“I believe it should be as easy to send money to someone as it is to send a photo.” Mark Zuckerberg
Facebook has announced plans to launch a new global currency powered by blockchain technology called Libra with a consortium of industry founding members. These include Visa, PayPal, eBay, Spotify, Uber, and Vodafone.
Libra aims to allow people to send, receive, spend, and secure their money, enabling a more inclusive global financial system.
Libra is a stablecoin fully backed by a reserve of real assets. The white-paper borrows heavily from the economics, technology, and narrative of the blockchain revolutionaries. Each member of the consortium will have their own goals, but here I focus on what this might mean for Facebook now and in the longer-term.
Reactions to Libra have spread faster than a ‘fake-news Kardashian meme’ on Facebook. This is not just the launch of new software, but a new currency to rival the Dollar, Pound, and Euro.
Many articles have dug deep and cast the net out far and wide on the complicated longer-term scenarios impacting industries, countries and privacy. However, in my view, a couple of things have been under-emphasised.
The first is seeing this announcement as a diversion from some of the large existential problems Facebook has today.
The second is seeing the messages through the lens of employer brand — Facebook needs tens of thousands of motivated workers now and in the future to build and maintain mountains of code.
“If we want things to stay as they are, things will have to change”
So said Giuseppe Tomasi di Lampedusa’s in his novel, The Leopard.
I think the announcement is primarily aimed at three groups.
Regulators — the call for big tech companies such as Amazon, Facebook, Google and Apple to be split apart is getting stronger on both sides of the Atlantic. Libra attempts to divert regulators from privacy and market dominance issues to new currency competition with the central banks, and competition for the dollar itself!
Fund managers –as Meltem Demirors points out most of Facebook’s profit comes from North America, however most active users are outside of the US. There is pressure for Facebook to monitise these users.
Employees and candidates — just to maintain its current business, Facebook needs to keep its employees and hire more. From 2Q17 to 2Q18 Facebook went from 20,000 employees to over 30,000 — now that’s a lot of coders! The days of ‘Don’t Be Evil’ are now dead in Silicon Valley, but Facebook needs to move on from its recent PR nightmare over Cambridge Analytica. Maintaining employee morale will be a current priority, if it drops and employees leave, then there is no Facebook.
‘Banking the Unbanked’ is a much more noble aim than ‘Advertising to the Bored’.
The announcement also launched its open-source code, new programming language and testnet for software engineers to stick their teeth into.
Viva Libra! An Employer Branding Masterclass
“First, I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the earth.” John F Kennedy’s address before Congress, May 25, 1961
Zuckerberg’s vision statement about sending money as easily as a photos ticks all the right boxes. It evokes JFK’s statement about putting a man on the moon. In some ways Zuckerberg’s goals for money is even bolder and much more utopian. But, what did landing a Man on the Moon ever do for us? (HT Monty Python, again.) This noble vision is aimed just as much at its workforce as it is to its shareholders.
The Libra name is a clever combination of money, justice, and freedom. Justice and Freedom (from banks?) — again this is aimed very much at its workforce. (but doesn’t play so well in Australia)
Content is King, but Context is Kingdom of Zuckerberg
This debate has only started and the themes are fascinating already.
The crypto-anarchists vs capitalists — “It’s cyberpunk come to life. Massive multinational corporations against the power of state.” Bitcoin was invented as a digital antidote to fiat money and to provide us all with digital gold without digging in the ground — but didn’t rid us of mining altogether.
Catching up with China — in the adoption of digital financial services, and social media — in some ways the US is behind China. Visa processes 2000 cash transactions/second, compared to Ant Financial (formerly Alipay) with 250,000 transactions/second. If Facebook does implement Libra in 2020, it will still be well behind where WeChat is now with both messaging, social media and payments. It is estimated that 80% of China’s big cities are cashless.
#FinTech vs #BigTech — there are NO banks in the founding members of the consortium. As Vinay Gupta suggests, the value is not in financial transactions but in the behavioral data Facebook holds. This is a big challenge to the financial services industry.
I think Facebook will probably get pushed back but negotiate its way into being able to compete with a much larger set of financial services institutions as a result of being talked down from attacking the dollar itself (with is the threat they are making.) It's only the start.
InstaShop — Libra will enable payments — and this will also impact retail — over to you Amazon?
Geopolitics –To many in the world, Facebook IS the internet. The market capitalisation of Facebook, top 5 in the US, and other FAANGs, matters to the US economy bigly. For individual countries, owning these platforms gives power and bargaining in future games of security and trade.
The Tokenisation of Work — I have written about the future of work, where AI and blockchain machines can help find and pay the perfect worker for work that needs doing. With all the personal information available to Facebook, wouldn’t this be the perfect work platform? If as Vinay suggests, the value is in our behavioral data then this also applies to hiring too. And payments to workers need stable-coins, like Libra, in this context, rather than fluctuating crypto. As work unbundles, it will be interesting to see which activities can be tokenised. In the medium term, we can try and reduce $600 billion paid in remittances from overseas workers.
The Libra Balancing Act
It is difficult to predict how Facebook’s long-term future will play out with battles on many fronts from Big Tech to FinTech to WeChat and Central Banks.
There have been some bold predictions from futurists, but this needs to be balanced with what it means for today.
The announcements can be seen as partly a deflection away from a crisis today, and a reframing of the Facebook narrative.
It’s a PR masterstroke.
The worst case is that with the increased scrutiny as a financial institution, trust in Facebook increases, and helps to reinforce its core business of US advertising.
The best case is that it builds new markets, distracts its competitors and controls a chunk of future digital payments.
Whether Zuckerberg is a Cyborg Assassin from 2029, or just an owner/boss trying to keep his business together, we shall find out in due course.