Facebook Dating arrives in Canada and Thailand

Facebook Dating arrives in Canada and Thailand

On the heels of Tinder’s plans to go more casual, Facebook is today expanding access to its own dating service, Facebook Dating. First launched two months ago in Colombia for testing purposes, the social network is today rolling out Facebook Dating to Canada and Thailand. The company is also adding a few new features to coincide with the launch, including the ability to re-review people you passed on and take a break by putting the service on pause, among other things.

If that latter feature sounds familiar, it’s because it’s also something dating app Bumble recently announced, as well.

Bumble in September launched a Snooze button for its own app, which addressed the problem many online daters have — the need for a detox from dating apps for a bit. Sometimes that’s due to frustration or just being busy; while other times it’s because they’ve matched with someone and want to give them a chance.

Facebook says you can still message people you already matched while on pause.

Meanwhile, offering daters a chance to give someone a second look is also common among dating apps, though it’s presented in different ways. For example, OkCupid may resurface people you’ve passed on, while Tinder’s newer “Feed” feature lets you keep track of updates from matches that you had earlier decided to ignore.

Second Look will be in Facebook Dating’s Settings, and show people in reverse chronological order. You can go back through your Suggested Matches and even review people you may have accidentally passed on — features for which other dating apps charge.

Also new today is the ability to review a blocked list, support for non-metric units (for things like range and height) and more interactive profile content, including tappable entry points for conversations — like a shared hometown or school.

These features will arrive in the new version of Facebook Dating, rolling out today, the company says.

It has tweaked the user interface a bit, too. Now, when scrolling through Groups and Events to unlock, these will appear vertically, instead of horizontally as before.

Facebook says it’s also working on a preemptive block list, based on user feedback.

This would let you search for people in Facebook Dating who are not already your Facebook friends that you know you don’t want to see — for example, an ex you’ve unfriended but not blocked on Facebook, a family member, etc., the company tells TechCrunch.

You’ll be able to search for specific people regardless of whether or not you know they have a Dating profile, and doing so won’t reveal to you if that person has a profile on Facebook Dating or not.

Preemptive blocking is actually fairly clever, given that many dating apps today surprise you with people you’d rather not see.

Originally announced at F8 this May, Facebook has already figured out some of the larger details about how it wants its dating service to operate. That includes its decision to limit users from expressing interest in no more than 100 people per day, and other settings to open the service to matching with strangers or with friend-of-friends.

There’s a certain (evil) genius in launching a Facebook Dating service, given that Facebook is already the place people go — along with Instagram — to research their new matches and potential dates, once things progress to that point. Plus, the service can leverage Facebook’s data. After all, if anyone knows who you are and what you’re like, it’s them. That could save users time in answering the “getting to know you” questions some apps pose to their users to help perfect their matching algorithms.

It also helps that Facebook is positioning the service for those who want relationships, given the leading dating app — Tinder — is known for the opposite. Match is preparing to focus Tinder more on young, casual dating, then build out Hinge for those interested in serious dating.

Facebook’s challenge is that user trust in the company today is lacking. And dating is something many considerate very private — not something they’d want exposed on a network where they’re connected with work colleagues, industry peers and extended family. While Facebook vows to maintain user privacy, its track record on this front is poor, which could limit the service’s growth.

Facebook has not said when the service will launch in the U.S., nor has it detailed the number of signups to date.

“We don’t have any specific metrics to share, but we’ve been pleased with the response in Colombia thus far and are excited to roll it out to Thailand and Canada,” a spokesperson said.

81% of VC firms dont have a single black investor — BLCK VC wants to change that

81% of VC firms dont have a single black investor — BLCK VC wants to change that

Venture capital has a diversity problem.

BLCK VC, a new organization founded by Storm Ventures associate Frederik Groce and NEA associate Sydney Sykes meant to connect, engage and advance black venture capitalists, is ready for a new era in the industry.

Their mission: Turn 200 black investors into 400 black investors by 2024.

“We think of ourselves as an organization formed by black VCs for blacks VCs to increase the representation of black investors,” Sykes told TechCrunch.

“You can look around and say ‘well, I know five black VCs,’ but you can also say this firm does not have a single black VC, they may not even have a single underrepresented minority … We want to make firms reckon with the fact that there is a racial diversity problem; there is a lack of black VCs and every firm should really care about it.”

