Is Facebook Simply Replicating Kenya’s Successful M-Pesa Mobile Payment System?

Facebook’s Libra and Safaricom’s M-Pesa

Are the similarities mere coincidence and competition, or is a global mega-corporation exploiting a successful Kenyan enterprise without collaboration or compensation?

Since Facebook announced its new Libra currency and mobile payments scheme, the global reaction has been very mixed. Libra is not truly a cryptocurrency though it will use blockchain. It will be pegged to a reserve currency, which cryptocurrencies are not.  Libra will “potentially” be governed by an association independent of Facebook, though that association remains non-binding and sketchy at this point. Potential regulatory issues abound around the World, and Facebook is currently not viewed very favorably by many governments.  But most interesting to me, Libra appears to be modeled after Kenya’s M-Pesa mobile payments system, the world’s leading mobile payments system, invented by mobile carrier Safaricom. Then I asked myself if Facebook, knowing that it needs to move away from selling personal data, has seized on Safaricom’s M-Pesa as its new revenue model. 

More disturbing to me, I asked myself if this might possibly be an example of Western mega-corporate exploitation of a smaller enterprise in the developing world. I have heard no reference whatsoever to M-Pesa from Facebook. In similar situations in high tech, the mega-enterprise would typically acquire the intellectual property of the smaller company, hire its founders and employees to gain market advantage. This is often called an “acqui-hire.” Even without IP, it can be done to simply ensure a positive brand image transaction.

Four years ago, in 2015, Facebook With apparent good intentions, and also a good dose of Facebook business strategy, struck out to promote Free Basics, a free limited Internet for the poor in less developed countries sponsored by Facebook and its local telecommunications partners. India was a prime market focus. While on the face of it Free Basics seemed to have merit, Zuckerberg ran into a wall of opposition. On close inspection of the details, Facebook’s problem, despite all of its global corporate sophistication, appeared to have been naïveté about the foreign markets it was trying to enter. International business is strewn with case studies of corporate arrogance and ignorance that led to failure. Zuckerberg could have looked no further back than 2013 for clues from Google and Eric Schmidt, who also failed in India, as to why Facebook failed. The Indian government viewed both Facebook and Google with the same suspicion that they had for the Raj in 1947.

I do not have all the answers yet about Libra and M-PESA, and other mobile carriers have also entered the mobile payment market, but at this point, I have deep reservations about Facebook’s failure to acknowledge its role and its responsibility to Safaricom and M-PESA. IMHO, questions need to be raised directly to Facebook.

Read more: Facebook’s International Business Blunder: following in the footsteps of Google

A bit of history from The Economist:

Why Does Kenya Lead The World In Mobile Money?

A convergence of factors, some of them accidental, explain Kenya’s lead

Source: Why does Kenya lead the world in mobile money? – The Economist explains

The Economist explains

From March 2nd, 2015:

PAYING for a taxi ride using your mobile phone is easier in Nairobi than it is in New York, thanks to Kenya’s world-leading mobile-money system, M-PESA. Launched in 2007 by Safaricom, the country’s largest mobile network operator, it is now used by over 17m Kenyans, equivalent to more than two-thirds of the adult population; around 25% of the country’s gross national product flows through it. M-PESA lets people transfer cash using their phones, and is by far the most successful scheme of its type on earth. Why does Kenya lead the world in mobile money?

M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash and thus making possible lower interest rates. But after pilot testing, it was broadened to become a general money-transfer scheme. Once you have signed up, you pay money into the system by handing cash to one of Safaricom’s 40,000 agents (typically in a corner shop selling airtime), who credits the money to your M-PESA account. You withdraw money by visiting another agent, who checks that you have sufficient funds before debiting your account and handing over the cash. You can also transfer money to others using a menu on your phone. Cash can thus be sent one place to another more quickly, safely and easily than taking bundles of money in person or asking others to carry it for you. This is particularly useful in a country where many workers in cities send money back home to their families in rural villages. Electronic transfers save people time, freeing them to do other, more productive things instead.

