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  1. #41
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    The Purpose of an Economy

    Ganesh Sitaraman, professor at Vanderbilt Law School, argues that the U. S. needs the middle class, that the Constitution was designed for a balanced share of wealth for our representative democracy to work. If the rich have too much power, it can lead to an oligarchy. If the poor have too much power, it can lead to a revolution. So the middle class needs to be the rudder that steers American democracy on an even keel.

    I believe that the primary purpose of the economy, and one of its key agents, the firm, is to create and sustain the middle class. The U. S. middle class from 1941 to 2000 was one of the most ferocious sources of good in world history. The American middle class financed, fought, and won good wars; took care of the aged; funded a cure for polio; put men on the moon; and showed the rest of the world that self-interest, and the consumption and innovation it inspired, could be an engine for social and economic transformation.

    The upward spiral of an economy depends on the circular flow between households and companies. Households offer resources and labor, and companies offer goods and jobs. Competition motivates the invention and distribution of better offerings (happy hour, rear-view camera, etc.), and the big wheel spins round and round. Big tech creates enormous stakeholder value. So why are we witnessing, for the first time in decades, other countries grow their middle class while ours is declining? If an economy is meant to sustain a middle class, and the social stability it fosters, then our economy is failing.

    Without a doubt, there have been tremendous gains in productivity in the U. S. over the past thirty years. It would be hard to deny that the American consumer, at every level, has become the envy of the free world. Yet the productivity boost and the elevation of the consumer to modern-day nobility have created a dystopia in which we’ve traded well- paying jobs and economic security for powerful phones and coconut water delivered in under an hour.

    How did that happen? Since the turn of the millennium, firms and investors have fallen in love with companies whose ability to replace humans with technology has enabled rapid growth and outsize profit margins. Those huge profits attract cheap capital and render the rest of the sector flaccid. Old-economy firms and fledgling start-ups have no shot.

    The result is a winner-takes-all economy, both for companies and for people. Society is bifurcating into those who are part of the innovation economy (lords) and those who aren't (serfs). One great idea will make a twenty-something the darling of venture capital, while those who are average, or even just unlucky (most of us), have to work much harder to save for retirement.

    It's never been easier to be a billionaire or harder to be a millionaire. It's painfully clear that the invisible hand, for the past three decades, has been screwing the middle class. For the first time since the Great Depression, a thirty-year-old is less well-off than his or her parents at thirty.

    Should we care? What if these icons of innovation are the disrupters we need to keep our economy fit? Isn't there a chance we'll come through the other end of the tunnel with a stronger economy and higher wages? Already there's evidence that this isn't happening. In fact, the bifurcation effect seems to be gaining momentum. It's likely the biggest threat to our society. Many will argue it's the world we live in. But isn't the world what we make of it? And we have consciously shifted the mission of the U. S. from producing millions of millionaires to producing one trillionaire. Alexa, is this a good thing?
    FRIENDS LANG KAMI

  2. #42
    ^ Continued from above ...

    Markets Are Failing, Everywhere

    Right now we are in the midst of a dramatic market failure, one in which the government has been lulled by the public's fascination with big tech. Robust markets are efficient and powerful, yet just as football games don’t work without referees who regularly step in, throw flags, and move one team backward or forward, unfettered capitalism gave us climate change, the mortgage crisis, and U. S. health care.

    Monopolies themselves aren't always illegal, or even undesirable. Natural monopolies exist where it makes sense to have one firm achieve the requisite scale to invest and offer services at a reasonable price. But the tradeoff is heavy regulation. Florida Power & Light serves ten million people; its parent company, NextEra Energy, has a market cap of $72 billion. However, pricing and service standards are regulated by people who are fiduciaries for the public.

    The Four, by contrast, have managed to preserve their monopoly-like powers without heavy regulation. I describe their power as "monopoly-like," since, with the possible exception of Apple, they have not used their power to do the one thing that most economists would describe as the whole point of assembling a monopoly, which is to raise prices for consumers.

    Nevertheless, the Four's exploitation of our knee-jerk antipathy to big government has been so effective that it's led most of us to forget that competition - no less than private property, wage labor, voluntary exchange, and a price system - is one of the indispensable cylinders of the capitalist engine. Their massive size and unchecked power have throttled competitive markets and kept the economy from doing its job - namely, to promote a vibrant middle class.

