Interview with Luigi Zingales: Social media and antitrust

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Allison Schrager has a conversation with Luigi Zingales on the topic “Break Up Big Tech?” A conversation about the future of the industry ”(City newspaper website, September 21, 2021).

Zingales brings up a number of interesting points, but here’s one:

I think the problem is we treat the Big Techs as one big problem, and we say we have to separate them. Rather, what we need to do depends on what we want to accomplish and what sector of the industry we are talking about. Let’s start with social networks. I think the government should have tried to stop Facebook’s acquisition of Instagram and WhatsApp, but I’m not sure separating them now would make a difference in the long run. If there are large network externalities, separating Facebook from Instagram would only be a temporary measure, because ultimately only one of the two will prevail. …

[T]here is one thing I would like to see. Why can’t I have software that monitors both Signal and WhatsApp and can receive and send data to both at the same time? In 2008, a company called Power Ventures did just that, but Facebook sued and established a principle in US courts that if I give you my Facebook login credentials and you download data with my consent, then you are committing a federal crime and should go to jail. I think it’s crazy, and it’s one of the many legal issues that make solutions difficult. …

We should separate the two key functions that Facebook performs: information sharing and information editing. Facebook and Twitter allow me to share a photo with anyone who follows me. Yet Facebook also decides whether all of my followers will see the photo at the top of their feed, at the bottom, or not at all, if their feed is obstructed by other posts. Facebook may also decide to promote my photo to many people that I don’t know. …

First, we need to separate the editorial role from the sharing role. In the editorial role, where there are no network externalities, we can have competition. I can have an editor from the University of Chicago, and another person could have Jacobin as editor. Newspapers can redefine their role as editors. I could subscribe to the Wall Street newspaper editorial selection services: the the Wall Street newspaper edit and select from the web the articles or tweets I want to read. For example, I hate when people talk about their lives on Twitter; the others like it. There should be free competition for the preservation of these information flows.

On the other hand, the sharing function (which benefits from network externalities) should be considered as a public carrier, with the typical restrictions of a public carrier, including universal service. Everyone should be allowed to post on Facebook, unless it violates the law. Likewise, Facebook’s sharing function should retain legal liability protection, while the editorial function should not. …

Consider a telephone company. Do you know how many crimes are committed over the phone? Are the telephone companies responsible for these problems? You could bug out every conversation, but no one would even consider that possibility. Unlike phone companies, Facebook, Twitter, and YouTube promote content posted on their networks. Recently, I wanted to watch a YouTube video of Noam Chomsky, and I immediately got all of these recommendations for this weird TV channel. When I started to investigate, I found out that he was from Venezuela. Venezuela has a very radical left-wing channel that broadcasts in English for the American market. YouTube is promoting the channel and making money from promoting it because it wants viewers like me to stay committed to their service as much as possible. And the way to keep us engaged is to give ourselves more and more radical stuff that gets us more and more energized. The problem isn’t social media; it’s the business model, which consists of making people addicted to platforms.

I’m not entirely convinced by Zingales’ claim that sharing on social media has implications for network externalities, unlike editorial choices about what to promote. There is also a certain degree of irony in the fact that a previous round of complaints against social media was that they cannibalized newspapers and other newspapers, transmitting their content without paying the original publishers for it. Now the proposition is that social media sites should be forced to let others crawl and deliver their content?

But I think it’s useful to think in specific terms about what we’re trying to accomplish by applying antitrust regulation to social media. Simply saying “sic ’em” is not a valid motivation for public policy. For example, is the goal to have a more competitive market for online advertising? Or to protect the confidentiality of individual data? Or are there issues in how these companies choose what content to promote, and how to promote it, that raise anti-competitive policy or other issues? Which part of a social media business is more like a phone conversation, just conveying what someone is saying, and which part involves the company’s strategy and choices?


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