Thorstein Veblen (1857-1929), the celebrated Norwegian-American economist and sociologist, evidently didn’t have an especially lofty view of the media, and that was before radio and television, let alone the internet and Facebook.
“The first duty of an editor is to gauge the sentiment of his reader, and then to tell them what they like to believe,” Veblen wrote in 1904, referring to a way to maintain or increase circulation. “His second duty is to see that nothing is said in the news items or editorials which may discountenance any claims or announcements made by his advertisers, discredit their standing or good faith, or expose any weakness or deception in any business venture that is or may become a valuable advertiser.”
The net result is that “both the news columns and the editorial columns are commonly meretricious in a high degree.”
As far back as 1904, Veblen, a critic of the unbridled capitalism of the late 19th century, understood that the two elements that would corrupt the free press and the market for ideas were the major advertisers and the readers themselves.
Many readers, Veblen realized, don’t peruse the papers to learn new information or gain insight into complex ideas or analyses that would challenge their preconceptions and prejudices. Most are guided by their emotions and urges to seek information that bolsters what they already believe.
With advertisers, it’s even simpler: They want maximum eyeballs. But even more than circulation, they want the media companies they pay to toe the line of their interests and eschew criticizing them or the economic and political system that benefits them.
Fast-forward to today. The mass media is a significant player in modern democracy; a big issue is its quality, independence and influence on public perceptions and political behavior. Technological, political and cultural changes have generally moved responsibility for financing the news groups’ activities to readers and advertisers. Dependence on government has been replaced by dependence on centers of economic power and the public’s tastes and weaknesses.
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Then Facebook arrived – not dependent on government or tycoons ruling network news and newspapers, while not having to serve the politicians who set the rules in business. It was direct democracy; utopian, basically: Everybody’s an editor, everybody’s a reporter, the market’s wide open to any opinion. All you need is a smartphone with an internet connection and you’re live. The world is listening if you have a good story or important information to share.
That was more or less Facebook’s story during its first decade; technology that would let the whole world log in and release us from censorship by the powers that control – directly or indirectly, overtly or covertly – the media that’s supposed to monitor the government. But about five years ago signs began to multiply that Facebook wouldn’t be solving all the structural problems and flaws of the media and the conversation; it would be creating new problems and challenges.
In the last three years, Facebook’s growth accelerated dramatically and the company turned into the biggest media and advertising monster in history. It should have been clear that we had a big problem beyond the problems we knew about so far. But only last week did politicians, experts and the press wake up and tell Mark Zuckerberg that that story was over.
After a decade of Zuckerberg and his colleagues in Menlo Park, California writing Facebook’s story and the narrative of the social media’s place in 21st-century democracy, control over the narrative has been taken from them. Zuckerberg will lose control not only of the narrative but of the story itself. At age 33, when most people are just starting to make a mark on the world, Zuckerberg will be losing much of that astonishing freedom he had to influence the minds and lives of billions of people.
Writing on the Facebook wall
Zuckerberg is losing that freedom first and foremost because he messed up. Despite all the warning signs, the genius founder who just a year ago went up and down the United States to “teach” and “connect” remained utterly disconnected from reality.
He and thousands of Facebook employees in Silicon Valley failed to understand the potential harm embedded in the brilliant, efficient and wonderful business model they had developed. When the possibility arose that people had used Facebook to influence elections, Zuckerberg’s reaction was that suggesting fake news on Facebook had influenced an election was a “pretty crazy idea.” Laughable. Last week the laughter stopped.
But the Cambridge Analytica scandal – the company’s use of information siphoned from Facebook – isn’t the main reason Zuckerberg is being curbed. Nor is it Facebook’s mistakes in management, security and public relations. These merely catalyzed the public belatedly realizing more about Facebook’s business model.
Zuckerberg will be losing some of his freedom because he’s too big and concentrates too much dangerous power in his hands. In contrast to the banks, oil companies and great infrastructure monopolies, which have risen and fallen and been restrained throughout history, the inherent threat in the companies created by Zuckerberg, Jeff Bezos, Sergey Brin and Larry Page is far greater. They don’t only control vast economic activity with ripple effects throughout most of the economy, they control the most precious, dangerous asset in the 21st century: information and data.
George Orwell, like Veblen, had dazzling insights into the media, political regimes and the speed of their degeneration. But his dystopian vision of “Nineteen Eighty-Four” couldn’t have envisioned the rise of privately owned corporate monsters that would concentrate broader, deeper, more up-to-date and more accurate information on us than anybody had ever held on anybody.
