Llama2 Joins the GenAI Battle: Meta Offers it Free for Research and Commercial Use
Meta has recently announced the launch of Llama 2, the highly anticipated second generation of their open source large language model. Llama 2 has been released for both research and commercial purposes, free of charge, to promote innovation and development in the field. Microsoft, a longstanding partner of Meta, is deepening its involvement in this project and has become the preferred partner for Llama 2, making it available through Azure. The widespread endorsement from a variety of stakeholders across the technological landscape, academia, and policy, signifies the embracement of Meta's open innovation approach in AI. The model is free for both academic and commercial use - as long you have less than 700 million users. (Source: Meta, The AI Advantage)
Microsoft Unveils AI Copilot: A Pricier Path to Productivity?
Microsoft has unveiled its plans to integrate an AI engine, dubbed Microsoft 365 Copilot, across its productivity suite, with a proposed cost of $30 per user per month. Copilot, comparable to ChatGPT, can execute tasks across various Office applications, from editing Word documents and summarizing Excel data trends, to creating PowerPoint presentations and drafting emails in Outlook. Copilot is set to roll out for 365 E3, E5, Business Standard, and Business Premium customers, though an exact launch date has not been disclosed. Microsoft also plans to include a privacy-centric version of its Bing chatbot that will not store chat history, as an added measure to protect corporate data. (Source: Yahoo)
Bill C-18 Fallout: Tech Giants Google and Meta Block News in Canada
In a strong rebuke to Canada's Bill C-18, which mandates payments from tech giants for news links to support the Canadian news sector, Google and Meta have responded by blocking news links in Canada. Initially, Google had voiced concerns about the approach's uncapped liability and the risky business framework it presented, while Meta had regarded news contribution as highly substitutable. However, the companies' decisions to cut off news links could lead to dramatic consequences: a potential decline in news outlets due to reduced traffic and revenue, decreased reliability of Google's search services, increased reliance on foreign news sources, and a surge in misinformation. (Source: Michael Geist)
Ripple vs SEC: A Mixed Verdict over XRP Sales
In the lawsuit between Ripple and the U.S. Securities and Exchange Commission (SEC), the verdict delivered was a mixed bag. The court ruled that Ripple's sales of its cryptocurrency, XRP, on public exchanges did not constitute offers of securities, hence rejecting part of the SEC's claim. However, the SEC scored a partial victory as the court found Ripple's $728.9 million sales of XRP to institutional investors were unregistered securities sales. Additionally, it was determined that Ripple's executives couldn't argue a lack of "fair notice" that XRP was a security at the trial. (Source: Reuters)
OpenAI's Code Interpreter: Your New Companion for Data Analysis, Visualizations, and More
OpenAI has recently added a new plug-in to ChatGPT Plus called the Code Interpreter, turning the AI into a personal data analyst. This plug-in utilizes Python to generate responses and allows users to both upload and download files. Here is Business Insider's summary of the key capabilities:
Data Analysis: Users can provide large datasets to the chatbot and request detailed analyses to identify trends, making it capable of handling data in various formats including CSV, XSLT, and JSON.
Data Visualizations: Code Interpreter can generate graphs based on provided datasets, useful for data exploration and visualizations.
Data Cleanup: Instead of manually processing data, Code Interpreter can clean up datasets in seconds, making it a valuable tool for data hygiene.
Game Generation: Users can instruct Code Interpreter to create games from scratch, offering a unique application in recreational coding.
Video and GIF Creation: The plug-in can also generate animated clips and GIFs from images and vice versa, providing users with more creative content creation options.
File Conversion: Code Interpreter can efficiently handle file conversions, such as transforming a PNG file into a JPEG, or an MP4 file into a GIF.
Code Writing and Debugging: Despite its focus on non-coders, Code Interpreter can write and debug code, demonstrating its ability to produce and improve coding output.
Playlist Analysis: The plug-in can be used to analyze Spotify playlists, offering new ways to interpret personal music trends.
QR Code Generation: Code Interpreter can also generate QR codes, simplifying this process for users and providing quick access to web links.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.
Meta's Threads Skyrockets to 100 Million Sign-Ups, Posing a Challenge to Twitter
Meta's social media platform, Threads, recorded 100 million sign-ups within five days of its launch, surpassing OpenAI's ChatGPT as the fastest-growing platform to reach this number. Seen as a potential rival to Twitter, Threads has attracted a broad user base including celebrities and politicians. Despite its rapid growth, it still lags behind Twitter's 240 million daily active users. Twitter has threatened to sue Meta, alleging Threads was built using its trade secrets. Threads supports posts up to 500 characters and media content but lacks a desktop version, direct messaging, and features like hashtags and keyword search. Meta has stated it will only consider monetization once Threads is on track to reach one billion users. (Source: CBC)
Balancing Act: Harnessing AI’s Potential in Tax and Accounting Amidst Regulatory Hurdles
Generative AI adoption is growing in tax and accounting firms, despite challenges like data privacy concerns and regulatory uncertainties. The technology, exemplified by OpenAI's ChatGPT, has potential for significant impacts but is also hindered by its limitations and the uncertainty of its economic effects. Major firms, including Ernst & Young, KPMG, Deloitte, and PwC, have invested in AI training and data analysis capabilities. However, AI's learning process raises data privacy issues, and regulators are lagging in addressing the fast-paced AI evolution. While AI has the potential to detect corporate fraud and revolutionize industries, firms need time for experimentation and learning to establish necessary standards and regulations. (Source: Bloomberg)
FTX is proceeding with its intentions to relaunch its primary global cryptocurrency exchange. WSJ, quoting Chief Executive John J. Ray III, reported that FTX "has begun the process of soliciting interested parties to the reboot of the FTX.com exchange." The success of "FTX 2.0", however, is unclear. Despite its tattered reputation, the larger challenge may be overcoming the ongoing crackdown on crypto. (see here for our prior coverage of this) Source: WSJ)
Former FTX CCO Sued for Silencing Whistleblowers
FTX is also suing its former Chief Compliance Officer (CCO). Daniel Friedberg has been accused in a lawsuit filed by FTX and its debtors in the U.S. Bankruptcy Court for the District of Delaware of paying off whistleblowers to suppress information about the company's alleged fraudulent activities. The suit claims that Friedberg, who also served as the General Counsel for CEO Sam Bankman-Fried's crypto hedge fund, Alameda Research, disregarded internal control deficiencies and focused on keeping whistleblowers quiet while allowing the co-mingling of customer assets, which led to the downfall of both entities. (Source: Compliance Week)
ChatGPT Plus Users Lose Browsing: OpenAI Reacts to Paywall Concerns
OpenAI has temporarily disabled the 'Browse with Bing' feature in ChatGPT Plus due to concerns about bypassing paywalls and privacy settings. The decision follows user feedback that the feature was displaying full content from URLs, infringing on content owners' rights. Despite criticism from some users, OpenAI is working to fix the issue but has not specified when the feature will be back online. (Source: Yahoo Finance)
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.
