Why not nationalize Facebook? good or bad idea?

Editor: Johnathan Meyers | Tactical Investor

The Facebook/Cambridge Analytica scandal is fast emerging as a watershed Moment

For the first time, how to regulate personal data has become a mainstream public issue, so it’s important that we understand fully all the options available to us.

In deciding what to do, the negative reactions of some tech pundits to the calls for individuals to #deletefacebook are instructive.

Somewhat counter-intuitively, they argue that it’s irresponsible and ultimately ineffective for people to #deletefacebook. On its own, this argument is overstated. The loss of even a small number of influential Facebook users (relatively wealthy, North Americans) is a signal to Facebook and governments about dissatisfaction with the status quo. That’s not a bad thing.

However, they’re also correct that a bunch of us deleting Facebook is an inadequate response to a systemic problem, so it’s worth following their logic to see where it takes us.

It turns out where it takes us is a pretty interesting place.

Seeing Facebook for what it is

As Slate’s April Glaser puts it, abandoning Facebook is a luxury because “for lots of people, leaving the service would be a self-harming act.”

For many people, Facebook has become a personal, professional and economic necessity: “Your business could have trouble reaching customers; your family might not gather on another social network; no one posts any events anywhere else.” For many users in poorer countries with bad internet connectivity, “Facebook is, in a sense, the whole internet,” Glaser writes. Full Story

We need to nationalise Google, Facebook and Amazon. Here’s why

For the briefest moment in March 2014, Facebook’s dominance looked under threat. Ello, amid much hype, presented itself as the non-corporate alternative to Facebook. According to the manifesto accompanying its public launch, Ello would never sell your data to third parties, rely on advertising to fund its service, or require you to use your real name.

The platform – an infrastructure that connects two or more groups and enables them to interact – is crucial to these companies’ power. None of them focuses on making things in the way that traditional companies once did. Instead, Facebook connects users, advertisers, and developers; Uber, riders and drivers; Amazon, buyers and sellers.

Reaching a critical mass of users is what makes these businesses successful:

the more users, the more useful to users – and the more entrenched – they become. Ello’s rapid downfall occurred because it never reached the critical mass of users required to prompt an exodus from Facebook – whose dominance means that even if you’re frustrated by its advertising and tracking of your data, it’s still likely to be your first choice because that’s where everyone is, and that’s the point of a social network. Likewise with Uber: it makes sense for riders and drivers to use the app that connects them with the biggest number of people, regardless of the sexism of Travis Kalanick, the former chief executive, or the ugly ways in which it controls drivers or the failures of the company to report serious sexual assaults by its drivers.

As a result, we have witnessed the rise of increasingly formidable platform monopolies.

Google, Facebook and Amazon are the most important in the west. (China has its own tech ecosystem.) Google controls search, Facebook rules social media, and Amazon leads in e-commerce. And they are now exerting their power over non-platform companies – a tension likely to be exacerbated in the coming decades.

Look at the state of journalism: Google and Facebook rake in record ad revenues through sophisticated algorithms; newspapers and magazines see advertisers flee, mass layoffs, the shuttering of expensive investigative journalism, and the collapse of major print titles like the Independent. A similar phenomenon is happening in retail, with Amazon’s dominance in undermining old department stores.

These companies’ power over our reliance on data adds a further twist. Data is quickly becoming the 21st-century version of oil – a resource essential to the entire global economy, and the focus of intense struggle to control it. Platforms, as spaces in which two or more groups interact, provide what is in effect an oil rig for data. Every interaction on a platform becomes another data point that can be captured and fed into an algorithm. In this sense, platforms are the only business model built for a data-centric economy Full Story

Reasons NOT to Nationalize Facebook

Facebook is neither a natural monopoly nor a public good

Howard claims that Facebook “is already a monopoly,” “has become a public good” and represents “public infrastructure.” He seems to misunderstand these terms.

Social networking markets are evolving rapidly

Related to the previous point, Facebook operates in a highly dynamic environment. The breakneck pace of change in social media makes these sites and services distinct from traditional monopolies and public utilities. Not only are most of these services relatively new, but they keep displacing each other in fairly rapid fashion. In the Web’s short history, we’ve witnessed creative destruction on steroids.

Public utility regulation could stifle innovation and raise prices

Howard seems to believe that privacy is the only value that people care about it when it comes to Facebook. But what about the convenience that comes from instantaneous connectivity and information sharing, and what about the cost of service? Facebook provides its services at no charge to users.

Government entities don’t have a good track record of protecting privacy

Howard’s nationalization proposal is built on the flawed premise that government entities have a better track record of protecting privacy. This is a stretch, to say the least. You can take your pick of just about any of the alphabet soup of government agencies—IRS, TSA, FDA, SSA, NSA, CIA—and find privacy violations galore. A day after Howard’s essay appeared, The Washington Post ran a front-page story about how “Stepped-up Computer Monitoring of Federal Workers Worries Privacy Advocates.” It documented the growing digital surveillance of government workers by various federal agencies.

Nationalization could backfire and become quite costly since many users would likely flee

Howard believes that “nationalizing the company [will] restore the public trust,” mostly by enhancing privacy, but why should we assume that a government takeover of a speech platform would increase public trust? As noted above, it is just as likely that federal control of Facebook would scare many existing users away for fear of what the government might be accessing. If users flee, nationalization would become a costly gambit that left taxpayers picking up the tab. Full Story

Why we should just nationalize Facebook

Just have the U.S. government take controlling ownership of the company. We’ve done it before, sometimes in the case of emergencies and wars, but also in the case of natural monopolies. That’s an instance where the natural costs to enter a market are really high, but operating costs for a business once it’s entered the market are low, so there are natural barriers to competition. Roads, water utilities, and electrical utilities are the classic examples since different companies aren’t going to build competing physical systems of highways, pipes, or power line towers. And publicly owned utilities in America are particularly common at the municipal or regional level.

At first blush, it seems weird to claim Facebook is a natural monopoly. There’s no physical infrastructure it has to lay down. It’s a web application — all bytes and electrons — so if someone doesn’t like the way it’s run, they’re perfectly free to start their own.

Yet Facebook sure looks like a monopoly.

Worldwide, Facebook’s 1.4 billion users are crushing competitors like Twitter and Instagram. The story here in the U.S. is slightly less dramatic, but still overwhelmingly in Facebook’s favour. This domination is almost total in the developing world, where Facebook is often the only means of accessing the internet at all.

Carriers in poorer countries often offer Facebook-only data plans (Sprint is even doing this in the U.S. now) or plan ingrained in new mobile devices and smartphones that offer access to the “internet” — i.e. Facebook — totally free. Which effectively locks poorer users into Facebook and nothing else. A fair number of users already don’t seem to realize that Facebook belongs under the conceptual umbrella of the internet, and is not a thing unto itself. Full Story