Twitter’s Dark Side

Plus: If fireworks sales are any indication, America is feeling celebratory. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

July 3, 2023

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TOGETHER WITH

Good morning and Happy Monday.

It’s Jaws for the post-COVID world.

Wildlife experts told The Wall Street Journal that lampreys — parasites that look more like something out of Alien than your local swimming hole — are returning to all five of the Great Lakes, threatening the region’s $7 billion fishing industry. The pandemic limited the amount of excursions that specialists needed to kill the parasites in their larval phase, and now they’re back and in greater numbers. So just like the spotted lanternfly, if you see a lamprey, you know what to do… run away and say “Eww, don’t let it touch me.”

Note: The Daily Upside will be taking a break over July 4th. See you on Wednesday!

Morning Brief

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Shadow banks live in darkness, Ireland and Luxembourg say.

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Twitter has some new headaches.

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Americans sure love fireworks.

Banking

Ireland and Luxembourg Echo Calls for Shadow Banking Oversight

If Ireland and Luxembourg want to shine a brighter light on shadow banks, they’re going to need a lot more voltage.

The two European countries are calling for stricter global regulations of a sector that now manages roughly half the world’s financial assets, the Financial Times reported on Sunday.

Going to the Dark Side

The past decade has seen a rapid expansion in the shadow banking system — essentially banking activities by just about anything that isn’t really a bank: hedge funds, private equity groups, mortgage lenders, and even well-known firms like Goldman Sachs and Morgan Stanley. The rationale behind them seemed plausible: to provide alternative sources of funding to corporate borrowers who wouldn’t need to rely on a limited lender base.

And they’re called shadow banks for a reason: they’re largely free from bank regulations and safeguards. And as we saw last fall in the FTX crypto breakdown, blurry financial lines among alternative lenders are exposed in a hurry when these funds rapidly grow their financial assets, take on too much leverage, and interest rates start jumping higher. Ireland and Luxembourg had their own bitter taste of this last fall when the Bank of England was forced to intervene with a bond-buying program to counteract rapid selling by funds residing in those two countries.

While countries can make their own shadow banking rules, regulators in Ireland and Luxembourg — where the sector manages roughly $10 trillion in assets — are calling for global standards:

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Vasileios Madouross of the Central Bank of Ireland told the FT that Dublin will call for an “overarching, comprehensive” framework. Marco Zwick of Luxembourg’s Commission de Surveillance du Secteur Financier added, “We have seen that an international crisis cannot be responded to by national initiatives alone; it needs a global response.” Even with the Bank of England and the European Central Bank echoing the same message, the process for universal shadow bank regulation has been slow going.

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In 2015, the Financial Stability Board, an international body that monitors the global financial system, recommended to the G20 that the major economies of the world “plug data gaps, remove hurdles to cross-border data sharing, and involve all relevant domestic authorities in assessing shadow banking risks,” according to Reuters.

Come into the Light: In the US, newly proposed transparency rules are already facing backlash. Last week, regulators proposed new rules that would expand the amount of information companies need to provide when proposing a merger under the Hart-Scott-Rodino antitrust filing system. Antitrust experts told the FT that the new changes seem to specifically target private equity groups, although they’re not named, which could lead to more deals getting blocked. Antitrust lawyers may not like the additional workload that’s sure to come, but more billable hours should help ease the pain.

– Griffin Kelly

Social Media

Twitter Restricts Access, Experiences Widespread Blackout

First, Twitter limited how many characters could go into your posts, stripping the national conversation of any remaining nuance. Now it wants to ration the number of tweets you can see in a day.

To ward off “extreme levels of data scraping” from “several hundred organizations,” per owner and current CTO Elon Musk, Twitter on Saturday instituted “rate limits” on how many tweets individual users can see in a day — all of which, some experts hypothesize, may have triggered the effective site-wide blackout for most users for roughly 24 hours.

