Free Speech – When You Pray For Rain, You Have To Deal With The Mud Too

The debate on free speech between tech companies, specifically Facebook and Twitter, and politicians such as Elizabeth Warren is heating up and getting hotter than ever. Facebook refused to take down political ads from the right wing that the left consider fake news. Politicians led by Elizabeth Warren vehemently criticized the decision by Facebook arguing that it is helping the President win an election again.

Coming from the background that I have, I appreciate the freedom of speech in America which is enshrined in the Constitution. There is nothing better to ensure that everybody is free to voice his or her own opinion. The right in and of itself is great and good. The problem; however, lies in how people execute the right and how it is perceived by others.

When a right-winged party runs a political ads with controversial information, the party is within its right to do so. Facebook, as it claims to preserve the right to expression on its platform, chooses to honor it. There is nothing inherently wrong with that.

The problem is that when you exercise your right to free speech and spread out false information on others, you rob others of the right to be perceived truthfully. In that sense, is it still acceptable? Also, it then falls onto Facebook to be the guardian of truth, the entity that decides whether a piece of information is right or false. And it’s not an easy task. Whatever Facebook does will please one part of the population and piss off the rest. Whatever is truth to one party of an ideology will be considered fake news by the opposing party.

I fear that there is no definitive answers to this debate. The Internet and Facebook enable friction-less communication of information and, as a consequence, false information around the globe. That’s the byproduct of it. I don’t see how Facebook can do one without harming the other aspect of their operation. And as explained above, I don’t see how it can please anybody in its endeavor to preserve the First Amendment, but also to police the content.

When we pray for rain, we have to deal with the mud too. That’s my mentality in a lot of issues. In this case, I think we pray hard for the rain, but we are not ready to deal with the mud

Weekly readings – 5th October 2019

Grab Accounts for 73% of Ride-Share Trips in First Half of 2019 in Vietnam.

Retailer Adoption of Apple Pay Quickens. Since I was able to use Apple Pay on my phone, I have been using it as the first payment method, even in a city as small as Omaha. I have been a pretty happy user ever since.

Source: Loup Ventures

Comparison of smart digital assistants by Loup Ventures

Meet the Women Leading Netflix Into the Streaming Wars

The man who built his own Lamborghini

Dog-walking startup Wag raised $300 million to unleash growth. Then things got messy. SoftBank doesn’t seem to be the Midas that some hyped it to be with its massive checkbook, does it?

Latest memo from Howard Marks: On the Other Hand

Researchers Discover the Tallest Known Tree in the Amazon

Measuring Apple’s Content Distribution Arm

WeWork Used These Documents To Convince Investors It’s Worth Billions. A long but good article on the accounting jujitsu that WeWork employed

Elizabeth Warren’s call to break up Apple

I wrote yesterday on Elizabeth Warren’s plan to break up yesterday. I thought that was that, but apparently she followed up with a call to break up Apple as she laid out in an interview with The Verge.

You were very specific in how you’d break up Google and the rest. How would you break up Apple?

Apple, you’ve got to break it apart from their App Store. It’s got to be one or the other. Either they run the platform or they play in the store. They don’t get to do both at the same time. So it’s the same notion.

Pulling that apart, the App Store is the method by which Apple keeps the iPhone secure. It’s integrated into the platform. How would you propose that Apple and Google distribute apps if they don’t run the store?

Well, are they in competition with others who are developing the products? That’s the problem all the way through this, and it’s it’s what you have to keep looking for.

If you run a platform where others come to sell, then you don’t get to sell your own items on the platform because you have two comparative advantages. One, you’ve sucked up information about every buyer and every seller before you’ve made a decision about what you’re going to to sell. And second, you have the capacity — because you run the platform — to prefer your product over anyone else’s product. It gives an enormous comparative advantage to the platform.

Users love Apple products because of the combination of hardware and their exclusive software. What good is a phone without functioning and useful apps? Apple distributes apps on their devices through App Store and that’s why I don’t understand what she meant by “breaking it apart from App Store”. From a consumer standpoint, Apple leads all manufacturers in terms of customer satisfaction. If any of her plans were about protecting consumer interests, this one didn’t seem to fit the bill.

Source: American Customer Satisfaction Index

Here is what Tim Cook reported in the latest earning call:

The latest survey of U.S. consumers from 451 Research indicates customer satisfaction of 99% for iPhone XR, XS and XS Max combined. And among business buyers who plan to purchase smartphones in the March quarter 81% plan to purchase iPhones. Based on the latest information from Kantar, iPhone experienced a 90% customer loyalty rating for iPhone customers in the U.S. 23 points above the next highest brand measured.

The most recent consumer survey from 451 Research measured a 94% customer satisfaction rating for iPad overall, with iPad Pro models scoring as high as 100%.
Among business customers who plan to purchase tablets in the March quarter, 68% plan to purchase iPads. 

Source: Seeking Alpha

From a developer perspective, I wrote about how much Apple paid out to developers over years:

As of June 2017, developers earned $70 billion from App store since its launch in 2008. As of January 2019, the figure went up to $120 billion. Moreover, we are about to see their investment in original content as their streaming service is reportedly going to be live this April.

