Ted Audio Collective Hi, everyone, you're listening to HBS after hours I'm young me and I'm here tonight with me here and Felix.
How are you guys? Good?
How are you? So I have to start by asking you have you guys deleted your Facebook yet?
You know if I was anywhere near active on Facebook I set up a Facebook account like eight months ago, and I have not returned to it since So I have not done anything But it's just in I you know it's ridiculous I'm on Twitter and LinkedIn and I only did it because of this book that came out last year
because I was told I had to But I don't know what I'm doing like I'm just pimping the book social media, and I know that's not the right thing to do, but that's all I know how to do so I I'm not doing things right and on Facebook I find it the least useful of the three so I I do more on Twitter and LinkedIn
I don't do anything on Facebook.
How about you Felix are you so I had a I had a wimpish reaction I thought about I thought about deleting it, and then I googled How do you delete your Facebook account and the explanations are really long.
It's like not straightforward, so then I did sort of a Half way thing I deleted the app from my phone But I you know I left my account alive, and you young me I am on Facebook, but not as young me I know oh Don't skip over that as not me what does that mean well?
I don't I have a big profile you have an avatar It's my nickname But you know and so you're not searchable by anybody.
That's right well You get to connect with your loved ones exactly, but my rule is I can never have more than nine friends So for example when my niece got old enough to be on Facebook.
I had to delete my brother -in -law Did you guys bring stuff to talk about yes, I thought we could do a little hot take on Zuckerberg Yeah, it's a little bit of an update from where we were a month or two So yeah, I want to get your take on what you thought about his performance And you know what we learned
from excellent Okay, and then you Felix, and I was thinking what's the most boring topic that I can think of There's been so much excitement on this podcast already, and so I want to talk about the post office Okay, okay, all right all right Okay, so Mahir why don't you get us started?
So um you know on our first podcast we actually talked about Facebook and since then of course a lot of things have happened and In the last two days mark Zuckerberg has been on Congress testifying people are obsessed I mean it was monitored in a really really interesting way And it was just such an event
an event in the world of business an event in the world of media And so I wanted to get your take on what you thought about how he did about the line of questioning what we learned Yeah, so I wanted to get your sense of that and then I want to hear more about where you think this whole Facebook Thing
is going so go ahead young me you first So I didn't watch all of it But I watched parts of it, and I have to say the parts I watched gave me that sense I get when I watch my sons try to explain to their grandparents how the smartphone works Yeah You know you just got the sense of a whole group of 20th
century lawmakers trying to understand a 21st century world and So at one level I found it deeply disconcerting that if there is going to be regulation It's going to be in the hands of a group of lawmakers who were clearly out of their comfort zone I mean it was fascinating to watch because they would ask
a question and In some cases he would give an answer that was maybe slightly technical and you could tell that they had had these pre -prepared Questions that their staff had written for them and so they didn't want to reveal that they had no idea what he was talking about So there was no follow -up the whole
thing was just a weird sort of kabuki theater not to say that it was meaningless I think it was meaningful and so what was the meaning so our political system moves at a glacial pace except under circumstances when it becomes really clear that Public opinion has shifted in a dramatic and widespread
way Yeah, and in those cases sometimes you see a pretty rapid things, you know So a few weeks ago you gave the gay marriage example, right to me, it feels like regulation is inevitable.
What do you think feel?
so I think my my I mean Preparedness of the lawmakers.
I think I would have I would have exactly the same reaction You know don't quite understand for completely obvious reasons and their 45 year old staff members understand a little better But not at any depth, but I thought actually he did pretty well And and I had the same impression Cheryl Samberg was on the news
hour the night before and and it was interesting that Generally speaking sort of a similar response and and quite effective what I liked about Both mark and Cheryl's performances it it it stood by the basics of their business So there there are some issues about what Facebook is and how it makes money
that are non -negotiable And they didn't waver and I and I really and I really like that and then I think One of the big challenges is you talk to all these different audiences you think you talk to the committee But of course you talk to the capital markets at the same time You talk to the 2 billion people
who use Facebook And then you talk to everyone who works for Facebook was engaged daily and that you know having these three four Conversations at one at the same time is just incredibly difficult, and I think against this backdrop I I thought that both of them actually did pretty well well to your
point The stock went up the stock went up in other words.
Yeah, the capital markets found his performance deeply reassuring Yeah, like five points up.
I mean it was a and it had been a bit of a tailspin So they found it very reassuring.
Yeah, I thought a couple of things one is I think Yeah, the legislators were not fantastic.
Although. I will say Kamala Harris is a bit.
She's a bit of a badass.