The Worker's Dilemma: Blindly Obey the AI or Go With What you Know?
This insightful article explores the tension that arises when AI's recommendations conflict with worker experience, highlighting the limitations of AI in understanding nuances that are not digitized. The AI's effectiveness is only as good as the data it is trained on. A significant part of the issue often arises when end-user employees are not consulted early enough in the AI integration process. Inclusion from the beginning, rather than after several steps have been taken, is crucial to avoid creating distrust among workers towards their employers and the technology being used. This lack of early consultation can lead to resistance and skepticism towards the AI tools, undermining their potential benefits. (Source: WSJ)
Revolutionizing Canadian Railways: North America's First Hydrogen Train
The first hydrogen-powered train in North America is now operational in central Quebec, offering a two-and-a-half-hour trip to demonstrate the potential of hydrogen as a green alternative to diesel fuel. The train, manufactured by French company Alstom, runs from Montmorency Falls in Quebec City to Baie-Saint-Paul, carrying up to 120 passengers. The train uses about 50 kilograms of hydrogen per day, replacing approximately 500 liters of diesel. The hydrogen is produced by Harnois Énergies using an electrolyzer that splits water into hydrogen and oxygen. The electricity used in this process comes from Hydro-Quebec, which is primarily hydro-generated and almost fully decarbonized, making the resulting hydrogen green. The train emits only water vapor, a byproduct of the fuel cell process where hydrogen gas from the tank is combined with oxygen in the air to generate electricity. This project is part of Quebec's plan for a green economy by 2030, focusing on hydrogen to decarbonize sectors where conventional electrification isn't feasible. (Source: CBC)
About-Face on AI: Meta's Decision to Keep Voicebox Under Wraps
Meta has decided not to release its AI voice replication technology, Voicebox, due to potential misuse risks. Voicebox, which can replicate and imitate voices with high accuracy, has applications in audio editing, multilingual speech generation, and assistance for the visually impaired. However, concerns have been raised about its potential for misuse, such as scammers convincingly impersonating others. Even though Meta has published a detailed paper on Voicebox, offering insights into its workings and potential mitigation strategies, the company has chosen not to release the technology to prioritize responsibility over openness. This decision underscores the ethical and social questions surrounding AI innovation and the need to safeguard against unintended consequences. (Source: Ubergizmo)
Voice Design Meets Community: The Launch of Eleven Labs' Voice Library
In related news, Eleven Labs has launched the Voice Library, a community platform for generating, sharing, and exploring a vast range of synthetic voices. The platform uses their proprietary Voice Design tool, which allows users to create unique voices based on parameters such as age, gender, and accent. The voices are multilingual, maintaining their primary speech characteristics across all languages. The Voice Library is not just a repository, but a platform for discovery and sharing. Users can share their created voices with the community and browse voices shared by others for their own use-cases. All voices in the Voice Library are artificial and come with a free commercial use license. Users earn rewards when their shared voices are used by others. The company plans to add more features to the Voice Library in the future, including more labels for specific use-cases, language-specific voices and accents, improved search system, and time-limited and exclusive voices. The company previously came under fire for the troubles that Meta is looking to avoid. (Source: ElevenLabs)
Amplification, not Abdication: A Good Way to Look at Generative AI?
I've finally penned this Medium post, which makes the case that in the short term, the primary use case for generative AI will be to enable professionals and others to amplify their output. In other words, by inputting a few words, we can achieve a tenfold increase in output. Case-in-point: provide simple instructions, and you'll receive an email that requires only a few tweaks before it's ready to go. However, AI should not be used as an excuse to abdicate one's professional liability, as demonstrated by a lawyer who submitted fake cases manufactured by ChatGPT. To prove this point, the post conducts an 'A|B Test' that leverages Tim Ferriss's 4-hour work week. Specifically, I put generative AI to the test by assigning it tasks that were previously assigned to a remote virtual assistant (VA) located in India. Most of the post's length is taken up by the responses obtained from the generative AI, making it a quicker read than it appears at first glance. (Source: MalikAtMedium)
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own
In 2018, CPA Canada held the Foresight Sessions where they consulted CPAs and others how the profession should move forward. CPA Canada took a broad view of the topic and brought a diverse crowd of people to look at how things could unfold. There were a number of facilitated sessions that looked at a number of possible scenarios and how the profession could thrive in each of those scenarios. What I liked about the sessions was the diversity of thought. The environment was so open that attendees were even willing to talk about things like wealth inequality and its potential impact on the profession.
Before looking at where we are now, it is good to take a step back and look at the underlying need to re-examine the profession. The CPA profession was borne in a book-based world where knowledge went through a manufacturing process of sorts. Regardless of whether it is the accounting standards themselves or the actual financial statements, the idea was there was a sense of finality to the process. The Internet, and more specifically the hyperlink, changed that. Data, information and knowledge are now networked.
It's not to say that the profession was unaware of this.
As a CPA who got his start in the world of Audit Data Analytics back in 2000 (yes, 20 years ago, when this type of work was known as computer-assisted audit techniques). Back then, IT-focused CPAs like myself used to tools like Audit Command Language or IDEA (sometimes referred to as 'generalized audit software'). This required the analysis of data largely for audit support.
