Government and Facebook conflicts

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Simon Wardley has first written about digital sovereignty and later he did some comments on Twitter about the moves a company as Facebook is doing.

Simon’s answer captured my attention:

So, first I have done is a short analysis about how Facebook works, decomposing the main components of a huge company as it is. I know, over simplification is not accurate.

Then the basis of the discussion goes around a map that is explained on the digital sovereignty post. Sorry but if you want to understand the next paragraphs you have to spend some minutes reading it.

To define slightly better the conflicts that I have seen I would like to do a small change on the “power” component, dividing it into the classification that is common at least in democratic countries: legislative, executive and judicial.

This differentiation is important, and we will see later why. Just as a highlight of what’s coming next, the point is that sometimes, the “executive” power is using the digital powers to skip from the physical sovereignty that the citizens of a land have provided to the politicians.

Where can we find conflicts between government and Facebook?

There are thousand of scenarios, and it’s impossible to cover all of them, but I will try to comment some of them. If you have another example, please let me know.

Situation #1, Respect Local Laws: national elections in a democratic country

Let’s put Spain as example (I know a little bit more about some rules here). So have clear laws about how politicians can communicate and persuade citizens, there are laws about freedom of expression and other mechanisms that enable an imperfect but accepted system. Someone could tell me that traditional channels of communication (newspapers, radio and TV) can influence as the same than Facebook on the elections, so let’s try to see this in deep.

In Spain the 24 hours before the voting day politicians cannot advertise themselves. Here the government controls traditional channels of communications stop offering advertisements, but in the internet, you can find volumes of information about the political parties 24×7 and a last minute “news” that expands quickly on the social networks.

The conflict? Facebook and other social networks are invading the land of power, not executing some filters during these previous 24 hours. They can say that are opinions, but the reality is that a lot of this content was there thanks to advertisement that they are monetizing.

Situation #2, Misinformation: US elections in 2016 and the fake news

Here Facebook and other digital channels have the ability to skip a simple rule that the Spanish people gave to ourselves.

In 2016 during the US elections there were in 2016 where it was clear the manipulation done on Facebook platform, even do that Facebook for this 2020 elections they have enabled an action plan where they are removing, highlighting or filtering some of the content published on the platform.

One of the key points where the credibility of the information. A trusted traditional channel of communication have a credibility, and their editors value it as key asset of the company. They can be more aligned to one party than to other, but they will not enable that a third party will publish any information without their control and without checking if this is a credible information or not, basically because their credibility is at risk.

Facebook was not seen as a channel of communication, they saw themselves as a platform where people publish things and they monetize it. At some point the maintain that people clicks “like” or “share” things as an individual act, and that there is not anything wrong on it. The problem comes when someone understands that with enough money and the right knowledge about how the platform works, they can modify the perspective or the perception of something, and we all know that a “lie repeated 1000 times is still a lie” but some people believe it.

A trusted traditional communications channel would have not enabled these fake news.

The manipulation of the platform had several consequences but I would like to focus on one. For this 2020 elections, Facebook have enabled a set of rules to remove, filter and avoid the spread of a publication. The questions that come to my mind are:

  • Who have decided that the filter rules are the right ones? (scope of digital legislative power).
  • How are these algorithms executing these rules? (scope of digital executive power).
  • How are the claims done by an user being judged? (scope of digital judicial power).

The conflict? A private company is exercising executive, legislative and judicial power, over the individuals of a nation.

The digital sovereignty have the same elements of the sovereignty and on this case FB has the upper hand of the power, nor the citizens that gave themselves a framework for living as a collective.

Situation #3 no civil discourse

Kenneth J. Gergen describes civil discourse as the “language of dispassionate objectivity”, and suggests that it requires respect of the other participants, such as the reader. It neither diminishes the other’s moral worth, nor questions their good judgment; it avoids hostility, direct antagonism, or excessive persuasion; it requires modesty and an appreciation for the other participant’s experiences.

