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How to Get Rich Investing in Stocks by Riding the Electron Wave

Last Remaining Copy of Stolen-Data is worth $100 Billion to Russia. Good Chance Facebook Will Be Shut Down

Companies / Cyber War Apr 11, 2018 - 10:53 AM GMT

By: Andrew_Butter


Evidence is emerging that the psych-ops techniques allegedly used by AggregateIQ to brainwash electors, were extraordinary effective. But now everyone who allegedly had copies of the stolen data that was used to profile and target; is saying that if they did have copies, which they largely deny, they have deleted them.

They have had plenty of time; the story broke in a year ago; last-week, Britain’s answer to Robo-Cop, Policeman-Plod, searched the offices of Cambridge Analytica, guess what he didn’t find? Meanwhile BBC Channel-4 reports that AggregateIQ seems to have disappeared into thin-air, doubtless they trashed their hard-drives on their way out. What’s left?

Facebook currently estimates of 87-Million accounts were hacked. That’s an “estimate”, because they don’t know which of the roughly 1.5 billion or so accounts that existed in 2014/15 were harvested. They say they are putting up a protocol so account-holders can find out if they are being hacked, today. That misses to point.  Meanwhile little news of the Russian psychologist, Aleksandr Kogan, who orchestrated the heist; what’s the chance he took a hard-drive to Russia, which, as Christopher Wiley recently remarked, was highly likely?

It’s likely that’s the one and only copy left, and like an ancient master; that’s worth billions, to whoever has it. Kogan says he doesn’t work for the Kremlin; all the same, they have methods of persuasion that are hard to resist.  Perhaps by now the CIA has started to join-up the dots about the value to “someone” of having access to the intimate secrets of 70-Million Americans, to analyze and manipulate, at their leisure?

Mm...So the big decision, sladki, is should the new President of Great-Again, be an orangutan; or Boris Johnson? Boris, incidentally, is American first and British second; which could explain why he is so opposed to immigration, first-generation immigrants are often like that. All that remains is for Robert Mercer, the ultra-right-wing American billionaire, who bankrolled both the Donald Trump campaign; and the Facebook data-breach, to be awarded the Order of Lenin.

In his testimony to the Common’s Select Committee, Christopher Wiley claimed that when Facebook found out about the data-breach they didn’t call-in Policeman Plod, or alert any authorities; they just sent a meek note to Cambridge Analytica asking them, politely, to delete. They didn’t suspend Cambridge Analytica’s Facebook account or that of its alleged affiliate AggregateIQ, its parent company the SCL-Group, or Robert Mercer; who controls Cambridge Analytica; and they did not ask for proof that data had been deleted.

If Wiley was telling the truth; that makes Facebook a partner in crime; because damage is a function of the number of breached accounts, multiplied by the time the stolen data was in circulation; and there is no clear evidence that it’s not still in circulation, somewhere. Also, the only way the data could be put to work, after profiling and targeting, was on Facebook.

That there was damage, there is no question; when finally the story broke; Facebook’s market-cap dropped by $100-Billion. What’s mystifying is why Facebook is not suing Robert Mercer & Co-conspirators for that amount, plus punitive damages? If they did, and they won, they could pay $1,150 less legal fees, to each account holder whose intimate private details were passed around the locker-room, if they could find them.

Small problem; the potential defendants don’t have that sort of money. A lawsuit filed in San Diego this week named Facebook, Aleksandr Kogan and Steve Bannon, as defendants, and valued the damages at $1,000 per hacked-account; Facebook estimates that was 70-Million Americans so the lawsuit is nominally $70 Billion.

The action, likely filed in haste, has quite a few flaws, and it is unlikely to get very far. Aleksandr Kogan doesn’t have any money so he’s not worth suing, anyway at the first sign of serious trouble he will be back in Russia. Steve Bannon doesn’t have much money; $20 Million or so; so he’s hardly worth the effort; Facebook was an unwitting, and idiotic victim, so why should they be in the same dock as the people who stole from them? And the person who allegedly financed the break in, Robert Mercer, is not mentioned in the action; his net worth is a tad-under $1 Billion, clean him out and that would give $15 to each victim, less legal costs, so that’s hardly worth the effort either; except of course to the lawyers who might collect $300 Million.

So why not cut to the chase and just sue Facebook, at least they have that kind of money, for now? Except to make that work you’d have to prove damages. So what if the data was stolen? None reached the public domain; no one was injured, unless you count the election of Donald Trump as damages. That could be right, but it would be hard to prove, particularly in California, remember O.J. Simpson.

A further complication; it’s obvious no-one knows who the 70-million plaintiffs are, even the plaintiff initiating the class-action in San Diego has no evidence that his data was stolen. Facebook talks about estimates, well if they knew who had their data stolen they would not need estimates. Everyone who might have had the data, whether they admit that or not, say that if they did, they deleted it, just like Facebook politely asked them too, oh and by-the way, Facebook did not ask for a copy; clever, the best defense in a court of law, is not, “I plead the fifth”, it’s “I don’t remember”, or “I deleted the data”.

