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The author seems to be mistaking the benefit of selection effects with competence. Those who work anti-fraud for platforms know that there is something like a

The author seems to be mistaking the benefit of selection effects with competence. Those who work anti-fraud for platforms know that there is something like a market for fraud. There is a market clearing quantity of fraud that will be present on any platform, dictated by the gains from learning to execute the exploit, the effort necessary to do so, and the number of times one might be able to do it. Small platforms have way less fraud because they are way less valuable to exploit, in general. And that's caused by _the very fact that they are small_. The big platforms actually are radically more competent at anti-fraud / anti-spam / etc, but the scope of their operations make them such juicy targets that there is a lot of it anyways. It the entire world of fraudsters against Amazon, or Google, or Facebook. That's a highly unequal battle and it's surprising how well the platforms fare, all things considered.

alexey-salmin 3y ago
I don't see any mistake. > Small platforms have way less fraud because they are way less valuable to exploit, in general. Yes. > The big platforms actually are radically more competent at anti-fraud / anti-spam / etc, but the scope of their operations make them such juicy targets that there is a lot of it anyways. If their business model (scale above everything) results in shitty customer experience I don't really care how competent they are. They are fighting the problem they created themselves: a platform too valuable for scammers.
- 8note 3y ago
  > If their business model (scale above everything) results in shitty customer experience I don't really care how competent they are. It's a tradeoff. If your customer service is good such that more people shop there, there will be more fraud attempts overall. It's not that a platform is too valuable for scammers, it's that a platforms is valuable at all. All platform value is value for scammers, and the most useful platform will also have the most scammers on it
  - alexey-salmin 3y ago
    This is like saying that everything (including scam attempts) is proportional to the scale so the scale doesn't really matter. It's not true. Scale bring synergy and reduces costs. But it's a two-way road which works for scams too: scamming one big platform and fighting one anti-fraud system is ten times more cost-efficient than adjusting to ten smaller ones.
tareqak 3y ago
OK, fraud exists. Irrespective of whether or not a platform is small or large, can they make their customer whole 100% of the time? Why or why not?
- CityOfThrowaway 3y ago
  To take your question seriously – one of the primary surface areas for fraud is exploiting the customer service function. Just to work one (real) example: 1. Buy expensive face cream from Amazon 2. Take out the expensive stuff and replace it with junk 3. Complain to Amazon that you got junk and need a refund. The challenge here becomes obvious. Even in claims where the customers was allegedly a victim, some portion of those customers are fraudsters. So any policy that results in a large, profitable company will likely result in something less than 100% of legitimate fraud cases from being satisfactorily resolved. In the case of the small business, they are very unlikely to be targeted by industrial scale fraud and will probably just be able to solve this with personal relationships and human judgment. That said, the price you pay the small operator is very likely to be meaningfully higher than the price of the scaled operator. If you care more about having near 100% probability of having fraud/abuse cases addressed than you care about benefiting from the economies of scale, then yeah, go with the small operator. In things like communities, my general sense is that there is almost no beneficial economies of scale. So I like to hang out in smaller places. But in things like information retrieval (ie. Google), the benefits are usually worth it for me to use that.
  - tareqak 3y ago
    The kind of experiences that the post and I am talking about are where the platform user or the customer end are dissatisfied by the platform's conduct. The question of the company itself being defrauded by some number of customers and having to defend against that as it becomes increasing larger is definitely valid and difficult to tackle at scale. However, I think it is a totally separate one. I do not think it is a necessity for the company to compromise the ability to make any one dissatisfied customer whole just because they are being targeted by a whole lot of fraudsters all at once. The company might have to increased their costs on their products to pay for things like additional training, tamper-evident packaging, improving supply chain management, and so on.
