The Market Ticker
Commentary on The Capital Markets- Category [Technology]
2017-08-03 07:00 by Karl Denninger
in Technology , 323 references
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There has been a lot of micro focus on Internet advertising -- the prevalence of "bots" (robotic "readers" that click ads), second, third, fourth and sixth accounts that belong to cats, dogs and mice, measurement problems (such as counting a video "viewed" if 50% of the pixels could have been seen for 2 seconds) and more.

But nobody has, as far as I know, talked about the real, underlying issue behind all of the above and more: Incentives, the mismatch thereof, and thus the outrageous enabling of worthless advertising which the consumer directly pays to have sent to them by the venues in question.

Think about the advertising world ex-Internet.  A television station has to air content people want to watch and that either informs or entertains.  It also generally has to differentiate between the two: News .vs. entertainment.  The running of commercials (advertising) is something that is distinct from either of the other two types of programming and is pretty easy for the consumer to differentiate.  The more entertaining or informing the ordinary content is the more people watch it and are engaged with a positive view toward said station and thus the more-receptive they are to advertising, in addition to the number of viewers growing.  In other words the incentives are aligned between the station owner and the advertiser.

This is exactly backward in the Internet space.

The Internet is consumed with "eyeballs", metrics such as daily active users and monthly active users.  None of these properties care if you are either entertained or informed, and in fact they actively seek to blur the boundary between entertainment, opinion and fact, never mind intentionally dishonest or outrageous content.  Why?  Because doing so drives daily active users.

Facebook, for example, began with being a place where the primary content was you sharing pictures of your cute pussy (cat, you dirty-minded fool.)  But it didn't stay that way for long, because your actual circle of friends is not that large.  So today a huge percentage of "posts" are from either 'affiliated sites' that make it easy to put their "stuff" on Facebook with the intent to drive traffic to them where they can obtain an advertising flow (e.g. Godin World, Viral threads, etc -- the myriad "look at this test result" posts) or are pure clickbait themselves (e.g. "onlyinyourstate", "upworthy", etc.)

A quick look through a typical feed page shows that the majority of items displayed are in one of these two categories.  Facebook could stop them instantly since identifying them as "clickbait" or "affiliated crap" (e.g. let me see your profile so I can spam you -- oh, and tell you what your name means in Springlashdeshi) is so trivial even a robot could do it.

If Facebook did that their "engagement" would fall by an enormous amount.

The problem is that not doing it makes Facebook worse than the National Enquirer in terms of being a "real place to go to either be entertained or informed."

Now remember something important: Facebook sells ads based on their claimed "active user" counts and "engagement." Not only does it not matter that "what you name means in Swahili" is posted on your timeline through some "affiliated site", a meaningless and inane sop to get you to give away personal data on yourself and everyone who has you listed as a friend without telling you in advance or compensating anyone for same Facebook the company has every incentive to cooperate with these firms screwing you by taking and selling that data because it drives up their "active user" and "engagement" numbers.  In other words "clickbait" is just fine with Facebook (despite what they say in public) so long as people keep clicking instead of forming a posse to stake out Zuckerpig's residence in Silicon Valley while demanding his head on a pike and the more surveillance Facebook can conduct on you and sell without provoking said posse to form the better -- for them.

Further, Facebook does not care how outrageous the claims are that are made through those sites even though they're displayed on their pages.

Why not?

Because they're not the ones making the claims.

Consider email spam.  We all hate it.  But how much would your ISP "hate it" if they billed you to transport it, that is, if they made money either directly or indirectly because you got spammed?  They'd love it!  Oh they might say otherwise, but there's utterly no reason in that situation for them to do anything to block it and in fact they'd probably act in ways to make it hard for you to block it.

Do you need to ask again why Google and Apple won't permit direct access to their "hosts" files by user programs for both IOS and Android which can, by doing so, implement an easy-to-use advertising blacklist?  The all claim it's for 'security reasons' but it would be trivial to force all such redirects to 127.0.0.1 which is intrinsically safe.  They know this and thus their "it's for security reasons" claim is fraudulent. Further, why do not the cell companies implement an easy-to-use option switch on your account to elect DNS servers that blackball known advertising domains?  I could have, and were I still running an ISP would have, done this years ago as it's literally a few hours worth of time to code it up and test it.  The effect of implementing such, in addition to eliminating the ads, is that your user-perceived performance improves markedly because page and app data load times go way down.

