CNN’s soft-ball-pitching, always-smiling, but-trying-ever-so-hard-to-seem-serious Laurie Segall sat across from Facebook CEO Mark Zuckerberg tonight as he broke his silence about just WTF happened with regard to the security of ‘our’ data, Cambridge Analytics’ data-mining, Russia, bad-actors, some more Russia, some more meddling, and, oh yeah, data breaches.
The full interview is below but it was Zuckerberg’s response (or lack of it) to one question, that raises more questions than it answers…
“Facebook has asked us to share our data, to share our lives on its platform and it has wanted us to be transparent, and people don’t feel like they’ve received that same amount of transparency. They’re wondering what’s happening to their data. Can they trust Facebook?”
Zuckerberg replied, in the same manner as his non-apology statement earlier in the day, by waffling endlessly over his prescribed talking points and yet failing entirely to answer Segall’s simple question…
“Yeah, so one of the most important things that I think we need to do here is make sure that we tell everyone whose data was affected by one of these rogue apps, right?” he said.
“And we’re going to do that. We’re going to build a tool where anyone can go and see if their data was a part of this.”
“So the 50 million people that were impacted, they will be able to tell if they were impacted by this?” Segall asked.
“Yeah – we’re going to be even conservative on that. We may not have all of the data in our system today. So anyone whose data might have been affected by this, we’re going to make sure that we tell. And going forward, when we identify apps that are similarly doing sketchy things, we’re going to make sure that we tell people then too, right? That’s definitely something that looking back on this, you know, I regret that we didn’t do at the time, and I think we got that wrong, and we’re committed to getting that right going forward.”
CNN’s Anderson Cooper describe Zuckerberg as “perhaps the most powerful man in the world,” noting that his platform is capable in influencing elections and perhaps even wars… little dramatic Anderson…
Fwd to 1:15 for the question (and non-answer)…
Any wiser? Can we trust Facebook?
Perhaps this clip from 2009, when The BBC asked Mark Zuckerberg if Facebook would ever sell personal user data.
His answer? “No! Of course not.”
Actions once again speaking louder than words.
All of which perhaps explains the plunge in the odds of Zuckerberg running for President…
Facebook advertisers have threatened to abandon the platform in the wake of a massive data harvesting scandal which began after it was revealed that an app created by two psychologists – one of whom Facebook employs – gathered data on over 50 million Americans and then sold it to political data firm Cambridge Analytics and several others, who used it without consent.
Mark Zuckerberg, co-founder and CEO of the social media giant gave several interviews Wednesday after spending three days in hiding, ostensibly with a crisis management team which advised him not give wholly unsatisfactory answers to one of the largest data breaches in history.
The scandal is pushing some Facebook advertisers to consider dropping the platform, reports The Times.
ISBA, a British group of advertisers that spend hundreds of millions of pounds a year on Facebook, demanded answers. It is understood that some of its 3,000 brands, which include those of the consumer goods companies Unilever and P&G, will not tolerate association with Facebook if it emerges that users’ data has found its way into the hands of brokers and political campaigners without authorisation. Sources close to the trade body said that if the company’s answers were not satisfactory, advertisers might spend their money elsewhere. ISBA will meet Facebook executives this week.
Others, such as Mozilla – the company behind the Firefox browser – have already pulled out, or as it said have “pressed pause” on Facebook advertising. In a scathing post, Mozilla said that “when Facebook takes stronger action in how it shares customer data, specifically strengthening its default privacy settings for third party apps, we’ll consider returning.” Until then, “Mozilla will advertise elsewhere” as it warned in a blog post this morning:
Mozilla is pressing pause on our Facebook advertising. Facebook knows a great deal about their two billion users — perhaps more intimate information than any other company does. They know everything we click and like on their site, and know who our closest friends and relationships are. Because of its scale, Facebook has become one of the most convenient platforms to reach an audience for all companies and developers, whether a multibillion corporation or a not-for-profit.
We understand that Facebook took steps to limit developer access to friends’ data beginning in 2014. This was after Facebook started its relationship with Cambridge University Professor Aleksandr Kogan, whose decision to share data he collected from Facebook with Cambridge Analytica is currently in the news. This news caused us to take a closer look at Facebook’s current default privacy settings given that we support the platform with our advertising dollars. While we believe there is still more to learn, we found that its current default settings leave access open to a lot of data – particularly with respect to settings for third party apps.