BLCK VC has been at work since the beginning of 2018, building and expanding a network of black investors in the San Francisco area, Los Angeles and New York. They seek to provide a community for black investors, a space for honest conversations and questions and a resource for VC firms looking to make more diverse hires. Today, the organization is taking the wraps off its plan to diversify the VC industry.

“There’s an incredible need to ensure there are resources in place so people don’t churn out of the community; getting people in the door is only half the battle,” Groce told TechCrunch. “This is us saying ‘hey, get involved.’ It’s time to broaden and give others access to what we are doing. It takes a village if we really want to see things start to shift.”

According to data collected by Richard Kerby, a partner at Equal Ventures, 81 percent of VC firms don’t have a single black investor. Roughly 50 percent of black investors in the industry are at the associate level, or the lowest level at a firm; only 2 percent of VC partners are black.

“It takes a village if we really want to see things start to shift.” — BLCK VC co-chair Frederik Groce.

The lack of representation, especially in powerful positions, has made it difficult for black aspiring investors to enter the industry, as well as for black investors to stay in VC.

“VC, more than a lot of industries, is very network driven in the way that they hire,” Sykes said. “The network started 40 or 50 years ago with a lot of white men who had the wealth at the time to invest in companies. As VC has grown, a lot of the people who started it hired people they knew, there wasn’t an effort to recruit from outside of their network. That has made VC this very homogenous industry.”

Aside from Kerby’s data and a Harvard Business School study on diversity in innovation, there is limited data available on black VCs and funding for black founders. Digitalundivided‘s research arm ProjectDiane is one of the few organizations to report on funding for black female founders, for example. According to its latest report, black women have raised just .0006 percent of all tech venture funding since 2009.

BLCK VC’s board includes Adina Tecklu, a venture investor at Canaan Partners; Brian Hollins, a growth equity investor at Goldman Sachs; Earnest Sweat, an investment manager at Prologis Ventures; and Elliott Robinson, a partner at M12 Ventures.

Facebook Portal isn’t listening to your calls, but may track data

Facebook Portal isn’t listening to your calls, but may track data

When the initial buzz of Portal finally dies down, it’s the timing that will be remembered most. There’s never a great time for a company like Facebook to launch a product like Portal, but as far as optics go, the whole of 2018 probably should have been a write-off.

Our followup headline, “Facebook, are you kidding?” seems to sum up the fallout nicely.

But the company soldiered on, intent to launch its in-house hardware product, and insofar as its intentions can be regarded as pure, there are certainly worse motives than the goal of connecting loved ones. That’s a promise video chat technology brings, and Facebook’s technology stack delivers it in a compelling way.

Any praise the company might have received for the product’s execution, however, quickly took a backseat to another PR dustup. Here’s Recode with another fairly straightforward headline. “It turns out that Facebook could in fact use data collected from its Portal in-home video device to target you with ads.”

In a conversation with TechCrunch this week, Facebook exec Andrew “Boz” Bosworth claims it was the result of a misunderstanding on the company’s part.

“I wasn’t in the room with that,” Bosworth says, “but what I’m told was that we thought that the question was about ads being served on Portal. Right now, Facebook ads aren’t being served on Portal. Obviously, if some other service, like YouTube or something else, is using ads, and you’re watching that you’ll have ads on the Portal device. Facebook’s been serving ads on Portal.”

Facebook is working to draw a line here, looking to distinguish the big ask of putting its own microphones and a camera in consumer living rooms from the standard sort of data collection that forms the core of much of the site’s monetization model.

“[T]he thing that’s novel about this device is the camera and the microphone,” he explains. “That’s a place that we’ve gone overboard on the security and privacy to make sure consumers can trust at the electrical level the device is doing only the things that they expect.”

Facebook was clearly working to nip these questions in the bud prior to launch. Unprompted, the company was quick to list the many levels of security and privacy baked into the stack, from encryption to an actual physical piece of plastic the consumer can snap onto the top of the device to serve as a lens cap.

Last night, alongside the announcement of availability, Facebook issued a separate post drilling down on privacy concerns. Portal: Privacy and Ads details three key points:

  • Facebook does not listen to, view or keep the contents of your Portal video calls. This means nothing you say on a Portal video call is accessed by Facebook or used for advertising.
  • Portal video calls are encrypted, so your calls are secure.
  • Smart Camera and Smart Sound use AI technology that runs locally on Portal, not on Facebook servers. Portal’s camera doesn’t identify who you are.

