May 27, 2018 Snippets Double Issue: Our new partnership with cities + GDPR Day
As always, thanks for reading. Want Snippets delivered to your inbox, a whole day earlier? Subscribe here.
This week’s themes: a Double Issue featuring Social Capital’s partnership with 100 Resilient Cities, plus the potential effects of GDPR on the ad-tech bubble of the past decade.
In last week’s issue of our ongoing Snippets series on cities, we looked at transportation as an example of how technology can be non-neutral: sometimes technology can be a great levelling force in society with equal-opportunity benefits for all, but other times that very same technology can act as a magnifier of inequality that perpetuates problems. In the case of the automobile, what had been a great societal levelling force 50 years ago (when living far from work was desirable) has flipped into a driver of spatial inequality (as downtown living becomes more attractive, and regular folks get pushed farther and farther out in search of affordable housing).
The lesson we have to contend with is that Silicon Valley might be an incredible place to innovate, and to start building the future of transportation through on-demand, electrified, autonomous cars (and bikes and scooters). But going from zero to one is only the first part of the story: the second half of the innovation journey is navigating the complex world of real-life cities as that technology gets deployed. Spend any time in a city, anywhere in the world, and you’ll see these secondary consequences and compounding inequities at work: reinforcing cycles of poverty, affordable housing crises, transportation gridlock and unmonitored air pollution all hold cities back from being places where everyone can thrive, not only the privileged and fortunate.
The good news is that, for all their problems, cities are one of the strongest, most resilient, and most powerful instruments for driving prosperity that humankind has ever created. As urban metropoles around the world continue to blossom and flourish in the 21st century, the economic and societal might of cities are beginning to really flex their muscle: over half of the world’s population now call cities their home, and they drive 80% of the world’s total economic output. Cities are strong. Their problems are numerous and daunting, but they are inherently fixable. From our perspective, what is critically needed is a better way to harness the zero-to-one capability of Silicon Valley and the world’s tech industry in a way that works closely with cities, in a way where we can both learn for each other.
As Chamath wrote this week in his post “Our Commitment to Cities”:
“Silicon Valley’s contributions to cities have been, thus far, ad hoc at best. The tech industry is great at going from zero to one: creating something where nothing existed. But cities have people and policies and centuries — even millennia — of history to content with and work within. Solving the problems of our cities will require collaboration, nuance and patience.
We need a new approach to fixing our cities, one where Silicon Valley plays a role in partnership with the public sector, policy matters, urban planners and environmentalists.
To that end, I’m thrilled to announce our work with 100 Resilient Cities (100RC), an organization created by the Rockefeller Foundation to help cities around the world become more resilient to the physical, social and economic challenges of the 21st century. It is today’s unequivocal leader in driving urban resilience. 100RC combines local action, including Chief Resilience Officers in cities that manage risk and plan for the future, global influence that incentivizes policy makers and financial institutions to fund resilient development, and solutions — the tools that underpin these shifts. This is where Social Capital will underpin its expertise.”
Social Capital’s partnership with 100RC is our commitment to cities and to the mayors and staff who manage them: we’re ready to take on the world’s greatest urban challenges. Dr. Rajiv J. Shah, president of the Rockefeller Foundation, adds, “Crating the right tools to unlock private capital for the good of cities and their residents is one of the greatest opportunities and challenges facing us today in an environment where public budgets are strained and stretched. By joining forces as unconventional actors focused on a common goal of resilience and development, 100RC and Social Capital are creating a new model to solve challenges facing cities.” Those chose challenges include urban planning, intelligent transit, improved water and air quality, waste management, safety and security, storm water, flood planning, and connected smart urban insights. Tech will provide the tools, and cities and their citizens have the answers; at Social Capital we’re thrilled to help bring these two communities of builders and problem-solvers together.
