Much attention has been focused on the role of social media such as Facebook and Twitter as enablers of Russian interference in the 2016 presidential election in the US and the Brexit referendum in the UK. I argue here, as JFK might have, that of those to whom much is given, much is required.

From a business model perspective Facebook[1] has a brilliant monetization engine. Thousands of international advertisers can pay to reach millions of consumers largely without the intervention of human employees at Facebook. This has allowed the company to grow rapidly at high margins (nearly 50% annual growth at 50% margins). The darker side of this hyper growth and scale is that it is impractical for Facebook to police the identity and content of its advertisers without either adding huge numbers of additional staff or developing new automated systems. Despite being a Facebook shareholder of long duration and an admirer of its senior team, I believe it is time to insist that they do more –either voluntarily or by law.

Many commentators label Facebook as a media company and argue that it should be required to identify political advertisements in the manner familiar to old media: “This ad is paid for by the few friends of Tom Glocer, etc.” I believe a higher standard should apply – one applicable to banks around the world. In the last century, banks were free to take deposits and trade with wealthy clients without asking difficult questions about the source or nature of their assets. Switzerland, in particular, came under the wraith of US prosecutors for its “discretion” in accepting client deposits. Since the 1970 adoption of the Bank Secrecy Act in the US and similar laws elsewhere, banks have been obligated to “know their customers” and police money-laundering to the point that “KYC” and “AML” are now familiar business acronyms.

Banks also complained that the new KYC regulations would impose unfair costs on them and hurt their revenues. They were not wrong and some institutions were never able to adjust to the new more transparent operating model (e.g., BCCI, BSI). Nonetheless the global banking system while not immune from abuse is a less welcome deposit and payment system for drug lords, dictators and terrorists — especially after the 2001 passage of the Patriot Act in the US.

Given this success I propose we impose similar KYC obligations on social media platforms with greater than 100,000 users. Will this move initially restrict business and hurt margins? Of, course. However, the threat posed to democracies around the world by weaponized social media are greater than the dangers that were present in international banking before the adoption of AML laws. Moreover, it won’t be long before Silicon Valley cranks up the same innovation it has shown in developing the underling social media platforms to automating KYC checks on the source of its advertising. I am not suggesting that Facebook can never accept an ad from the Russian FSB (or the US CIA for that matter), only that the true source of the funding needs to be prominently disclosed. Front men and cutouts such as “Friends of Charlottesville” are not enough. The stakes are high and so the burden placed on those who would profit from such powerful platforms must be commensurate with the challenge.

[1] For ease of reference I will refer to Facebook as proxy for all other social media.

I have always been interested in the question of how individuals organize themselves to perform work. In this I am not alone as this issue lies at the heart of a rich vein of modern economic scholarship. The seminal work in the field was and remains The Nature of the Firm written by Nobel economist Ronald Coase in 1937. I argue below that “gig” economy innovators such as UBER and Airbnb and the advent of blockchain and its promise of smart contracts and initial coin offerings will extend the boundaries of efficient market contracting into what was once the exclusive province of the firm.

The central tenet of Coase was that there was a dynamic tension between those functions a company chooses to perform internally and those functions that it would choose to contract for externally. The tension exists because there are transaction costs that act upon the form of organization chosen. An entrepreneur who overly relies on external production will soon find that the transaction costs associated with price discovery, contracting and enforcement will outweigh returns. Similarly, but at the other extreme, the costs of managing an overly large and sprawling enterprise will outweigh the benefits of the command and control system of firm management. William Baumol and Oliver Williamson, among others, further explained the boundaries of the firm by introducing the behavioral elements of principal-agent conflicts: In large firms mangers seek to maximize personal benefits that range beyond returns to disaggregated shareholders