CPA Canada also published the Information Integrity Control Guidelines (authored by Efrim Boritz and myself), which looked at how controls and "enablers" would create information integrity. The project was designed to take a fresh look at the traditional dichotomy between "general computer controls" and application controls". For example, the publication also looked at controls specifically around content.
Why Data Governance?
The challenge I have found is how to succinctly articulate how CPAs can play on the dividing between business and technology. Data governance probably is a good place to start. Even when you consider something more technical like a 'data scientist', a key component is to have business domain knowledge. Hence, to capture the future it makes sense to look at something that is beyond technology but rather data and information. After accountants have experience with data, but not configuring routers. Furthermore, as pointed out in this CPA Canada article "there is already a need for foundational standards of practice around all aspects of data governance and the data value chain".
Why are CPAs suited for data governance?
I have always felt that CPAs have a solid foundation in understanding information. Through the FASB framework, we realize the trade-offs between relevance and reliability, as well as understanding the reality of what is needed to audit something. When looking at the work Efrim and I have done around information integrity, this was a key resource because it is unique in understanding the parameters of information.
When teaching a class at Waterloo, I linked how this framework is now even relevant to social media companies. Google/YouTube, Facebook, and Twitter have all been "auditing" posts on their respective sites due to misinformation about COVID-19 or other matters. When covering this in-class, the concern I raised was around the "slippery slope". For example, does that mean all the other posts are "materially correct"? Such things illustrate how CPAs can add value when it comes to data governance.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.
An interesting thing happened to me earlier in the week. I was looking to get some data on death statistics around the major causes of death.
But I noticed a strange thing: the table from Statistics Canada looked different than it did a few days earlier.
Then I realized it had been just updated.
My first reaction was to sigh as I would have to update my research to reflect the revised work. But then another thing occurred to me: where's the fanfare around this? I didn't recall "hearing" about this, but then again I don't listen to the radio. So I did some quick research around the major newspapers to see if it was front-page news.
The only mention I could find was a Spanish article on the topic published by CBC, which I found through Google News.
What's this got to do with financial auditing?
It has to do with the portability of concepts we have around accounting, particularly those that relate to assessing the reliability of financial information. These concepts are portable to other domains - such as assessing the value of information technology. Richard Hunter and George Westerman note in Real Business of IT: How CIOs Create and Communicate Valuethat one of ways an IT organization can create value is to "improve decision making by improving information quality or timeliness".
This is not limited to the world of business but can also be ported to the societally relevant information. In other words, the collective media system.
Facebook's Media Misgivings versus the Original Sin of Sensationalism
As it is widely known now, Facebook has been accused of allowing its service to be used to manipulate the 2016 elections in the US. The topic is much larger but the point is that the issue of decision usefulness of the news spread came to light: how society decides about key issues can be impacted by the spread of "materially misstated" information.
However, the problem is not limited to Facebook.
Before Trump popularized the term "fake news", Noam Chomsky and Edward Herman put together the book Manufacturing Consent. The latter was a scholarly work, that looked at the issue of media bias in a much broader sense than Trump's characterization of the press.
But as we know as auditors, the harder objective to test is the one of "completeness". For example, to test whether the company had any undisclosed liabilities at year-end an auditor may test disbursements made after year-end to see if management paid off something that should be recorded in the financials as a liability.
And that's where we get to the statistics of death and the media's lack of interest in reporting them.
Media focuses on the sensational stories of "human on human" violence. But do you know how many people died from such causes in 2018?
According to Statistics Canada, the total number of people that died due to homicide was 373 people - down from 459 the previous year. It is the 25th leading cause of death (22nd in 2017).
The top killer of Canadian was malignant neoplasms cancer at ~79,000 and heart disease was ~53,000. As Statscan puts it:
"Cancer (malignant neoplasms) and heart diseases remained the first- and second- leading causes of death in 2018, accounting for 46.8 % of all deaths. This was a slight drop from 2017, where these two causes accounted for 48.0% of all deaths..."
But what we are more afraid of:
(A) The shifty-looking character walking behind us at 10 pm at night, or
(B) that sugar infested donut being offered to us at the office?
With respect to the latter (which is why I was looking at these stats in the first place), a big cause of this epidemic is the food that we are being fed. A CBC documentary, “The Secrets of Sugar”, linked sugar to chronic diseases:
“Emerging science is connecting the high consumption of sugar in North American diets with the rapid spread of chronic diseases such as cancer, heart disease and Alzheimer’s.”
The documentary also features Dr. Robert Lustig who blames diabetes and childhood obesity on sugar in the following lecture:
If we add diabetes (per Dr. Lustig) and Alzheimer's (per CBC) to the deaths caused by cancer and heart disease, then we are accounting for more than half of the 283,000 deaths that occurred in 2018 or 51.4%.
No one is saying there are easy answers to get the bottom of these deaths. But how can we get there if don't even know what questions to ask? A media system that gives incomplete information about our society is not providing reliable information to assess what we can do about these life-and-death issues. And so we will probably continue to worry about that shifty character, instead of our sugary diets.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.
"Stablecoins have many of the features of cryptoassets but seek to stabilise the price of the “coin” by linking its value to that of a pool of assets."
Previously, I had noted that the US could possibly use stablecoins, such as Facebook's Libre, to support its foreign policy against China. In the post I noted that:
"Things really get interesting when the U.S. government issues a digital dollar. The dollar is already the world’s primary reserve and commercial currency, but this would give it an even bigger edge. That’s because people in countries whose currencies aren’t trusted or who are barred or restricted from buying foreign currencies—think China, Argentina, Russia—could now easily obtain the one currency that has long symbolized international stability. Whereas the international movement of paper dollars can be (somewhat) controlled with physical checks at border crossings and regulation of bank transfers, digital dollars would be far more footloose. They would invade other jurisdictions’ currency zones. If citizens of other countries can easily acquire dollars—by far the most sought-after currency in the world—and use them to buy almost anything, why would they need renminbi or pesos or rubles? In this scenario, other currencies become less sought after, the dollar more powerful. It is the ultimate expression of U.S. hegemony, and, for other governments, undermines their nation-state sovereignty."