  • Do you see something of this in Facebook?
  • How can you do it if you do not know if you are discussing with a person or a bot?
  • How can this be done if there is no control of it?

In a democratic land, if you want to organize a protest, you can call on it, ask for permission to walk on the streets of a city and protest about the ideas you have and being heard by other citizens. There are some laws that tells how you can behave, there is a control of how you do it, and another citizen can claim that some aspect of that protest was against the law.

In Facebook you can organize a protest creating thousand of bot-users, creating and budgeting a campaign, and spreading it in the platform.

The questions that come to my mind are:

  • Who has validated that the virtual protest/campaign is aligned with the law? (scope of digital executive power).
  • How can I demand that some aspect of the protest is wrong? (scope of digital judicial power)
  • Is classifying the only way  to tell Facebook that something is wrong? (scope of digital executive power)
  • If something is proved as wrong, how is Facebook punishing it? (scope of digital judicial power) and how is Facebook avoiding this type of wrong behavior again? more algorithms? (scope of digital legislative power)

The conflict? A private company is exercising executive, legislative and judicial power, over the individuals of a nation.

The digital sovereignty have the same elements of the sovereignty and on this case FB has the upper hand of the power, nor the citizens that gave themselves a framework for living as a collective.

Situation #4 no civil rights

Civil and political rights  are a class of rights that protect individuals’ freedom from infringement by governments, social organizations, and private individuals. They ensure one’s entitlement to participate in the civil and political life of society and the state without discrimination or repression.

In the space of Facebook’s land:

  • Who does define the civil and political rights of the users? (scope of digital legislative power)
  • Who does take care of these right? (scope of digital executive power)
  • Who does take care of the right execution of these rights? (scope of digital judicial power)
  • Have you read something about this in the terms of service when you create the Facebook account?
  • How the use of Facebook respect the civil and political rights?

Situation #5 lack of data protection

Well, there are tons of discussions and controversy around data protection but the basis is that there is a basic conflict.

The conflict? You do not have control of the data that you give to Facebook, and governments have more or less data protection policies.

Other conflict? They are tracking you in thousand of ways, you just consult the list of patents they have related to this: they control the camera, the microphone, the way you touch the screen, location….

Some words to ponder, consider and debate

You can say: you can individually stop using Facebook!!

And I will reply to you, that your are partially right. As an individual, I can remove my Facebook account, but we live in a society and we belong to collectives that when something new comes we have to accept the positive things that this “new thing” has, and control as best as possible the bad things that the “new thing” has.

When cars became popular, nobody told “stop using cars”, the citizens created rules to live with this new technology, have the benefit of the positive aspects and minimize the bad aspects.

A short analysis of how Facebook works

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This post tries to analyze some aspects of Facebook as a company, so I can confront some values promoted by Facebook and how they enter in conflict with government’s values.

Let’s start looking for capital flows

The first thing is to follow the flow of capital, so first thing I have done is to look into the Q2 2020 quarterly report for investors.

The first thing we can find is that 98% of the revenue comes from advertisement.

These are the KPIs and measures offered by FB and they are considered valid from market point of view:

  • Facebook Daily Active Users (DAUs)
  • Facebook Monthly Active Users (MAUs)
  • Facebook Average Revenue per User (ARPU)
  • Family Daily Active People (DAP)
  • Family Monthly Active People (MAP)
  • Family Average Revenue per Person (ARPP)

I want to remind the main types of cost, so I will save this screenshot here:

Spending time on their platforms is the main thing they measure and what happens there is the second thing we should look at. Where?

