The Libra witch trials

Issue 42/2019

We're back! For those who wondered where the newsletter went, I was off in Japan watching the Wallabies crash and burn out of the Rugby World Cup. Rugby Australia needs a complete overhaul and while the coach has gone, the rot runs far deeper. Unfortunately, I'm not sure anyone with sufficient influence has the backbone to mess with the New South Wales old boys' club and push for what's required.

Speaking of lacking a backbone, during a six hour Congressional hearing last week Mark Zuckerberg basically conceded that his cryptocurrency Libra, as originally defined in the white paper, is no more. A shame, really, as Libra executed properly by a company with the resources of Facebook really could have caused some of the welfare-boosting financial sector disruption that the world desperately needs.

But the assault on Facebook, the Zuck and Libra by the House Financial Services Committee, of which Libra was the centrepiece, makes me certain he doesn't have the stomach to pull it off:

The roughly six-hour hearing saw Zuckerberg fumble questions from the House Financial Services Committee about how the external Libra Association will be funded, what kinds of regulations should apply to Libra, how Facebook plans to make money from Libra, and how policies like refunding fraudulent transactions will work.

“Frankly, I’m not sure we learned anything new here as policy makers,” the ranking Republican on the committee, Rep. Patrick McHenry, said in a closing statement.

What Zuckerberg did make clear is that Facebook won't launch Libra without proper regulatory approval in the U.S., and that Facebook would withdraw from the Libra Association if the group eventually decided to move forward on its own without the approval of U.S. regulators. But Zuckerberg's testimony didn't shed any light on what specific laws Facebook thinks should govern Libra.

Zuckerberg is distraught and at this point will clearly do anything to appease the political class and maintain his 'woke' status. It was, after all, only a couple of years and several scandals ago that he was travelling around the country, presumably to boost his profile as 'one of the common people' prior to a possible 2020 run at the Presidency. He will fold at every opportunity and waiting for "regulatory approval", for a supposedly disruptive cryptocurrency, essentially spells the end for what Libra was supposed to be.

Worse, it seems further concessions have already been suggested, with David Marcus - head of Facebook's Libra project contribution - "open to looking at alternative approaches".

Facebook's lack of gumption aside, some of the questioning at the hearing titled "An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors", was disgracefully outlandish:

How many companies in the Libra association are headed by LGBTQ people? Isn't it true that Libra is a project of white men? What are you doing for African Americans whose lives you have ruined? Do you discuss white supremacy at your far right dinner parties?

Six hours of democracy at its finest. As a recent OpEd in the Wall Street Journal aptly stated, "Facebook is hardly problem-free (though its effect on elections is grossly exaggerated). In the annals of mankind, permission-denying politicians are likely to remain the bigger problem".

RIP Libra and potentially the United States as disruptor in chief, if the openly anti-innovation House Financial Services Committee is any representation of the country as a whole.

Enjoy the rest of this week's issue. Cheers,

— Justin


The bits


Good news from Australia, bad news from India

The safety / privacy trade-off is one of the more important debates in which most governments are unwilling to engage (their incentives align them to a strong security bias). But in Australia at least there is some limit to the seemingly never-ending erosion of digital privacy:

"An ambitious but controversial plan for a central identity database of Australians has been rejected by the Federal Parliament's security and intelligence committee. The bill [would have allowed] the Department of Home Affairs to collect, verify and share identity information across Commonwealth and state and territory governments and included plans for a face verification service that would make it easier for documents containing photos of people to be verified online."

Elsewhere, India has copied the EU and dived right into the rabbit hole of worldwide content removal, attempting to impose its local laws on companies and people in other countries. I'm not sure how this will play out but it's not good if you like having a free and open internet.

Learn more:


How to lose billions

Ask SoftBank, which is playing fast and loose with Japanese pensions by throwing good money after bad at the Ponzi scheme that is WeWork:

"SoftBank first committed $3.1 billion in new funding in 2017. Mr. Neumann has told others that Mr. Son appreciated how he was crazy—but thought that he needed to be crazier.

Despite We’s growing size, its losses have been increasing at the same rate as revenue, creating a constant need for fresh investments.

Meanwhile, numerous other business lines, including a residential arm, a gym and an office design and management arm, have all been scaled back or failed to deliver the high profit margins once expected, people familiar with the businesses said."

Learn more:



Image of the week

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Don't trust valuations

Don't trust bank valuations:

"With access to all the same information that public investors saw in the S-1, Morgan Stanley and Goldman Sachs bankers valued WeWork at $80-100 billion.

Months later, the company's latest valuation is under $8 billion."

This week's data breaches


Remember the Equifax data breach? All the dirt is being dug up at the class-action lawsuit against the company and it shows some appalling data protection practices. For example, both the username and password for the portal used to managed credit disputes were simply "admin". And the data it stored? All unencrypted and available through a "public-facing, widely used website".

The breaches:


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Issue 42/2019: The Libra witch trials was compiled by Dr Justin Pyvis and delivered on 29 October, 2019. Feel free to send feedback, suggestions for future issues, ideas, insults, or pretty much anything that crosses your mind to his Keybase or Twitter account.