectations of ever-higher revenues from increased ad sales might be overstated as well.  This is all standard stuff – but Facebook has the additional burden of representing a significant bet about technological behavior in general.

Owning Facebook stock, especially one trading at high multiples, is a bet on two highly uncertain propositions: that user’s time is not close to an exhausted resource, and that Facebook will eat the Internet.  The first is pretty simple to evaluate if you care, and less interesting.  However, the second is an extremely risky and hard to evaluate.  In order to justify its valuation, Facebook has to become the primary means of digital communication and engagement for most of its users.  So it won’t just be for stalking exes, but also a email/voice/videochat hub, general search center, review clearinghouse, retailer, etc.  Futhermore, it has to do this in a pretty short timeframe because otherwise people will get entrenched in doing this things via other channels.

Facebook even being capable of eating the Internet rests itself on two highly uncertain assumptions – that people want (or will tolerate) a single online persona, and that youngsters will want to use the same social network populated by their parents, teachers, and sundry authority figures.  Buying Facebook as a growth stock requires you to believe those assumptions firmly, and then layer on a further set of assumptions about its technology capability, product offerings, competitive position,  and so on.  And the downside risk if any of those assumptions are wrong?  They range from bad to awful – it’s all too easy to imagine a downward spiral of user abandonment that wipes out the entire company in fairly short order.

Facebook stock relies on both hard-to-evaluate competitive market dynamics and impossible-to-evaluate sociological dynamics, and the most plausible (who knows about most likely) downside risk is complete destruction of the company at an extremely uncertain point in the future.  It’d be strange if it didn’t trade at a discount, but some people are silly.

Entrepreneurialism != “The Economy”

Conservatives love to harp on the (mainly imaginary) regulatory excesses of Barack Hussein Obama, which have apparently made it impossible to start a small business in this country.  Which, living in San Francisco, is news to me.  However, there are actually countries in which the crushing weight of government regulation make it impossible to start a successful small business, and not just North Korea.  France has a thriving economy, but it has such a mass of red tape, and such inflexible labor practices, that it is actually extremely difficult to start a thriving startup in the Silicon Valley mode.  Go read the Times piece – it’s an interesting look at what the imaginary “Obamanomics” would look like in terms of the consequences for entrepreneurship.  Here’s my question – does this materially affect economic growth?

While this sounds crazy, I think we ought to consider France as a component of the global economy, and even just of the regional European economy.  France has many large corporations and highly skilled managers and engineers, and its economy is doing just fine.  It makes perfect sense if you consider that entrepreneurship, like all other economic activity, is governed by comparative advantage.  As the article mentions, French culture is actually pretty hostile to entrepreneurship and aspiring entrepreneurs are likely to flee to London (and probably Berlin, startup hub of Europe).  It sure seems like France’s comparative advantage lies in Areva (the gigantic state-run nuclear company) rather than letting a thousand flowers bloom.  And the aspiring French entrepreneurs in turn go to the startup hubs which perform better due to the influx of French entrepreneurs.

It’s clear that having a startup hub is great for the local economy.  But no one knows how to start one from scratch, which suggests it is difficult.  Furthermore, the network effects thought to drive the prosperity of these hubs have positive returns to scale…which suggests that with a fixed number of entrepreneurs divided among a greater number of hubs, the total level of value creation drops.  A greater number of startups in Paris would bring some incremental activity…but does it outweigh the reduced productivity of London’s startup scene?  Zuckerberg moved out West because it was the only place Facebook could become Facebook – and while the money flowed to Menlo Park, the consumer surplus flowed to the whole world and everyone became better off.

Plus, there are of course good reasons for France’s restrictive labor laws – they greatly enhance the quality of life for the non-entrepreneur in France.  So this article is illuminating of the choice between economic comfort and economic dynamism, but it’s not at all clear that France is making the wrong tradeoff here.

The Original “Social Network”

Like

Like (Photo credit: afagen)

The New York Times has a great story today on the the demise of the impersonal “staffing solution” and the rise of the referral. I love it because it highlights the way that online social networks makes our world “smaller”, but not in the way that people thought that they would have.  Someone in the 1990s, making predictions about how the Internet would affect hiring, would predict that companies could easily hire the best talent from anywhere in the country and probably have them work remotely.  Instead, the internal referral is only becoming more powerful and regional centers of industry like San Francisco have completely held onto their power.

I think it truly is that LinkedIn has altered the landscape.  It does a very effective job for recruiters of illuminating the people that you didn’t know were there – the friends and peers of your very best employees.  I know that if I were looking to hire a top performer for any position, I would just go through my LinkedIn contacts and blast out a question to all the people whose judgment I trusted.  Recruiters have slightly more sophisticated tactics, but the upshot is that the online social network ends up reinforcing the offline social network rather than supplanting it.

Something completely different and analogous – one of the shocking findings of political science researchers profiled in “The Victory Lab” was that the old-fashioned methods really are the most effective.  Nothing but nothing is as effective in moving your vote as having a neighbor knocking on your door.  TV, radio, direct mail – all of that pales in comparison to the power of a meaningful human interaction.  The Obama campaign relied heavily on technology in the 2008 and 2012, but not to reach voters through direct marketing – the technology was there to organize and facilitate the massively complex infrastructure of having millions of face-to-face interactions.

Digital media really has not driven a revolution in social behavior, but seems to work best when enabling and extending the types of social behavior that people do anyway.  As a side note, that makes me very curious about the long-term viability of Facebook – it totally breaks the pattern of social interaction of the past couple centuries in the industrialized world, where people move around and reinvent themselves.  Rather by enabling persistent communication and contact across a lifetime, it makes things look a lot more like a village where everyone knows everyone else.  This is obviously not a unique observation…but at the same time, I think it’s more likely that our Western social norms of lifecycle-driven reinvention will break Facebook than vice-versa.  For that same reason, LinkedIn seems like a much more appealing line of business to be in – an online resume storehouse and professional network that you can customize to put forward whatever you need to communicate.

I still need to think through what this actually implies for the available opportunity areas for social networking, but I think the framework is clear: look at how people make decisions and interact offline, and develop ways to enhance and extend those interactions.  Another reason, by the way, to be very dubious of the enterprise valuations of social networks – people don’t want to be advertising vehicles either on- or offline.