Europe is more advanced than the Americans in the protection of privacy on the internet. While the Obama administration spent eight years mainly praising and fawning on the digital giants, Germany, Belgium and Britain began to set new rules on privacy protection, and on antitrust and tax rules for companies whose entire operation is virtual.
On March 22, Zuckerberg and his right-hand woman Sheryl Sandberg said they were “open to regulation.” Zuckerberg said he felt “fundamentally uncomfortable sitting here in California in an office making content policy decisions for people around the world.” Until a few months ago he was trying to sell critics the thesis that it’s the “community” and “users” who decide and he just provides the platform.
But Zuckerberg hasn’t really come clean. He hasn’t said what has been clear to observers of technology, advertising or the media: The problem with Facebook isn’t political meddling or the leaking of information to consultancies. That’s the symptom. The problem with Facebook is its business model. Not that it doesn’t work – it works beautifully. It’s a lot more efficient and delivers much better results than most business models ever.
Facebook’s remarkable efficiency – its ability to collect content, present it and mainly to target, locate and zero in on user profiles – is the problem. After all, there’s no law in nature or economics that says efficiency necessarily serves worthy social purposes. In the case of Facebook, that efficiency can be a great way for people to connect at negligible cost and terrific speed, but it can also be a frightening way to warp the public conversation and exploit human weaknesses.
More than a century ago, Veblen warned that newspapers maximize profits by playing to readers’ prejudices. Facebook took that forward with its Like and Share buttons and built an algorithm that addicts the user by pushing content often driven by rage, anger and polarization.
Veblen feared that advertisers would influence the agenda and editors’ content choices. Facebook built an algorithm that transfers control directly to the advertisers. The ultimate goal of the feed is to addict the user and sell ads. There’s little room for judgment calls; the advertisers’ money controls the algorithm. This machine knows better than any editor what the people want and how to reach the readers that advertisers want. No wonder Facebook received 20 cents of every dollar spent on online advertising worldwide last year.
The network effect – the rising valuation and power of the platform as the number of its users grows – raises questions about whether the free market can create new competition against companies like Facebook and Google. Western antitrust authorities twiddled their thumbs for a decade while the digital giants snapped up every potential rival and new technology. Having failed to learn from the Microsoft experience of the late 1990s, the authorities found themselves facing five technology giants with unprecedented economic and political clout.
Facebook’s current crisis could be an opportunity to force regulation on it and open the markets to competition. Severing Facebook from its subsidiaries WhatsApp and Instagram, and Google from its subsidiaries, could prove crucial to restoring dynamism and competition to these markets.
The Facebook story is about to turn a page. The applause for the gurus of technology will be replaced mainly by discussion – sometimes professional, sometimes inflammatory – on how to protect the public from Facebook.
Meanwhile, Google and Microsoft (which acquired LinkedIn last year) are sitting on the sidelines, telling us they’re not part of this story. But once the public realized the simple principle – that if a product is free or very cheap it’s a sign that you the customer are the product – it was clear the giants’ turn would come. Apple and Amazon, with their cloud services, have not yet so aggressively used customer data as part of their business models, but the depth and amount of information they possess is just as great a danger.
The lesson from the sudden change in the decision-makers’ attitudes toward the internet giants, and the realization that rules have to be set to protect the public from them, leads to one huge conclusion: Many politicians, economists and opinion-shapers successfully sell the public the idea that if we let market forces, competition and companies act with zero intervention, the results will always be better.
The market failures, frauds, cheating, inequality and flaws of this system are always ascribed to the legislator’s intervention. Since hardly any area in our lives lacks regulatory involvement, great or small, it’s easy to sell the notion that failure stems from overzealous intervention, not the absence of intervention. This concept has driven decades of increasing business concentration in Israel and the United States.
Now here come the technology giants and show us the gaping hole in this simple, neat and utopian theory. Facebook was subject to practically no regulation over the past decade. The hazards revealed in its business model stem from its success, not from corrupt politicians.
But market forces didn’t create the necessary checks and balances and didn’t constrain Facebook. On the contrary, they drove it increasingly to areas where it’s unlikely to bring any good and may well be creating distortions and dangers.
The invisible hand didn’t hold back Zuckerberg, it just whetted his appetite to more efficiently, invasively and sophisticatedly exploit his users’ personal information – to a point so alarming that the moment the public glare focused on him, he got scared and called out: Regulate me. And it will happen.