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Rational People Sell Out: WhatsApp Edition

2014 February 21
by Ian Welsh

A while back I wrote something which made a number of people angry:

Any new social structure must throw off surplus that people can live on, and that surplus must not be able to be bought up by the old system, which will seek to do so.  The ban against selling out/being bought out must be irrational and ideological.  Rational people sell out.

As you’ve probably heard, WhatsApp (the largest messaging system outside North America) was just bought out by Facebook, for 19 billion.  A normal enough story, but Robert Myers pointed me to this article on WhatsApp’s ethics:

He had just three rules as he experimented with the early iterations: his service would defiantly not carry advertising, an experience satisfyingly absent from his Soviet upbringing; it would not store messages and thus imperil individual citizens’ privacy; and it would maintain a relentless focus on delivering a gimmickless, reliable, friction-free user experience.

Now that Facebook owns it, how long will it be before all information is stored, the NSA has a backdoor and there are ads?

Rational people sell out.  When there are bad actors (and Facebook is a bad actor), who have so much money that they can make you filthy rich overnight, it is rational to sell out.  (Assuming they don’t have you already because they funded you with a very nasty contract).

This is a supremely important point.  People are very confused about rationality.  Rational is not a synonym for “good”. It is often rational to be a complete scumbag and to act in ways which will hurt other people (or at least not help them.)  This is true even in the long run, because you don’t have to deal with most people.  Betray millions of people, who cares?  There are millions more who will be happy to give you whatever you want when you are a billionaire.

The response to that, of course, would be “it’s only an app company.”  True, but it’s also a way of communicating without it being so easy to be spied on, and soon that will be gone.   You can’t create anything good in tech, without it being bought out. It cannot be done. People will always sell. Only open source offers the possibility of it, but open source projects, once they get big, almost always take money from dubious sources, because only dubious sources have a lot of money right now, and even a small team of developers still costs hundreds of thousands or millions a year to support.

Ethics which are negotiable for cash, aren’t ethics you can build a society on.  Rational people betray.  Systems that work take betrayal off the table by simply forbidding it, and backing it up with an irrational attachment to norms.  “We don’t spy on people, period.  We don’t torture.  We don’t allow pharma companies to price their drugs so high that people can’t afford them.  We don’t allow vote suppression.”

As I wrote on rationality and ideology in the past:

Note, finally, the use of the word irrational.  We think of irrationality as bad, but rational decision making leads to betrayal.  If someone’s going to offer me more than I can otherwise earn to betray the rest of my people, a lot of folks are going to take that deal unless they have the irrational belief that it’s wrong, and a rational belief that if they do it, those who have an irrational belief in the system will hurt them, or even kill them.

Irrational people don’t sell out. Rational people do: unless they know that irrational people will find them, and hurt them, if they do.

You cannot have a prosperous, free society without irrational attachment to social norms which are not always in the interest of individuals. You must take various forms of betrayal and race to the bottom off the table. It will always be in someone’s interest to exploit people, to pollute, to spy, to torture. Rationality does not stop such behavior in individuals.

24 Responses
  1. Celsius 233 permalink
    February 21, 2014

    Ian; I think this is a stellar post.
    It really strikes to the heart of whats going on in our society, and specifically, why I don’t twitter or use facebook (or any other social media [snapchat?]).
    It’s becoming increasingly difficult to communicate via anything on the web and enjoy a feeling of privacy, because there isn’t any, period!
    Snail mail may see a renewed interest in lieu of the onslaught of e-spying by all capable governments.
    Further, I would add that we either get used to it or (preferred) find alternatives.
    I’m an optimist by nature, but have always recognized reality as what is.
    As dystopian as it gets, we humans, who give a shit, will find a way forward.
    Whatsapp’s is a mere piffle for those paying attention.
    Let them have their toys…

  2. Celsius 233 permalink
    February 21, 2014

    Let me add; I am not a rational person and I’m often not a reasonable person.
    Mostly I’m a contrarian. Cheers.

