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Long Term Matters: What do Facebook’s investors care?

raj thamotheram

Raj Thamotheram

Mark Zuckerberg “is a bigger threat to American democracy than Donald Trump”, says David Runciman, professor of politics at Cambridge University. The understated description makes the assessment all the more chilling.

Sean Parker, Facebook’s first president, agrees. He says tech giant founders have exploited a vulnerability in human psychology to drive the addiction for ‘likes’, ’retweets’ or comments. “It literally changes your relationship with society, with each other…. God only knows what it’s doing to our children’s brains.”

Facebook’s former vice-president of user growth, Chamath Palihapitya says “the short-term dopamine-driven feedback loops we’ve created are destroying how society works…. This is a global problem…. I feel tremendous guilt…. So we are in a really bad state of affairs now, in my opinion.” 

How did tech become toxic? 

Partly it is due to size. FAANG stocks (Facebook, Amazon, Apple, Netflix and Google, now Alphabet) are the world’s biggest corporations by market capitalisation. These mega firms buy new competitors – as Facebook has done with Instagram, WhatsApp and many others – creating huge barriers to entry.

Facebook has 2.27bn monthly active users. That is bigger than the population of any country (US: 327m; China: 1.415bn) and these networks can infiltrate into people’s lives in a way no state can. 

Moreover, “they don’t just monopolise one thing”, says Runciman, “they monopolise many things at once… Zuckerberg is both an industrialist and a media magnate: Rockefeller and William Hearst rolled into one.”

Zuckerberg is not consciously anti-democratic. Rather, the threat comes from the sector’s core business model which seeks to drive both sides of democratic life without connecting them. 

One side is the “super-charged solutionism” – a belief that all difficulties have benign, often technocratic, solutions. Solutionists, and their many devotees, are convinced that anything that enhances society’s problem-solving ability will be a democratic plus. They even believe they can help lay the foundations of democracy in places like China where Google is keen to re-enter

The other side is “super-charged expressionism” – the ability to publish anything you want. Zuckerberg believes users should be able to publish Holocaust-denial posts because he does not “think that they’re intentionally getting it wrong ”. Fake news and the micro-targeting of voters with messages designed by artificial intelligence to trigger prejudices takes this to another level, with obvious harm especially in fragile democracies such as Brazil. WhatsApp has 120m active users in a country of only 211m and is accused of helping to influence the election of Jair Bolsonaro, the far-right candidate, as president.

The full charge sheet includes tax avoidance and undermining social mobility. According to Guy Standing, a professor at London University’s School of Oriental and African Studies, “Facebook paid just £4,327 [€4,800] in corporation tax in 2014 , contriving an accounting loss after paying over £35m to UK-based staff in a share bonus scheme.” Google drives its employees to work in customised buses which are said to “connect the part of San Francisco where no one else can afford to live to the parts of Silicon Valley where no one else is qualified to work”. And the New York Times has revealed that Facebook hired the Republican-affiliated firm Definers Public Affairs to circulate negative stories about its critics, among them the philanthropist George Soros.

Social media is destroying empathy and making us unhappy, with Instagram users perhaps most at risk , as leading insiders, such as Jaron Lanier , the celebrated pioneer of digital innovation, have long warned. Facebook is also accused of contributing to the genocide in Myanmar by the normally corporate friendly group, BSR.

Can we contain these beasts?

As individuals: we could delete our social media apps or go ‘dry’ for weeks. As Palihapitya says, “My solution is I just don’t use these tools anymore.” Perhaps most at risk are children. Many Silicon Valley kids are said to attend Waldorf Schools, whose pedagogy strives to develop skills in a holistic manner and typically ban electronics. 

If enough of us suspend or close our accounts – and before you do, please post this article, if reading online – better-governed competitors who keep your information private and do not bombard you with ads will emerge.  

As investors: some sustainability investors have spoken out about Facebook – Nordea being the biggest but several American SRI investors such as Arjuna Capital and Trillium have also spoken up including. New York City Pension Fund is leading efforts to impose an independent chairman. But without the support of mainstream investors, these initiatives will lead nowhere.  

Learning little from the “irrational exuberance” of the 1990s tech bubble, institutional investors have chased after fewer and fewer stocks, therefore rewarding acquisitions. These investors are loathe to do anything that may burst the bubble, even if their collective silence increases its likelihood.

As citizens: in the same way the UK government nationalised the East India Company, government action is needed again. As Runciman says: “If Facebook is going to be tamed any time soon, it will need to be done by the power possessed by states.… This can’t simply be a People versus Facebook.” 

Awareness is building. As a Financial Times headline said last November, “Facebook put profits above care for liberal democracy .” Some Democrats have begun to think about ways government can act but US leadership is unlikely soon – the Supreme Court has granted corporates the same rights to free speech as individuals (Citizens United, 2010) which means companies have an unchecked right to buy political influence – aka legalised bribery . In fact, it is the UK Parliament’s Serjeant at Arms , not the SEC, that has caused Facebook to wake up to its corporate arrogance. Many are looking to the EU to set benchmark , which arguably is one reason why so many far right US billionaires are funding anti EU activity in the UK, Hungary and elsewhere .

When forced to do so, these giants will invent technical fixes to deal with situations like Brazil . Or they will share their advertising revenue with local media . One or two may even change their business model to survive. When industries get out of control, what happens is inevitable. As the New York Times journalist Nicholas Confessore said in a 16 November 2018 podcast: “This is the moment when people around the world see inside the sausage factory and they don’t like it.” In the words of a leading US Democrat: “Facebook cannot be trusted to regulate itself”. With their typical willful blindness, Facebook’s investors are making a regulatory clampdown more likely and will have no one else but themselves to blame when it happens. 

Raj Thamotheram is founder and chair of responsible investment think tank Preventable Surprises

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