We are encouraged that Mark Zuckerberg has promised to improve the privacy settings and make them more protective. When Facebook takes stronger action in how it shares customer data, specifically strengthening its default privacy settings for third party apps, we’ll consider returning.
We look forward to Facebook instituting some of the things that Zuckerberg promised today
Meanwhile, Facebook shares remain under rising pressure – falling approximately 8.6% in three trading sessions and down again on Thursday pre-market as investors – particularly “ethical” investment funds – reconsider their decision to hold the increasingly radioactive company.
Nordea, the largest bank in the Nordic region, which manages about £283 billion (~$400 billion USD), said that it had put some of its Facebook investments in “quarantine” while it assessed the scandal. Union Investment, a German group that manages about £255 billion ($360 billion USD), said that it was reviewing its holding of Facebook shares. –The Times
Investors have also launched several lawsuits against Facebook, claiming that the company made “false and misleading statements” regarding its privacy policies and who they share data with.
One San Francisco shareholder, Fan Yuan, filed a lawsuit on behalf of an undisclosed party of investors who claim that Facebook’s “omissions” led to a “precipitous” decline in the company’s stock price – wiping out nearly $50 billion of value on Monday and Tuesday.
A Maryland woman who said that she was “frequently targeted with political ads while using Facebook” during the 2016 US election filed a separate suit against Facebook and Cambridge Analytica, alleging that the companies had treated her personal data with “absolute disregard”. Cambridge Analytica denies that it used Facebook data to “microtarget” political adverts when it worked for the Trump campaign. –The Times
Yesterday, WhatsApp co-founder Brian Acton, who Mark Zuckerburg turned into a billionaire after Facebook bought his company for $22 billion, is now telling people to delete their Facebook accounts, promoting hashtag #deletefacebook.
Action was referencing the online movement that is gaining steam in the wake of the data harvesting scandal.
After staying on for three years, Acton quit Facebook in September, and is now a major backer of rival messaging service Signal, which boasts encryption to make its messages resistant to government surveillance.
In a Wednesday night interview with CNN, Zuckerberg admitted that Facebook “made mistakes,” and that “This was a major breach of trust and I’m really sorry that this happened. Our responsibility now is to make sure this doesn’t happen again.”
Zuckerberg also vowed to notify all users “whose data might have been affected” by the breach, and will be “happy” to testify before congress “if it’s the right thing to do.”
Zuckerberg said in a Facebook post that he has pledged to investigate suspicious apps and ban developers who violate data sharing rules or refuse to comply with an audit. He added: “We will restrict developers’ data access even further to prevent other kinds of abuse. For example, we will remove developers’ access to your data if you haven’t used their app in three months. We will reduce the data you give an app when you sign in — to only your name, profile photo and email address.”
“We’ll require developers to not only get approval but also sign a contract in order to ask anyone for access to their private data. We’ll have more changes to share in the next few days.”
That said, tens of thousands of apps could be harvesting data…
Yesterday Dr Kogan, the Russian-linked Cambridge academic who obtained the data of 50 million users by offering “personality quizzes” before selling the data to Cambridge Analytica, told the BBC that “tens of thousands” of apps could have done the same thing.
A Facebook whistleblower told MPs that the company had ignored his warnings and lost control of users’ data by giving easy access to developers. Sandy Parakilas said that when he worked at the company in 2011-12 “personal identifiable data was basically allowed to leave Facebook”. He told MPs that he had warned executives that poor safeguards could enable foreign powers or data brokers to harvest data. –The Times
ISBA notes: “The claims that other apps using the Facebook platform, and pre-dating 2015, have collected similar bodies of personal data and that controls for distribution have been inadequate, raise questions about the possibility that Facebook data has been, or is being used improperly elsewhere. ISBA is asking Facebook for a full account.”
It appears Cambridge Analytica has some enemies…
Cambridge Analytica’s London headquarters has been evacuated and a major thoroughfare closed as the Metropolitan Police investigates reports of a suspicious package.
Zuckerberg: “I never thought I’d have to safeguard the integrity of elections. ” [well, have you done a good enough job?]
Zuck: “Um, we will see.”
Blain’s Morning Porridge – March 22nd 2018
“Gybe: To shift suddenly and forcibly from one side to the other..”
