Frances Haugen: I’ve Come Not to Bury Facebook, But to Save It

A change in leadership, employees with backgrounds in humanities, and a switch so a “slower, smaller” approach – this whistleblower darling is on a crusade to save lives by saving Facebook.

About 10,000 people were packed into the Altice Arena in Lisbon, Portugal on opening night of the Web Summit. It was one of the first tech gatherings this size since the outset of the pandemic. And Web Summit’s CEO, Paddy Cosgove, never one to shy away from thorny issues, was going to make a field day of it.

The opening speaker, no CEO or tech titan, was instead a young, genuine, and even unassuming blond woman who looked like she was plucked from an Iowa cornfield. And in an instant, Frances Haugen became the trending topic and darling of Web Summit.

Haugen (who really is from Iowa) has been thrust into the spotlight as the Facebook whistleblower. The former Facebook employee left her job as a product manager in May, taking thousands of internal documents with her.

And then she wrestled with how to do the right thing with the information she had, she told the audience. It was information that paints a sad picture of a company that has repeatedly valued profits over ethical business, sown discord, and created unhealthy dependencies.

On stage, to her right, sat Libby Lu, the CEO of Whistleblower Aid, a powerful organization that choose to represent Haugen only after a careful and laborious vetting process that looked at everything from her motives to her evidence. Now, with her as their client, the group coaches her, covers her legal fees, and even offers bodyguards and protection. Liu said Whistleblower Aid looks for a “strong sense of conscience, and an inability to tolerate wrong” before taking on a client. “They should not need to be torn between their careers and what’s right.”

Haugen is a whistleblower for our time. She is the “every girl” who worked hard and had the dream of working at Facebook. Within moments on stage she told the audience that her mother is a priest, one she turned to often for advice and counsel before deciding to come forward.  Her mother, she said, told her that “every human being deserves the dignity of the truth.”

“There’s been a pattern of behavior at Facebook where they have consistently prioritized their own profits over our general safety,” said Haugen. Facebook, she said, “has tried to reduce the argument to a false choice between censorship and free speech.” But in fact, she explained, it’s the algorithmic decisions Facebook runs its business on that amplify political discord, and spread misinformation, and contribute to addictive, unhealthy behaviors. The engagements Facebook creates are dangerous because they are based on a megaphone effect in which the most volatile posts are the most amplified.

Haugen has no shortage of remedies for what ails Facebook. She gives props to Twitter and Google, which she says more deftly and more transparently manage content moderation. “We need to make it slower and smaller, not bigger and faster,” she said of Facebook, explaining that smaller groups of family and friends are easier to moderate. She argued that computer scientists need to have a moral compass, and said that happens best when they have a background in humanities as well as coding. And certainly algorithms can be bettered, to change the dynamic of what information is presented to whom.

Finally, she said, “I’m a proponent of corporate governance,” reminding the audience that Mark Zuckerberg is the Chairman, CEO, and Founder of the company, holding well over half of the voting shares.  Things are “unlikely to change if that system remains,” she said.

“Maybe it’s a chance for someone else to take the reins. Facebook would be stronger with someone who’s willing to focus on safety,” she went on. She rued the fact that Facebook just announced hiring 10,000 engineers to build out its new Meta product, when that many engineers could have been deployed to fix Facebook’s obvious current problems. Though the company has publicly pushed back, declaring that her documents were a “cherrypicked” sample taken out of context, Haugen replied that she welcomes them to release more documents to the public.

Facebook Chief Product Officer Chris Cox kept his chin up in a virtual appearance at Web Summit after the company’s nemesis Frances Haugen had spoken.

At Web Summit, Facebook had ample opportunity to respond, but after Haugen’s authentically empathetic and smart delivery, its messages rang a bit hollow. Nick Clegg, who appeared at the conference via a Livestream, said, “There are always two sides to a story,” noting that Facebook’s artificial intelligence systems study the prevalence of hate speech on platforms. “Out of ten billion views of content, five might include hate speech – that’s 0.05%,” he said.

Chris Cox, one of Facebook’s earliest employees, now head of product and a close friend of Zuckerberg, also appeared on stage via Livestream, ostensibly to showcase the new Meta agenda. But he offered these words in response to questions about Haugen’s comments: “It’s been a tough period for the company. “He added that he welcomed “difficult conversations” around Facebook’s future.

The media, lawmakers and the Web Summit audience were enamored by Haugen and her message, which came peppered with wonderfully genuine, demurring comments like, “I don’t like to be the center of attention.”

But she came across as a force of nature when she said “Facebook would be stronger with someone who’s willing to focus on safety.” She is committed to a crusade she believes is fundamental to saving lives. What makes her not afraid, she said, is that “I genuinely believe that there are a million, or maybe 10 million lives on the line in the next 20 years, and compared to that, nothing really feels like a real consequence.”

“I have faith that Facebook will change.”