Patents

I have been reviewing the list of FB´s patents and I have stopped in the second page of patents as there are so many. From the extraction I got:

  • Methods and systems for identifying target images for a media effect
  • Automated detection of tampered images
  • Location based content aggregation and distribution systems and methods
  • Ranking items using a unified model
  • Techniques to promote filtered messages based on historical reply rate
  • Informative advertisements on hobby and strong interests feature space
  • Generating catalog-item recommendations based on social graph data
  • Determining related query terms through query-post associations on online social networks
  • Optionalization and fuzzy search on online social networks
  • Apparatus, method and program for image search
  • Methods and systems for providing user feedback
  • Systems and methods for partitioning geographic regions
  • Dynamic tagging recommendation
  • Automatic personalized story generation for visual media
  • Managing notifications pushed to user devices
  • Systems and methods for filtering page recommendations
  • Systems and methods for filtering page recommendations
  • Predicting reach of content using an unresolved graph
  • Providing social endorsements with online advertising
  • Real-time tracking of offline transactions
  • Systems and methods for selecting content to send to labelers for prevalence estimation
  • Temporal clustering of social networking content
  • Suppressing entity suggestions on online social networks
  • Methods and systems for synchronizing data streams across multiple client devices
  • Systems and methods for suggesting content

Tired of reading patents? …. me too.

I want to focus on some of them:

  1. Systems and methods for recommendation of topical authorities: Systems, methods, and non-transitory computer-readable media can determine one or more respective topics of interest for at least some users of a social networking system. At least some of the topics can be propagated to at least a first user, wherein the propagated topics were determined to be of interest to users that follow the first user in the social networking system. At least one topic from the propagated topics for which the first user is a topical authority is determined.
  2. Inferring relationship statuses of users of a social networking system:This patent application discusses predicting a set of emotional states using information such as how many times you visit another user’s page, the number of people in your profile picture and the percentage of your friends of a different gender.
  3. Determining user personality characteristics from social networking system communications and characteristics: This patent proposes using your posts and messages to infer personality traits. It describes judging your degree of extroversion, openness or emotional stability, then using those characteristics to select which news stories or ads to display.
  4. Predicting life changes of members of a social networking system: This patent application describes using your posts and messages, in addition to your credit card transactions and location, to predict when a major life event, such as a birth, death or graduation, is likely to occur.
  5. Associating cameras with users of a social networking system : Analyzes pictures to create a unique camera “signature” using faulty pixels or lens scratches. That signature could be used to figure out that you know someone who uploads pictures taken on your device, even if you weren’t previously connected. Or it might be used to guess the “affinity” between you and a friend based on how frequently you use the same camera.
  6. Correlating media consumption data with user profiles: This patent explores using your phone microphone to identify the television shows you watched and whether ads were muted. It also proposes using the electrical interference pattern created by your television power cable to guess which show is playing.
  7. Routine deviation notification : This patent tracks your weekly routine and sending notifications to other users of deviations from the routine. In addition, it describes using your phone’s location in the middle of the night to establish where you live.
  8. Statistics for continuous location tracking: Correlating the location of your phone to locations of your friends’ phones it tries to deduce whom you socialize with most often. It also proposes monitoring when your phone is stationary to track how many hours you sleep.

There are a lot of algorithms that they have patented to protect one of their most valuable assets: their platforms.

The use of these algorithms and the decisions that they are taking show up a lot of

Facebook needs

Let’s start with Facebook needs. Below a summary of needs.

I want to put my attention to “active users” and “behavior’s analysis”, to me these are the two key aspects I would like to review in deep. Some of the questions that comes to my mind are:

  • How does FB keeps the users engaged on their platforms?
  • How does FB keeps the attention of the people?
  • How does FB change the habits and routines of interaction to keep people engaged?

Chamath Palihapitiya answers is: “with short term dopamine-driven loops”.

how dopamine-driven feedback loops work?

Well, this is the basic loop:

How dopamine driven feedback loops work

Some books with more information

All this is more complex that the short summary I have done here, so in case you want more details a book focused on this topic should be a good source of information. For instance:

  • Chaos Monkeys: Inside the Silicon Valley Money Machine’
  • Facebook: The Inside Story (English Edition)

Now I will comeback to the analysis of conflict of values between government and Facebook.

Algorithmic Trading Wardley Map

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I have been drawing this map as part of a conversation on slack with other user (Tom) where I was trying to figure out what map and needs are required.

