Silicon Valley faces reckoning as backlash grows against Big Tech
Open this photo in gallery:The Associated Press
Facebook CEO Mark Zuckerberg announces new tools and initiatives to help people keep each other safe and supported at Facebook’s Social Good Forum, Nov. 29, 2017.
STUART RAMSON/THE ASSOCIATED PRESS
SAN JOSE, CALIF.
PUBLISHED JANUARY 12, 2018
UPDATED JANUARY 13, 2018
It’s been a week of soul searching for the tech industry.
Facebook Inc. announced it was making a “major change” to its news feed in what’s seen as a response to growing controversies over fake news and foreign political interference on its platform. And two major Apple Inc. shareholders issued a letter pressing that company to help protect young children from smartphone addiction.
The moves are just the latest in a reckoning that is rocking Silicon Valley as some of the technologists and investors who have helped build the world’s most powerful tech firms are raising the alarm over the negative consequences of their innovations.
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Technology companies have faced an onslaught of criticism over the past year about sexist workplace cultures, congressional inquiries into Russian political interference in online political advertising and a growing body of evidence that smartphone addiction is becoming a public health crisis.
Many of the concerns aren’t new. But what has changed is that the loudest warnings are coming from within .
Facebook shares fell nearly 5 per cent on Friday after chief executive Mark Zuckerberg said the company would dramatically overhaul its news feed to reduce the number of posts by advertisers and publishers in favour of more content from users’ friends and family.
“We feel a responsibility to make sure our services aren’t just fun to use, but also good for people’s well-being,” Mr. Zuckerberg wrote. The announcement is largely seen as a sign that the company is worried about the growing backlash over how its technology has been used to manipulate public opinion and is now looking for ways to fix it.
Former Apple executive Tony Fadell took to Twitter this week after investment firm Jana Partners and the California State Teachers’ Retirement System, who collectively own $2-billion (U.S.) in Apple stock, pushed the company to do more to protect children from the effects of digital technology. “We believe there is a clear need for Apple to offer parents more choices and tools to help them ensure that young consumers are using your products in an optimal manner,” the investors wrote in an open letter.
“Device addiction is real,” Mr. Fadell added in a lengthy series of Twitter posts. He called on device-makers to help. “Our smartphone ‘bottle’ needs to tell us we’ve had enough.”
Apple responded by saying it has already added parental controls to its phones and was planning to introduce “even more robust” safeguards.
The events top off what has been a steady stream of condemnations from high-profile entrepreneurs and investors over the past several months. Early Facebook executives Sean Parker and Chamath Palihapitiya have warned of social media companies’ ability to manipulate human behaviour. Twitter co-founder Ev Williams mused that the micro-blogging site had helped fuel the rise of online hate speech.
The backlash comes at a time when Big Tech is seemingly unstoppable. Major tech firms’ stock prices are at record highs. The four largest Silicon Valley companies – Apple, Facebook, Amazon.com Inc. and Google’s parent company, Alphabet Inc. – now have a combined market capitalization larger than the GDP of Russia. But as their power has grown, tech companies are starting to see a sharp reversal from the sense of idealism that has long underpinned the industry. Digital skepticism is becoming the new normal in Silicon Valley, leading to questions over whether tech companies can fix themselves, or will be forced to by regulators.
“There’s a tectonic shift in the public’s perception of Big Tech,” said Scott Galloway, a marketing professor at New York University who published The Four, a book about the big four tech firms last year. “A year ago we were talking about which CEO was more Jesus-like or was going to run for president. Now [tech] companies are being referred to as the new tobacco.”
Among the most vocal proponents of those downsides is Silicon Valley venture capitalist Roger McNamee. An early investor in Google and Facebook, Mr. McNamee mentored Mr. Zuckerberg on what he saw as the vast potential of the nascent social media company starting around 2006.
Over the past year, however, Mr. McNamee – who still holds Facebook stock – has dedicated himself full-time to bringing public attention to the harmful effects of smartphone technology: how it is helping to expose children to inappropriate video content, contributing to a rise in teen suicide, leaving adults lonely and isolated and undermining democratic elections.
“All of those things add up,” he says. “It suggests we’ve passed a tipping point and that these companies who have won on every objective measure – they’ve succeeded beyond their wildest dreams – they can afford to now go and do the right thing.”