In Coase’s Penguin, or Linux and the Nature of The Firm (112 Yale L.J. 369 (2002)), Yochai Benkler reviews the traditional tug-of-war between the individual and the firm as analyzed by Coase through Williamson and posits a third way: “Free software is only one example of a much broader social-economic phenomenon emerging in the digitally networked environment, a third mode of production [called] ‘commons-based peer production.’” (Benkler at 369). The volunteer army that supports, edits and enlarges Wikipedia is perhaps the best known, but by no means the only example of large-scale software/data projects maintained by the commons (see, e.g., Linux, Apache, Mozilla, Symphony). Promoters of open source collaboration rely upon a variety of motivational mechanisms to substitute for markets and contract rights, on the one hand, and internal managerial command, on the other, more familiar to Coase. For example, individuals choose to contribute to open source projects for their own psychic and social benefits, to enhance their reputations (socially as well as with potential employers), or to build consulting or service businesses around the open source code. Benkler does not claim that commons-based production will replace firms or markets, just that it represents a novel “third way” not heretofore witnessed.

I think we have now entered a period in which many of the attributes of the open source movement will be absorbed into the vastly distributed forms of commerce made possible by cloud computing platforms, “gig economy” services, and blockchain and other distributed ledger systems. Through each wave of technology innovation, the new capabilities have tended to reduce transaction costs (friction), unbundle offerings, and expand the possible scope of the enterprise (e.g., steam engine, telegraph, TCP/IP, etc.). Cloud services like AWS permit small businesses to deploy very sophisticated and resilient computing resources, now priced per second of compute time or lines of code. Gig economy services such as UBER, Airbnb, WorkFusion and Mechanical Turk allow asset owners to fractionalize the offering of third party transportation or lodging, and parcel out work to part-time workers. And finally, blockchain will enable firms to raise capital via initial coin offerings, transfer funds and settle property transactions using near zero cost payment “rails” and smart contracts, and greatly reduce the transaction costs that Coase recognized as the primary driver of organizing work within firms.

While these blockchain developments will not eliminate all of the reasons individuals contribute to open source projects (e.g., pride of authorship, joy of creation), the combination of micropayment functionality, crowdfunding, and smart contracts will permit global coordination of work outside the walls of the firm on a scale unimaginable to Ronald Coase.

The recent revelations concerning the grotesque and likely unlawful sexual aggressions perpetrated by movie mogul Harvey Weinstein over many years have prompted me to revisit the evolving body of law concerning the rights of “whistleblowers.”

For some time the SEC and other Federal agencies have taken the position that obligations contained in standard confidentiality or non-disclosure agreements purporting to restrain employees from reporting wrongdoing may not be enforced. The SEC has gone further, interpreting its Rule 21-F17(a) as prohibiting any confidentiality agreement that does not include an express whistleblower carve-out for the reporting of securities law violations. In fact, the SEC has gone as far as suggesting that it would take action against any attorney that drafts such a non-complying agreement (In the Matter of KBR, Inc.). Other parts of the Federal Government have also endorsed whistleblower carve-outs (e.g, Department of Labor, EEOC, NRLB).

So you may fairly ask me at this point what my esoteric and nostalgic tour of the law concerning non-disclosure agreements has to do with the ugly revelations about Harvey Weinstein?  Simply this: The Weinstein Company (and Miramax before it) are widely reported to have required employees and third parties to sign very strict non-disclosure agreements. I think Congress should pass a law prohibiting the enforcement of any confidentiality, non-disparagement or similar non-disclosure agreement against any whistleblower that comes forth to report any crime in general, and sexual aggression/harassment in particular. If this Republican Congress refuses to act, or the Predator-in-Chief vetoes the legislation, California and New York States should act as these states are home to most of the entertainment industry which has for too long condoned the “casting couch.”

It already takes great courage for the victims of sexual aggression to come forward and complain about the powerful men (yes, almost always men) who seek to leverage their wealth and power for sexual favors. They should not be required to risk the high cost and uncertain outcome of litigation to bring their stories to light.

