The 22 year old who emerged from the elevator early one morning in the late summer of 2006 didn’t look like he would soon become one of the most influential people in the world. He was dressed like a college kid, which until recently he had been, and seemed kind of sleepy. But he was a young man on a mission. He had arrived to show a handful of journalists at Time, where I was an editor, a transformative new feature of his two-year-old website, Facebook.
“Mark?” I asked, having never met him before. He perked up as we walked to a conference room, where his Facebook co-founder Chris Hughes, his sandy hair nearly covering his eyes, was standing by with a laptop for a demonstration. Facebook already had 10 million users at that point, but the website was still a fairly static experience. The new feature, News Feed, would change all that, our guest, Mark Zuckerberg, declared, by connecting people more closely to the world around them. World domination and harmful side effects were not part of the conversation that day.
Thirteen years later, that’s what everyone is talking about, including Zuckerberg’s erstwhile colleague Hughes, who last week published a passionate manifesto calling for the dismantling of the social-media behemoth he helped create: “It is time to break up Facebook,” he wrote in the New York Times. “I’m disappointed in myself and the early Facebook team for not thinking more about how the News Feed algorithm could change our culture, influence elections and empower nationalist leaders.”
Facebook, now with 2 billion users, draws the most heated criticism in Corporate America right now, but the pitchforks are out for Big Tech in general. The very thing that Silicon Valley worships—scale—is now problematic for the industry’s behemoths. Amazon, Google and Facebook totally dominate e-commerce, internet search, and social media. “If you try to run up against Amazon directly, it’s like going up against Usain Bolt in the 100-meter race,” said Chieh Huang, founder and CEO of e-commerce site Boxed, at a Techonomy conference this week.
Because of their outsized economic power, the giants have increasingly become engaged in public conflicts when they try to push into even more lines of businesses, coming off as bullies. “Amazon is embroiled in controversies over the use of its facial-recognition software, the treatment of both its warehouse workers and its delivery drivers, whether its talking speakers violate child-protection rules, how much it is really lowering prices at Whole Foods, and whether or not its Ring doorbell-camera subsidiary is protecting users’ privacy,” said the Wall Street Journal last week in making a case that “Amazon’s size is becoming a problem—for Amazon.”
Not all big tech companies face the same criticisms, of course. Facebook and Google take the most flak as privacy invaders, since their business models depend on what author Shoshana Zuboff has dubbed surveillance capitalism, in which “predictions of our behavior are bought and sold” without our knowledge. Uber, which has been accused of building its empire on the backs of its drivers, suffered a disappointing initial public offering (IPO) this week, which some critics attributed to a warped winner-take-all mentality that has taken over Silicon Valley.
Apple, for its part, touts its respect for privacy “as a fundamental human right,” but has its own dominance issues with the power of its App Store. The U.S. Supreme Court this week allowed a class-action lawsuit to move forward, giving consumers the opportunity to make the case that Apple has used monopoly power to raise the price of iPhone apps. In an almost cartoon-like scenario, Apple has even been accused of cracking down on apps that fight iPhone addiction, according to an analysis by the New York Times and Sensor Tower, an app-data firm. “Why is one company—with no mechanism for democratic oversight—the primary and most zealous guardian of user privacy and security?,” the Times asked in a follow-up editorial.
The growing public consensus is that society has to reign in the giants, which has given the 20-and-more Democratic Presidential candidates a big problem to tackle. The question is, how? Among the chief proposals: breaking up some of the giants to level the playing field, passing legislation to regulate them, taxing them in various ways, and pursuing lawsuits to force behavioral changes on a corporate level. “The good news is that we’re onto them. They’re on the defensive,” said Zuboff last week in a panel discussion on digital privacy at the Brooklyn Historical Society. Her fellow panelist, author Douglas Rushkoff, pointed out that in the early days of the internet, it was seen as a benign force to connect humanity. “It used to seem like the government was the enemy,” he said, whereas now it’s “technologies that divide and alienate us.”
To get ahead of the backlash, the tech giants have gone on image-boosting campaigns, touting their benefits to society and their ability to self-regulate. Amazon released a report during National Small Business Week that said it helped mom-and-pop companies create 1.6 million jobs last year, up from 900,000 the year before. Meanwhile, Google CEO Sundar Pichai wrote a piece for the New York Times, declaring that the company’s approach to privacy adheres to its egalitarian, “for everyone” philosophy about its products. “For us, that means privacy cannot be a luxury good offered only to people who can afford to buy premium products and services. Privacy must be equally available to everyone in the world,” he wrote, mentioning several new privacy features the company is introducing.
At Facebook, Zuckerberg announced late last year that he plans to create a Facebook Oversight Board of outside advisors to help the company in its efforts to moderate harmful content. Facebook is looking for feedback about the board, “partly through some roundtables held around the world with policy experts,” The Week reported. Testifying before Congress last month, Zuckerberg said that his company could live with regulation, but noted that “details matter.” Yesterday, Facebook announced that it would put more restrictions on the use of its live video service.