So I started with the user: the algorithmic trader. This person wants to implement an algorithm for executing trades automatically without human intervention. So, the design of a system, the back-test of the algorithm and the execution of the final tested code are its main needs.

Then, you could decide if to do it by yourself or using one of the existing platforms. I know Quantopian a little bit, so I have used this one as reference for the map (you can use others).

I have drawn the lines in different colors to differentiate the selection of a user that wants to take one route or other: user that builds its own environment (green) or that uses a platform (orange).

I have doubts with the practice, in the few knowledge I have, practices depends more on the models and technique that an author writes about.

The Wardley Map

The typical steps that an algorithmic trader do are:

  1. Design the system starting defining the trading rules that wants to put in place. Once done it’s moved into an algorithm.
  2. The algorithm is tested on a data set, and results are evaluated through a set of indicators and standard values that traders use to work with.
  3. Once a tested algorithm is considered as valid, the code is executed in production with real money.

Key aspects of the map:

  • Real time data is key for the execution of the code, specially if the algorithm works well in small spaces of time. There is a big space of work here and the competition with high frequency traders is tough.
  • The connection with the broker is key, a platform as Quantopian that used to have it, removed it. The brokers uses to enable APIs for connections from external computers. Here again the time response is key.
  • One of the advantages of Quantopian is that they offer a prepared datasets that in the past had high quality. This makes you save a lot of time because the preparation and maintenance of data is something that is very time consuming.
  • I have not represented concepts as risk management, as this is something conceptual that the algorithm trader has to implement in the code following the principles, rules and systems that is more valid for him/her.

Quantopian Business model

This Bostonian company has two main lines of business are:

  1. Developer members, who develop and test algorithms for free, focusing on specific factors that, in case they are winning algorithms, can be added to Quantopian’s offerings to institutional investors. In this case they can have some royalties or commissions.
  2. Institutional investors, have their investments managed by the winning algorithms.

There were a moment where they took a decision

In 2017, Quantopian decided not support the connection with live trading brokers

I have read this note, where it’s announced that Quantopian no longer supports live trading through Interactive Brokers (or Robinhood). Here, the users are moving to other environments, some of the ones mentioned are:

Reading the comments of the forums, it seems that the solutions are not perfect, but the users are surviving using other environments. The users having their own environment must be laughing.

The point is, Quantopian wanted to have a free environment to promote winning scripts and then use them with their institutional investors. To have real winning algorithms you need real competition that forces people to find higher profits, not just a mediocre profit that an individual could use to earn some dollars. They probably identified that real competition was invaded by average brokers that wanted to take advantage of a free environment, and they cut the umbilical cord for these average brokers.

Gameplays

We can identify two sets of gameplays used by Quantopian:

  • Education: they have had a clear approach to educate people and the amount of educational content is really extense and high quality.
  • Open approaches : the use of python as programing language enabled them to attract a lot of researches that are used to work with it, and to take the advantage of libraries as Zipline.
  • Differentiation: they were offering the institutional investors a set of algorithms that were tested and they had real winning percentage and profits. The market is very extense, and to have an “army of researchers” looking for weird correlations that leverage profits for “free” is something definitely different.
  • Creating constraints: the removal of access to live brokers was an invitation to some set of users to leave the environment. I can imagine that they took the number of users connected to brokers, and they easily calculated the amount of resources that they were consuming.

Which other gameplays do you identify?

Which other platforms exist?

I found this picture in https://tradingtuitions.com/  that is very useful to understand some of them:

 

Using a stand-up desk

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I built a stand-up desk some years ago for Michele, but I have decided to give it a chance and see how it works.

I will take note of the different feelings I have with it during the first weeks. Let’s see if it works or not.

Week 1:

  • I was able to work on it during 3 – 4 hours per day, this week only 3 days.
  • I added a pillow on the floor to help me with the pain of the heels (I have to take care of them).
  • The low side of the back had some muscle aches.
  • I was able to attend calls and not being distracted. I can stretch, so this helps.

