26 April 2022

The worst way to fix Facebook

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Everyone agrees that we need to do something about Facebook, Google, Apple and Twitter.

Well, almost everyone. As I wrote in Everyone wants to fix Facebook, I’d prefer we did nothing. But that’s just me.

Given that the something-must-be-done mob is likely to win, here are three ways we could fix Facebook: the worst way, the not-quite-so-bad way and (let me dream a little) the best way.

The worst way

If you listen to tech industry commentators, you’ll hear a thousand and one ideas as to what to do about Facebook, Google, Apple and Twitter.

The temptation for politicians is to write all thousand and one ideas into law. Once the lawyers are done with it, those ideas will be formalized into a million and one rules.

Facebook will love this. Have you noticed how eager Mark Zuckerburg is to propose regulations for social media? That’s because social media regulation is the best thing that can happen to Facebook.

Navigating those million and one rules will be a nightmare.

Facebook, with its three hundred billion dollar market capitalization, will simply hire very expensive lawyers to handle compliance. Not a problem.

Facebook’s competitors, on the other hand, with lesser resources, will struggle to comply. What do all those rules mean anyway? Who do they apply to? It won’t be clear.

Strangle the upstarts

The startups that might challenge Facebook’s dominance will fare the worst.

Many of these startups have yet to be founded.

Many of them won’t be founded if regulations are passed. If you’re a tech founder, starting a social media company becomes a lot less attractive if social media is highly regulated.

Any startups that are founded will be competing on an uneven playing field.

Facebook gained all its users in an era when social media was unregulated.

Any challengers will struggle to gain users in an era when social media is highly regulated.

There’ll be no competition.

That’s why Mark Zuckerburg is so eager to propose regulations: they’ll strangle any upstarts.

Regulation is the worst way to fix Facebook, because it’ll only consolidate Facebook’s dominance.

The not-quite-so-bad way

Anti-trust action against Facebook, Google, Apple and Twitter would not be quite as bad as regulation.

It would apply only to these big tech companies, not to their competitors, much less to startups. So unlike regulation, it would not stifle competition.

Even if the action were limited, it would slow Facebook down. The anti-trust action against Microsoft in the early 2000’s held it back in a way that seems to have prevented it from dominating the web and mobile waves to the same extent as it dominated the PC wave.

Anti-trust action would delight politicians and bureaucrats. They’d be falling over each other to claim the credit for being the tough leader who tamed big tech.

Anti-trust action against Facebook would be so much fun that it seems churlish to ask whether it’s the right thing to do.


Is it the right thing to do?

Is Facebook a monopoly? It’s not at all clear that it is.

If a competitor set up an alternative social media platform, called, say, TikTok, could Facebook exercise its monopolistic power to shut down the competition? No, it couldn’t. It would if it could, but it can’t, because Facebook doesn’t have that kind of monopolistic power.

Should Wikipedia fear anti-trust action? If Facebook has a monopoly in social media, then Wikipedia certainly has a monopoly in collaborative encyclopedias. Admittedly, like Facebook, Wikipedia has no monopolistic power – if I set up an alternative collaborative encyclopedia, it couldn’t shut me down – but that’s no defence against anti-trust action, it seems.

Do we really want to hobble our most innovative companies? You can say all you like about Facebook, but it has clearly created something that people like. If they didn’t like it, they wouldn’t use it. And they do use it, in their billions.

Should Tesla fear anti-trust action? It, too, has clearly created something that people like. Should it avoid growing too big, because big tech companies risk anti-trust action, not because they’re monopolies, but just because they’re big?

The point of anti-trust is to prevent bullying. If there’s only one oil company, called, say, Standard Oil, it can use its monopolistic power to charge any price it likes for its oil. Consumers who need oil have no option but to pay that price. Under the circumstances, charging extortionate prices is bullying.

Let me be clear: Facebook is a bully. Its aggressive acquire-or-destroy approach to smaller tech companies is pretty atrocious.

But who’s the bigger bully: Facebook, for its aggressive competition, or the politicians and bureaucrats who would use the power of their office to hobble Facebook?

And who’s the bigger enemy of democracy: Facebook, for running a few crappy ads paid for in roubles, or the politicians and bureaucrats who would take arbitrary action against arbitrary companies just because it might make them popular?

The best way

If we truly wanted to level the playing field, we might want to think about how we currently tilt it in favour of Facebook, Google, Apple and Twitter.

Every tech regulation we pass tilts the playing field in favour of big tech.

It’s now impossible to start a small tech company legally.

If you so much as put up a web site, you’ve already broken innumerable laws. Which ones? Who knows! If you comb through the millions of words of regulations passed in the hundreds of jurisdictions where your web site might be seen, I guarantee you’ll find one you’re infringing. Probably many. No doubt it’ll be something to do with the precise wording of the pointless pop-ups you’re required to display on any functional web site.

You’ll never know which of the innumerable laws you’ve broken, because if you’re trying to start a small tech company, you have no time to comb through those millions of words of regulations.

Who does?

Well, Facebook’s lawyers do. The big tech companies are the only ones who have a hope of complying with all the regulations. It’s their unfair advantage over the competition.

If we want to level the playing field, passing more regulations is the worst way to do it.

Anti-trust action might work, at the expense of stifling innovation, punishing success and undermining democracy.

But the best way?

That’s simple.

Repeal all the nonsense regulations we’ve already passed.

The times, they are a-changin’

Of the top 10 companies by market capitalization at the turn of the century, only one is still in the top 10 twenty years later*.

Ironically, that company is Microsoft, the only big tech company to have been subject to significant anti-trust action. It doesn’t seem to have dented their dominance.

Times change.

Technology evolves.

Innovaters rise.

The mighty fall.

If we let them.

All we have to do for the big tech companies to lose their dominance is get out of the way.

It would be ironic indeed if, in our determination to do something about Facebook, Google, Apple and Twitter, we succeeded only in perpetuating their dominance.

* 2001 v 2021 Michael Mauboussin on the Acquired podcast

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