That is, Facebook's deployment of the cryptocurrency gives the US government plausible deniability that the US is working to undermine the Chinese from a currency perspective. As I noted in this post, I cited the Wall Street Journal in explaining China's concern regarding cryptocurrency.
"Virtual currencies in theory allow holders to bypass China’s traditional banking system to move money outside its capital-controlled borders. That could make it more difficult for Chinese regulators to maintain a tight grip on the yuan."
The G7 report in another evidence to support this hypothesis as China is not included in the working group, despite the fact it is a leader in mobile payment technology.
That being said, the bigger takeaway from the report is that the Big Banks seem to be sensing how Facebook and other Big Tech Companies (Annex B of the report analyzes the capabilities of Facebook, Amazon and others to transmit payments) could be encroaching on their turf. What Annex B doesn't mention, is that "the largest corporate stockpiles are all in the tech sector: the top five hold a collective $601 billion."
Tech companies in Canada, like Rogers, have already been granted a banking license. In other words, it is a matter of legislators pen to grant such licenses to big tech, who can turn the billions in cash into trillions of loans through fractional reserve banking.
Finally, we should always keep in mind that the rentier economy is more lucrative than actually making products or delivering services. Perhaps the biggest illustration of this is how Sony makes 63% of its operating profits from finance with “[l]ife insurance has been its biggest moneymaker over the last decade, earning the company 933 billion yen ($9.07 billion)”.
Where are the Big Banks especially vulnerable?
In the report, the Working Group notes that "cross-border payments remain slow, expensive and opaque, especially for retail payments such as remittances. Moreover, there are 1.7 billion people globally who are unbanked or underserved with respect to financial services" and more specifically "Recent stablecoin initiatives have highlighted these shortcomings and emphasised the importance of improving the access to financial services and cross-border retail payments. In principle, retail stablecoins could enable a wide range of payments and serve as a gateway to other financial services. In doing so, they could replicate the role of transaction accounts, which are a stepping stone to broader financial inclusion. Stablecoin initiatives also have the potential to increase competition by challenging the market dominance of incumbent financial institutions." [Emphasis Added]
Furthermore, when HSBC skirted AML regulation they got a $1.9 billion fine, but that works out to be 5 weeks worth of profit.
What about bitcoin?
The report does attack bitcoin as well noting that:
"The first wave of cryptoassets, of which Bitcoin is the best known, have so far failed to provide a reliable and attractive means of payment or store of value. They have suffered from highly volatile prices, limits to scalability, complicated user interfaces and issues in governance and regulation, among other challenges. Thus, cryptoassets have served more as a highly speculative asset class for certain investors and those engaged in illicit activities rather than as a means to make payments."
Although they are a key proponent of the status quo, there is some truth to this claim. The average small-business owner cannot deal with such volatility when it comes to a medium of exchange.
Even proponents of Bitcoin, such as Andreas Antonopoulos, readily admit that the currency is in a bubble. But he also points out that it is a mechanism for people to control the currency instead of corporations or governments. (As noted in this post, he dismisses Facebook's foray into cryptocurrency)
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else
“Many players have attempted to use cryptocurrencies to fund their malign behavior. This is indeed a national security issue,” Treasury Secretary Steven Mnuchin said in remarks at a Monday news briefing. Should Facebook develop its digital coin, called Libra, to “have a payments system correctly with proper [anti-money-laundering safeguards], that’s fine,” Mr. Mnuchin said" [emphasis added]
The US is pretty committed to fostering all their muster against China and enabling capital flight from their country would be an important tool in the new "Great Game" that is being played by these hegemons.
What can bitcoiners teach us about innovation and cryptocurrency?
Although the grand chess match between China and the US is important, the innovation angle is also something worth analyzing.
What did bitcoin enthusiasts have to say about Facebook's Libra?
It turns out their critique, via Mastering Bitcoin's author Andreas M. Antonopoulos, yield some insight into the reality of blockchain innovation. He had the following to say about Libra:
As per the video, he notes that cryptocurrency is "open, public, borderless, neutral, and censorship resistant" (this post lays out what each means, so check that out). More importantly, he points out these characteristics can only emanate from a decentralized approach used by bitcoin and certain other public cryptocurrencies. Conversely, if we have a centralized blockchain - like Libra or Ripple - then it loses these magical qualities. As pointed above, Mnuchin requires a "throat to choke". The only way you can't have a "throat to choke" - is when that throat is decentralized.
What's the innovation?
In the class, I teach about Audit, Innovation and Technology, I went through my Delta Framework. In this table, we have key characteristics of the old system or technology. The second column looks a bitcoinesque cryptocurrency, while the third looks at Libra.
What the analysis confirmed is how permissioned blockchain, such as Libra, is more of an incremental innovation rather than something radical that would upset the apple cart. Specifically, the ability to use permissioned ledgers will make it really easy for the consortium to fulfill their AML obligations. Why? Because all the record keeping is automated. And that last word is key: automation. Permissioned blockchain is really about "frictionless" transaction propagation between known parties via a decentralized ledger. The Libra consortium is essentially establishing systems that can trace a transaction from crade-to-grave because the underlying blockchain technology is all about automating the accounting. Regulators are actually going to love it.
The public blockchain, on the other hand, is about disrupting the concept of fiat currency itself. If governments can conjure currency out of thin air, why not Satoshi Nakamoto? And there you have bitcoin. Of course, as previously published, governments are not going to like this and have worked to crush bitcoin by going after people. But the point is that eliminating the centralized intermediaries of trust was never bitcoin's objective and could be arguably are caught in a "gale of creative destruction". Rather, it was to offer an alternative to the fiat currency order that we live in and the blockchain technology was just the means to do it.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else
"Libra, which will let you buy things or send money to people with nearly zero fees. You’ll pseudonymously buy or cash out your Libra online or at local exchange points like grocery stores, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app."
The head of Libra, David Marcus, went on CNBC to discuss this initiative as well.
The move represents the growing power of Facebook and other IT companies that increasingly dominating the economy.