The answer in both cases is the same: The phone OS makers and cell carriers only care about volume since that's how they get paid and the cost is not on them -- it's on you.

Further, none of these firms care if bots, "cats", "dogs" and similar click ads and use their systems.  All of the above drive up their "engagement" numbers, their "daily active users" and traffic levels which the folks transporting the data to you bill you for.  They only care if they are caught intentionally ignoring or actively promoting such garbage because then advertisers could sue them.

The incentives for AT&T, Verizon, T-Mobile, Google, Apple, Facebook, SNAP and similar, in other words, are exactly opposed to an advertiser's incentives.  In fact as long as you tolerate the additional cost in both time and money to transmit all that spam to your screen they love it since it drives up the numbers they use to sell ads and, in the case of the transport firms, the direct revenue from you as a customer!

An advertiser only gets a good deal in buying advertising if he or she earns more in profit than the ad costs to run.  Not revenue folks, profit.  Every incentive the carriers, OS sellers and social media firms have is directly dilutive if not actively opposed to the interests of said advertisers!

Eventually advertisers are going to figure this out.  P&G already has to some small extent; they cut $100 million off their digital ad spend last quarter and saw no decrease in revenue growth.  While $100 million isn't a large percentage of the total advertising budget for a company like P&G it underlines the point; that money was literally a cash bonfire handed to the people running the ads as it bought them exactly zero increase in business.

If and when the stock market figures this out Facebook is a literal ghost.  So is SNAP.  So are all the other properties that have these lofty valuations.  Oh sure, sites like The Market Ticker, which actually offer up something that I'd like to think of as insightful editorial content continue to have some value in the advertising space but the majority of that which is not a photo of your dog or plate of food on Facebook or SNAP is in fact clickbait or some scheme to get your information and in turn that means their so-called "MAUs" and "DAUs", along with their "engagement" figures are worthless.  Google, while having a real property in Adsense probably finds itself with half or three-quarters of the business it generates today while internet properties like Facebook and SNAP have perhaps has 10% of today's useful ad load and a literal zero stock price.

Further, if the regulators were to get their **** together and forbid carriers from billing you for data used to carry advertising, forcing it to be tagged and back-billed to the advertiser, you'd instantly see options show up to elect to block that data from all the cell carriers in an afternoon.

Were just one of them to do that the "value" of said mobile advertising would fall to an immediate zero and they'd gain all the customers.

"Uncarrier" eh?  Uh, no.

Legere could do this in a day with T-Mobile, for example, if he decided to.

You'd never put up with being billed by the minute for television time that included ads, as that would effectively force you to pay for the delivery of advertising into your living room.  Why do you tolerate cell companies billing you for the data used to carry said advertising to your phone?  Remember that this is essentially all of Facebook's ad revenue today.  This is an outrageous and fraudulent practice as it carries negative value to you and yet the industry has managed to evade both consumer protection laws and the consumer's torches and pitchforks thus far.

For how much longer will that evasion continue to work?

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2017-07-26 11:21 by Karl Denninger
in Technology , 420 references
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Recently there have been claims made on Reddit from a person who says he was a former Amazon IT employee.

He alleged that there are intentional back door connections into their "public" side from a "private" side run by, ostensibly, the NSA.  Said systems were intentionally connecting to same and did have root access to said public side machines.

Folks, I've said this before and nobody wants to pay attention to it but you had better listen up.  It's simple, really:

IF YOU HAVE ADMINISTRATIVE (e.g. "root") ACCESS TO A MACHINE RUNNING A HYPERVISOR AND HOSTING CLIENTS YOU CAN TRIVIALLY READ ANY OF THE MEMORY IN USE BY SAID CLIENTS WITHOUT BEING DETECTED.  THIS IN TURN MEANS YOU CAN TRIVIALLY READ ANY ENCRYPTION KEYS USED BY SAID CLIENTS AND STEAL THEM UNDETECTED.