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How Oil-Rich Aberdeen is Pivoting Away from Fossil Fuels

Aberdeen boomed in the 60s after the discovery of North Sea oil. Now the Scottish city wants to be a renewable energy capital and a model for what carbon-dependent cities can do to adapt. (Part of Hamm’s ongoing COP26 coverage.)

In the middle of the 20th century, Aberdeen was one of Great Britain’s economic basket cases. But the fortunes of this city of 200,000 in northeast Scotland swung wildly after the discovery of North Sea oil in the late 1960s. The city’s economy boomed. Now the city and its region are pivoting to build a new economy that is not so dependent on oil. City leaders have a new aspiration: to be a renewable energy capital.

“Everybody recognizes that oil and gas is declining in the North Sea and they have to be ready for the future. We have an energy transition underway,” says Barney Crockett, Aberdeen’s lord provost (what the Scots call a mayor), who has been one of the leaders of the transition.

During the United Nations’ COP26 climate conference taking place now in Glasgow, Scotland, some of the more progressive climate-oriented initiatives in the United Kingdom are getting a spotlight on the world stage. Aberdeen serves as a model for what even carbon-dependent cities want to do to adapt to climate change and transform their economies, so they can benefit from the huge changes in technology and industry now underway. (Watch for more dispatches from COP26 this week and next on efforts to make the UK, and, by extension, the world, more sustainable and resilient.)

Five years ago Aberdeen launched a campaign aimed at reducing its use of fossil fuels in buildings and transit. That has already produced a 34% reduction in the city’s carbon emissions. But it’s just the start: In March, the city council approved a five-year plan aimed at increasing the city’s resilience to climate change. Meanwhile, private industry, with support from regional government, is developing advanced capabilities in wind and hydrogen energy. While offshore oil technologies and services are likely to continue playing an important role in Aberdeen’s economy for years, city leaders seem determined to change direction.

Climate activists, however, say Aberdeen—and the UK government—aren’t pushing the transition hard and fast enough. “UK oil and gas extraction policy is completely out of step with what the science tells us will be required to achieve our climate change goals,” says Tessa Khan, director of UpLift, a UK-based environmental group. She is skeptical that local leaders in Aberdeen will be able to get the cooperation they need from the oil and gas industry to make a quick and effective transition. “The incumbent interests want to preserve oil and gas for as long as possible, at a time when we can’t afford to do it anymore,” she says.

A recent survey commissioned by UpLift showed that about two-thirds of people in Scotland think the UK government should quickly wind down oil and gas production in the North Sea and redirect spending to green industries. The UK government has come under harsh criticism for refusing to rule out new exploration licenses for the North Sea even as it touts its new North Sea transition deal with industry.

Montrose Alpha oil platform (Credit: Creative Commons)

Aberdeen’s Crockett argues that North Sea oil producers are among the world leaders in reducing the carbon and gas footprints of their operations, so it’s better to have them producing oil during the energy transition rather than relying on operators elsewhere who flare or leak methane.

Aberdeen has been able to set off on this path to a lower-carbon future partly because of a warm relationship between government and industry. However, in contrast to the United States, where many legislative leaders appear to be beholden to the fossil fuel industry and there’s strong resistance to decarbonization, there seems to be a shared understanding among government and business leaders in northeast Scotland that things have to change and it’s best to get out ahead of it.

At the center of Aberdeen’s energy transition is Opportunity North East (ONE), a private-sector -led economic development initiative aimed at diversifying the region’s economy.  Launched in 2016 with initial funding from the Wood Foundation, ONE draws its board membership from the region’s business community, its universities and colleges, and regional governments. It’s focused on growing industries including life sciences, digital technology, tourism, and food and drink, and on accelerating the transition to a net-zero economy.

Toward that end, ONE created the concept of the Energy Transition Zone, which was launched in April 2021 as a separate not-for-profit company, ETZ Ltd. This ambitious project aims to reposition the North East of Scotland as a globally-recognized integrated energy cluster. Its leaders aim to develop a sustainable long-term international industry base that delivers sustainable jobs and growth. Its focal point will be a new industrial zone located next to the city’s massive new £350 million South Harbour development.

Funded initially by £53 million in grants, government funds, and private-sector funds from ONE, ETZ plans on hosting or incubating a cluster of businesses with the goal of directly supporting 2,500 green-industry jobs and another 10,000 transition-related jobs by 2030. The focus is on off-shore wind and hydrogen, but ETZ also wants to foster further development of carbon-capture technologies to help make the oil and gas industry less destructive to the environment

More than 40,000 people are employed directly by oil and gas in the region, so government and industry leaders want to sustain and increase employment even as that core industry declines. “This is a managed transition,” says Maggie McGinlay, CEO of ETZ Ltd. “We can’t just turn our backs on oil and gas. We support them in their decarbonization efforts while helping to manage the transition to renewables.”

One factor that may give Aberdeen a leg up in this transition is that the technologies and skills that already support local offshore oil production can be redirected to develop wind operations in deep water and other ocean energy projects.

