What Was Missing from Zuckerberg’s Call for Regulation

These days, it often feels like you have to declare your side before offering an opinion on almost anything. So let me state categorically that I love Facebook and have for over a decade. And that love hasn’t wavered, even as others have had their hatred for or distrust of the platform reinforced by a series of negative headlines and scandals.

So, when Mark Zuckerberg penned an op-ed for The Washington Post urging governments to regulate Facebook and other internet companies in four big areas, you could almost hear the eyes rolling. Of course, Facebook is a corporation, and it is acting in its self-interest. But in my view it was actually a positive move.

For years, I winced at how Big Tech approached regulatory matters. When they wade into policy matters, they fail to see the bigger picture — and the younger the company, the worse they are at this. The hole that Facebook has dug for itself is entirely because its leadership seemed to believe that if they stayed within the letter of the current law they wouldn’t be regulated. This is a completely naive and ahistorical view. And this view has prevented Facebook from innovating in their own policy space. Without that policy innovation, we are left with essentially nonsensical suggestions to break up Facebook — which wouldn’t actually solve any of the issues anyone has with Facebook.

Instead, what Facebook needs to understand that it was the winner in a winner-take-all contest for the social media market. Now, it is in an unassailable position and it’s eventually going to be regulated accordingly.

We’ve been here before with the last round of Big Tech companies. When we started with the large integrated monopolies, like AT&T, everybody hated them. What we did in response was to regulate in a way that addressed what was causing them to be a monopoly. In telecommunications, you could not make calls from one network to another network. Old Tech argued that to even contemplate that would be a bad thing because of quality and privacy concerns. Nonetheless, it was done, through interconnection requirements. And that meant that the network effects that gave Old Tech an unassailable monopoly dissipated. Consumers had choice and those companies moved down the list of the most hated. Essentially, we have the same issue going on with Facebook today.

Facebook is effectively a communications company where people send messages and they receive messages. The problem is that you only can send and receive messages within Facebook. If you want to leave, you can’t leave without taking your entire network with you. This is their monopoly moat. Successful regulation should address this specifically, not just break up the company for being too big.

Read more of this Harvard Business Review article by Joshua Gans by clicking here.