Facebook is quick to explain that, in spite of what it deemed a misunderstanding, it hasn’t switched approaches since we spoke ahead of launch. But none of this is to say, of course, that the device won’t be collecting data that can be used to target other ads. That’s what Facebook does.

“I can be quite definitive about the camera and the microphone, and content of audio or content of video and say none of those things are being used to inform ads, full stop,” the executive tells TechCrunch. “I can be very, very confident when I make that statement.”

However, he adds, “Once you get past the camera and the microphones, this device functions a lot like other mobile devices that you have. In fact, it’s powered by Messenger, and in other spaces it’s powered by Facebook. All the same properties that a billion-plus people that are using Messenger are used to are the same as what’s happening on the device.”

As a hypothetical, Bosworth points to the potential for cross-platform ads targeting video calling for those who do it frequently — a classification, one imagines, that would apply to anyone who spends $199 on a video chat device of this nature. “If you were somebody who frequently use video calls,” Bosworth begins, “maybe there would be an ad-targeting cluster, for people who were interested in video calling. You would be a part of that. That’s true if you were using video calling often on your mobile phone or if you were using video calling often on Portal.”

Facebook may have painted itself into a corner with this one, however. Try as it might to draw the distinction between cameras/microphones and the rest of the software stack, there’s little doubt that trust has been eroded after months of talk around major news stories like Cambridge Analytica. Once that notion of trust has been breached, it’s a big lift to ask users to suddenly purchase a piece of standalone hardware they didn’t realize they needed a few months back.

“Certainly, the headwinds that we face in terms of making sure consumers trust the brand are ones that we’re all familiar with and, frankly, up to the challenge for,” says Bosworth. “It’s good to have extra scrutiny. We’ve been through a tremendous transformation inside the company over the last six to eight months to try to focus on those challenges.”

The executive believes, in fact, that the introduction of a device like Portal could actually serve to counteract that distrust, rather than exacerbate it.

“This device is exactly what I think people want from Facebook,” he explains. “It is a device focused on their closest friends and family, and the experiences, and the connections they have with those people. On one hand, I hear you. It’s a headwind. On the other hand, it’s exactly what we need. It is actually the right device that tells a story that I think we want people to hear about, what we care about the most, which is the people getting deeper and more meaningful hashes of one another.”

If Portal is ultimately a success, however, it won’t be because the product served to convince people that the company is more focused on meaningful interactions versus ad sales before. It will be because our memories are short. These sorts of concerns fade pretty quickly in the face of new products, particularly in a 24-hour news environment when basically everything is bad all the time.

The question then becomes whether Portal can offer enough of a meaningful distinction from other products to compel users to buy in. Certainly the company has helped jumpstart this with what are ultimately reasonably priced products. But even with clever augmented reality features and some well-produced camera tracking, Facebook needs to truly distinguish this device from an Echo Show or Google Home Hub.
Facebook’s early goal for the product are likely fairly modest. In conversations ahead of launch, the company has positioned this as a kind of learning moment. That began when the company seeded early versions of the products into homes as part of a private beta, and continues to some degree now that the device is out in the world. When pressed, the company wouldn’t offer up anything concrete.

“This is the first Facebook-branded hardware,” says Bosworth. “It’s early. I don’t know that we have any specific sales expectations so much as what we have is an expectation to have a market that’s big enough that we can learn, and iterate, and get better.”

This is true, certainly — and among my biggest complaints with the device. Aside from the aforementioned video chat functionality, the Portal doesn’t feel like a particularly fleshed-out device. There’s an extremely limited selection of apps pre-loaded and no app store. Video beyond the shorts offered up through Facebook is a big maybe for the time being.

During my review of the Portal+, I couldn’t shake the feeling that the product would have functioned as well — or even better, perhaps — as an add-on to or joint production with Amazon. However, that partnership is limited only to the inclusion of Alexa on the device. In fact, the company confirms that we can expect additional hardware devices over the next couple of years.

As it stands, Facebook says it’s open to a broad spectrum of possibilities, based on consumer demand. It’s something that could even, potentially, expand to on-device record, a feature that would further blur the lines of what the on-board camera and microphone can and should do.