Dozens of mobile-money systems have been launched, so why has Kenya’s been the most successful? It had several factors in its favour, including the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom; the regulator’s initial decision to allow the scheme to proceed on an experimental basis, without formal approval; a clear and effective marketing campaign (“Send money home”); an efficient system to move cash around behind the scenes; and, most intriguingly, the post-election violence in the country in early 2008. M-PESA was used to transfer money to people trapped in Nairobi’s slums at the time, and some Kenyans regarded M-PESA as a safer place to store their money than the banks, which were entangled in ethnic disputes. Having established a base of initial users, M-PESA then benefitted from network effects: the more people who used it, the more it made sense for others to sign up for it.

M-PESA has since been extended to offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money (because they do not need to waste hours queuing up at the bank). One study found that in rural Kenyan households that adopted M-PESA, incomes increased by 5-30%. In addition, the availability of a reliable mobile-payments platform has spawned a host of start-ups in Nairobi, whose business models build on M-PESA’s foundations. Mobile-money schemes in other countries, meanwhile, have been held up by opposition from banks and regulators and concerns over money-laundering. But M-PESA is starting to do well in other countries, including Tanzania and Afghanistan, and last month it was launched in India. At the same time, operators in some other countries are doing an increasingly good job of imitating it. Some of the factors behind Kenya’s lead cannot be copied; but many of them can, which means it should eventually be possible for other countries to follow Kenya’s pioneering example.

Immigrants Will Think Twice About Coming to Silicon Valley

Since I joined the high-tech industry years ago, Silicon Valley has had a fundamental need for highly educated engineers and scientists that could not be filled by American graduates. This reality has been bemoaned by Congressional politicians for decades now, who have essentially done nothing to increase the emphasis on STEM education (science, technology, engineering, and math) for resident Americans, and who instead chose to provide the H1-B Visa enabling Silicon Valley high-tech companies to employ immigrants to fill these crucial positions, and has enabled the high-tech industry to thrive.  In my own group at Intel years ago, one of my closest colleagues was a Canadian math graduate from McGill and a Harvard MBA with an H1-B visa. Today, Silicon Valley is now notable for its multicultural diversity.  The election of Donald Trump has raised very real fears in Silicon Valley. His platform is almost completely devoid of any acknowledgment of the crucial importance of high-tech innovation to U.S. productivity and economic growth, the need for H1-B immigrants and the parallel need for greater investment in STEM education. But then Trump is on record calling computers “a mixed bag” and thinks people should wean themselves off the internet. Trump is also said not to have basic computer skills, beyond the use of his Twitter account. 

Supporters of Trump prior to the election were few and far between. Peter Thiel, a venture capitalist, former founder of PayPal, and a gay man, is perhaps the single most visible Trump supporter in the Valley. Tim Cook, CEO of Apple, did hold a private Silicon Valley fundraiser for Paul Ryan during the election, but otherwise, his support has been publicly tepid at best, as Trump has lashed out vigorously at Apple’s overseas manufacturing. Meg Whitman, CEO of Hewlett-Packard and a host of other Silicon Valley luminaries were outspoken supporters of Hilary Clinton. There are indications of a tenuous thaw from some in Silicon Valley but where will it lead?

What Will Happen to the H1-B Visa and Investment In STEM?

Source: Silicon Valley Reels After Trump’s Election – The New York Times

 STATE OF THE ART THE NEW YORK TIMES, NOV. 9, 2016

Farhad Manjoo

Silicon Valley Reels After Trump’s Election

Silicon Valley’s luminaries woke up Wednesday morning to a darkened new global order, one that the ceaseless optimism of their tech-powered visions seemed suddenly unable to conquer.

Across the technology industry, the reaction to Donald J. Trump’s election to the presidency was beyond grim. There was a sense that the industry had missed something fundamental about the fears and motivations of the people who use its products and that the miscalculation would cost the industry, and the world, greatly.

“The horror, the horror,” said Shervin Pishevar, a venture capitalist at the firm Sherpa Capital who, like just about every leading light in tech, had strongly supported Hillary Clinton’s candidacy. “We didn’t do enough,” he added. “There were too many people in the tech industry who were complacent. They waited and waited and waited to get engaged in this election. And now we have this nightmare.”

Others were more succinct in their devastation. “I’m heartbroken,” said Stewart Butterfield, co-founder of the corporate messaging service Slack.

 For some, buried in the visceral reaction was also a realization that the tech industry’s relationship with government — not to mention the public — looks bound to shift in a fundamental way.