I Thought what was impressive about him is I think he took responsibility unequivocally kind of 101 he did it and Sandberg did it too um So I thought that was really really good I mean, I think the question going forward is what is the regulation and what happens to the business model?
Maybe one of my favorite moments is when he was asked so what about regulation and in particular what about the you you might remember the European directive on privacy protection kicks in on May 25th, so this is not just a couple of weeks a couple of weeks from now when he was asked did the Europeans
get it Right, and then I think maybe to some people surprise He said yeah, the Europeans did get some things right.
Yeah, and and so practically that would mean Everything is opt -in Default is going to be your opt -out and you have the company has to have a Very pretty narrow business reason why it manages your personal data So if that's the kind of regulation that he now seems to be sort of okay with that was actually
to me at least This was pretty big news.
That's pretty big news.
I think we need to be really careful when we ask for though, right?
I believe that regulation is gonna make Facebook even more dominant.
I really do So Facebook uses three kinds of data to power its advertising engine The first is data that Facebook collects not just on Facebook, but everywhere else you're online The second kind of data is Third party data the third kind of data is data that its advertisers bring to the table three types
of data To create one of the most sophisticated advertising engines in the world So now what we're gonna do is build a really tight wall around that and we're gonna make it much more difficult for data To get in and out.
All right. I think if this had happened to Facebook five years ago, it would have been a very bad thing Today if it happens today and these walls come down it basically locks in their dominance Imagine if you are a tiny competitor and you want to be the next Facebook You can't bootstrap your way there
the way that Facebook did in because you're gonna be hit with the same regulations I hadn't really thought about the dominance point But isn't there like a hit to profitability if you can't monetize in the same way So it's gonna be expensive for them to comply.
Yeah, but we know guys whenever an industry Gets a bunch of regulations slapped on it who protests all the big players and then what happens the big players are the only ones with The resources to comply so who suffers the small players dot Frank was supposed to punish big banks who suffered small banks
And all the big banks just adapted.
I believe what's gonna happen in Europe for example if you are a small publisher the challenge you face in Developing traction is gonna be so hard whereas the first time you use Google or Facebook after these things are enacted and they say well We need to collect some data in order for you to continue
to use our platform people are gonna say, okay Of course when I use Google so the big players are gonna get all the opt -ins early on I see and the small players are not I think what's interesting my young man's argument is It's kind of a it's a great argument.
It's like a classic regulation argument, which is the incumbents are the winners And I think that could still reinforce Facebook's dominance What I'm saying is if someone were to try to build an advertising network to rival the quality of Facebook's It would be very hard to do it.
Let me try one last argument on you today when you go to Facebook's privacy controls and you say You know should people find me with the help of the email address that I provided when I first sign up you can choose Everybody find finds me the rest of humanity friends of friends or friends There's no choice
that says no. I don't actually want people to find me and so I See how you're thinking about the degree of competition between Facebook and everyone else But maybe this will be a push for Facebook to really make clear What's the incremental value that they provide for the data that I give up?
So under European rules, the default is no one can find that email address that you gave Facebook And no one can find that picture and you know It's in Facebook's court to make an argument but oh and actually here is the value to users if you Let your email be searchable or if you and and and so maybe
less competition but better quality so that sounds like not right but No, but I think you here's the part I do agree with you on I do think it's possible that you will see their business shrink Yeah For all of the reasons that you said so there will be people that will monitor their privacy controls
with much greater rigor than we See right now, but what I'm saying is something different I see things getting locked in in a really particular way that makes me nervous.
I'm not I'm not against regulation I think it's inevitable makes you nervous Being young me or being Facebook.
It makes me nervous being young me.
So so I don't know.
I hope you're right I'm just sharing my anxiety.
I'm sharing my anxiety.
Yeah. So the big question is do we talk about this long here?
We don't have to talk about the post office Okay, he likes the post office the post office what a riveting So, of course the motivation to talk about the post office in part has to do with the president's tweet About the benefits that Amazon gets from from the post office so I'll quote to get a started
one of the tweets read only fools or worse are saying that our money losing post office makes money with Amazon and then in all all capitalized they lose a fortune and this will be changed So is that right?
Well if it's in all caps it it must be Well, I mean so it is there's a grain of truth right which is do they lose a lot of money post office?
Yes, do they charge?
Amazon perhaps less than they could I think that's also possibly yes Do they lose money by doing business with Amazon?
I think the answer that is no and so I think that's subtle enough for the president's purposes You know which is you know, what's happening here as I understand if you look is fundamentally Amazon's using the post office for the last mile and Really very little else.