“Right now, there’s no recording possible on the device,” Bosworth says. “The idea that a camera with microphones, people may want to use it like a camera with microphones to record things. We wanted to start in a position where people felt like they could understand what the device was, and have a lot of confidence and trust, and bring it home. There’s an obvious area where you can expand it. There’s also probably areas that are not obvious to us […] It’s not at all fair to say that this is any kind of a beta period. We only decided to ship it when we felt like we had crossed over into full finished product territory.”

From a privacy perspective, these things always feel like a death by a million cuts. For now, however, the company isn’t recording anything locally and has no definitive plans to do so. Given the sort of year the company has been having with regards to optics around privacy, it’s probably best to keep it that way.

Sonys new noise-canceling headphones are great traveling companions

Sonys new noise-canceling headphones are great traveling companions

I’ll admit that I’ve been caught up in the Bose hype. I’ve worn qBoseSony WH-1000XM3, a pair of wireless/wired cans that truly give everything else I’ve tried a bad name.

These $349 headphones come with a USB cable, audio cable, international audio adapter, and a compact case that holds the whole thing in a tight package. The headphones also support Bluetooth and will automatically swap to wired mode when you insert the headphone cable. The WH-1000XM3s support full noise cancellation that turns even the noisiest situation into a blissful escape. An ambient audio feature lets you listen to external sounds at the touch of a button and there is even a “Quick Attention” feature that turns the headphones down instantly when you need to speak to someone. Sony touts 30 hours battery life on one charge, a claim that I won’t refute as I haven’t recharged these things after multiple flights and they’re still going strong.

In short, these things are great.

Sony likes to brand all of its features and these headphones are no exception. The cans contain a “HD Noise-Canceling Processor QN1″ that run two 1.57 ” drivers that can handle up to 40 kHz. Something called a SENSE ENGINE notices what you are doing – walking, sitting, talking – and automatically changes the audio and noise reduction. Finally, the headphones offer multiple styles including stages, clubs, and outdoor stages. I doubt many will use or notice these features but they’re nice to have.

How do they sound? First, understand that these are not audiophile headphones. You get nice separation, great sound stage, and high quality audio out of these things but mostly you’ll be listening wirelessly to music on your phone or listening to awful audio being blasted out of your seatback entertainment system. Put garbage in, as they say, and you get garbage out. That said, I found these headphones superior to nearly every other model I’ve tested recently, including my Bose QuietComfort 35 IIs. The Sony models were bright and crisp and sounded great with noise canceling on or off. I also tested the headphones in loud environments including cafes and at home with lots of ambient audio playing. The ambient audio immediately disappeared when I turned on noise canceling, leaving only great sound.

They charge via USB and easily pair with any Bluetooth device instantly.

Now for some quibbles. The WH-1000XM3 has no physical power switch, a feature that lets you ensure your headphones are completely off. This single feature could mean the difference between a good flight and a bad flight. Further, the power button is right next to and the same size as the noise cancelation button. This makes it hard to tap this button if you’re wearing the headphones.

Thankfully, the headphones work when turned off, a feature that many lower-end noise canceling models lack. This means you can still listen to headphones if the battery is dead. I also noticed a bit of a bass heaviness in the WH-1000XM3s, but that could be a relic of using the fairly flat Bose headphones for so long.

The headphones also have some fairly cryptic touch features on the right cup including a call and music pause feature that works when you tap the sensitive surface. You can swipe through songs and turn the audio up and down and change the soundstage with a little button next to the power button.

Sony produces excellent audio products and these are no exception. I fly nearly every week these days and find myself reaching for these headphones over anything else I have in my extensive test collection. Time will tell if these cans survive the rigors of travel but given the price and the build quality I wouldn’t be surprised if these headphones are nestled in my backpack for years to come. Now I just have to break up with my Bose and I just know there will be drama.

Japan is cracking down on SoftBank’s revenue

Japan is cracking down on SoftBank’s revenue

First, a couple of quick follow-ups to our coverage of Form Ds yesterday, and then a deeper dive into the challenges SoftBank is facing with regards to its revenue in Japan. Finally, some notes on recent articles we have read.

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Form D(isappearing)

Form Ds are (usually) filed by startups to the SEC when they take on venture capital. However, there appears to be an increasing pattern of startups foregoing the filing, which has implications for both reporters (we have less info about what’s happening in the venture world) as well as with aggregate VC stats, which often rely at least partially on filings to determine the state of venture capital.