During the Obama years, Silicon Valley came to see itself as the economic and social engine of a new digital century. Smartphones and social networks became as important to world business as oil and the automobile, and Amazon, Apple, Facebook, Google and Microsoft rose to become some of the most prosperous and valuable companies on the planet.

Mr. Obama, who rode many of these digital tools to the presidency, was accommodative of their rise; his administration broadly deferred to the tech industry in a way that bordered on coziness, and many of his former lieutenants have decamped to positions in tech.

Mr. Trump’s win promises to rip apart that relationship. The incoming president had few kind words for tech giants during the interminable campaign that led to his victory. Mr. Trump promised to initiate antitrust actions against Amazon, repeatedly vowed to force Apple to make its products in the United States, and then called for a boycott of the company when it challenged the government’s order to unlock a terrorist’s iPhone. Mr. Trump’s immigration plans are anathema to just about every company in tech.

Amazon, Apple, Facebook, Google and Microsoft offered no immediate comment about Mr. Trump’s win, or how the new administration’s stated policy goals would affect their businesses.

But it seems clear that a shift is in the offing. Leaders of these behemoths have long spoken in ambitious, gauzy sentimentalities about a broadly progressive future. Their goals weren’t simply financial but, they said, philosophical and democratic — they wanted to make money, sure, but they also wanted to make the world a better place, to offer a kind of social justice through code. Theirs was a tomorrow powered by software instead of factories, and offering a kind of radical connectivity that they promised would lead to widespread peace and prosperity.

Last year, Sundar Pichai, Google’s chief executive, published a broad rebuke of Mr. Trump’s plan to ban Muslims from immigrating to the United States. Mark Zuckerberg, Facebook’s co-founder and chief executive, told an audience of developers in April that “instead of building walls, we can help people build bridges.”

 Peter Thiel, former founder of PayPal, and perhaps the most visible and lonely Trump supporter in Silicon Valley

In private, during the campaign, many tech leaders were positive that their vision would prevail over Mr. Trump’s. When asked about whether they were preparing in any way for a Trump victory, bigwigs at many of the industry’s leading tech and financial firms were bemused by the notion. They thought it would never happen.

The deeper worry is that tech is out of step with the national and global mood, and failed to recognize the social and economic anxieties roiling the nation — many of them hastened by the products the industry devises.

Among techies, there is now widespread concern that Facebook and Twitter have hastened the decline of journalism and the irrelevance of facts. Social networks seem also to have contributed to a rise in the kind of trolling, racism and misogyny that characterized so much of Mr. Trump’s campaign.

And then you get to the economic problems. Unlike previous economic miracles, the tech boom has not led to widespread employment. Much of the wealth generated by the five biggest American tech companies flows to young liberals in California and the Pacific Northwest, exactly the sort of “global elites” Mr. Trump railed against in his campaign.

It’s not clear that most Americans see technological progress as the unalloyed good that it is considered in Silicon Valley. Technology has pushed so deeply into people’s lives, changing how they work and go to school and raise their children, that it could well raise more fears than hopes. A new smartphone is nice, but perhaps not if it means that your trucking job will be replaced by a big rig that drives itself.

“We need to figure out how to connect more Americans to the economic engine of technology,” said John Lilly, a partner at the venture capital firm Greylock Partners.

On Wednesday, some in Silicon Valley worried about their disconnection from the mass of voters who chose Mr. Trump.

“In tech, we need scale, so we look at the world through the lens of aggregate metrics like page views, active users and even revenue,” Danielle Morrill, the chief executive of a start-up called Mattermark, wrote in an email. “But that doesn’t mean we understand the people on the other side of the screen as individuals. That’s the danger and the opportunity.”

Still, some people in tech said that despite their heartache over the outcome, they felt renewed inspiration to take bolder action to realize their progressive visions. Some made very big, idealistic proposals — this being, after all, the land of disruption. On Twitter, for instance, Mr. Pishevar said he would fund a campaign to get California to secede from the nation.

Others weren’t as high-flying but were nevertheless resolute.

Aaron Levie, the chief executive of Box, an online document storage company, suggested that the tech industry promote specific policy issues.

