Week 51
Discover more from The Gap
Week 51
BigTech News, Crypto Regulation & Closing Message of 2022 by Russell Brand
I aim to send out The Gap newsletter each Sunday, but this week you’ll receive an early edition due to the upcoming holidays. This will be the last newsletter of the year. Depending on your level of interest, I recommend that you read or scroll through the entire thing as you will get a good sense of what The Gap is all about.
This week’s posts:
Why the Twitter Hive Mind Makes Bad Decisions
Meta is Moving Fast and Breaking Things Including the Law
Should Crypto Be Regulated or Left to Burn?
Closing Message of 2022 by Russell Brand
Let’s get into it.
Why the Twitter Hive Mind Makes Bad Decisions
Elon Musk recently asked the Twitter community in a poll to decide if he should step down as the Head of Twitter. He wrote: “I will abide by the results of this poll”. More than 17.5 million users voted and 57.5% voted “Yes”. The “Twitter hive mind” has spoken. And Thursday morning (CET), Elon Musk announced his forthcoming resignation.
I would question how good the “Twitter hive mind” really is at making decisions. In Snoop Dogg’s corresponding poll 81% of nearly 3.4 million users voted “Yes” him running Twitter.
With all due respect, Snoop Dogg is probably not the right candidate to run the public conversation on a major tech platform, and obviously, people know this. Users simply vote “yes”, because they don’t have “skin in the game”. If Twitter ran completely afoul, users could sit back with a bowl of popcorn and enjoy the show. This is a coordination failure and I don’t think blue checkmarks are the solution.
I would argue that “blue subscribers” do not have skin in the game. True, they pay $8 dollars per month to be verified users. Someone will have to explain to me what they gain from it besides supporting Musk and Twitter with small donations. But anyway.
The people with true skin in the game are shareholders and investors. They are truly affected by the ups and downs of a company and have much more at stake than a steady monthly $8 fee. It would be a fascinating experiment to run the public conversation on a distributed platform with a DAO structure which would make every user a micro-shareholder and micro-CEO at the same time. Additionally, content moderation could be carried out by the platform’s users with a voting system in the style of Reddit Community Points.
Meta is Moving Fast and Breaking Things Including the Law
CTO and Head of Reality Labs at Meta, Andrew Bosworth, published a manifesto this Monday telling investors why he and his team stills believe in Meta’s VR (Virtual Reality) and AR (Augmented Reality) future. Reality Labs is the department of Meta working on Zuckerberg’s “Metaverse”. As presented in the grandiose and slightly awkward promo video here.
To highlight some of Meta’s achievements in VR, AR, and AI for 2022:
The advanced VR headset - Meta Quest Pro - was released in October. Only one year after Facebook’s name change to Meta and Zuckerberg’s Metaverse presentation.
The text-to-video model Make-A-Video and text-to-image model Make-A-Scene were introduced to the public.
Meta AI’s Cicero managed to beat most human players in a strategy game called Diplomacy played through language negotiations.
Meta’s ranking and recommendations-powered products such as Reels and their core ads systems saw impressive gains in 2022 thanks to powerful AI models
According to Bosworth, Meta’s Horizon World - a VR social community currently populated by legless avatars - attracted a bunch of talented virtual world builders in 2022 and will continue to flourish in 2023.
Reality Labs are mostly known for VR. However, Bosworth reveals that half of their operating expenses are directed at one of the most ambitious AR initiatives in the world, focused on building a new kind of computing platform.
Bosworth also points out that only 20% of Meta’s overall investment supports Reality Labs’ R&D work, while 80% goes to Meta’s core business. And Meta’s core business is thriving:
Daily active users on Facebook were at an all-time high in October.
Instagram has more than 2 billion monthly active users.
WhatsApp has 2 billion daily active users.
Facebook’s old slogan “Move Fast and Break Things” still rings true today. Meta is surely moving fast as a business, while breaking people’s ability to focus and also laws.
Yesterday, Meta proposed in a court filing to pay $725 Million to resolve a class-action lawsuit concerning the unlawful disclosure of user data in connection with the Cambridge Analytica Scandal.
It was revealed in 2018 that Facebook had allowed the British political consulting firm Cambridge Analytica to access and analyze 87 million users’ personal data for targeted political advertising. Cambridge Analytica is believed to have made a profound impact on Brexit and the election of President Trump in 2016. In 2019, The US Federal Trades Commission (FTC) imposed a $5 Billion penalty on Facebook for violating consumers’ privacy.