And so that's a very valuable thing To Amazon and from the post office perspective, you're really building off its fixed fixed cost network So I think it's both possible and in fact, I think it's likely that they are Making money in the sense they're covering more of their fixed cost by doing the last
mile service but that Amazon might be willing to pay more and that as a Consequence of that implicit in that is the first class mail is subsidizing Amazon and implicit in that is we're all subsidizing Amazon So look, I don't want to agree with the president on this I think there's a grain of truth in there
that there is something at least that's my instinct if you're Amazon and You're looking at a delivery chain parts of which you can do very efficiently and parts of which are enormously expensive and then you look over there and There's the US Postal Service That will just take that tiny piece of your
delivery chain the piece That's the most inefficient for you to do and the most expensive for you to do that last mile delivery and hard to reach places where it makes no economic sense for you to do it and They charge you a price.
Of course, you're gonna of you know, is that Amazon's fault the US Postal Service is so Massively dysfunctional in so many ways that it's it's hard to blame Amazon for this so you were exactly right the the question is basically so the the Postal service has massive fixed costs the buildings and the trucks
Now the allocation of fixed cost is of course not something that the post office can decide itself so there is a regulatory Commission and a little while back roughly 10 years they decided that 5 .5 % of fixed costs should be allocated to packages now 5 .5 % was Perhaps not unreasonable at the time when they
decided but since then The letter delivery business has become much smaller and the package business has become much larger And so you would adjust over time the regulatory Commission hasn't done that the board that there's a board for the post office that has at this point in time zero appointed members
because President Obama couldn't get anyone on the board and President Trump hasn't gotten around to nominating his people so there's no there's no board oversight either, but what I find interesting about this is and I think it's a It's it's a it's a general pattern that when we think about public
services Were were distrustful and so then we burden these businesses with insane regulation and poor governance And then we complain oh my god.
You're doing a poor job.
How can that be? We need even more regulation and we need even more oversight and in the end You basically cannot run the post office.
So why is the post office losing so much money?
Well, one reason is maybe not all hundred and fifty million Businesses and addresses and households serve to be six six days a week six day service Like this is the sense in which I think we're very quick at sort of pointing out What's wrong with these businesses, but they operate under insane constraints.
Yeah, no, I think that's right But let me ask both of you what what is if you ran the post office.
What's the single change you would make?
Is it five day delivery?
Is it closure? What is the single?
What are the biggest changes you would make?
The tricky thing about the post office is there are parts of it that are completely obsolete And then there are parts of it that I think are absolutely necessary So in urban areas, for example, we don't need six day delivery to every household I mean, there's so many private solutions There are other
parts of the country where there aren't good private solutions And so the post office becomes much more of a critical lifeline so I don't think you could Privatize it all together because then you would be left without any solutions or very expensive solutions in certain parts of the country that need
It most I think you have to dramatically restructure it shrink it down Fundamentally change the operating model around it.
I think right now the Postal Service is not only dysfunctional but it perpetuates such an Economy of waste.
I mean just think about how much of the mail put packages aside How much of the mail that you receive is junk?
50 % what is it? I mean just think of think of what's happening.
We cut down a tree We mill it into paper.
We print a bunch of marketing material on it.
We load it onto a truck We ask a whole bunch of mail carriers to deliver it to households all across the country Just so that we can receive it and throw it away But so let me ask you this as both of you know I grew up in Switzerland other than the size Switzerland and the US are quite similar So there's
a skeptical attitude towards government in general But what really surprised me when I first moved to the US is that where I grew up there was this distinction between the government meaning politics and Then the state on enterprises that are run in a decent fashion.
There is a general trust That these businesses do a good job and as a result Regulation is present but light touch and then they can do many things that I think are just unimaginable Yeah, that's interesting.
I was gonna make a joke about the cultural tropes on Swiss efficiency Oh Yeah, no, I think it's a really it's a really interesting question So I came to this country when I was eight and I thought it was magical How male arrived and it was as efficient as it was like then there is a miracle of like
a letter Two days later showing up somewhere else Well, but it's still true right?
What is the rationale for these public institutions, right?
There is that it binds us together Which is somebody living in the rural area deserves just as much service as you do as a cosmopolitan urbanite That's an important principle and that there's something in that principle that's worth salvaging I'm totally on the side of the post office.
You cannot have it both ways.
You cannot create Crazy constraints and what they can and what they cannot do in ways that then make it almost impossible to perform Well, and then we say on see we need even more constraints.
We need even more regulations because you're not doing well to me, this is the perfect example of Dysfunction at every level and to your point.