    Air Supply

    How do they do it? It's useful here to remember how Microsoft killed Netscape in the 1990s. The process starts innocently enough, as a firm builds an outstanding product (Windows) that becomes a portal to an entire sector - what we'd now call a platform. To sustain its growth, the company points the portal at its own products (Internet Explorer) and bullies its partners (Dell) to shut out the competition. Even though Netscape had the more popular browser, with over 90 percent market share, it couldn't compete with Microsoft's implicit subsidies for Internet Explorer.

    It's happening everywhere across the Four, whether it's the slow takeover of the entire first page of search results that Google can better monetize, substandard products on your iPhone's home screen (like Apple Music), coordinating all assets of the firm (Facebook) to arrest and destroy a threat (Snap), or information-age steel dumping via fulfillment build-out and predatory pricing no other firm can access the capital to match (Amazon).

    (Un)Natural Monopolies

    Maybe the consumer is better off with these "natural" monopolies. The Department of Justice didn't think so. In 1998, the federal government filed suit against Microsoft, alleging anticompetitive practices. During the trial, one witness reported that Microsoft executives had said they wanted to “cut off Netscape’s air supply” by giving away Internet Explorer for free.

    In November 1999, a district court found that Microsoft had violated antitrust laws and subsequently ordered the company to be broken into two. (One company would sell Windows; the other would sell applications for Windows.) The breakup order was overruled by an appeals court, and ultimately Microsoft agreed to a settlement with the government that sought to curb the company's monopolistic practices by less stringent means.

    The settlement was criticized by some for being too lenient, but it’s worth asking whether Google - today worth $770 billion and the object of affection for any free-market evangelist - would exist if the DOJ hadn't put Microsoft on notice regarding the infanticide of promising upstarts. In the absence of the antitrust case, Microsoft likely would have leveraged its market dominance to favor Bing over Google, just as it had used Windows to euthanize Netscape.

    Indeed, the DOJ's case against Microsoft may have been one of the most market-oxygenating acts in business history, one that unleashed trillions of dollars in shareholder value. The concentration of power achieved by the Four has created a market desperate for oxygen. I've sat in dozens of VC pitches by small firms. The narrative has become universal and static: "We don't compete directly with the Four but would be great acquisition candidates." Companies thread this needle or are denied the requisite oxygen (capital) to survive infancy. IPOs and the number of VC-funded firms have been in steady decline over the past few years.

    Unlike Microsoft, which was typecast early on as the "Evil Empire," Google, Apple, Facebook, and Amazon have combined savvy public-relations efforts with sophisticated political lobbying operations - think Oprah Winfrey crossed with the Koch brothers - to make themselves nearly immune to the scrutiny endured by Microsoft.
    FRIENDS LANG KAMI

  3. #43
    ^ Continued from above ...

    The Four's unchecked power manifests most often as a restraint of competition. Consider: Amazon has become such a dominant force that it's now able to perform Jedi mind tricks and inflict pain on potential competitors before it enters the market. Consumer stocks used to trade on two key signals: the underlying performance of the firm (Pottery Barn's sales per square foot are up 10 percent) and the economic macro-climate (more housing starts). Now, however, private and public investors have added a third key signal: what Amazon may or may not do in the respective sector. Some recent examples:

    The day Amazon announced it would enter the dental-supply business, dental-supply companies' stock fell 4 to 5 percent. When Amazon reported it would sell prescription drugs, pharmacy stocks fell 3 to 5 percent.

    Within twenty-four hours of the Amazon - Whole Foods acquisition announcement, large national grocery stocks fell 5 to 9 percent.

    When the subject of monopolistic behavior comes up, Amazon’s public-relations team is quick to cite its favorite number: 4 percent - the share of U. S. retail (online and offline) Amazon controls, only half of Walmart’s market share. It's a powerful defense against the call to break up the behemoth. But there are other numbers. Numbers you typically won’t see in an Amazon press release:

    • 34 percent: Amazon's share of the worldwide cloud business

    • 44 percent: Amazon's share of U. S. online commerce

    • 64 percent: U. S. households with Amazon Prime

    • 71 percent: Amazon's share of in-home voice devices

    • $1.4 billion: Amount of U. S. corporate taxes paid by Amazon since 2008, versus $64 billion for Walmart. (Amazon has added the entire value of Walmart to its market cap in the past twenty-four months.)

    What about Facebook? Eighty-five percent of the time we spend on our phones is spent using an app. Four of the top five apps globally—Facebook, Instagram, WhatsApp, and Messenger - are owned by Facebook. And the top four have allied, under the command of the Zuck, to kill the fifth - Snap Inc. What this means is that our phones are no longer communications vehicles; they're delivery devices for Facebook, Inc.