“To shift to an economy driven by innovation from tech-enabled businesses, we need to get ahead on the issues we’ve been talking about in Silicon Valley for years, like education, patent reform and immigration reform,” he said. “By and large, minus taxes and some tax repatriation issues, much about Trump’s rhetoric has been antithetical to most of the big businesses that are driving the economy.”

Mark Suster, a venture capitalist at Upfront Ventures, echoed the idea.

“Tech needs to take a deep breath, and then reflect on how this happened,” he said. “And have policy proposals that can realistically address the inequality in our country.”

Facebook’s International Business Blunder: Following In The Footsteps of Google

With good intentions, and also a good dose of Facebook business strategy to expand its base of users, Mark Zuckerberg has struck out to promote Free Basics, a free limited Internet for the poor in less developed countries sponsored by Facebook and its local telecommunications partners. While on the face of it Free Basics would seem to have merit, Zuckerberg has run into a wall of opposition.  On close inspection of the details, Facebook’s problem, despite all of its global corporate sophistication, appears to be naïveté about the foreign markets it is trying to enter. It is possible to argue that Zuckerberg and Facebook have the best of intentions and sound arguments.  But the best of intentions and sound arguments mean nothing if the key element lacking is a clear understanding of the targeted foreign market, and the crucial need to adapt to it or fail.  Zuckerberg could have looked no further back than 2013 for clues to why he has failed.

In 2012 and 2013, I was involved in an effort to deploy wide area wireless Internet capability to broad swaths of India. This involved working with large Indian corporate partners. We were also working at a time when Google, Microsoft, and others were also busily competing to deploy so-called “white space Metro WiFi” to rural areas in lesser developed countries. Google was also experimenting with its “loon balloon” project to use high altitude balloons to deploy Internet access points in remote areas.  It quickly became clear to us that the Indian government and corporate officials wanted only an indigenous Indian Internet solution, which fit our strategy of working with Indian partners.  Google and the other big U.S. based companies were viewed as neo-colonialists. Ironically, on March 19, 2013, Google Chairman Eric Schmidt wrote an editorial in The Times of India, “Which Internet Will India Choose,” in a well-intentioned effort to convince Indian leaders of the Google vision for the Internet in India.  For all intents and purposes, Schmidt’s editorial landed on deaf ears in India.  Also, regrettably, Indian corporate culture being what it is, not much happened on the Indian side to develop their own Internet deployment solution. All of this is not unusual in foreign markets.

Read more: Eric Schmidt: Which Internet Will India Choose?

As a veteran of high technology international business, I am intrigued by these international business blunders by otherwise very sophisticated business leaders and corporations.  They seem to repeat themselves over the years, sometimes in different ways and in different markets. Years ago I stumbled on David A. Ricks book, Blunders in International Business, now in its fourth edition, with new and updated case studies.  It is enlightening and also quite funny.  I recommend the book to Mark Zuckerberg.

Mark Zuckerberg can’t believe Egypt  & India  aren’t grateful for Facebook’s free internet

The nerve. (AP Photo/Rajesh Kumar Singh)

December 28, 2015Quartz India

All Facebook CEO Mark Zuckerberg wants to do is make the world a better place for his new daughter. While he’s technically on paternity leave, he couldn’t sit idly by as India attempts to halt Internet.org, Facebook’s initiative to provide free but limited internet to the developing world.E

Last week, the Times of India reported that the country’s telecom regulatory body had asked Facebook’s partner, wireless carrier Reliance, to cease the Internet.org service as it determines whether operators should be able to price their services based on content. Responding to criticisms of the program, Zuckerberg penned an op-ed published Dec. 28 in the English-language daily. In it, he expressed annoyance that India is debating net neutrality—a principle dictating that telecom operators provide people with equal access to the internet—as the country struggles to connect its citizens to the internet.

In the process of defending Internet.org, Zuckerberg paints India—where about a billion people are not connected to the internet—as backwards for even daring to question the benefits of Facebook’s charity-like endeavor.

“Who could possibly be against this?” he asks passive-aggressively. “Surprisingly, over the last year there’s been a big debate about this in India.”

Yes, net neutrality is a big deal—and not just in India. In the US, for example, an appeals court is currently examining the legality of a new set of net-neutrality rules enacted by the Federal Communications Commission this year. But Zuckerberg almost portrays net neutrality as a first-world problem that doesn’t apply to India because having some service is better than no service.

