The role of historical context in providing a modern understanding should never be downplayed. Introducing to center stage, Facebook, which has been thrust into the limelight by Cambridge Analytica hiding in one wing, and an unnamed swarm of Russian influence-bots in the other. The actors may seem new, and the arena different, but if history can tell us anything it is that this is a play that we have already seen several times over.
Western economies have grown over the centuries through repeated cycles of unbound and often catastrophic growth, followed by periods of anguish, grievance and eventually regulation.
Similar theatrical genres that have captured our hearts, minds and economies have included Wild West renditions of industrialists gaining economic strongholds through railroads, oil and steel corporations – not too dissimilar to the current genre of China's investment on the African continent – and the more recent motion picture of The Bank Heist: the inside job that stole the global economy, depicting the financial institutions' rampant and unfettered speculation on, well, anything, which forced us to turn to the government for a fix. "Too big to fail" is what we heard back then. The theme tune of today's social media crisis can be sung to the lyrics "too big to regulate".
Facebook, however, has not found itself in this arena alone. It is a founding member of the Frightful Five – Apple, Google, Microsoft, Facebook and Amazon. Frightful not just because of their financial dominance – they are the largest US companies by stock-market value – but also because of their undue influence over (dis)information and global politics.
Their complicated relationships to Ireland notwithstanding, these American-founded corporations pose an implicit threat to the jurisdictions of world governments.
They sit in a lonely group of five through the creation of a massive and defensible moat called the network effect which surrounded their technology platform in the early 2000s. This has since allowed them to fully control an entirely new market around communication, media and civil society.
Arguments have been made that it is the enlightened investors who should have predicted that so few companies would hold such power. Others have gone further to say that this crisis is the horse that the investors didn’t only back, but bred, jockeyed and fed more than just hay. In a capitalist America, technology venture investors are heroes responsible for blowing oxygen into the flame of the American Dream. Across the Atlantic in a social-led Ireland, many are fast to demonise the money trail that leads to problems like Facebook’s social and information inequality.
It isn’t just Facebook and the other four whose power is growing exponentially; it is the perilously high levels of power of the executives themselves. Mark Zuckerberg has created Facebook in a way such that as his company grows, so too does his reach within the company through a dual-class shareholder system.
In a regular “one share, one vote” system, Facebook’s large growth and entrance to the public markets would have seen him owning an increasingly small slice of the Facebook pie and having heightened governance by outside influences. The opposite is true here, as Zuckerberg clings on to controlling nearly 60 per cent of the stock. This is important; ownership of a company does not just pertain to a legal right to the profits achieved by that company, but also conveys the right to participate in how that company is governed.
Mark Zuckerberg has created Facebook in a way such that as his company grows, so too does his reach within the company through a dual-class shareholder system
Free from the shackles of regulation, Zuckerberg has assembled a community that is larger than any religion or country, controlling the most valuable global data. But who controls him? In a free-market economy run by our western ideology, we believe we will enjoy the upside of increased profits and high growth while being able to self-regulate and steer ourselves away from the downside. The unregulated dual-shares system that Facebook has employed is increasingly raising alarms, even to the early investors, who see the clear risks of power corruption.
The crucial issue is not Cambridge Analytica or Russian bots but is instead Facebook and Big Tech accountability; first, who can protect the users and consumers of the Facebook product, and second, who can protect the shareholders? Neither Zuckerberg nor his number two in command, Sheryl Sandberg, has addressed one of the largest technology crises to erupt of recent times.
Beast to be tamed
While enjoying the friendliness, utility and all-encompassing convenience of social media, we have created a situation whereby the most powerful person in the world cannot be removed from office. We have, like by like and share by share, created a global information autocrat. Facebook is too big to regulate and its leader is nowhere to be found. We have, perhaps unwittingly and through lack of considerate regulation, created a beast that cannot be tamed.
So who will regulate? Prior to the “tech bubble”, a European company of this size and holding an operating strength in so many industries would have been long broken up in the interest of market and shareholder protection. The mislabelling of Facebook as a social media instead of a purely media platform provides robust protection, which won’t change anytime soon in the United States.
There is intellectual dispersion surrounding the regulatory methodology of the five, with the academic left seeking anti-trust reform and the political right being elusive as the tech industry uses its consequential fortunes to lobby. It is sure that the new information war will break out, as many other wars have done before, on the European continent.
As the US looks to Europe, which houses deep technical and regulatory expertise in this industry, one ponders about the director who is brave enough to write the script for the final act. If nothing else, we can be sure that the curtain won’t close on this show without industry heads rolling and the onset of a long period of shameful reflection, as prescribed to us in every historical play that has come before.
Sinéad O’Sullivan is a Sainsbury management fellow at Harvard Business School. Her research assesses the growing influence of US technology companies and their role in the global democratic process