I do not mean to gloss over the distinction between reporting alleged crime to the authorities versus telling the story to the media in violation of a non-disclosure agreement. Here legislators will need to balance the legitimate desires of organizations to maintain confidentiality versus the importance of having multiple victims come forward with their testimony. I for one would lean in favor of public disclosure with perhaps a standard such as the reckless disregard of the truth recognized under Frist Amendment precedent for alleged libels of public figures.

Since the Great Financial Crisis we recognize as a matter of good public policy that whistleblowers should be protected to encourage them to come forward and report wrongdoing at our financial institutions. After Weinstein, Ailes, O’Reilly, Cosby and Trump we should accept no less in the entertainment industry or elsewhere.

For 19 years I worked for a company that was and remains the antithesis of fake news. From its founding in 1851, Reuters has sought to produce accurate, independent and well-sourced journalism. There have been moments when Reuters fell short of this ambition, and its best editors and journalists have always been conscious that humans struggle to abstract themselves completely from their personal, political or religious contexts; however, getting the story right has always been at the heart of the Reuters mission. As a non-journalist myself I found this inspiring.

 
Thus, it should come as no surprise that I find the debate on “fake news” and “post-truth” politics extremely distressing. Not that I believe that US Presidential candidates must conduct themselves in accordance with the The Reuters Handbook of Journalism (or the Marquess of Queensberry Rules for that matter), but Donald J. Trump and his team plumbed new depths of lying in his successful pursuit of the presidency. As the Wall Street Journal reported immediately after the election: “Asked whether he thought his rhetoric had gone too far in the campaign, the president-elect responded: ‘No. I won.’” Perhaps this is the ultimate faux justification for fake news — regardless of what we teach our children, the ends always justify the means.

I think not.

So what can be done if like I you believe that democracy requires an informed electorate? (I reject at the outset one possible answer that has resonated from Plato to Hamilton: just exclude voters, from the poor to women to African Americans who were deemed unqualified to vote.) It seems to me that this leaves two basic choices. First, that each citizen be sufficiently educated, motivated and versed in the issues of the day to make an informed decision. Or, second, that she follow the advice of suitably informed experts or briefing materials curated by them.

We might all prefer that each citizen of voting age devotes the time and energy to independently research and arrive at fact-based conclusions on difficult issues such as global warming, fracking and the economics of global trade, but this may be asking too much. These issues are complex and often require a thorough grounding in science if not epistemology. Moreover, adult study time is limited, attention spans are short and spin-masters abound to cloak issues in a fog of misinformation.

So what about riding the coattails of experts? There once was a time when voters did place their trust in experts who they believed would do the heavy fact lifting for them. The endorsement of the local paper, even if it was the liberal-leaning New York Times, the BBC, Walter Cronkite, The Council on Foreign Relations, Chatham House, The Brookings Institute, the right-leaning Wall Street Journal, the parish priest or rabbi. However, the real poison of fake news, Benghazi conspiracy theories, and Russian disinformation is that it eats away at the credibility of institutions and the very idea of meritocracy, declaring an all-leveling “pox on both houses.” We saw this corrosive force at work in the lead-up to the Brexit vote in the UK — a very important societal choice requiring a firm grasp of economics – when the stark warnings of prominent economists, ministers and bankers were dismissed as “fear mongering.”

The road back to truth from post-truth must begin by restoring faith that there is a difference between facts and lies, between argument and bombast. Facts matter. As the great Senator Daniel Patrick Moynihan observed, “everyone is entitled to his own opinion, not his own set of facts.” Donald J. Trump would not have won the popular vote if “millions of illegals” had not voted for Hillary Clinton; he did not witness hundreds of New Jersey Muslims celebrating the destruction of the World Trade Center; and the concept of global warming was not invented by the Chinese to harm US manufacturing.

One means of attacking fake news and lies is for established media to be more aggressive in fact checking and calling out Trumpian lies. Indeed, many publishers took the unprecedented step of including in their headlines the caveat that: “Trump asserts without evidence that illegal voting cost him the popular vote.” However, this is really weak tea in a polarized country where those who embrace these lies are not reading the publications careful enough to fact check their headlines. Mark Zuckerberg, while clinging disingenuously to the fiction that Facebook is not a media company, has offered a range of helpful suggestions ranging from stronger technical systems to detect false information to tools that make it easier for users to report fake news.