In fact, this reality was one that was discussed at the CPA Foresight Initiative that were recently held. In my breakout group, dubbed "Tech Titans, I proposed is that there is actually nothing stopping one of these companies from becoming a bank. Circulating this picture to the wider group:
It is quite clear that these tech giants are well capitalized. What stops them from blessed by the grand wizards of Capitalism to become a bank? For example, Rogers has been issued a bank license in Canada to "issue credit cards and other financial products". Although the charter seems limited in scope, if they have enough capital reserves what's to stop the next step of them issuing loan through the magic of fractional reserve banking?
And so here you have it. Facebook is the first of the Tech Titans, also known as it’s Facebook, Apple, Amazon, Netflix and Google (FAANG), to turn embark down the path of financialization. What separates Libra from Bitcoin is that it's a stablecoin, is that it is a "stable coin"; where the value does not fluctuate. Bitcoin, in contrast, is not an actual currency as it is not backed by nothing. Hence the fluctuating value prohibits it from being something that consumers and retailers can keep in their wallets to buy things. As the Libra whitepaper notes:
"Libra is designed to be a stable digital cryptocurrency that will be fully backed by a reserve of real assets — the Libra Reserve — and supported by a competitive network of exchanges buying and selling Libra. That means anyone with Libra has a high degree of assurance they can convert their digital currency into local fiat currency based on an exchange rate, just like exchanging one currency for another when traveling. This approach is similar to how other currencies were introduced in the past: to help instill trust in a new currency and gain widespread adoption during its infancy, it was guaranteed that a country’s notes could be traded in for real assets, such as gold. Instead of backing Libra with gold, though, it will be backed by a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks."
Arguably, Apple was the first of the FAANG to go down this road with their shiny new credit card, but this was largely incremental innovation as they are leveraging Goldman Sachs and MasterCard for the underlying infrastructure. And it’s a credit card, which is obviously a legacy payment technology.
Facebook, on the other hand, is charting new territory by wrapping its foray into financialization in blockchain technology. However, they too have assembled a coalition of the willing as well:
Although Calibra (Facebook's digital wallet to hold Libra) will not be connected to people's Facebook account, there is a treasure trove of data that would come from linking a person's personal data to the audit trail that would come from their Calibra wallet. And given Facebook's track record on privacy, it's not difficult to see why people would be suspicious about Facebook trying to monetize this data. That being said, David Marcus (head of Facebook's Calibra divison) noted on an interview on CNBC that there is a significant effort to get the cryptocurrency up and running.
My bet was on Amazon
As I noted in a previous post, I thought it would be Amazon that would be first to the market with a "stable-coin". My prediction was based that Amazon would have the most to gain by cutting out the credit card companies. The trick though, was how would Amazon get people to load up cash directly into their systems? Amazon would have to make a deal with a retailer, like Starbucks or Walmart, who could not only provide such access to Amazon but could also then get to use that cryptocurrency.
What did I miss?
The FAANG are not as powerful as the banking sector. Both Apple and Facebook have included major financial players in their respective entrance world of financialization. Perhaps that will change over time but for now, it seems they are content to partner with major players within the industry.
Why financialization?
Apple and Facebook may occupy the headlines when it comes to their respective financial plays, but they are not the first in tech to realize there are pots of money to be made from the rentier economy.
Perhaps the biggest illustration of this is how Sony makes 63% of its operating profits from finance with “[l]ife insurance has been its biggest moneymaker over the last decade, earning the company 933 billion yen ($9.07 billion)”. So even Sony - the inventor of the Walkman - is not focused on the production of goods or services but on such rent-seeking activity.
What about regulation?
How on earth is Facebook going to get away with this without being regulated?
Facebook appears to have bought themselves time by establishing this initiative in Switzerland. The other reality is that it's highly unlikely that this initiative was overlooked by the legal departments at Visa, MasterCard, PayPal, etc. That being said, could regulation be the worst thing for Facebook? I think that they may benefit from it. As I noted in this post, regulation can be a monopolist's best friend:
"In Tim Wu's Master Switch, Theodore Veil also advocated for the concept of a regulated monopoly in the arena of telephones:
"[Theodore] Vail died in 1920 at age 74, shortly after resigning as AT&T's president, but by that time, his life's work was done. The Bell system had uncontested domination of American telephony, and long-distance communication was unified according to his vision. The idea of an open, competitive system had lost out to AT&T's conception of an enlightened, licensed, and regulated monopoly. AT&T would remain in this form until the 1980s, and it would return in not so substantially different form in the 2000s. As historian Milton Mueller writes, Vail had completed the "political and ideological victory of the regulated monopoly paradigm, advanced under the banner of universal service."" [emphasis added]
We all know, including Facebook, that the world of finance is heavily regulated. Consequently, they likely know that the day they will have to comply with numerous regulations is inevitable.
However, could it be that the US Regulators are turning a blind-eye on purpose?
"Things really get interesting when the U.S. government issues a digital dollar. The dollar is already the world’s primary reserve and commercial currency, but this would give it an even bigger edge. That’s because people in countries whose currencies aren’t trusted or who are barred or restricted from buying foreign currencies—think China, Argentina, Russia—could now easily obtain the one currency that has long symbolized international stability. Whereas the international movement of paper dollars can be (somewhat) controlled with physical checks at border crossings and regulation of bank transfers, digital dollars would be far more footloose. They would invade other jurisdictions’ currency zones. If citizens of other countries can easily acquire dollars—by far the most sought-after currency in the world—and use them to buy almost anything, why would they need renminbi or pesos or rubles? In this scenario, other currencies become less sought after, the dollar more powerful. It is the ultimate expression of U.S. hegemony, and, for other governments, undermines their nation-state sovereignty."
That is, Facebook's deployment of the cryptocurrency gives the US government plausible deniability that the US is working to undermine the Chinese from a currency perspective. As I noted in this post, I cited the Wall Street Journal in explaining China's concern regarding cryptocurrency.
"Virtual currencies in theory allow holders to bypass China’s traditional banking system to move money outside its capital-controlled borders. That could make it more difficult for Chinese regulators to maintain a tight grip on the yuan."
(I also noted that the US had similar concerns around bitcoin and used DoJ operation Chokepoint as well as IRS rules to curtail the use of bitcoin and other cryptocurrencies. It's not realistic to think that a country will let down it's guard when it comes to capital controls.)