Aberdeen faces a challenge many infotech industry giants have dealt with in the past: How do they gradually phase out legacy businesses while rapidly growing new ones. The tech boneyard is full of companies who failed. Now, the pressure is on Aberdeen to pull it off. The whole world needs to be watching.

Steve Hamm is a freelance writer and documentary filmmaker based in New Haven, Connecticut, USA. His new book, The Pivot: Addressing Global Problems Through Local Action, about the journey of Pivot Projects, was published in October by Columbia University Press. This is one of a series of dispatches from COP26.

Read more of Hamm’s Dispatches from COP26

October 29th: COP26: Let’s Pivot to Save the Planet

November 1: SustainChain: a Collaboration Platform for Do-Gooders

November 5: Glasgow Dispatch: Startup Funding Encourages Sustainability

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Facebook, the Imperialist Media Company

Techonomy’s Kirkpatrick continues to be appalled by developments at the company he wrote a book about back when. New name? Lipstick on a pig. This is a renegade media company, period, with horrific impact on the world.

The enormous set of unseemly revelations known as the Facebook Papers show, among other things, that Facebook is a global media company that does not bear its associated responsibilities. (A full list is here of the now well over 100 articles in over a score of outlets.)

A media company selects programming and presents it to viewers. Just about every one of the Facebook Papers stories is about how the company makes decisions about what content to show and to whom. Yet traditional media companies, unlike Facebook, are required by law and tradition to bear responsibility for the content they present viewers. Internet companies, by contrast, got an exemption in the now-notorious Section 230 of the Communications Decency Act of 1996, which says content created by users is not the responsibility of web platforms. Facebook has applied that logic of non-responsibility to speech and content distributed all over the world.

But Facebook doesn’t just provide a neutral window for content created by friends and organizations you follow. It curates that content and shows it to you selectively, in the order it chooses – in a way that maximizes revenue. What it shows you is its willful decision.

Many of the unseemly revelations in the Facebook papers flow directly or indirectly from how the company’s algorithms work. It is in the software that decisions about what content is shown to one viewer versus another is actually manifested on Facebook. Such software, like human editors, is making subjective decisions. And the algorithms are themselves governed by human decision making, either by the programmers who created the algorithm or later decisions made by content moderators, reviewers, or public policy executives. As the Washington Post reported in one recent story, “The company may not directly control what any given user posts, but by choosing which types of posts will be seen, it sculpts the information landscape according to its business priorities. “

It is in the poorer parts of the world where the company’s irresponsibility and inattention has the worst consequences. (Facebook revealed in its quarterly report this week that 3.5 billion people globally—half the population of the planet, use its products.) Whistleblower Frances Haugen herself says she was primarily motivated by worries about FB harming the “global south.” Her worries are justified. Here is a detailed and hair-raising accounting of Facebook’s misdeeds in poorer parts of the world, as revealed in the Papers, from the great site Rest of World.

Many of the problems FB faces are presented by its more forgiving journalistic critics, like Casey Newton, as consequences of its sad and unfortunately vast size, with the implication that it thus cannot be expected really to deal properly with these myriad issues. “There is a pervasive sense that…no one [in the company] is entirely sure what’s going on,” Newton wrote Monday, Oct. 25 in his Platformer newsletter, a little sympathetically.  

But I have watched Facebook over the past decade and a half make decision after decision in the interests of growth that could have been predicted to lead to the problems that resulted today, had any thought been given to that possibility. No thought was given, because growth, and the associated power and profit that flowed from it, was by far the main thing Facebook cared about.

Take for example the rapid expansion over the past decade into country after country, in language after language. Facebook did this enthusiastically, and heedlessly. There was in most cases no thought given to the moderation challenges that would inevitably ensue. But the kinds of content, privacy, and political missteps Facebook has been accused of in the United States are equally a risk, and a likelihood, in every other country.

To this day there is essentially no oversight given by Facebook to most content or user speech in distant countries. For this, in my opinion, Facebook is absolutely culpable. I will repeat a statistic that I cannot stop talking about from the Facebook documents: the company only allocates 13% of its moderators’ time for combatting misinformation outside the United States, even though 90% of users live elsewhere.

Let’s call this what it is: a neo-imperialist mindset that values what happens in the U.S. more highly than what happens in other countries. This has the consequence of causing less damage in the U.S. and a few selected European allies while more seriously weakening societies elsewhere. These neglected countries–where literally billions of the company’s users live–are the same ones the company blundered its way into as it sought growth and global hegemony. It’s not that different from how, for decades, the U.S. methodically undermined and overthrew governments perceived unfriendly to U.S. interests, especially starting in the 1950s, regardless of the consequences for people in those countries.

It is regularly said by Facebook spokespeople that right-wing discord and civic strife in the U.S., India, and elsewhere did not begin on Facebook. That is an idiotic truism. The question is whether Facebook’s actions, oversights, and willful neglect have worsened it. The Facebook Papers offer example after example that the answer is yes.

