Rana Foroohar, “Don’t Be Evil”

00:05
very excited to introduce Rana Rana Zay
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is the global business columnist and
00:11
natural times and CNN’s global economic
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analysts previously she’s been the
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assistant managing editor in charge of
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Business and Economics at time as well
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as the magazine’s economic columnist and
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spent 13 years at Newsweek as an
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economic foreign affairs editor and
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correspondent and in her new book don’t
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be evil which i think is a great title
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Rhonda Chronicles how far big tech has
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fallen from its original vision of free
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information and digital democracy
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drawing on nearly 30 years of experience
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reporting on the technologies sector
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Ronna traces the evolution of companies
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such as Google Facebook Apple Amazon
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into behemoths that monetize people’s
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data spread misinformation and hate
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speech and threaten citizens privacy she
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also shows how we can fight back by
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creating a framework that both fosters
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innovation and protects us from threats
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posed by digital technology her book is
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already garnering widespread praise with
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the Guardian calling it a masterly
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critique of the internet pioneers who
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now dominate our world so without
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further ado please help me in welcoming
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Rana for a heart to politics and prose
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thank you I am so honored to be here
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it’s really a pleasure this is one of my
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favorite bookstores probably my favorite
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bookstore in Washington and so it’s just
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a huge pleasure I thought I would start
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by just talking a little bit about how I
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got the idea to write this book it’s
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actually my second book my first book
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makers and takers was a look at the
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financial sector and how it no longer
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serves business so I like to kind of
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take on these big industry-wide maybe
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take down so we’ve the word but kind of
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look at an ecosystem and economic
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ecosystem see how it’s working or not
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working I got the idea for this book
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probably two months into my new job at
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the Financial Times
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I was hired in 2017 to be the chief
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business commentary writer so my my job
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was to sort of look at the top world’s
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business stories economic stories and
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try to make sense of them in commentary
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and when I do that I tend to try and
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follow the money in order to narrow the
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funnel of where to put my focus and I
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had come across a really really
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interesting statistic that 80%
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of the world’s wealth corporate wealth
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was living in 10% of companies and these
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were the companies that had the most
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data personal data and intellectual
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property and so the biggest of those
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were the big tech platforms that my my
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book kind of tries to make icons of
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we’re using all the candy colors here
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the fangs Facebook Amazon Apple Netflix
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Google so that was a pretty stunning
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statistic and it was interesting because
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I was thinking about how wealth since
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2008 had transferred from the financial
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sector into the big tech sector and that
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had happened really quietly without a
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whole lot of commentary in the press now
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at the same time I was starting to kind
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of dig into this story something else
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happened a much more personal episode I
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came home one day and I there was a
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credit card bill waiting for me and I
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opened it up and I started looking
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through and there were all these tiny
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charges in the amount of dollar
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ninety-nine three dollars five dollars
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whatever and I noticed that they were
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all from the app store and I thought oh
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my gosh I must have been hacked and then
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I thought who else has my password my
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ten-year-old son Alex I see nods from
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parents and others so I go downstairs
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and I find Alex on the couch with his
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phone which is his usual after-school
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position and I say you know what what’s
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up do you know anything about this and
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he sort of stunned and oh yes oh that
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yeah and turns out alex has gotten very
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fond of a game called FIFA Mobile which
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is an online soccer game and it’s one of
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these games that’s dude that you can
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download it for free but once you get
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into the game and start playing you have
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to buy stuff
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in-app purchases it’s called our loot
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boxes is another another name so if you
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want to move up the rankings and do well
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in the game
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you have to buy virtual Ronaldo or some
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new shoes for your player and nine
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hundred dollars and one month later Alex
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was at the top of the rankings but I was
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horrified I was actually horrified and
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fascinated in fact I mean as
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mother I was horrified his phone was
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immediately confiscated passwords were
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changed limitations were put into place
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by the way he now officially is allowed
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only one hour a day on his phone he’s 13
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years old the average for that age is 7
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hours a day national average now he
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sneaks in an extra I think he probably
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gets about 90 minutes because I can’t
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police him all the time on the way to
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the on the way to school but it’s I mean
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to me that is a stunning fact that the
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average American 13 year old spent 7
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hours day on their phone anyway so I was
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horrified as a parent but I was
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fascinated as a business writer because
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I thought this is the most amazing
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business model I have ever seen and I
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have to learn everything about it and
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right about that time someone had come
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to see Mia a man named Tristan Harris
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who’s one of the characters in my book
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and Tristan is a really interesting guy
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he was formerly the chief ethics officer
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at Google and he was trying to bring
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goodness and not evil to the company and
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make sure that all the all the products
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and services were functioning sort of a
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human interest and then he realized he
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was not having any luck doing that
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within the company so he decided to go
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outside and start something called the
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Center for Humane technology and Tristan
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had become really really worried about
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the core business model that is it’s
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particularly relevant for Google and
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Facebook but is also a big part of
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Amazon’s model and and it’s really the
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model that another author Shoshanna
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Zubov who recently wrote a wonderful
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book on this topic would call
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surveillance capitalism and so it’s the
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idea of companies coming in and tracking
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everything you are doing online and
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increasingly offline you know if you
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have your if you have an Android phone
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it might know where you are in the
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grocery store if you’re in a car with
