Yes, that’s right. Google’s security chief for its government products plays Russian Roulette with nail guns on national television. And–according to his Wikipedia bio, “Raven has been linked to Heather Sweet (AKA Dita Von Teese) when they went to University High School together and Glamor Model Carmen Electra whom they met after his Nail Gun demonstration.”
I guess chicks dig the nails.
Gawker tells us:
Maybe it should come as no surprise that Google’s Director of Security is also a “mentalist” magician; few can better sell the illusion of ironclad internet security, after all, than a master of deception who fooled thousands of NBC viewers.
But Eran Feigenbaum — better known as “Eran Raven” — has turned the cheese knob up awfully high, considering his buttoned-down job as the Director of Security for the putative blue-chip operation that is Google Enterprise, which is trying to sell “cloud computing” to no less uptight a customer than the federal government.
So once again, Google’s commercial involvment with the federal government takes on a circus-like atmosphere, except this is no sideshow–and once again the U.S. government’s General Services Administration is in the middle of some odd shenanegans. No hot tubbing with GSA Commissioner Jeff Neeley in Vegas–yet–but the GSA seems to have given Google a contract that will allow Google and it would seem Eran Raven, Mentalist, to get access to at least potentially classified information.
So who is Eran Raven? It appears that his real name is Eran Feigenbaum who claims to have worked in the “intelligence community” which has a very specific meaning where I come from. So…think about this: Does this just seem like a circus or do you think that Google actually submits their performers–I mean, security directors–to background checks? I suppose that concern is unwarranted–after all, if it’s good enough for the GSA….
Mr. “Don’t Be Evil” has a new one: Private Equity Firm YCombinator Says “Kill Hollywood” Starting with the Unions
MTP readers will recall the absurd post from Silicon Valley private equity firm YCombinator entitled “Kill Hollywood” which was a request for startups to…Kill Hollywood (see also New York Times “Investment Firm Y Combinator Goes on Offensive Against Hollywood“).
Yes, bring on the digital chickenfeed. And in a race for gratification between Citizen Kane and digital chickenfeed, we know which one will win out with the Valley Boys. (Citizen Kane is a movie, by the way. That’s what writers call “irony”. They haven’t invented that yet in Farmville.)
We thought at the time that the idea that a venture capital fund would request proposals to fund by startups whose goal was to “Kill Hollywood” was probably the most crystalized form of Geek Hate we’d seen, maybe ever. But what else would you expect from the intellectual loins that gave you Gmail (how Google monetizes emails from children they’d never be able to get through the front door), Facebook (we’ll see if anyone goes to jail on that one), and of course–digital chickenfeed.
All of which the world can live without.
So you may have wondered who in the world comes up with this “Kill Hollywood” idea? Don’t expect the New York Times to tell you. A post on the YCombinator message board may yield an answer:
“Paul Buchheit deserves all the credit for this idea. The YC partners were having lunch yesterday and he suggested posting this RFS. Whereupon we all turned to Jessica, who is usually the one who talks us out of doing crazy things. I was kind of surprised she didn’t try to talk us out of it….Entertainers absolutely embrace innovation, both creative and technological. It’s structures that don’t. Here’s two specific targets: Creative Artists Agency and the Screen Actors Guild. Good luck.”
Right. What we really need to “kill” are the two institutions that have protected artists for 100 years: talent agents and unions. Especially unions. Technology has always done such a good job of protecting artists’ rights.
Now this is an interesting thought coming from those who are such devoted defenders of the First Amendment as Mr. YCombinator. Because you know what else is in the First Amendment?
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” It is this assembly clause of the First Amendment (and the Fourteenth Amendment) that protects unions (see, e.g., NAACP v. Button, 371 U.S. 415 (1963), Brotherhood of Railroad Trainmen v. Virginia State Bar, 377 U. S. 1 (1964)). And then, of course, there’s Article 23 of the Universal Declaration of Human Rights.
So the organizations that the YCombinator folk want to spend their millions to “kill” first are the agents who the artists choose to defend their rights (I’m sure they probably overlooked the lawyers), but most importantly the unions whose leaders are elected (unlike the leaders of say, Creative Commons).
