The reputations of Facebook founder and CEO Mark Zuckerberg and COO Sheryl Sandberg are in tatters today after a long expose in the New York Times that examined how the pair dealt with the rolling crisis that engulfed the company during and after the 2016 elections that saw Donald Trump elected under a cloud of suspicion that he had help from Russia.
The story has been picked up on cable news and it paints a picture of a company led by two executives more interested in company growth than anything else. The story includes examples of attempts to pass the blame on to others, withholding useful information from investigators and repeated denials of culpability when the known facts inside the company said otherwise.
Most significantly, it shows a company in constant reactive mode in part because no one seemed to have a moral center, a clear sense of right and wrong, and the fortitude to take the right actions for customers and the country regardless of how those actions might hurt the executives or damage the company’s reputation.
A day earlier, the Times also published a three-part video, “Operation Infektion,” describing a decades-long effort by the Kremlin to spread fake news (active measures) about the West and the US especially in an effort to weaken its adversaries. The overlap between the stories hasn’t received as much attention in the media, which is a shame because social media became the accelerant in an act of political arson.
There’s a lot of information already available on the debacle so let’s skip ahead to Infektion to get a big picture view of how Russia’s use of Facebook damaged society in the West and how its repercussions will play out for a long time.
The most relevant part of the Times video series comes in part 2 dealing with the seven commandments of active measures, a term that encompasses Russia’s approach to spreading fake information to the detriment of the West. The seven commandments are,
Find the cracks—social, economic, linguistic, religious, or ethnic issues that can be exploited and wedge them open. This can include almost anything from gender issues, to religion, to immigration and abortion. You get the picture. Russia started out picking sides but grew to realize it could manipulate both sides of any issue to manufacture discord. There are examples of confrontations during the 2016 election in which both sides were galled into action by Russian efforts, often on Facebook.
Create a big bold lie—something that is so outrageous no one would believe it was made up. Example, the AIDS virus was manufactured by the US to hurt minorities and escaped from a lab at Fort Detrick, MD, where it was supposedly made.
A kernel of truth—provide a speck of facts to make the lie more believable. The US does have labs that work on viruses and ways to combat them in war. Fort Detrick is one place where this research goes on. The kernel of truth in this case is the name of the lab assigned blame for the fictional virus release.
Conceal your hand, make it seem like the story came from elsewhere. The first mention of the AIDS story came from a small paper in India and it took years for it to percolate through the journalism community in the 1980s. One weak spot exploited by this approach is that fact checking didn’t go all the way to establishing primary sources. News stories up to and including some in America only used other stories as their sources. Thus, the people relying on the transitive property of truth were severely exploited.
Find a useful idiot, someone who would unwittingly promote the fake news story as real. The emphasis in that phrase is evenly distributed. A useful idiot can be anyone who unwittingly (the idiot) takes the pseudo-information at face value and passes it on (the useful bit), often amplifying it. In the case where a news organization propagates an untrue story, it is serving as a useful idiot, even if it attributes the story to another news outlet in another country.
Deny everything when the truth squad shows up. We’ve seen way too much of it lately. When the truth squad tried unraveling the AIDS scare it had to go through many layers of news outlets and reporters to find Russians who denied everything. Or consider “no collusion.” Collusion isn’t a crime in the US but conspiracy is. So in this two word phrase you have a useful idiot spreading a big lie with a kernel of truth in an effort to conceal his hand. It’s brilliant.
Play a long game. Repeat, repeat, repeat. Regardless of costs, keep your eyes on the prize and understand that losses and setbacks are temporary when you play a long game. It’s a very Zen idea. Consider the birther movement. The only way to silence it was to meet its terms by producing President Obama’s birth certificate. The choice was continued low grade carping with erosion of public trust or swallowing a larger amount of humiliation all at once.
In nearly all these commandments you can see how Facebook was taken advantage of during the election cycle thus playing the useful idiot. But also, you see the tactics the company tried to use to deflect attention from itself during investigations—keep in mind the Times’ story headline is “Delay, Deny and Deflect: How Facebook’s Leaders Fought Through Crisis.”