As you may already know, this past Friday was GDPR Day: the day on which the European Union’s new General Data Protection Regulation rules come into effect. The EU Commission summed up the purpose as: “The objective of this new set of rules is to give citizens back control over their personal data, and to simplify the regulatory environment for business.” The rules, which you can find here, create a new framework and set of guidelines for any companies that seek to track, process, or generally use the data of European citizens (which, in a global online world, means just about every Internet company). And the penalties for non-compliance are severe enough that pretty much everybody is taking it very seriously — this is why you were buried in a landslide of “We’ve updated our privacy policy” emails this weekend, and why Google and Facebook have already been hit with lawsuits on day one.
Activist Max Schrems accuses Facebook and Google of GDPR breach | The Financial Times
What’s so interesting about the GDPR scramble is that it’s uncovering not just one problem, but really two intertwined issues that have co-evolved together. The first problem is that the online advertising and ad-tech industry has become an impossibly tangled quagmire of entities (ad exchanges, aggregators, networks, data suppliers…) and activities (targeting and retargeting, supply- and demand-side aggregation, analytics…) where nobody has full visibility, and there haven’t been any effective oversight bodies or accountability standards. As a result, user experience and user privacy have both gone down the toilet. Michael Freinbichler demonstrated this perfectly on Twitter, showing the regular USA Today page next to their new “EU-Safe” version. Guess which page loaded faster, looked better, and contained fewer cookies and JavaScript files?
The second problem is that targeted ads, and the visual real estate in which they’re placed, have been packaged and processed and abstracted to such a degree that no one knows how much they’re worth. There’s a great irony here, in the promise that targeting, big data analytics and the internet would give us more precision and clarity into ad performance. The reality — aside from outliers like Google — is that for a very long time we’ve been selling what may often be a worthless product, while calling it gold with a smile.
There’s a fascinating comparison to be made here with the 2008 financial crisis. Peter Calthorpe from UrbanFootprint (remember him from last week?) has an interesting and non-traditional take on one of the drivers behind the housing crisis that we don’t often hear about. It was that we built too many houses that people didn’t actually want to live in: houses in the desert, houses in the exurbs, houses wherever land and construction costs were low. So how do you sell a house that no one really wants? Well, you make it really easy to buy. And the way we did that was by pooling and securitizing mortgage debt into increasingly complicated instruments that created a false sense of confidence, backed by precision and math, separating the ultimate buyers from the houses themselves. So long as the bubble was inflating and the shell game could continue, no one was incentivized to stop.
Fortunately, the “adtech bubble”, as Doc Searls calls it in a must-read article, is nowhere near as large nor as leveraged as the housing market, so GDPR doesn’t pose any kind of systemic risk to the world outside of the online advertising and marketing industry. But we should pay attention to the comparables.
In an online world that was growing users, growing content, and growing serve-able ad space every year, it’s true that a lot of legitimate and successful advertising could take place — look at Google. But there was also a huge rise rise in ad technology, middlemen, and processing whose job was not actually to target anyone more effectively, but really to pool, obscure, and repackage ad space that no one really wanted and turn it into something that could be sold for an attractive price, with “precision” and “big data” as the veneer through which advertisers could keep buying those targeted ads, year after year. There are an awful lot of similarities between “Five bad loans pooled together can still make a Triple-A rated security! You can trust math!” and what’s been going on with targeted advertising. And the reason it’s been able to perpetuate for so long is that the internet has grown so fast, for such a long time.
One way that bubbles form is when we create an excessive amount of inventory of something that nobody actually wants, but we’ve all collectively deluded ourselves into believing they have durable value. In Peter Calthorpe’s story of the housing bubble, the American housing industry had expanded for such a long time, with so little oversight, that by the end a greater and greater percentage of houses being built were in places nobody really wanted them. And the only way to unload those houses onto buyers was by way of a system of increasingly complex and ultimately toxic synthetic assets. The story of online advertising over the last ten years sure looks the same way: web and mobile traffic has been going up for such a long time, with so little transparency and oversight into the advertising networks paying for that free content, that by the end, a huge percentage of those ads being placed were generating little to nothing in terms of actual cash value. (The Weather Channel, of all companies, savagely described the termination of their Facebook ad partnership with “We noticed, over the course of two years, that we were being paid in all types of currencies — followers, shares, views — that did not feel like money.”) Come GDPR day on Friday, not only did ad buying fall off a cliff in Europe, but there was a distinct wave of “finally, we can get out of this un-worthwhile mess” that emerged out of the woodwork, right on schedule.