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smart technology your your location
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coordinates can be tracked so all of
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this is serving to build a picture of
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you that is then used to be sold to
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advertisers and then you can be targeted
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with what’s called hyper targeted
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advertising which is essentially why for
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example
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if I go online to look for a hotel in
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California I might get a certain price
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but someone else might get a different
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price so this is a really important
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thing we are looking at different
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internets right there are subtle
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differences but they’re there and this
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data profile that is being built up is
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splitting us as individual consumers but
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I would argue that it’s also splitting
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us as citizens and I’ll when I get to
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the readings I’ll kind of flush that out
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a bit more but Tristan
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kind of turned me on to this business
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model and he also helped me connect the
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dots between this business model and
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what had happened to my son because it
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turns out that the technologies these
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sorts of nudges that take you down a
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game or that bring you to certain places
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on Amazon or that give you a certain
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kind of search result or purchasing
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option on Google are part of an entire
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field called capped ology which is kind
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of an Orwellian word and these these
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technologies actually come largely out
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of something called the Stanford
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persuasive technology lab so there is an
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entire industry that is designed to
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track your behavior and pull in things
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like behavioral psychology casino gaming
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techniques and then layer those on to
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apps that will push you towards making
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purchasing decisions or perhaps even
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other kinds of decisions political
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decisions that might be good for certain
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actors and it’s interesting because when
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I started to think about all this one of
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the things I really wanted to do in this
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book was to cry try and create a single
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narrative arc to take folks through this
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20 year evolution of this industry from
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the mid-1990s which is really when the
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consumer internet was born till now and
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at the time I was writing and and still
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probably today you could argue that
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Facebook was the company that was
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getting the most negative attention for
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a lot of the economic and political
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ramifications of its business model but
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if you go back to the very beginning
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Google is the most interesting way to
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track this because Google really
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invented the targeted advertising
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business model they really invented
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surveillance capitalism and one of the
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things that is fascinating and and
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sometimes I’m asked what’s the most
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surprising thing that you found when
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writing this book and really the most
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surprising thing is it was all hiding in
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plain sight so if you go back to the
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original paper the Larry Page and Sergey
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Brin who were the founders of Google did
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in 1998 while at Stanford as graduate
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students they actually lay out they lay
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out what a giant search engine would
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look like how it would function but then
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how you might pay for it and if you go
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down to page 33 there is a section in
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the appendix called advertising and its
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discontents and it essentially says that
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if you monetize a search engine in this
this way with hyper targeted advertising
the interests of the users and the
interests of the advertisers be they
companies or who knows what public
entities are eventually going to come
into conflict and so they actually
recommend that there be some kind of
academic search engine an open search
engine in the public interest so this to
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me first of all is fascinating that it
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was just there all along and fascinating
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that very few people have read that
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entire paper even though even those that
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write about it which in some ways kind
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of goes to the point that in the last 20
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years we all do a lot less reading not
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folks here but but in general we do less
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reading there was actually a fascinating
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study that came out recently from common
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sense media which is Jim’s dyers group
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in California that tracks children’s
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behaviors online teenagers only
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one-third of them read for pleasure more
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than once a month
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long-form articles doesn’t matter if
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you’re reading on an e-book or device
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but long-form articles books only once a
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month for pleasure so all our entire
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world has been changed economically
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these companies have huge monopoly power
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politically we’re all kind of living
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with the ramifications of this new world
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of social media disinformation fake news
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and cognitively our brains are changing
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our behaviors are changing so connecting
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all of those things was really what I
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was trying to get at in this book and so
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I’m gonna read two or three maybe short
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excerpt
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and then we can leave a lot of time for
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questions so that people can kind of
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dive into as much of this as they want
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and I’ll start perhaps with my very
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first meeting with the Googlers Larry
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Page and Sergey Brin who I met not in
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Silicon Valley but in Davos the Swiss
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gathering spot of the global power elite
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where they had taken over a small Chalet
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to meet with a select group of media the
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year was 2007 the company had just
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purchased YouTube a few months back and
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it seemed eager to convince skeptical
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journalists that this acquisition wasn’t
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yet another death blow to copyright paid
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content creation and the viability of
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the news publications for which we
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worked
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unlike the buttoned-up consulting types
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or the suited executives from the old
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guard multinational corporations that
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roamed the promenades of davos their
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tasseled loafers slipping on the icy
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paths the Googlers with a cool bunch
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they wore fashionable sneakers and their
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chalet was sleek white and stark with
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giant cubes masquerading as chairs in a
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space that looked as though it had been
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repurposed that morning by designers
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flown in from the valley in fact it may
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have been and if so Google would not
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have been alone in such access I
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remember attending a party once in Davos
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hosted by Napster founder and former
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Facebook president Sean Parker that
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featured giant taxidermy bears and a
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musical performance by John Legend back
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in the Google Chalet Brin and page
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projected a youthful earnestness as they
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explained the company’s involvement in
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or authoritarian China and insisted
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they’d never be like Microsoft which was
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considered the corporate bully and
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monopolist at the time what about the
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future of news we wanted to know after