Because what the non-union Valley boys really want is to have the artists alone, defenseless and exploitable. That’s certainly the effect of what Google’s lawyer Daralyn Durie recently argued to Judge Dennis Chin in the Google Books case. Fortunately for artists everywhere, Judge Chin got as close to laughing in her face as a sitting judge properly can. But let’s be clear: the Valley Boys (and Girls) want to bust the unions and any other associations that artists can form to defend themselves against the attack of the machines. (See also “Just So You Know Where You Stand: Google Attacks Authors and Photographers Organizations in Books Case“.)
Now we have seen this movie before–I think Fritz Lang made it. These are people who root for the robots, if you know what I mean. The real irony, of course, is that YCombinator VC Paul Buchheit who dreamed up the venture fund’s “Kill Hollywood” campaign is credited with “suggest[ing] [Google's] now-famous motto “Don’t be evil” in a 2000 meeting on company values.” Now that is not something I’d be too proud of, personally.
So I guess he must mean, bust the unions, but don’t be evil about it. So maybe YCombinator will fund Pinkertons.com?
The next time these VCs come to union pension funds to peddle their shares, let’s all ask them to explain that “Kill Hollywood” business. Starting with CALPERS.
And just in case you were wondering, here’s a copy of a union-busting handbill from Google’s Net Coalition that was discovered by Variety.
MTP readers will recall that one of the perks of being a Google insider is that you get to park your private jet at Moffett Field, the NASA installation near the headquarters of the Leviathan of Mountain View, a/k/a the Googleplex. This is the kind of thing you get to do when your Google stock gets 10 times the voting rights of anyone else’s Google stock. (See “Life in the Two Gulfstream Family: Senator Grassley Nails NASA Administrator Over Google’s Misuse of Moffett Field“.)
How does it happen that Google executives get this perk you may ask? What is the justification? Devine right, perhaps? No…well, maybe in Silicon Valley, but not in America, surely?
You can just imagine Larry and Sergei trying to find a good parking spot for their jets and deciding on Moffett, the iconic airfield hangar on the San Francisco Peninsula, a stone’s throw from the Googleplex.
But—what’s interesting is that their names do not appear once in the relevant leasing document, the “REIMBURSABLE SPACE ACT AGREEMENT BETWEEN NASA AMES RESEARCH CENTER AND H211, LLC REGARDING AUTONOMOUS EARTH OBSERVATIONS.IN SUPPORT OF GLOBAL CHANGE RESEARCH” or, as it is known by its short name, the “Chicks Dig the Plane Deal.”
H211 LLC is apparently the entity that Google executives formed to handle their dealings with NASA on the planes that has a neighborly relationship with Blue City Holdings LLC that evidently owned one 767 that it sold to Google, according to reports. A Boeing 767-238(ER) tail number N2767 to be precise. (“H211″ refers to Hangar 211 at Moffett Field.)
H211 replied to Senator Grassley’s letter to the NASA Administrator—now why didn’t the NASA Administrator respond? Maybe it has something to do with this 2008 story from the New York Times:
Last year, a company controlled by Larry Page and Sergey Brin, Google’s founders, along with Eric Schmidt, its chief executive, signed an unusual agreement with NASA giving them rights to use Moffett Field, an airfield adjacent to Google, for their growing fleet of private airplanes. At the time, NASA described the arrangement as a win-win: NASA would receive $1.3 million in rent every year, and it would get to place scientific instruments on the planes for use by its researchers.
Mr. Zornetzer said things didn’t turn out exactly as expected. The Googlers and the agency both found out that they could not make modifications to the passenger planes, which include a Boeing 767, a Boeing 757 and two Gulfstream Vs, without getting new certifications from the Federal Aviation Administration each time.
“Any modification to the exterior or electronics requires new certification,” Mr. Zornetzer said. So the Googlers brought in the fighter jet. “The Alpha Jet they are bringing on board is considered an experimental aircraft, so we don’t have the same issues as with a passenger plane,” he added.