GDPR Mayhem: programmatic ad buying plummets in Europe | Jessica Davies, Digiday
It only seems fitting that the online adtech industry, much like the financial services industry a decade ago, couldn’t help but find new ways to sell their inventory. Will GPDR be the event that pulls back the curtain on how much of this advertising is ultimately creating zero value? It certainly could. And hopefully it means our web pages will load faster, and a little more privately, before too long.
Elsewhere in the world:
Cities in Ethiopia, and why is the second largest one so small? | Tyler Cowen
How China’s 36-best car company saved Volvo | Bryan Gruley & Jamie Butters, Bloomberg
And around America:
Why do Americans stay when their town has no future? | Alec MacGillis, Bloomberg
In a warming west, the Rio Grande is drying up | Henry Fountain, NYT
It’s commencement speech season; here are a few from this year to check out. Several of them focused on the theme of truth:
Ira Glass | Columbia Journalism School 2018 Commencement
Rex Tillerson | Virginia Military Institute 2018 Commencement
Michael Bloobmerg | Rice University 2018 Commencement
And others on gaps that remain in society and how to overcome them:
Abby Wambach | Barnard 2018 Commencement
Oprah Winfrey | USC Annenberg 2018 Commencement
Hitting walls where others aren’t:
Booking.com gains ground as an Airbnb rival | Cory Weinberg, The Information
The finance to value framework in startups | Fred Wilson
Invisible asymptotes | Eugene Wei
Other reading from around the Internet:
Check, please: Waitr purchased, likely next meal delivery service to go public | Second Measure
The AI Doctor will see you now | Christopher Mims, WSJ
Rush to protect lucrative antibody patents kicks into gear | Heidi Ledford, Nature
In this week’s news and notes from the Social Capital family, EIR and friend of Social Capital Jessica Alter (founder of Tech For Campaigns and FounderDating) recently wrote something important that you should read on opioids and the future of work in America:
Why don’t you care? Opioids and the future of work | Jessica Alter
Death by drug overdoses is now the leading cause of death for Americans under 50, which is a statistic that’s both shocking and numbing: it has overtaken car accidents, guns, and breast cancer to become the number one killer of young and middle aged people in the United States. The majority of these deaths come from opioids, which touch not only those who are addicted but also their parents, children, partners, and friends — over 40 million Americans are directly affected.
Jessica’s post covers a grim correlation that’s necessary to talk about: the relationship between the opioid struggle and a related phenomenon, labor-force dropout. We may celebrate low unemployment statistics, but they don’t include working-age citizens who have dropped out of looking for work entirely, a segment of the population that has been rising steadily since 2000. And the relationship between the two is far more related to place and environment than we want to admit.
As Jessica writes, “It’s easy to pick your jaw up off the floor after reading those numbers and go about your day or just mention them as a “did you know” at a dinner party. But I hope some subsegment of you help with finding solutions. … I’m especially interested in talking to people who want to help with the treatment side of this crisis. Not only because prevention requires government intervention and regulation but also because treatment for opioid addiction holds the promise of improving all addiction treatment (which is currently subpar). There are major opportunities on the medical and social sides (jobs, financial training, etc) of treatment and the one that is maybe the most foundational — data. So if you do care, let’s talk.”
If this is an issue you care about, please get in touch.
Have a happy and thankful Memorial Day weekend,
Alex & the team from Social Capital