I can understand why folks complain about the hefty 30% Apple tax on App Store, but thanks to Apple and AppStore, developers and businesses have generated a tremendous amount of revenue, to the tune of $120 billion over the years. Techcrunch reported a comparison between Google Play and AppStore about 5 months ago

According to SensorTower, an average iPhone user spent more on apps in 2018 than they did in 2017.

iPhone Per Active Device Average Revenue U.S. 2015 to 2018
Source: SensorTower

If Apple and AppStore are making consumers happy and bringing developers/app makers money, what exactly is the reason for breaking Apple apart from the AppStore, undermining the control over the ecosystem?

Also, there is a difference between making money off user data and making money off products/services improved by the use of data analysis. If you can mine data to improve services and products, you must be a fool not to. Website administrators use Google Analytics to improve website performance. Netflix uses data to see what shows you may be interested in. Google uses your data to improve the search algorithm to make it more relevant and fast. What is wrong with all of that? I also fail to recall an instance where Apple released a certain product/service and abused its power to favor the product/service.

In short, the interview with The Verge made me even more disappointed in her after yesterday, something I didn’t imagine would happen so fast. A friend of mine mentioned that she represented the left. I don’t think this has anything to do with the political ideologies. Understanding how these technology companies work has nothing to do with one’s political view. It’s concerning to have a Presidential candidate with that ill-informed hostility to the growth engine of the US economy.

Elizabeth Warren’s big (ridiculous) plan

Elizabeth Warren, one of the politicians who announced intention to run for the Presidency in 2020, released a blog post today outlining her plan to break up technology companies, if she is elected.

It’s ridiculous in my opinion.

I totally agree with Senator Warren on the role of promoting competition, because 1) it’s good for small-and-medium sized businesses; and 2) more importantly, it’s good for consumers. When there is competition to earn consumers’ money, it’s the consumers who reap the benefits.

Senator Warren’s whole piece seems to focus only on the first point above and neglect the second one, which in my opinion is the more important between the two. In her blog post, the Senator had a bolded claim that reads: “How the new tech monopolies hurt small businesses and innovation”. It depends on which industry she was referring to. It can be argued that Google’s monopoly can stifle any search engine startups, but it’s unfair to imply that Google can threaten in manufacturing industries and many others that are not where Google operates.

She accused tech powerhouses to use M&A to kill competition. Without Google, would Android and millions of users around the world have an established alternative to Apple today? One of the reasons why companies do M&A is to gain capabilities in a short amount of time. It’s like when you don’t know speak Japanese, instead of spending easily a decade to learn the language, you can hire somebody from Japan tomorrow and start doing business. The same thing applies to companies. Rather than spend money and years on R&D without guaranteed success, companies can acquire the capabilities available on the market quickly and reduce the risk of missing out strategic opportunities. The acquired companies can leverage resources at the acquirers to evolve to the next level. There is an argument to be made about Instagram & Facebook, Disney and Marvel, VMWare and Nicira.

Here is what she had to say on marketplaces

Using Proprietary Marketplaces to Limit Competition. Many big tech companies own a marketplace — where buyers and sellers transact — while also participating on the marketplace. This can create a conflict of interest that undermines competition. Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version. Google allegedly snuffed out a competing small search engine by demoting its content on its search algorithm, and it has favored its own restaurant ratings over those of Yelp.

There is some truth in what she said, but selling private labels and running a marketplace are two different things. If the private labels, as in the case of Amazon, are crappy, Amazon won’t be able to sell them. If Google-favored content isn’t in the best interest of users, they won’t consume it. Functioning as a marketplace, Amazon and Google generate revenue by offering a marketing channel and logistics help to vendors. Small businesses can sell goods on Amazon without worrying much about building a supply chain on its own. For many businesses, Google is the best way to reach online users. I can buy in the claim that these tech companies can be unfavorably biased to vendors which sell competing services/products, but the tech firms do also help a lot of other small guys.

Here is another point she made:

Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector. Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business.

Having big techs swallow startups IS an exit venture capitalists want to recoup their investments. I don’t know if she noticed, but there have been quite many VC funds that have one billion dollars or more. This argument is pretty shaky at best.

She threatened to unwind these mergers and acquisitions if she is elected:

Amazon: Whole Foods; Zappos
Facebook: WhatsApp; Instagram
Google: Waze; Nest; DoubleClick

I can see the point behind Facebook – WhatsApp – Instagram, but I honestly don’t know her rationale behind the other two. Amazon doesn’t have a monopoly on selling shoes online just because they acquired Zappos, not does it have monopoly on groceries just because of Whole Foods. Walmart is fighting back really hard and other retailers such as Target is also expanding their footprint because they embraced the digital trend to compete with Amazon. On the other hand, yes Google has the monopoly in search, but DoubleClick is NOT all the reasons for that monopoly. And what do Waze and Nest have to do with it? Also, Google won because it offered the best and fastest search to users. Take it apart and what would that do to users?

Don’t get me wrong. I am in favor of the RIGHT regulations to keep tech companies in check. We need to step up our game to protect users’ privacy. It’s just not any citizen’s job to write regulations. That’s why we elect politicians.

The whole blog post is not a well-thought-out piece on the topic. If she really wants to break up competition, look at the airlines. Look at the credit score companies. Look at the pharmaceuticals that have MONOPOLIES over drugs for 10-20 years. How many companies do you know produce airplanes? Boeing and Airbus, the list ends there for me and likely many others. How about Comcast, AT&T and Verizon?

To tackle this problem, it’s important to look at it from different perspectives. Tech corporations are not perfect, but it will be unfair just to look at their faults and ignore the benefits they bring to our lives.