Facebook, had it been led by people who had an empathetic and ethical concern for its impact, could have grown more deliberately. It could have taken care to only enter a country or support a new language if it had the resources to properly govern its service there. But that would have slowed down the profit engine, and might not have made Mark Zuckerberg the richest 37-year-old in human history.

In the avalanche of material emerging from the Facebook Papers, it’s easy to get lost, or overwhelmed. But another quote from a different Washington Post story offers clarity: “The documents…provide ample evidence that the company’s internal research over several years had identified ways to diminish the spread of political polarization, conspiracy theories and incitements to violence but that in many instances, executives had declined to implement those steps.”

 

Note: The company also changed its name this week, to the arrogant-sounding “Meta.” How apt, that Facebook would trumpet its move towards a fuller escape from reality for its users just as COP26 was about to begin, underscoring how devastated will be the actual world those users live in. The central idea conveyed by the company’s new direction–that life should inexorably become more and more virtual–feels wrong. So with things burning down around us, is the idea that we can quietly and guiltlessly escape into a Meta virtual world where the great Zuckerberg guides us to digital bliss?

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The Stuff Shortage is a First World Problem

Shortages in the labor market; ports that can’t offload container ships; rising prices–it’s a recipe for a stuff shortage. Taming the supply chain is going to take a concerted effort on many fronts.

File this under TMI (too much information): I have a colonoscopy scheduled, and at the moment New York City seems to be completely out of bowel prep liquid. The shortage is expected to continue through spring. OK, I understood the earlier toilet paper and grocery shortage, but this one has me scratching my head about the precarious state of our society’s supply chain for goods.

Even the most uninformed consumer can see the holes on the shelves in their local grocery store. Many are probably already deep freezing in-case-I-can’t-get-one-later Thanksgiving turkeys. The President has stepped into the picture, announcing an agreement he helped negotiate so the Port of Los Angeles can operate 24/7 to try and break the log jam that’s leaving scores of ships waiting offshore to be unloaded. Walmart, FedEx, UPS, Samsung, and other superpowers of stuff have committed to working around the clock. Home Depot, Target, and Costco, among others, have taken to chartering their own ships to get products to the U.S. faster.

“I think Johnny is going to get a back-order slip in his stocking this year,” quipped Robert Handfield, a supply chain expert at North Carolina State, in this NYT story about the global demand freak-out. “The congestion makes the ship that got wedged in the Suez, snarling traffic for six days, look like a fender bender on a country road,” said Stephen Lamar, the president and chief executive of the American Apparel and Footwear Association, in another NYT story.

We Love Our Stuff

The bottom line?  We can’t get our stuff. Shortages in the labor market; ports that can’t offload container ships; rising prices–it’s a recipe for a stuff shortage. And with the holidays around the corner!  Could they be stuffless?

Good sources tell me, off that record, that this is a real outlier in the normal supply and demand model. A Mckinsey report looking at 2022 says that typically, after economic downturns, “consumer confidence returns, and so does spending”. We’ve had a rebound in demand as the pandemic abates.  But we’ve got no supply, and not enough people to get what supply there is to us, or to sell it to us when it arrives. There are serious shortages both of truck drivers and retail employees. For a quick overview of the stuff problem read Marketplace’s description of the many bottlenecks that separate us from our stuff.

Do We Have Too Much Stuff?

Could this be The Great Recalibration? A recent Stephen Colbert monologue calls our stuff the thing that unites us.  “Because of COVID lockdowns and labor shortages and a lack of shipping containers, everything you want is either not made yet, stuck on a boat, or waiting for a trucker who can’t drive because the Gatorade bottle he needs to pee in is stuck on a boat or hasn’t been made yet.” According to 21 statistics on Becoming Minimalist, we’re badly over-stuffed. There are 300,000 items in the average American home (LA Times); the average size of that home has nearly tripled over the past 50 years (NPR); and one out of every 10 Americans rents offsite storage—the fastest-growing segment of commercial real estate for the past four decades (New York Times Magazine).

We Make Too Little Stuff

Adding insult to the injury of our stufflessness, we don’t make most of the stuff we want here in the U.S.. Our stuff is mostly produced in Asia, especially China. A big chunk of apparel, electronics and autos are made elsewhere. Just 28 percent of computer and electronic products and 48 percent of automobiles Americans purchased in 2015 were domestically made, according to the Department of Commerce, and I suspect that number has only decreased. Cheap labor and shipping made manufacturing offshore a better investment. The countries that make our stuff are facing worker shortages of their own.  Movements to shop locally and buy locally-made goods are having their moment, but America is not yet well tooled to do this at scale.

We Need More Agility

One thing we certainly don’t make enough of are semiconductors. Toyota said  Friday that it would cut November auto production targets at home and abroad by as much as 15 percent as the pandemic and a global semiconductor shortage have made it difficult for the Japanese automaker to meet its manufacturing goals. But more agile companies, in particular Tesla, figured out how to turn on a dime. Tesla created new firmware for chips it could get, rather than wait for the ones it couldn’t.