Week 2:

  • not too much time on the stand-up desk due to some circumstances.

Week 3:

  • I have been able to stay at least 3 – 4 hours working and moving to do other things.
  • I have been running and I feel the legs are a little bit tired.
  • The low side of the back still feels muscle aches.

Year 3, Learning about Wardley Maps Q4

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In Q3 slot my focus was to increase my basis about the Wardley Maps. I have translated the book into Spanish and I have started a set of maps related to gameplays.

During this quarter I would like to increase this knowledge with more examples and practical work. The big challenge to me is not going to be able to generate content, but to increase the number of people having conversations about it.

  • Vision: create real examples to cover the main axis of the maps: climate patterns, doctrines and gameplays.
  • Values: have fun, learn the details of the different people about it.
  • Method: create content and publish it on different places, combine the use on investment purposes.
  • Obstacles: Time, Ariel’s surgery.
  • Measures:
    • There are 30 climatic patterns, complete at least 20 examples of climate patterns.
    • There are 40 doctrines, complete at least 30 examples of doctrines.
    • There are 63 gameplays, complete at least 41 examples of gameplays.
    • Be able to attract some attention of this knowledge.

Death line = 31/December/2020

Wardley maps, the payment war in the mobile app ecosystem

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On this post I want to review several types of gameplays that Simon Wardley proposes on his book. 

This post is the first one of entries I want to write about gameplays used in Wardley maps. I would like to write about simple examples that enable people to understand how the gameplays work and enable conversations with all of you.

On this one, I will use a situation that is taking place in 2020: the payment war in the mobile App ecosystem.

Background

There are 3 companies that have created their own application ecosystems, enabling other companies to publish their applications in these environments and generate profits as long as the payments are made through the marketplace that these companies created. These companies are: Alphabet, Apple and Tencent.

These ecosystems are very useful, and very rich, they provide a programming language, development environments, test and production environments, a set of market rules and many other components. All this have enabled the creation of millions of applications and the creation of several companies.

These markets are highly valued assets for these large companies and are very lucrative, so any attack on this side of the moat will have an answer.

When you buy in one of these marketplaces, payments are made through it, and there is a percentage that the market itself keeps for itself. At the time of writing this article that percentage is 30%.

If you are a small company, you just have to understand that this is the case, and count it as part of the rules of the game, so you just forecast that it is a cost in your P&L. As small player, this market allows you to reach a huge number of users and the cost of reaching them would be more than 30% of turnover.

But if you are a large company, you are also willing to try to break some of the things established in these markets (considered by some to be monopolistic). Specially if you are a large company and your product knows itself, why pay 30% per transaction?

Is it a lot or a little for Apple?

If we look at Apple’s third quarter results we can find this table:

On the table, we see how services, which mainly come from the App Store, are the second segment that provides more revenue to Apple, after the iPhone.

The reference map

Well, let’s see how this one goes:

BATTLE FOR DIRECT PAYMENTS

 

August 2020, the beginning of the battle

Payment management is one of the characteristics of this market place, and it’s during the upload process to the app store when quality checks are done.

The quality processes of the app store checks if payments are made through the Apple payment gateway or if it is redirected to another site.

Apple and Alphabet detected that the Fornite application, belonging to the Epic Games company, was skipping the payment gateway, and announced that they were freezing Fornite updates to the latest published version of Fornite, not allowing new downloads or updates.

To put it in context, Fornite has 116 million users through Apple who suddenly cannot update their application, cannot be uninstalled and reinstalled, and also do not allow new installations.

Visually the situation is such that:

On one hand Apple offers a payment through its gateway, retaining a percentage of the billing, on the other hand Epic Games tries to obtain the payment directly.

The hordes of lawyers on both sides showed up, on one hand Epic Games sued Apple’s veto, and on the other hand Apple replied that Epic Games is skipping an agreement that they signed. They claim that the retained revenue is used for covering the costs of the market place.