As the big tech companies scramble to adapt to much greater public scrutiny, here are some of the latest proposals for reining them in:
BREAK THEM UP
“Today’s big tech companies have too much power—too much power over our economy, our society, and our democracy,” Presidential candidate Elizabeth Warren wrote in March. “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. … That’s why my administration will make big, structural changes to the tech sector to promote more competition—including breaking up Amazon, Facebook, and Google.” Lately, candidates Joe Biden and Kamala Harris have made similar statements.
In his specific call to bust up Facebook, citing the historical anti-trust examples of AT&T and Standard Oil, co-founder Hughes argued that too much power is in the hands of one person. “Mark’s influence is staggering, far beyond that of anyone else in the private sector or in government. He controls three core communications platforms—Facebook, Instagram and WhatsApp—that billions of people use every day.” That’s where Hughes draws the dotted line for breaking up the company, which he feels should never have been allowed by the federal government to acquire the two other platforms. “How would a breakup work? Facebook would have a brief period to spin off the Instagram and WhatsApp businesses, and the three would become distinct companies, most likely publicly traded.”
To some degree, tech companies already face regulation by the federal government, including the Federal Trade Commission (FTC). Any day now, Facebook and the FTC are expected to announce that the company will pay a penalty of $3 billion to $5 billion to settle claims that it mishandled users’ personal data. “The case is being closely watching globally as a litmus test on how the U.S. government will police the country’s tech giants,” reported the New York Times.
Even so, existing U.S. laws have failed to keep up with the rapid growth of market power in Big Tech. Europe, instead, has taken the lead in new legislation, particularly in the realm of privacy. “If you want to understand where the world’s most powerful industry is heading, look not to Washington and California, but to Brussels and Berlin. In an inversion of the rule of thumb, while America dithers the European Union is acting,” wrote The Economist in a recent cover package, published the same week European Union authorities fined Google $1.7 billion for antitrust violations in the digital ad market.
Last year, Europe adopted the General Data Protection Regulation (GDPR), a sweeping new law that defines personal data and a citizen’s rights in regard to its use. The GDPR is “an important milestone,” said Zuboff, “but it’s based on data ownership, which is a problem. It’s hard to get back.” What Zuboff calls “the public text,” or the information that users willingly give to tech platforms, is “only the little crust of ice on top of the iceberg of information turned into knowledge that they have about us. It’s the shadow text, a massive knowledge base about us.”
In the U.S., Europe’s new law inspired the state of California to quickly pass a Consumer Privacy Act of its own, due to take effect in 2020. But that only served to kick the debate over regulation into high gear. “The business community so thoroughly dislikes the California law that there’s broad agreement on passing federal legislation in Washington to preempt that and other potential local directives, possibly this year,” wrote Fortune’s Adam Lashinsky.
“This is one area where it doesn’t make sense to have a patchwork of laws,” Michael Beckerman, CEO of the Internet Association, a 45-member trade group, told Lashinsky. “It’s almost like having different electricity standards between states.” One idea that Silicon Valley is coming to grips with is the establishment of a singular regulatory agency focused on the digital realm.
PUT TAXES ON THEM
While most proposals to get a handle big tech companies focus on anti-trust actions and regulation, economist Paul Romer, a Nobel laureate who advised the Justice Department in its antitrust case against Microsoft, has proposed another solution: taxes.
“Instead of banning the current business model—in which platform companies harvest user information to sell targeted digital ads—new legislation could establish a tax that would encourage platform companies to shift toward a healthier, more traditional model,” Romer wrote. “The tax that I propose would be applied to revenue from sales of targeted digital ads, which are the key to the operation of Facebook, Google and the like. At the federal level, Congress could add it as a surcharge to the corporate income tax. At the state level, a legislature could adopt it as a type of sales tax on the revenue a company collects for displaying ads to residents of the state.”
Romer argues for the tax approach because the tech companies may already be too big to regulate, in the sense that powerful companies can often undermine their regulators. “Of course, companies are incredibly clever about avoiding taxes,” he acknowledged. “But in this case, that’s a good thing for all of us. This tax would spur their creativity. Ad-driven platform companies could avoid the tax entirely by switching to the business model that many digital companies already offer: an ad-free subscription.”
A tax-the-tech movement is catching on locally as well. In San Francisco, where a wave of initial public offerings (IPOs) have aggravated the hot-button issue of income inequality, city supervisor Gordon Mar has proposed a so-called IPO tax that would raise the levy on companies for stock-based compensation to 1.5%, about quadruple the current rate. Mar estimates the tax would generate as much as $200 million over two years, which the city could spend on housing, transportation and health programs. “San Francisco in 2019 is in a radically different place as a city than we were just a decade ago,” Mar told the Wall Street Journal. “I think there is broad support to reset our relationship with the tech sector.”
Indeed, a broad rethinking of society’s relationship with digital technology is underway, and it won’t be settled overnight.
“The solution is more democracy. Only coming together in the service of political power and political pressure” will work to persuade legislators that they need to act, says Zuboff, who says it will take “five to ten years, not the work of a day or year. Democracy says that humans have the right to rule themselves, and I don’t see ourselves giving up on that power.”
Steve Koepp is a co-founder of From Day One. Previously, he was editorial director of Time Inc. Books, executive editor of Fortune and deputy managing editor of Time