    Facebook even has an internal database that tells it when a competitive app is gaining traction with its users, so that the social network can either acquire the firm (as it did with Instagram and WhatsApp) or kill it by mimicking its features (as it's trying to do with Stories and Bonfire, which are aimed at Snapchat and Houseparty).

    Google, for its part, now commands a 92 percent share of a market, Internet search, that is worth $92.4 billion worldwide. That's more than the entire advertising market of any country except the U. S. Search is now a larger market than the following global industries:

    • paper and forest products: $81 billion

    • construction and engineering: $79 billion

    • real estate management and development: $76 billion

    • gas utilities: $58 billion

    How would we feel if one company controlled 92 percent of the global construction and engineering trade? Or 92 percent of the world’s paper and forest products? Would we worry that their power and influence had breached a reasonable threshold, or would we just think they were awesome innovators, as we do with Google? And then there's Apple, the most successful firm selling a low-cost product at a premium price. The total material cost for the iPhone 8 Plus is $288, a fraction of the $799 price tag.

    Put another way, Apple has the profit margin of Ferrari with the production volume of Toyota. Apple's users are among the most loyal, too. It has a 92 percent retention rate among consumers, compared with just 77 percent for Samsung users. In February 2017, 79 percent of all active iOS users had updated to the most recent software, versus just 1.2 percent of all active Android devices.

    Apple uses its privileged place in consumers' lives to instill monopoly-like powers in its approach to competitors like Spotify. In 2016, the firm denied an update to the iOS Spotify app, essentially blocking iPhone users' access to the latest version of the music-streaming service. While Spotify has double the subscribers of Apple Music, Apple makes up the discrepancy by placing a 30 percent tax on its competition.
    FRIENDS LANG KAMI

  4. #44
    ^ Continued from above ...

    Apple is not shy about using its popularity among consumers to its advantage. It was recently discovered that Apple has been purposely slowing down performance on outdated iPhone models, a strategy that is likely to entice users to upgrade sooner than they would have otherwise. This is the confidence of a monopoly.

    In the late nineteenth century, the term trust came into use as a way to describe big businesses that controlled the majority of a particular market. Teddy Roosevelt gained a reputation as the original "trust buster" by breaking up the beef and railroad trusts, and filing forty more antitrust suits during his presidency. Fast-forward a hundred years, to 2016, and we find candidate Trump announcing that a Trump administration would not approve the AT&T–Time Warner merger "because it's too much concentration of power in the hands of too few." A year later, his Justice Department sued to block it.

    So our presidents are still fighting the good fight, right? Well, let's break this down. AT&T has 139 million wireless subscribers, sixteen million Internet subscribers, and twenty-five million video subscribers, about twenty million of which were acquired from DirecTV. Time Warner owns content-producing brands such as HBO, Warner Bros., TNT, TBS, and CNN. A vertical merger between the two companies could, in theory, create a megacorporation capable of creating and distributing content across its network of millions of wireless-phone, Internet, and video subscribers.

    Too much power in the hands of too few? Maybe. But if content-and-distribution heft is what we're worried about, then Teddy would have been knocking on Jeff's, Tim's, Larry's, and Mark's doors a decade ago. Already each of the Four has content and distribution that dwarfs a combined AT&T–Time Warner:

    • Amazon spent $4.5 billion on original video in 2017, second only to Netflix's $6 billion. Prime Video has launched in more than two hundred countries and recently struck a $50 million deal with the NFL to stream ten Thursday-night games. Amazon controls a 71 percent share in voice technology and has an installed distribution base of 64 percent of American households through Prime. Name a cable company with a 64 percent market share - I'll wait. In addition, Amazon controls more of the market in cloud computing than the next five largest competitors combined. Alexa, does this foster innovation?

    • Apple is set to spend $1 billion on original content this year. The company controls 2.2 million apps and set a record in 2013 when the number of songs it sold on iTunes hit twenty-five billion. Apple's library now includes forty million songs, which can be distributed across the company's one billion active iOS devices, and that’s not even mentioning its television and video offerings. But AT&T needs to sell Cartoon Network?

    • Facebook owns a torrent of content created by its 2.1 billion monthly active users. Through its site and its apps, the company reaches 66 percent of U. S. adults. Facebook plans to spend $1 billion on original content. It’s the world’s most prolific content machine, dominating the majority of phones worldwide. Now "what’s on your mind?"

    • Four hundred hours of video are uploaded to YouTube every minute, which means that Google has more video content than any other entity on earth. It also controls the operating system on two billion Android devices. But AT&T needs to divest Adult Swim?