So wouldn’t you think that if the purpose of giving Google a lease on Moffett Field was to have Google’s fleet of jets do experiments for NASA that once it became apparent that the planes couldn’t actually handle the experiments–there would be no more reason for Google to have the use of Moffett Field?
And oh, yes, the “Alpha Jet”?
A company controlled by Google’s top executives [that's H211 LLC], including its billionaire founders, Larry Page and Sergey Brin, appears to have added a new plane to its well-equipped fleet: a fighter jet, or more precisely a Dornier Alpha Jet. According to Wikipedia, the Alpha Jet is a a light attack jet and advanced trainer aircraft manufactured by Dornier of Germany and Dassault-Breguet of France.
Another interesting fact is that the Google contracts relating to the basing rights for the Google fleet contain in the “PURPOSE” paragraph one of the most indirect descriptions I’ve ever seen, worth of the Allegory of the Cave:
NASA and Partner [that's H211 LLC] are concurrently entering into that certain NASA Ames Research Center Enhanced Use Lease (SAA2 – 402054) (the “Lease”) with respect to the premises more particularly described therein and commonly known as the hangar bay of Hangar 211 and ancillary support space. Partner is beneficially owned by the principal executives of an entity (the “Programmatic Partner”) with whom NASA ARC has a programmatic, collaborative relationship.”
Now if you didn’t know, would you ever guess that the English translation of “Partner is beneficially owned by the principal executives of an entity (the “Programmatic Partner”) with whom NASA ARC has a programmatic, collaborative relationship” means H211 LLC is owned and controlled by Larry Page, Sergei Brin and Eric Schmidt? And that the Programmatic Partner is Google, Inc.?
So why “beneficial owner”? That term usually means that someone (the “legal owner”) holds the item, shares in this case it appears, in trust for someone else. That’s most likely because because the legal owner of H211 LLC appears to be Hillspire LLC. With an address of 555 Bryant Street in Palo Alto, also known as the UPS Store. According to its website, “Hillspire is an integrated family office investment management firm that was formed in 2006 to manage the capital of a California-based family.”
According to public records, though, Hillspire LLC is owned by Big Hen Group II, LLC, Blue City Holdings LLC, H211, LLC, Top of The Hill Partners, LLC, Waverley Street, LLC, Eric Schmidt and relateds, and something called Schmidt Investments. According to Linkedin, Hilspire is “a wealth management firm with asset under management in excess of one billion dollars.”
We didn’t have time to go through all of these entities, but in order for the statement in the NASA contract to be true, it seems that some or all of the entities would have to have shares owned by Page and Brin. That’s kind of hard to tell.
Then there’s the question of security. Do you think you need to have a security clearance to get onto a NASA research facility? Assuming you weren’t landing a fighter jet there, of course.
“And if they could talk to one another, don’t you think they’d suppose that the names they used applied to the things they see passing before them?”
The Allegory of the Cave by Plato, line 515b2.
Reading a company’s SEC filings is always an interesting enterprise, particularly because you know that whatever they say is the absolute best thinking that all the top people in the company, their lawyers and their bankers can come up with. But sometimes it’s kind of like the shadows on the wall of the Cave, with the insiders as the puppeteers. Consider this excerpt from Google’s 8-K filed today:
“We may be subject to legal liability associated with providing online services or content: “…We also arrange for the distribution of third-party advertisements to third-party publishers and advertising networks, and we offer third-party products, services, or content. We may be subject to claims concerning these products, services, or content by virtue of our involvement in marketing, branding, broadcasting, or providing access to them, even if we do not ourselves host, operate, provide, or provide access to these products, services, or content. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner.”
“If we lose.” Right? Shouldn’t it also say, “if we lose”? Isn’t the only time you would pay a penalty when you lose? Because you are found civilly or criminally liable for a bad act? But they left that out. And if they think they might lose, shouldn’t the company be reserving for a liability? You know, like they did with the $500,000,000 Google paid to keep the insiders from being indicted for violating the controlled substances laws? (Albeit Google held the reserve about a year or two late if you ask me. Or if you ask the shareholders who are suing Google for failing to disclose the risk.)
What do you suppose they could be thinking of, these puppeteers?
