Facebook CEOMark Zuckerbergwent to Washington this week to convinceCongressthat it’s a good idea to let his company launchits own global currency.
The new payment system –Libra– would purportedly solve a few problems. First, it’s meant to benefit the many “unbanked” people around the world – those who are they don’t have access to a bank account or can’t use the one they have because the fees are too high. Second, transferring money from country to country is currently quite expensive and Libra wants to cut out those fees. And third, most transactions are slow, often taking days for a purchase to go through completely even when it’s only taking place in one country.
Libra wants to fix all that. But as with everything Facebook has done, the development is raising eyebrows andquite a few questions.
In fact,lawmakers seized the opportunityof Facebook’s CEO testifying before the House Financial Services Committee to ask Zuckerberg about everything from Facebook’s diversity numbers, the millions of child abuse images on the platform, andhow the platform handles political ads.
At times, it felt like the representatives were airing a long list of grievances against the social media giant. At others, it seemed clearthey just don’t trust Facebookat all.
Deepa Seetharaman, a reporter for the Wall Street Journal who focuses on social media and politics, joinsResetpodcast hostArielle Duhaime-Rossto discuss Congress’s reaction to the most current Zuckerberg appearance, explaining why exactly lawmakers have such a strong, negative reaction:
If you look at what Facebook has been going through since the 2016 election, it has been controversy after controversy for that company from the get-go. There have been questions aroundits handling of misinformation,violent live videos, issues around its ability to enforce policies on hate speech, that handling of private data from consumers andCambridge Analytica. It’s just been a litany of controversies. So when Facebook launched Libra earlier this year … it was introducing this new product in a very hostile environment.
Later in the episode, Columbia University law professorKatharina Pistorbreaks down why Facebook wants to start its own currency, how Libra would actually work, and why consumers should be concerned.
Listen to theirentire discussion here or below.We’ve also shared a lightly edited transcript of Seetharaman’s conversation with Duhaime-Ross.
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Arielle Duhaime-Ross
Why did Zuckerberg appear before Congress? How’d [he] do?
Deepa Seetharaman
He was there to talk about this project that Facebook has been working on for a little while now called Libra. It’s a payment system that the company announced officially early this summer. And lawmakers have a ton of questions about it, how it works, what it will look like, what the effect will be on the financial markets. There’s a lot of hand-wringing about what the potential impact of what Facebook in this space could be. And that’s why he’s there to answer those questions.
Arielle Duhaime
-Ross
What was the initial response to Libra when it was first announced this summer?
Deepa Seetharaman
Distrust. If you look at what Facebook has been going through since the 2016 election, it has been controversy after controversy for that company from the get-go.
There have been questions around its handling of misinformation, violent live videos, issues around its ability to enforce policies on hate speech, that handling of private data from consumers and Cambridge Analytica. It’s just been a litany of controversies.
And so when Facebook launched Libra earlier this year, after working on it secretly within the company for about a year, it was introducing this new product in a very hostile environment. People just don’t trust Facebook anymore. And you really saw that over the summer. Congress asked Facebook’s head of Libra – that’s David Marcus – to appear and answer a lot of questions about what that project was, what it could mean, and how it would work.
The regulatory scrutiny was so intense that several partners just left the Libra Association, a group of companies that was working with Facebook on Libra.[We’re] talking big names like Visa and MasterCard. So the backdrop for Zuckerberg’s hearings was a lot of anger, a lot of mistrust in the company. And you saw that reflected in the questions today.
Arielle Duhaime-Ross
A few weeks ago, there was leaked audio that was released, and in it,Zuckerberg said that these public events, these hearings get a lot of attention, but actually the real work happens in private. What do we know about what’s going on behind the scenes for this particular effort?
Deepa Seetharaman
For this particular effort, Facebook has been meeting Democrats and Republican aides. They have been trying to talk up the benefits of Libra.
One argument that they have made both publicly and privately is that innovation is important. And it’s really important for American companies to be the innovators, because otherwise America could be overtaken by China. This is an argument that seems to land with certain lawmakers, and they’ve really worked to stress that they are not going to do anything without US regulatory approval.
It’s a little early to tell whether it’s working, whether Libra will actually successfully launch, but they’re trying to answer all these questions.
(Arielle Duhaime-Ross)
So what happened at the hearing? Because what I saw was a Mark Zuckerberg who kind of came with an aw-shucks attitude where he was on the charm offensive, trying to get these members of Congress to be okay with the concept of Libra. And he even said things like he doesn’t even know if it’s going to work, but it’s great that an American company is innovating.
What was your impression of Zuckerberg’s performance?
Deepa Seetharaman
I think it’s clear that he has been practicing. He was last in front of Congress April 2018. Those were his first congressional hearings. Then, he was at answering a lot of questions about Cambridge Analytics and privacy policies and the ad platform. And at the time, there were a lot of questions he couldn’t answer, especially around the way that the ad system worked that he referred to his team on. And also, Congress wasn’t asking necessarily the most informed questions.
Today’s performance was very different. Both Mark Zuckerberg and Congress came armed with much better questions and much better information. Mark was pretty collected. He responded to the questions and as well as he could.
But it’s hard to overstate – this was a grilling of Facebook writ large. It wasn’t just about Libra. There are concerns about that particular effort in that technology. But there were even larger concerns about Facebook track record and whether it could be trusted. At one point, a lawmaker asked: Have you learned not to lie?
While another lawmaker said that she was appalled and disgusted that Mark didn’t know theintricacies of their civil rights audit. And [that he] couldn’t describe even the top three conclusions of the audit, right off the top of his head.
That was a moment, I think, when he was asked with a civil rights audit where Mark seemed a little bit more upset. But on the whole, he seemed pretty put together in the face of some very, very tough questions about the company. I mean, that was my impression just from listening that it was really about, can people in general trust Facebook, much less this potentially risky and new Libra effort.
Arielle Duhaime-Ross
Why is Facebook trying to launch a global currency like Libra? Now, the company has beencriticized like never before. And so it’s interesting that they would decide to launch a really ambitious project at this point in time. Why are they doing this now?
Deepa Seetharaman
You have to really understand what’s been in the company’s DNA. It’s a company that is built on the idea that you want to innovate and move forward. And Mark in particular is very interested in making sure that Facebook stays ahead and never rests and is constantly adapting and evolving to the times.
You see this impulse in why he bought Instagram and why he bought WhatsApp and why he bought Oculus. These are companies that were in spaces that he thought the world communication was moving towards.
This Libra effort is in that same bucket. He wants to build a way for people to transact. But it’s also about monetizing his messaging systems and trying to make sure that the company isn’t complacent. They’re moving into areas where consumers will be in the future. So when the world shifts and potentially embraces cryptocurrencies, Facebook is there, but they’re not behind.
Libra is a place where suddenly Mark’s efforts to innovate and make sure that Facebook isn’t left behind clashes with this broader distrust in Facebook and the company’s poor track record when it comes to safety and security issues.
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