Roger McNamee’s Facebook Critique

In a recent Time magazine article, Roger McNamee offers an agitated criticism of Facebook, adapted from his book Zucked: Waking Up to the Facebook Catastrophe.  Facebook “has a huge impact on politics and social welfare,” he claims, and “has done things that are truly horrible.”  Facebook, he says, is “terrible for America.”

McNamee suggests his “history with the company made me a credible voice.” From 2005 to 2015, McNamee was one of a half dozen managing directors of Elevation Partners, an $1.9 billion private equity firm that bought and sold  shares in eight companies, including such oldies as Forbes and Palm.  U2 singer Bono was a co-founder. Other partners included two former executives from Apple and one from Yahoo.  Another is married to the sister of Facebook’s COO. Such investors are not necessarily disinterested observers, much less policy experts.

Between November 2009 and June 2010 Elevation Partners invested $210 million for 1% of Facebook.  That was early, but two years after Microsoft made a larger investment. Back then, McNamee and other investors had facetime with Zuckerberg.

McNamee supposedly became alarmed while perusing “Bay Area for Bernie” on Facebook and finding suspicious memes critical of Hillary.  Later, he imagined the Brexit vote must be due to misleading Facebook posts (as if British tabloids and TV were silent). “Brexit happens in June,” he says, “and then I think, Oh my god, what if it’s possible that in a campaign setting, the candidate that has the more inflammatory message gets a structural advantage from Facebook? And then in August, we hear about Manafort, so we need to introduce the Russians into the equation.”

He suggests goofy Facebook ads by Russian trolls stole the U.S. election from Clinton. Actually, the Mueller indictment said the Internet Research Agency “allegedly used social media and other internet platforms to address a wide variety of topics” to inflame political debates, frequently taking both sides of divisive issues.  Such political trolling for fun and profit (clicks generate advertising money) is commonplace in Russia, and also at home in the USA.

McNamee’s political agenda is partly a matter of endorsing aggressive discretionary use of antitrust prosecution, which I have analyzed at length in Regulation.  But he goes much further than that.   He would empower politicians to both dismantle and constrict McNamee’s suspiciously selective list of disfavored firms (which absolves Apple, Microsoft and others).  He also wants government to coddle, bankroll and subsidize the sort of start-ups he’d probably like to invest in – after they’re subsidized and protected.  And he wants “public health services to counter internet addiction.”

“We can create a political movement,” says McNamee; “We can insist on government intervention.”  He wants “to set limits on the markets in which monopoly-class [?] players like Facebook, Google and Amazon can operate.” “The economy would benefit from breaking them up… I favor regulation as way to reduce harmful behavior.”

There is no coherent argument for “limits on markets,” however, since McNamee doesn’t try to explain (nobody could) how Amazon owning a newspaper or grocery store, or Google buying DoubleClick, or Microsoft acquiring GitHub could reduce competition in those markets.

Facebook owns one of many photo-sharing services (Instagram) that has to compete with email, and Facebook owns one of many messaging services (WhatsApp and Messenger), among others from Apple and many others, that struggles to compete with texting.

Instagram, WhatsApp and Snapchat compete with others for mobile photo sharing, and with YouTube for video sharing, but they aren’t really comparable to Facebook, Twitter, LinkedIn or Google Plus for sharing opinions, news and links.  “Breaking-up” Facebook by forcing the sale of Instagram and WhatsApp to different owners (e.g., private equity firms) would make no discernable difference to consumer choices or competition.

McNamee’s proposed regulation of “harmful behavior” would invite political censorship and propaganda.  So too would his proposed subsidies and protection from competition for new firms deemed “civically responsible” by politicians and bureaucrats. “In exchange for adopting a benign business model, perhaps based on subscriptions, startups would receive protection from the giants. Given that social media is practically a public utility,” he claims, “I think it is worth considering more aggressive strategies, including government subsidies … [because] civically responsible social media may be essential to the future of the country. The subsidies might come in the form of research funding, capital for startups, tax breaks and the like.”

McNamee’s scheme for inviting ambitious political operatives to force Facebook to submit to being micro-managed as a regulated public utility is because he is confident that most common folk (unlike himself) are easily duped.  It is his noblesse oblige to launch a political movement to protect the lumpenproletariat from their childish foolishness.

