Sinan Aral, David Austin Professor of Management at the MIT Sloan School of Management and MIT Initiative on Digital Economy, joins Yahoo Finance to discuss how Facebook and social media networks should be regulated.
- So Mark Zuckerberg responded to what we witnessed on Capitol Hill yesterday, the testimony from the Facebook whistleblower. Let's break all of this down with somebody who knows and understands social media better than just about anybody. That is Sinan Aral, The Hype Machine's author as well as the David Austin Professor of Management at the MIT Sloan School of Management and MIT Initiative on the Digital Economy. It's good to see you again, Sinan. Glad you are joining us.
SINAN ARAL: Good to see you as well. Thanks.
- Let me just quote that Zuckerberg letter to employees yesterday evening. "We care deeply about issues like safety, well-being, and mental health. It's difficult to see coverage that misrepresents our work and our motives." What is he getting right? Or what is he missing? Because it seems like a lot of people are ready to beat up Facebook.
SINAN ARAL: Well, I mean, I think that this witness, the whistleblower, is credible, you know. She's an insider. She spent a lot of time bringing tens of thousands of pages of documents out of the company. She didn't overreach in her testimony. So she-- when asked about things that she didn't know about, she said, I didn't work on that project. I don't work on revenue and so on. And it seems to be garnering a bipartisan support.
In other words, you see congressmen and women saying, it's time to get to work. And hopefully, that's true and that-- and that that will actually happen. The response, I thought, was incredibly weak. I think calling her illogical, representatives of the company saying she stole the information while we have laws that protect whistleblowers and so on, I think they could have done a much better job in answering the claims and being a lot more forthcoming and forthright, but we didn't see that.
- And Sinan, one thing that you did point out in your notes to us and something that has been-- many of the lawmakers have been calling for from Facebook is more transparency. And we have yet to actually see that from the social media giant. Do you think that's about to change now? Do you think that because of the recent criticism, because of the events over the last couple weeks, that we could potentially see more transparency from them?
SINAN ARAL: I sincerely hope so. Because, remember, right now there's a debate about on one side, you have the whistleblower and her supporters saying, look, there's evidence, internal research and documents that say that Facebook knows that it harms kids and people in general and Facebook saying, no, you're just cherry picking certain pieces of research. We report every quarter lots of decreases in harmful content. And we get 99% of it and so on. And the question everyone is asking is, who's right?
Well, the answer is that we need more transparency that is mandated by law in order to find out. Because, essentially, right now akin to big tobacco, we want to know, does cigarette smoking cause cancer? But we don't have access to what's in the cigarettes. There have been industry academic partnerships that try to get inside of Facebook, and other social media companies. They were delayed for up to two years, and then when Facebook did give data, that data was found to have a tremendous amount of errors in it.
So this sort of let's work this out in an industry academic partnership doesn't seem to work. We need legislation that brings crowbars to the front door and gives us access to what is going on with the algorithms and the data so that we can understand Facebook and other social media's impact on society, our mental health, our public health, our democracy, and so on.
- Sinan, at the end of the day, there was that statement from their PR department at Facebook, which said, look, Congress hasn't changed the law in 25 years. It's up to them to figure out how to regulate this. Isn't that, though, the danger? Because as you just said, there isn't transparency. Congress-- you know, how many on Capitol Hill truly understand how to break this apart? And I don't mean break up Facebook. But I mean to understand what may or may not be going on with these algorithms.
SINAN ARAL: So there's this debate at the sort of surface, which is about, what are the harms of Facebook? And what are the positive potentials of Facebook? Underlying that debate is this debate about transparency, which is, how do we determine exactly what kind of harms Facebook engenders or other social media? I don't think this should be limited to Facebook. I think that any large social media platform should be subject to new transparency rules.
And there are many proposals in Congress and elsewhere that would bring that transparency. But people have to realize that this transparency debate is prima facie. It's a priority. It has to happen first. We need to have access in order to make clear links between what we see on Facebook, how the algorithms are coded, and the effects we see on society. If we rush to regulate harms that may or may not exist before we know exactly how things are working, then we're going to get things wrong. And so that kind of transparency that is guided by experts is what's needed first.
- And Sinan, real quick, let's talk about competition because you're an investor. You're an entrepreneur. You see social media-type startups all the time. To what extent has Facebook stifled competition? And why is that such a massive-- or it should be a massive concern for lawmakers going forward?
SINAN ARAL: So in addition to transparency, the other fundamental, underlying issue, a foundational issue, is competition. You're right. As an investor, I see startups with great ideas about how to fix social media every single day. These are viable businesses. These are real things that could help us bring mental health to our kids, that could help us create a better social media ecosystem, but they are not getting the oxygen they need to succeed and survive. They will not get the oxygen they need to succeed or survive until we solve the competition problem.
Right now the industry runs on network effects. And because of that, large companies dominate not just the competitive landscape but the data. They have access to and control over all the users and all the data. And so any new startup with a great idea for how to make this space better doesn't get the oxygen it needs to succeed.
To solve competition, while we can worry about breaking up one company or another, a more sustainable solution is structural reforms to the economy itself. And that means interoperability legislation and data and social network portability. Things like the Access Act are sitting in front of Congress now that would force interoperability among the social media platforms.
And we need data portability and social network portability akin to cell phone number portability. Do you remember when you couldn't take your cell phone number with you when you switched from Verizon to Sprint? Then we passed a law that said that was not legal, and you should be able to. That created lots of competition in the cell phone industry. We need the same thing for social media today.
- Sinan Aral is author of The Hype Machine and also a professor at MIT. We appreciate having you back here at Yahoo Finance and look forward to the next discussion as we continue to follow the Facebook follies as some people are calling it.