Poor Prioritization Creates Riches
The rapid rise of Silicon Valley technology companies inspired a new capitalist paradigm. Software no longer needed to be mature or devoid of bugs before ending up in the hands of consumers. With venture capital to burn and dreams of exponential returns, founding technology teams raced as fast as they could to grow their customer bases. The “Internet 2.0” business model seemed perfect. Technology teams focus on growth at all costs with the ultimate goal of monetizing their users. Monetization is primarily done through targeted advertising. In exchange for the use of a company’s products and services, users are subjected to advertisements. The inputs required of technology teams don’t drastically differ whether they have 5, 500, or 5,000 users. The difference in outputs, however, are startling. On a per employee basis, profits are unprecedented. By the end of 2018, Facebook produced net income of $2,403,630.83 per employee. Facebook employees are more efficient in producing income than any other company in the technology sector. Facebook proved that companies could operate with incredible effectiveness and efficiency while limiting headcount. The scalability of the targeted advertising business model led to a windfall in riches, but not without a cost.
The era of “Move Fast and Break Things” has resulted in some shocking breaches of privacy and trust. Cambridge Analytica, a firm specializing in data analytics, acquired the private Facebook data of tens of millions of users. While this incident arguably led to the most impactful manipulation of Facebook users, it wasn’t the first. Back in 2012, Facebook had altered the number of positive and negative posts displayed in the news feeds of hundreds of thousands of users. It then analyzed the tone of the posts these users published on the platform. In a study published in Proceedings of the National Academy of Sciences of the United States of America, Facebook researchers concluded that the manipulated sentiments displayed in a user’s newsfeed influences the tone of a user’s future posts. (1) It is clear that consumer rights and protections have become secondary to growth and revenue targets.
We’re finding, though, that these methods of growth are unsustainable. The public demanded CEO’s to testify before congress and courts are ruling companies pay billions of dollars in fines. Google CEO Sundar Pinchai testified before the House Judiciary Committee in response to claims that Google suppresses conservative news from its search algorithm. The EU fined Google billions of dollars for anti-competitive ad practices. Google forced its customers to sign exclusive contracts, stifling competition. The EU found the contracts to be in violation of antitrust laws. The above two incidents aren’t the only reasons why Google has come under fire. The company’s own employees protested Project Dragonfly, an Google’s effort develop a censored search engine for China. A widely circulated open letter published on Medium details how the censored search engine will enable Chinese state surveillance. The “Googlers” believe that Google has begun to prioritize profits over its own values. With societal, financial, and legal pressures mounting, Google’s business model requires reevaluation.
From Blitzscaling to Thoughtful Scaling
The “blitzscaling” philosophy that has permeated throughout Silicon Valley will be replaced by a slower, more thoughtful way of growth. We’ve seen what happens when technology companies are unconcerned with the long term effects of their decisions. Scrutiny is intensifying as cries for increased regulation of technology companies grow louder. The EU already instituted GDPR, or the General Data Protection Regulation. This regulation protects EU citizens by mandating companies receive consent to capture data. Moreover, consumers have more control over their data. The most notable component GDPR is Article 17, “the right of erasure.” Commonly known as “the right to be forgotten,” the protection is as follows:
“The data subject shall have the right to obtain from the controller the erasure of personal data concerning him or her without undue delay and the controller shall have the obligation to erase personal data without undue delay where one of the following grounds applies:
- the personal data are no longer necessary in relation to the purposes for which they were collected or otherwise processed;
- the data subject withdraws consent on which the processing is based according to point (a) of Article 6(1), or point (a) of Article 9(2), and where there is no other legal ground for the processing;
- the data subject objects to the processing pursuant to Article 21(1) and there are no overriding legitimate grounds for the processing, or the data subject objects to the processing pursuant to Article 21(2);
- the personal data have been unlawfully processed;
- the personal data have to be erased for compliance with a legal obligation in Union or Member State law to which the controller is subject;
- the personal data have been collected in relation to the offer of information society services referred to in Article 8(1).” (2)
The US may not be too far behind the EU is bolstering consumer protections. In a rare example of bipartisan collaboration, Democratic and Republican members of congress are discussing regulations around data transparency, control, and breaches. Once these discussions ultimately result in regulations, we can rest assured that ethical considerations will be incorporated in the development and refinement of technology companies’ business models. Regulation will slow the pace of growth within the technology sector, as revenue streams will be required to adhere to societal values.
The Technology Companies of the Future
This piece is not meant to skewer technology companies for their past failings. Developing cutting edge technology will occasionally wound the public’s sense of fairness. This latest wound, however, can be healed. We can view the technology industry as having reached a point of maturity. Once regulations are enacted, the private and public sectors can collectively push the industry forward at sustainable speeds. Business operations and algorithms will no longer be black boxes. Consumers will be afforded more transparency when engaging with technology companies’ products and services. This transparency will create a more equitable and less damaging future.
- “Editorial Expression of Concern: Experimental Evidence of Massivescale Emotional Contagion through Social Networks.” Proceedings of the National Academy of Sciences, vol. 111, no. 29, 2014, pp. 10779–10779., doi:10.1073/pnas.1412469111.
- Official Journal of the European Union, Vol. L119 (4 May 2016), pp. 1-88
Have thoughts about technology companies of the future? Leave a comment below or contact me directly.