It's a case of taking an organization and setting them up to fail You know and it's it's interesting because coming on the heels of our Facebook conversation About the come, you know the conversation about do we trust our lawmakers to impose set of regular you know What you're seeing in the case of the post
office is just this executed it at its very very worst on That happy note Okay, so All right.
So did you guys bring in your picks for tonight?
I think we did So before we get into a couple of updates The first is me here last week you talked about University Challenge.
Yes. I saw it. I went on YouTube It's ridiculously hard here.
I can't even understand the questions Some of the questions you can't even understand and then the crazy thing is sometimes he's not it's like a multi -part question sometimes the questions are paragraphs long and it's a multi -part question and You're still trying to figure out what he's asking and someone
will buzz It's crazy.
That's what I love about it.
It's just absurd at one point.
He's showing images of different kinds of The different kinds of arrhythmias, I'm just telling you it's crazy My second update is Felix last time you talked about artsy I did.
Yes. Well, it prompted an email from a friend of mine Who said artsy?
Awesome. I'm an investor and they do have a business model Remember you were freaking out that he said recurring revenue says software as a service Business model paid for by the galleries so you can rest.
Oh wonderful. That's great news.
Okay, so me here What do you have to recommend, you know, so I love food and people often ask me for recommendations Specifically about Indian food because I'm Indian of origin and I always have nothing to say because I never eat out Indian food Why would I eat out Indian food when I can get it at home?
It's like way better and I don't like Indian food when I eat so now I finally have a recommendation and it's a great restaurant It's called Indian accent.
It started in Delhi by a guy named money.
Shmarotra. He's got a New York branch now on 56th Street he's got one in London and it elevates Indian cuisine to a whole different level and It's fine dining esque, right?
So it's not Dada street food.
It's really inventive and Delicious.
So for example, he's got an amuse -bouche, which is a little piece of non Stuffed with goat cheese, which is something you would never find in India, but it's really interesting explodes in your mouth He's got this just no goat cheese in India.
It's just it's you know, it's more of a paneer place.
It's not I'm telling you you should go it is Delicate it's interesting.
So now I finally have a Recommendation when somebody asked me for Indian food and I want to share it with the world.
Awesome. Awesome. Fantastic Okay, can't wait feelings.
So I noticed This is a podcast by three business school professors and we never recommended the business book I thought that was quite interesting And I know the podcast is supposed to be the connection between society and business so I thought I would recommend a business book that I Started reading
actually I haven't quite finished So maybe it's the title the the title is big is beautiful debunking the myth of small business by Bob Atkinson and Mike Lind and Sort of the the starting point of the book is that everybody loves small business and Small means very many different things right small
can mean entrepreneurial small can mean You know the little bit they go around the corner and so on and so on and so what what they essentially do is they look At some of the spillovers from small and big businesses.
How innovative are they?
What is the likelihood that they create many jobs?
What do they do for customer experience and so on and so on and and in a nutshell?
We're confusing small and young Yeah, everything we like comes from young businesses and then The bulk of what we like is just big business.
Yeah big business does innovation big business creates jobs big business does Everything we want business to do but if you if you want a flavor other than big business pick a young firm By young you mean new new.
Yes in the first. Yeah three years Before they die that sounds really good.
It's a really interesting book Excellent.
All right, so my recommendation tonight is browser extension I know it's I know this is the sexiest podcast ever don't you?
All right, but but you have to write this down the name of the extension is ghostery ghost like Casper the ghost g -h -o -s -t -e -r -y And it might not even be the best in class But it's so simple to use and it just does one thing and that is once you install it Creates a little button in the corner of your
browser Whatever browser you use and every website you go to it tells you all of the third party Parties that that website is sharing your data with Wow so if you go What new sites do you browse so go to your new site?
Whether it's the Wall Street Journal New York Times go to wherever you want and it's a surreal experience to read an article about them blasting Facebook for sharing information and you click and you see a number 36 because They're sharing with 36 different third party and you can see what all of them
are Including Facebook and you can turn them off one by one.
You can block them one by one But even if you don't just to be on the internet and watching that thing spin So any new site you go to whether it's Fox News or the New York Times it will be in the 20s or 30s and it just gives you a sense of Everybody's sharing data.
So you can go after Facebook all you want, but data is being disseminated and you are Can you say again ghostry?
G -H -O -S -T -E -R -Y it takes 20 seconds to install.
It's super super easy to use, but it will change the way you Experience the internet.
So I did I did go on the HBS website into my relief One and it's our own internal Yes, all right.
All right. Thanks for listening everyone.
This is HBS after hour
