Why Regulation Can Help The Tech Giants To Work Better
Dec 25, 2018
Tech giants urged to embrace regulation to regain control and improve public image, as the lack of rules threatens their business models and user trust.
It’s been some time since social networks earned free media exposure for events that promised an everlasting and positive impact on society. Facebook’s dystopian myriad of leaks and misuses, Twitter’s struggles to prevent hate speech from flowing through its platform, and an increasing number of people with the ability to game the system have taken away the cool aura that once floated over California. Markets are already showing how their faith in previously considered unstoppable money-making machines has dipped by bringing down share prices and optimistic gains forecasts. However, it’s from another sphere that some movement is likely to ring the bells hard enough to hurt the money windfalls coming from user-generated content. Regulation is just a step away from becoming the norm. Tech giants should welcome this to improve their image and get tools to retake control of the game.
There is very little mystery about the seriousness of the events created by nasty actors when handling user data through system failures to keep information safe. Facebook has been used to win a few elections (although it’s questionable to determine to what extent) and there is not much happening to imagine that the issue is solved.
The agents that took advantage of massive data manipulation had their positions reinforced instead of weakened due to corporate stubbornness preventing any drastic measure. Examples? Philippines dictator-style president Rodrigo Duterte has more than 4 million followers hearing his vigilante remarks. Brexit headmaster Nigel Farage has over 1.2 million, and the supreme social network puppeteer (also POTUS) Donald Trump has 80 million accounts listening to him via Facebook and Twitter - with no fact-checking of any kind.
Regulation is a word that makes markets feel chills. Shareholders like to think that demand and supply do an excellent job to balance over temporary distortions but in this case, it’s pretty clear that they will at least have the availability to listen first. Wealthy individuals, corporations, and major companies have been demonstrating more sensitivity than usual lately. Issues like climate change denial are very bad deals (to use a Trumpian cliché). Dodgy companies manipulating platform backdoors make very few elements happy and seed havoc everywhere.
More examples? The UK is trying to perform cardiac massage on the Brexit corpse looking for a deal with any resemblance to the one that promised £350 million weekly for the taxpayers’ pockets after getting rid of the European feast. In the US, Republicans are tied to a maniac hippopotamus in a porcelain shop, pulling troops out of Syria and throwing America into a trade war with China that can’t be won. Brazilians are set to spend 4 years with a politician that knows absolutely nothing, who has already promised to take the country out of the Paris agreement exactly when the Amazon needs to be protected most to avoid a true environmental holocaust, other than publicly defending torturers, rapists, and vigilante death squads. These are not some loony leftist alarmism, and doing nothing to prevent it will cost so much money that no one - not even evil capitalist sinister-laughter moguls - are ready to bankroll.
The media industry is in an odd position at the moment. Its crumbling business models are pressing the sector over ownership concentration leading to staff, and investment cuts leaving loads of trained journalists out of a job. At the same time, social media has morphed the remaining journalists to accept some level of the cult of personality, becoming celebrities themselves. They waste the vast majority of their time pursuing fruitless debates, antagonising critics and snapping up the phenomenon that gave birth to Infowars-styled journalism, where the applause of niche audiences is more important than properly updating society on what it needs to know. The waning effectiveness of sharp and honest journalism decreases precisely when it’s needed the most.
An intervention from society in the rules of engagement of the sector can be beneficial to address the distortions technology has brought. Companies can be compelled to be more transparent with users about how their data is handled, how much money the company makes from it, provide a complete deletion of the user information, and even deliver it following industry standards so the user can take it elsewhere, fostering competition and innovation.
Data breaches like the ones that occurred on Facebook, Yahoo, or Marriott would lead to hefty fines, but the most significant watchdog would come from users themselves. With the availability of competitors, the fear of losing large numbers of clients (i.e., users) following a data breach would encourage companies to invest more in data safety to avoid losses both in cash and market share.
Third-party services ancillary to the main activities of the user data industry would not only foster innovation and growth but would also provide a safer environment, with specific industry subsets to be explored in more depth, reducing the space for possible loopholes. The system could be virtually self-regulated, but if some companies were unwilling to comply with the rules of the game, agencies would have legal firepower to enforce severe punishments quickly, with fines paid in advance while court appeals were still in motion.
It is easy to forget that the data giants themselves were victims of the data breaches. True, their refusal to admit their share of guilt following legal advice and the relentless PR war makes them less likable, but this is just a side effect of their corporate DNA acquired after their IPOs. The legal enforcement that regulation would bring could deter some shareholders initially, but the enterprises wouldn't be severely hurt. At the same time, CEOs and COOs would need to spend less time pleading with directors' boards to implement changes like the ones leading to data breaches.
Facebook, Twitter, and Google are, in fact, guinea pigs of themselves, and despite all the investment in innovation, their businesses grew much, much faster than any fully-controlled experiment. No company reached 1 billion clients as quickly as Facebook, and there is hardly an established market that has been so overrun by a newcomer as the one Google did to the ad industry.
User (or better, citizen) information is already a valuable commodity, but very few can extract the profits generated by it - the user least of all. Imposing balance on the equation that encompasses the data giants, individuals, businesses, and government is not a Marxist idea (although there will not be a shortage of distracted observers suggesting so) — quite the opposite. Stable markets with clear rules ubiquitously enforced are much more lucrative than shaky ones and tend to have cyclic crises less often and less intense. Tech is an industry that thrives with innovation and with mechanisms that foster competition. The lack of regulation and the "buy-and-shut-possible-contenders" model plus patent-handcuffing competitors not only hurts growth but serves society worse. There would be a lot to be told about how democracy would gain and society would be fairer with such arrangements, but it's better not to mention it. It hardly helps things to go further. Money talks and it's smart for everyone - investors primarily - to listen.