Democracy in the age of data
"Data is the new oil" has been a clichéd maxim of the internet age. But the events that unfolded last week have underlined the extent of complexities that can be created in society depending on the nature of its usage.
 
A year-long investigation by multiple media outlets in the US and Britain revealed that a consulting firm, Cambridge Analytica, accessed data of at least 50 million social media users without their proper consent. They then used these data points to psychologically profile people and individually target them with politically-motivated content to manipulate the 2016 US presidential elections. A similar approach was used to influence electoral outcomes all around the world, possibly even in India.
 
Even though the process of manipulating the political narrative during elections is not something new, there is something sinister about for-profit organisations and foreign agents using data technologies to disrupt democratic norms. If electoral outcomes come to be defined by exploiting deep-rooted psychological fears of voters based on data analytics instead of developmental issues that drive progress and prosperity, social cohesion will fall under immediate threat, proving pernicious to the very fabric of democracy. The political vision of governments and politicians need to be steered by people instead of mathematical algorithms.
 
It must be highlighted that social media and the vast explosion of data due to it are not the problems per se. However, when societies are finding themselves being increasingly run by data, a defined set of ethical norms need to be formulated to guide its use. The issue is of the utmost importance for India, as it has a significant online presence that is vulnerable to privacy violations. It has the highest number of Facebook users and the second-highest number of Twitter users in the world -- with a combined reach of almost 300 million.
 
A committee of experts under Justice B.N. Srikrishna has already been set up to deliberate upon a data protection framework for India. It is working on drafting a data protection bill and has deliberated on a number of pertinent issues like what constitutes "personal data", the specifications of consent and establishment of a data protection authority. A white paper has also been published by the authority, detailing a lengthy discourse on these very issues. Meanwhile, the Parliamentary Standing Committee on Information Technology has also listed "Citizens' data security and privacy" as a subject of study. However, not much seems to have been done on the topic. Recent events might hopefully set the ball rolling on that front and inspire a multi-partisan report on the matter.
 
Once the processes of setting up a robust framework of regulatory policy and statutory law to govern matters of data privacy are complete, there will be a requirement to establish cultural expectations that incorporate ethical standards right when the data technologies are being built. The application of regulatory mechanisms after individuals have been profiled is akin to closing the stable doors after the horses have bolted. The race to become the next-big-thing in technology has placed ethics on the backseat and, hence, it is often the case that investigations are conducted, and apologies are demanded, only after the damage has been done. The environment of "develop first, question later" will have to change.
 
The issue of data and privacy regulations will become even more important as technological companies gain greater market share in provision of financial services instead of traditional banks. When you instantly transfer money to friends and family over apps like WhatsApp to avoid the hassle of asking around for bank account numbers, the company gains direct access to your transactions. The power of that data will lie with the entity which posses it. Interestingly, retail banks will begin to lose out on this essential oil as it will be unable to identify customer interactions once it shifts to these new age non-banks.
 
The use of data mining as a strategic tool, put in the right hands, can be a powerful tool to understand societal preferences and address consumer needs. However, no good comes with a complementing bad and our democratic societies need to be wary of the latter by building robust security mechanisms that ensure privacy and consent. At times, even that might not be enough. Consumers willingly hand over a lot of personal information for the convenience of services without knowledge of the consequences of their actions and the eventual use of the data. Therefore, a final action that needs to be undertaken in the world of data is to build user-awareness. There is simply no substitute to a well-informed consumer base.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

 

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    US authorities confirm Facebook probe for data leaks
    The US Federal Trade commission has confirmed that it was investigating Facebook after the leak of personal and other data on some 50 million users to political consulting firm Cambridge Analytica.
     
    The FTC said on Monday that it "takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook". 
     
    "Today, the FTC is confirming that it has an open non-public investigation into these practices," Efe news quoted Acting FTC Bureau of Consumer Protection Director, Tom Pahl, as saying.
     
    Pahl emphasized that the agency is committed to using "all of its tools" to protect the privacy of consumers and that the main such tool is "enforcement action" against companies that do not fulfill their promises in the data privacy area or that violate the law.
     
    He explained that the FTC is acting against firms that do not abide by the "Privacy Shield" agreement regulating data transfer with the European Union and against companies that undertake "unfair acts" that harm consumers or violate the FTC Act.
     
    "The FTC is firmly and fully committed to using all of its tools to protect the privacy of consumers. Companies who have settled previous FTC actions must also comply with FTC order provisions imposing privacy and data security requirements," a statement said. 
     
    "Accordingly, the FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook."
     