Who wants to bet? Drugs, illegal movies and music (or let’s just say “YouTube” for simplicity’s sake), bogus financial products, mail order brides, illegal Olympics tickets…one of those? Or is it something we haven’t thought of yet like the Foreign Corrupt Practices Act?
“Your Horses Seem to be Winning”: The European Commission’s Antitrust Case Against Google Matters to Artists and Songwriters
Both the European Commission, the U.S. Federal Trade Commission and the U.S. Senate Antitrust Subcommittee are working at bringing an antitrust complaint against Google for a variety of reasons. The EC and the FTC are pursuing both similar but different rationales due to differences in the antitrust laws of Europe and the United States. Antitrust is a complex body of law, but is designed to both promote competition in the market and also to punish firms that abuse their dominant or monopoly positions.
For artists, these cases are important because the central theme boils down to this: If Google just offered search and sold its Adwords and Adsense products, the fact that the company had achieved at least a dominant position if not a monopoly over search on the Internet would not necessarily be bad. It’s not illegal to be a monopolist.
The harm comes with the almost inevitable hubris accompanying a monopoly position and the abuse of that monopoly position in one business line (or “vertical”) to extend the monopoly into other verticals. This is particularly true when the monopoly profits from one vertical are used by the monopolist to subsidize another firm wholly owned by the monopolist that extends the monopoly to another vertical.
For artists, this can be summarized as YouTube.
Notice and Shakedown on the Potomac
Google paid a billion dollar premium for YouTube in 2006 at a time that the evidence in the Viacom case clearly demonstrates that YouTube was trafficking in stolen copyrights, trading on artists’ rights of publicity and trademarks of various persons, all without permission. The question of what that billion dollars was for and how hard artists and songwriters got screwed will be tried in the Viacom case and YouTube class action.
Every time a person runs a Google search, watches a YouTube video or sends a message through Gmail, the company’s data centers full of computers use electricity. Those data centers around the world continuously draw almost 260 million watts — about a quarter of the output of a nuclear power plant.
So if you are going to compete with YouTube–after YouTube has been subsidized by Google for six years–then your startup costs have to include building these kinds of vast data centers that Google maintains in Senator Ron Wyden’s home state (see the excellent Harper s article, “Keyword: Evil” about Google’s Oregon data center that can light up a city the size of Tacoma).
Is that realistic? No.
And then there is the question of how Google ranks YouTube videos in search results. We began noticing in 2007 that a search for the Billboard Top 50 in Google returned video search results in the first page–usually the top 3. With no other videos.
Google Might Be Doping the Horses
How likely is that to happen all by itself? Senators Blumenthal and Franken summed it up at the recent U.S. Senate Antitrust Subcommittee hearing:
Senator Richard Blumenthal from Connecticut [told Google's Eric Schmidt:] “You run the racetrack, own the racetrack, you didn’t have horses for a while but now you do and your horses seem to be winning.” To which his colleague from Minnesota, Al Franken, joked: “Google might be doping the horses.”
When you consider that a senior Google executive acknowledges hardwiring Google products ahead of their competitors in search results, it should come as no surprise that Google would hardwire YouTube in Google search results. There are also a number of other techniques they could be using under the hood to slow down competitors in search to favor both the Google service and Google’s advertising sales.
So you can see that when it comes to YouTube, there are tremendous competitive pressures at work. You have to ask why? What is so important about capturing the online video vertical with YouTube, a company that has routinely lost what must be closing in on a billion dollars–that’s in addition to the purchase price premium and liability for an adverse copyright judgement in the Viacom case, not to mention the class action. The leader of the class action is the UK’s Premier League, which would be like saying there was a class action with the NBA as the lead plaintiff. (And don’t rule that out, by the way.) If Viacom continues to be victorious in the case and gets their billion dollar award, you could easily see several name plaintiffs getting comparable awards.
So why is YouTube worth all this risk? There must be an answer–I think it’s because the “video” vertical that Google is really after is replacing broadcast television by means of Android enabled TVs delivered straight to the home. That video might be worth the risk.