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admitting that page read only free news
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online whereas Brin often bought the
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sunday New York Times in print it’s nice
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he said cheerfully
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the duo affirmed exactly what we
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journalists wanted to hear Google they
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assured us would never threaten our
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livelihoods
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yes advertisers were indeed migrating
13:14
and mass from our publications to the
13:15
web where they could target consumers
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with a level of precision that the print
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world could barely imagine but not to
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worry Google would generously retool our
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business models so we too could thrive
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in the new digital world I was much
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younger than and not the admittedly
13:29
cynical business journalist that I have
13:30
since
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and yet I listened skeptically
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skeptically to that happy future of news
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like lecture whether Google actually
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intended to develop some brilliant new
13:40
revenue model or not what alarmed me was
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that none of us were asking a far more
13:44
important question sitting towards the
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back of the room somewhat conscious of
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my relatively junior status I hesitated
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waiting until the final moments of the
13:52
meeting before raising my hand excuse me
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I said we’re talking about all this like
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journalism is the only thing that
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matters but isn’t this really about
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democracy if newspapers and magazines
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are all driven out of business by Google
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or companies like it I asked how are
14:06
people gonna find out what’s going on
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Larry Page looked at me with an odd
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expression as if he were surprised that
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someone should be asking such a naive
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question oh yes we’ve got a lot of
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people thinking about that
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not to worry his tone seemed to say
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Google had the engineers working on that
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little democracy problem next question I
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read that because I’m kind of amazed
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there is still a real lack of
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understanding I think in the valley
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about some of the real negative
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externalities of what have been let’s
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face it amazing technologies I mean we
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you know where would we be without
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search in our smartphones we all
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carrying around the power of a mainframe
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in our pockets but as a journalist I
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think there’s really been a an inability
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of these companies to kind of own up to
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you know some of the bad stuff that they
14:59
have wrought and I think that that still
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considers oh sorry still continues to be
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to be the case one of the other points
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that I try and make in the book is that
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the problems I’m talking about have
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actually moved outside of just the big
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four flat platform firms that that we’re
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moving into a world in which
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surveillance capitalism is going to be
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part of the healthcare system and the
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financial system and really every kind
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of business is now using this as its
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model so for example if you buy coffee
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at Starbucks Starbucks knows a lot about
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you Johnson & Johnson knows a lot about
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you there there are firms watching you
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all the time and so we’re really at a
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pivot point I think where we have to ask
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as a society what are the deeper
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implications of this and our
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okay with them and so I would like to
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read another excerpt where I look at how
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this model is is moving into the
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insurance sector and what that means so
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far data has been obtained via computers
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and mobile devices but now with the rise
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of personal digital assistants like
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Amazon’s Alexa Google’s home mini and
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Apple Siri now at 30 and now in a third
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of American homes with triple digit
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sales growth a year the human voice is
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the new gold while reports of Alexa
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Alexa and Siri listening in on
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conversations and phone calls are
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disputed there’s no question that they
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can hear every word you say and from
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there it’s a short step to them using
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that knowledge to direct your purchasing
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decisions it isn’t much of a longer step
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to see the political implications
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already some researchers worry that
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digital assistants will become even more
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powerful tools than social media for
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election manipulation certainly none of
16:38
us will be unaffected consider consider
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that homeowner oops sorry
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I’m reading from a reading from the
16:44
wrong part I think apologies somehow
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picked the wrong section here anyway I’m
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going to talk you through this example
16:58
because it’s it’s something that is
17:01
already out there I had a conversation a
17:03
couple of years ago with an executive
17:04
from Zurich Financial which is a big
17:07
financial company they do insurance many
17:10
parts of the world they will now if
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you’d like them to put sensors in your
17:14
home or in your car and if you have for
17:18
example as I do you live in a 1901
17:20
townhouse let’s say you’re upgrading
17:22
your pipes you get a check you get a you
17:24
know a positive mark and you may see
17:26
your insurance premium go down but let’s
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say your kid is smoking a joint in their
17:32
bedroom and the sensor picks up on that
17:34
you then get a black mark here and your
17:36
premium may go up same again in your car
17:39
if you’re speeding your insurance
17:42
company will know and so on and so forth
17:43
now you can either like this or not
17:46
depending on where you sit in the
17:48
socio-economic spectrum but what’s very
17:50
very interesting is that entire business
17:53
model a pooled risk business model
17:55
that’s what insurance is it’s now been
17:57
completely dissed
17:58
so you can be targeted and split so this
18:02
is no longer about society pulling risk
18:04
a saree pooling risk this is about
18:06
individuals having to own the risk so if
18:09
you take that to its natural conclusion
18:12
you can imagine an elite up here that
18:17
has access to special pricing and all
18:19
kinds of great products but you can also
18:21
imagine an uninsurable group of people
18:25
at the bottom and then who is going to
18:28
pick up that risk now the public sector
18:30
may be maybe they’ll be a junk bond
18:33
market for insurance either way you have
18:36
a split in society that didn’t exist
18:39
before and that was always the business
18:42
model here you know you go back and read
18:44
some of the early work of someone like
18:46
Hal Varian for example who was the chief
18:48
economist at Google splitting pricing
18:51
down to the individual was always the
18:53
point of platform technology firms like
18:56
Google or Facebook or Amazon splitting
18:58
individuals out so they could be
18:59
targeted in different ways but that not
19:01
only splits pricing it splits Society
19:05
and so that’s kind of really the the
19:07
core issue I want to get out here
19:10
I think I’ll maybe read just just one
19:13
more excerpt and then we can do we have
19:15
we have time yeah and then we’ll open it
19:17
up for questions after that my first
19:22
book just to mention again was about the
19:25
financial industry and one of the things
19:26
that strikes me is that big tech
19:28
companies have in some way become the
19:30
new too big to fail entities not only
19:33
are they holding more wealth and power
19:35
than the largest banks but in some ways
19:36
they function like banks they have a
19:39
tremendous amount of money they use it
19:41
to buy up corporate debt if that debt
19:44
were to go bad that could actually be
19:46
the beginnings of another financial
19:47
crisis and so that’s kind of a part of
19:49
this story that really hasn’t gotten out
19:51
there so let me let me read just two or
19:54
three more pages for you on that topic
19:57
the late great management guru Peter
20:00
Drucker once said in every major
20:01
economic downturn in US history the
20:03
villains have been the heroes during the
20:05
preceding boom I can’t help but wonder
20:08
if that might be the case over the next
20:10
few years as the you know
20:11
it states and possibly the world heads
20:13
towards its next big slowdown downturns
20:16
historically come about once every
20:18
decade and it’s been more than that
20:19
since the 2008 financial crisis back
20:22
then banks were the too-big-to-fail
20:24
institutions responsible for our falling
20:26
stock portfolios home prices and
20:28
salaries technology companies by
20:30
contrast have led the market upswing
20:32
over the past decade but this time
20:34
around it’s the big tech firms that
20:36
could play the spoiler role you wouldn’t
20:39
think that it could be so when you look
20:40
at the biggest and richest tech firms
20:42
today take Apple for example warren
20:44
buffett says he wished he owned even
20:45
more Apple stock Goldman Sachs is
20:47
launching a new credit card with the
20:48
tech Titan which became the world’s
20:50
first trillion-dollar market cap company
20:52
in 2018 but hidden within these bullish
20:55
headlines are a number of disturbing
20:57
economic trends of which Apple is
20:59
already exemplar study this one company
21:02
and you begin to understand how big tech
21:04
companies the new too-big-to-fail
21:05
institutions could indeed sow the seeds
21:08
of the next financial crisis the first
21:11
thing to consider is the financial
21:12
engineering done by such firms like most
21:15
of the largest and most profitable
21:17
multinational companies Apple has loads
21:19
of cash about 300 billion as well as
21:22
plenty of debt close to 122 billion
21:24
that’s because like nearly every other
21:27
large rich company it has parked most of
21:30
its spare cash in offshore bond
21:32
