Technology, Capital Markets, Corporate Governance, Leadership, Entrepreneurship
As a follow-up to our recent article Your CEO’s Personality Influences His/Her Ability to Scale, we analyzed a group of public company Technology CEOs by applying the Big 5 Personality Traits model. Access our presentation here: TECHNOLOGY CEOs: BIG 5 PERSONALITY ANALYSIS
It is true. Your CEO’s personality influences his/her ability to scale (among other things). It may seem self-evident. One’s intuition may suggest such a relationship between personality traits and workplace effectiveness. Well, it is more than a hunch. Published research demonstrates a relationship between CEO personality traits and company performance. Gow, Kaplan, Larcker and Zakolyukina…
Viacom founder Sumner Redstone once said that “content is king”. The time was the 1990s. Whether to own content assets or distribution assets was the question of the day. Technology, Media and Telecom (“TMT”) companies were positioning themselves for the “information superhighway”.
Today, content assets enjoy premium valuations. Look no further than Netflix (although the book of Netflix has yet to be written. Let’s see how the world views the company when Disney begins to pull content from Netflix in 2019), which is up 62% YTD, while Charter, Comcast and AT&T are down 22%, 22% and 16% respectively over the same period as consumers opt for OTT streaming services over cable bundles.
“Cord-Cutting” and “Cord-Nevers” are hardly new phenomenons. Cracks in the cable bundle began to appear years ago. Companies and analysts have modeled cable subscriber declines for multiple quarters. What is surprising is that companies and analysts are surprised by the rate of decline. Within the Technology sector history has taught us that the rate of decline is always greater than one initially estimates. When things “go south” they tend to go south quickly.
Perhaps it is human nature that companies tend to not position themselves for change fast enough. Change is difficult to accept. Thus, companies underestimate the rate of change. They are slow to on-board new DNA and new ways of thinking that may help them build muscle within the “new discipline”. As a result, disruption tends to come from new market entrants rather than from incumbents. Incumbents become observers rather than change agents. It is only logical that capital would flow toward the disruptors and away from those disrupted.
We created the CEORater Technology Founder CEO Index in 2017 in large part to illustrate our strong belief that founder CEOs are better qualified to lead Technology companies than are “hired” CEOs/ professional managers. The CEORater Technology Founder CEO Index returned 13.0% and 10.5% on a Weighted and Unweighted Return basis respectively (click here for detail) during the January 2nd 2018…
Facebook has removed access to legitimate applications such as Apply Magic Sauce due to the backlash from the Cambridge Analytica scandal. Unfortunately, when a negative event occurs the corporate response is typically one that overshoots and overcorrects, a ham-fisted approach (Hulk smash!) rather than a logical, methodical approach. Rather than take the time to educate the public, it’s less expensive and easier for companies to fold under pressure. Facebook will undoubtedly survive the public backlash. However, the backlash is not without casualties. Smaller companies that have built businesses on top of platforms like Facebook suffer.
Case in point, Apply Magic Sauce, which I considered embedding into our former insurtech product, “Identity Hub” (read about Apply Magic Sauce in today’s WSJ). I was fascinated by Apply Magic Sauce’s application which predicted certain personality attributes based upon one’s Facebook “likes”. Users were required to opt-in to Apply Magic Sauce. There was nothing nefarious about it. We decided to pass on integrating the application as the use case we envisioned (predictive fraud analytics) wasn’t one that was top-of-mind with P&C insurance companies.
Here’s to hoping that Facebook exercises precision in determining which third party applications to shut off.
The CEORater Technology Founder CEO Index returned 8.2% and 8.4% on a Weighted and Unweighted Return basis respectively (click here for detail) during the January 2nd 2018 – March 29th 2018 period.
The S&P 500 Information Technology (TKR: S5INFT) returned 1.8% on a Weighted basis over the same period.
The Guggenheim S&P 500® Equal Weight Technology ETF (TKR: RYT) returned 4.7% on an Unweighted basis over the same period.
Making Numbers Is Not Enough The hallmark of a great company is not one that simply meets or beats consensus estimates with some regularity. Imagine if Reed Hastings and Netflix chose not to pursue the company’s over-the-top (“OTT”) strategy when investors where hungry for DVD profits. Imagine if Jeff Bezos and Amazon scaled back their…
The Facebook uproar – wow! I’m shocked that people are shocked. We put our lives online for the world to see – the temptation for nefarious actors to act is there. We can’t be surprised at the result.
What happened? Facebook and UK-based Cambridge Analytica (“CA”) are at the eye of the storm. What occurred was NOT a data breach. It was NOT a cyber-attack. It was a case of poor supervision on the part of Facebook with regard to how a 3rd party developer accessed and used Facebook member data.