Valencell, producer of many chips we use in wearable devices, also did the firmware pivot. I spoke with Steven LeBoeuf, Ph.D., the company’s president and co-founder, who told me the two smartest decisions the company made (in hindsight) were to identify a supply-chain management firm and focus on writing code, and not produce any chips of its own. “Over the years our investors often asked us why we didn’t consider fabricating our own chips,” he said. But LeBoeuf says the company chose to focus on writing code that could be tuned for any chip available. “It’s been chaotic and extremely dynamic, almost schizophrenic, because you’ll get one report about supply in the morning and then an update later in the day,” said LeBoeuf.

We Need Different Logistics

The entire supply chain needs a revamping. Some bright spots in retail for 2022 will be the creation of micro-fulfillment centers (MFC), which are, in effect, small warehouses placed near end points where consumers live.  Over $300 million of VC money has gone to robotics companies developing technology for such MFCs, said Michael Jordan, retail research manager at ShopCore, a large commercial shopping center property manager. Dozens of MFCs are now open, including some making news like GoPuff. Kroger announced it is building two smaller-size automated fulfillment facilities with technology partner Ocado. Walmart will build a giant technology-driven distribution center for fresh and frozen grocery items, and has selected Spartanburg County, S.C., as the site for this new 720,000-square-foot facility, its largest ever. Set to open in 2024, it will employ more than 400 full-time workers and feature automation, robotics and machine learning to process twice the amount of goods that could be moved by a traditional center.  These high-tech facilities will ultimately focus on “dark store” fulfillment, meaning consumers never go there, but it delivers their stuff either curbside or on the front steps.  Think of this new trend like mini Amazon warehouses, designed to move the supply chain closer to you.

In the apparel industry, tech companies like EVRYTHNG Product Cloud, are creating digital identities for physical goods helping brands gain more visibility and transparency into their supply chain. Currently, they work with global apparel brands like Ralph Lauren to track and trace products across the product lifecycle, from factories and into the hands of the consumers who can scan QR codes to authenticate the products and learn more about the history of the products and get other branded content and experiences.

Taming the supply chain is going to take a concerted effort on many fronts. Consumers are going to have to reassess the stuff in their lives and how quickly they need it at their doorstep. Retailers are going to need to tech-up their spaces, re-thinking physical stores as mini-fulfillment centers. Supply chain experts are going to need to start looking at blockchain and other methods of tracking who’s moving what where, to bring more efficiency to everything from inventory management to clogged ports and pipelines.

As for me — the doctor had a stash of not-for-resale prep samples.  And I’m just fine.

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Facebook’s Tragic Obsession With Image

Facebook executives and its all-powerful CEO feel so self-righteous that they dismiss all criticism outright, including this week. It’s tragic, but it’s possible to explain.

How long must we wring our hands over the errors and arrogance of one powerful company? Sadly, probably a lot longer. That’s largely because, whenever it’s confronted with criticism, that company treats it as a mere image problem to be managed with public relations rather than an opportunity for introspection or engagement.

The past week has brought near-endless discussion about the revelations of Facebook whistleblower Frances Haugen, as revealed in the Wall Street Journal, on 60 Minutes, and in her testimony to Congress. (My summary of the Journal series and its import.) Yet when CEO Mark Zuckerberg and his confederates try to explain away Haugen’s criticism, their statements are routinely laden with self-justification, self-righteousness, lack of humility, and myopia.

For all the fascinating ins and outs of the documents she took, Haugen’s own eloquent statements, and her proposed policy solutions, it’s important to keep it all in context. Long before she ever came along, we knew this company had done much that’s irresponsible, over an extended period. We knew it had inadequate governance. None of Haugen’s revelations come as a surprise to anyone who has closely followed this renegade company, led by its unrestrained and reckless all-powerful leader. We’ve heard it all before. (For just one of innumerable examples, in late 2018 I wrote a piece for Techonomy called “Facing Facebook’s Failure.”)

Some might say, as Stephen Colbert did this week “Wait a minute! Did you tell me a corporation chose money over the safety of consumers? That is so disturbing!” (About 5 minutes in.) But ruefully funny though that may be, many of us, and many in governments around the world, believe this company’s sociocultural and political role is so great it has unique responsibilities.

Facebook and Zuckerberg fail to take their responsibilities seriously enough, though ironically, their reasons for doing so are themselves grounded in a sense of exceptionalism. We–its legions of critics everywhere–see a crying need for this company to rise to the occasion of its centrality in global communications and commerce with better governance and oversight. But Facebook’s leaders see that centrality itself as justifying a general disregard for what they see as trivial and minor blemishes on a near-heroic effort to connect the world. Far from thinking themselves in error or even, as some say, criminally liable for harms, they believe they do not get sufficient credit for all the good they do.