Perhaps Aleksandr Kogan kept a copy? But good-luck executing an extradition-order, let alone a search warrant, issued by a U.S. court on a Russian national, in Russia, on the grounds that a crime affecting U.S. Citizens, was committed in U.K. that amounted to nothing much more serious than peeping-tom at the Facebook accounts of 70-Million Americans, and anyway Kogan had permission from Facebook to do that.

What he didn’t have permission to do was to pass the data on to Cambridge Analytica, who, in any case say they only “licensed” 30-Million. Sounds like Agatha Christie, except there’s no murder-weapon to be found and no-one knows who the victims were; the perfect crime.

Three years later, Facebook belatedly suspended the accounts of some of the alleged perpetrators (not Robert Mercer or the SCL-Group), and my Best-Friend-For-Life, Zuck, who is taking this whole thing so seriously that he has started to wear a suit AND a tie; promised to not allow that to happen again. Well Darn, that’s so sweet. Clearly Zuck cares, about me, personally;  I know that because he can read everything I post, and see every click I make; every breath I take, he’s watching me; my heart skipped a beat!

There is little; or no evidence that the stolen data was used on the Donald Trump campaign, which doesn’t mean it wasn’t, but lips are sealed. But there is plenty of anecdotal evidence that it was used to help sway the EU Referendum in U.K. 

Wiley pretty-much implied in his testimony, that if the stolen Facebook data had not been harvested, the EU-Referendum might have gone the other way. Both denominations, Leave and Remain, have reasons to be upset about that.

The Remain Camp can justifiably say they were robbed, and point to the drop in GDP that over two years cost UK more than $100-Billion, they say.

They may have a valid point, but the Leave Camp got stung too, because what was once “the will of the people”; can now be translated, allegedly, into “the will of the ultra-right-wing American billionaire computer-creep who bankrolled Donald Trump...Robert Mercer”; which doesn’t have quite the same ring to it; as “the will of the people”. No wonder they took down the video-clip of Nigel Farage saying he could not have done it without the help of his close-friends, Robert Mercer; and Mercers’ sidekick Steve Bannon!

Would the Leave campaign have won without creepy-billionaire Robert Mercer? Perhaps, but as anyone who follows cricket knows, ball tampering, is ball tampering, and BREXIT plus ball tampering; arguably does not mean BREXIT.

There again, what was the harm? No data was released to the public domain, no-one was injured, and according to Teresa May who apparently trumps the Electoral Commission (no pun intended), the best-man won.

The harm is in the value of what was stolen, and what could be done with that data, in the future, now that it’s effectiveness is proven.

Putting aside the likelihood that what America got out of the deal might have been Donald Trump, the value of what was stolen, in UK, was a lot more than what Robert Mercer paid for getting his hands on the data, which, pro-rata was about £10,000 for roughly one-million U.K. accounts.

The value; is what was the value to those who benefitted from using the data; just as the value of what was stolen in a bank-robbery is just that, not how much money the crooks paid to carry-out the heist.

Take a step back, what happened to the data?

There is a common misconception that the stolen accounts were used as targets, that’s not what happened; it’s a three-step process, and in this case in U.K. one-million accounts were harvested, and about seven-million people were targeted. The first step is to extract usable data, that’s what the Ripon software allegedly developed by AggregateIQ, does.

Step-two is to analyze it so you can figure out useful things about individuals that can be used for targeting, that’s done by multivariate statistical modeling using SAS-JMP or SRSS software, very standard, out of that you get what I call a model, and some call an algorithm.

Example, from a study I was involved-in years ago. We found out that people who own dogs were half-as-likely to default on an auto-loan, and people who owned a Labrador and a Range Rover, almost never did. So, these days, if and auto-loan company wanted to do advertising on Facebook, and they wanted to target low-risk customers, they would tell Facebook, “only send this ad”, which might have a picture of a Labrador, “to people who own a Labrador, and drive a Range Rover”. To go after the high-risk segment you would specify, “Anyone who owns a car and does not own a dog”.

In U.K.; Vote Leave, wanted to avoid sending ads to people who had made up their minds, and just focus on swing voters; in that regard, understanding how to reach swing voters and no one else, and knowing what those were interested-in, would have been a big help in deciding who to target, what content was sent out, and segmenting who got to see what.

The reason you need one-million or so accounts, is that’s what’s required to get accurate targeting tools, typically in ordinary market research, you might interview no more than one thousand; in anything like the depth required; there is a lot of information on a Facebook account, much more than you can collect in a YouGov survey, that’s not nearly enough data to do psych-ops.