Currently, the FTC is seeking to prevent Meta from acquiring “Within Unlimited”, the company behind a popular VR-fitness game called “Supernatural”. FTC alleges that the expansion of Meta’s VR empire would lessen competition in the market and is a violation of antitrust law. If the federal court in San Jose, California, rules in favor of FTC’s request, it would have a devastating effect on Meta’s leading position in the VR/AR-space as they would be forced to build the metaverse in-house rather than acquiring it from a mix of companies.
Meanwhile, another antitrust case against Meta is brewing up in the EU. This Monday, the European Commission said that it has informed Meta of its preliminary view “that the company breached EU antitrust rules by distorting competition in the markets for online classified ads”.
While Meta’s reach, size, and dominance in the social media landscape make profit-hungry investors drool, the EU Commission is concerned. Margrethe Vestager, Executive Vice-President in charge of competition policy, says:
With its Facebook social network, Meta reaches globally billions of monthly users and millions active advertisers. Our preliminary concern is that Meta ties its dominant social network Facebook to its online classified ad services called Facebook Marketplace. This means Facebook users have no choice but to have access to Facebook Marketplace. Furthermore, we are concerned that Meta imposed unfair trading conditions, allowing it to use of data on competing online classified ad services. If confirmed, Meta’s practices would be illegal under our competition rules
If the EU Commission concludes that Meta is breaching antitrust laws with Facebook Marketplace, they could face a fine of up to 10% of the company's annual worldwide turnover, which translates to $11.8 Billion.
Should Crypto Be Regulated or Left to Burn?
In the wake of FTX’s collapse, Brian Armstrong, CEO of Coinbase, published a blueprint this week on how centralized crypto exchange can be regulated, and how innovations in decentralized finance can be protected. As a short summary, Armstrong calls for:
regulation of stablecoins.
laws for centralized exchanges and custodians concerning KYC (know your customer), AML (anti-money laundering), federal licensing, consumer protection, and prohibitions of market misconduct.
clarification of which cryptocurrencies are commodities and which are securities.
enforcing the laws against local and foreign exchanges operating in the US to ensure a level playing field
Treating self-custody wallets in DeFi and Web3 as software companies, not as financial products, to open room for innovation.
Armstrong believes that the collapse of FTX can be a catalyst to “finally get a new crypto legislation”.
The counter-argument is formulated well in a Financial Times piece from November 17 by Stephen Cecchetti and Kim Schoenholtz:
In the aftermath of the collapse of FTX, authorities should resist the urge to create a parallel legal and regulatory framework for the crypto industry. It is far better to do nothing, and just let crypto burn.
I can support this viewpoint. Why should governments around the world spend a vast amount of honest taxpayer money to legitimize an industry which is now mainly associated with fraud and scams? Like in any bad relationship, once trust is broken, it cannot be restored.
Closing Message of 2022 by Russell Brand
I would like to kick out 2022 with this video from Russell Brand. He talks about Ectolife and a future where people can buy and design babies in a factory.
By the way, Ectolife’s video is not just a satirical comment on rapid advancements in biotech, this could 100% be for real in the future. I agree with the current top comment by Paul Dove:
This isn't just dystopian, it's literally the way our species could become extinct. We're already so dependent on technology that most people wouldn't survive without it, but this level of dependence, not able to reproduce without artificial wombs, feels like what will end us as a species.
So far, the technology does not exist. The video is only a conceptual presentation of what will be possible in the future by the science-educating filmmaker Hashem Al-Ghaili. Still, I am horrified about the idea and don’t have anything intelligent to say about it. Luckily, Russell Brand has the wit and ironic distance to look further and deliver this inspiring remark which will serve as The Gap’s closing message of 2022:
I suppose ultimately what we have to do is to cling to our humanity, cling to our nature, not be judgemental of people who necessarily require assistance or take unusual pathways to parenthood, but not to commodify and industrialize every aspect of our nature. Perhaps this is no different from agriculture, the industrialization of food, and treating nature just as a resource. Perhaps this is what inevitably happens when a species loses its way. But it seems to me that this could mark a turning point or mark a point of reflection. Who do we want to become as a species? Do you want your consciousness controlled by tech? Do you want your reproductive system annihilated and then replaced by tech? Do you want everything in your life to be a product? Or do you think there is a way back for humankind?
Merry Christmas and Happy New Year :-)
Best regards,
Tobias Jensen
Week 51
Good analysis Tobias. Especially enjoyed your insights on Meta. Like Google's deep mind and Google brain, they are doing more in AI than appears to the public.