Endless controversies have enveloped this company from its inception, but the turn toward widespread condemnation of Facebook began with the election of Donald Trump. The months and years following saw a progressive series of revelations about the social network’s role in his victory.

A quick set of reminders: Cambridge Analytica got hold of illicitly-acquired personal data about tens of millions of American Facebook users. That data was used by the Trump campaign and others to target Facebook advertising to potential voters with devastating exactitude, by both location and political disposition. The data was further targeted, it appears, with help from detailed electoral-district polling data stolen by Russian hackers from the Democratic National Committee. That same data was almost certainly used by Russian agents to precisely target pro-Trump ads they themselves purchased on Facebook, with rubles in some cases. Similar illicit political machinations have happened with far less press coverage in scores of countries around the world. Finally, Facebook embedded employees in the Trump campaign to assist it in spending many tens of millions on Facebook ads. (This same kind of assistance was also given around that time to the neo-fascist Alternative for Germany (AfD) party, helping enable its rise.)

In all this are multiple errors of commission and omission by Facebook. It failed to govern its data, enabling the Cambridge Analytica hack. It failed to govern its advertising, enabling the Russian electoral interference. It acted amorally in several domains, including the design of its algorithms and in its advertising operations. For lots more damning detail about all these failures, read the recent book An Ugly Truth: Inside Facebook’s Battle for Domination, by Sheera Frenkel and Cecilia Kang.

What can easily lead an observer to despair is the near-endless series of other areas Facebook has made similar errors and oversights. The errors have emerged from its headlong and heedless search for global growth, regardless of region, language, or country.

Much has been made this week about Instagram’s pernicious effects on girls’ mental health, and it’s a serious problem. But the most damning piece of data in the Haugen documents, in my opinion, is that only 13% of Facebook’s efforts to combat misinformation and disinformation in 2020 were conducted in languages other from English, despite that 90% of users are outside the US, overwhelmingly speaking other languages. People in most countries function on Facebook with literally no guardrails. This failure of oversight has contributed, by all evidence, to the rise of dishonest autocrats in country after country, including Duterte in the Philippines, Erdogan in Turkey, Orban in Hungary, and Bolsanaro in Brazil. In all those countries, Facebook’s services serve as the primary media, and corrupt fear-mongering politicians and political parties concentrate a huge share of their communications efforts on the platform, using both paid and unpaid messages.

In the many statements and appearances by company executives this week, none addressed this shameful statistic. And with the press obsessed over teenaged girls’ reaction to Instagram, they were not asked to. In Mark Zuckerberg’s own disingenuous and misleading Facebook post, he said a “false picture” of the company had been painted by the articles and testimony. Unless he can address issues like that statistic and show it to be false, he is lying.

For all the controversies aired in recent days, another very damning report, albeit unverified, emerged about two weeks ago. Bloomberg reporter Max Chafkin says, in his new biography of Peter Thiel, that in an early 2019 meeting with Trump and Jared Kushner at the White House, Zuckerberg agreed to continue his policy of not fact-checking political speech if Trump would hold off on regulating Facebook. Zuckerberg of course denies such a deal occurred.  But it would be in keeping with his self-righteous and self-centered governance of his company.

Always keep in mind that as he mouths high-minded defenses of his own behavior, Zuckerberg has through that behavior become the richest person his age in human history. He is now the sixth richest in the world, according to Bloomberg’s real-time rankings, with $123 billion, aged 37. As he moved fast and broke things, he got richer than anyone, ever. No wonder we feel disinclined to give him the benefit of the doubt. Also, in case you forgot, he absolutely and completely controls the company, in a manner also unprecedented for any organization this size in the history of business. This is the practical reason why he and other executives can so freely disregard criticism. He personally controls 58% of voting shares and cannot be overruled. When a group of directors began proposing significant steps towards governance of speech on Facebook about two years ago, he unceremoniously fired them all from the board.

The damning information could go on endlessly, and will, until Zuckerberg is forced to change. But for an eloquent analysis of the company’s ineffective image-centric crisis response this week, read this trenchant thread from political consultant Steve Schmidt, analyzing one of the only public appearances by a senior Facebook executive in the wake of Haugen’s revelations. As he calls it–“a blizzard of words and empty assertions delivered with confidence.”

David Kirkpatrick is founder of Techonomy and author of The Facebook Effect.

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How can one company make so many mistakes? An astonishing reportorial coup by the Wall Street Journal is rattling Zuckerberg’s empire.

The Wall Street Journal this week began publishing an extraordinary series of damning articles about Facebook. The five so far consistently hit one theme–that the company is often very well informed about harms its systems cause society, but nonetheless chooses either not to take action or to lie in public about what it knows, or both. What makes the series unusually authoritative is that it derives from an extensive cache of internal company documents, many created by teams at the company intended to detect and prevent harms.