HAVING DONE SO YOU CAN NOW READ EVEN SO-CALLED ENCRYPTED DATA STORED ON THE DISKS OF SAID CLOUD SERVICE COMPLETELY UNDETECTED.

ALL CLOUD SERVERS ARE BUILT ON THIS ARCHITECTURE.

EVERY.

SINGLE.

ONE.

There is no such thing as a secure encryption key, ever, on a cloud server.

EVER.

All such keys must be presumed to have been stolen immediately upon being put on said machine.  If said key is a signing key, such as for a Certificate Authority ("CA") or similar then the person who steals it can trivially create new authentication credentials that the system will accept as legitimate even though they are entirely forged.

There is exactly zero a customer can do to protect against this in a "cloud" environment.  Leaving aside the fact that firms like Amazon employ a huge number of people with legitimate administrative access to said machines, that you have no ability (or right) to vet any of them and you will never be told if any who have ever accessed any machine on which your data resides are terminated or quit, with or without cause, the fact remains that there is now an allegation that Amazon intentionally allowed our "three letter agencies" a back door into said machines and it was actively used on a regular, ongoing basis and thus all your keys that ever touched any of those cloud providers must be assumed to now be in the possession of multiple other people, including, I remind you, other than US government actors since the NSA, CIA and similar cannot manage to keep their own contractors from stealing and handing over said material.

Specifically both Russia and China must be presumed to have any such key along with others and you must presume that they will use it and there isn't crap you can do about it when they do.

You are a ****ing idiot if you have any sort of confidential business information on any of the public cloud company machines.

Period.

I've been in the computer field since the 1980s and I've never in my life seen anything so ******ned stupid as what is going on in corporate America today --  not when it comes to stock valuations and definitely not when it comes to deploying business-critical applications on knowingly-bugged systems that in fact are bugged with the explicit permission and cooperation of the firm you're buying the service from.

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2017-07-26 07:00 by Karl Denninger
in Technology , 538 references
[Comments enabled]  

Prediction: Within 10 years every single airline will be reduced to carriers that operate routes consisting entirely of flights of more than 1,000 miles, most over water.

Why?

Because self-driving cars.

The long-haul trucking industry is going to get it up the pooper first, simply because of the cost of tractors.  Self-driving vehicles there are a moderate cost increase and they eliminate the nut in the cabin that makes mid-five to low-six figures and as such they pay for themselves in a single year.  You will still have drivers for the local segments but the automation will hook up and run the trailer from Terminal A -> Terminal B, where it will automatically undock and drop it, instantly deleting 80% of the truck drivers in the economy.

But as the cost comes down to where the additional cost gets under $5,000 -- and it will be a while before the hardware and software is that cheap, probably 20 years or so -- the airline industry is finished.

Look folks, most cars today can be retrofitted as the automakers have moved to electric steering assist (as opposed to hydraulic) for fuel economy reasons, every engine is DBW (no mechanical link between the throttle and pedal in the cabin) and brake systems now have both retardation and application available via the ABS pump which is routinely used for both since it does traction control as well.  They're four-channel too, unlike the brake pedal which is one-channel, which means they can be more-efficient than even a highly-skilled driver in terms of stopping ability.  (As an aside a highly-skilled driver can beat the ABS-n-mash-pedal mode; I can quite-handily outperform these systems in crap conditions, but they're a vast improvement for the "slam on brake" crowd, which is most people.  But no driver with a one-channel system can beat a 4-channel system that is applying, rather than retarding, the brakes.)

What this means is that it is now a matter of sensors + CPU and you have an autonomous-capable vehicle.  Punch in a destination, get in back and ride.

Show me a $500 Lidar array that can do the job and suddenly that $2,500 retrofit becomes not only possible it's easy and it's an option roughly equivalent in cost to a leather seating package on new vehicles.  At that point the "take rate" will be 90%.