Although the foreign policy aspect may be important, there are real risks for the consumers here. How do the consumers know that their money is safe at Facebook? For example, the FDIC insures deposits of actual banking institutions. Unlike Bitcoin, Facebook can be forced to under audits and other compliance activities. Without such oversight, it's impossible to know whether Facebook is actually keeping enough reserves to back Libra. Take for example Tether, a stablecoin that was allegedly backed by the US Dollar. They initially had to break things off with their auditor. And it seems that they have retained lawyers to provide the necessary assurance over their reserves. However, this article on Forbes traces how Tether seems to be changing its wording around whether Tether is actually fully backed by US fiat currency.
So, we shouldn't be surprised to the FDIC or some other financial regualtor's seal as part of its updated infographic in the near future.
In future post(s), we will look at how bitcoiners are reacting to this as well as what potential opportunities Libra could bring to the audit.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else
In an investigation by the Guardian and the New York Times, the alleged misdeeds of Cambridge Analytica were revealed.
As noted in the Guardian article:
"Christopher Wylie, who worked with a Cambridge University academic to obtain the data, told the Observer: “We exploited Facebook to harvest millions of people’s profiles. And built models to exploit what we knew about them and target their inner demons. That was the basis the entire company was built on.”... Documents seen by the Observer, and confirmed by a Facebook statement, show that by late 2015 the company had found out that information had been harvested on an unprecedented scale. However, at the time it failed to alert users and took only limited steps to recover and secure the private information of more than 50 million individuals."
The following video from TheVerge sums up the issue:
Although such allegations have received attention (in my opinion due to the association with Trump's campaign), the reality is that these allegations against Facebook are actually not new and reported in both the Intercept in early 2017 and the Guardian way back in 2015.
There was an ensuing backlash (as noted in the video above and here) that forced Facebook CEO, Mark Zuckerberg to respond. He both had a written response and gave the following interview on CNN:
During the CNN interview, he mentioned the word "audit" 3 times[emphasis added]:
"So we're going to go now and investigate every app that has access to a large amount of information from before we locked down our platform. And if we detect any suspicious activity, we're going to do a full forensic audit"
"And we're now not just going to take people's word for it when they give us a legal certification, but if we see anything suspicious, which I think there probably were signs in this case that we could have looked into, we're going to do a full forensic audit."
"We know how much -- how many people were using those services, and we can look at the patterns of their data requests. And based on that, we think we'll have a pretty clear sense of whether anyone was doing anything abnormal, and we'll be able to do a full audit of anyone who is questionable."
Can CPAs come to Mark's rescue?
Zuckerberg's repetitive use of the word audit should be read in conjunction with his "welcoming" of regulation:
"I actually am not sure we shouldn't be regulated. You know, I think in general, technology is an increasingly important trend in the world, and I actually think the question is more what is the right regulation rather than yes or no, should it be regulated?"
Zuckerberg would not be the first tech giant to opt for regulation as a business strategy.
In Tim Wu's Master Switch, Theodore Veil also advocated for the concept of a regulated monopoly in the arena of telephones:
"[Theodore] Vail died in 1920 at age 74, shortly after resigning as AT&T's president, but by that time, his life's work was done. The Bell system had uncontested domination of American telephony, and long-distance communication was unified according to his vision. The idea of an open, competitive system had lost out to AT&T's conception of an enlightened, licensed, and regulated monopoly. AT&T would remain in this form until the 1980s, and it would return in not so substantially different form in the 2000s. As historian Milton Mueller writes, Vail had completed the "political and ideological victory of the regulated monopoly paradigm, advanced under the banner of universal service."" [emphasis added]
As Tim points out in his book, the move enabled AT&T didn't always use their monopolistic powers for good. They charged high long distance rates and even stifled innovation suppressing the answering machine due to potential conflict with its main business.
Regardless, it shows that Facebook could be an early advocate for CPAs offering privacy related assurance services around its algorithms.
AlgoTrust: A new service offering for CPAs?
The concept of AlgoTrust is something I have previously discussed in this post.
The idea actually has support from multiple angles not least of which of comes from information security expert, Bruce Schneier:
"...it is also worth noting that there are other experts who hold that algorithms - from a privacy perspective - need to be regulated. Bruce Schneier, a well-known information security expert who helped review the Snowden documents, in his latest book, Data and Goliath ... also calls for "auditing algorithms for fairness". He also notes that such audits don't need to make the algorithms public, which is it the same way financial statements of public companies are audited today. This keeps a balance between confidentiality and public confidence in the company's use of our data."
Big Data versus Privacy: The monetization paradox
Such an algo-audit could leverage the work done by AICPA and CPA Canada in the realm of privacy, specifically the Generally Accepted Privacy Principles. That being said, privacy audits have been a hard sell in the past. But what distinguishes the service here is that it would be auditing the algorithm for compliance with privacy "regulations".The reason regulations need to be put in quotes is that in substance privacy legislation is effectively eliminated if the consumer consents to use the service.
The challenge, therefore, is balancing the drive to monetize big data with the privacy needs of the people who use the service. For example, people who identify with the "left" may not want Steve Bannon or Trump accessing their data. Similarly, people who identify with the "right" may not want Obama accessing their social media data. The end result is that no one can access meaningful data due to privacy restrictions - resulting in a standard so restrictive that it eliminates that ability of companies like Facebook to monetize the treasure trove of data that they have collected.
As noted in an earlier post, there is an inherent highlight the conflict between privacy and profiting from big data. The value of big data emerges from the secondary uses of big data. However, privacy policies require the user to consent to a specific use of data at the time they sign up for the service. This means future big data analytics are essentially limited by what uses the user agreed upon sign-up. However, corporations in their drive to maximize profits will ultimately make privacy policies so loose (i.e. to cover secondary uses) that the user essentially has to give up all their privacy in order to use the service.
There is a lot of potential in attempting to create an assurance service to address Facebook's predicament, but as they say, the devil is in the details.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else
The WSJ published an article discussing the cost of houses in the Bay Area. As per the title of the article, "Apple Paychecks—One Reason for High Home Prices", the key culprit they highlight are the significant salaries that the Apple employees are allegedly paid.