Here’s the Journal’s summary of its first four articles: “Facebook’s own research lays out in detail how its rules favor elites; its platforms have negative effects on teen mental health; its algorithm fosters discord; and that drug cartels and human traffickers use its services openly.” The most recent piece, published Friday Sept. 17, documents how the company has been unable to prevent its systems from being overrun by anti-vaccine propaganda. Again, all this comes not from dissident ex-employees or outsiders, but from the company’s own employees, as documented in internal presentations.

Sadly, for those like me who have followed Facebook closely for years, none of this is a surprise. But the Journal series may bespeak a major shift, even for those who are jaded and expect little other than evasion and apathy from this shockingly-powerful company. The articles suggest it may start to be seen widely as an outlaw enterprise, one that cares little whether or not its activities bring harm to society. The series demonstrates a company reflexively making choices about how to respond to challenges based not on a desire to reduce harm but rather on an obsession with user growth, user activity (which generates page views that enable more advertising), and especially, public perception.

One depressing and telling new statistic revealed in the the Thursday installment of the series is about global efforts around misinformation, which is rampant and has damaged country after country. Internal documents show that Facebook employees and contractors in 2020 spent 3.2 million hours finding and often removing false or misleading posts and ads. But only a shocking 13 percent of all that work was spent on content outside the U.S. Yet, the article too gently points out, 90 percent of Facebook usage is in other parts of the world. The reason for the discrepancy, based on the evidence presented here as well as accounts in the recent book The Ugly Truth, is that the company is primarily concerned about negative press coverage in the U.S.

The article makes the urgent point that Facebook does not even have the capacity to perform oversight in many places where egregious harms are taking place because of the platform. It gives the example of Ethiopia, where “armed groups use the site to incite violence against ethnic minorities.” The documents show that few, if any, company employees monitor such activity. The company has no speakers or reviewers for some languages used in Ethiopia, nor are the artificial intelligence tools Facebook touts as a silver bullet to address harmful speech used in those languages.

In classic obfuscatory company-speak, spokesman Andy Stone responded to such concerns by telling the Journal this week the company has safety programs in “over 50 languages.” Sounds good, right? In fact, Facebook officially supports over 110 languages, and scores more are used on its platform. Facebook’s net profits after tax will exceed $40 billion this year. Could it afford to ensure hate is monitored and managed in all those languages?

The Journal notes the documents show that employees themselves feel “embarrassment and frustration, citing decisions that allow users to post videos of murders, incitements to violence, government threats against pro-democracy campaigners and advertisements for human trafficking.” The Journal also writes that these internal reports “offer an unparalleled picture of how Facebook is acutely aware that the products and systems central to its business success routinely fail and cause harm.”

“We’re not actually doing what we say we do publicly,” a company researcher says in one document. That statement summarizes much of the entire series, and even Facebook’s standard attitude.

Other articles in the series describe equally unsavory actions. The first installment revealed a vast list of 5.8 million prominent users worldwide, many of them politicians and public figures, who are exempt from the company’s normal enforcement policies regarding speech. “These people can violate our standards without any consequences,” according to an internal presentation. The list was created, according to the documents, specifically to prevent what the company calls “PR fires”–instances of bad publicity.

Another article that has generated tremendous reaction, including demands from U.S. senators for more information, focuses on Instagram’s effects on teen self-image, and Facebook’s disingenuous public statements about what it knows about harmful effects from its platform. The senators are especially concerned because a letter sent from Mark Zuckerberg to Congress in response to a formal request for company data on this problem omitted mention of a key company study that found 32 percent of teen girls said Instagram made them feel worse if they already felt bad about their bodies.

Though the Journal repeatedly has sought comment from Facebook on all this, executives have shown little sign of contrition or even a willingness to admit the company has done anything untoward. One tiny exception is in the first article about the program exempting 5.8 million from policy enforcement on speech. Spokesperson Stone conceded criticism of the program was “fair.”

Many people find it hard to explain how one company could make so many mistakes, often so willfully. Why doesn’t this company want to be a force of order and progress? The answer is pretty simple, it seems to me. Facebook has no governance. It doesn’t have a CEO. It has an emperor. What he cares about is growth, so growth priorities prevail over harm remediation.

His control over the company is total. If he doesn’t like a board decision, he fires its members. But everyone needs and benefits from oversight. No one is perfect. Zuckerberg may be the richest person his age in human history. He may have unfailing confidence in his judgement and motives, but in central, fundamental, critical, obvious ways, he is failing as a leader.

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Does the Buy Now, Pay Later Wildfire Make Sense?

Like a barely contained wildfire, the Buy Now, Pay Later sector has been blazing across acres, bringing white-hot valuations and eye-watering acquisitions—and it’s happening worldwide.

Like a barely contained wildfire, the Buy Now, Pay Later (BNPL) sector has been blazing across acres in recent days, bringing white-hot valuations and eye-watering acquisitions—and, like wildfires, it’s happening worldwide. This week, PayPal revealed it is purchasing Japan’s Paidy for $2.7 billion, in a “mostly cash” transaction (it’s funny that the OG digital money app wants to pay in cash). The publicly traded US BNPL giant Affirm announced on Friday 71% revenue growth for its fiscal Q4 and had, um, a pretty good day on the market; the five-day chart tells all:

This piece originally appeared in FIN, James Ledbetter’s fintech newsletter.

