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Wasted Talent

May 2, 2011

Facebook is one of the most celebrated websites on the internet.  I don’t think it’s worth near the hype it’s received.  I wonder how many people realize that Facebook has nothing to do with staying connected with friends and family.  The reason the company is now worth nearly $65 billion dollars is they are a corporate data mining operation with one goal in mind — sell as much targeted advertising as possible.   I just finished reading an interesting article in Business Week.

As a 23-year-old math genius one year out of Harvard, Jeff Hammerbacher arrived at Facebook when the company was still in its infancy. This was in April 2006, and Mark Zuckerberg gave Hammerbacher—one of Facebook’s first 100 employees—the lofty title of research scientist and put him to work analyzing how people used the social networking service. Specifically, he was given the assignment of uncovering why Facebook took off at some universities and flopped at others. The company also wanted to track differences in behavior between high-school-age kids and older, drunker college students. “I was there to answer these high-level questions, and they really didn’t have any tools to do that yet,” he says.

Over the next two years, Hammerbacher assembled a team to build a new class of analytical technology. His crew gathered huge volumes of data, pored over it, and learned much about people’s relationships, tendencies, and desires. Facebook has since turned these insights into precision advertising, the foundation of its business. It offers companies access to a captive pool of people who have effectively volunteered to have their actions monitored like so many lab rats. The hope—as signified by Facebook’s value, now at $65 billion according to research firm Nyppex—is that more data translate into better ads and higher sales.

After a couple years at Facebook, Hammerbacher grew restless. He figured that much of the groundbreaking computer science had been done. Something else gnawed at him. Hammerbacher looked around Silicon Valley at companies like his own, Google (GOOG), and Twitter, and saw his peers wasting their talents. “The best minds of my generation are thinking about how to make people click ads,” he says. “That sucks.”

Your friends and family aren’t the only people viewing what you do on Facebook.  There’s an army of analysts watching everything you do.  They want to know who you’re dating, how long you’ve been together, when you break up, where you’re working, your hobbies, your interests, what TV shows you enjoy, movies you’re watching, your education level, your thoughts on political positions, and the list goes on.  These analysts crunch away and sell off all of your information to corporations wanting to sell their products.

It’s sad to me that our most brilliant mathematicians are not working on inventions and technology which changes the world — instead they focus on helping Wall Street fat cats by devising trading algorithms, and work on complex software systems for targeted corporate advertising.

Hammerbacher grew up in Indiana and Michigan, the son of a General Motors (GM) assembly-line worker. As a teenager, he perfected his curve ball to the point that college scouts from the University of Michigan and Harvard fought for his services. “I was either going to be a baseball player, a poet, or a mathematician,” he says. Hammerbacher went with math and Harvard. Unlike one of his more prominent Harvard acquaintances—Facebook co-founder Mark Zuckerberg—Hammerbacher graduated. He took a job at Bear Stearns.

On Wall Street, the math geeks are known as quants. They’re the ones who create sophisticated trading algorithms that can ingest vast amounts of market data and then form buy and sell decisions in milliseconds. Hammerbacher was a quant. After about 10 months, he got back in touch with Zuckerberg, who offered him the Facebook job in California. That’s when Hammerbacher redirected his quant proclivities toward consumer technology. He became, as it were, a Want.

At social networking companies, Wants may sit among the computer scientists and engineers, but theirs is the central mission: to poke around in data, hunt for trends, and figure out formulas that will put the right ad in front of the right person. Wants gauge the personality types of customers, measure their desire for certain products, and discern what will motivate people to act on ads. “The most coveted employee in Silicon Valley today is not a software engineer. It is a mathematician,” says Kelman, the Redfin CEO. “The mathematicians are trying to tickle your fancy long enough to see one more ad.”

I can’t stand quants.  I think they’re worthless human beings.  The idea of investment is providing capital to entrepreneurs who will bring new products and services to the world, making the world a better place.  In effect, these money masters are in charge of our society’s resources,  controlling which technology gets created.  They hold humanity’s destiny in the palm of their hands.  And what do they do with this power?  They create a casino where everyone tries to outwit one another by devising clever mathematical algorithms to make systematic trades.  They create the mortgage security market and then bet on who will and will not default on their mortgages.  They inflate a bubble, make huge profits on the upswing, then cash in on the downswing in the derivatives market.   It’s so absurd that I want to scream.

Call me old fashioned and conservative, but I believe banking and finance should be a boring job, because it is.  We don’t need financial cowboys gambling away our hard earned savings and retirements.  In order for markets to function properly, profits and rewards must be based on whether or not a person is adding value to and improving others lives.  When people can earn money without doing this, things fall apart.   This seems like a good place to quote Hayek.

“It is that any workable individualist order must be so framed not only that the relative remunerations the individual can expect from the different uses of his abilities and resources correspond to the relative utility of the result of his efforts to others but also that these remunerations correspond to the objective results of his efforts rather than to their subjective merits. An effectively competitive market satisfies both these conditions.”

– Friedrich Hayek – Individualism And Economic Order

Working at Facebook selling advertising is infinitely better than being a “quant”, but that’s not saying much.  There is some merit to effectively making people aware of products that are available, and helping a person find a good deal.  All in all though, it’s sad to see our brightest minds waste their lives and their talent.  Jeff, don’t waste your life working for Facebook.  Go out there and contribute to real technology that truly improves the human condition.  We already have enough junk in our homes.

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