  3. Dagnarus permalink
    February 21, 2014

    Agreed.
    One of the things I got out of game theory was that a society made up of rational individuals was unlikely to behave rationally.

  4. RJMeyers permalink
    February 21, 2014

    What was especially striking about that Ars Technica article was the contrast between the WhatsApp founders’ stated goals/ideals and the fact that they just flagrantly violated all of them. “We want a non-ad based, simple/streamlined, privacy protecting service where we have no idea who our users are.” *THUNK* ($19 billion hitting the table). “Here you go Facebook, a company that does the complete opposite of everything I’ve said!” It almost read like a satire piece from The Onion.

  5. someofparts permalink
    February 21, 2014

    So how do we get people to be irrationally ethical?
    Start at birth would be my first guess.

  6. Pelham permalink
    February 21, 2014

    I like to thing of myself as healthily irrational at times. But, of course, I don’t know how that would hold up if someone offered me $19 billion.

    Separately but relatedly, is it really the best use of resources to funnel $19 billion to someone who developed yet another online messaging service, albeit one with a twist?

    I’m thinking of this: There’s a tiny startup company that’s trying to get funding to develop Thorium-fueled molten-salt reactors for a cleaner, safer form of nuclear energy that — they claim — could solve all the world’s energy and climate-change problems in fairly short order while providing cheap energy. And there are two somewhat related technologies that are soundly theorized, one of which is backed by Bill Gates. So this stuff, at least, is not totally loopy.

    The Thorium people say they would need $100 million to $200 million to get going and in five years could have a commercially viable reactor. In large part, they would be drawing on 50-year-old technology that proved itself in the 1960s at Oak Ridge. I’m not a nuclear scientist, so I can’t vouch for this at all. But the extensive reading I’ve done on this and related technology suggests to me that there’s something to it.

    Let’s say that $200 million would really do the trick, in the sense of at least testing one or more of these technologies for viability. And yet years of campaigning on behalf of these projects has yet to yield the funding. It just doesn’t materialize.

    But $19 billion does materialize for WhatsApp. So what’s up?

    It doesn’t make any sense. And I think it has something to do with our narrow, locked-in conception of what a “free market” is. Not only do we arbitrarily and calculatedly exclude certain harmful effects of products and services from the market’s pricing mechanism, but we also exclude the wide range of human sentiment, sensibility and sense of community, allowing in only quite narrow motivations keyed to individual greed, avarice, vanity and suchlike.

    Of course, that’s where the big profits are.

  7. Jeff Wegerson permalink
    February 21, 2014

    In my twenties I once proposed the idea of “government for the rational, freedom for the irrational.” It was based on the idea of murder. A lot of murders are irrational and emotional one offs. But somewhere along the spectrum of repetition there begins to emerge a rationality behind the seeming irrationality. A reason for the murders begins to emerge. That becomes the time to take the freedom from the murder and govern it.

    The idea comes from the notions of repetition. The rational predictively repeats whereas the irrational does not.

    But it was not a particularly sophisticated idea on my part. It was simply a literal understanding of the math of rational and irrational numbers. Rational fractions repeat but irrational ones like pi do not.

    So my idea was probably not really a rational one to have.

  8. BlizzardOfOz permalink
    February 21, 2014

    So you’re saying that Fakebook — just like with Instagram — is mainly interested in 1) siphoning WhatsApp’s users into its own services, and 2) taking a superior competing product off the market. I have to wonder, at what point does anti-trust law come in to play (you know, in the hypothetical scenario where an elected President were more accountable to Facebook’s 100 millions of users than to Zuckerberg).

  9. atcooper permalink
    February 21, 2014

    First, note only 4 billion of that (still a lot!) is in cash. The rest is part and parcel of Facebook’s absurd valuation.

    The whole social space still has a tremendous amount of maturity to come to. Facebook is under a lot of pressure – has been since it went public.

    Much of that side of the tech biz is hot money looking for quick returns. The actual long term value is still much in question.