portfolios over the last ten years at
21:34
the same time since the 2008 crisis is
21:37
that it is issued cheap debt at rates to
21:41
do sorry it is issued cheap rate sorry
21:44
cheap debt at low rates in order to do
21:48
record amounts of share buybacks and
21:50
dividends Apple’s responsible about a
21:53
quarter of the 407 billion in buybacks
21:55
and out since the Trump tax bill was
21:57
passed in December of 2017 but buybacks
22:00
have bolstered mainly the top 10% of the
22:03
US population that owns 84% of all stock
22:06
the fact that share buybacks have become
22:08
the biggest single use of corporate cash
22:10
for over a decade now has buoyed markets
22:13
but it’s also increased the wealth
22:15
divide which many common economists
22:17
believe is that not only the single
22:19
biggest factor in slower than historic
22:21
trend growth but is also driving
22:22
political populism which threatens the
22:25
good system itself that phenomenon has
22:28
been put on steroids by the rise of yet
22:30
another trend epitomized by Apple
22:33
intangibles such as intellectual
22:35
property and brands now make up a much
22:37
larger share of wealth in the global
22:39
economy the digital economy has a
22:41
tendency to create super stars since
22:43
software and internet services are so
22:45
scalable and they enjoy network effects
22:50
let’s see do but as these as software
22:56
and internet services become a bigger
22:58
part of the economy they reduce
23:00
investment across the economy as a whole
23:02
and that’s not only because banks are
23:03
reluctant to lend to businesses whose
23:06
intangible assets may simply disappear
23:08
if they go belly-up but because of the
23:10
winner-take-all effect that a handful of
23:12
companies including Apple Amazon and
23:14
Google enjoy so to sum this up in plain
23:17
English as this handful of companies has
23:20
gotten bigger and more powerful
23:21
investment in the overall decline
23:23
economy has declined the number of jobs
23:26
that they’re creating relative to their
23:28
market size is much lower than that in
23:30
the past so you have the superstar
23:32
economy that has become kind of a
23:33
winner-take-all game I think that we’re
23:37
going to probably see some kind of a
23:39
market correction in the next couple of
23:41
years it’s going to be very interesting
23:43
at that point to see whether tech leads
23:45
the markets down and whether you might
23:47
then see a kind of an Occupy Silicon
23:49
Valley sentiment as you did in 2008 with
23:53
Occupy Wall Street I think that that’s
23:54
really quite possible we can delve more
23:57
into that if you’d like but I think I
23:59
want to stop here and be respectful of
24:01
question time and there are parts that
24:04
you guys want to hear more about or
24:06
particular areas that I could read more
24:08
from you can let me know go ahead
24:15
because sure we don’t get to speak very
24:18
often you and I one is you’ve doubtless
24:23
read about Bloomberg’s decision recently
24:26
to forbade its reporters from covering
24:28
Michael Bloomberg yeah yet The
24:31
Washington Post has no problem
24:34
investigating Vsauce do you see is that
24:38
a problem for you have you thought about
24:40
that is that a and so have any
24:43
consistency that should bother at
24:45
financial journalists and the second
24:46
question is how important for any
24:51
solution to the problems you you raise
24:53
would an tights for the revival of
24:56
antitrust be s we see on the continent
24:59
where it’s more aggressive and among
25:01
some of the the Democratic candidates
25:04
for the president well so let me take
25:06
the antitrust question first that’s
25:08
actually important part of the book
25:10
there’s an entire chapter on antitrust
25:12
and I think we probably are gonna see
25:15
some shifts as folks may know since the
25:19
1980s onward antitrust in America has
25:23
basically been predicated on price so as
25:25
long as consumer prices were falling it
25:28
was perceived that companies could be as
25:30
big as they wanted that it wasn’t a
25:31
problem but one of the things I look at
25:34
in the book is this this shift to a
25:36
world in which transactions are being
25:39
done not in dollars but in data so
25:42
that’s a that’s a barter transaction
25:43
really and one of the things that’s so
25:45
interesting and this is actually a way
25:47
in another way in which Silicon Valley
25:49
is similar to Wall Street the
25:50
transaction is really opaque so you
25:53
don’t know essentially how much you’re
25:55
paying for the supposedly free service
25:58
that you’re receiving that is a very
26:02
difficult market to create fairness
26:04
within and it probably makes the Chicago
26:07
School notion of consumer prices going
26:10
down no problem I think probably
26:13
irrelevant and so there’s two ways in
26:15
which that’s being dealt with you have
26:17
the rise of this new Brandeis school of
26:19
thinking in which you know maybe this is
26:22
really about power maybe maybe we should
26:25
think about the big tech firms
26:26
we do the nineteenth-century railroads
26:28
we’re alright you know you had at one
26:30
point railroad Titans that would come in
26:33
and build tracks and then own the cars
26:35
and then own the things that were in the
26:37
cars and eventually that became a
26:39
zero-sum game and it’s you know it’s as
26:42
folks probably know we’re in a period in
26:44
which there’s as much concentration of
26:46
wealth and power as there was in the
26:47
Gilded Age so I could imagine very
26:50
easily a scenario in which you could
26:51
justify Amazon say being the platform
26:55
for e-commerce but not being able to
26:57
compete in the specific areas of fashion
27:01
or you know whatever else they’re
27:03
selling against other customers and in
27:05
fact that’s already the case in the
27:06
financial sector that big companies that
27:09
trade let’s say aluminum you know as
27:12
Goldman Sachs did this is what it ran
27:14
into a suit a few few years ago that it
27:16
was both owning all the aluminum and
27:18
trading it and that’s that’s
27:20
anti-competitive and so that became an
27:22
issue for the Fed so I think we probably
27:24
are going to see that kind of ruling as
27:26
for the post and journalism you know
27:29
it’s funny I have some friends that are
27:30
they’re quite influential to post and
27:34
they say that Bezos is pretty hands-off
27:37
I mean I can’t I can’t vouch for that
27:38
one thing I will say is that Amazon did
27:41
put this book on the top 20 nonfiction
27:43
what Stern’s a month so you know I don’t
27:46
know if that’s a ploy to make me think
27:48
that they’re they’re being really fair
27:49
but from probably Jeff Bezos I don’t
27:52
know I he probably not thinking that
27:53
much about this book or me but anyway
27:56
next question go ahead so it seems like
27:59
some of the major decisions that these
28:01
big tech companies are making are in
28:04
regard to fake news and how they’re
28:06
moderating fake news or the lack of it
28:08
so have you seen maybe an approach by
28:11
any current social media platform or any
28:13
proposed plans in place that you think
28:15
would be best for moderating fake news
28:17
that’s such a good question so just to
28:20
kind of pull back the the two points of
28:22
view on that are hey look you know the
28:26
platform tech companies are essentially
28:27
giant media and advertising firms right
28:30
I mean if you look at the business model
28:31
of a Google or a Facebook it’s
28:34
essentially just like the Financial
28:35
Times or CNN it’s just much more
28:37
effective and it can be targeted to the
28:39
individual
28:40
that means that these firms have taken
28:42
you know 85 90 percent of the app new
28:45
digital advertising pie in the last few
28:47
years now given that they function as
28:49
media companies should they not be
28:51
liable for disinformation in the way
28:55
that a media company would be so if I
28:57
print something incorrect at the FT
28:59
that’s you know the the paper and also
29:02
my hide on the line there I think that
29:05
we should actually think about rolling
29:08
back some of those loopholes that these
29:09
firms enjoy since the mid-1990s onwards
29:12
I think that they are going to have to
29:14
take some responsibility now the
29:16
question is do we want Mark Zuckerberg
29:18
being the minister of truth and that’s
29:20
that’s that’s a really tough question
29:23
what I would prefer is for the
29:26
government to actually you know for
29:28
democratically elected governments to
29:29
come up with rules about what is and
29:32
isn’t appropriate and to not have
29:34
individual companies making those
29:36
choices I think we’re in a period right
29:38
now where you know you’ve got Twitter
29:40
you’ve got Google to a certain extent
29:41
coming out saying okay we recognize we
29:43
need to do things differently that’s
29:44
putting pressure on Facebook but at the
29:46
end of the day we’re gonna have to have
29:47
I think an entirely new framework not
29:51
just in this area but also in taxation
29:53
in you know an antitrust which we’ve
29:56
already talked about this is the shift
29:58
that we’re going through is I think the
30:00
new Industrial Revolution it’s a 70 year
30:03
transition and it’s going to require a
30:04
lot of different frameworks relative to
30:07
what we already have so the answer is no
30:10
I don’t see any particular company that
30:12
has come up with the right framework yet
30:14
any other questions
30:16
oh yeah I’d like to go back to antitrust
30:18
for a minute the Washington Post put up
30:20
an article just this afternoon about how
30:23
Apple is changing its business model and
30:25
it’s different as you know it’s
30:27
differentiated itself in the market by
30:29
saying they care about privacy well now
30:32
they are moving from a a device company
30:38
to a services company according to the
30:40
article and they are used and they are
30:43
using privacy as a lever to provide
30:46
services that their that other smaller
30:51
companies like tile which is the example
30:54
the article has used to create a market
30:59
for itself right and so it says in the
31:03
article that the feds are considering
31:04
looking at antitrust measures against
31:06
Apple but I think it raises a bigger
31:09
question that you pointed to which is
31:13
that the models of antitrust don’t work
31:16
anymore so in terms of privacy lots of
31:22
people have talked about monetizing
31:24
privacy getting paid yeah data but how
31:27
do you think from an economic point of
31:30
view we as a society need to look at the
31:33
role of privacy and the role of
31:35
antitrust together to somehow change the
31:38
way we think about these companies
31:41
because in addition we’ve got
31:43
consolidation in the marketplace so yeah
31:45
no longer fair competition you can’t
31:48
become another Amazon right easily
31:51
because there are so many big so mate
31:53
because the players are big and there
31:55
are so few of them in each part of the
31:58
economy yeah a right so there’s a lot in
32:00
what you’ve just said for starters I
32:03
think you’re hitting on something really
32:04
important which I get at in my solutions
32:06
chapter that this is such a huge shift
32:09
and it’s touching so many different
32:11
areas and we’ve talked about privacy
32:13
we’ve talked about antitrust we haven’t
32:15
even gotten into national security you
32:17
know civil liberties I mean there there
32:19
are so many different areas and when you
32:21
one of the things I noticed when I sat
32:23
down to write the solution sections you
32:25
know when you do a think book you always
32:26
have to have the solutions section and
32:28
you know the publisher wants like that
32:29
Silver Bullet thing and you look at this
32:32
and you notice that when you pull a
32:33
lever here it effects something in this
32:35
other areas so I think that’s one reason
32:38
why we should have a national committee
32:41
to actually look at what are all the
32:43
questions it’s when I speak to folks
32:45
particularly in DC policymakers there’s
32:47
you know the antitrust camp here the
32:49
privacy camp here the security folks
32:50
there that conversation needs to be
32:52
happening in a 360 way and it is
32:54
happening much more so that way in
32:57
Europe I will say I just came off of two
32:59
weeks of book touring in Europe and the
33:02
conversation there I think is much more
33:04
developed and they seem to be to go to
33:06
your point about the ecosystem and how
33:08
share it one of the things that seems to
33:11
be folks seem to be headed towards is a
33:13
public digital Commons a kind of a
33:16
database let’s say alright if you decide
33:19
as you know the cat seems to be out of
33:21
the bag that we’re gonna allow
33:22
surveillance capitalism I mean there
33:24
there are certain folks like Shoshanna
33:26
would love to see the dial turned back
33:28
I’m not sure if that’s possible let’s
33:30
have a public database in which not just
33:33
one corporation or a handful of
33:35
corporations but multiple sized players
33:37
as well as the public sector as well as
33:40
individual citizens who’s you know after
33:43
all it’s our data being harvested
33:45
everybody gets access and then you can
33:47
figure out how you want to share the pie
33:49
and one interesting example recently is
33:51
the Google sidewalk project in Toronto
33:54
it sounds like you’re up on these issues
33:56
so you’re probably aware but Google had
33:59
taken over sort of twelve acres on the
34:01
Toronto Waterfront and put sensors
34:04
everywhere and the idea was to create a
34:06
smart city in which you’d be able to
34:08
manage traffic patterns and energy usage
34:10
and things like that but until recently
34:12
Google was going to own all that data
34:14
and have access to and finally the
34:16
Toronto government got a clue and said
34:18
well actually you know what let’s put
34:19
this in a public database so other
34:22
smaller or midsize local firms can come
34:25
in and be part of that economic
34:26
ecosystem but also as a public sector we
34:30
can decide well maybe we want to share
34:32
data for energy issues or for health
34:36
issues but maybe we don’t want to share
34:37
it for certain other kinds of things and
34:40