    Perhaps Trump is right that the merger of AT&T and Time Warner is unreasonable, but if so, then we should have broken up the Four ten years ago. Each of the Four, after all, wields a harmful monopolistic power that leverages market dominance to restrain trade. But where is the Department of Justice? Where are the furious Trump tweets? Convinced that the guys on the other side of the door are Christlike innovators, come to save humanity with technology, we've allowed our government to fall asleep at the wheel.

    Margrethe Vestager, the EU commissioner for competition, is the only government official in a Western country whose testicles have descended - who is not afraid of, or infatuated with, big tech. Last May, she levied a $122 million fine against Facebook for lying to the EU about its ability to share data between Facebook and WhatsApp, and a month later she penalized Google $2.7 billion for anticompetitive practices.

    This was a good start, but it's worth noting that those fines are mere mosquito bites on the backs of elephants. The Facebook fine represented 0.6 percent of the acquisition price of WhatsApp, and Google's amounted to just 3 percent of its cash on hand. We are issuing twenty-five-cent parking tickets for not feeding a meter that costs $100 every fifteen minutes. We are telling these companies that the smart, shareholder-friendly thing to do is obvious: Break the law, lie, do whatever it takes, and then pay a (relatively) anemic fine if you happen to get caught.

    The monopolistic power of big tech serves as a macho test for capitalists. The embrace of the innovation class makes us feel powerful. We like success, especially outrageous success, and we’re inspired by billionaires and the incredible companies they founded. We also have a gag reflex when it comes to regulation, one that invites unattractive labels. Since I started suggesting that Amazon should be broken up, Stuart Varney of Fox News, a charming guy, has taken to introducing me on-air as a socialist. Any day now, I suspect he'll start calling me European.

    There’s no question that the markets sent a strong signal in 2017 that our economy is sated on regulation. But there's a difference between regulation and trust busting. What's missing from the story we tell ourselves about the economy is that trust busting is meant to protect the health of the market. It's the antidote to crude, ham-handed regulation. When markets fail, and they do, we need those referees on the field who will throw a yellow flag and restore order. We are so there.

    The tremendous success of the Four - which alone accounted for 40 percent of the gains in the S&P 500 for the month of October - wallpapers over the fact that, as a whole, the markets in which they operate are not healthy. Late last year, Refinery29 and BuzzFeed, two promising digital-marketing fledglings, announced layoffs, while Criteo, an ad-tech firm, shed 50 percent of its market capitalization. Why? Because there is Facebook, there is Google, and then there is everyone else. And all of those other firms, including Snap Inc., are dead; they just don't know it yet.

    Are we sure all these companies deserve to die? Or is it the case that our markets are failing and preventing the development of a healthy ecosystem with dozens of digital-marketing firms growing, hiring, and innovating?
    FRIENDS LANG KAMI

  5. #45
    ^ Continued from above ...

    Search...Your Feelings

    Imagine two markets. One that includes the firms below:

    Amazon | Apple | Facebook | Google

    And another that includes these independent firms:

    As Darth Vader urged his son, I want you to "search your feelings" and answer which market would:

    Create more jobs and shareholder value.

    While trust busting is typically bad for stocks in the short run, busting up Ma Bell unleashed a torrent of shareholder growth in telecommunications. Similarly, Microsoft, despite its run-in with the DOJ in the 1990s, just hit an all-time high. In addition, it's reasonable to believe that Amazon and Amazon Web Services may be worth more as separate firms than they are as one.

    Inspire more investment.

    There are half as many publicly traded U. S. firms than there were twenty-two years ago, and most firms in the innovation economy understand that their most likely - or only - path to exist is to be acquired by big tech. An absence of buyers makes for an economy in which the two options are to go big (become Google) or go home (go out of business). While home runs provide good theater, the doubles and triples of acquisitions by medium-sized firms are likely a stronger engine of growth.

    Broaden the tax base.

    The aggregation of power has resulted in firms that have so much political clout and resources that they can bring their effective tax rates well below what midsize companies pay, creating a regressive tax system.

    Why should we break up big tech? Not because the Four are evil and we’re good. It’s because we understand that the only way to ensure competition is to sometimes cut the tops off trees, just as we did with railroads and Ma Bell. This isn't an indictment of the Four, or retribution, but recognition that a key part of a healthy economic cycle is pruning firms when they become invasive, cause premature death, and won't let other firms emerge. The breakup of big tech should and will happen, because we're capitalists. It's time.
    FRIENDS LANG KAMI

  6. #46
    From Vice ...

