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Why Twitter, Facebook and Google Are the Antisocial Networks

Summary:
In today’s Outside the Box we resume our eight-part Strategic Investment Conference Speaker Series with my friend Niall Ferguson, senior fellow of the Hoover Institution at Stanford and the Center for European Studies at Harvard. Niall has a cautionary tale for us on the topic of social networks. The problem, in a nutshell: Facebook certainly made an impact last year, but not quite the impact the young Zuckerberg had in mind in his Harvard dorm. A committed believer in globalisation who tends to wear his liberal politics on his T-shirt sleeve, Zuckerberg is reeling. Not only did the masterminds behind the Brexit and Trump campaigns successfully use Facebook advertising to hone and target their ultimately victorious campaign messages; worse, the Russian

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In today’s Outside the Box we resume our eight-part Strategic Investment Conference Speaker Series with my friend Niall Ferguson, senior fellow of the Hoover Institution at Stanford and the Center for European Studies at Harvard. Niall has a cautionary tale for us on the topic of social networks.

The problem, in a nutshell:

Facebook certainly made an impact last year, but not quite the impact the young Zuckerberg had in mind in his Harvard dorm. A committed believer in globalisation who tends to wear his liberal politics on his T-shirt sleeve, Zuckerberg is reeling. Not only did the masterminds behind the Brexit and Trump campaigns successfully use Facebook advertising to hone and target their ultimately victorious campaign messages; worse, the Russian government appears to have used Facebook in the same way, seeking to depress voter support for Hillary Clinton. Worse still, neo-Nazis seem to have been using the social network to spread their own distinctive brand of hate.

Niall – ever the history prof – can’t help chiding Mr. Zuckerberg on his choice of majors at Harvard:

Yet the architects of the biggest social networks to have existed should not have been surprised. If he had studied history at Harvard rather than psychology and computer science, Zuckerberg might have foreseen the ways in which Facebook and its ilk would be used and abused.

And then Niall treats us to a wonderful historical excursion that commences in 16th-century Germany, when that powerful predecessor of social media, the printing press, took viral the message of a notorious thorn in the side of the Catholic Church. With unexpected consequences.

Today, Niall notes, “our networking revolution is much faster and more geographically extensive than the wave of revolutions unleashed by the German printing press.” And the social, political, and geopolitical consquences pile up more quickly and powerfully, too.

To hear the next chapter in this fast-evolving tale directly from Niall’s lips, you’ll want to be front and center at my upcoming Strategic Investment Conference, next March 6–9 in San Diego. Niall has lit up the room at several past SICs, and he’ll be with us again – as will the other seven luminaries we’ve been featuring in this eight-part SIC Speaker Series. You can reserve your seat right here.

And this year will be special. I think it was about five years ago that I had the center-right Scotsman Niall and the center-left Irishman David McWilliams in my suite at the end of the conference, and they sat down at the table and held one of the most fascinating conversations I’ve ever been witness to. Scheduling was tricky this time around, but I’ve been able to get both of them for this conference. They’ll each make a presentation and then sit down together on stage to take up where they left off five years ago in my suite.

These guys are witty, articulate, and eminently knowledgable on their topics – which are many. David is the next head central banker for the Bank of Ireland and was selected as the most influential young person under 40 in that country. Niall has done it all, from professorships at Harvard, the London School of Economics, and Stanford to the PBS series The Ascent of Money, which won the International Emmy for best documentary. Not only will David and Niall’s little chat be entertaining, you will walk away with a better understanding of the true dilemma facing Europe and the directions it might take in addressing its problems. And the direction they choose will have a major impact on the rest of the world and especially the United States.

Christmas was generally quiet at the Mauldin household. Shane and I will celebrate New Year’s Eve with David Tice and his family and friends, and then the next day we’ll open our house to our neighbors and friends between noon and five for all the black-eyed peas, ham, and cornbread they can eat.

For those not from the United States are not familiar with the Southern tradition, black-eyed peas were only considered hog food up north and were certainly not served in polite company much in the 1800s in the South. But over time, the tradition has grown up to have black-eyed peas on New Year’s Day for luck for the coming year. Throw in a ham hock and maybe a slab of bacon, some seasonings, and simmer for a long time, and you have something that is actually extraordinarily good. We will probably make seven or eight gallons, and one of those big pots will be well-laced with jalapenos, too, for a little extra kick. And, of course, there will be a small vegetarian pot for those with that preference. If you’re reading this letter and you’re in the Dallas area, then you’re one of my one million closest friends, so just drop me a note – you’re invited.

I wish you the best for the New Year, and now I will get back to work on my personal forecast issue for 2018. Watch for it this weekend! Have a great week.

Your feeling optimistic today analyst,

John Mauldin, Editor
Outside the Box

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By Niall Ferguson
Originally published in The Sunday Times, October 1, 2017

Just as Martin Luther’s utopian vision and the invention of the printing press led to an era of religious war and turmoil, the internet, hailed as a portal to a better world, is threatening democracy

Why Twitter, Facebook and Google Are the Antisocial Networks
Russians assumed to be acting for Vladimir Putin used Mark Zuckerberg’s Facebook to influence the US election - AP

The hyperconnected world was not supposed to be like this. In May, Evan Williams, one of the founders of Twitter, told The New York Times: “I thought once everybody could speak freely and exchange information and ideas, the world is automatically going to be a better place. I was wrong about that.”

