June 1, 2010

"Facebook caves in to critics with plans to tighten privacy settings" David Gelles writes of Mark Zuckenberg's latest palinode (*). "Google balks at turning over private Internet data to regulators" echoes Kevin J. O'Brien in his latest article on Google's foray into systematic snooping (**).

There is clearly something wrong with our Information Age and part of it has to do with lack of privacy. But will anything ever change?

"The chairman of the Federal Trade Commission, Jon Leibowitz, told Congress last week that his agency would look into Google's actions". Yet Stephanie Kirchgaessner and Chris Nuttall report the same FTC approved the AdMob bid by a "5-0 decision", calling it "a significant victory for Google" (***). Double click on that! "We've been working nonstop on [new privacy settings] for a few weeks" boasts Mark Zuckerberg according to Miguel Helft and Jenna Wortham (****). The valuation of Facebook depends on how far it can abuse its users' privacy, he is only doing his job.

Despite it all change will come, eventually. But surely it helps to understand what is wrong to begin with, a goal of these fillips. Serendipitously, if such quality can apply to the output of a watchful study of Homo Economicus, Tim Harford provides us with a key to the current disarray.

Prompted by the lament of a table hog, the kind restaurant and café owners forever try to shoo out lest they lose traffic, Tim Harford points to the concept of "tacit agreements [, which] govern the fair use of [...] "free" resources" (*****). One does not pay to sit down at a table and enjoy its amenities, but one is expected to order food or drink for the privilege. Everybody understands that the world over, although it should be stressed such agreements depend on the local culture. If you are not a fast eater and your means are modest, better book a table in Paris than in Boston.

From the start we have noticed the parallel between the abuse of our data rights and pollution. Both results from tapping to excess what has so far been expediently considered as a "free" resource, whether clean water and air or data. Tim Harford's reminder highlights a major difference.

As long as the scale of human activities remain small, the environment will clean itself. Calling this a tacit agreement would be to turn Nature into a person and switch from scientific theory to religious authority. But matters of data have always involved a fair share of tacit agreements.

As proof, take the "friendly" card I just received from Earthlink, my Internet access provider (1). It tells me my cable connection "will be changed to include a 250 gigabyte monthly data usage cap". No surprise there. It only reflects an earlier decision by Comcast, their subcontractor. Yet they advertise "Enjoy instant high speed cable internet every time" (2), which, at a 6 Mbit/sec access speed, amounts to 1,944 Gbytes/month. So here comes the tacit agreement.

I, Earthlink, am free to claim a whole lot of benefits and only deliver a fraction of my claim, 12.8% to be precise. Truth in advertising is not the same as proven facts. To this first tacit understanding, add the assumption on which the whole telecommunication infrastructure is predicated. At all times, only a fraction of all users makes a call. Finally top this with the implicit expectation by consumers that operators will invest enough to keep busy signals to a bearable minimum. That's a lot to leave unsaid for one industry and yet, by and large, it had worked for more than a century.

What's wrong then with the Information Age is not only that our thirst for productivity has made us dependent on automation to the point we are no longer in control. It is also that the same alliance of technologies which have enabled it in the first place has torn apart all our past tacit agreements.

Not even the most avid Internet surfer can use more than a fraction of available access time. But a home computer can be on at all times, either to download movies and music to be found for free on the web or to act as a server where to find them. Such line hogs break the technical model of Earthlink and Comcast and with it the underlying tacit agreement.

In the same way the business model of industrial content publishers broke down as consumers no longer could be held to an implicit agreement to limit their free copies to their true friends. This is again why Amazon is different from Randal Picker's "local merchant" "back in the dawn of sales". Buyers of "Les Fleurs du Mal" (3) and "Madame Bovary" (4) under Napoleon the Third had an unspoken agreement with their bookseller to be discreet about it. Amazon's privacy policy is hardly a protection against this personal data hog.

I may have bewailed vapid privacy policies. Facebook "Statement of User Exploitation" (5) is explicit enough on its rewriting implicit data rights.

Recognizing "you own all the content and information you post on Facebook", it adds "you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any [intellectual property rights] content you post". Isn't it an apology of sharing to make a Proudhon proud? Not quite. "You will not collect users' information [...] using automatic means [...] without our permission". In other words what is yours is mine but I alone decide how to mine it. No wonder "your privacy is very important to us". Cattle too is precious to the farmer who raises it.

Can democracy and the forces of competition restore the equilibrium with new tacit agreements backed by updated laws? It ought to be so. But for one we live under a pronaocracy rather than a democracy. Until it starts to lose ground to a better open platform business model (6), Google will remain too big to touch. Indeed the FTC now mimicks the European Commission. Loud, ineffectual barking coupled with indulgent, official backing.

Second capitalism is based on decentralization but what Malthus said about food supplies can be applied to competing space. Earth being limited, globalization, which at first nourished free competition, ends up replacing it with power sharing arrangement.

Martin Wolf ends his modern version of "The Ant and the Grasshopper" (7) with the moral: "if you want to accumulate enduring wealth, do not lend to grasshoppers" (******). His delightful retelling deserves better than making a precept of the well known proverb "on ne prête qu'aux riches" (8). La Fontaine's fable illustrated anglo-saxon capitalism. As Martin Wolf's remix progressively scales up the two protagonists to the size of China and the United States, you realize at some point you may no longer be able to rely on market solutions (9).

True Facebook is still vulnerable today to competition and Jenna Wortham introduces us to a number of challengers to whom I wish the best (*******). But let us not lose focus.

What's wrong with our Information Age, above all, is fuelling Google, its dominant leader for which Apple is but a convenient foil to fool the FTC.

Today China is Google's only real competition and their dividing the world between the two of them by tacit agreement is of no help to us.

Philippe Coueignoux

• (*) .............. Facebook caves in to critics with plans to tighten privacy settings, by David Gelles (Financial Times) - May 23, 2010
• (**) ............ Google Balks at Turning Over Private Internet Data to Regulators, by Kevin J. O'Brien (New York Times) - May 28, 2010
• (***) ......... FTC approves Google's AdMob bid, by Stephanie Kirchgaessner and Chris Nuttall (Financial Times) - May 22, 2010
• (****) ....... Facebook Bows to Pressure Over Privacy, by Miguel Helft and Jenna Wortham (New York Times) - May 27, 2010
• (*****) ..... Dear Economist, by Tim Harford (Financial Times) - May 29, 2010
• (******) ... The grasshoppers and the ants - a contemporary fable, by Martin Wolf (Financial Times) - May 26, 2010
• (*******) . Rivals Seize On Troubles Of Facebook, by Jenna Wortham (New York Times) - May 24, 2010
• (1) see Frequently Asked Questions about Comcast Usage Cap for more information - retrieved on May 31, 2010
• (2) see Step up to Earthlink Cable for more information - retrieved on May 31, 2010
• (3) see Les Fleurs du Mal in the Wikipedia
• (4) see Madame Bovary in the Wikipedia
• (5) see Facebook Statement of Rights and Responsibilities - April 22, 2010 version as retrieved on May 31, 2010
• (6) past successes against IBM and Microsoft de facto monopolies came after their successors, respectively Microsoft and Google, had started to surge ahead
• (7) see The Ant and the Grasshopper in the Wikipedia
• (8) "People lend only to the rich"
• (9) ironically the same damning lesson applies to his own suggestion of separating utility from casino banking.
  .... Whether through inflation or zero interest rates, ant savings will still be debased by the need to counter the effects of grasshoppers profligacy.