Why no one really quits Google or Facebook

Image Credits: MirageC / Getty Images

Another week, another set of scandals at Facebook and Google. This past week, my colleagues reported that Facebook and Google had abused Apple enterprise developer certificates in order to distribute info-scraping research apps, at times from underage users in the case of Facebook. Apple responded by cutting off both companies from developer accounts, before shortly restoring them.

The media went into overdrive over the scandals, as predictable as the companies’ statements that they truly care about users and their privacy. But will anything change?

I think we know the answer to this question: no. And it is never going to change because the vast majority of users just don’t care one iota about privacy or these scandals.

You’re reading the Extra Crunch Daily. Like this newsletter? Subscribe for free to follow all of our discussions and debates.

Privacy advocates will tell you that the lack of a wide boycott against Google and particularly Facebook is symptomatic of a lack of information: if people really understood what was happening with their data, they would galvanize immediately for other platforms. Indeed, this is the very foundation for the GDPR policy in Europe: users should have a choice about how their data is used, and be fully-informed on its uses in order to make the right decision for them.

I don’t believe more information would help, and I reject the mentality behind it. It’s reminiscent of the political policy expert who says that if only voters had more information — if they just understood the issue — they would change their mind about something where they are clearly in the “wrong.” It’s incredibly condescending, and obscures a far more fundamental fact about consumers: people know what they value, they understand it, and they are making an economic choice when they stick with Google or Facebook.

Alternatives exist for every feature and app offered by these companies, and they are not hard to find. You can use Signal for chatting, DuckDuckGo for search, FastMail for email, 500px or Flickr for photos, and on and on. Far from being shameless clones of their competitors, in many cases these products are even superior to their originals, with better designs and novel features.

And yet. When consumers start to think about the costs, they balk. There’s sometimes the costs of the products themselves (FastMail is $30/year minimum, but really $50 a year or more if you want reasonable storage), but more importantly are the switching costs that come with using a new product. I have 2,000 contacts on Facebook Messenger — am I just supposed to text them all to use Signal from now on? Am I supposed to completely relearn a new photos app, when I am habituated to the taps required from years of practice on Instagram?

Surveillance capitalism has been in the news the past few weeks thanks to Shoshana Zuboff’s 704-page tome of a book “The Age of Surveillance Capitalism.” But surveillance capitalism isn’t a totalizing system: consumers do have choices here, at least when it comes to consumer apps (credit scores and the reporting bureaus are a whole other beast). There are companies that have even made privacy their distinguishing feature. And consumers respond pretty consistently: I will take free with surveillance over paid with privacy.

One of the lessons I have learned — perhaps the most important you can learn about consumer products — is just how much people are willing to give up for free things. They are willing to give up privacy for free email. They are willing to allow their stock broker to help others actively trade against them for a free stock brokerage account with free trading. People love free stuff, particularly when the harms are difficult to perceive.

This is not to say that Facebook and Google shouldn’t try to improve their shoddy records on privacy, or rebuild trust with users. Those consumers are always able to leave, and their sentiment should never be taken for granted. But after more than a decade of abuse, we should look deeper at our analysis and perhaps conclude that these issues aren’t abuse at all, but rather a bargain, a negotiation, and one that people are quite willing to live with.

China’s influence pushed MSCI to add shares to index

(Photo by China Photos/Getty Images)

MSCI runs some of the most important financial indexes in the world. Trillions of dollars of capital are pegged to these metrics, which is why changes to them can be so controversial. Few decisions by MSCI have been as significant though as the addition of Chinese “A-shares” to its emerging markets indexes last year, which for the first time added mainland Chinese stocks to these important benchmarks. Billions of dollars of capital was expected to flow to those stocks, as wealth managers matched their allocations to the updated indexes.

Now, we have learned just how much pressure MSCI faced in adding those shares. Mike Bird at the Wall Street Journal reports that China placed enormous pressure on MSCI to change its indexes, threatening to cut off its access to domestic wealth managers and stunt its growth in the number two economy. From the article:

MSCI’s discussions with several Chinese asset managers were abruptly curtailed in 2015 and 2016 after the firm didn’t add Chinese-listed stocks to the emerging-markets index following its midyear reviews, according to people close to or directly involved in the discussions. The Chinese firms communicated that they had been instructed by authorities to cut off negotiations with MSCI, the people said.

China’s two national stock exchanges also threatened to withdraw MSCI’s access to market pricing data, which the company provided to its customers all over the world, the people added. It was akin to “business blackmail,” said a person familiar with MSCI’s negotiations with Chinese regulatory authorities.

Companies the world over attempt to manipulate these indexes, particularly given the increasing amount of money flowing to ETFs and other index-backed funds. But few companies have the clout required to actually get MSCI to make changes that benefit them. China, with its huge market, clearly does.

MSCI is “now considering quadrupling China’s weighting in the emerging-markets index.” Maybe that’s objective and fair — after all, China is crucial for the global economy. With China’s meddling and MSCI’s capitulation though, one has to wonder how much is blackmail, and how much is financial science.

More links

TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at danny@techcrunch.com) if you like or hate something here.

Share your feedback on your startup’s attorney

My colleague Eric Eldon and I are reaching out to startup founders and execs about their experiences with their attorneys. Our goal is to identify the leading lights of the industry and help spark discussions around best practices. If you have an attorney you thought did a fantastic job for your startup, let us know using this short Google Forms survey and also spread the word. We will share the results and more in the coming weeks.

This newsletter is written with the assistance of Arman Tabatabai from New York

You’re reading the Extra Crunch Daily. Like this newsletter? Subscribe for free to follow all of our discussions and debates.

Latest Stories