perhaps there would be some way in which
34:42
individuals could take back some of that
34:44
value so California is thinking about a
34:47
digital dividend payment from the big
34:49
tech companies there’s also been talk of
34:51
a digital sovereign wealth fund if you
34:53
think about kind of data as the new oil
34:56
whatever the value is judged to be it
34:59
would be putting the sovereign wealth
35:01
fund in the same way that Alaska or
35:02
Wyoming give back payments or use that
35:05
for the the public sector that could be
35:08
done with data too so I think something
35:10
like that is probably going to be the
35:12
best solution I’ll tell you I have many
35:14
examples in the book of ways in which
35:16
the bigger players have been able to
35:18
squash small and mid-sized firms and
35:20
that
35:21
a major issue and a lot of venture
35:23
capitalists that I speak to are actually
35:26
becoming concerned about that because
35:27
they say that there’s sort of black
35:29
zones of innovation where if Amazon is
35:33
there or Google is there you really
35:34
can’t start a business there’s just been
35:36
too much that’s been been written
35:38
ring-fenced question over here
35:40
yes while your book may be the the best
35:43
one on the subject they’ve certainly
35:44
been other books before talking about
35:46
individuals privacy and their their data
35:49
and everything about them why is it that
35:52
you think people are so unconcerned
35:56
about handing over all of their data to
35:58
these companies when they are perhaps
36:00
very concerned about handing it over to
36:02
the government why why do they feel
36:04
these guys are the good guys and the
36:06
government is necessarily the bad guys
36:08
yeah it’s such an interesting question
36:11
and that really varies from country to
36:13
country I find that that’s sort of an
36:15
interesting cultural dynamic that can
36:17
shift depending on what market you’re in
36:19
I have really been puzzled as to why
36:23
people are so first of all why everybody
36:25
just clicks the box and says no problem
36:27
I think part of that is is the opacity
36:29
of the market I mean if you kind of go
36:31
back to Adam Smith basic economics you
36:35
need three things to make a market
36:36
function property properly that would be
36:38
equal access to data transparency in the
36:41
transaction and a shared moral framework
36:44
and you could argue that none of those
36:46
things are in place so when we’re making
36:48
these transactions I think as that’s
36:51
that very fact becomes better explained
36:56
and people begin to kind of understand
36:58
that narrative like the insurance
36:59
example I just gave that all right
37:02
you’re getting something but you’re
37:03
giving up a lot I’m beginning to see
37:07
pushback already and I suspect in recent
37:10
weeks as some of the big players have
37:11
moved into healthcare you know into into
37:14
the commercial banking business I just
37:17
think that we are going to begin to see
37:18
more people being reluctant to give up
37:23
that much value for what they’re getting
37:25
you’re also interestingly seeing when
37:28
there are other options people will go
37:31
elsewhere so Jimmy Wales who started
37:33
Wikipedia just I think
37:34
the weeks ago came up with a new social
37:36
networking site he’s already got 300,000
37:38
users there and it’s an odd
37:41
they don’t do targeted advertising it’s
37:42
run on the wiki model where you can
37:44
donate if you want I think once the
37:47
antitrust piece is in place and you
37:49
actually have space for new competitors
37:52
to come in and to offer up different
37:54
kinds of services that perhaps are more
37:56
respectful of privacy that you you know
37:58
you could see a shift there but I’m
38:00
curious actually can I pull the audience
38:02
for a minute because I want to ask how
38:04
many people think that in the next five
38:07
years individuals are going to become
38:09
more worried about giving up information
38:12
that’s going to change their behavior
38:13
online so like two-thirds but not yeah
38:19
that’s interesting okay oh go ahead
38:23
sorry we’re sheep we’re cheap oh my god
38:26
that was a different book curious if you
38:30
see the administration’s
38:32
suggestion that it the California can’t
38:35
set its own rules for gas mileage and so
38:41
on and emissions as having a parallel in
38:44
this area you know I hadn’t thought
38:48
about that question before I always
38:50
think about California as really being
38:53
very leading what is eventually going to
38:55
become the national standard and I think
38:58
in data I feel like that is gonna happen
39:01
you know even the Europeans in fact are
39:04
saying that the California model is
39:06
probably the better model for data data
39:08
protection and privacy and sharing of
39:11
value so the Europeans have GDP are you
39:13
know which was kind of the first step in
39:15
the privacy direction but it doesn’t
39:17
take into account that economic
39:18
ecosystem so perversely you have the big
39:21
companies maybe being able to do better
39:23
with the GDP our model and smaller ones
39:26
getting cut out of the loop because they
39:27
don’t have the legal muscle to kind of
39:29
deal with all the rules so I do think
39:31
the California model is going to become
39:32
a de facto standard we also haven’t
39:34
talked about China which is of course
39:36
going its own way and I have it I have a
39:38
chapter in the book where I look at that
39:40
I look at the current trade war tech war
39:43
kind of through the lens of surveillance
39:44
capitalism and
39:46
that’s gonna be very interesting I think
39:48
one of the big probably the biggest mid
39:52
to long-term economic question for me is
39:54
are we going to see a transatlantic
39:56
alliance around digital trade and coming
39:59
up with some standards because China is
40:01
going its own direction it’s going to
40:02
develop its own ecosystem it has its own
40:04
big players the u.s. is in another
40:07
category but where is Europe gonna be is
40:09
it going to be a tri polar world is it
40:11
going to be a bipolar world in terms of
40:13
how all this works that that’s a major
40:15
ik you cannot make an actually foreign
40:16
policy question I think hey thanks for
40:21
coming and thinking um I’m wondering we
40:25
have like a Department of Agriculture we
40:27
have a Department of Energy will there
40:29
be a Department of Technology ever in
40:30
the US and which other countries already
40:33
have that kind of thing going yeah
40:35
England is talking about that actually I
40:37
think kind of an FDA of Technology is
40:40
probably a very good idea you know I see
40:44
going back to the example about my son
40:46
there there
40:46
the research is nascent and causality is
40:49
is difficult to prove but there there’s
40:51
you know a new body of research since
40:54
2011 2012 when smartphones really became
40:57
ubiquitous showing that levels of
40:59
anxiety and depression and younger
41:01
people arising you know they’re there
41:04
they’re issues of self harm sometimes
41:07
when people you know use these
41:08
technologies addictively so I think that
41:11
that’s that’s a big issue to me it’s
41:12
very similar to cigarettes you know
41:14
those were regulated there was a
41:16
different narrative and then behaviors
41:17
changed and I think I think that that’s
41:20
one area to consider policy wise there
41:25
may be time for one or two more
41:26
questions
41:27
okay sorry over here and then over here
41:29
hi
41:30
I’m kind of curious what you think about
41:33
the fact that most of these
41:36
conversations around technology or even
41:38
democracy tends to focus on institutions
41:41
and systems and structures which is
41:44
great because they are so powerful and
41:47
ubiquitous my background is in teaching
41:51
critical thinking and in conflict
41:54
management and I what I worry
41:58
that so little attention is being paid
42:01
to the intelligence and maturity of the
42:05
citizenry I’m from India after 70 years
42:10
of democracy we’ve lost it I think it’s
42:15
simplistic to blame the right-wing
42:18
leaders and the government I believe we
42:22
as a people have not developed the
42:24
maturity to be effective intelligent
42:30
citizens we don’t have the values we are
42:34
still feudal we are still extremely
42:37
hierarchical we don’t have the
42:40
democratic values in India and we didn’t
42:43
cultivated over 70 years I see a
42:46
parallel to being susceptible to the
42:52
seductions of Technology whether it be
42:56
free news or the click baiting or
43:00
anything that the big companies seduce
43:04
us with that even as we need as you said
43:08
they an FDA kind of for technology we
43:13
seem to be observing ourselves of the
43:17
responsibility of being you know of
43:20
waking up and no se pians I hear I hear
43:24
what you’re saying and it’s interesting
43:25
two things come to mind first of all as
43:28
I say I just got back from Europe the
43:29
debate is much more nuanced there and
43:33
and further along and I think that’s in
43:36
part because there was not quite as much
43:39
pendulum shift in the last 40 or 50
43:41
years from the public sector to the
43:43
private sector as there was here I think
43:46
I’m not quite sure if I agree entirely
43:49
with your point about institutions I
43:50
think in some ways part of the problem
43:53
one of the reasons why we have
43:54
concentration levels that are same as
43:57
they were in the 19th century is that
44:00
you know we have a generation of
44:03
business leaders that grew up in the 80s
44:04
thinking that the government was only
44:06
good for cutting taxes and there’s hyper
44:09
individualism that’s that’s
44:12
the entire economic model and in some
44:14
ways I think that you know Facebook is
44:16
maybe the apex of the neoliberal
44:19
economic model if you think about the
44:22
problems of globalization were that cap
44:25
but you know it was supposed to be
44:27
globalization was supposed to be about
44:28
capital goods and people crossing
44:30
borders well it turned out the capital
44:31
could cross a lot faster than either
44:33
goods or people if you take that into
44:36
the world of data that’s even more true
44:38
and so I think that you have a group of
44:41
companies now that have really
44:44
turbocharged a lot of the problems that
44:46
have given us the politics that we have
44:49
now and and a company like Facebook I
44:51
mean I think it every time Zuckerberg is
44:52
on the hill it’s like there’s this
44:54
attitude that they are supranational you
44:56
know and kind of flying 35,000 feet
44:59
above national concerns and I think that
45:02
that’s part of a larger shift and
45:04
probably going to be a big part of the
45:05
2020 debate right are we gonna now have
45:08
a pendulum shift back away from private
45:12
power to some public power some
45:14
different sharing of that which is a
45:16
values question which I think gets at
45:18
some of what you’re talking about
45:20
long-winded answer anyway I think we
45:22
have time for maybe one more question
45:23
yeah – quick question okay one is some
45:27
of the tech companies especially the
45:29
platform companies have you know why
45:32
should we not consider looking at them
45:35
as utility companies yeah I mean we’ve
45:39
had phone companies and as far as I know
45:41
they don’t data mine our conversations
45:43
and maybe mistaken a bit right I mean
45:46
right that’s they could easily right
45:49
right yes it’s different different
45:50
business model yeah yeah so so that was
45:52
one the other thing is you mentioned
45:54
that eventually we need tech policy
45:56
around this and the issue at least my
45:59
issue is that the people who make these
46:01
decisions the the policy makers they
46:05
just most to them don’t have the
46:07
technical background right to properly
46:10
assess the different choices and make
46:12
those decisions I mean I think one of
46:15
them Zuckerberg or someone testified the
46:17
questioning was just awful I mean they
46:20
just ignore our tech support was
46:22
terrible
46:23
yeah exactly so I know anyway whatever
46:27
thoughts you have no that’s a great and
46:29
that’s like maybe a great place to sort
46:31
of wrap up I think the utility model is
46:34
completely viable and it’s interesting
46:36
one of the bits of pushback that you’ll
46:38
sometimes get from folks in the valley
46:40
about that is well if we’re if we’re
46:42
split in this way or if the the capacity
46:46
to innovate is sort of you know
46:47
compressed as the profit margins would
46:49
be compressed in a utility model that’ll
46:52
be bad for innovation not really I mean
46:54
there’s the statistics show for starters
46:56
that companies innovate more when
46:58
they’re smaller they tend to innovate
47:00
more when they’re private and breakups
47:03
in the past you can argue have actually
47:05
created more innovation so a lot of
47:07
academics would say that even the the
47:10
the the antitrust just the threat of
47:13
antitrust action against Microsoft was
47:15
one of the reasons that Google was
47:16
allowed to to blossom as it did you can
47:19
go back to the breakup of the bells and
47:22
say maybe that created space for the
47:25
cellphone industry to to move ahead so I
47:28
think there’s a lot of examples that a
47:31
more decentralized model is actually a
47:34
good thing and I think that that is
47:36
actually going to be a really important
47:37
thing because right now there’s this I
47:40
think very perverse debate in the u.s.
47:42
that is bringing together parts of the
47:45
far right and parts the far left that
47:47
all right we need these companies to
47:48
stay big because they’re the national
47:50
champions and the the becoming war with
47:52
China that is a complete bunk that is
47:56
not shown out first of all I mean these
47:58
companies would love to be in China if
47:59
they could get into China you know I
48:02
think decentralized is the advantage in
48:06
all respects in the US economically so
48:09
yeah I’m have no problems with a utility
48:12
model anyway I think my time is up but
48:15
I’d be happy to sign books and answer
48:17
any other questions here at the table
48:18
and thanks so much for your attention
48:19
[Applause]
48:34
you