In September Sheryl Sandberg, Facebook’s chief operating officer, acknowledged that the company’s online tools had allowed advertisers to target self-described “Jew haters”. “We never intended or anticipated this functionality being used this way,” she admitted, “and that is on us.”

Surprise! The men and women who built the internet-based social networks that have so transformed our lives thought everything would be awesome if only we could all be connected. Speaking at Harvard’s degree ceremony in May, Facebook’s co-founder and chief executive, Mark Zuckerberg, looked back on his undergraduate ambition to “connect the whole world”. “This idea was so clear to us,” he recalled, “that all people want to connect . . . My hope was never to build a company, but to make an impact.”

Why Twitter, Facebook and Google Are the Antisocial Networks

Facebook certainly made an impact last year, but not quite the impact the young Zuckerberg had in mind in his Harvard dorm. A committed believer in globalisation who tends to wear his liberal politics on his T-shirt sleeve, Zuckerberg is reeling. Not only did the masterminds behind the Brexit and Trump campaigns successfully use Facebook advertising to hone and target their ultimately victorious campaign messages; worse, the Russian government appears to have used Facebook in the same way, seeking to depress voter support for Hillary Clinton. Worse still, neo-Nazis seem to have been using the social network to spread their own distinctive brand of hate.

Yet the architects of the biggest social networks to have existed should not have been surprised. If he had studied history at Harvard rather than psychology and computer science, Zuckerberg might have foreseen the ways in which Facebook and its ilk would be used and abused.

Five hundred years ago this year, Martin Luther sent his critique of corrupt church practices as a letter to the Archbishop of Mainz. It is not wholly clear if Luther also nailed a copy to the door of All Saints’ Church, Wittenberg, but it scarcely matters. Thanks to the invention of the printing press by Johannes Gutenberg, that mode of publishing had been superseded.

Before 1517 was out, versions of Luther’s original Latin text had been printed in Basel, Leipzig and Nuremberg. By the time Luther was officially condemned as a heretic by the Edict of Worms in 1521, his writings were all over German-speaking Europe. In the course of the 16th century, German printers produced almost 5,000 editions of Luther’s works.

Luther’s vision was utopian. Just as Zuckerberg today dreams of creating a single “global community”, so Luther believed that his Reformation would produce a “priesthood of all believers”, all reading the Bible, all in a direct relationship to the one, true God.

It didn’t turn out that way. The Reformation unleashed a wave of religious revolt against the authority of the Roman Catholic Church. As it spread from reform-minded clergymen and scholars to urban elites to illiterate peasants, it threw first Germany and then all of northwestern Europe into turmoil.

In 1524 a full-blown peasants’ revolt broke out. By 1531 there were enough Protestant princes to form an alliance (the Schmalkaldic League) against the Holy Roman Emperor, Charles V. Although defeated, the Protestants were powerful enough to preserve the Reformation in a patchwork of territories.

Religious conflict erupted again in the Thirty Years’ War, a conflict that turned central Europe into a charnel house. Especially in northwestern Europe – in England, Scotland and the Dutch Republic – it proved impossible to re-establish Roman Catholicism, even when Rome turned the technologies and networking strategy of the Reformation against it, in addition to the more traditional array of cruel tortures and punishments that had long been the church’s forte.

The global impact of the internet has few analogues in history better than the impact of printing on 16th-century Europe. The personal computer and smartphone have empowered networks as much as the pamphlet and the book did in Luther’s time.

Indeed, the trajectories for the production and price of PCs in America between 1977 and 2004 are remarkably similar to the trajectories for the production and price of printed books in England from 1490 to 1630.

In the era of the Reformation and thereafter, connectivity was enhanced exponentially by rising literacy, so that a growing share of the population was able to access printed literature of all kinds, rather than having to rely on orators and preachers to convey new ideas to them.

There are three major differences between our networked age and the era that followed the advent of European printing. First, and most obviously, our networking revolution is much faster and more geographically extensive than the wave of revolutions unleashed by the German printing press.

In a far shorter space of time than it took for 84% of the world’s adults to become literate, a remarkably large proportion of humanity has gained access to the internet. As recently as 1998 only about 2% of the world’s population were online. Today the proportion is two in five. The pace of change is roughly an order of magnitude faster than in the post-Gutenberg period: what took centuries after 1490 took just decades after 1990.

Google started life in a garage in Menlo Park, California, in 1998. Today it has the capacity to process more than 4.2bn search requests every day. In 2005 YouTube was a start-up in a room above a pizzeria in San Mateo. Today it allows people to watch 8.8bn videos a day. Facebook was dreamt up at Harvard just over a decade ago. Today it has more than 2bn users who log on at least once a month.

Why Twitter, Facebook and Google Are the Antisocial Networks

The scale of Facebook’s success is especially staggering. Two-thirds of American adults are Facebook users. Just under half get their news from Facebook.