While helpful what we need more is a robust and trusted set of fact-checkers. Perhaps a new, less boring version of C-SPAN delivered over-the-top to everyone’s Facebook feed in which trusted cultural icons appear and debate the news of the day. Not screaming talking heads appearing, Crossfire-like, to boost media ratings, but public school teachers, judges, firefighters, rock stars, athletes — even the occasional think tank scholar discussing the pros and cons of the vital issues facing our country and our world. How such a system would work in practice, who would choose the fact checkers (quis custodiet ipsos custodies?), how to finance it and would there be multiple such systems (perhaps replicating the fake news problem one level up) are all valid concerns. Nonetheless, the threat to our democracies is grave enough to warrant concerted action.

I would be very proud if Reuters stepped into this breach, in this the bicentennial of the birth of Paul Julius Reuter, to apply its well-honored tradition of independence and freedom from bias to contribute to the solution. However, that is not my call today, if it ever was. All I can do like the journalists I so admire is to state fairly the urgent case for action.

Dear Donald,

I am writing you this letter because I love our country and, despite your hateful rhetoric, I suspect that you do as well. Since I doubt you do much reading other than fanzines about yourself, I don’t expect you to read this or the many other unflattering (but true) posts I’ve written about you in this blog over the past four years. Nonetheless, I hope that others closer to you will convey the recommendations (really, the hopes) I set forth below.

Listen to your better angels.

Set yourself the goal of competing with the Obamas in dignity, grace and inclusion.

Disavow the racists who celebrate your victory with hate speech and waving Confederate flags.

Surprise us all with kindness, compassion and inclusiveness.

Eschew the has-been loyalists and fanners of the flames of prejudice who campaigned with you by appointing the best and the brightest to advise you. Listen to them patiently and seek out those who will speak truth to power now that your office confers it upon you and you need not bully others to obtain it.

Appoint a Muslim and a Mexican-American to high office. Better yet, make sure they are feminists.  Appoint the best qualified jurist to the vacant Scalia seat on the Supreme Court.  Since you tend to pack your teams with family members you might even consider choosing your elder (and better behaved) sister, Judge Maryanne Trump Barry.

Focus your boundless energies on attacking the entrenched bureaucracy of Washington – the kudzu of rules and agencies that strangle good governance. You can start by merging the SEC, CFTC and CFPB into a single agency that balances investor protection with vibrant and fair capital markets.

Don’t tamper with the independence of the Federal Reserve, but follow through on your proposals to use the fiscal policy of infrastructure investment (as I’ve been arguing for years in this blog) to relieve the burden that the Fed and other central banks around the world have had to carry with monetary policy alone.

Revamp the tax code to make it simpler, shorter and more fair: reduce the corporate tax rate to be more in line with the economies around the world with which we compete; move to a territorial system of corporate taxation and encourage the repatriation of foreign source income; increase the earned income credit for poorer families to provide a basic income to those who work less skilled/lower paying jobs; abolish the preferential treatment of carried interest; abolish the AMT but make all individuals (yourself included) pay at least 20% of their income and gains.

Protect the environment. If you really don’t believe the science of global warming, ask your son Baron – most 5^th Graders who attend Columbia Grammar in NYC know more than their parents about climate change.

On healthcare, rebrand Obamacare Trumpcare if you prefer and fix the insurance/payment provisions that don’t work,  but leave in place the protections that actually benefit the folks who elected you such as coverage for those who had no health insurance and the prohibition on denying coverage based on prior conditions. 

Don’t underestimate the value the US receives from the “Pax Americana.” Yes, the United States bears a disproportionate share of the cost of defending freedom and democracy around the world, but we benefit greatly from free trade, open shipping lanes and the reserve currency status of the US Dollar. Respect international treaties and don’t encourage further nuclear proliferation.