October 2020, Google temporary gives up in India to 150 Indian start-ups

As we can read in this article, Google has been pressured by some 150 Indian companies that use the play store to publish their applications. They have pressed so that the 30% fee that Google wants to impose does not go forward.

Google intends to collect 30% of payments globally in September 2021. Well, it will postpone the application of the policy only in India until April 2022.

The thing has reached the point where the government has announced the intention to study creating an alternative App Store for India to counteract dependence on Google and Apple.

What kind of plays are we seeing here?

Well, the ones that come to mind for now are:

  1. Move First : Epic Games is moving first against these market places. There are competitors of Epic Games that have not made a move yet, and that are very powerful economically. In the event that Epic Games get something for this daring it would be at an advantage over its direct competitors.
  2. Land grab : Epic Games’ offensive move to try to break down the status-quo of the App Store market that imposes a fee that is abusive to them.
  3. Movement restriction : Both Apple and Alphabet have for now restricted the movement of Fornite.
  4. Undermining barriers to entry : What Epic Games is doing is trying to break down a very large barrier to entry that provides Apple with a fairly large revenue line.
  5. Alliances : Apple and Alphabet brought their restriction measure almost jointly. The stakes are high and it would be necessary to watch how aligned these two giants are during this battle.

To put in context with respect to the table of types of known moves:

In yellow the plays put in place by Epic Games, and in orange the plays put in place by Apple

From here, what can we expect?

Well, everything:

  1. Alliances: It would not be ruled out for other companies to join forces with Epic Games and join the complaint filed by them.
Note : I will update this article as events occur

Monthly POMO evolution

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I was digging into the Permanent open market operations (POMO) this August, trying to understand the impact of the FED in the stock market.

Now that some months after the turmoil have passed, I have looked into the numbers in a monthly basis.

The amount injected by the Fed in the market during these 9 first months of 2020 is:

To see the evolution of the last 4 months in a better way, I have removed March and April. This is how data looks like:

What about the 2.3T$ promised by the FED?

In March the FED announced a stimulus program of 2.3T$ for the market through POMO. Right now they have spent 1.84T$ which is around 80% of the program.

What’s coming during next 6 weeks?

Well the main events are:

  • US President election.
  • Q3 results of the majority of the main companies of the indexes.

 

 

What is Digital Silk Road?

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What is the DSR?

Launched in 2015, the digital silk road is a mainly private-sector-driven program, supported by the state, with the aim of enhancing China’s digital presence abroad, and thereby extending its commercial and political influence. It is so far going well, particularly in the emerging world.

This subset program comes from Belt Road Initiative (BRI) announced in 2013. The BRI represents a significant shift in global trade, laying the foundations for a paradigm shift in supply chain and logistics management.

The long term vision is that Belt Road Initiative is the vehicle by which China is restoring the ancient Silk Road.

Three main drivers

  • Chinese telecoms equipment makers,
  • Data Centre and Storage Infrastructure along the economic corridors,
  • Chinese companies using this to export interpretation of smart city sensors and data platforms.

Geography

  • Asia, the Middle East, Europe, Africa and Latin America.

Some projects of the program:

  • Optic fiber projects in Latin-America, Africa and South Africa (initial budget 7B$).
  • In Africa, Huawei and ZTE have built much of the digital infrastructure, including health care connectivity.
  • Huawei 5G expansion, that will enable a basis for Internet of the Things projects.
  • Smart shipping, which goal is optimize operations through enabling just in time operations as well as acting as information centers that enables optimized transport mode choices that connect with the port.
  • Smart city projects.
  • Build submarine and terrestrial optic fables
  • Building of data centers.
  • BeiDou satellite navigation system have been identified as key asset for DSR.
  • China’s Blockchain Services Network (BSN)

China Standards 2035

It is a roadmap that will be published in 2020 Q4 for defining the set of standards that private and public companies from China should be addressing. This blueprint will be updated (I did not found the frequency).

The landscape

Some schedules found