It used to be said that there were six degrees of separation between any two individuals on the planet – say, between yourself and Monica Lewinsky. On Facebook there are just 3.57 degrees of separation, meaning that any two of the 2bn Facebook users can get in touch by taking fewer than four steps through the network. The world is indeed connected as never before. We are all friends of friends of friends of friends.

Second, the distributional consequences of our revolution are quite different from those of the early-modern revolution. Early modern Europe was not an ideal place to enforce intellectual property rights, which in those days existed only when technologies could be secretively monopolised by a guild. The printing press created no billionaires.

Johannes Gutenberg was not Bill Gates (indeed, by 1456 he was effectively bankrupt). Moreover, only a subset of the media made possible by the printing press – the newspapers and magazines invented in the 18th century – sought to make money from advertising, whereas all the most important ones made possible by the internet do. Few people foresaw that these giant networks would be so profoundly inegalitarian.

To be sure, innovation has driven down the costs of information technology. Globally, the costs of computing and digital storage fell at annual rates of, respectively, 33% and 38% between 1992 and 2012. Everyone has benefited from that. However, oligopolies have developed in the realms of both hardware and software, as well as service provision and wireless networks.

The ownership of the world’s electronic network is extraordinarily concentrated. Google (or rather the renamed parent company, Alphabet Inc) is worth $669bn by market capitalisation. About 16% of its shares, worth around $106bn, are owned by its founders, Larry Page and Sergey Brin. The market capitalisation of Facebook is approaching $500bn; 475 million of the shares, worth about $81bn, are owned by its T-shirt-loving founder.

Unlike in the past, there are now two kinds of people in the world: those who own and run the networks, and those who merely use them.

Third, the printing press had the effect of disrupting religious life in western Christendom before it disrupted anything else. By contrast, the internet began by disrupting commerce; only very recently did it begin to disrupt politics, and it has really disrupted only one religion, namely Islam.

The political disruption reached a climax last year, when social networks helped to topple David Cameron in the Brexit referendum and to defeat Hillary Clinton in the US presidential election.

In the American case, a number of networks were operating. There was the grassroots network of support that the Trump campaign built – and that built itself – on the platforms of Facebook and Twitter. These were the “forgotten” men and women who turned out on November 8 to defeat the “failed and corrupt political establishment” that Trump’s opponent was said to personify.

A role was also played by the jihadist network, as the Isis-affiliated terror attacks during the election year lent credibility to Trump’s pledges to “strip out the support networks for radical Islam” and to ban Muslim immigration.

Yet in two respects there is a clear similarity between our time and the revolutionary period that followed the advent of printing. Like the printing press, modern information technology is transforming not only the market – most recently, by facilitating the sharing of cars and homes – but also the public sphere. Never before have so many people been connected in an instantly responsive network through which “memes” can spread even more rapidly than natural viruses.

But the notion that taking the whole world online would create a utopia of netizens, all equal in cyber-space, was always a fantasy – as much a delusion as Luther’s vision of a “priesthood of all believers”. The reality is that the global network has become a transmission mechanism for all kinds of manias and panics, just as the combination of printing and literacy for a time increased the prevalence of millenarian sects and witch crazes. The cruelties of Isis seem less idiosyncratic when compared with those of some governments and sects in the 16th and 17th centuries.

Second, our time is seeing an erosion of territorial sovereignty. In the 16th and 17th centuries, Europe was plunged into a series of religious wars. Spain and France tried by fair means and foul to bring England back to the Roman Catholic fold. As late as 1745, a French-backed army of Scottish Highlanders invaded England with a view to restoring the old faith in the British Isles.

In the 21st century, we see a similar phenomenon of escalating intervention in the domestic affairs of sovereign states. There was, after all, a further network involved in the US election of 2016, and that was Russia’s intelligence network.

It is clear that the Russian government did its utmost to maximise the damage to Clinton’s reputation stemming from her and her campaign’s sloppy email security, using WikiLeaks as the conduit through which stolen documents were passed to the western media. Russian hackers and trolls last year posed a threat to American democracy similar to the one that Jesuit priests posed to the English Reformation: a threat from within sponsored from without.

Leave aside the question of whether or not the Russian interference decided the election in favour of Trump; suffice to say it helped him, though both fake and real news damaging to Clinton was also disseminated without Russia’s involvement. Leave aside, too, the as yet unresolved questions of how many members of the Trump campaign were complicit in the Russian operation, and how much they knew.

The critical point is Facebook itself may have decided the outcome of an election that would have gone the other way if about 40,000 voters in just three states had chosen Clinton over Trump.

No, it wasn’t meant to be this way. This was not what Silicon Valley envisaged when it set out to build “a planet where everything is connected” – the motto of Eric Schmidt’s foundation.

But then Luther didn’t set out to cause 130 years of bloody religious warfare either.

© Niall Ferguson 2017

Extracted from The Square and the Tower: Networks, Hierarchies and the Struggle for Global Power by Niall Ferguson

John Mauldin
Financial NY Times best-selling author, pioneering online commentator. Over 1 million readers turn to Mauldin for his view on Wall Street, markets, and history.

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