By the elite and for the elite: Failed states and social media platforms
There are some interesting parallels between centralized economies and today’s centralized social media platforms. To be sure, some of the comparisons are crude but equally some of the similarities are strikingly close and as such are worth considering by investors looking to the future.
A central economy is one in which economic decisions are taken by the government. They are typically run by monolithic economic organizations and there is little incentive for innovation from citizens. Their talent is sapped by tilted playing fields, leading to little in the way of opportunity. Historically they also tend to fail not with a bang but with a long, slow and drawn out whimper. They fail because they are unable to take advantage of their society’s potential for growth; everything is dominated by the elite and the economic institutions that serve them. What has this got to do with social media you might reasonably ask? Today’s social media platforms are centralized, operated, managed and planned by an ‘elite’ who benefit from the data of the many.
If we stretch the analogy it’s not hard to imagine social media users as denizens of a digital state. They are not encouraged to do anything else other than chit and chat and ‘play the game’ by handing over their data.
Sinister
If you compare how the ‘elites’ benefit from centralized economies to how social media ‘elites’ benefit from their centralized platforms, the parallel becomes a little sinister.
Centralized economic institutions are not there by mistake they are there for the benefit of elites. For instance, those at the top gain a lot from the extraction of valuable minerals, a country’s wealth, forced labour or protected monopolies and all at the expense of society.
It’s only relatively recently that many social media users have realized their data is being exploited, traded and sold on, without their consent, so the ‘elites’, such as behemoth corporates, can use it to further their own aims.
Akin to a dictatorship
We’re all familiar with how Cambridge Analytica exploited Facebook user data. And maybe a reckoning is due. Recently a group of Facebook investors demanded that CEO Mark Zuckerberg step down from his position of chairman. One investor said: “Why does Mr Zuckerberg need [voting control]? Is it because he does not want governance to evolve with the rest of his company? If so, this American dream is now akin to a dictatorship.”
Certainly Zuckerberg has benefited from his ‘digital state.’ He is worth an estimated $70 billion making him the sixth richest person in the world. Facebook users, who provide him with the data that underpins these riches, receive nothing other than a means to communicate with each other.
It’s interesting to note that in centralized economies elites benefit from what are essentially rigged systems which are tilted for their benefit. We can argue with some force that today’s social media platforms are the same. Of course, people will point out that it’s simply capitalism but in today’s world of data driven societies, what sort of capitalism takes everything and gives back nothing?
Fading stars
This is not an attack on Facebook; all of today’s social media platforms have the same centralized approach. But is their star diminishing? User numbers are falling; there is an increasing lack of trust from users and many now understand they are driven by an elite of enormously wealthy people who have gotten rich on the backs of others. Just like a centralized economy.
The problem with centralized economies is that ultimately they fail because the model is inherently flawed. Could a similar pattern be at play with centralized social media platforms?
At the end of July this year Twitter stock plunged by 20% in the wake of a one million user decline. Share price over six months shows a marked downwards turn.
Downward trends
Facebook exists to exploit personal data and following several high-profile scandals, from fake news to political manipulation, it is under intense scrutiny. Its share price over one year has been steadily trending down.
SnapChat lost three million users for the first time in the second quarter of 2018. Its user base has been steadily declining since its peak of 21 million between April and May of 2016 and its share price over one year has been sinking. Instagram stock has also been sliding over a one year period despite attracting some big advertisers.
You can argue that these are simply the ups and downs of business which they surely are. But there’s something else at play and it’s called social media fatigue. It’s a widely acknowledged phenomena characterized by users pulling back because they become overwhelmed and simply get tired of chatting, posting, updating and maintaining connections.
Questions investors must ask
As a result the question investors must surely ask is whether the early stellar growth rates that sent all of these companies racing to public flotations can possibly be sustained in each and every case.
We think not because like centralized economies the foundations are steadily being nibbled away at and they can’t offer alternatives because of their rigid models.
Take Facebook’s recent Portal offering. As if the thought of installing a gigantic Facebook camera in your house wasn’t scary enough, the company has revealed alarming new details about its Portal device.
Unrivalled opportunities
Specifically, it will be watching who you call, for how long and how you use apps. It will then use this info to target adverts at you. This isn’t digital progress. It feels like a tired and desperate attempt to keep the ad revenues coming in and the centralized model working.
At Humans.net we are challenging this digitally ‘tired’ model by introducing next-gen social media. A pilot has been enormously successful and we are now going global. Humans is characterized by great opportunity, watertight security, unrivalled flexibility and above all, fairness. Users’ can actually make money from their data which surely appals and frightens today’s social media ‘elites.’