bjterry 3y ago
That is not at all in conflict with the post. The selection effect is one of the sources of the empirical diseconomies of scale the author mentions.
- CityOfThrowaway 3y ago
  My first read was that the author was claiming that smaller companies are at least as competent at moderation than big platforms. In my first read, I took that to mean from a process and inputs viewpoint. But reading it again, I suppose the author could be taking a more consequentialist point of view. They are at least as good (or much better), largely because they don't have to do much. I suppose that's fair, but also a lot of words in the OP to state a truism :-)
pdonis 3y ago
It's not just that the big platforms provide a much stronger incentive for fraudsters. It's that providing that stronger incentive is not a bug for the big platforms, it's a feature. It goes hand in hand with their business model, which is to sell access to as large a pool of users as possible. > The big platforms actually are radically more competent at anti-fraud / anti-spam / etc No, they're not. They are purposely incompetent at those things, because it's part of their business model. They cannot implement actual competence (which would mean providing sufficient actual human support to deal with the volume of mistakes that their automated algorithms make), not because it would cost too much (the article quite correctly points out that their huge profits provide plenty of cash to pay for human moderation), but because it would reduce their value to their actual customers, who are not their users.
- CityOfThrowaway 3y ago
  I don't see how spam or fraud brings value to advertisers (which is what I assume you're talking about?) or any one else for that matter (other than the spammer/fraudster). Perhaps I can squint and see how an email platform like Gmail could be read as a protection racket, but I don't see it in other platforms.
  - pdonis 3y ago
    > I don't see how spam or fraud brings value to advertisers It doesn't; that's not the point. The point is, as I said, that the big platforms make money by selling access to as large a pool of users as possible, and that requires them to not crack down on spammers and fraudsters--because at their scale, it is impossible for them to reliably distinguish the spammers and fraudsters from the rest of their users. So they can't crack down on spammers and fraudsters without also reducing the size of their user pool and thereby killing their business model. The article explicitly talks about this: Either you have to back off and only ban users in cases where you're extremely confident, or you ban all your users after not too long and, as companies like to handle support, appealing means that you'll get a response saying that "your case was carefully reviewed and we have determined that you've violated our policies. This is final", even for cases where any sort of cursory review would cause a reversal of the ban, like when you ban a user for impersonating themselves. And then at FB's scale, it's even worse and you'll ban all of your users even more quickly, so then you back off and we end up with things like 100k minors a day being exposed to "photos of adult genitalia or other sexually abusive content".
deleted 3y ago
[deleted]
Majromax 3y ago
> The author seems to be mistaking the benefit of selection effects with competence. [...] The big platforms actually are radically more competent at anti-fraud / anti-spam / etc, but the scope of their operations make them such juicy targets that there is a lot of it anyways. The author addresses this point in one of the appendices: >> A standard extension of this idea that I frequently hear is that big companies actually do have the best anti-spam and anti-fraud, but they're also subject to the most sophisticated attacks. I've seen this used as a justification for why big companies seem to have worst anti-spam and anti-fraud than a forum like HN. While it's likely true that big companies are subject to the most sophisticated attacks, if this whole idea held and it were the case that their systems were really good, it would be harder, in absolute terms, to spam or scam people on reddit and Facebook than on HN, but that's not the case at all. This response makes intuitive sense. If the big companies are indeed more effectively competent at anti-abuse/anti-fraud measures, then the fraud that does slip through should be more subtle and less obvious, particularly over a prolonged period.