    A $10 Billion Lawsuit Could Finally Unmask The Creator Of Bitcoin

    By David Gilbert Feb 27, 2018

    For most of the last decade, internet snoops, journalists and bitcoin enthusiasts have been trying to unmask Satoshi Nakamoto, the mysterious creator of bitcoin who holds almost 1 million of the digital coins - currently worth $10 billion.

    Now a bombshell lawsuit against the man who publicly claims to be Nakamoto could finally answer that question.

    Craig Wright outed himself in 2016 as the creator of the world's most valuable cryptocurrency, but his claims were met with widespread skepticism.

    Now legal experts believe that the lawsuit, being brought by the family of a close collaborator of Wright, will once and for all confirm the true identity of Satoshi Nakamoto.

    Wright, an Australian cryptographer has largely disappeared from public view since saying he was going to provide no more proof of his claim.

    Now he's facing a lawsuit being brought by the estate of Dave Kleiman, a computer scientist and cybersecurity expert, who many had identified as a possible answer to the question of who created bitcoin.

    The lawsuit claims Wright stole 1,100,111 bitcoins that rightfully belonged to Kleinman and would currently have a market value of $10,236,532,855. As well as the missing bitcoin, Kleinman's estate is alleging that Wright "unlawfully, willfully, and maliciously misappropriated trade secrets belonging to Dave's estate relating to blockchain-based technologies."

    Wright issued a single-worded response to the lawsuit when asked about it on Twitter late Monday: "Greed."

    According to one expert, the lawsuit would necessarily demand the unmasking of the true identity of Satoshi Nakamoto:

    The Kleinman estate is being represented by Boies Schiller Flexner, the firm that represented Al Gore in his Supreme Court case challenging the results of the 2000 presidential election.

    However, a blog post by bitcoin security specialists WizSec has poured cold water on the claims made by both Wright and the Kleinman estate, suggesting that neither party owned the bitcoin being claimed.

    "The very existence of those bitcoins in the first place is just another fantasy," the post says. "The lawsuit is a nonsensical fight over unrelated funds that never belonged to either party."

    WHO WAS DAVE KLEINMAN?

    A former helicopter technician in the U.S. Army, Kleinman was paralyzed and wheelchair-bound following a serious motorcycle accident. He met Wright in an online cryptography forum in 2003 and according to the lawsuit, the pair worked together on the white paper that outlined how bitcoin and the blockchain would work, published under the pseudonym Satoshi Nakamoto in 2008.

    The pair also formed a Florida-based company, W&K Info Defense Research LLC, in 2011 to focus on cybersecurity.

    However, the lawsuit also says it is "unclear whether Craig, Dave, and/or both created bitcoin."

    It continues: "For reasons not yet completely clear, they chose to keep their involvement in Bitcoin hidden from most of their family and friends. It is undeniable, however, that Craig and Dave were involved in bitcoin from its inception and that they both accumulated a vast wealth of bitcoins from 2009 through 2013."

    In an email sent to Louis Kleinman, Dave's 94-year-old father, 10 months after his son's death, Wright claims: "Your son Dave and I are two of the three key people behind bitcoin."

    Kleinman died just months before bitcoin really hit the mainstream, in April 2013, after a long battle with Methicillin-resistant Staphylococcus Aureus (MRSA). At the time of Kleinman’s death, no one in his family was aware of the extent of his involvement in creating bitcoin or that he had accumulated "an incredible sum of bitcoins."

    The lawsuit claims that Wright took advantage of this fact to seize bitcoin belonging to Kleinman by forging a series of contracts that purported to transfer the assets to Wright or companies controlled by him.

    To do this, Wright backdated contracts and used a computer-generated font called Otto to forge Dave Kleiman's signature, according to the lawsuit.

    GRUESOME SCENE

    The circumstances of his death are also couched in mystery. "Dave was found dead in his home. The scene of Kleiman's death was gruesome. His body was decomposing, there were wheelchair tracks of blood and fecal matter, open bottles of alcohol, and a loaded handgun next to him. A bullet hole in his mattress was found," the lawsuit says.

    Wright and Kleinman operated a bitcoin mining operation which saw them collect over one million bitcoin, which was held in trusts based in the Seychelles, the U.K. and Singapore.

    Wright is currently living in London where he is chief scientist of blockchain startup nChain. In his role, Wright has filed hundreds of patents related to bitcoin and blockchain technology.

