Former Zuckerberg advisor: Facebook’s problem is its business model

Former Zuckerberg advisor: Facebook’s problem is its business model

CNN’s Julia Chatterley spoke with Roger McNamee, co-founder of Elevation Partners, an early Facebook investor and former adviser to Mark Zuckerberg, about the criticism the company faces and what regulation of the social media platform should look like.

Here’s what he had to say.

Chatterley: I vividly remember you telling me that back in 2016, you went to Sheryl Sandberg and you went to Mark Zuckerberg and you said, ‘Guys, you’ve got a problem and you have to get ahead of this.’ And I listened back to how Mark spoke on [the recent earnings] conference call. And earlier in the show, I sort of referred to it as denial. What do you make of his response in the face of what we’ve seen in the last 24 hours?

McNamee: Julia, I think Mark Zuckerberg has an enormous public relations problem. He has been very successful for years at deflecting criticism by claiming a right to free speech. The problem is that the underlying business model of Facebook, where you bring three billion people onto one network with no boundaries and no safety net, then combine that with a business model that’s based on essentially promoting emotionally intense content in order to promote engagement, and then add into that the ability to target people with extreme precision. And the result is that an enormous number of ideas that have lived for years at the fringes of society — things like white supremacy and anti-vax — have suddenly been thrust into the mainstream and done huge damage. And so there’s really nowhere for Mark to go on this issue. He can attempt to deflect it, but I think the evidence that Francis Haugen provided is unequivocal and it’s from Facebook’s own internal research.

Chatterley: I mean, he says, Facebook says it’s being taken out of context. To your point, and I mentioned this at the top of the show, it’s half the world in terms of monthly active users. It’s now 3.6 billion people around the world that are using one of these products. And we had the outage of their products two weeks ago, where it felt like for small businesses, they couldn’t operate. Most of us were working out how we could call people and we had to go back to traditional forms. I mean, we’ve had so many examples of how powerful Facebook… [has] become. Are we at the point now where for lawmakers there is no choice?

McNamee: I would like to think that’s true, Julia, because the problem is not social media. The problem is this business model and the culture of relentlessly pursuing profit at all costs. When companies like Facebook and Google and Amazon get to be the scale of a nation so that they act like governments, the conflict with democracy are unavoidable. And we as a country are faced with a moment of truth.

Either Congress and the courts are going to pursue their job, which is to basically protect consumers, or we’re done. Because if you think about it, almost every major problem we have going on in this country is made worse by Internet platforms like Facebook. And we have a need for something that looks like a Food and Drug Administration to ensure safety of tech products. We need to have privacy so that people are not manipulated by corporations that know absolutely everything about them. And then obviously, as you point out, we need some kind of competition regulation that makes sure that small businesses are not held captive to a single platform.

Chatterley: Facebook just announced their earnings and said, ‘Look, we’re spending $5 billion on safety measures, but we’re going to spend $10 billion investing in augmented reality and that part of the business,’ which to me is quite fascinating. And actually, investors continue to reward themfor monetizing in very dangerous ways, as you’ve pointed out, with the algorithm in the way that… more eyeballs are generated with extreme content.

I don’t really see any sort of break here in terms of changing behavior for advertisers going to Facebook in small business cases because they have to, because this is how they get access to consumers. Facebook, as you said, is a profit maximizer in continuing to do this. And you like to see — you would hope that this is a point where regulators step in to change things. But that takes time. It could be years, Roger.

McNamee: Julia, I think in the interim, we need the judicial system to do its job. One of the things that became clear from Francis Haugen’s releases is that Facebook has crossed some legal lines that create great jeopardy.

For example, think about, there was a whole Wall Street Journal article that was about human trafficking. That is a clear felony. And Facebook knowingly allowed it to take place on its platform. There’s a ton of evidence from the Francis Haugen files that Facebook knowingly did not do everything it could have done to prevent “Stop the Steal” from turning into a violent insurrection.

We also know from other cases… where redactions were removed last week that there is an antitrust case in Texas. The attorney general of that state is pursuing Facebook and Google for price fixing and digital advertising. And the redactions seem to suggest a tremendous awareness of those two companies that they’re violating antitrust law, which is itself a violation. And that is again a felony at the federal level.

And so I think if we see the Securities and Exchange Commission pursuing the opportunities it has relative to disclosure and insider trading, and if we see the Justice Department going after human trafficking, the insurrection and the other aspects that have come up there, like antitrust, then I believe you’re going to buy time for regulators to pass legislation to do what they need to do.

Chatterley: Also, the information that you provide to investors, surely, and how truthful you’re being in terms of the impact that you’re having with investors. To your point, the last time we checked, human trafficking, facilitating the drug trade was illegal. Does that go right up to Mark Zuckerberg and to Sheryl Sandberg?

McNamee: Well, there is a case in Delaware where I believe six pension plans, including I think some state pension plans, have sued Facebook for a failure to properly disclose what was going on during Cambridge Analytica, the implication of which was that the stock sales made by the executives were in fact in violation of insider trading rules. And these things are really serious, and it is incumbent upon the Securities Exchange Commission to do an investigation and if they find that the evidence that has been revealed is correct, to actually pursue a case. And I do think that is — if you’re going to have a rule of law, if you’re going to have a democracy, you have to enforce the laws and you have to defend democracy. And that’s really the choice we’re all faced with today.

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Chatterley: The benefit of having huge power and huge wealth like a company like this is that you can afford to hire lobbyists. And I think anyone who spent time in Washington, D.C. or Brussels knows the power of that kind of expenditure and the voices in ears. Care to imagine, Roger, how much they’re spending on lobbyists and how many people they’ve hired in Washington?

McNamee: Yeah. I mean, the answer is tens of millions of dollars for Facebook alone. But the industry, the big tech companies, are the largest spenders in Washington by a lot. And I believe that’s also true in Brussels. And the one piece of advice I have for all governments outside the United States is to pursue the aspect of this that is most appropriate for you.

So in Europe, privacy regulations really are paramount, I think in the way people think about it, and the General Data Protection Regulation has proved to be grossly inadequate. They really need to think about banning the use of any kind of intimate data in third-party transactions.

So think about health care, location, financial, web browsing, applications use, that kind of stuff, which is so intimate and allows manipulation. You know, that’s the kind of thing that any country can ban inside its borders. You don’t need a coordinated response here because these companies are so dangerous that each country has its own way of looking at it. And I would encourage them all to pursue the right course for them.

Chatterley: You know, very quickly. As I was poring over the information in the Facebook papers this weekend, I was furiously texting using WhatsApp, calling my family back home, using WhatsApp. The irony is not lost on me of the utility value to me personally, while I have this conversation. How do you price those two things?

McNamee: It’s really hard. I mean, people ask me all the time, should I get off these things? And I say, ‘Look, if you’re a small business, it’s really hard to get off of Facebook. If you’re a rock-and-roll band, it’s impossible to get off of Facebook.’

And WhatsApp is so important to people across borders. And the issue isn’t the products themselves, it’s the business model. It’s the culture of Facebook and companies like it, which basically compromise the interests of the people who use their products constantly. And that’s what we have to stand up and defend.

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