A number of readers emailed us with their views on the matter. One lawyer and multi-time startup founder wrote to say that:

Some additional considerations are cost: the Form D can be expensive with all of the associated state blue sky filings, especially if you have participation from a number of angels or smaller funds.

When you file a Form D, that generally pre-empts any equivalent state filing. HOWEVER, we were wrong yesterday when we said that “the form pre-empts most state securities laws so that startups don’t have to file in state jurisdictions.” Startups DO have to file in state jurisdictions, but usually just to point out that they have filed with the SEC.

Beyond cost, one issue with filing is when the round is smaller than the ultimate intended size. One reader reported in:

I was CFO at a startup and after consulting legal counsel, we didn’t file Form D for a Series C capital raising. Why? Because we didn’t want some investors to see how much is left in the round and defer funding

You might have convinced an investor to put in say $30 million into a round, and then they are shocked to find out that the round is really intended to be $50 million when the Form D hits the presses. Obviously, this is something that should be transparent to all parties, but I actually could see this happening more commonly at the seed stage, where some rounds almost certainly fundraise continuously and investors are more skittish.

Finally, it’s not just the finance and legal folks pushing for less filings, but also PR firms. One notable PR firm head told me that:

We’ve pushed a bunch of our clients to pursue [a 4(a)(2) exemption], but they were raising / had raised money from Tier One VCs.

That exemption allows startups to avoid a Form D filing, which “protects our launches from getting scooped.” The same PR head told me that this has been a policy for the past 18 months or so.

The data is still early, but the norms for filing do seem to be changing, and we are still doing more work on this. Reach out directly with your thoughts.

Japan is going after carrier revenue

KIM KYUNG-HOON/AFP/Getty Images

Now for the big story. We have been obsessed this week with SoftBank, first covering the telco group’s penchant for debt, and then covering the unusual financing situation between the IPO of its Japanese mobile division and its bankers, in which SoftBank is demanding its underwriters provide a massive bond to the Vision Fund in order to lever it up and juice returns.

It feels like the more we dig into all of SoftBank’s moving pieces, the stranger the story gets.

Over the past few weeks, the Japanese telco market has been absolutely crushed by traders. Market leader NTT DoCoMo announced about a week ago that it would cut customer rates by 40% on mobile services, and warned investors that it may take five years for the company to return to this fiscal year’s profitability. Concerned over industry-wide rate reductions, a possible pricing war and potential upticks in churn, investors rapidly sold the country’s three major wireless companies — including SoftBank — causing their collective market caps to plunge $34 billion the following day.

Japan’s telcos are extraordinarily profitable and exist in a mature market, so why the sudden rate change?

The two-dimensional answer is that the Japanese government has become more strident in its criticisms of the telcos, which charge some of the highest fees of any carriers in the world.

That’s partly because Japan’s mobile market has functioned essentially as an oligopoly, dominated by NTT DoCoMo, au-KDDI, and SoftBank, which currently account for around 45%, 31% and 24% market share, respectively. The lack of competition has led to unreasonably high bills for customers, but hefty and growing profits for the telcos.

Jun Sato/WireImage via Getty Images

The Japanese government, led by prime minister Shinzo Abe, has been trying to force prices lower. As Bloomberg’s Maiko Takahashi and Dave McCombs pointed out in a recent article, the government has been trying to reverse this trend for a while now:

In 2015 Prime Minister Shinzo Abe called for lower prices and the companies eventually responded by offering reduced-cost service plans that didn’t undermine revenue growth, as they were offset by rising average revenue per user for data. Comments by government officials about lowering prices in 2016 brought a similar response. Still, carriers said they are concerned the pressure could increase this time.

This time around, the Japanese government has gotten more serious. It’s now also pushing for structural changes that will not only create pricing competition, but that will also make it easier for others to enter the market. As Takahashi and McCombs continued:

The government has also been pushing to boost competition by making it harder for the big three to lure new users by offering the latest phones at little or no upfront cost. Officials have also pushed to end SIM locking, a practice by which carriers lock their handsets to be used only on their network.

They are not only looking at bills, but also other competitive barriers,” said [Tachibana Securities GM Shigetoshi] Kamada. “They want bills to drop naturally by making the environment more competitive.