Mr. McNamee brought some of his concerns directly to both Mr. Zuckerberg and Facebook chief operating officer Sheryl Sandberg in early 2016. They responded quickly and he spent four months talking to executives about how to deal with the threat of bad actors manipulating Facebook’s platform. But eventually, he says, Facebook made it clear it wasn’t interested in seriously tackling the problem. That’s when Mr. McNamee went public.
“The notion was never to cause a problem,” he says. “The goal from the beginning has been to have a conversation about what is the appropriate role of social networks in our society?”
Many tech insiders who are raising concerns point to the combination of ever-present smartphone technology that can collect reams of data on users, algorithms using that data to develop highly targeted content and the ad-based business model that has made smartphone users a highly lucrative market.
“As soon as you have smartphones, you have constant surveillance of people all the time and it naturally progresses from what you could call advertising to… [what] you have to call a constant behaviour modification technology,” says Jaron Lanier, a computer scientist who is widely credited as the father of virtual reality. “Now you have these behaviour modification empires that are paid to change society.”
Investors are taking notice of the growing chorus of worried voices emanating from Silicon Valley.
The decision by large shareholders to target Apple over smartphone addiction is a smart strategy, said Kellie McElhaney, a business professor at the University of California, Berkeley. The smartphone-maker has historically been responsive to pressure on social and environmental issues. While Apple isn’t solely responsible for the attention-grabbing apps that run on its phone, it’s in the best position to push the industry to change.
“Apple has a significant amount of influence on every provider to Apple, from the materials in the phone to the app providers,” she said. “So that’s where I do see a responsibility on Apple to use their power.”
This year “is going to be a turning point for the tech companies,” said Jonas Kron, director of shareholder advocacy at Boston-based Trillium Asset Management, an investment firm that focuses on social-impact investing. “I think they’re going to be confronting investors’ interest and investor attention in a way that they have never had to in the past.”
Trillium has filed several shareholder proposals pressing companies including Apple, Tesla, and Google parent company Alphabet over issues such as privacy concerns, workplace diversity and environmental reporting. It recently filed a proposal asking Facebook’s board to consider establishing a risk oversight committee to help the social media company combat issues such as fake news and the use of its platform by terrorists.
Mr. Kron isn’t surprised to see the tide of public opinion is turning . Many other industries have introduced new technologies and products to an initial wave of enthusiasm that eventually gives way to concerns about the negative consequences. He points to the food and beverage industry, where decades ago pesticides and monoculture farming were seen as important developments that helped to dramatically reduce the cost of food, but eventually provoked a consumer backlash over environmental and health concerns.
“It’s not that one day everybody is going to wake up and Facebook or Google is going to find that it has lost half the user base,” he says. “It’s going to be a much more slow erosion that will leave them scrambling for relevance.”
Having sounded the alarm on Silicon Valley’s ethical shortcomings, investors and entrepreneurs are turning their attention to how to fix the problems they’ve created.
Mr. McNamee offers up several solutions: Facebook, Google and Twitter should directly contact every user who was exposed to the Russian-backed election content to tell them they were being manipulated. Company CEOs should testify publicly before Congress. Regulators should ban fake social media accounts – or bots – and block technology companies from acquiring competitors until they can prove they’ve fixed their problems. Users should be given more control over their own data, which could include imposing a statute of limitations on how long tech companies can use the information they collect .
Social media companies ultimately have only a handful of options, Mr. Lanier says. They can allow the backlash to grow until they are eventually forced out of business, or they can shift their business models away from advertising and toward low subscription fees for users along with paying those who produce content. Netflix has used a similar model to usher in a golden era of so-called “peak television.”
“If people pay for social networking, we’ll have peak social networking and it will just get a lot better,” he says.
Without major changes by the industry itself, Prof. Galloway predicts that European competition regulators will issue their first fine in excess of €10-billion ($15-billion Canadian) against one of the major tech firms within the next 12 months. There is also an “outside chance” that a European country could restrict access to U.S. social media businesses within their borders in order to help local entrepreneurs build their own domestic online platforms. “Some nation is going to wave their middle finger at Big Tech and say: We’re not as fascinated and adoring of you as your colleagues in the U.S.,” he said.
Mr. McNamee hasn’t heard from anyone at Facebook for nearly a year, but says he would welcome the chance to help the company solve these issues before the backlash starts to weigh on their financial performance. The default strategy to deflect responsibility for the harmful effects of technology isn’t working, he says. “If they continue to fight, they’ll succeed in avoiding regulation for a time. But they’re going to harm their brands in some really profound ways.”