    Whatsapp was a very lean operation – less than 40 employees. As a messaging service, what they achieved in terms of engineering is, frankly, amazing. It undercuts the telcos – in my book, always a good thing.

    Finally, I mourn their selling to FB, just as did Nest to Google, and the upcoming cable merger.

    I would encourage everyone to think before giving over any information to the technologists – this includes free user reviews on Amazon as much as email addresses to pornographers looking to install a bot in your computer.

    Related link of interest – http://ben-evans.com/benedictevans/2014/2/19/whatsapp-and-19bn

  10. Julien permalink
    February 21, 2014

    Ok, two things:

    1- It’s easy to sit in judgement, high and mighty, but unless someone here has personally been offered 19 billions and turned it down, I’ll take your lamentations with a truckload of salt.

    People forget or don’t know that startups and the people who found them are about, well, starting up something. Once it’s up and running, it’s a very rare individual who will also be good and/or interested in running a business. Their thoughts will turn to the next thing they want to do, the next challenge. So when the pay window shows up, especially with that many zeroes, most startup people will think of what that money will enable them to do next.

    And then there’s the infamous monetization angle. WhatsApp charges 0.99$ a year after the first year. No one knows if that’s enough to run the business. By the CEO’s own account, their monetization strategy “is still in it’s early stages.” He views monetization as “five, 10 years down the road.” So basically, they had no idea how to generate revenue from their service.

    So if you have no clue how to pay the operating expenses of your company in the long run, then maybe selling it now will allow you to do more good in the long run than riding it down as it crashes and burn in a few years.

    2- Let’s not make WhatsApp into a champion of privacy or a revolutionary improvement in human communication. It is not and they never wanted to be, either. It’s a customized implementation of an open source instant messaging protocol. You could roll out your own, easily enough, if you were so inclined.

    Now, that’s not to say they weren’t smart about some things. They offered their app on platforms that typically get overlooked (non-smartphones, like Symbian and Nokia S40), so that allowed them to grow into a market that’s underserved. And network effect being what it is, their user base grew very, very large.

    But they are not champions of privacy, by a long shot. We’re talking about an app that’s going to upload a copy of your address book to their server, and keep it there to use as they please. An app that until 18 months ago did not encrypt the messages it sent, and still does not unless you’re on an iPhone or Android (which leaves out the majority of their users). Oh, and that new-fangled encryption, it’s hopelessly broken.

    And even in that regard, WhatsApp is not anything special, because security is hard to get right and easy to do wrong. The might talk the talk, but they certainly never walked the walk, at least in anything but the most lazily minimal way.

    The only thing that makes WhatsApp different from the litany of instant messengers that came before, and will come after, is that they won the lottery. They where in the right place at the right time to benefit from another company that has more money than sense.

    It’s not the poster child for anything.

  11. Phoenician in a time of Romans permalink
    February 21, 2014

    Instead of “irrationality”, you may be thinking of this concept

    http://en.wikipedia.org/wiki/Superrationality

  12. Ian Welsh permalink
    February 21, 2014

    I was once offered millions to violate my morals, and I turned it down. Believe that or not as you will. The idea that everyone is scum who will sell out is simply incorrect. And whenever someone says “you’d do it too”, the answer is “maybe, but maybe you’re talking for yourself.”

    The founder had ethics “no spying”, he has broken that ethical rule (and you know he has) because he was offered enough money.

  13. Declan permalink
    February 21, 2014

    On this topic, see Plato’s ‘Republic’ and Jane Jacobs’ ‘Systems of Survival’

    Plato divided his Republic, with ‘gold’ natured guardians – whose lives were organized to prevent them from selling out the republic – in charge of things, while people with a more ‘base’ nature were relegated to working in commerce and making money to pay taxes to support the guardians. He believed this caste type system was essential to prevent people from mixing up the ethics required for successful commercial work and the ethics required for guardian work.

    You can see Plato’s scheme at work in the origins of most of the world’s currently dominant/wealthy/most populous cultures, with Japan and Europe’s feudal systems (where engaging in trade was the worst thing a member of the governing class could do) and India’s caste system or China’s separate class of bureaucrats (well described in David Graeber’s ‘Debt’).

