Mike Greenfield has some really insightful things to say on his blog about big data statistical risk and the difficulty in predicting human behavior. Take for example his experience with starting a company, which proved how dangerous it was to rely on a sole supplier.

So Facebook acted rationally, optimizing for their own best interests and those of their users. They killed the notifications feature (which we used to tell someone her friend’s child was turning two). They removed boxes and tabs from profile pages (which over a million moms had added to show off their kids’ accomplishments). And they hid invitations (which moms used to tell their friends about our product).

At that time, we were almost completely dependent on Facebook’s channels to communicate with our users and find new ones. We felt like a beer maker preparing for the government banning beer sales in markets, shutting down bars, and only allowing people to drink in restaurants on Tuesdays. Not quite prohibition, but pretty darned close.

I want reiterate that Greenfield is in the business of predicting human behavior based on data analysis. Although he says “Facebook acted rationally” he actually started his blog post with “Facebook, the VCs said, could suddenly turn off all of their communication channels and we’d collapse. We thought they were full of it…”.

Why didn’t he see it coming?

It sounds to me that VCs predicted the danger of losing a sole supplier. That makes sense in a simple predictive risk model. A “rational” behavior model for suppliers who see economic opportunity, however, is a complex and messy business. It really shouldn’t be so casually described as if a supplier who kills their distribution channel is predicted easily or is rational/optimizing.

Although I love the prohibition analogy it probably is not for the reasons Greenfield uses it. Prohibition is a good example of bad regulation and resulting security risks.

Consider for a moment how the consumption of alcohol actually increased in America after it was banned. If Facebook’s regulation of data were like prohibition then we should predict an illegal data running/smuggling boom.

That didn’t happen, as documented by Greenfield. Instead his story centers on “cutting the cord” and walking away from Facebook forever.

Also consider that prohibition in America was led by popular religious extremists (well, popular in Kansas anyway) who violently forced into power a bunch of blatent hypocrites.

The “conservative” politicians who said they favored a “dry” country ended up meaning someone who drank but refused to admit it. In today’s terms it is similar in nature to the radically homophobic politicans.

Those calling for regulation thus can be mired in complex psychological and cultural issues, which makes “rational” predictions of their economic behavior less than obvious. Was Greenfield accounting for a fundamentalist Carrie Nation element to Facebook when he was threatened by “hatchetation” of his data?

The really interesting point of Greenfield’s story is that at the same time he (like most people) predicted a demise of email and replacement with social networking (risk of staying on email), he also was using the venerable traditional direct-communication path of email to save his company from destruction.

As 2010 came to a close, the proverbial feces was hitting the proverbial fan, and we started to look at email as a way out of the ditch. […] Over the course of 2011, we streamlined our content-writing and emailing operations, in the process turning email into a viable re-engagement channel for millions of moms.

The lesson of course is to predict and manage risk related to distribution channels to your customers, which is what the VCs told them in the first place. It sounds to me had he followed his own risk analysis based on a prediction of the future he would have been far worse off. In other words don’t stop using email unless you realize the true risk of giving up ownership and control over your communication.

Fast forward to Greenfield’s more recent post called “Predicting the Future is the Future” and he extols automation.

Automation is incredibly important. It democratizes the process of building and using statistical models, so that a small startup (with lots of data) can build pretty good statistical models without a team of statisticians. These automated statistical models will almost inevitably perform more poorly than their human-built counterparts, but they’re close enough to be competitive.

I really want to agree with him, because technology can make data more accessible and therefore more democratic. Giving out statistical model tools to everyone means they too can start a company and make money from mining your personal data.

But again he leaves out an essential part of behavior — who gets to own and control access to data. This part of risk has to be better defined before we can celebrate democracy and a risk reduction.

His description of the troubles with Facebook give a clear example of how automation can be rendered completely useless — it runs straight into severe power inequality in terms of resource control and management risks.

Alas, back to the Facebook prohibition analogy, every farm in America used to have an apple tree, if not an orchard. Yet the saying “as American as apple pie” is a subtle reminder of the strange story of hard cider in America.

150 years ago, in the 1840s, hard cider held the position now held by beer as the preferred alcoholic beverage of the working class.

Where did it go? It turns out that while technology democratized the process of building farms and making goods it alone was unable to prevent the extinction of the preferred beverage in America.

…the temperance movement remains as a major culprit responsible for the decline of cider consumption in the U.S., but the association of cider with rural WASP culture was the added factor which distinguishes cider from beer or wine. Add to this the economics of beer production, growing urbanization, German immigration, a predatory beer industry, and a substitute drink in coca-cola, and there seems to be enough factors working together to explain why and how cider so completely disappeared.