The the data for the findings were based on the work done by Zillow completed "at the request of The Wall Street Journal" who "used census data to track down where workers in the census tract that is dominated by Apple’s Cupertino, Calif., headquarters live—primarily neighborhoods in the San Jose and San Francisco metropolitan areas". It's not clear if they relied on their own data to complete this analysis. As per the graph below, Zillow tied the rising house prices to iPhone sales.
To be fair, and abide by full disclosure principles, the article does also blame "[z]oning laws and regulatory red tape are key factors as well". However, would it be the WSJ if it didn't lay such a charge?
Where to begin? The article raises a lot of issues in terms of the role of publicly available data - regardless if it is only the census data, data gathered by aggregators such as Zillow or social media sites.
As I had written a couple of years ago, the article actually is the promise of social media to "return us to the village". In the village privacy was limited because people knew each other and any deeds or misdeeds made by the individual were quickly found out by the community. A good example of how social media accomplishes this was role of public in identifying the rioters involved in the post-Stanley cup "celebrations". If such a riot had happened in the village, the rioters would be have been held accountable in a similar manner.
The Zillow-WSJ effort is really along similar lines: if employees of a company or members of a particular guild were buying up houses and driving up prices in particular area; wouldn't people in the village know?
Furthermore, it actually is village business. We need to understand how we will live with one another how we are going to make the most of living together in this shared space called community, which requires an understanding of how the actions of one group within the community will impact others especially when it relates to a basic need like housing.
That being said, it opens up the issue of big data and its ramifications on privacy. Although the above rationale translates well into issues relating to communal benefit it doesn't translate well into issues relating to how private entities can handle the information they were given for a specific purposes. This of course refers to the concept of "consent" well-established within privacy parlance.
"The authors, however, raise a much more interesting point when discussing privacy in the era of big data. They highlight the conflict between privacy and profiting from big data. They note how the value of big data emerges from the secondary uses of big data. However, privacy policies require the user to consent to a specific use of data at the time they sign up ahead. This would prohibit companies from big data. However, corporations in their drive to maximize profits will ultimately make privacy policies so loose (i.e. to cover secondary uses) that the user essentially has to give up all their privacy in order to use the service. What the authors propose is an accountability framework. Similar to how stock issuing companies are accountable to the security regulators, the idea is that organizations would be accountable to a privacy body of sorts that reviews the use of the big data and ensures that companies are accountable for the negative consequences of the data.
For those of use that have been involved in privacy compliance, such an approach would make it real for companies to deal with the privacy issues in proactive manner. We saw how companies attitudes towards controls over financial reporting shifted from mild interest (or indifference) to active concern with the passage of Sarbanes-Oxley. In contrast, no similar fervour could be found the business landscape when addressing privacy issues. Although the solution is not obvious, the reality is that companies will make their privacy notices meaningless in order to reap the ROI from investments made in big data."
Most people are familiar with the 4 Vs definition of Big Data: Volume, Variety, Velocity and Veracity. (And if you are not here is an infographic courtesy of IBM:)
I have written about the Big Data in the past, specifically, on its implication on financial audits (here, here, and here) as well as privacy. However, I was meeting with people recently and were discussing big data and I found that business professional understood what it was divorced from it operational implications. This is problematic as the potential for big data is lost if we don't understand how big data has changed the underlying analytical technique.
But first we must look at the value perspective: how is big data different from the business intelligence techniques that business have used for decades?
From a value perspective, big data analytics and business intelligence (BI) ultimately have the same value proposition: mining the data to find trends, correlations and other patterns to identify new products and services or improve existing offerings and services.
However, what Big Data really is about is that previous analytical technique that was limited due to technological constraints no longer exists. What I am saying is that big data is more about how we can do analysis differently instead of the actual data itself. To me big data is a trend in analytical technique where the volume, variety, or velocity is no longer an issue in performing analysis. In other words - to flip the official definition into an operational statement - the size, shape (e.g. unstructured or structured), speed - is no longer an impediment to your analytical technique of choice.
And this is where you, as a TechBiz Pro, need to weigh the merits of walking them through the technological advances in the NoSQL realm. That is, how did we go from the rows & columns world of BI to the open world of Big Data? Google is a good place to start. It is pretty good illustration of big data techniques in action: using Google we get extract information from the giant mass of data we know as the Internet (volume), within seconds (velocity) and regardless if it's video, image or text (variety). However, Internet companies found that the existing SQL technologies inadequate for the task and so they went into the world of NoSQL technologies such as Hadoop (Yahoo), Cassandra (Facebook), and Google's BigTable/MapReduce. The details aren't really important but the importance lies in the fact that these companies had to invent tools to deal with the world of big data.
And this leads to how it is has disrupted the conventional BI thinking when it comes to analysis.
From a statistical perspective, you no longer have to sample the data and extrapolate to the larger population. You can just load up the entire populations, apply your statistical modeling imagination to it and identify the correlations that are there. Chris Anderson, of Wired, noted that this is a seismic change in nothing less than the scientific method itself. In a way what he is saying is that now that you can put your arms around all the data you no longer really need a model. He did get a lot of heat for saying this, but he penned the following to explain his point:
"The big target here isn't advertising, though. It's science. The scientific method is built around testable hypotheses. These models, for the most part, are systems visualized in the minds of scientists. The models are then tested, and experiments confirm or falsify theoretical models of how the world works. This is the way science has worked for hundreds of years. But faced with massive data, this approach to science — hypothesize, model, test — is becoming obsolete. Consider physics: Newtonian models were crude approximations of the truth (wrong at the atomic level, but still useful). A hundred years ago, statistically based quantum mechanics offered a better picture — but quantum mechanics is yet another model, and as such it, too, is flawed, no doubt a caricature of a more complex underlying reality. The reason physics has drifted into theoretical speculation about n-dimensional grand unified models over the past few decades (the "beautiful story" phase of a discipline starved of data) is that we don't know how to run the experiments that would falsify the hypotheses — the energies are too high, the accelerators too expensive, and so on."
