People as a product!

In digital space, users are increasingly being shaped as commodities by various sites and services.

LAST week, social photo-sharing application Instagram caused an uproar when it announced changes to its terms and conditions.

The changes were related to its advertising policy, and were interpreted by many people as the company reserving the right to share user information and pictures with advertisers (or to be used in advertising) without permission.

Instagram has since reversed that policy and apologised for the “confusing” language, stating: “Legal documents are easy to misinterpret.” (You can read its response at http://bit.ly/U79Nld.)

This seems to have pacified some users, but many are still fuming, while others have opted to try different photo-sharing apps as an alternative.

There are two primary issues with this. One is a privacy issue, in that the company would even consider sharing user information and pictures with its parent company Facebook and other third-party organisations (including advertisers).

The other is copyright; in the same response, Instagram co-founder Kevin Systrom wrote: “Instagram users own their content and Instagram does not claim any ownership rights over your photos. Nothing about this has changed.”

Users had every right to be upset. These are serious issues with severe repercussions, and it is becoming more and more common that online sites and applications are usurping the rights and control of their users. Facebook’s constant changing of privacy settings is legendary. The deeper we embed ourselves within such social network sites, the more we seem to get walled in.

As the days wear on, we find it increasingly harder to escape – most of our connections are in our social network of choice, our memories are stored within our profiles, and we are relying on it to be our source of information.

In many cases, we have come to depend on it for almost all of our interactions – we no longer need to remember people’s birthdays, we can send messages to each other conveniently without the need to store addresses, and we can broadcast our lives to all our friends at the click of a mouse.

Whether or not the reliance on such technology is a good thing is a different debate, but the fact is that the services these sites provide – it doesn’t matter if we never needed them before – are extremely useful.

However, many users don’t realise that this is still a service. Such technology has become so embedded in our lives that many of us have taken it for granted.

The fact that it is also primarily operated on the Internet has contributed to this sense of entitlement. Why buy newspapers when you get the news online for free? How many of us still send text messages via SMS now that there is iMessage, Blackberry Messenger and WhatsApp? With Skype and Viber, who needs to make traditional phone calls?

In some cases, it is easy to see how the companies behind them are making money. Newspapers now provide news for free (some have paywalls) with the hope of driving more traffic to their sites, which are plastered with advertising.

Apple and RIM, the maker of the Blackberry, promote their messaging systems to encourage people to buy their devices. Skype has a premium service that users can pay for as well as cheaper computer-to-phone rates which helps supplement its income. In that sense, the products these companies offer are obvious.

Social network sites like Facebook, Instagram and Twitter also have a product: You and me.

What they essentially do is no different from the media outlets – they sell their user base to advertisers. Unlike the print and broadcast media, however, these sites tend to have more information on their users which can be sorted or mined to help advertisers reach their target market.

Each update we post on these sites contains more information about our lives and what interests us – whether it’s in the words we use, the places we check in from or the photos we upload. And they have a lot of information. Citing European policy law, a student from the University of Vienna made a request to Facebook to hand over all the information it had on him. And Facebook provided it – all 1,200 pages of it.

The point here isn’t about how scary it is that a company has so much information on each of us – this too is a different debate.

The concern is that as technology advances, we are increasingly being shaped to be a product, and this is an awareness we have to carry with us constantly. It is pertinent to note that this is not a new phenomenon – the whole basis of the advertising industry is based on consumers being the product.

This is why newspapers are able to subsidise publishing costs to sell their products at a relatively low price (or in some cases, offer it for free) and why we get to watch television for “free”. Or pay very little.

We need this awareness because it will help us make decisions about how we navigate our digital lives. It will also help us reclaim some of the control – and our rights.

Instagram may have reversed that new policy for now, but there’s no saying it won’t come back in another form. Facebook has gotten away for many years with changes that its users do not like because few people are willing to walk away from it.

This is not to suggest that what these companies are doing is right. But the adage that nothing is free rings true in this situation. There are alternatives but each comes with a price.

The alternatives to these sites – some of which are on open-source platforms – may not be as polished and lack the critical mass to be as effective as the big social sites. Then there are the commercial entities which charge you (Flickr, for example, is capitalising on a sudden exodus from Instagram to its platform, offering its paying customers an additional three months of service).