Who is Cambridge Analytica? Other than dead in the water, CA is a data mining/data analytics firm. There are thousands of companies like CA that aggregate and analyze data for various purposes.
What did CA do wrong? CA’s sin was that the firm misrepresented itself and how it would access and use Facebook member data. CA positioned itself as a personality survey application. Approximately 300,000 Facebook members downloaded the app. CA designed the app to capture your data and that of your Facebook friends. So for every person that downloaded the application, CA captured data not only on the 300,000 people that downloaded the app, but also on an additional 166 people for every one person – or 50 million people in total. While you may have provided consent, your Facebook friends did not. That’s strike one against CA.
Second, CA used this data to inform the Trump campaign’s political targeting effort. The Facebook members who gave their consent did so never knowing that their data would be used for a political campaign, much less their friends whom never consented to anything.
By the way, the Obama campaign did something similar. It too created an app for political purposes. It too captured Facebook data not only for those members who provided consent, but also for Facebook members who were friends of those who consented but never provided content themselves. So CA and the Obama campaign had strike one in common.
What should Facebook do? I believe Facebook should create a sandbox environment where 3rd party applications are tested to see how they would behave on FB’s platform – a proving ground of sorts – where Facebook could compare 3rd party application behavior to Facebook’s usage terms. However, this won’t happen as Facebook is not commercially motivated to provide this type of expensive preventative measure. It would be a waste of time and taxpayer dollars for the Federal Government to mandate this type of measure as it would be ill-equipped to audit such a process.
A more practical approach for Facebook would be to make it easier for members to provision their personal data in terms of visibility and sharing with 3rd party developers. Second, Facebook should pursue legal action against developers who abuse Facebook’s Terms of Use. Do so loudly and with maximum visibility to deter would be bad actors.
What should you do? There is nothing you can do to remove your digital footprint from the world. At the extreme, delete your social media accounts after you have purged your data from the respective platforms. A more practical approach would be to set your privacy provisions to “closed” or “private” across all applications and Websites that you use. Don’t volunteer to share your personal data and that of your contacts when you download apps.
This Facebook CA scandal is hardly news. Guess who else knows much about who you are? Your bank. Visa. Amex. MasterCard. Your local supermarket. Your doctor. Other companies that know or can infer much of what makes you “you” are many. Here are a few:
Here’s our recent CEORater Podcast covering this subject:
Transparent CEO Succession Plans Are Best Communicating CEO succession plans to institutional investors does not have to be complicated. Generally speaking, transparency around your CEO succession process is a good thing. This should not be confused with providing investors with a play-by-play update (I would not recommend the latter). Here’s a high-level outline that may…
Crowdsourcing is more prevalent in society than one may initially think. Many are familiar with Amazon product reviews and Yelp restaurant reviews – both a form of crowdsourcing. Facebook, Instagram and Twitter are platforms where members may quickly assess which subjects are trending amongst friend groups and follower networks – also a form of crowdsourcing.
CEORater and Glassdoor (both crowdsourced platforms), enable users to anonymously review CEOs and companies in an effort to bring transparency to the workplace. Instagram has gained traction with a new use case – enabling users to visually assess corporate culture given the platform’s deep trove of image and video content.
Crowdsourcing use cases will become increasingly prevalent as the amount of crowdsourced data increases and commensurately the opportunity to gain insight through basic reporting tools and advanced analytics including Natural Language Processing (“NLP”). Job seekers, managers, senior leadership and corporate boards will have more data – including crowdsourced data – with which to make decisions.
Employees are the most valuable resource as it relates to crowdsourced platforms for prospective job seekers. Who better to post reviews related to corporate culture, career opportunities and senior leadership’s operating style than a company’s employees? Like any other data-related process, the more users that participate (i.e. employee written reviews), the better the quality of the aggregate data. For example, let us assume that “Company XYZ” has 5,000 employees located across offices in the U.S., Canada, Mexico, the U.K. and India. The greater the engagement level amongst XYZ’s employees in terms of posting anonymous reviews, the better the data quality for it will reflect diverse opinions from a variety of cultures, work experiences and functional disciplines. To encourage participation on HR-related crowdsourced platforms it is critical to gain trust amongst users – especially those whom publish to the platform. Therefore, enabling users to anonymously publish reviews is essential.
What may the future bring for HR-related crowdsourced platforms? We believe these platforms will increasingly focus on images and video-based reviews – practices that have become common on the leading social media platforms . In terms of how crowdsourced review data is used, we believe that amongst job seekers the use case will not materially change in the near-term other than user participation across platforms will increase. As the data sets grew they become increasingly attractive to machine-learning platforms which may run sophisticated multivariate unsupervised learning processes in an effort to gain actionable insight.