Headwinds have become tailwinds, and Jay Powell opens his tenure at the FED by upgrading the outlook for the US Economy.
As a keen sailor, I have more than a passing interest in from where the wind is blowing. There are a number of things to bear in mind about tailwinds; i) they get you where you expect to go faster – meaning we shouldn’t neglect thinking about how this Goldilocks recovery ends.
And, ii) sailing downwind (ie tailwinds) can prove the most dangerous point of sail – things can go from smooth and stable to disaster in frighteningly short moments as a result of a sudden windshift causing a crash-gybe to flick the crew into the water, or the mast to come tumbling down. I’ve attached a photo showing just how bad tailwind sailing can go…
The Fed’s message was simple: stronger growth, lower but stable full employment, modestly rising inflation, and rates set to double to double to 3.4% in 2020. Three, maybe four hikes this year, but three next year…. It should not have come as much of a surprise to the market. Some of the news reports say it was “Aggressive”, but what I heard was a dovish “middle-ground” back-loading of further tightening – further hikes to follow if justified. They are not slamming on the breaks, but gently brushing the pedals. Powell summed it up nicely: “The economy is healthier than it has been since before the crisis…”
Cynics might ask which particular crisis?
The world is an increasingly volatile place – a blusterous conflabulation of sentiment, facts, hopes and expectations that tends to spin very differently to Central Bankers scripts.
Perhaps its a modern update Chinese curse, but we live in “unconventional” times – while the Fed is considering tightening policy, the government is looking to Spend, Spend, Spend. We should be keeping a tight eye on employment – with the economy already looking inside NAIRU – how will tax-cuts and fiscal spending impact already tight labour costs? Meanwhile, what about the global economy? What about Populism? Or geopolitics and the threats of a trade-war with China? What about so many other unforseen things…. As we charge downhill with the spinnaker flying, just how stable is that mast?
Next on my worry list this morning is Facebook.
I was out with someone who knows about this kind of stuff – my 23 year old son Jack who is making a career for himself in advertising (and directing music videos in his spare time!). He explained it’s not just Cambridge Analytica that’s been exploiting Facebook and other social media sites through deep diving apps that amuse us with puppy pics, while measuring and tailoring product and messages to our desires and weaknesses.. Its happening across the board – it’s a dimly understood marketing revolution. We just don’t realise how social media users aren’t customers – we’re the product! It was a light-bulb moment…
Almost as revealing as Mark Zuckerberg’s dollar-late appearance last night on CNN. What struck me is that he has as little idea as the rest of us what a monster Facebook has become. Sure, he took responsibility – but does he actually understand what for?
You can’t uninvent stuff – but last night I deep dived my social media pages, changed all the options, put in new passwords and wonder just what a mess we’ve created.
Back in the real world – or is it?
Some interesting thoughts on alternative assets yesterday. According to some US research, global investors now hold around 25% of their total assets – accounting to some $7 trillion – in the form of Alternatives – ie things that aren’t “financial assets” such as stocks and shares. We’re very aware that assets like property tend to yield significantly more than financial assets – properly reflecting their lesser liquidity, but also how stocks and bonds have tightened and become inflated as a result of QE policies.
I was reading stuff about how much investors should demand for illiquidity – a base guess being a 1% spread over the risk free rate if you are locked into an illiquid alternative asset for one year rising to 6% for 10-yrs plus. Others say managers should be earning at least a 3% illiquidity premium on illiquid alternatives to justify themselves.
The trick is finding the right people to manage alternatives – for instance a global aircraft leasing firm or a firm with a fleet of ships under management, with all the technical and professional management skills to understand why planes fly and ships float, while also making sure they are working hard to earn a return. Or guys who understand the intricacies of private equity. There aren’t that many conventional bond/equity long/short portfolio managers who’ve got a breeze of an idea on which particular renewable energy projects beats the rest – but there are specialists who do. One approach is to find the right experts to invest on fund’s behalf – and we’ve got such managers we recommend.
That said, the research note yesterday made the case that many investors are utterly unprepared for ill-liquidity risks of alternative / illiquid assets. While the best case is to plan and hold illiquid alternatives through to maturity, its equally important to plan for need – have a plan to sell if you have to.
That said, I think I’ll stick with my 2018 investment strategy: buy assets correlated to global growth, and avoid correlation with inflated liquid assets.