To make matters tougher for the incumbents, Rakuten, Japan’s “Amazon-esque” e-commerce giant, has decided to test the waters in the telco market, having received an operating license to start service in 2019.

All this is backdrop to the main stage, which is that SoftBank intends to IPO its Japanese mobile carrier division, in what could be the world’s largest IPO float in history. That IPO is critical for cleaning up SoftBank Group’s balance sheet, which is heavily loaded with debt.

That leads us to a three-dimensional analysis: could NTT DoCoMo and KDDI be preemptively cutting rates at exactly the time that SoftBank needs to show good financial results and projections to investors in its IPO roadshow? It’s a brilliant play, since some pain today to the bottom line could potentially knock out or at least diminish one competitor in the market, turning this oligopoly into a duopoly, Rakuten’s telco initiative not withstanding.

SoftBank is acutely aware of the changing landscape, yet remains full steam ahead on the IPO front. In fact, SoftBank didn’t even seem slightly worried about the rate cuts, with Group CEO Masayoshi Son stating “I can make a commitment right here that profit and revenue in the mobile business will continue to grow.” SoftBank noted that its telco profits will be fine, with the company planning to cut costs in the business by reducing its workforce by around 40%.

We’re not saying this is blatant marketing for the IPO, but what makes SoftBank’s claim seem a bit dubious is the fact that when NTT announced its rate cuts last week, even NTT stated it expected to see its operating profit and revenues drop, not to mention that the company wasn’t even targeting a full recovery from the impact until 2023. And in an already saturated market with well-resourced new entrants, generating enough new users (let alone keeping existing ones) to offset a rate cut and maintain even a steady Average Revenue Per User (ARPU) seems like a pretty tall task.

When you combine the losses other Japanese telcos expect with the fact that SoftBank has been pretty transparent about the IPO proceeds going towards future Vision Fund investments rather than back into the telco unit, it’s a little perplexing on how there can be such a rosy outlook for the business. And that ultimately may fuel disinterest with this particular public float, and therefore broader challenges to both SoftBank and its Vision Fund, with all the implications for growth-stage startups that entails.

Thoughts on Articles

‘Gun-Shy’: How Federal Prosecutors Forgot Silicon Valley: Great overview and analysis from Matt Drange at The Information about the decline of white-collar prosecutions out of the U.S. Attorney’s office in San Francisco, which was once managed by Robert Mueller before he became director of the FBI. “The number of white-collar cases prosecuted by the U.S. attorney for the Northern District of California has plunged from a peak of 354 in 1995 to 72 in fiscal 2018.” Major challenges include a decline of interest in white-collar prosecutions nationwide, bad office culture and botched executions of several high-profile cases. Definitely worth a full read. (~2,300 words)

LA Is Trying to Fix its Prostitution Problem by Banning Right Turns at Night—and it Might be Working: Too long article about a unique tactic of the LAPD: in order to generate sufficient probable cause to stop a car trolling for sex, the city installed “no right turn” signs at intersections in areas with high prostitution in order to have more reasons to stop cars. What a hack of the system. (~1900 words, but probably should be like 800)

‘The Bus Is Still Best’: Helpful analysis by notable transit pundit Jarrett Walker, discussing the role of microtransit options like Via or Chariot in city transportation networks. Walker doesn’t believe that ride-sharing will be the future of mass transit, and instead posits that a properly-managed and well-resourced bus system is much more efficient from a cost, coverage, space, and equality perspective. While some of the conclusions are a bit binary, he offers an effective and revealing comparison of transportation unit economics, while also providing a useful primer on the actual functions an effective public transport system has to service. Worth reading, even if only to serve as a clear overview of the various aspects city transit agencies have to consider in transportation and infrastructure decisions. (~2,050 words)

What’s next

Definitely drop us a line if you have thoughts about Form Ds or SoftBank – we are continuing to investigate. We are thinking of focusing on Rakuten’s new telco a bit as well, so ping us if you have thoughts or data to share. We’re at danny@techcrunch.com and arman.tabatabai@techcrunch.com.

Reading docket

What we are reading (or at least, trying to read)

Articles

Books

Daily Digest: Technology and tyranny, lying to ourselves, and Spotify’s $1b repurchase

Daily Digest: Technology and tyranny, lying to ourselves, and Spotify’s $1b repurchase

Want to join a conference call to discuss more about these thoughts? Email Arman at Arman.Tabatabai@techcrunch.com to secure an invite.