Science aside the observation that Chris Anderson makes has big implications for business decision making. Advances in big data technologies can enable the deployment of statistical techniques that were previously not feasible and can yield insights without having to bother with model development. Statisticians and data scientists can play with the data and find something that works through trial and error. From financial audit perspective, this has tremendous implications - once we figure out the data extraction challenge. And that's where veracity comes in, which is the topic of a future blogpost.
But to close on a more practical level, companies such as Tesco are leveraging big data analytics to improve their bottom. An example, courtesy of Paul Miller from the Cloud of Data blog/podcast site, is how Tesco extracted the following insight: “[a] 16 degree
sunny Saturday in late April will cause a spike. Exactly the same figures a
couple of weeks later will not, as people have had their first BBQ of the
season”. In terms of overall benefits to the company, he notes “Big Data
projects deliver huge returns at Tesco; improving promotions to ensure 30% fewer
gaps on shelves, predicting the weather and behaviour to deliver £6million less
food wastage in the summer, £50million less stock in warehouses, optimising
store operations to give £30million less wastage.”
As reported across the tech news sites, Facebook Home hit 500,000 downloads in the first 5 days. However, techcrunch gave some perspective. It noted that Instagram (which is owned by Facebook) had "over 5 million downloads in six days". So what is holding people back?
One possible issue is privacy. As noted in this previous post, the younger generation is privacy savvy and is opting for apps like SnapChat that don't retain pics and other personal info. So it may be possible that the not-so-hidden-cost of privacy is too high a price to pay. And many commentators have noted that this issue with respect to Facebook Home. As noted in this blogpost by GigaOm's founder, Om Malik, fears Facebook's past privacy issues will be especially problematic if Facebook can capture (and monetize) one location data. As pointed out by CIO.com this can be turned off, but how many people are not going to use the map feature of their phones to keep this private?
On the other hand, is Facebook as popular as it used to be? Speaking to a colleague at work, he notes that his "tween" son is using... (drum roll please)... Google Plus! Yes, that's right Google Plus - the social network that people mocked as a possible Facebook competitor is now being picked up (anecdotally) by the youth. Although this may be anecdotal evidence, Facebook last redesign was viewed by some as an imitation of Google Plus. For Facebook's version of the story check here:
Overall, it's quite fascinating how the social media sites and tech companies wax and wane in popularity. Remember RIM? The company that could do wrong, now is on fighting (one could argue valiantly, but that could be the nostalgia in me talking.) for spot number 3 in the smartphone wars. Of course the biggest giant to fall from the public's favour is Apple with it's stock sliding from a height of $705 to a current price of just under $400.
However, as pointed out by Horace Dediu on this podcast, Facebook has effectively circumvented Google by making this the home screen on Google's real estate. He has good analysis of the whole supply chain, making an analogy of Facebook's strategy to Intel's strategy of "Intel Inside":
Some of you with connections to the younger folk may have heard of SnapChat. The promise of the application was that it would allow its users to share images that would be deleted within a few seconds of it being transmitted. Another similar app and function is offered by Facebook called Poke. The hope was that, such an app would protect the privacy of the users by maintaining the confidentiality of the messages sent. However, CNET uncovered (based on the blog, BuzzFeed FWD) that it is quite easy to go around the controls:
"an iPhone user simply has to plug the smartphone into a computer, navigate to the phone's internal storage, and find the folders for Snapchat and Poke where the videos are stored locally. The user can then copy the videos from the phone to the computer to sneak a peek at them. In BuzzFeed's testing, this bug applied only to videos; photos didn't appear to show up."
The workaround, if you will, illustrates something that we know that there is always a way around these controls and therefore they offer limited privacy protection at best. The reality is that once something gets online it's out there forever.
I try to make the next generation of accounting students aware of the risks during the Master's course I teach at the University of Waterloo. During class, I ask them to pull articles on how posting on Facebook can undermine one's career and professional prospects. (here is a blog that compiles social media faux pas that results in one losing one's job). As the then CEO of Sun Microsystems (now owned by Oracle), Scott McNealy stated (back in 1999), "You have zero privacy anyway.Get over it."
Over the summer, I had some time to think about privacy and social media as I was researching the phenomenon. One of the thoughts that struck me was that social media actually represents the "Return of the Village". Being an urbanite myself. I am used to living in the city or the burbs where people "mind their business". However, that's not how life is in the traditional village. In the village, everybody knows everybody and word gets around quickly about people's affairs. There, just as in the online world, if you don't want anyone to know something don't tell anyone about it. Consequently,privacy has always been limited in a village context. However, as Jeff Jarvis touts in his book Public Parts, there are benefits to living life publicly. In other words, by living in the "online village" we get the benefits of a community that was hard to find living in the more individualistic urban setting. A couple examples that illustrate this concept:
When developing an internal controls strategy around social it is important to keep the human element at the focus of the strategy. As illustrated by SnapChat, technology-centric controls can be easily circumvented. Furthermore, when considering the risks of employees contributing online it is important to remember that it is hard to segment one's professional world in the corporate cubicle with one's personal life. Consequently, governance and controls need to address the personnel rather than relying solely on technological solutions, such as data loss prevention tools. For example, Microsoft relies essentially on its people to police themselves and in order to post things that are in-line with Microsoft's corporate culture. In other words, the techno-centric solutions can supplement governance controls but they don't supplant them.
In terms of protecting oneself from privacy breaches it requires vigilance. Some totally avoid being a social network for just the reason. That being said such people are in the minority (I poll students annually as to whether they are on Facebook: a handful give it up because it is a waste of time. I've found 1 or 2 people who've given it up for privacy reasons). Other try to mitigate such risks through "social controls". For example, in the Facebook Effect, the author notes how colleges have no cellphone and no camera parties to avoid illegal activities for finding their way online. It may seem like weak control because anyone can sneak a camera into the party. What this misses is really that the control is social in nature: people won't take pictures because they wanted to be invited to the next party!
Ultimately, the real test of social media will be how it is used against people who do not conform to the norm. For example, what would happen if employers discriminate against people who support the Occupy Wall Street movement? If people go along with such discrimination, social media essentially becomes a way to ensure conformity in society. Conversely, if such discrimination is opposed, then it would lead to a more open society as the threat of social sanction (e.g. unable to finding employment) is effectively removed.