Government Probes Fidelity Over Obscure Mutual-Fund Fees

Boston-based firm characterizes so-called infrastructure fee as solution to ‘broken’ business model

.. By marking the charge as an infrastructure fee, the fund firms may be able to avoid disclosing it to investors.
.. Fund companies that decline to pay the amount will “be subject to a very limited relationship” with the company, the document says. Funds can either pay the fee themselves or push the cost onto investors in the mutual fund. This can increase the overall fees of a fund, causing individual investors to pay more and dent returns.
.. The fee is calculated as 0.15% of a mutual-fund company’s industrywide assets, not just on the dollar amount of assets held by Fidelity customers buying shares on the platform, the document says.

The infrastructure fee appears to be a way for Fidelity to make up for revenue the firm has lost as a result of investors flocking to reduced-cost mutual funds, a situation the firm refers to in the document as “unsustainable economics.” Fidelity also stated in the document that its traditional business model is “broken” and characterized the infrastructure fee as a solution to that problem.

.. The infrastructure fee is levied on lower-cost share classes such as those aimed at retirement accounts. The Labor Department has jurisdiction over retirement accounts that are subject to extra protections and disclosures under the Employee Retirement Income Security Act, or Erisa.

.. The document outlining the infrastructure fee, “Fidelity FundsNetwork Business & Services Guide,” is “not to be distributed to the public as sales material in oral or written form,” and “may not be shared with any third party.”

.. When a fund pays a fee that aims to result in the sale of fund shares, either directly or indirectly, securities laws require it to be part of what is known as a 12b-1 plan and to be disclosed to investors. Many lower-cost fund share classes don’t have 12b-1 plans—a reason why they are cheaper.

.. The Fidelity infrastructure fee is also the subject of a lawsuit filed last week in a Massachusetts federal court by a participant in a retirement plan offered by T-Mobile US, Inc. In that suit, the plaintiff contends that the infrastructure charge is prohibited under Erisa and that Fidelity incentivizes mutual funds on its platform to “conceal the true nature of fees associated with these funds.”

Exclusive: WhatsApp Cofounder Brian Acton Gives The Inside Story On #DeleteFacebook And Why He Left $850 Million Behind

Now he’s talking publicly for the first time. Under pressure from Mark Zuckerberg and Sheryl Sandberg to monetize WhatsApp, he pushed back as Facebook questioned the encryption he’d helped build and laid the groundwork to show targeted ads and facilitate commercial messaging.