Today I can drive from my home to Atlanta in about 5 hours.  All-in, including "mandatory" 1 hour pre-take-off airport arrival requirements it takes me almost 4 hours assuming no weather or schedule delays to fly that same route.  30 minutes to the airport, 1 hour pre-departure mandated time to be at the airport, 1 hour 15 minute flight time (up more than 15 minutes in the last 8 years due to airlines reducing speed to save fuel!), another half-hour at Hartsfield deplaning and dealing with that sprawling piece of crap and 30 minutes to the destination via some form of ground transport is nearly 4 hours!  Actual operating cost of said autonomous vehicle is materially cheaper than the flight is and I can take a nearly-unlimited amount of cargo with me at no additional cost, unlike today's airplanes where every single ****ing bag is another $50.

The day I can get into the car at midnight in the back where I have equipped half the fold-down rear seat and trunk into a comfortable place to sleep, push the button, go to sleep and wake up at 6:00 AM (1 hour time zone shift) in Atlanta in time for two espressos before a business meeting Delta is bankrupt.  That's especially true when I can choose to cut the fuel cost of the vehicle by some 35% by going to bed at 10:00 and telling the computer to route and operate for optimum fuel efficiency, which takes another hour or so but I don't care because I'm sleeping anyway.  Exactly zero wasted time results from such a paradigm because the travel takes place when I am usually asleep anyway versus the current model that demands that I be aware and awake (and not doing something else of my choosing) for most of the time.  Out of those ~4 hours in air travel today I can only sleep for one of them and that's if there's no screaming kid or 400lb monster in the next seat!  Oh, and if I want a drink -- boozy or not -- it doesn't cost $5 either as I can bring an entire cooler full of them in my car.

The model isn't much different for a drive to Indianapolis or some similar place like Chicago.  There are no direct flights there from here, so air travel is a damned mess.  I have to take two flights, deal with the layover and the crazy in three airports -- departure, mid and destination.  I also have to deal with the hassle and expense of ground transport (taxi, uber or a rented car) on the other end, none of which is true if I get into my automated personal vehicle and push the button.  Again, I can choose my departure time as I wish instead of as an airline wishes, optimizing it for time I'd spend sleeping anyway, and thus reducing the lost time to nearly zero -- even for a 1,000 mile trip halfway across the country!

I need emerge from said car only to******and refuel it -- once, during said 1,000 mile trip.  I probably need to******anyway somewhere during that time, so there's no net loss.

Folks, there is no business model for the airlines as they exist today once this becomes rationally expensive.  Hell, even if these are originally "fleet vehicles" you hire and nobody buys one except the super-rich it still works because I can always take the Taxi, "L" or Uber on the other end and summoning one of these vehicles for the return trip works too.

Not only is this more-convenient and "on demand" rather than on someone else's schedule nobody gets bumped, nobody gets groped, there's no "extra fee and insult" garbage the airline industry has turned into a maze of and it's cheaper on top of it.

The airlines have cut their own throats, in short, and technology is about to kill them all, with the exception of 3,000 mile flights and over-water segments where you simply can't do it any other reasonable way.  That's a fraction of their current capacity and operating schedule and I'm going to enjoy watching them all burn in bankruptcy court.

Oh, and as for the cities and other places that have piled up the debt building airports?  **** 'em all for not ramming these issues up the chute of the airlines and forcing them to cut the crap years ago.  May those cities and port authorities (here's looking at you, OHare, LaGuardia and others) all rest in (fiscal) pieces.

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2017-07-22 07:00 by Karl Denninger
in Technology , 251 references
[Comments enabled]  

As is allegedly claimed you can buy nearly anything on the so-called "Darknet", a network of web sites linked by Tor that supposedly makes you "anonymous."

Well, not really anonymous -- if you want to transact anyway.

Two "newer" sites for drugs were recently shut down.  That's not all that new; the infamous Silk Road went down a good time back and the operator got busted.

But this time the cops did it differently.  They took over the site and ran it for long enough to finger a bunch of people on both the supplier and buyer sides of transactions.