    Rob Sherman, Facebook's deputy privacy chief, said in a statement last week that the social networking firm remains "strongly committed to protecting people's information," adding that "we appreciate the opportunity to answer questions the FTC may have".
     
    A week ago, after the controversial leak of private information on millions of users came to light, press reports said that the FTC was investigating whether Facebook violated the terms of a 2011 consent agreement requiring user consent for sharing data by providing use data to Cambridge Analytica in 2014.
     
    The London-based political research organization, which collaborated with the election campaign of Donald Trump in the runup to the 2016 vote, used the leaked information to develop a computer programme to predict the decisions of US voters and influence them.
     
    In 2011, Facebook promised to ask for the consent of its users before making certain changes in their privacy preferences, as part of an agreement with the government, which accused the firm of abusing consumers by sharing with third parties more information than users had authorized.
     
    Breaking that agreement could result in the tech firm facing a fine of $40,000 per violation, the CNBC financial network said.
     
    Facebook CEO Mark Zuckerberg on March 21 admitted that it was a "breach of trust" to allow an app developed by Cambridge University professor Aleksandr Kogan to collect data for Cambridge Analytica, and he added that the firm will "fix" the problem by, among other things, investigating all apps that could access users' personal data before 2014 and banning any developer that "does not agree to a thorough audit".
     
    After Monday's announcement, Facebook shares fell by as much as 6 per cent on Wall Street. 
     
    Last week, the firm suffered significantly in the markets as its stock price plunged, reducing the value of outstanding shares by some $50 billion.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
     

     

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    Warren Buffett Recommends Investing in Index Funds — But Many of His Employees Don’t Have That Option

    Warren Buffett, the most successful investor of our time, is a huge fan of low-cost index funds — funds that replicate a market index rather than try to outperform it — as the way for the average investor to succeed in the stock market. “By periodically investing in an index fund … the know-nothing investor can actually outperform most investment professionals,” he wrote in his 1993 letter to shareholders of his Berkshire Hathaway conglomerate. “Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”
     
    He returned to the subject in this 2016 letter, writing, “Both large and small investors should stick with low-cost index funds.” And in his newest shareholder letter, Buffett said that one reason he made a widely publicized bet (which he has now won) that a low-cost Vanguard index fund would outperform a group of hedge funds over a 10-year period was “to publicize my conviction that my pick — a virtually cost-free investment in an unmanaged S&P 500 index fund — would, over time, deliver better results than those achieved by most investment professionals, however well regarded and incentivized those ‘helpers’ may be.”
     
    Given Buffett’s praise of index funds — specifically, those with low fees — you’d think that all the employees at Berkshire Hathaway companies would get to practice what the boss preaches by being able to invest their 401(k) money in such funds.
     
    But you’d be wrong.
     
    It turns out that employees of many Berkshire subsidiaries have the same problem — and it’s one that, as we’ll see, also affects millions of Americans outside of Buffett’s companies. To wit, your employer, not you, chooses your 401(k) investment options and your choices may be less than optimal either because your employer doesn’t know any better or because your employer’s interests are different from yours.
    You wouldn’t expect to see this problem at a company run by a brilliant investor like Buffett, but it’s there. I’ve looked at the retirement plans of each Berkshire subsidiary whose investment options I could find on file at the Labor Department, which turned out to be about 50 of the 63 subsidiaries listed on Berkshire’s website.
     
    Each offers its own investment options rather than having Buffett or someone else at headquarters pick a package of suitable company-wide investments. That’s not surprising in one sense: Buffett is famously hands-off in how he oversees the companies owned by Berkshire.
     
    But the result is that many of the subsidiaries offer little or nothing in the way of index funds. And even when they do offer such funds, different Berkshire employees can end up paying wildly divergent fees for the same investment, depending on which operation they work for. Those differences can cost — or save — them tens of thousands of dollars over the course of decades.
     
    Consider two examples that I got from a list assembled by Eli Fried, an investment consultant who advises pension and endowment funds and is the person who brought the Berkshire disparities to my attention. Fried told me he was looking at 401(k) investment options offered by the top companies on Fortune’s list of most admired companies and was surprised by what he found at Berkshire.
     
    On the index fund front, there’s a big difference between the S&P 500 index funds that employees of Berkshire-owned NetJets, General Re, GEICO, FlightSafety, Clayton Homes and H.H. Brown Shoe Group can buy, and the one that BoatU.S. employees can buy. BoatU.S. employees pay a fee of 0.62 percent, or $62 a year for a $10,000 investment. That’s more than 15 times the 0.04 percent — $4 a year per $10,000 — that employees of the six other Berkshire companies pay.
     
    There are also some big differences in…Continue Reading… 
     
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