With an average market cap of roughly $560 billion, the dominance and control of the FAANG companies (Facebook, Amazon, Apple, Netflix, and Google parent Alphabet) is steadily on the rise. As these tech titans continue to grow and enter new markets there’s increasing concern about the ways their power has and will continue to shape our society.
During a dinner at the annual World Economic Forum in Davos, Switzerland, billionaire investor and philanthropist George Sorors took these tech titans to task – Facebook and Google, in particular.
After “accusing the industry of exploiting its users’ attention spans, personal privacy and autonomy to boost corporate profits,” Soros said “the internet monopolies have neither the will nor the inclination to protect society against the consequences of their actions…that turns them into a menace and it falls to the regulatory authorities to protect society against them,” Politico reports.
In his remarks, Soros likened Facebook and Google to casinos, “deceiving users by ‘manipulating their attention and directing it towards their own commercial purposes’…’deliberately engineer[ing] addiction to the services they provide.'”
Soros’ discontent with the trajectory of social media giants is not new. In fact, last year, he divested significant shares in several big tech companies. Notably, as Market Watch reports, “George Soros’s hedge fund, Soros Fund Management LLC, eliminated or reduced investments in some of the biggest names in tech last quarter [Q3 2017], including Facebook Inc. FB, +1.34% and Apple Inc.AAPL, +0.23% Soros divested a 1,700-share stake in Apple as well as 1.55 million shares of Snapchat parent company Snap Inc. SNAP, -1.09% according to a quarterly filing with the Securities and Exchange Commission. The hedge fund greatly decreased its holdings in Facebook and Twitter Inc. TWTR, +9.52% cutting Facebook shares from 476,713 shares to 109,451 and chopping investments in Twitter’s stock and debt.”
With claims that Facebook and Google induce people to give up their autonomy and ‘freedom of mind,’ Soros warned of a ‘web of totalitarian control’ if the actions of major tech firms were not curbed and put in check. He also lauded the European Union model of enforcement as far superior to anything available in the U.S., fearing that American regulators were either too afraid or enamored by Big Tech to appropriately curb the far-flung reach and power of the industry in favor of promoting the public interest.
As an investor in Big Tech, Soros has intimate knowledge of the inner workings of the companies he critiques. “The business model of social media companies is based on advertising. Their true customers are the advertisers,” he said. “But gradually a new business model is emerging, based not only on advertising but on selling products and services directly to users. They exploit the data they control, bundle the services they offer, and use discriminatory pricing to keep for themselves more of the benefits that otherwise they would have to share with consumers. This enhances their profitability even further—but the bundling of services and discriminatory pricing undermine the efficiency of the market economy.
Soros’ indictment of Big Tech is following a growing chorus of discontent toward the monopolists that control so much of what we see, experience, and interact with online. While it is uncertain where efforts to curb the tech industry’s influence will end up, it’s clear that the darling years of Silicon Valley among thought leaders, policymakers, and concerned citizens is on the front end of facing more challenging times.