It is only by carrying this awareness with us always that we can truly make the right decision – whether to stick with these companies, or stick it to them.

ReWired By Niki Cheong

Niki has just completed his MA Digital Culture and Society at King’s College London. Connect with him at http://blog.nikicheong.com or on Twitter via @nikicheong. Suggest topics and issues on digital culture, or pose questions, via email or on Twitter using the #Star2reWired hashtag. 

Hubby and wife laying low — no thanks to debtor son

< Hapless situation: Lee relating Chan and Yong’s story during the press conference.

IPOH: Chan Kwai Woh and Yong Yin Yoke, both in their 70s, have been moving from one budget hotel to another since Dec 17.

The elderly couple is trying to avoid being hounded and threatened by loan sharks from whom their 48-year-old son Voon Jiun had borrowed huge sums of money.

“I want to cut ties with my son for causing us so much trouble, and I request the loan sharks to find him instead of harassing us,” said Chan.

The 73-year-old part-time technician said their home in Taman Cempaka here was splashed with red paint on Dec 15 and Dec 23.

“We lodged a police report after the first incident and moved out without taking much clothes or even our high-blood pressure medicine,” he told a press conference at the office of Perak MCA Public Services and Complaints Bureau chief Datuk Lee Kon Yin here yesterday.

“After the first incident of paint being splashed in our porch we questioned our son about the matter and the next day he disappeared.”

Missing borrower: Voon Jiun has gone into hiding.

Chan and Yong, 70, have four other children but are afraid to stay with them as the loan sharks might also harass their families.

“It is stressful dealing with the loan sharks and we decided it was best to stay outside,” said Chan.

He believes Voon Jiun had fled after borrowing money from the loan sharks. His whereabouts are not known.

Showing photographs of his son, Chan said their relationship had been strained for some time.

“He had been staying for over 20 years in Australia, where he got married and has a 10-year-old daughter.

“However, he returned to Malaysia alone in June,” said Chan, adding that the family does not know what the son does for a living.

Meanwhile, Lee said he would write to the police to speed up the investigation on Chan’s report.

“I will follow them back to their house so that they can take their medication and other items.

“But I have advised them to stay put in their house. If there is any problem they can always contact the police, instead of staying in budget hotels,” he added.

By MANJIT KAUR
manjit@thestar.com.my 

The rotten heart of capitalism: interest rate-fixing scandals

The magnitude of the banking scam must be realised and tough action taken

The UBS building in Zurich. Photograph: Michael Buholzer/Reuters



This is the year the consensus changed. Around the world, policy-makers, regulators and bankers recognised that the legacy of the 20-year credit boom up to 2008 is more corrosive than all but a few realised at the time. The bankers – and the theorists who justified their actions – made a millennial mistake. Navigating a way out of the mess was never likely to be easy, but it is made harder still by not recognising the magnitude of the disaster and the necessary radicalism involved if things are to be put right.

If there were any last doubts they were dispelled by the record $1.5bn fine paid by the Swiss bank UBS for "pervasive" and "epic" efforts to manipulate the benchmark rate of interest – Libor – at which the world's great banks lend to each other. The manipulation was at the behest of the traders who buy and sell "interest rate derivatives", whose price varies with Libor, so that cumulatively billions of pounds of profits could be made. Nor was UBS alone. What is now evident is that all the banks that made the daily market in global interest rates in 10 major currencies were doing the same to varying degrees.

There was a complete disdain for the banks' customers, for the notion of custodianship of other people's money, that was industry wide. It is hard to believe this culture has evaporated with the imposition of a fine. No banker falsifying the actual interest rates at which he or she was borrowing or lending, or trader who requested that they did so, had any sense that there is something sacred about banking – that the many billions flowing through their hands are not their own. It was just anonymous Monopoly money that gave them the opportunity to become very rich. The UBS emails, which will be used to support criminal charges, could hardly be more revealing. This was about making money from money for vast personal gain.