There's no defense against that, of course.  And not only will there be some prison sentences coming from this latest little escapade but more to the point, this probably marks the end of that particular area of "commerce."

There's literally no way for a buyer or seller to know if the "intermediary" is really some random person running the site and making a commission or the cops, who are simply collecting all the information in the middle, waiting until they get plenty of it to identify the people on both ends (in order to transact in something, of course, you have to send it from somewhere to somewhere in meatspaceand then bust everyone on both sides.

I don't see how you defend against this one.... and sowing the fear that the next site you try to use if your favorite just "disappeared" might in fact be run by the cops is probably enough to destroy the attraction for this particular little path for "illicit commerce" -- at least where physical goods have to change hands.

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2017-07-21 15:20 by Karl Denninger
in Technology , 239 references
[Comments enabled]  

Good God, this is the dumbest and most dangerous - thing I've seen yet.

A Facebook message pops up on my phone screen. “What’s going on in your world?”

It’s from a robot named Woebot, the brainchild of Stanford University psychologist Alison Darcy.

What?

This "bot" looks at what you do and then decides it thinks you're depressed.

Ok, who owns that "deduction" and what happens when it's wrong?

See, here's the problem -- this doesn't require an "app" that you load.  Facebook looks at everything you do that it can link back to your id on their site now.

Is the company doing this now -- and selling it to whoever wishes to buy, such as, for example, your health insurance company?  Your employer?  A recruiting company (that in turn has quite a bit of influence over whether you find future employment)?  A prospective landlord?  Never mind the government.

Look folks, you have some deep thinking to do.  It is exactly this sort of "app" that leads me to say "Advertise on Facebook or any other Zuckerberg property and I will never buy from you again."

The simple fact of the matter is that today this sort of privacy invasion is legion.  Simply loading Facebook Messenger on your phone immediately correlates with ads that Facebook could only know you're interested in by mining what you do on said phone and sending it back to Facebook.  Note that nowhere did you consent to the app snooping around in your process list, yet what happens could only be determined in that way.

Therefore you must assume it does.

Then there are the myriad reports of people who suddenly start seeing ads for something they discussed orally with someone while their phone was on but idle and locked.  Again -- they had a conversation, not a text message exchange or an email, but a verbal conversation with someone, and suddenly.... "it knows."  How does it know other than by snooping using the microphone in the device in your pocket or on the table?

It doesn't even have to be your device, since nowdays people are "voiceprinting" folks -- if you friend manages to "donate" your conversation because his device is on and snooping you get tagged automatically.

Folks, you can't sit for this sort of ****.  Not only is this "AI" unreliable and nothing more than a pattern match it is a fact that you are disadvantaged financially by it in an amount sufficient to pay for all of it and whatever someone pays to "advertise" using it otherwise there would be no market for it and it would disappear.

So it is a fact that you are being screwed.  You probably can't identify exactly how and when you are being screwed but that you are is a fact.

You either put a stop to this or we will quite-soon find the nightmare scenario happening all too often -- you don't get the job, you don't get the loan, your auto insurance is suddenly canceled because "you're just not a good risk" (but they won't tell you why) and more.

The EU has figured out that this is a severe and unconscionable intrusion into your life.  That is, you can't possibly give informed consent because you have no idea what sort of "out of scope" use the people who collect the data will put it to and thus a huge amount of this sort of crap there will be banned as of the first of next year.

We had better ban it here and the market way to do it is that for every organization you see that advertises on these "platforms" boycott them immediately, permanently and tell them why.

Further, if you want to have a conversation with someone -- an actual conversation where you can speak freely and roll things around between you -- then you need to first insure that all electronic devices within range of your voices are turned off.  If you can't do that and prove it up then worthless platitudes are all that remain safe to discuss, and this in turn means that your real interactions with other people in real life have just become entirely worthless as well.

Think about that folks -- are you willing to sacrifice all of the value of your personal interactions with others so you can have "Face****er" in your pocket -- or any of your "friends" can and do?

Stop it now -- by market power if you can and by force if you must -- or lose what's left of the value in human interaction.

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