Acton also walked away from Facebook a year before his final tranche of stock grants vested. “It was like, okay, well, you want to do these things I don’t want to do,” Acton says. “It’s better if I get out of your way. And I did.” It was perhaps the most expensive moral stand in history. Acton took a screenshot of the stock price on his way out the door—the decision cost him $850 million.

.. “As part of a proposed settlement at the end, [Facebook management] tried to put a nondisclosure agreement in place,” Acton says. “That was part of the reason that I got sort of cold feet in terms of trying to settle with these guys.”

.. That kind of answer masks the kind of issues that just prompted Instagram’s founders to abruptly quit. Kevin Systrom and Mike Krieger reportedly chafed at Facebook and Zuckerberg’s heavy hand. Acton’s account of what happened at WhatsApp—and Facebook’s plans for it—provides a rare founder’s-level window into a company that’s at once the global arbiter of privacy standards and the gatekeeper of facts, while also increasingly straying from its entrepreneurial roots.

.. Despite a transfer of several billion dollars, Acton says he never developed a rapport with Zuckerberg. “I couldn’t tell you much about the guy,” he says. In one of their dozen or so meetings, Zuck told Acton unromantically that WhatsApp, which had a stipulated degree of autonomy within the Facebook universe and continued to operate for a while out of its original offices, was “a product group to him, like Instagram.”

.. So Acton didn’t know what to expect when Zuck beckoned him to his office last September, around the time Acton told Facebook brass that he planned to leave. Acton and Koum had a clause in their contract that allowed them to get all their stock, which was being doled out over four years, if Facebook began “implementing monetization initiatives” without their consent.

.. The Facebook-WhatsApp pairing had been a head-scratcher from the start. Facebook has one of the world’s biggest advertising networks; Koum and Acton hated ads. Facebook’s added value for advertisers is how much it knows about its users; WhatsApp’s founders were pro-privacy zealots who felt their vaunted encryption had been integral to their nearly unprecedented global growth.

.. This dissonance frustrated Zuckerberg. Facebook, Acton says, had decided to pursue two ways of making money from WhatsApp. First, by showing targeted ads in WhatsApp’s new Status feature, which Acton felt broke a social compact with its users. “Targeted advertising is what makes me unhappy,” he says. His motto at WhatsApp had been “No ads, no games, no gimmicks”—a direct contrast with a parent company that derived 98% of its revenue from advertising. Another motto had been “Take the time to get it right,” a stark contrast to “Move fast and break things.”

.. Facebook also wanted to sell businesses tools to chat with WhatsApp users. Once businesses were on board, Facebook hoped to sell them analytics tools, too. The challenge was WhatsApp’s watertight end-to-end encryption, which stopped both WhatsApp and Facebook from reading messages.

.. For his part, Acton had proposed monetizing WhatsApp through a metered-user model, charging, say, a tenth of a penny after a certain large number of free messages were used up. “You build it once, it runs everywhere in every country,” Acton says. “You don’t need a sophisticated sales force. It’s a very simple business.”

.. Acton’s plan was shot down by Sandberg. “Her words were ‘It won’t scale.’ ”

.. “I called her out one time,” says Acton, who sensed there might be greed at play. “I was like, ‘No, you don’t mean that it won’t scale. You mean it won’t make as much money as . . . ,’ and she kind of hemmed and hawed a little. And we moved on. I think I made my point. . . . They are businesspeople, they are good businesspeople. They just represent a set of business practices, principles and ethics, and policies that I don’t necessarily agree with.”

.. When Acton reached Zuckerberg’s office, a Facebook lawyer was present. Acton made clear that the disagreement—Facebook wanted to make money through ads, and he wanted to make it from high-volume users—meant he could get his full allocation of stock. Facebook’s legal team disagreed, saying that WhatsApp had only been exploring monetization initiatives, not “implementing” them.

.. Zuckerberg, for his part, had a simple message: “He was like, This is probably the last time you’ll ever talk to me.”

.. Acton graduated from Stanford with a bachelor’s in computer science and eventually became one of the first employees at Yahoo in 1996, making millions in the process. His biggest asset from that time at Yahoo: befriending Koum, a Ukrainian immigrant he clicked with over their similar no-nonsense style.

.. WhatsApp, persuading a handful of former Yahoo colleagues to fund a seed round while he took on cofounder status and wound up with a roughly 20% stake.

.. two things sparked Zuckerberg’s mega-offer in early 2014. One was hearing that WhatsApp’s founders had been invited to Google’s Mountain View headquarters for talks, and he did not want to lose them to a competitor.

.. He recalls Zuckerberg being “supportive” of WhatsApp’s plans to roll out end-to-end encryption, even though it would block attempts to harvest user data. If anything, he was “quick to respond” during the discussions. Zuckerberg “was not immediately evaluating ramifications in the long term.”

.. told them that they would have “zero pressure” on monetization for the next five years.

.. Facebook prepared Acton to meet with around a dozen representatives of the European Competition Commission in a teleconference. “I was coached to explain that it would be really difficult to merge or blend data between the two systems,”

.. Later he learned that elsewhere in Facebook, there were “plans and technologies to blend data.” Specifically, Facebook could use the 128-bit string of numbers assigned to each phone as a kind of bridge between accounts. The other method was phone-number matching, or pinpointing Facebook accounts with phone numbers and matching them to WhatsApp accounts with the same phone number.

.. Within 18 months, a new WhatsApp terms of service linked the accounts and made Acton look like a liar. “I think everyone was gambling because they thought that the EU might have forgotten because enough time had passed.” No such luck: Facebook wound up paying a $122 million fine for giving “incorrect or misleading information” to the EU—a cost of doing business

.. Linking these overlapping accounts was a crucial first step toward monetizing WhatsApp. The terms-of-service update would lay the groundwork for how WhatsApp could make money. During the discussions over these changes, Facebook sought “broader rights” to WhatsApp user data, Acton says, but WhatsApp’s founders pushed back, reaching a compromise with Facebook management. A clause about no ads would remain, but Facebook would still link the accounts to present friend suggestions on Facebook and offer its advertising partners better targets for ads on Facebook.

.. By then, three years since the deal, Zuckerberg was growing impatient, Acton says, and he expressed his frustrations at an all-hands meeting for WhatsApp staffers. “The CFO projections, the ten-year outlook—they wanted and needed the WhatsApp revenues to continue to show the growth to Wall Street,”

.. Internally, Facebook had targeted a $10 billion revenue run rate within five years of monetization, but such numbers sounded too high to Acton—and reliant on advertising.

.. Acton had left a management position on Yahoo’s ad division over a decade earlier with frustrations at the Web portal’s so-called “Nascar approach” of putting ad banners all over a Web page. The drive for revenue at the expense of a good product experience “gave me a bad taste in my mouth,” Acton remembers. He was now seeing history repeat.

.. He has supercharged a small messaging app, Signal, run by a security researcher named Moxie Marlinspike with a mission to put users before profit, giving it $50 million and turning it into a foundation. Now he’s working with the same people who built the opensource encryption protocol that is part of Signal and protects WhatsApp’s 1.5 billion users and that also sits as an option on Facebook Messenger, Microsoft’s Skype and Google’s Allo messenger. Essentially, he’s re-creating WhatsApp in the pure, idealized form it started: free messages and calls, with end-to-end encryption and no obligations to ad platforms.

Free Speech Will Not Save Us

But they also include a typical conservative cluelessness about black grievances, a performative and commercialized Americanism that parodies healthy civic life, and the toxic identity politics that Donald Trump is constantly encouraging. And then, of course, the N.F.L. is particularly vulnerable to Trump’s demagogy because its business model depends on gladiatorial combat whose medical risks it has been desperate to hush up.