Keep a cool head; don’t let others bait you; keep off Twitter, you now have a very big megaphone.

Oh, and don’t build that silly wall.

I was invited by the New York Federal Reserve Bank to moderate a panel at its annual Culture Conference on the challenges and opportunities that FinTech is raising for the culture of financial institutions.  As this is a topic that has long interested me I was happy to accept.  At tomorrow’s session (October 20, 2016) the distinguished panel and I will discuss the issues summarized below in a post that originally appeared in Medium.

Technology and Culture

Thomas H. Glocer, Former Chief Executive Officer, Thomson Reuters and Director and Chairman, Operations and Technology Committee, Morgan Stanley

This is being published from the New York Fed by a guest writer as part ofReforming Culture and Behavior in the Financial Services Industry: Expanding the Dialogue. The views of the author are his own and are offered by the New York Fed to contribute to discussions on this topic.

Much has been written about the digital future of finance and banking over the past few years, particularly as it relates to the disruptive technologies gaining traction and their potential impact on the actual business of finance. On October 20, I plan on going beyond the headlines to explore fundamental questions about the impacts these disruptive and transformative technological changes can have on culture and conduct, both within an individual financial firm and the industry more broadly.

With my esteemed panelists — Megan Butler of the UK Financial Conduct Authority, Martin Chavez of Goldman Sachs, and Axel Lehmann of UBS — we will spotlight the risks and challenges of merging technology and banking cultures. We will also build on the theme of trustworthiness, which will be introduced earlier in the day, and consider whether technological change presents an opportunity — or an impediment — in building the trustworthiness of the financial sector.

Technology advancements within a firm tend to remove friction, accelerate processes, displace human labor and unbundle core functions. As firms strive to stay competitive given this rapid rate of change, we are seeing a rise of technologists in banking, with some banks aspiring to emulate tech firms. This shift in the underlying composition of a firm has the potential to lead to a culture clash with traditional banking models. Firms will need to carefully balance the drive for innovation with prudent risk taking.

As business models, workforce and the culture of financial services evolve through technological change, how do these changes impact the public’s trust in banks? Consumers will continue to need trustworthy providers of financial services. New uses of technology may help mitigate conduct risk. They may also provide fresh opportunities for mischief. Steering a firm toward the former, and away from the latter, will be of the first order.

Supervisors, too, need to be attentive to technological change and its impact on consumers and the stability of the financial system. An array of cheaper and more suitable products are likely to become available for consumers. Regulatory technology may substantially reduce human error and misconduct, but may not address all of the risks posed by these new offerings (i.e., will RegTech keep pace with FinTech). And, with greater electronic connectively — and less actual in-person connection — the basic human ties that foster self-restraint and greater trust may be lost.

Finally, to navigate this fast-changing and complex environment successfully, strong leadership will be critical. Technology often results in greater complexity and a realm of deep vertical expertise that only highly skilled technologists can understand. This will present new challenges to corporate governance and the traditional responsibilities of directors. Specialized technology expertise in senior leadership positions, and on boards, will become increasingly important over time, but boards should not delegate oversight responsibility to one or a handful of “expertized” members. The public purposes of banks must remain an indispensable part of the decision process when making leadership choices. Technology is, after all, a means to an end, not the end in itself.

With this week’s passing of Shimon Peres the world has lost a warrior for peace – as full of contradictions as those words suggest.

Much has been written and eulogized about this truly great man. He was an optimist; he was naïve; he was an egoist; he was a wonderful grandfather; he sought lasting peace; he was twice Defense Minister and architect of Israeli’s nuclear program. He was first and foremost a great statesman and the last of a generation of lions.

I met with Shimon regularly, in Davos, in London and once, very memorably, in Tel Aviv. It is that personal memory I recount here. While I was chief executive of Reuters, I visited Israel every couple of years to see clients like everywhere else, to meet with tech entrepreneurs from this start-up nation, to support the brave Reuters journalists in Israel as well as the West Bank and Gaza, and to visit my family.