A statistician looking at data in 1840 might have said cider was the future, but the question is whether they could or would have predicted a much more complicated mix of risk factors related to irrational human behavior (e.g. religious fervor and ethnic prejudice) that killed the market.

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England’s farmers were insulated from the risk of politics and industry in early 1900s America, so they still make cider:

Source: Broome Farm on Flickr.

Mother Earth News says it is not too late to learn how to make your own American cider…assuming you can find a reliable apple distributor.

Chinese sentiment last year clearly turned against shark fin, as reported in xinhuanet.

A Chinese lawmaker has proposed that the country’s top legislature ban the trade of shark fin, a high-end delicacy consumed by wealthy people in China and East Asia.

Shark-fin trading generates enormous profits, but encourages overfishing and brutal slaughter of sharks, of which some 30 species are near extinction, said Ding Liguo, deputy to the National People’s Congress, the top legislature.

Just a few days ago, in a logical next step, China announced a shark fin ban at official receptions.

China’s Government Offices Administration of the State Council (GOASC) is to issue guidelines to ban serving shark fins at official receptions, according to a report by news website CNTV.cn on Monday.

An official with the GOASC said the guidelines, instructing all levels of government agencies to stop serving the delicacy at such events, will come out within one to three years, the report said.

Meanwhile, back in San Francisco the Chinatown Neighborhood Association (CNA) has filed a lawsuit against AB 376, the state law set to ban of shark fins in California by July 2013: Chinatown Neighborhood Association et al., v. Edmund Brown, et al.

CBS News points out that the lawsuit centers on racial bias.

Two Asian-American groups have challenged the state’s shark fin ban in a federal lawsuit in San Francisco, claiming it discriminates against Chinese Americans because it blocks cultural uses of shark fin soup.

“It discriminates against people of Chinese national origin by targeting and suppressing ancient cultural practices unique to people of Chinese national origin,” the lawsuit alleges.

[…]

Its use dates back to the Ming Dynasty in the 14th century, the lawsuit says.

The CNA arguments are not very convincing. First, as Chuck Thompson explains perfectly, the lawsuit fails rudimentary logic and simple historical checks.

“Shark fin soup is popular because it was learned from Hong Kong twenty years ago,” [Clement Yui-Wah] Lee told me. “And even if 500 years ago some Chinese were eating it, this doesn’t mean it’s a tradition we have to follow. Chinese people don’t bind women’s feet anymore because we know it’s wrong.”

Lee is right. The Chinese don’t bind women’s feet anymore. It is just as true that the menu for the wedding feast of the Guangxu emperor in 1889 included no shark product of any kind.

Eating shark fin is to Chinese what eating Caviar is to Americans. Refusing to eat shark fin soup because of documented harm does not make anyone less Chinese. It might actually be the opposite; a more traditional Chinese custom is to study, respect and honor nature. Here’s another perspective on this same issue from Chinese NBA star Yao Ming

While shark fins have been used to make soup for hundreds of years, until recently consumption was limited to a small elite, said Yao, who gave up eating shark fin in 2006 and says he avoids events where it is served.

Perhaps the California law should have been written to say “shark fin soup is prohibited unless you are the Ming Dynasty Emperor of China.” Since there just isn’t much chance of that happening might as well just say it is prohibited.

Second, how does the race card play if the Chinese are officially banning and publicaly avoiding shark fin soup? At this point we could say the California law supports and honors Chinese culture by calling for a ban. Kudos to California for supporting Chinese conservationists and trying to help prevent shark extinction.

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Updated to add: A 2011 Pew report called “The Future of Sharks: A Review of Action and Inaction” gives some detailed market data and analysis

Sharks are particularly vulnerable to overexploitation because of their biological characteristics of maturing late, having few young and being long-lived.

Inside the report you can find who is killing the most sharks and who is buying fins

Given that the Top 20 account for about 80% of global reported shark catch, the future sustainability of shark populations is effectively in their hands.

Here is some of the data on U.S. shark kill, which emphasizes that fins are not well tracked but the exports primarily go to Hong Kong.

Frozen shark fin is not identified separately in U.S. trade data. However, Hong Kong import data indicate that in 2008, 251 t of dried and frozen shark fins were imported from the United States in 2008 (Oceana 2010). Given that only 8 t of dried fin were identified in the U.S. export data as exported to Hong Kong that year, it is assumed that the majority of fins is exported as frozen product and is included in the U.S. data as “sharks, frozen, nei.”

[…]

In 2008, the U.S. reported that of its 35 identified shark stock/complexes, four were subject to overfishing and four were overfished, and the status of about 20 others was unknown or unidentified (NMFS 2009). Shark finning was banned in U.S. Atlantic fisheries in 1993, and this ban was extended nationally in 2000. As of 2008, all sharks in the Atlantic Highly Migratory Species Fishery must be offloaded with fins naturally attached.