    Jacobs felt that society would work best when people could be morally adept enough to apply commercial values in commercial settings (selling out is fine, as long as you don’t cheat people or defraud them) and guardian values in guardian settings (selling out is the most serious crime, but cheating and fraud are fine as long as they are directed at enemies of the state). Jacobs was optimistic that we could maintain ourselves in this fashion as long as people maintained sufficient moral awareness.

    But in a world where the supreme court of the most powerful nation on earth can’t tell the difference between the corporation as a commercial ‘person’ (who can enter contracts, own things, etc.) and the corporation as political ‘person’ (who can vote and who can support a political party and who is loyal to their country and would fight to defend it), I have to doubt Jacobs’ optimism, as indeed she herself did later in life, with one of her last books being ‘Dark Age Ahead’.

    For his part, Plato thought that one type of society would lead to another, with a feudal type system being replaced an oligarchic system being replaced by a democratic system being replaced by a totalitarian system before the whole edifice collapsed and a new feudal society could emerge. So far he seems pretty on track regarding Western civilization.

  14. David Kowalski permalink
    February 21, 2014

    One other possibility, Ian, is that the system more or less forces the founder of WhatsApp to violate/abandon his ethics. I don’t know who owns the company but it probably includes venture capitalists, “investors”, and others who really aren’t motivated or equipped with the founder’s vision and ideals. Maybe the founder had little choice or at least little “rational” choice.

    I used to bank at Commerce Bank. Commerce was acquired by a large Canadian bank, TDbank. Well, the founder opposed the takeover vocally, in writing and with his stock votes (to his own financial cost if he succeeded. Toronto Dominion won out because although the customers got something of a raw deal the stockholders were far better off in the short and medium term taking the money and “investors” don’t have an eight or ten year horizon on anything these days.

    The local bank is now “TDbank” and I still bank there because it kept enough of the old structure (bought at a large premium) to be better than other banks in the area.

  15. Ian Welsh permalink
    February 21, 2014

    That is probably often the case David, but in this case he’s been very public about how happy he is with the deal.

    My first financial job was a life insurer that was demutualizing. A lot of policy holders made a lot of money off it, but it was a one time cash out, and every policy holder after that got a worse deal, because shareholders demand profits, and the execs started awarding themselves stock options and so on so they could cash in.

    The difference was very noticeable as an employee, both in how we were treated (worse) and in how we were told to treat customers.

  16. darms permalink
    February 22, 2014

    Maybe WhatsApp’s privacy was an illusion all along – http://pando.com/2014/02/21/the-problem-with-whatsapps-privacy-boasts-theyre-not-true/

  17. February 22, 2014

    Thanks, Julien, for laying it out for those who aren’t in the Silicon Valley and don’t understand the culture and how it works (and doesn’t work). Your summary of Whatsup is pretty much mine, i.e., they were never about privacy otherwise they would have made some effort to incorporate privacy into the product from day one, except I’ll point out one last thing: their funding source was Sequoia Capital. If they had *not* accepted the deal, Sequoia Capital would have cut them off and they wouldn’t have met payroll next month, because Sequoia Capital’s business model is to sell whenever the investment vs payoff multiplier gets above a certain percentage — and the multiplier here was *way* above Sequoia’s cut-off.

    Note that outfits like Sequoia Capital don’t just give you $40M to start a business. They dole it out quarter by quarter as you meet various business goals and objectives, and if you cross them by interfering with their payday, that’s it — you’ll never get a dime in the Silicon Valley again. The reality is that this is how the system works right now. To make the system work differently will require a new set of rules for how we finance startups and other such “disruptors”. Which is another conversation entirely…

  18. hidflect permalink
    February 22, 2014

    Whatsapp is fcking workaround hack. It:s worth about $19 Million at best.