Net neutrality activists have long argued that Internet.org provides a “walled garden” experience because the sites that users can access for free are determined by Facebook and its telecom partners, essentially making them gatekeepers to the internet for poor people.

While Zuckerberg acknowledges that Internet.org, which is currently active in more than 30 countries, does not provide people with access to the full web, he argues that it’s a step in the right direction. According to the Facebook CEO, half of the people who come online for the first time using Internet.org decide to pay for full internet access within 30 days.

Instead of wanting to give people access to some basic internet services for free, critics of the program continue to spread false claims–even if that means leaving behind a billion people.

Instead of recognizing the fact that Free Basics is opening up the whole internet, they continue to claim–falsely–that this will make the internet more like a walled garden.

Instead of welcoming Free Basics as an open platform that will partner with any telco, and allows any developer to offer services to people for free, they claim–falsely–that this will give people less choice.

Instead of recognizing that Free Basics fully respects net neutrality, they claim–falsely–the exact opposite.

Zuckerberg continues by offering an anecdote of a farmer named Ganesh, who uses the free internet service to check weather updates and commodity prices. “How does Ganesh being able to better tend his crops hurt the internet?” he asks rhetorically.

But examined more closely, his arguments don’t directly address the concerns of net neutrality activists. For the people who choose not to upgrade or can’t afford to pay for full internet access, Internet.org does indeed provide a walled garden of online content. Millions of people already have a skewed perception of the web, believing Facebook to be the internet, a Quartz analysis has shown.

Furthermore, while Facebook can add more telecom partners, which would theoretically open up the number of sites and services Internet.org users could access for free, it currently has only one partner in India, Reliance.

Zuckerberg also fails to address the claims that zero-rated services such as Internet.org amount to economic discrimination—that this is essentially poor internet for poor people. Furthermore, in an op-ed published in the Times of India in October, net-neutrality advocacy group Savetheinternet.in quoted Tim Berners-Lee, father of the internet, as saying: “Economic discrimination is just as harmful as technical discrimination, so [internet service providers] will still be able to pick winners and losers online.” Facebook’s walled garden could very well determine the sites and services that will succeed in India.

Over and over again, Zuckerberg has pointed to research showing that internet access can help lift people out of poverty. The fact remains that Internet.org provides limited, slow, and subpar access, and these limitations make it all the more difficult for people to climb the economic ladder. As Naveen Patnaik, chief minister of the Indian state Odisha, has said: “If you dictate what the poor should get, you take away their rights to choose what they think is best for them.”

Reid Hoffman: Venture Capitalist Loser | MIT Technology Review

UPDATE: Since I wrote this post last week, on November 25th, events swiftly unfolded to underscore the points I made in criticism of Reid Hoffman’s views on venture capital, in his interview with the MIT Technology Review. Bill Gates and a host of global leaders, Silicon Valley industry leaders, and high-tech billionaires announced the Clean Tech Initiative, at the opening of the UN COP21 Climate Change Conference.  This initiative precisely makes my point that venture capitalists like Reid Hoffman fail to see their social responsibility, or to examine the ethics of their investments.  At the time I wrote the opening paragraph to this post (below), I had absolutely no idea that my points would be validated by Bill Gates, Obama, and high-tech industry leaders  Meg Whitman of HP, Facebook Chief Executive Officer Mark Zuckerberg, Alibaba Chairman Jack Ma, Amazon CEO Jeff Bezos, Ratan Tata, retired chairman of India’s Tata Sons, the holding company of the Tata group, and South African billionaire Patrice Motsepe of African Rainbow Minerals.  I would now go so far to say that Hoffman’s views are an embarrassment to himself in the face of the vision of others.

READ MORE: Bill Gates, Mark Zuckerberg, Jeff Bezos And A Host of Others Announce Clean Tech Initiative

An insightful interview with Reid Hoffman, venture capitalist and founder of LinkedIn. But to my mind, Hoffman seems blase’ about Big Ideas and “deep tech” funding. I share the views of Startup Genome founder, Max Marmer, and bemoan the limited focus of VC’s on world-changing technologies, leaving it to billionaire angels. I also sense a myopia about the ongoing intense debate over the distortion of the sharing economy by Uber, Airbnb, and others.  Thanks to Gary Reischel for posting this article on his Facebook page.