The trouble, as he sees it, is that people friend people they agree with, “so each persons’ News Feed becomes a unique reality, a filter bubble that creates the illusion that most people the user knows believe the same thing. Showing users only posts they agree with was good for Facebook’s bottom line,” he claims, “but some research showed it also increased polarization.”  Such sharing of news and opinion among Facebook friends, says McNamee, has “aggravated the flaws in our democracy while leaving citizens ever less capable of thinking for themselves.”

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Why is the tendency of like-minded people friend or follow each other any more of a “threat to democracy” (as McNamee calls it) than conservative Republicans watching Fox News and leftist Democrats watching MSNBC? Should that be banned too? And how is McNamee’s proposed Social Media Czar supposed to ban liberals or conservatives (who are said to be increasingly incapable of thinking) from using social media to befriend or follow like-minded people? After all, the FCC and FTC can’t even control robocalls and spam texts.

Many uses of the Internet involve some personal data about identity, contacts, sometimes politics. Many “likes” might a strong clue of which party a Facebook user will vote for – but that is easier to find from public voter registration and campaign donation.  Google and Apple collect and share data that may reveal your interests, though that can be largely thwarted by deleting your browser and search history. Sites like Facebook or Instagram don’t acquire sensitive data about banking, health or criminal offenses.  In the case of Facebook, McNamee’s feigned hysteria about privacy and data-mining algorithms is mainly about tracking our online shopping and searches to guess what we want to buy.  Personally, I find some targeted ads useful but most are easy to ignore.

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If you hate commercials on TV, cut the cable cord. If you hate commercials on Facebook, close your account.  Yet most Facebook users apparently find the social benefits still exceed the privacy costs. That is their choice to make. After a year of criticism from regulators, politicians and professional “privacy advocates,” Facebook’s fourth quarter earnings were up 30% from a year earlier and the number of active monthly users was up 9%.

Facebook and Google, like other enormously valuable internet services, are free because of advertising. McNamee’s vague vision of “human-driven social networks” would apparently be “based on subscriptions” and taxpayer subsidies, including some sort of federal protection from “giant” domestic and foreign competitors (which at least implies banning takeovers, even though the chance of a big buyout is precisely what motivates many start-ups).  

Very few Facebook alternatives have attracted more than a few million users and survived with no ads and no fees.  Vero, for example, lured three million users by offering “access to Vero free for life… until further notice” while adding that they “will confirm the start date and pricing of Vero subscriptions soon.”  That business plan begins with early freeloaders then hopes for later suckers. Any subscription-based social medium could work only if everyone we wanted to reach was also willing to pay the fee, which is statistically unlikely.  That’s why McNamee lobbies to force taxpayers to provide “human-driven social networks” like Vero with socialist start-up capital and endless subsidies.

An author’s political agenda often drives the arguments, which explains why extreme rhetoric about hypothetical “crises” in the future are typically abused to excuse extreme proposals for government meddling in the present.  McNamee turns out to be just another missionary for paternalistic big government to throttle successful big tech firms, subsidize less-promising firms, and protect the gullible masses from being persuaded by Facebook posts to make what he regards as politically undesirable choices.

This article was originally published by Cato at Liberty. It is reprinted by permission from the author.

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Alan Reynolds

Alan Reynolds is a senior fellow at the Cato Institute and was formerly director of economic research at the Hudson Institute. He served as research director with the National Commission on Tax Reform and Economic Growth, an adviser to the National Commission on the Cost of Higher Education, and a member of the Office of Management and Budget transition team in 1981. His studies have been published by the Organization for Economic Cooperation and Development, the Joint Economic Committee, the Federal Reserve Banks of Atlanta and St. Louis, and the Australian Stock Exchange. Author of Income and Wealth (Greenwood Press 2006), he has written for numerous publications since 1971, including the Wall Street Journal, the New York Times, National Review, the New Republic, Fortune, and The Harvard Business Review. A former columnist with Forbes, Reason, and Creators Syndicate, Reynolds is currently a member of the Investors Business Daily brain trust.

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