    After many people questioned his claims of being Nakamoto in 2016, Wright said he would be providing no further public proof of his claim.

    The identity of the person or persons who created bitcoin has been a topic of interest for the media and the bitcoin community for many years, with multiple names being floated, including Gavin Andresen, Hal Finney, Nick Szabo, and most infamously Dorian Nakamoto.
    FRIENDS LANG KAMI

  7. #47
    Is social media really affecting academic performance?

    AFP Relaxnews / 08:11 PM February 22, 2018

    Although many parents may be worried that the rise of social media is distracting children from their studies, new European research suggests that using sites such as Snapchat, Facebook or Instagram has a minimal effect on academic performance.

    Carried out by researchers from the University of Bamberg, Germany, the new study set out to clarify whether social media does in fact have a negative impact on school grades, looking at 59 studies that included more than 30,000 young people worldwide.

    “There are several contradictory single studies on this subject and this has made it difficult previously to properly assess all results,” explained co-author Caroline Marker. Although some studies report that social media has a negative impact on school performance, others show a positive influence, while some have failed to find any relationship at all.

    In the new review the team found that as they had expected, students who used social media intensively to communicate to their peers about school-related topics actually tended to have slightly higher, not lower grades.

    In addition, they found that those who were particularly active on social media did not spend less time studying.

    However, those who used social networking sites very frequently, regularly post messages and photos, did have slightly lower grades, although the team stressed that the negative effect, is very small.

    Those who used social media while studying or doing homework also had slightly worse grades than students who didn’t use the sites, possibly because this form of multi-tasking distracted students from their work.

    Commenting on whether social media could be causing the slight decrease in grades, or whether students who already have lower grades are more easily drawn to the distraction of social media, co-author Professor Markus Appel said, “We cannot answer this question. Both directions of cause and effect are possible, but they are not very pronounced.”

    He concluded, “Concerns regarding the allegedly disastrous consequences of social networking sites on school performance are unfounded.”

    “Nevertheless, parents should take an interest in what their kids are doing on social media, know the social networks and be willing to understand the usage patterns,” he continued. “The more open-minded parents are with respect to their children’s online activities, the better they will be able to communicate with them.”

    The findings also come just weeks after a study of more than 1.1 million U.S. teens found that those who spend a large amount of time on their smartphone, for example using social media or texting friends, are more likely to be unhappy than those who spend time doing non-screen activities such as sports, reading newspapers and magazines, and face-to-face social interaction.

    However, the team also found that those who spent a small amount of time in front of a screen were actually the happiest, and now recommend limiting use to no more than two hours a day.

    The German study can be found published online in the journal Educational Psychology Review. JB
    FRIENDS LANG KAMI

  8. #48
    Facebook is facing an existential crisis

    by Dylan Byers @CNNMoney

    March 19, 2018: 10:40 AM ET

    The Cambridge Analytica scandal has done immense damage to the brand, sources across the company believe. It will now take a Herculean effort to restore public trust in Facebook's commitment to privacy and data protection, they said. Outside observers think regulation has suddenly become more likely, and yet CEO Mark Zuckerberg appears missing in action.

    The scandal also highlights a problem that is built into the company's DNA: Its business is data exploitation. Facebook makes money by, among other things, harvesting your data and selling it to app developers and advertisers. Preventing those buyers from passing that data to third parties with ulterior motives may ultimately be impossible.

    Indeed, the most alarming aspect of Cambridge Analytica's "breach" is that it wasn't a breach at all. It happened almost entirely above board and in line with Facebook policy.

    Aleksandr Kogan, a University of Cambridge professor, accessed the data of more than 50 million Facebook users simply by creating a survey filled out by 270,000 people. Facebook provided Kogan with the data of anyone who took the survey, as well as their friends' data. In a statement, Facebook said, "Kogan gained access to this information in a legitimate way and through the proper channels that governed all developers on Facebook at that time."

    The one rule Kogan violated, according to Facebook, was passing the user data to third parties, including Cambridge Analytica, the political data firm founded by former Trump aide Steve Bannon and conservative donor Robert Mercer.

    But even Facebook sources acknowledged to CNN that it is impossible to completely monitor what developers and advertisers do with the data once it's in their hands. It's like selling cigarettes to someone and telling them not to share the cigarettes with their friends.

    The limits of Facebook's ability to enforce compliance with data usage was highlighted by Facebook's own response to Kogan's violation. Facebook says it learned of Kogan's violation in 2015 and was subsequently assured by all parties that the data had been destroyed. But Facebook also says it learned just days ago that "not all data was deleted."