In the process, Facebook has become a useful idiot on steroids, thanks to the Internet and social media’s reach. In the age before the Internet and social media these tactics might have caused some trouble but the disturbance was usually self-contained because it couldn’t spread as well. The truth squad eventually rode in and set things right. Today it’s much harder. For example, in the pre-Internet era, the fake story about the AIDS virus took 6 years to spin up. The story about a child sex ring run by the Clinton campaign and operating out of a pizza restaurant in Washington, DC only took 6 months to bear “fruit” if that’s even the right term for the mass shooting that happened.
What to do?
There is a nascent movement in Congress to develop some form of regulation over Facebook and other social media giants, which is reasonable but not very welcome. It never is. The result of the tech revolution is that we can no longer function very well as a society without information, a trend that is still increasing. This trend makes equal and transparent access to information something that must be spread throughout society.
At the same time, social media and Facebook can no longer be regarded as neutral platforms that foster free speech. They have become publishers bringing eyeballs to advertisers and they have responsibilities that go with this status as well as First Amendment rights. Sen. Mark Warner (D, VA), already has a draft working paper circulating suggesting some components of regulation. Michelle Goldberg Opinion columnist at the Times wrote that,
Among them are amending the Communications Decency Act to open platforms up to defamation and invasion of privacy lawsuits, mandating more transparency in the algorithms that decide what content we see, and giving consumers ownership rights over the data that platforms collect from them.
My two bits
Facebook, Google, Amazon, and many other platforms that use a social media model to capture consumer data and remarket it to advertisers, is now a utility. My definition of a utility is something that started as a disruptive innovation and proved so useful that it has become indispensable to modern life. Modern transportation beginning with the railroads, electricity, telephone, and cable have all trod the same path. At the moment cable, especially as a gateway to the Internet, is the outlier thanks to decisions by the Trump era FCC. By rolling back net neutrality rules set by the Obama administration, the FCC negated the principle of the common carrier that over-arches other utilities. We can and should hope this is a temporary aberration.
But back to data and its collectors and merchants. The consumer and the nation at large have a right to expect that the purveyors of modern life’s essentials will abide by the essence of the Hippocratic Oath and first do no harm. Enacting a common sense set of regulations to make this so should not be a heavy lift.
A century ago President Theodore Roosevelt pushed legislation enacting standards for food and drugs ushering in the Food and Drug Administration (FDA). A generation later, after Wall Street shenanigans brought on the Great Depression, his cousin, Franklin Roosevelt, brought forth the Securities and Exchange Commission (SEC). We’re at a similar crossroads today. The path forward might be shrouded in mist but the way backward is completely unacceptable.
Like so many things riling society today, from global warming to immigration, fixing the problem is not the hard part. Getting the various sides to agree there is a problem that needs addressing and negotiating a solution is. Doing nothing is never a solution because letting a situation fester only makes it worse. The recent revelations of Facebook’s failures has demonstrated that putting its house in order is more than it can do internally. Perhaps a reconfigured political landscape in the US and a new year will bring solutions into focus.
We should say this clearly but maybe just once: Not everything Donald Trump thinks or says is whacky.
The exception that might prove the rule is the western approach to trading with China and Trump’s initiative to put upwards of $60 billion in tariffs on goods emanating from the Middle Kingdom. Lest you think $60 billion is a tad rich, read on.
Last year, Trump also said that more than 60,000 factories (not jobs) had left the US for China since China was admitted to the World Trade Organization (WTO) in 2001, a claim that is right directionally but that fails to account for factories moving to other places such as Mexico and Canada to name two. But when you round up, the total number is solid. It comes from a US Census Bureau report in 2014.
China’s tactic on global markets has been decidedly mercantilist meaning its method is to accumulate foreign reserves by exporting finished goods while keeping its markets relatively closed to imports. Lots of nations do this, especially when they are emerging onto the world stage. Import tariffs were even an important part of US trade policy throughout the 19th century and into the 20th until the Smoot-Hawley Tariff Act (1930) contributed materially to the Great Depression. Open markets and global trading have been a hallmark of US commerce strategy for over 70 years but Trump wants to change the status quo.