And of course, all of this is dwarfed by Square’s purchase of Australian BNPL pioneer Afterpay last month for nearly $30 billion (click here for a detailed analysis of that deal).

As PayPal’s and Square’s acquisitions demonstrate, the BNPL wildfire is not limited to the US. Addi, a leading Latin American BNPL/payment firm, this week announced a new $75 million fundraising round, valuing the company at “nearly triple” what it was ostensibly worth all of 90 days ago. Also this week, it was reported that Revolut, one of the largest UK-based neobanks, is planning to enter the BNPL space; that report was quickly followed by a similar assertion from rival Monzo.

So BNPL is obviously in fifth gear—but does it broadly make sense? What used to be called “layaway” is handy for consumers, but is there all that much money to be made, given existing payment options? FIN, while understanding the appeal of BNPL, has long been somewhere between confused and skeptical regarding its meteoric growth. So this post lays out the bear case against BNPL, and then lets the ever-sharp Mark Palmer, managing director and fintech analyst at BTIG, talk us off the ledge.

What, exactly, is being acquired? The technology behind BNPL is not complicated. Indeed, PayPal has had a successful BNPL product for almost a year. Back in February, PayPal revealed that in the fourth quarter of 2020, about 2.8 million PayPal customers worldwide used its BNPL service for transactions worth more than $750 million, with 250,000 unique merchants. PayPal said at the time that its BNPL offering “represented the best start for any product it has ever released.”

An Arizent study from early this year found that PayPal was by far the leading BNPL provider in the US, with 45% market share. So there’s nothing magical about PayPal buying Paidy, and the customers being acquired aren’t all that numerous, given the price. PayPal to date has not dominated in Japan, partly for regulatory reasons, and partly because of cultural attitudes toward personal debt. According to SimilarTech, Japan–the third-largest economy in the world–is PayPal’s eighth largest market, well behind smaller economies such as Italy and Canada:

Given, then, PayPal’s existing BNPL dominance in its largest market, why spend billions to grab a company in a small market, when you might organically get those customers at a lower cost?

Are consumers into BNPL for the long run? There is so much data suggesting that, despite tremendous BNPL growth in recent years, consumers don’t trust it and fear its effects on their personal finance. This week, a survey found that one-third of US consumers who’ve used BNPL have fallen behind on a payment; within that group, 72% believe their credit score had suffered as a result. A British watchdog group found that one in 10 BNPL users have been chased by debt collectors. It seems at least possible that BNPL is a fad that will wear off once consumers realize it’s leading them to overspend.

Aren’t these valuations insane? Obviously a lot of factors enter into the valuation of a company being acquired, but if a buyer puts up 5x or 10x a company’s annual revenues, there’s a case to be made that it’s overpaying. The PayPal and Square BNPL purchases are north of 40x assumed revenues (and how those numbers are derived is a fun science we needn’t explore here).

That closes, as it were, the case for the BNPL prosecution. Now for the defense:

Consolidation and the quest for the superapp. Palmer puts the PayPal acquisition into a crucial context–this is fintech consolidation, which was entirely predictable. Indeed, the very first FIN post, in October 2020, referred to “when the fintech sector hits an inevitable consolidation period (a few years out, I’d wager).” Companies like Square and PayPal (and maybe Facebook and other nonfinancial companies) are trying to create all-singing, all-dancing superapps. BNPL is perceived to be a crucial component of that, and so paying billions is merited.

Scarcity is driving the prices. “The reality is, there just aren’t that many Buy Now, Pay Later platforms at scale that would be available to any of these companies,” Palmer asserts, and so throwing a couple of billion dollars to acquire them makes market sense. Indeed, word on the digital street is that even announced deals might be scuttled if even more generous offers come forward.

What’s ultimately being bought is not technology, but customers and their loyalty. Palmer argues that the number of active BNPL users of a company like Paidy are worth more than they might seem, because their loyalty and ability to repay has already been established. A company like Square or PayPal can combine that credit history with existing data and products to squeeze even more money out of those customers.

Whatever consumer suspicion exists, BNPL growth will power through. Palmer didn’t cite specific figures, but it’s very easy to find projections that BNPL is going to continue to burn bright. One study found that the global BNPL market will grow to $166 billion by 2023. Another report predicted it will hit $4 trillion by 2030.

Independent of the pro-con BNPL argument, it’s vital to note that Affirm still loses a lot of money. Its most recent SEC filing indicates a loss for fiscal year 2022 of between $135 and $145 million.

This piece originally appeared in FIN, James Ledbetter’s fintech newsletter. Ledbetter is Chief Content Officer of Clarim Media, which owns Techonomy.

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