Interest rate derivatives are presented as highly useful if complex financial instruments – essentially bets on future interest rate movements – that allow the banks' customers better to manage the risks of unexpected movements in interest rates. Whether a multinational or a large pension fund, you can buy or sell a derivative so you will not be embarrassed if suddenly interest rates jump or fall. Bookmakers lay off bets. Interest rate derivatives allow buyers to lay off the risk that their expectations of interest rate movements might be wrong.

What makes your head reel is the size of this global market. World GDP is around $70tn. The market in interest rate derivatives is worth $310tn. The idea that this has grown to such a scale because of the demands of the real economy better to manage risk is absurd. And on top it has a curious feature. None of the banks that constitute the market ever loses money. All their divisions that trade interest rate derivatives on their own account report huge profits running into billions. Where does that profit come from?

The answer is it comes largely from you and me. Global banking, intertwined with the global financial services and asset-management industry, has emerged as a tax on the world economy, generating much activity and lending that has not been needed, but whose purpose is to make those who work in it very rich. The centre-left thinktank IPPR reports that people with identical skills earn on average 20% more in financial services than in other industries, with the premium rising the higher the seniority. That wage premium does not come from virtuous hard work or enterprise. It comes from how finance is structured to deliver excessive profit.

Scandalous

The Libor scam is an object lesson in how finance taxes the rest of the economy. Plainly, the final buyers of the mispriced interest rate derivatives could not have been other banks, otherwise they would have lost money and we know that they all made profits. In any case, they were part of the scam. The final buyers of the mispriced derivatives were their customers. Some must have been large companies, but many were those – ranging from insurance companies and pension funds to hedge funds – who manage our savings on our behalf.

Here a second scam kicks in. One of the puzzles of modern finance is why the returns to those who buy shares in public stock markets are so much lower than the profits made by the companies themselves. One of the answers is that there are so many brokers, asset managers and intermediaries along the way all taking a cut. Sometimes it is through excessive management fees, but another way is not doing honest to God investing – choosing a good company to invest in and sticking with it – but through churning people's portfolios or unnecessarily buying interest rate derivatives to protect against interest rate risk, while charging a fee for the "service". Many of those mispriced interest rate derivatives will have ended up in the investment portfolios of large insurance companies and pension funds or, more sinisterly, in the portfolios of the banks' clients.

Most rotten

Bank managements are presented as ignorant dolts, fooled by rogue traders. They were no such thing. The interest rate derivative market is many times the scale than is warranted by genuine demand precisely because it represented such an effective way of looting the rest of us. The business model of modern finance – banks trading on their own account in rigged derivative markets, skimming investment funds and manipulating interbank lending, all to underlend to innovative enterprise while overlending on a stunning scale to private equity and property – is not the result of a mistake. It represents a series of choices made over 30 years in which finance has progressively resisted any sense it has a duty of custodianship to its clients or wider responsibilities to the economy. It was capitalism allegedly at its purest. We now understand it was capitalism at its most rotten. It needs wholesale reform.

The government's proposals to ringfence investment banking from the rest of a bank's activities, following the proposals from Sir John Vickers, is a start. But it is only that. Last week, Conservative MP Andrew Tyrie's cross-party parliamentary commission proposed " electrifying" the ringfence with the threat of full separation if malpractice continues. It also considered banning banks from trading in derivatives on their own account. But while tough, the commission should extend its brief. The issue is to create a financial system in its entirety that serves individuals and business alike, makes normal profits and, above all, embeds its public duty of custodianship in the bedrock of what it does. The government fears that more upheaval will unsettle banking and business confidence. It could not be more wrong. Reform is the platform on which a genuine economic recovery will be built.

Comment by Will Hutton - Guardian
 Related posts:
The Libor fuss! 
Libor scandal blows to British banking system
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To Malaysians, time to learn to live without maids!

 

I REFER to the report in “Maids may snub Malaysia” (The Star, Dec 24, reproduced below).

People may wring their hands in despair now but bear in mind a litany of abuse cases and the fact that Malaysian workplace laws regarding maids have been dragged into the 21st century with better wages and conditions is too late.

People have justified for too long the treating of maids as second-class humans by claiming all sorts of benefits that they bring to these women.

In the report, it states “If maids chose not to come here, many women would either have to give up their careers or demand for more childcare centres”.

My sister in Australia has for the last 20 years worked in a full-time job, undertaken part-time university studies, raised three children, seen to my ageing father and ran a house.

