FANG*-ian Bargain

(Economist cover illustration)

*Jim Cramer's acronym for Facebook, Amazon, Netflix, and Google (Alphabet).

Facebook and Google have borne rising criticism for the "fake news" that users are referred to on their platforms. From the left they are charged with Russian disinformation that swung the election to Donald Trump. From the right they, along with Twitter, are blamed for censorship of conservative views.

IMHO, fake news is a far less important problem (alleviated by providing as much information as possible and letting consumers decide for themselves) than their accumulation of data on billions of human beings.

Including Netflix, Amazon, and Apple, tech giants know what we buy, where we are, our health, our viewing and reading habits, who we know, much about our wealth, where we live, and are privy to much of our private communications.

Many of their services appear to be free, but users “pay” for them by giving away their data.....The platforms have become so dominant because they benefit from “network effects”. Size begets size: the more sellers Amazon, say, can attract, the more buyers will shop there, which attracts more sellers, and so on. By some estimates, Amazon captures over 40% of online shopping in America. With more than 2bn monthly users, Facebook holds sway over the media industry. Firms cannot do without Google, which in some countries processes more than 90% of web searches. Facebook and Google control two-thirds of America’s online ad revenues....

Facebook not only owns the world’s largest pool of personal data, but also its biggest “social graph”—the list of its members and how they are connected. Amazon has more pricing information than any other firm.

Old-fashioned antitrust law provides poor protection against the power that springs from data analyzed by powerful computers.

The traditional tools of utilities regulation, such as price controls and profit caps, are hard to apply, since most products are free and would come at a high price in forgone investment and innovation.

One solution: [bold added]

personal data are the currency in which customers actually buy services. Through that prism, the tech titans receive valuable information—on their users’ behaviour, friends and purchasing habits—in return for their products. Just as America drew up sophisticated rules about intellectual property in the 19th century, so it needs a new set of laws to govern the ownership and exchange of data, with the aim of giving solid rights to individuals.

In essence this means giving people more control over their information.

"Control" to the Economist doesn't mean that Facebook or Google doesn't have the information, just that they aren't as free to keep it out of competitors' hands. In any event privacy will be as dead as the dodo.

Whether the subject is nuclear weaponry or space exploration or personal data, the hoary cliché still holds: law and ethics cannot keep up with technology.