Regulating the Tech Giants Isn’t a Zero-Sum Game
Should the government intervene to put guardrails on the most lucrative American industry?
Nothing in life is free.
If you’re an alum of tech giants like I am, the core message Netflix’s The Social Dilemma won’t be a surprise. The film illuminates what tech insiders already know: users are the product, and more specifically, manipulating users’ behavior to click, view, purchase, and engage is currently the most valuable product on earth. In fact, U.S. Tech stocks’ value recently eclipsed the entire European stock market’s value, racking up a staggering $9 trillion in market cap.
Nothing in life is free and technology is no exception. Our actions online on so-called “free” platforms have a sticker price, and it’s made a lot of people very, very rich.
There, I just saved you 90 minutes.
But as Sarah Klearman points out in a recent article, the film doesn’t offer much in the way of solutions. The tech insiders interviewed, as she points out, realize the issue and have even attempted to change the culture from the inside out, with minimal results.
Congress: instead of trying to become deep experts in tech, how about regulating the tech companies using common sense practices from other industries?
Believe it or not, the tech giants might actually thank you.
Businesses have no incentive to self-regulate
Why would they? Despite grandiose statements by organizations like the Business Roundtable to “better serve all of our stakeholders, not just shareholders,” businesses are still driven by the guardrails in which they operate: maximizing profit while abiding by the law (or paying fines for breaking it as a small cost of doing business, à la Facebook recently).
If there’s nothing to enforce compliance, or if the consequence of breaking the law is too small, businesses will push the boundaries.
The debate on whether or not businesses should exclusively focus on maximizing profit is a decades-old debate, most notably pivoting in the 1970s when Milton Friedman asserted that shareholder value is the only thing CEOs should care about.
And while trends show that consumers do care about corporate values — e.g., the recent commitment by Sephora and others to fill their shelves with Black-owned products — the public’s attention span is short. Public opinion cannot be the only guardrail that motivates businesses to do the right thing.
I’m not debating whether or not businesses should broaden their scope to include more stakeholders than Wall Street. That’s an essay for another time.
I’m asserting that after amassing $9 trillion in combined market cap, tech giants do very much care about increasing shareholder value.
Therefore, if consumers do not demand that companies do the right thing, and if businesses are currently incentivized to maximize shareholder profits, governments must step in to provide guardrails that protect damage to society and to consumers.
Government intervention is not new
Dozens of industries: airlines, financial services, healthcare, and others are heavily regulated in the United States. But it’s clear that many members of Congress have a limited understanding of the tech industry, creating a lopsided legislative agenda in which tech firms lobby heavily for their interests (maximizing shareholder value) without a strong voice of opposition.
So, Congress: instead of trying to become deep experts in tech, how about regulating the tech companies using common sense practices from other industries?
Customers are savvy. Just because you tell them how you’re making money off of their data doesn’t mean they won’t use your platform.
Believe it or not, the tech giants might actually thank you.
The win-win of regulating the tech industry
Tech companies currently operate many different “mini-companies” across regions. At Uber, we even had “city teams” that had to dissect and solve for the hundreds of different regulatory requirements for cities in which we operated. I remember sitting for hours with one particular set of city regulators debating 40 granular data sources and whether or not they should be disclosed publicly, or if those data sources were proprietary.
This bottom-up approach creates massive inefficiencies for companies, operating under different rules state by state and even city by city. It means companies have to design different products and policies at a region-by-region level, which is expensive (and conflicts with their goal of maximizing shareholder value).
Public opinion cannot be the only guardrail that motivates businesses to do the right thing.
Now, don’t get me wrong. Tech giants aren’t going to blissfully applaud any regulations that come their way. But some common-sense approaches that recognize the changing nature of work, shopping, and connecting online could help protect consumers and simplify compliance for tech companies.
1. Require tech companies to disclose information in plain English
Studies have shown that dozens of states still have large populations (>20%) of readers reading below a fifth-grade literacy level (which is tragic, and unacceptable, but reality). So why are things like cookies disclosures on websites still in legalese? Companies should use words and phrases that everyone can understand.
2. Require business model explanations before users join your platform
Right now, it’s incredibly easy to sign up for just about any tech-based product. It’s often a one-click experience. Why? More users means more value. Tech companies want the least friction possible.
But signing up for something without knowing what you’re actually opting into is one of the biggest critiques of tech giants. Why not incorporate a short video or app-based education model to describe how the website works, how privacy works, and get users to sign up based on a more educated understanding?
At Uber, we talked to our customers: riders and drivers, all the time. They would tell us “I ride/drive with Uber or other platforms depending on who’s giving me the best offer that day.” So it was our job to give them the most enticing offer. That encourages healthy competition.
Customers are savvy. Just because you tell them how you’re making money off of their data doesn’t mean they won’t use your platform. In fact, they may even be more loyal to you if they know you understand them the best.
3. Incentivize healthy competition
Anti-trust law is out of date. Oil, steel, and other old-school business regulation models just don’t translate to the modern era. We’re not competing for widget sales, we’re competing for consumers’ attention.
But the concept that the only way to stop the tech giants from amassing more power and monopolies is to block acquisitions feels like a lose-lose for everyone. Startups need exit opportunities.
So how about creating an incentive that helps startups have more staying power against their Goliath peers? The big tech companies already enjoy dozens of tax incentives around R&D and innovation, whereas small startups get little benefit from these. What about using tax revenue from big tech to fund investment in emerging companies, to help them grow and compete on a more even playing field?
4. Require representation on corporate boards
Just like racial diversity, diversity of thought can also drive better and healthier outcomes for companies. Some states have rules about who serves on boards for gender and racial diversity.
If Congress is concerned that consumers’ voices aren’t being heard, or that their interests aren’t being protected, how about requiring representation from consumer groups on corporate boards? It’s shown that having women on your board improves company performance — imagine what value could be unlocked by having customer voices on your board, too.
5. Define ‘facts’
Advertisers today can publish just about any content they want. It’s why Facebook is currently scrambling to create a disinformation-management team to prevent a repeat of the 2016 election interference.
Why not lay some guardrails around widespread content sharing? If an audience size is above X size, perhaps guidelines around where the information came from, the source, and the validity of the information could help consumers know just how “real” the idea is.
Regulating tech giants doesn’t have to mean stifling growth. Instead, by making tech products more accessible and with consumers in mind, tech companies can continue to flourish with a little healthy competition.