My attention is focused on two privately funded Big Idea entrepreneurial ventures in Vancouver B.C., General Fusion, and D-Wave.  General Fusion and at least two other companies in California and Germany are competing against the two massively funded governmental nuclear fusion projects, ITER at Cadarache in France, and The National Ignition Facility at the U.S.  Department of Energy’s Livermore National Labs. D-Wave, is pioneering quantum computing, having successfully sold two early quantum computers to Google and Lockheed Martin/NASA in Silicon Valley.

Max Marmer…read more: Reversing The Decline In Big Ideas

Read More mayo615: Are Venture Capitalists and Big Ideas Converging Again?

 

Source: Venture Capital in Transition | MIT Technology Review

VC Reid Hoffman on VC’s Evolution

Silicon Valley entrepreneur and investor Reid Hoffman wants venture capital to adapt to an era in which startups must grow faster.

• By Robert D. Hof on November 23, 2015

BUSINESS REPORT
Funding Innovation

Reid Hoffman

Reid Hoffman has worked the entire tech startup ecosystem: he cofounded LinkedIn in 2002, used the money he made there to become one of Silicon Valley’s most prolific angel investors, invested early in Facebook, Zynga, and many others, and is now a venture capitalist at Greylock Partners. At Greylock, which he joined in 2009, Hoffman has focused his investments on consumer Internet companies that use software to create networks of millions of users, such as the home-sharing site Airbnb.

Startup incubators that nurture entrepreneurs’ early ideas, super-angels who invest small amounts in large numbers of early-stage companies, and project crowdfunding via Internet sites such as Kickstarter are all presenting alternatives to traditional VCs. Hoffman thinks firms like his can compete by providing services such as dedicated teams that recruit engineers and holding dozens of networking and educational events to help startups get big faster. He’s currently teaching a Stanford University class for entrepreneurs in “blitzscaling,” his term for the rapid scaling up of startups.

Hoffman spoke with MIT Technology Review contributing editor Robert Hof about why that’s especially important today and whether enough investing is being done in core technologies such as computer science, networking, and semiconductors.

How have changes in technology altered the way you invest?
Starting a software company is now a lot cheaper and faster than it used to be, thanks to Amazon Web Services, open-source software, and the ability to build an app on iOS or Android. Speed to realizing a global opportunity is more critical competitively. I wanted to build out a [venture capital] platform that was appropriate to the modern age of entrepreneurship.

VCs have always provided help on networking and hiring. How is your platform different?

Think about how an application gets built on iOS. It calls up services on Apple’s platform, such as a graphics framework or how to create a dialog box. Similarly, a business gets built by hiring people, developing its product or service, growing its revenues. The modern venture firm needs to provide a set of services that the company can call upon. We have a dedicated team to recruit engineers and product people. We have more than a dozen communities of people from big Valley companies like Apple and Facebook focused on technical topics such as big data and user growth. They meet with our companies to teach things like growth hacking, the use of social media, and other low-cost alternatives for marketing.

“There are still billions of people coming online. Also, software is affecting almost every industry … And we’re just beginning to see how data informs everything.”

How long will these software-driven networks you’re focused on be good investing opportunities?

There are still billions of people coming online. Also, software is affecting almost every industry, from transportation, with Uber and self-driving cars, to personalized medicine, health, and genetics. And we’re just beginning to see how data informs everything. Those trends are in the very early innings, so they’re the ones that will have the macroeconomic impact over the next five to 10 years.

You’ve said you don’t think there’s a bubble in tech investing, but surely not all these upstarts are worth so much?

People are so exuberant about finding their way to the cutting-edge companies that valuations are going up across the board. Some companies are so massively valuable that even when you invest in them at an accelerated valuation, they’re still cheap in retrospect. But many companies are given [high] valuations when they actually shouldn’t be.

I don’t think higher valuations in private [venture capital fund-raising] rounds lead to a massive [public] market correction. A private down round [fund-raising that values the company at a lesser amount than the previous round] doesn’t destabilize the public capital markets. But it’s still pretty frothy. So when you’re seeing inflated valuations, you sit it out.

Have you been sitting out more often?
We’ve passed on many more deals in the past two years.

Is true innovation beyond slick apps being financed to the extent it should?
Markets tend to go toward realizable, short-term rewards that require little capital.