.. So the N.F.L. owners have a multilayered problem, cultural and financial and political and medical, to which a simple why-don’t-they-respect-free-speech solution seems woefully insufficient.

.. Everything about the intersection of sports and race relations and the Trump presidency is simply toxic, and expecting free speech to flourish where those rivers meet is like suggesting that a Superfund site cleanup begin by planting daffodils in the most polluted stretch.

.. There’s a similar problem with debates about free speech on liberal college campuses. Yes, it’s obviously bad when speakers are denied a platform, threatened and shouted down. But if every protester suddenly fell silent, the atmosphere in elite academia would still be kind of awful — and not only from a conservative perspective.

.. Meritocracy, materialism and smartphones would still induce mental breakdowns among bright young climbers. The humanities would still be in existential crisis and possibly terminal decline. A “hedge fund with a library attached” model of administration would still prevail. An incoherent mix of ambitious scientism and post-Protestant moralism and simple greed would still be the ruling spirit.

Much of recent left-wing campus activism has to be understood in this depressing context — as a response to a pre-existing crisis, an attempt to infuse morality and purpose into institutions that employ many brilliant minds but mostly promote incurious ambition and secular conformity.

Which suggests that the dissident, “dark web” intellectuals who have gained a following by warring with those activists ultimately need (as some of them seem to intuit) a competing moral and metaphysical vision of their own, not just the procedural freedom to say some stuff that is politically incorrect.

A classical liberalism that only wants to defend its own right to argue — because that’s what John Stuart Mill would want or something — will end up talking only to itself. If you want a healthy culture of debate, it’s not enough to complain that Marxists and postmodernists are out to silence you; you need your own idea of what education and human life itself are for.

The business of SaaS

Understand why SaaS businesses work and how to grow them.

Software-as-a-service (SaaS) is a billing and delivery model for software which is so superior to the traditional method for selling software licenses that it restructures businesses around itself. This has led SaaS businesses to have a distinct body of practice. Unfortunately, many entrepreneurs discover this body of practice the hard way, by making mistakes that have been made before, rather than by spending their mistake budget on newer, better mistakes.

Apple Watch Is a Bridge to the Future

Apple Watch likely outsold Amazon Echo during the holidays despite Apple Watch selling for nearly 10x more money.

.. Based on unit sales, the Apple Watch business is currently about the size of the Mac business.

.. the device has become a bridge between the present and future. By including a screen, Apple Watch retains the familiarity found with smartphones, tablets, and laptops/desktops. At the same time, Apple Watch is giving wearers a glimpse of the future by introducing new ideas around how artificial intelligence, voice, digital assistants, and smart sensors can come together to produce a new kind of experience.

 .. We are witnessing nothing short of a revolution with Apple Watch. The device holds the potential to become more disruptive to the current computing paradigm than even Apple may want to acknowledge. This potential is becoming easier to see as time goes on.
.. For companies with business models based on grabbing as much of our attention as possible, Apple Watch does not represent a preferred revolution. This is likely one reason why Android Wear has failed to amount to much for Google. There just isn’t much incentive for Google to put Android on the wrist.

.. a segment of the iOS developer community that ranges from indies to multinational companies. This group is becoming nervous about Apple Watch because it’s not clear how the device will support the existing app ecosystem.

..  News of major companies backing away from Apple Watch support has led this community to think that Apple Watch is in trouble. In reality, this is backwards. The current app ecosystem, not Apple Watch, is in trouble.

.. Apple Watch likely won’t support the same kind of ecosystem that we are accustomed to with iPhone and iPad. Apple Watch ends up being designed more for what may come after the App Store.

..  most of my interactions with services and features on Apple Watch end up being through the Siri watch face and various cards featuring glanceable amounts of information and data chosen for me by a digital assistant. These cards are personalized for me based on the time of day and my schedule.

.. We move away from pulling data from various apps and getting pushed mostly useless notifications to being pushed a curated feed of data that is always changing and tailored

.. thinking of a product or feature that may one day serve as a legitimate iPhone alternative, there is a small but passionate group who thinks a paradigm around voice is the answer.

.. Unlike Amazon and Google, who are desperately trying to position voice as a way to leapfrog over the current smartphone/tablet and app paradigm, Apple is approaching things from a different angle. Instead of betting on a voice interface that may push some information to a stationary screen, Apple is betting on mobile screens that are home to a digital assistant. Apple is placing a bet that consumers will want the familiarity of a touch screen to transition to a future of greater AI and digital assistants.

..  Apple Watch will eventually become completely independent of iPhone.

.. Apple also has invested significantly in getting the health, fitness, and medical industries to embrace Apple Watch. Items like GymKit allow Apple Watch wearers to pair their device with fitness equipment.

.. Later this year, there will be more than 40 million people wearing an Apple Watch on a daily basis.

.. As competition for our attention moves away from smartphones and tablets, it will soon become evident that Apple holds immense power in being the largest wearables software provider in the world. This power will manifest itself in Apple’s digital assistant occupying a growing role in hundreds of millions of users’ lives.

The Collapse of Complex Business Models

Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.

.. In the mid-90s, I got a call from some friends at ATT, asking me to help them research the nascent web-hosting business. They thought ATT’s famous “five 9’s” reliability (services that work 99.999% of the time) would be valuable, but they couldn’t figure out how $20 a month, then the going rate, could cover the costs for good web hosting, much less leave a profit.

I started describing the web hosting I’d used, including the process of developing web sites locally, uploading them to the server, and then checking to see if anything had broken.

“But if you don’t have a staging server, you’d be changing things on the live site!” They explained this to me in the tone you’d use to explain to a small child why you don’t want to drink bleach. “Oh yeah, it was horrible”, I said. “Sometimes the servers would crash, and we’d just have to re-boot and start from scratch.” There was a long silence on the other end, the silence peculiar to conference calls when an entire group stops to think.

The ATT guys had correctly understood that the income from $20-a-month customers wouldn’t pay for good web hosting. What they hadn’t understood, were in fact professionally incapable of understanding, was that the industry solution, circa 1996, was to offer hosting that wasn’t very good.

This, for the ATT guys, wasn’t depressing so much as confusing. We finished up the call, and it was polite enough, but it was perfectly clear that there wasn’t going to be a consulting gig out of it, because it wasn’t a market they could get into, not because they didn’t want to, but because they couldn’t.

.. The web hosting business, because it followed the “Simplicity first, quality later” model, didn’t just present a new market, it required new cultural imperatives.

.. “If you want something to be 10 times cheaper, take out 90% of the materials.” Making media is like that now except, for “materials”, substitute “labor.”

“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”

… Bureaucracies temporarily suspend the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.

In spring of 2007, the web video comedy In the Motherhood made the move to TV. In the Motherhood started online as a series of short videos, with viewers contributing funny stories from their own lives and voting on their favorites. This tactic generated good ideas at low cost as well as endearing the show to its viewers; the show’s tag line was “By Moms, For Moms, About Moms.”

.. Once the show moved to television, the Writers Guild of America got involved. They were OK with For and About Moms, but By Moms violated Guild rules. The producers tried to negotiate, to no avail, so the idea of audience engagement was canned

.. The most watched minute of video made in the last five years shows baby Charlie biting his brother’s finger. (Twice!) That minute has been watched by more people than the viewership of American Idol, Dancing With The Stars, and the Superbowl combined. (174 million views and counting.)

.. “Charlie Bit My Finger” was made by amateurs, in one take, with a lousy camera. No professionals were involved in selecting or editing or distributing it. Not one dime changed hands anywhere between creator, host, and viewers.

.. it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.