alexey-salmin 3y ago

I don't see any mistake. > Small platforms have way less fraud because they are way less valuable to exploit, in general. Yes. > The big platforms actually are radically more competent at anti-fraud / anti-spam / etc, but the scope of their operations make them such juicy targets that there is a lot of it anyways. If their business model (scale above everything) results in shitty customer experience I don't really care how competent they are. They are fighting the problem they created themselves: a platform too valuable for scammers.

8note 3y ago
> If their business model (scale above everything) results in shitty customer experience I don't really care how competent they are. It's a tradeoff. If your customer service is good such that more people shop there, there will be more fraud attempts overall. It's not that a platform is too valuable for scammers, it's that a platforms is valuable at all. All platform value is value for scammers, and the most useful platform will also have the most scammers on it
- alexey-salmin 3y ago
  This is like saying that everything (including scam attempts) is proportional to the scale so the scale doesn't really matter. It's not true. Scale bring synergy and reduces costs. But it's a two-way road which works for scams too: scamming one big platform and fighting one anti-fraud system is ten times more cost-efficient than adjusting to ten smaller ones.

tareqak 3y ago

OK, fraud exists. Irrespective of whether or not a platform is small or large, can they make their customer whole 100% of the time? Why or why not?

CityOfThrowaway 3y ago
To take your question seriously – one of the primary surface areas for fraud is exploiting the customer service function. Just to work one (real) example: 1. Buy expensive face cream from Amazon 2. Take out the expensive stuff and replace it with junk 3. Complain to Amazon that you got junk and need a refund. The challenge here becomes obvious. Even in claims where the customers was allegedly a victim, some portion of those customers are fraudsters. So any policy that results in a large, profitable company will likely result in something less than 100% of legitimate fraud cases from being satisfactorily resolved. In the case of the small business, they are very unlikely to be targeted by industrial scale fraud and will probably just be able to solve this with personal relationships and human judgment. That said, the price you pay the small operator is very likely to be meaningfully higher than the price of the scaled operator. If you care more about having near 100% probability of having fraud/abuse cases addressed than you care about benefiting from the economies of scale, then yeah, go with the small operator. In things like communities, my general sense is that there is almost no beneficial economies of scale. So I like to hang out in smaller places. But in things like information retrieval (ie. Google), the benefits are usually worth it for me to use that.
- tareqak 3y ago
  The kind of experiences that the post and I am talking about are where the platform user or the customer end are dissatisfied by the platform's conduct. The question of the company itself being defrauded by some number of customers and having to defend against that as it becomes increasing larger is definitely valid and difficult to tackle at scale. However, I think it is a totally separate one. I do not think it is a necessity for the company to compromise the ability to make any one dissatisfied customer whole just because they are being targeted by a whole lot of fraudsters all at once. The company might have to increased their costs on their products to pay for things like additional training, tamper-evident packaging, improving supply chain management, and so on.

bjterry 3y ago

That is not at all in conflict with the post. The selection effect is one of the sources of the empirical diseconomies of scale the author mentions.

CityOfThrowaway 3y ago
My first read was that the author was claiming that smaller companies are at least as competent at moderation than big platforms. In my first read, I took that to mean from a process and inputs viewpoint. But reading it again, I suppose the author could be taking a more consequentialist point of view. They are at least as good (or much better), largely because they don't have to do much. I suppose that's fair, but also a lot of words in the OP to state a truism :-)

pdonis 3y ago

It's not just that the big platforms provide a much stronger incentive for fraudsters. It's that providing that stronger incentive is not a bug for the big platforms, it's a feature. It goes hand in hand with their business model, which is to sell access to as large a pool of users as possible. > The big platforms actually are radically more competent at anti-fraud / anti-spam / etc No, they're not. They are purposely incompetent at those things, because it's part of their business model. They cannot implement actual competence (which would mean providing sufficient actual human support to deal with the volume of mistakes that their automated algorithms make), not because it would cost too much (the article quite correctly points out that their huge profits provide plenty of cash to pay for human moderation), but because it would reduce their value to their actual customers, who are not their users.

CityOfThrowaway 3y ago
I don't see how spam or fraud brings value to advertisers (which is what I assume you're talking about?) or any one else for that matter (other than the spammer/fraudster). Perhaps I can squint and see how an email platform like Gmail could be read as a protection racket, but I don't see it in other platforms.
- pdonis 3y ago
  > I don't see how spam or fraud brings value to advertisers It doesn't; that's not the point. The point is, as I said, that the big platforms make money by selling access to as large a pool of users as possible, and that requires them to not crack down on spammers and fraudsters--because at their scale, it is impossible for them to reliably distinguish the spammers and fraudsters from the rest of their users. So they can't crack down on spammers and fraudsters without also reducing the size of their user pool and thereby killing their business model. The article explicitly talks about this: Either you have to back off and only ban users in cases where you're extremely confident, or you ban all your users after not too long and, as companies like to handle support, appealing means that you'll get a response saying that "your case was carefully reviewed and we have determined that you've violated our policies. This is final", even for cases where any sort of cursory review would cause a reversal of the ban, like when you ban a user for impersonating themselves. And then at FB's scale, it's even worse and you'll ban all of your users even more quickly, so then you back off and we end up with things like 100k minors a day being exposed to "photos of adult genitalia or other sexually abusive content".

deleted 3y ago

[deleted]

Majromax 3y ago

> The author seems to be mistaking the benefit of selection effects with competence. [...] The big platforms actually are radically more competent at anti-fraud / anti-spam / etc, but the scope of their operations make them such juicy targets that there is a lot of it anyways. The author addresses this point in one of the appendices: >> A standard extension of this idea that I frequently hear is that big companies actually do have the best anti-spam and anti-fraud, but they're also subject to the most sophisticated attacks. I've seen this used as a justification for why big companies seem to have worst anti-spam and anti-fraud than a forum like HN. While it's likely true that big companies are subject to the most sophisticated attacks, if this whole idea held and it were the case that their systems were really good, it would be harder, in absolute terms, to spam or scam people on reddit and Facebook than on HN, but that's not the case at all. This response makes intuitive sense. If the big companies are indeed more effectively competent at anti-abuse/anti-fraud measures, then the fraud that does slip through should be more subtle and less obvious, particularly over a prolonged period.