On one such trip in 2006 I had one of the most exciting and fulfilling days of my career or, for that matter, my life. I was scheduled to meet Peres in his Tel Aviv office for a coffee in the morning and to visit Mahmoud Abbas for a late night tea in Ramallah. Ever the peacenik, I was looking forward to gaining insights from the Nobel Laureate for Peace on his current views of the seemingly intractable Israeli – Palestinian peace process. While I recall repeatedly attempting to turn our conversation back to these matters of state, Peres preferred to speak about the latest technology investments by his son Chemi, and the prospects for advancements in nanotechnology in particular.

Those who know me well know that I never shy away from a good technology discussion, but I pressed Shimon to discuss Arab-Israeli relations and raised the problems we at Reuters were having obtaining travel permits for our excellent Palestinian journalists. He finally got animated and declared that Reuters journalism was “pro-Palestinian.” Coming from a man I admired and respected so much I was alarmed and somewhat hurt by the charge; however, I would recover later that day when President Abbas accused Reuters of being “pro-Israeli.” I concluded that if both sides claimed we were biased we must either be really bad or very good. I chose to believe the latter.

This weekend Jews around the world will celebrate Rosh Hashanah, the beginning of the Hebrew new year.   We should enter this new year with renewed hope and optimism as this would certainly be Shimon’s advice and attitude. Shanah Tovah Shimon; we will miss you.

In a recent post, Liz Spayd, the newly appointed Public Editor of the New York Times, asked the open question as to whether Times readers see the paper as being overly liberal.  In particular, supporters of Donald Trump have complained that New York City’s traditional journal of record has a “relentless bias” against the Republican nominee.

While I have been an occasional critic of the “Gray Lady,” I rise to her defense in this election cycle.  I’m not talking here about the Editorial page of the paper which is unashamedly left-leaning in its opinion-making.  Rather, I focus on how publications seeking to cover this election in a fair and unbiased manner should approach the Trump candidacy.

For the reasons I outline below, I believe that the extraordinary nature of the Trump campaign requires responsible journalists to jettison their traditional “on the one hand, on the other hand” paradigm. Never has there been a candidate who so brazenly lies, spouts racial and religious insults and threatens to violate treaties and the Constitution alike. Under such extreme conditions blandly to apply the rules of politics-as-usual is to abdicate the vital responsibility of the Fourth Estate.

I am not advocating an abandonment of journalistic ethics or turning the front page or home page into the op-ed page. Instead, I believe that fairness in the context of the Clinton-Trump campaign requires a heightened scrutiny of both candidates. For example, when running video of either candidate or reporting their comments, their lies or inconsistent prior statements should be called out in real-time. This can be done with a crawler on live video or a corrections box adjoining text.

To her great credit, Fox’s Megyn Kelly strongly confronted Candidate Trump with his long and sorry history of misogyny. Likewise, Chris Mathews of MSNBC really did play hardball with Trump over the candidate’s waffling on exactly how women should be punished for seeking an abortion. Unfortunately, these are rare displays of journalistic backbone in the face of Trumpian bombast, bigotry and bullying.

Where were the follow-up questions when Trump flatly asserted he could not possibly release his tax returns because they were being audited by the IRS? (Think about that one a moment – why should it matter if Trump is being audited if he was previously happy to sign and file the returns as correct?). Or who lifted a pen or a microphone to condemn Trump’s proposals to deport 11 million immigrants, ban Muslims from the US, encourage Japan and South Korea to obtain nuclear weapons, welch on the US national debt or abrogate the NATO treaty? These are not serious political policy positions. This is race-

baiting and rabble-rousing and needs to be called out and corrected.

So the next time the New York Times self-consciously worries that it is not being fair to Mr. Trump it should consider whether the normal rules of journalism apply to the parallel Trump universe or whether independence, fairness and integrity require a more exacting edit.