More importantly, Trump is also focused on a more important aspect of relations with China, intellectual property (IP) theft, which has been going on for a long time.
The New York Times reported in 2013, that IP theft was a specialty of the People’s Liberation Army (PLA) unit 61398,
The hackers were behind scores of thefts of intellectual property and government documents over the past five years, according to a report by Mandiant [a security firm], in February that was confirmed by American officials. They have stolen product blueprints, manufacturing plans, clinical trial results, pricing documents, negotiation strategies and other proprietary information from more than 100 of Mandiant’s clients, predominantly in the United States.
This is in addition to the other requirements western companies face when setting up shop in China including technology transfers and taking on Chinese companies as partners.
None of this is news. In “The Great Industrial Wall of China,” in The American Prospect, a liberal leaning magazine, Carolyn Bartholomew noted back in 2009 that,
In order to provide an advantage for Chinese industries and companies, and to attract U.S. companies to locate in its country, the Beijing government manipulates its currency, showers subsidies on favored industries, provides low-interest loans from a state-owned banking system, tolerates and even encourages the theft of intellectual property, and ignores WTO rules.
So there in a nutshell is Donald Trump’s not-so-crazy case against unfair Chinese competition, but justifying tariffs is an entirely different matter. The time for this approach to fighting back was before China became a powerful global economy by taking the markets for the goods, not the factories, admittedly on other presidential watches. But all presidents have messes to clean up from previous administrations. Most take this in stride.
Trump’s approach to solving difficult problems or cleaning up messes, has been to simply wish away the problem by rolling the clock back but that’s impossible. His promises to bring back coal are a good example of how this approach fails. Coal is now more expensive than natural gas because advanced techniques like directional drilling and hydraulic fracturing, have produced a glut. It’s also less polluting. So the odds of bringing the coal industry back to its former predominance are nugatory.
Similarly, China is now in a position in which it makes a great deal of the products consumers need, which were once made locally. The Chinese took markets, not jobs or factories. They now make things at a fraction of the cost of western goods because their labor costs are much lower. There is good reason to think that production jobs that left first world locations will not be coming back for the same reasons that natural gas is ascendant in power generation. Notably, gas will have a brief time in the sun because the alternatives are becoming cheaper and replacing all kinds of fossil fuel power production and because, in the long run, they are far less polluting. That’s the way markets work.
Some industrial migration can’t be stopped because it is a natural part of economic evolution—part of how countries climb the economic ladder. But industrial espionage in which a country makes off with blueprints, strategies, research data, and other intellectual property is different. It steals the future as well as the capital and effort that go into creating the IP and in the long run it impoverishes the victim of the theft.
A tariff might be proper given what’s gone before and $60 billion per year may sound large—and it is in comparison with the $375.2 billion trade gap between the countries and it is certain to grab the attention of the Chinese. But it has to be part of a larger strategy. Tariffing Chinese goods in general doesn’t make sense for goods that carry no IP developed in the last few decades. Such tariffs only make everyday goods more expensive for consumers without changing the equation. They are like the zero-sum moves in a checker game.
If the goal is to make trade more equitable then the strategy should include much better adherence to the WTO rules of globalization and an agreement that recommits the parties to fair trade. In a less well publicized move Trump has said the US would file a trade case in the WTO against China.
But also, other countries are feeling the same pressure from the Chinese that the US feels. So it would make sense to form a coalition with allies to confront China with one voice. But Trump continues to alienate allies at the same rate he antagonizes adversaries (except Putin). This is a chess game that plays out over time and Trump has not shown the savvy or the patience to pursue.
But this is all vitally important because when the trade war gets going, the Chinese aren’t going to retaliate over consumer items, they’re going for the things that will hurt like not buying our airliners (Boeing), heavy equipment (Caterpillar) and just about anything that emanates from Silicon Valley and environs.
On the other hand, trump’s negotiating strategy includes making a ridiculously high demand followed by downward negotiation when the other party comes to the table. If so the trade war might look a lot like the steel and aluminum tariffs which builds loopholes for almost all other nations.