    In a statement, Facebook deputy general counsel Paul Grewal said "protecting people's information is at the heart of everything we do." That may be a hard argument for the public to accept given that Facebook's business is providing people's information to outside parties whose ultimate goals are unknowable.

    Facebook says that starting in 2014 it gave users greater control over what parts of their information are shared with app developers and advertisers. It also says it has enhanced its app review process to require developers "to justify the data they're looking to collect and how they're going to use it — before they're allowed to even ask people for it."

    Still, the sources inside Facebook acknowledge that such measures cannot guarantee that some people won't succeed in mining Facebook data and passing it off to third parties.

    On Capitol Hill, the talk of regulation is growing louder. Lawmakers seeking tighter restrictions on big tech feel even more emboldened than they did in the wake of revelations about Russian meddling in the 2016 election, a source on Capitol Hill told CNN.

    Democratic Senator Amy Klobuchar has called on Zuckerberg to appear before the Senate Judiciary Committee, on which she serves, to explain "what Facebook knew about misusing data from 50 million Americans in order to target political advertising and manipulate voters."

    Meanwhile, Zuckerberg and the rest of the Facebook leadership seem conspicuously absent. Neither the Facebook CEO nor his top deputy, Sheryl Sandberg, have commented publicly on the matter. They have left that task to Grewal, a lawyer. No one has provided an adequate explanation for why Facebook did not disclose Kogan's violation to the more than 50 million users who were affected when the company first learned about it in 2015.

    "We are conducting a comprehensive internal and external review and are working to determine the accuracy of the claims that the Facebook data in question still exists. That is where our focus lies as we remain committed to vigorously enforcing our policies to protect people's information," Grewal said in a statement Sunday.

    All of this comes as Facebook is already getting questions about the long-term appeal of its platform, at least in the United States. The number of daily active users in the United States — a whopping 184 million — declined for the first time last quarter. Facebook also lost 2.8 million users under the age of 25 last year, and is set to lose another 2 million this year, according to eMarketer.

    The Cambridge Analytica scandal is likely to hasten user disenchantment with the network, sources inside Facebook acknowledged. Facebook is increasingly being seen as a platform vulnerable to manipulation by political groups, foreign governments, or worse.

    Ultimately, however, the real culprit in the eyes of the American public may not be Cambridge Analytica or the Russians, but rather Facebook itself.
    FRIENDS LANG KAMI

  9. #49
    What you need to know about Facebook's data debacle

    by Charles Riley @CRrileyCNN

    March 20, 2018: 6:43 AM ET

    What happens to the data you post on Facebook? And who's responsible for how those personal details are used?

    Facebook (FB) is under intense pressure to answer these questions - and more - after it admitted that a company linked to President Donald Trump's campaign had accessed and improperly stored a huge trove of its user data.

    The controversy erupted as UK media and The New York Times reported that data analysis firm Cambridge Analytica tried to influence how Americans voted using information gleaned from millions of Facebook profiles.

    Here's what you need to know.

    What happened?

    Facebook said it gave permission to University of Cambridge psychology professor Aleksandr Kogan to harvest information from users who downloaded his app — "thisisyourdigitallife."

    The app offered a personality test. But Facebook users who downloaded the app also gave the professor permission to collect data on their location, their friends and content they had "liked."

    That was allowed under Facebook's rules at the time.

    The New York Times, however, reported that Kogan provided that data - which included information from over 50 million profiles - to Cambridge Analytica, breaching Facebook's rules.

    Cambridge Analytica was working to develop techniques that could be used to influence voters.

    Facebook said it asked Cambridge Analytica to delete the data in 2015, but learned several days ago from "reports" that not all of it had been purged.

    Cambridge Analytica said that the data set revealed by The New York Times was not used "as part of the services it provided to the Donald Trump 2016 presidential campaign."

    The company's methods came under further scrutiny late Monday after a British television channel aired a report showing CEO Alexander Nix discussing potential bribery and entrapment of politicians.

    In the report, Nix is seen suggesting the encounters could be filmed and posted to the internet.

    Cambridge Analytica said in a statement that the undercover Channel 4 report was "edited and scripted to grossly misrepresent the nature of those conversations and how the company conducts its business."

    Nix said the company does not engage in bribery or entrapment.

    Why does this matter?

    Facebook has been unable to shake off questions over its role in the 2016 presidential election.

    CEO Mark Zuckerberg initially expressed skepticism that Facebook could have been used to influence voters, but a series of revelations over Russian meddling have caused the company to make big changes in recent months.