  19. Jessica permalink
    February 22, 2014

    I may not know how I would react if someone dangled my share of $19 billion in my face, but I can know how we as a culture must get people to act if anything is to be created that isn’t under the control of our oligarchs.
    I suspect that for payouts this high, there is no way we could offer carrots so wonderful that no one would sell out. If that is true, then the stick will be necessary.
    At this point in time, most people are more or less OK with sell-outs. If someone can get something for nothing (which always means they are getting someone else’s share too), most of us admire that. If we developed a cultural sensitivity such that when WhatsApp sold out, they immediately lost most of their user base, then no one would dangle the temptation in front of them. *
    More basically, we need a truly democratic spirit* that recognizes that any extreme concentration of wealth is inherently toxic to humanity.
    If it is true that a company like WhatsApp will be on a short leash from a company like Sequoia Capital, that they can be forced to sell out, then one small step in the right direction might be to make this toxic side of venture capital as visible as possible.
    * I am not in the least suggesting that either of these is easy or could be done without many other accompanying changes. I just offer them as clues as to the direction to go toward.

  20. Tony Wikrent permalink
    February 22, 2014

    “So how do we get people to be irrationally ethical?”

    The lefty position of ignoring those dead European males comes back to haunt us.

    Read Machiavelli. Who wrote that Romulus killing his brother Remus was entirely justified because it was necessary for establishing Rome.

    A year and a half ago, I wrote a little post explaining the historical context and significance of Machiavelli. The core theme is that Machiavelli sought above all else to protect and preserve the city of Florence, as a human triumph of art and architecture, but more importantly, as the admittedly imperfect embodiment of the idea of self government. You can find it here: Machiavelli and the survival of republics. http://www.correntewire.com/machiavelli_and_the_survival_of_republics

    Or, if you are not comfortable with the idea of killing, let’s look at Watergate. And Iran/Contra. And Michael Milkin and Drexel Burnham Lambert. If people had been fully prosecuted and put in jail – for a very long time – we would never have had the nightmare rule of elites such as Karl Rove, or Dick Cheney, or Donald Rumsfeld, or Joseph Cassano (of the London ops of Bare Sterns).

    Look at Rick Perry and other neo-confederates today. Talk about secession should not just end because it is politically unpopular beyond the die-hard Republican base. It should end because loud mouths like Perry were charged with, and imprisoned for, if not treason, then at least sedition. What Democrat or bobble head has the cajones to even make the argument, though?

  21. February 22, 2014

    There’s nothing that Facebook, Twitter, et al do that requires a huge corporate infrastructure, a simple standard protocol could easily do the same job that they do in a decentralized way. But it’s not just a technical matter–I was quite willing to start evangelizing for Diaspora, despite the appalling decision to accept Zuckerberg’s “philanthropy”…and then the head of the project turned up dead, a “suicide”, and the project homepage turned uber-corporate overnight.

    I think the OP is rather disingenuously understating the scale of the problem here. Huge interests are at stake and there are ways, after all, of dealing with those who choose, for whatever personal reason, not to sell out.

  22. Jessica permalink
    February 23, 2014

    “we would never have had the nightmare rule of elites such as Karl Rove, or Dick Cheney, or Donald Rumsfeld, or Joseph Cassano (of the London ops of Bare Sterns).”
    To that list, I must add names such as Ben Bernanke and Barack Obama and Jamie Dimon

  23. steeleweed permalink
    February 24, 2014

    One might consider self-aggrandizing behavior rational if each of us were totally independent, but in a society with mutual interdependencies, it is ultimately self-defeating to operate on that basis simply because soon or later you piss off everyone. The gain you get from always putting yourself first are short-term and when you need others down the road, you’re screwed.
    It is therefore quite rational to establish & follow ethical rules, even if they are not to your particular advantage in every circumstance. You are your brother’s keeper – unless you have the delusion that you will never need others.

  24. February 25, 2014

    The way my dad phrased this was, “Everything that is rational isn’t reasonable”, which isn’t quite exactly what you’re getting at but was still aimed at poking a hole in the worship of “rational” as if it meant “good”.

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