Particularly if it could be accomplished without an FCC license or being subject to the payola rules.
Songwriters Holding Their Tunes in their Hands
Against this multibillion dollar, hundred million megawatt, hijacking of TV by stealing TV–is the individual songwriter. How much do you really think YouTube cares about songwriters given the monopolist hubris at work in all of these various deals?
The answer is–not at all. Songwriters have virtually no chance at negotiating the deals that the copyright law guarantees them because they are up against not only hubris in negotiations–here’s your deal, take this or sue us which we know you can’t afford to do–but they are also up against hubris in DMCA practice or what is known as the “notice and shakedown.” YouTube will tell songwriters that they have to catch YouTube in the act, send them a notice and only then will YouTube take down the video, after putting up a cutesy message slamming the copyright owner. Content ID works poorly and is easily defeated because it was never designed to work, just to be a fig leaf.
So it is for all these reasons that artists and songwriters, especially independent artists and songwriters, have every reason to support antitrust regulators who are ultimately acting to promote competition, even if it means breaking up Google or at least forcing a sale of the YouTube asset. Which would be interesting, because who would subsidize YouTube on a go-forward basis who did not have Google’s monopoly profits and future designs on the television industry?
Notice and Shakedown Goes to Brussels
So Google is now locked in a hemispheric death struggle with the European Commission and the United States, those pesky nation states that just get in the way. Or at least their laws do.
As Senators Kohl and Lee said in a public statement:
“We are pleased that the EU is working with Google to develop a set of voluntary solutions to the search engine’s problematic practices, including those that we identified at our September 2011 hearing. We are hopeful that Google will be a willing partner with the EU’s Competition Commissioner. We continue to urge the FTC to investigate the concerns we raised at our hearing and to ensure a competitive search market where consumers can fairly pick the winners and losers in our online economy.”
And Google’s reaction to the EU? See you in court. Of course, that’s the essence of the notice and shakedown. The question is, can Google not only do it to songwriters, but also to the two largest economic areas in the world?
Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy, issued a statement today that is instructive for antitrust regulators around the world. It boils down to this: We know what you’re doing to abuse the privilege of operating in the free market–specifically our free market. You have special responsibilities for being a dominant firm and you are abusing them. We are going to let you try to fix them voluntarily, but should you fail, we will fix the problem for you.
So before the knees start jerking amongst my fellow free marketeers, let it be said that I find it disingenuous in the extreme to try to pretend that Google is just another Joe standing on the corner trying to eke out a living on the streets of Brussels. So when we look at Google’s behavior through free market principles, I think the most necessary part of that analysis is to require a monopolist abuser of free market privileges to first correct the bad behavior. Then we can talk about the rest. I also think that it is important for other good government reasons that the Leviathan of Brussels stay its hand–even against the Leviathan of Mountain View whose senior executives have clearly stated they resent the laws of nation states–and allow participants in the market to course correct.
To do otherwise would be to punish the Google stockholders for the bad behavior of the control group in the company. (Remember that each Google stockholder is 1/10th of a person from a voting point of view because the insiders operate under a one share, 10 votes rule due to the insiders’ 10x voting power–this is why the company is being sued for using $500,000,000 of company funds to keep its insiders from being indicted.)
So by a pretty nifty positioning, Vice President Alumnia has put the onus on Google to correct bad acts voluntarily. At the end of the day, this is the important thing for consumers, competitors, and Google’s stockholders. If the Google rulers will not act to protect its stockholders, then who will if Alumnia does not?