All this she has done without a maid, housekeeper or cleaner.

She has not given up her career.

What she has gained from this are children who are emotionally intelligent, responsible, able to undertake tasks such as simple cooking, cleaning their bedrooms, washing the car, walking the dog and discovering that being part of family is learning to be responsible.

I know of countless Malaysian families in the same boat as my sister. The world will not end if maids don’t come.

GORDON REID Kuala Lumpur

Maids may snub Malaysia

By PATRICK LEE patrick.lee@thestar.com.my

PETALING JAYA: Malaysia may soon be the last choice of foreign domestic maids.

With other countries paying higher wages and the current low exchange rate of the ringgit, domestic maids may prefer to go elsewhere, warn economists.

RAM Holdings group chief economist Yeah Kim Leng said that although there would be a greater demand for maids, especially with an ageing population, it would be harder to hire them.

“Unless our income is able to keep up with the rising costs, fewer people will be able to afford maids,” he said.

He said that with improving economies in countries like Indonesia, Malaysia may no longer be viewed as a potential job market.

Yeah said more locals might have to work as maids and predicted a greater demand for outsourcing of domestic chores and daycare.

“The Government will have to look into an alternative for working parents,” he said.

Yeah was commenting on an announcement by Prime Minister Datuk Seri Najib Tun Razak that both Malaysia and Indonesia had agreed to review the cost structure for recruiting maids.

There has been a trickle of Indonesian maids into the country despite the signing of an MoU between Malaysia and Indonesia on May 30 last year which set a RM4,511 agency fee for the hiring of maids.

The Malaysian Maid Employers Association (Mama) has since claimed that the cost structure was not sustainable as agents were reluctant to bring Indonesian maids into the country, leading to a shortage.

MIDF research chief economist Anthony Dass said locals would have to choose between paying more for their maids or not having any at all.

“If another country offers better (fees) for maids and agencies, why should they come here?” he said.

Dass said increased wages for maids would reduce Malaysians' disposable incomes, especially if salaries do not go up.

He said if maids chose not to come here, many women would either have to give up their careers or demand for more childcare centres.

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Malaysia in 2013, stability amid a global storm

There is growing optimism among investors despite possibility of overall contraction


Multi-sector economy: Malaysia’s economic performance has been strong, and it is often recognised as among the emerging economies that will have a prominent role on the world stage in the coming years.

KUALA LUMPUR: The new year is just around the corner. In many ways, it will be a relief to say farewell to 2012, a year which has seen the advanced countries struggling amid seemingly unending economic and financial uncertainty.

Naturally, the tail-end of the year is a time to look ahead with hope and expectation. And indeed, there is growing optimism among investors about the global economy. However, is this realistic when some experts refuse to rule out the possibility of an overall contraction?

When presenting its Economic Outlook in late November, the Organisation for Economic Cooperation and Development (OECD) warned that the global economy was expected to make “a hesitant and uneven recovery” over the coming two years.

OECD secretary-general Angel Gurra pointed out that we were not yet out of the woods. “The near-term outlook is not only weak, but also downside risks predominate. The lingering euro-area crisis remains a serious threat to the world economy. At the same time, if left unresolved, the US fiscal cliff' could tip the US economy into recession and weigh on global growth,” he added.

The eurozone is expected to see a 0.4% contraction this year and a further 0.1% fall in 2013. Even if the White House and congressional leaders can hammer out a short-term agreement on the budget that will avoid the fiscal cliff, growth in the United States is forecast to grow at 2% next year, down from the 2.6% forecasted in May.

With the United States and Europe battling to revive their economies, the OECD believes the world economy will grow by 3.4% in 2013, up from 2.9% this year.

This will likely be supported by the economic expansion of the likes of China, Brazil and India, although they too will be impacted by challenges faced in the West.

< Gurria: ‘The near-term global outlook is not only weak, but also downside risks predominate

Malaysia too will contribute to this forward momentum. Its economic performance has been strong, and it is often recognised as among the emerging economies that will have a prominent role on the world stage in the coming years.

The recent Country Brand Index (CBI) 2012-13, for example, ranks Malaysia as third among the Future 15 tomorrow's leading country brands that have “great potential across a variety of areas”.