Hello! We are experimenting with new content forms at TechCrunch. This is a rough draft of something new. Provide your feedback directly to the authors: Danny at danny@techcrunch.com or Arman at Arman.Tabatabai@techcrunch.com if you like or hate something here.

Harari on technology and tyranny

Yuval Noah Harari, the noted author and historian famed for his work Sapiens, wrote a lengthy piece in The Atlantic entitled “Why Technology Favors Tyranny” that is quite interesting. I don’t want to address the whole piece (today), but I do want to discuss his views that humans are increasingly eliminating their agency in favor of algorithms who make decisions for them.

Harari writes in his last section:

Even if some societies remain ostensibly democratic, the increasing efficiency of algorithms will still shift more and more authority from individual humans to networked machines. We might willingly give up more and more authority over our lives because we will learn from experience to trust the algorithms more than our own feelings, eventually losing our ability to make many decisions for ourselves. Just think of the way that, within a mere two decades, billions of people have come to entrust Google’s search algorithm with one of the most important tasks of all: finding relevant and trustworthy information. As we rely more on Google for answers , our ability to locate information independently diminishes. Already today, “truth” is defined by the top results of a Google search. This process has likewise affected our physical abilities, such as navigating space. People ask Google not just to find information but also to guide them around. Self-driving cars and AI physicians would represent further erosion: While these innovations would put truckers and human doctors out of work, their larger import lies in the continuing transfer of authority and responsibility to machines.

I am not going to lie: I completely dislike this entire viewpoint and direction of thinking about technology. Giving others authority over us is the basis of civilized society, whether that third-party is human or machine. It’s how that authority is executed that determines whether it is pernicious or not.

Harari brings up a number of points here though that I think deserve a critical look. First, there is this belief in an information monolith, that Google is the only lens by which we can see the world. To me, that is a remarkably rose-colored view of printing and publishing up until the internet age, when gatekeepers had the power (and the politics) to block public access to all kinds of information. Banned Books Week is in some ways quaint today in the Amazon Kindle era, but the fight to have books in public libraries was (and sometimes today is) real. Without a copy, no one had access.

That disintegration of gatekeeping is one reason among many why extremism in our politics is intensifying: there is now a much more diverse media landscape, and that landscape doesn’t push people back toward the center anymore, but rather pushes them further to the fringes.

Second, we don’t give up agency when we allow algorithms to submit their judgments on us. Quite the opposite in fact: we are using our agency to give a third-party independent authority. That’s fundamentally our choice. What is the difference between an algorithm making a credit card application decision, and a (human) judge adjudicating a contract dispute? In both cases, we have tendered at least some of our agency to another party to independently make decisions over us because we have collectively decided to make that choice as part of our society.

Third, Google, including Search and Maps, has empowered me to explore the world in ways that I wouldn’t have dreamed before. When I visited Paris the first time in 2006, I didn’t have a smartphone, and calling home was a $1/minute. I saw parts of the city, and wandered, but I was mostly taken in by fear — fear of going to the wrong neighborhood (the massive riots in the banlieues had only happened a few months prior) and fear of completely getting lost and never making it back. Compare that to today, where access to the internet means that I can actually get off the main tourist stretches peddled by guidebooks and explore neighborhoods that I never would have dreamed of doing before. The smartphone doesn’t have to be distracting — it can be an amazing tool to explore the real world.

I bring these different perspectives up because I think the “black box society” as Frank Pasquale calls it by his eponymous book is under unfair attack. Yes, there are problems with algorithms that need addressing, but are they worse or better than human substitutes? When eating times can vastly affect the outcome of a prisoner’s parole decisions, don’t we want algorithms to do at least some of the work for us?

Lying to ourselves

Photo: Getty Images / Siegfried Kaiser / EyeEm

Talking about humans acting badly, I wrote a review over the weekend of Elephant in the Brain, a book about how we use self-deception to ascribe better motives to our actions than our true intentions. As I wrote about the book’s thesis:

Humans care deeply about being perceived as prosocial, but we are also locked into constant competition, over status attainment, careers, and spouses. We want to signal our community spirit, but we also want to selfishly benefit from our work. We solve for this dichotomy by creating rationalizations and excuses to do both simultaneously. We give to charity for the status as well as the altruism, much as we get a college degree to learn, but also to earn a degree which signals to employers that we will be hard workers.