Bitcoin’s end may be forecasted in its recent price run up (I intentionally didn’t say value because it has no intrinsic value). Late last week the digital currency traded above $20,000 for the first time according to an article in the New York Times. That article also noted that the crypto currency started the year below $1,000 and as recently as this October coins could be had at a now very attractive $5,000 each.
The Times article said the factor driving the new interest is the increasing interest from Wall Street and for good financial reasons,
At the current cost, the value of all Bitcoin in circulation is about $300 billion. To get a sense of how big that is, all the shares of Goldman Sachs are worth about $90 billion.
But the only comparison should be with other currencies like the dollar. Bitcoin’s price is tiny compared to the M1 money supply, a measure of dollars in circulation. M1 is hovering near $3.6 trillion according to the Federal Reserve Bank of St. Louis.
M1 is a good jumping off point because it reminds us that real money is regulated by something other than the marketplace and that regulation is much more transparent. Every major country and currency has its own version of such an index except in Europe where some countries use the Euro but the principle is still the same. In contrast, Bitcoin has Coinbase, a San Francisco company providing brokerage services. We should note that Coinbase’s systems went kaput for an afternoon last week. That’s not exactly something to make you warm and fuzzy.
But the valuation (ok, I said it) is like blood in the water for Wall Street. Hedge funds and brokerages are lining up to trade in Bitcoin. Said the Times,
Coinbase now has more account holders than Schwab, and it has struggled to keep up with the growth.
But more troubling is the looming trouble that Bitcoin could deliver the the financial system,
The path for large investors has been smoothed by the Chicago Mercantile Exchange and Chicago Board Options Exchange, which have been racing to roll out Bitcoin futures contracts. Most banks are already signed up with these exchanges and consequently can immediately begin trading the contracts. The options exchange has said it plans to start trading on Sunday [December 10].
My friends involved in this say that Bitcoin and other crypto currencies provide a measure of freedom from government regulation, which is more conducive to doing business. But all of this freedom only reminds me of the words of Anatole France, an early 20th century poet, novelist and journalist, and Nobel Laureate, “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”
I see this run up as potentially destabilizing to the global financial system and quite possibly the black swan that the Trump administration didn’t see coming that produces its first real test. The fall out from the test might turn out to be worse than the crash.
I swear I was getting through this and trying to move on. She wasn’t my favorite candidate but when you consider the alternative she looked like George Washington in a pantsuit. Like many people I had moved on from denial and anger to Elizabeth Kubler-Ross’ next stage in the grief pyramid called bargaining. He can’t be that bad…they can tame him…I’m going back to work, he can’t chase me there…I’ll be okay.
But noooo! A brief story in the New York Times today says Donald Trump, incipient POTUS is planning to hold a technology conference next week. It’s right here under this headline, “Trump Plans Technology Conference With Silicon Valley Executives.” The article by David Streitfeld, Maggie Haberman, and Michael D. Shear covers a lot of ground what with Trump also seeming to have cancelled the next generation of Air Force One today, which is also in the piece.
Says the article, “The list of those being invited was not immediately clear, but they could include Mark Zuckerberg of Facebook, Timothy D. Cook of Apple and Sundar Pichai of Google.” Sure, that’s right, Silicon Valley CEOs have nothing scheduled that far out so of course they’ll all trudge over to Trump Tower. Whatever it is, when a president asks for your time, he’s doing it in the name of all the American people so you more or less have to attend.
The one saving grace in all this might be (and we really don’t know all the details yet) the fact that these are all consumer technology mavens so far. Maybe Trump has a punch list of social media enhancements to go over or maybe he intends to build a wall between our electrons and the rest of the world. Or maybe Trump just wanted to call a fly-in for rich guys to compare private aircraft. His is bigger, you know.
Regardless, I’ll withhold judgment on Trump’s tech chops until I know if this is just show and tell for social media or if he really wants the skinny on what to expect in areas like machine learning, AI, the IoT, and a half dozen other techno-wizbangs that will rock his world soon. I’ll begin to worry when Ellison, Benioff, and Gates get summoned.