Progress Is Imperfect and Not Inevitable

Regulation is not a black and white issue, particularly in tech.

Tech unicorns may not be as cuddly as we once thought.

It’s been an interesting time lately to be a Silicon Valley unicorn. Snapchat has gone public admist both celebratory commentary and skepticism. Uber had maybe the #worstmonthever — getting crushed with accusations of alleged harassment, CEO and co-founder Travis Kalanick’s own boorish behavior and its business model being exposed as possibly fool’s gold, to say nothing of the cutthroat and illegal methods recently exposed. Across the Valley, Facebook stirred up a bevy of reactions due to the grand open letter Mark Zuckerberg published about the company’s role in shaping a new world order.

All of these points underscore a truth that seems to be escaping many in digital media and tech, particularly the residents and champions of the idea of Silicon Valley. Progress is not guaranteed by innovation, and at best it is progress is an imperfect evolution. Companies disrupting industries and consumer behavior need to address this head-on and meet an obligation of understanding the opportunity costs associated with innovation.

Take Uber. Ride sharing apps have been hailed as ingenious saviors disrupting the travel industry, and particularly for upending the taxi market. You could extend this example further to companies like Airbnb or TaskRabbit who have helped facilitate the rise of the new ‘sharing economy.’ On the surface, this is progress with tangible benefits to people acting as consumers. However, there are opportunity costs associated with these gains. Chief among them is the marginalization and eventual potential extinction of traditional service industries — taxis, for example — which employ a lot of people. Furthermore, where are the gains distributed? To the consumers, yes but there is increasing evidence that this gain is increasingly skipping the company’s drivers straight into the company’s pocket. If Uber drivers increasingly earn less for their work and they displace taxi drivers from the trade while the company’s driver-less trucks replace truck drivers, what happens to all of the people making less or no income with less or no benefits? What impact does that have on the greater economy when the spending power of those people are significantly reduced?

This chart should worry you if you work in social media and digital advertising… source: Snap (via Recode)

Another illustration of the need to think long and hard about tech regulation can be seen in the “competition” between Snapchat and Facebook. Snapchat has been a darling of the tech industry and pop culture for a couple years now. It has embraced product innovation on an incredible scale. They’ve managed to not only redefine the nature of social networking but also to normalize a new medium, augmented reality. With a dearth of IPOs in recent years, Snap, Inc. (Snapchat’s parent company) is a key player in two Wall Street debates: should companies continue to aim to go public, and can Snapchat compete with Facebook where others (ahem, Twitter) have failed? While the jury is out on the former, the latter point is increasingly worrisome when you consider that Snapchat’s growth has stalled out right as the company moves from privately funded to publicly traded.

Why has Snapchat’s growth stalled? Facebook. As Facebook systematically copies Snapchat’s ‘Stories’ feature on every platform it owns — first Instagram, then WhatsApp and coming, ultimately, Facebook — it’s been able to leverage it’s absolutely massive user base. There are 1.5 billion-plus people on Facebook and 500 million-plus people on Instagram. Snapchat, admirably, has built a 150 million-plus user base out of nothing. However, with Facebook’s recent strategy having a seemingly correlated effect on Snapchat’s growth, one has to wonder if Snapchat can ultimately make social networking a competitive industry.

And competition would be a really good thing. Zuckerberg’s open letter is basically a manifesto, and it leads to some pretty heavy implications. If you want to get in the weeds on it, read this article and then listen to the accompanying podcast for excellent dissection and opinions on the significance of this event. I’ll summarize here: Facebook is one of, if not the most powerful companies on the planet and the fact that their CEO just came out and said he wants to use Facebook for the very political purpose to shape how people are connected and share information. Whether or not you agree with him, that should trouble you.

There is no real regulation for social networks right now that could counter what Zuckerberg is proposing. Whether you agree or not with his political point of view — and he clearly has one —it’s important to have some sort of oversight into this industry that ensures it will prevent those in power from consolidating and potentially corrupting through a slanted worldview. Look at what we’re facing down now in the US government with respect to executive authority and alleged overreach. We can’t afford to have rose-colored glasses when it comes to the vision of tech that tech leaders claim to be offering.

Facebook and Google dominate online advertising. These two titans of the industry their share of the digital advertising pie grew 100-plus percent in the past year. That means everyone else lost share of revenue. That’s not good. Facebook is becoming a monolith of a monopoly that is crushing the ability for the social media and the digital advertising market to be competitive. For the sake of those industries and by extension in support of our economy we need to have more competition in what is now the dominant communications and information medium for almost everyone. We should be rooting for Snapchat to ascened to a truly competitive position, and for other companies to follow.

That may mean discussing new regulation models and reforms to existing ones, because progress isn’t perfect and guaranteed just because some espouse a belief that it is so. Silicon Valley and those who evangelize it tend to tout this grand idea that they’re shaping a better world. That’s a fine idea in theory, but it is increasingly clear that we need to find ways to hold companies and their leaders accountable in practice.

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