But nothing Machiavellian so far, that’s all standard marketing methodology, except for two things; the base-data should have been obtained legally, and the providers of the data, should have known what you were planning to do with it, and signed a consent-form. That didn’t happen; no one told them “we want to do a psychological profile on you so that we can covertly brainwash people like you, including your friends,  to do things they wouldn’t normally do”; whether that might be to seduce young children or vote BREXIT, that’s not for you to know. If they had asked that, they probably would not have got consent.

The harm is in the value of the data, which would be pretty easy to work out, if there was a ready-market for stolen Facebook account-holder data; just as when someone values a house, they look at transactions in the area, of similar houses, and make a judgment-call, except in this case there isn’t a market. Absent a market, there are only two ways to work out value:

Replacement cost: How much would the data have cost honest buyers? Well absent stealing from Facebook, to get that data would have required one-million random-sample, in-depth, face-to-face interviews, those cost in the region of $50 each, minimum, absent a proper consent form, but who reads the fine-print these days; so the total cost, just to get the required data used by Vote Leave, legally, would have been about $50 Million.

The other way to get a handle on value is by consideration of utility. Accounts vary but most reports say that the Leave-Campaign, in aggregate, spent £3.5 Million buying Facebook advertising. It’s quite possible they spent more. There is little dispute it was that investment, that tipped the balance. The reason it did was because by targeting using profiles obtained by analyzing the Facebook data, the advertising was much more effective. Let’s say the “supercharging” made the advertising 15x more effective so the  extra benefit the Leave Campaign got from using illegally obtained data was 15 x £3.5 = £52.5 Million, minus the value of not profiling and targeting = £3.5 Million, for a total of £49 Million.

When you do valuation, if the “answer” is similar doing it two different ways, that provides a degree in confidence about the approach. Of course other people might make different assumptions and come up with different answers, but it’s highly unlikely anyone would come up with a valuation that was less than £25 Million.

The harm is that the data was allegedly donated to Vote Leave and other campaigners, ultimately by or at the behest of Nigel Farage’s good friend, Robert Mercer, and the value of that donation was not reported to the Electoral Commission. There is a big fuss going on now about £625,000 that was allegedly slipped into Vote Leave’s pot; imagine if the true value of what Robert Mercer allegedly donated, was properly reported?

So many allegedly-this and allegedly-that’s, but so far no criminal charges, let alone convictions; perhaps, now might be a good time for Policeman Plod to get out of bed, have nice cuppa-tea, and jump on his bicycle?

 Although there-again, why bother? There is a statute of limitations on electoral fraud of 12-months, that’s expired, so it’s highly unlikely that in a democratic country, which respects the law, at least some of the time; that any charges will be filed, unless they get them for conspiracy...or terrorism?

Why this matters, is nothing to do with the BREXIT result, both Leave-voters and remain-voters should be concerned, what matters is what appears to have happened was that democracy, was hijacked.

Boris Johnson and Michael Gove surely must have known what was going-on. They were head of the Vote-Leave campaign, so it’s hard to imagine they didn’t, but they say that Leave won fair and square. That might be the way they do it at Eton, but those are not the values that helped Britain succeed in the past, or why, until now their culture, laws, and sense of fair-play, used to be respected all over the world. If the allegations are true, perhaps the honorable thing for Boris and Gove to do now; might be to resign, and Zuck-off?

If one-million accounts was worth  £50 Million, for one round of psych-ops, and perhaps whoever has the data could use it for ten-rounds;  the data has a shelf-life, so long as there is no pesky Policeman-Plod breathing down your neck, telling you to delete and desist, like in the Kremlin basements. In that case, fair-value might be £50 Million x 1.4 = $75-Million x 10 x 87 = $65 Billion, rounded-up, let’s say $100 Billion. If the Kremlin has the data by now, they surely did not pay that amount for it, but that’s what it could be worth to them, and perhaps is what they might ask for if anyone wanted it back. That’s unless someone shut-down Facebook; because to make use of the profiles generated by the data, you need Facebook.

There you go Best-Friend-Zuck; to put this cat back in the bag, just hop on a plane to Moscow with $100 billion in your pocket, negotiate a deal, and on top of taming the monster that is threatening to put you out of business; you might even get to find out who had their data stolen, so you could send them $1,000 each as compensation.

But is saving Facebook worth $187 Billion and if so; to whom; perhaps having a democracy, where elections are not manipulated by American Oligarchs; might be worth more, than Facebook? So shut it down?

Or perhaps a compromise might be to ban all political advertising on Facebook, Twitter, What’s App, and What-ever; including...please...political posturing by Donald Trump on Twitter? Either way, surely it’s time to buy Policeman-Plod a laptop?

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe. Ex-Toxic-Asset assembly-line worker; lives in Dubai.

© 2018 Copyright Andrew Butter- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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