$10 billion
Value of Airbnb, a Hoffman investment, in its most recent fund-raising round

That tends to favor pure-play software companies like Airbnb, Dropbox, and Uber that have global reach and network effects [in which a service becomes much more valuable as more people use it]. If more capital naturally flowed toward deep tech, I think that would be a good thing for the world. But you do have SpaceX, you do have Tesla. Deep tech isn’t that starved for capital.

VC investing is way up, but the traditional exit, the IPO, often comes after a company has already grown quite large. As a result, public investors, as well as employees don’t share as much of the increase in value. Is that a problem?
It used to be, back in 1993–’96, tech companies would go public and then public market shareholders would benefit from the huge growth in valuations. Now it’s more the private investors who benefit. I don’t think that’s necessarily a problem.

Doesn’t that go against the idea that employee stock options and so on will democratize wealth, or at least spread it more broadly?
Ideally, you’d like to make the capital returns available to everybody, not just to the folks who can participate in these elite private funds or elite private financings. I’d rather have it democratized. But on the other hand, it makes complete sense from a company perspective to delay liquidity, because they can run much more efficiently as a private company and get as much momentum as possible.

Are We Facing a Future of Invisible Workers?

Are We Facing a Future of Invisible Workers? | Blog, What We’re Reading | BillMoyers.com.

February 25, 2014

This undated photo provided by Facebook shows the server room at the company’s data center in Prineville, Ore. (AP Photo/Facebook, Alan Brandt)

At The New Yorker, George Packer considers one significant way in which this Gilded Age differs from the last one. Amazon, Apple and Google are not Standard Oil, Ford or General Motors, but there are parallels.

Packer writes:

A hundred years ago, the popular image of the worker was a sweaty toiler, his face smudged with coal dust or scorched by the blast furnace, oppressed by the industrial machine but not its total victim. He was coiled with potential energy that was frightening to some and inspiring to others — he had the country’s future in his muscular hands. By the time Studs Terkel published his oral history “Working,” forty years ago next month, that image had blurred. The Chicago steelworker at the start of the book was a working stiff, bored and trapped by his job but still able to take its existence for granted. And he now had company — among others, a hospital aide, a supermarket cashier, a pair of hair stylists. These were the last days of secure blue-collar work, and the beginning of wage stagnation in the service economy.

In the decades after 1974, the archetypal worker became a store greeter at Walmart — part time, nonunion, making near-poverty wages. The animating spirit of her working life was no longer the dignity of labor, the drama of factory strife, or the slackness of union bureaucracy — it was required cheerfulness barely concealing an unhappiness that she was too afraid to show. She was isolated, anxious, and, basically, powerless, under the constant threat of having no job at all.

As the bottom fell out of the working class, this attitude spread to other kinds of work, including the once formidable assembly line: employees at the Volkswagen plant in Chattanooga, who recently voted against joining the United Auto Workers, cited the fate of their counterparts in Detroit. Solidarity had become too risky — they were lucky just to be making nineteen dollars an hour.

When I wrote about Amazon – which is as emblematic of the American corporation in 2014 as U.S. Steel was in 1914 and Walmart in 1994 — for a story in The New Yorker, earlier this month, I began to wonder what a company worker looked like. I found it hard to come up with an image. Amazon’s workforce is made up mainly of computer engineers and warehouse workers, but when you think of Amazon you don’t picture either one (and there aren’t many photographs to help your imagination). What you see, instead, is a Web site with a button that says “ADD TO CART” and a cardboard box with a smile printed on the side. Between clicking “BUY” and answering the door when U.P.S. arrives lies a mystery — a chain of events that only comes to mind if you make a conscious effort. The work is done by people you don’t see and don’t have to think about, which is partly what makes Amazon’s unmatched efficiency seem nearly miraculous.

The invisibility of work and workers in the digital age is as consequential as the rise of the assembly line and, later, the service economy… With work increasingly invisible, it’s much harder to grasp the human effects, the social contours, of the Internet economy.

Read the whole piece at The New Yorker.

Online Privacy Policy? What Online Privacy…?

A number of my students have asked me about online privacy. Many of us, not only students, have not spent the necessary time to read and research the privacy policies of the major online social media and e-commerce websites, much less to understand the implications they face with the current state of online privacy.  It is time consuming, complicated and riddled with legalese. Even if you spent the time, you probably wouldn’t understand it, so why bother?

