RogerBW's Blog

Libra Shrugged, David Gerard 06 November 2020

2020 non-fiction. In 2019, Facebook announced that it was planning to revolutionise money. How did it fail?

Most of David's writing is day-to-day journalism: entity A has said thing B, and this has implication C. And that's mostly the form this book takes too: there's substantial background as to what Libra was initially meant to be (both in an official sense and how it might actually have worked in practice), but from the point of the announcement it's mostly straight reportage of the events as various financial regulators and politicians expressed their concerns and people from Facebook utterly failed to deal with them.

This unfortunately makes much of the book a bit repetitive: someone expresses the same concern as someone else did before, some explanation is added, a similar non-answer is given by Facebook. Yes, we do understand for example that a demand for "safe" cashlike assets led to unsafe ones being repackaged and labelled as safe in 2008, and that a huge demand for such assets by a Facebook pseudocurrency needing to maintain a reserve would be likely to produce similar effects to the ones seen then; we got it the first time. Yes, we know that in all rich countries except the US money transfers happen in minutes rather than days, and even the US is catching up now.

What I'd have liked to see more about is why this clearly idiotic project got any traction in the first place. Not why Facebook thought that it could use its market power to data-mine financial transactions the same way it data-mines everything else it does; that's obvious, and it's still going to do that if not actively prevented. But why did it hire a cryptocurrency enthusiast in the first place (always an error for any organisation), why did it not have someone in the structure who could say "cryptocurrency is intrinsically toxic and will attract negative attention, let's do this in a different way" or "maybe people just want to pay a price for something and not have to worry about today's exchange rate", and why was it taken by surprise when regulators objected, to the point of not having even its normal lying reassurances ready to go? (Well, that may come from putting a cryptocurrency enthusiast in charge; they're often charmingly naïve about financial regulation, and since they always think of themselves as basically the scammers rather than the potential victims they naturally tend to regard regulators as the enemy.) Similarly, why did the various initial members of the Libra Association agree to sign up to something which even then was clearly going to attract major regulatory awkwardness? I'm not asking "why did they think a chance to get a huge profit by becoming part of a de facto monopoly would be a good idea", which is obvious, but rather "why didn't they take into account the downside risk of being associated with a project like this".

But if you need reassurance that it's not just you, that Facebook people really are acting stupid (in a way that only people with a specialised intelligence who think it's a general intelligence can manage) and with an utter disregard for the wellbeing of anyone except themselves, here is plenty of documented evidence. Facebook delenda est.

A review copy was provided; also David's a friend.

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  1. Posted by John Dallman at 09:41am on 08 November 2020

    Facebook, and the Libra Association, probably thought it was bound to "succeed," in that lots of Facebook's users would sign up and use it.

    I expected that, but that the failure would come when someone (more honest than Facebook about their own willingness to cheat and steal) swiped a huge chunk of money.

    Presumably, Facebook didn't expect regulators to look harder at something that a huge number of relatively naïve people would be exposed to?

  2. Posted by RogerBW at 10:27am on 08 November 2020

    I suspect the sensible people at Facebook (assuming there are any) had never dealt with financial regulators before, and trusted the cryptocurrency enthusiasts to know what they were talking about. (Which five minutes listening to them will prove is false, but five minutes listening to a cryptocurrency enthusiast is hard work.)

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