The Limit Does Exist

With ad revenue in the tank, Musk and Co have turned to new avenues to gin up some cash. With its plan to charge users $8 a month for a coveted blue check proving largely unsuccessful, Twitter’s turned to charging third-party developers exorbitant fees — up to $42,000 a month — for access to Application Programming Interface (API) software, aka, the tools used by third-party developers to access Twitter data and build new apps that interface with the platform.

The previously free API keys have entered the spotlight recently thanks to their role in training large language models such as ChatGPT. To combat the data scraping, Twitter imposed tweet-viewing limits of 6,000 posts per day for Blue Checked members, 600 posts for non-paying users, 300 posts for brand-new members, and zero access for folks with no Twitter account at all (though Musk now says these limits have increased some). And then came what can only be described as a technical hiccup that more or less crashed the entire site.

The brainiacs who traverse the matrix that is Twitter’s back-end code have some pretty sound theories on what, exactly, happened:

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“It appears that Twitter is DDOSing itself,” web developer Sheldon Chang posted on up-start Twitter rival Mastodon this weekend, after observing a bug in Twitter’s web app in which the site inadvertently overloaded itself with requests — much like how malicious hackers often intentionally attack websites.

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The new rate limits “likely created some hellish conditions that the engineers never envisioned and so we get this comedy of errors resulting in the most epic of self-owns, the self-DDOS,” he wrote, adding “It’s amateur hour.” The bug was observed by at least one other software engineer.

On Bluesky, the other upstart Twitter clone, Twitter’s own former head of trust and safety Yoel Roth elaborated on the theory: “There’s a reason the limiter was one of the most locked down internal tools. Futzing around with rate limits is probably the easiest way to break Twitter.”

The Sky is Always Bluer: There’s also a reason social media platforms don’t want to crash, ever. Twitter users experiencing doom-scrolling withdrawal flocked to Bluesky… which subsequently faced performance issues of its own due to the record traffic surge. That said, if anyone has a spare Bluesky invitation laying around…

– Brian Boyle

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Consumer Spending

Celebration Budgets Explode for the Fourth of July

(Photo credit: Jingda Chen/Unsplash)

As The Simpsons once succinctly noted, Americans believe there’s no better way to celebrate the independence of their country than by blowing up a small part of it.

They’ll be exploding more of it this year. Spending on fireworks is skyrocketing in 2023, according to the American Pyrotechnics Association. Meanwhile, Americans are spending more on Fourth of July barbecues than ever before. How’s that for dinner and a show?

Boom Goes the Fireworks

The covid years were quiet. Too quiet. Now, the fireworks industry is roaring back — sorry about this — with a bang. Fireworks sales for professional shows fell to $93 million in 2020, a 75% decrease from the year before, then boomed to $261 million in 2021 and to more than $400 million last year. In 2023, that figure is set to explode by another $100 million, according to the APA.

Consumers appear similarly stoked for cookouts. When poised with the eternal question of burger, brat, or hot dog, Americans seem to be choosing all three — plus perhaps a scoop of caviar on the side:

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According to an annual survey from the National Retail Federation, Americans are planning per-person food spending of nearly $94 for Independence Day barbecues.

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That’s up from the record high of $84 per person spent last year, according to NRF. Meanwhile, the number of people planning to host or attend a July 4 gathering has increased from 76% in 2020, 84% in 2021 and 2022, to 87% this year.

And don’t (just) blame inflation. The roughly 11% increase in per-person spending roughly laps the nearly 6% year-over-year food price inflation seen in May.

PSA: There is, of course, an added cost to the proceedings. Fireworks sparked an estimated 12,264 fires in 2021, according to the National Fire Protection Association, resulting in 29 civilian injuries and $59 million in direct property damage. A gentle reminder: Keep a wary, and if possible protected eye on your group’s self-appointed demolitions expert.

– Brian Boyle

Extra Upside

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Yo-ho: Maritime engineers use giant kites to propel cargo ships and reduce emissions.

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Let’s not get some shoes: The end of student-debt forgiveness to hit retail sector.

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Apple to oranges: Goldman Sachs wants to hand its Apple Card duties over to American Express.

Just For Fun

Look who’s walking.

Is he flying?

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