It’s a depressing perspective, but one that’s ultimately correct. Why do people wear Stanford or Berkeley sweatshirts if not to signal things about their fitness and career prospects? (Even pride in school is a signal to others that you are part of a particular tribe). One of the biggest challenges of operating in Silicon Valley is simply understanding the specific language of signals that workers there send.

Ultimately, though, I was nonplussed with the book, because I felt that it didn’t end up leading to a broader sense of enlightenment, nor could I see how to change either my behavior or my perception’s of others’ behaviors as a result of the book. That earned a swift rebuke from one of the author’s last night on Twitter:

Okay, but here is the thing: of course we lie to ourselves. Of course we lie to each other. Of course PR people lie to make their clients look good, and try to come off as forthright as possible. The best salesperson is going to be the person that truly believes in the product they are selling, rather than the person who knows its weaknesses and scurries away when they are brought up. This book makes a claim — that I think is reasonable — that self-deception is the key ingredient – we can’t handle the cognitive load of lying all the time, so evolution has adapted us to handle lying with greater facility by not allowing us to realize that we are doing it.

No where is this more obvious than in my previous career as a venture capitalist. Very few founders truly believe in their products and companies. I’m quite serious. You can hear the hesitation in their voices about the story, and you can hear the stress in their throats when they hit a key slide that doesn’t exactly align with the hockey stick they are selling. That’s okay, ultimately, because these companies were young, but if the founder of the company doesn’t truly believe, why should I join the bandwagon?

Confidence is ambiguous — are you confident because the startup truly is good, or is it because you are carefully masking your lack of enthusiasm? That’s what due diligence is all about, but what I do know is that a founder without confidence isn’t going to make it very far. Lying is wrong, but confidence is required — and the line between the two is very, very blurry.

Spotify may repurchase up to $1b in stock

Photo by Spencer Platt/Getty Images

Before the market opened this morning, Spotify announced plans to buy back stock starting in the fourth quarter of 2018. The company has been authorized to repurchase up to $1 billion worth of shares, and up to 10 million shares total. The exact cadence of the buybacks will depend on various market conditions, and will likely occur gradually until the repurchase program’s expiration date in April of 2021.

The announcement comes on the back of Spotify’s quarterly earnings report last week, which led to weakness in the company’s stock price behind concerns over its outlook for subscriber, revenue and ARPU (Average Revenue Per User) growth, despite the company reporting stronger profitability than Wall Street’s expectations.

After its direct-offering IPO in April, Spotify saw its stock price shoot to over $192 a share in August. However, the stock has since lost close to $10 billion in market cap, driven in part by broader weakness in public tech stocks, as well as by fears about subscription pricing pressure and ARPU growth as more of Spotify’s users opt for discounted family or student subscription plans.

Per TechCrunch’s Sarah Perez:

…The company faces heavy competition these days – especially in the key U.S. market from Apple Music, as well as from underdog Amazon Music, which is leveraging Amazon’s base of Prime subscribers to grow. It also has a new challenge in light of the Sirius XM / Pandora deal.

The larger part of Spotify’s business is free users – 109 million monthly actives on the ad-supported tier. But its programmatic ad platform is currently only live in the U.S., U.K., Canada and Australia. That leaves Spotify room to grow ad revenues in the months ahead.

The strategic rationale for Spotify is clear despite early reports painting the announcement as a way to buoy a flailing stock price. With over $1 billion in cash sitting on its balance sheet and the depressed stock price, the company clearly views this as an affordable opportunity to return cash to shareholders at an attractive entry point when the stock is undervalued.

As for Spotify’s longer-term outlook from an investor standpoint, the company’s ARPU growth should not be viewed in isolation. In the past, Spotify has highlighted discounted or specialized subscriptions, like family and student subscriptions, as having a much stickier user base. And the company has seen its retention rates improving, with churn consistently falling since the company’s IPO.

The stock is up around 1.5% on the news on top of a small pre-market boost.

What’s next

  • We are still spending more time on Chinese biotech investments in the United States (Arman previously wrote a deep dive on this a week or two ago).
  • We are exploring the changing culture of Form D filings (startups seem to be increasingly foregoing disclosures of Form Ds on the advice of their lawyers)
  • India tax reform and how startups have taken advantage of it

Reading docket