    It has sought to crack down on fake news, undermine the business model used by trolls and make political advertising more transparent.

    Zuckerberg now has a whole new set of questions to address: Was Facebook transparent enough with users about how their information would be used? Should it have done more to keep tabs on how third parties were using data?

    There could be major implications for the company's business model, which is based on selling user data to app developers and advertisers.

    Lawmakers and regulators have already seized on the controversy.

    Massachusetts Attorney General Maura Healey said Saturday that her office is opening an investigation into Facebook and Cambridge Analytica. The UK Information Commissioner's Office is also investigating, as is the European Union parliament.

    "This is a big deal. ... The privacy violations there are significant," Republican Senator Jeff Flake told CNN. "The question is, who knew it? When did they know it? How long did this go on?"

    Facebook's stock has been pummeled amid the fiasco. The shares tumbled nearly 7% Monday, shaving about $37 billion off the value of the company.

    What happens next?

    Lawmakers have called on Zuckerberg to explain his company's actions.

    Amy Klobuchar, a Democrat who serves on the Senate Judiciary Committee, said on Saturday that "Zuckerberg needs to testify."

    "This is a major breach that must be investigated," she said on Twitter. "It's clear these platforms can't police themselves."

    The UK's Information Commissioner's Office said Monday that it was trying to obtain a warrant to search the offices of Cambridge Analytica in London.

    Facebook also said that Cambridge Analytica had agreed to a digital forensic audit of its servers and systems in an attempt to show that it deleted certain Facebook data it held on some American users.

    Auditors hired by Facebook visited Cambridge Analytica's London office on Monday evening, but stood down at the request of the Information Commissioner's Office.

    The revelations are likely to fuel calls for more regulation of tech companies. The industry is already scrambling to prepare for tough new data privacy rules in Europe, and similar measures could be considered elsewhere.

    -- Chris Isidore, Sherisse Pham, Daniel Shane and Donie O'Sullivan contributed to this report.
    FRIENDS LANG KAMI

  10. #50
    Google loses Android battle and could owe Oracle billions of dollars

    By Danielle Wiener-Bronner

    Updated 00:29 AM PHT Thu, March 29, 2018

    (CNN Money) — Google just lost a major copyright case that could cost it billions of dollars and change how tech companies approach software development.

    An appeals court said on Tuesday that Google violated copyright laws when it used Oracle's open-source Java software to build the Android platform in 2009.

    Tuesday's ruling is the latest development in a topsy-turvy eight-year battle between Google and Oracle.

    Oracle first brought its case against Google in 2010, claiming that Android infringes two patents that Oracle holds on its Java software, a ubiquitous programming language powering everything from phones to websites.

    In 2012, a jury determined that Java does not deserve protection under copyright law. Two years later, an appeals court overturned the ruling, raising the question of whether Google's use of Oracle's API violated copyright law.

    Related: Facebook has lost $80 billion in market value

    A jury determined in 2016 that Google's use of Oracle's APIs was legal under the copyright law's fair use doctrine, which allows the free use of copyrighted material under specific circumstances. Oracle appealed the decision, and a judge took its side on Tuesday.

    "There is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform," a panel of three Federal Circuit judges wrote in Tuesday's opinion.

    Oracle said in a statement on Tuesday that the recent "decision protects creators and consumers." Google said it is weighing its next steps. It could appeal to the full slate of judges on the court.

    "We are disappointed the court reversed the jury finding that Java is open and free for everyone," a Google spokesman said in a statement. "This type of ruling will make apps and online services more expensive for users. We are considering our options."

    Related: Jury sides with Google in billion dollar Oracle suit

    Another court will decide how much Google owes Oracle in damages.

    As of 2016, Oracle was seeking about $9 billion from Google. But because APIs have become much more widespread over the years, a court could decide that Oracle deserves more, said Christopher Carani, a partner with McAndrews, Held & Malloy and a professor at Northwestern's law school.

    "The numbers in this case will be staggering," he added.

    The verdict is likely to eclipse the current largest copyright verdict of $1.3 billion, awarded to Oracle when it sued rival SAP in 2010.

    Google isn't the only company that stands to lose from this decision. Many others rely on open-source software to develop their own platforms. Tuesday's ruling means that some will either have pay to license certain software or develop their own from scratch.

    "The decision is going to create a significant shift in how software is developed worldwide," Carani said. "It really means that copyright in this context has teeth."

    "Sometimes free is not really free," he added.

    CNNMoney's David Goldman contributed reporting.


 
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