The charges–let’s call them that as Vice President Alumnia has been clear that these points of inquiry will be where the Commission goes in a full-blown antitrust prosecution (a procedure referred to as a “Statement of objections”)–are similar to the objections made by a number of U.S. senators at last year’s U.S. Senate Antitrust Subcommittee hearing. The senators’ objections were summarized in a letter from Senators Kohl and Lee to the Federal Trade Commission. Senators Kohl and Lee commended to the FTC testimony before the Antitrust Subcommittee as evidence of the need for a thorough investigation into Google, as well as public statements made by a senior Google executive:
“As discussed at our Subcommittee hearing, Marissa Mayer, Google’s Vice President of Local, Maps, and Location Services, admitted in a 2007 speech that Google did in fact preference its own websites. She acknowledged that, in the past, Google ranked links ‘based on popularity … but when we roll[ed] out Google Finance, we did put the Google link first. It seems only fair, right? We do all the work for the search page and all these other things, so we do put it first … That has actually been our policy, since then … So for Google Maps again, it’s the first link, so on and so forth. And after that it’s ranked usually by popularity.’ In response to written follow-up questions asking whether her statement was an accurate statement of Google policy, Eric Schmidt stated that ‘it is my understanding that she was referring to the placement of links within a one box … and her description was accurate.’
While the basis for Mr. Schmidt’s “understanding” is not clear, even if her statement was in fact limited to the “one box” result, this is a clear admission of preferencing Google results. As consumer surveys show that 88 percent of consumers click on one of the first three links, these statements appear significant when analyzing Google’s potentially anti-competitive practices.”
At the same hearing, Senators Blumenthal and Franken drove the point home:
Senator Richard Blumenthal from Connecticut [told Google's Eric Schmidt:] “You run the racetrack, own the racetrack, you didn’t have horses for a while but now you do and your horses seem to be winning.” To which his colleague from Minnesota, Al Franken, joked: “Google might be doping the horses.”
Vice President Alumnia’s statement demonstrates that the U.S. Senate are not the only ones concerned:
Our investigation has led us to identify four concerns where Google business practices may be considered as abuses of dominance.
First, in its general search results on the web, Google displays links to its own vertical search services. Vertical search services are specialised search engines which focus on specific topics, such as for example restaurants, news or products. Alongside its general search service, Google also operates several vertical search services of this kind in competition with other players.
In its general search results, Google displays links to its own vertical search services differently than it does for links to competitors. We are concerned that this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence.
Our second concern relates to the way Google copies content from competing vertical search services and uses it in its own offerings. Google may be copying original material from the websites of its competitors such as user reviews and using that material on its own sites without their prior authorisation. In this way they are appropriating the benefits of the investments of competitors. We are worried that this could reduce competitors’ incentives to invest in the creation of original content for the benefit of internet users. This practice may impact for instance travel sites or sites providing restaurant guides.
Our third concern relates to agreements between Google and partners on the websites of which Google delivers search advertisements. Search advertisements are advertisements that are displayed alongside search results when a user types a query in a website’s search box. The agreements result in de facto exclusivity requiring them to obtain all or most of their requirements of search advertisements from Google, thus shutting out competing providers of search advertising intermediation services. This potentially impacts advertising services purchased for example by online stores, online magazines or broadcasters.
Our fourth concern relates to restrictions that Google puts to the portability of online search advertising campaigns from its platform AdWords to the platforms of competitors. AdWords is Google’s auction-based advertising platform on which advertisers can bid for the placement of search ads on search result pages provided by Google. We are concerned that Google imposes contractual restrictions on software developers which prevent them from offering tools that allow the seamless transfer of search advertising campaigns across AdWords and other platforms for search advertising.
I have just sent a letter to Eric Schmidt setting out these four points. In this letter, I offer Google the possibility to come up in a matter of weeks with first proposals of remedies to address each of these points.
If Google comes up with an outline of remedies which are capable of addressing our concerns, I will instruct my staff to initiate the discussions in order to finalise a remedies package. This would allow to solve our concerns by means of a commitment decision – pursuant to Article 9 of the EU Antitrust Regulation – instead of having to pursue formal proceedings with a Statement of objections and to adopt a decision imposing fines and remedies.
How Google responds to Vice President Alumnia will set the stage for a prolonged period of antitrust investigation that may well break up the company given Google’s “catch me if you can” approach to its relations with elected representatives. This despite the hundreds and hundreds of millions–if not now billions–of stockholder money that the control group will spend on legal fees trying to perpetuate its ridiculous business practices.
If Google accepts the responsibility of its market dominance, that will be a refreshing change of behavior. More likely–the company’s insiders will resist being governed to the bitter end, like boys who don’t want to clean up their room.