Constructed annually by global brand consultancy FutureBrand, the CBI measures and ranks global perceptions around the world's nations based on elements such as their cultures, industries, economic vitality and public policy initiatives.

Economic reforms

This year is the first time that the index report incorporate the Future 15, which reflects six future drivers: governance, investment, human capital, growth, sustainability and influence.

Published last October, the CBI 2012-13 report notes: “Malaysia's workforce, tourism and vast resources may just be the secret to its success.”

That, of course, is not the full picture. A key component of the Malaysian success story has been the sound implementation of economic reforms since the nation's independence that has transformed an exporter of raw materials into an emerging, multi-sector economy driven by exports and supported by a well-developed regulatory system.

Manokaran says the economy is still driven by domestic demand, led by private consumption
 
Forward-looking planning has enabled the Government to capitalise on the country's unique offering, including a rich heritage and scenic landscapes, to support a thriving tourism sector. Home to more than 15% of the world's species, Malaysia is one of the world's most bio-diverse areas.

The current emphasis is on climbing the the economic ladder, and this is done via Government-led initiatives such as the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP), and a conscious effort to slowly liberalise sub-sectors of our economy.

Also crucial are a focus on building on the country's vast natural resources, a commitment to economic openness, and a concerted effort to drive investments in infrastructure and research and development. These are complemented by the encouragement of innovation in business and amongst the workforce, and the development of regional alliances.

Malaysia's economy has been resilient amid the challenging global economic conditions, with real gross domestic (GDP) product growth estimated at 5.1% this year and 5% in 2013, according to the World Bank.

Its third-quarter performance surprised on the upside with GDP expansion beating economists' median expectations of 4.8%; year-on-year growth in the quarter was 5.2%, with domestic demand fuelling economic activity and compensating for the slower export demand from major trading partners affected by the ongoing economic woes.

Domestic demand in the third quarter continued to experience double-digit growth, increasing 11.4% from a year ago. The impetus for this was supplied by strong public and private sector investment.

Private investments were primarily driven by capital spending in the services sector, particularly in transportation, real estate and utilities, while public investments were mainly capital spending by public enterprises in transportation, oil and gas, education and utilities.

< Zeti warns of some uncertainties in the export sector
 
Endless possibilities

Commenting on Malaysia's third-quarter performance, Alliance Research chief economist Manokaran Mottain said the economy was still driven by domestic demand, led by private consumption and investment activities, which reflected the Government's drive to stimulate income growth, improve and develop infrastructure, and ensure a steady flow of foreign capital.

However, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz cautioned that although GDP growth in the fourth quarter was likely to continue that of the third quarter, there were some uncertainties in the export sector. The central bank estimates that growth for the whole of 2012 will be at least 5%.

The experts are cautiously confident about Malaysia maintaining its economic performance in 2013. The recent Malaysia Economic Monitor, a report by the World Bank, said Malaysia's growth would likely weather a weak global environment and would grow robustly in 2013.

Public and private investments are expected to remain strong and lend support to economic growth in the new year. Private investment is forecasted to grow at 13.3% in 2013, up from 11.7% in 2012, driven by the rollout of the ETP. Public investment is forecasted to expand by 4.2% in 2013, as a result of higher capital outlays by non-financial public enterprises and development expenditure by the Federal Government .

The Finance Ministry has said the prospects for the services sector are expected to remain upbeat with the accelerated implementation of key initiatives under the National Key Results Area and continued investment in the seven services sub-sectors under the National Key Economic Areas.

These initiatives are geared towards driving the wholesale and retail trade, finance and insurance, and communication sub-sectors, which are forecasted to grow 6.8%, 5.2% and 8.2% in 2013.

Though the United States and Europe have some way to go before they can again enjoy pre-crisis growth rates, Malaysia looks set to stay on its stable trajectory of growth, benefiting from wise economic planning and a steady pace of growth.

A bright future lies ahead for Malaysia, a nation earmarked to become a force that will reshape the global landscape of tomorrow. As the country plays an increasingly important role, it will no doubt offer Malaysians and the world a destination for growth and endless possibilities.

By News Desk The Star/Asia News Network

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