Scott McNealy, the founder and former CEO of Sun Microsystems (now owned by Oracle), is perhaps most famous for one quote.

“Privacy? Get over it! You have no privacy!”

There is a joke that is told about valet parking at a posh restaurant.  A diner and his guest pull up to one of the finest local restaurants in front of a sign saying “valet parking.”   A very well-dressed gentlemen approaches the car and graciously opens the car doors. The gentleman accepts the keys from the driver of the late model BMW 5 Series turbo. After being seated for dinner, the diner mentions to the waiter how impressed he was with attentiveness of the valet parking staff, to which the waiter replies in shocked disbelief, ” What valet parking?”

This amusing anecdote is not so funny if you consider that is pretty close to what is happening to all of us when we visit online social media websites, or e-commerce sites.   We feel comfortable and relatively safe on well-known websites, not realizing that our BMW has been stolen by that nice gentleman with “valet parking.”  This loss of personal privacy is very real and very immediate for all of us.

“What privacy?”

Just for the record, and for whatever it is worth, the opening sentence of the privacy policy for this website reads as follows, “I have a firm belief in personal privacy, and to Internet privacy. To the extent that I can protect privacy in a cyber World dominated by large corporate self–interest, I will do my utmost to protect user privacy.”  I can do almost nothing about the privacy policies set by the global social media companies.

We know very little about the details of the personal information that has been extracted from us, how it is managed, how it is used, and with whom it is shared, and how much money has been paid for it. Perhaps we deserve a cut?  We do know that more information has been gathered on the Internet in the last two years, than in all of the previous years combined. It is beyond terabytes. It is multiple zetabytes of information and growing exponentially. The world of Big Data, for better or worse, will be built on this massive pile of personal data.

Silicon Valley’s social media industry is fighting privacy advocates over proposed California legislation, the first of its kind in the nation, that would require companies like Facebook Inc. and Google Inc. to disclose to users the personal data they have collected and with whom they have shared it.

Bonnie Lowenthal, a Democratic California assemblywoman from Long Beach (my native home town) has introduced this legislation, the “Right to Know Act.”  What is disturbing and surprising is that  the bill has caused a massive backlash against it, though it is asking for simple transparency, similar to that required for credit reporting. Google and Facebook are conspicuously silent on the “Right to Know Act,” preferring to let their industry association and unknown lobbyists speak for them.

The industry backlash against the “Right to Know Act”. It would make Internet companies, upon request, share with Californians personal information they have collected—including buying habits, physical location and sexual orientation—and what they have passed on to third parties such as marketing companies, app makers and other companies that collect and sell data.

Why are the Internet companies fighting this simple transparency so vigorously?  Google formerly trumpeted that it’s corporate watch phrase was to “do no evil.”  The industry backlash against Ms. Lowenthal’s legislation does not feel like doing no evil.

The bill highlights how lawmakers are seeking to update privacy laws. An update of a 10-year-old law focused on the direct-marketing industry, the bill could have national impact because of California’s size, and it would bring the state’s privacy practices closer to those common in Europe.

“In 2003, the biggest problem people had with privacy was telemarketing,” said Ms. Lowenthal. “Today, there are so many different mobile apps that can track location and spending habits that it’s time for an update in state law.”

I will continue to monitor this issue and report on it as it develops.

Why Knowing How To Code Is So Important: One Million More Jobs Than Students

As many of my colleagues and students know, student cyber skills are one of my big passions.  Having been incredibly fortunate to be thrown into the whirlwind of Intel and Silicon Valley, I watched as the local secondary schools and universities responded to this.  By the 1980’s the University of California system was requiring UNIX skills (the Berkeley version, of course) of all undergraduates, which later morphed into HTML Web design skill requirements.  I am very gratified to learn that our Computer Science faculty is already focused on providing similar courses with a view to making them part of the curriculum for all undergraduates.

Code.org  the new non-profit aimed at encouraging computer science education launched last month by entrepreneur and investor brothers Ali and Hadi Partovi, has assembled an all-star group of the world’s most well-known and successful folks with programming skills to talk about how learning to code has changed their lives — and isn’t quite as hard as people might think.