Occam’s razor is a principle that says when something happens that can be explained in multiple ways, the simplest explanation is usually the right one. The same is true of solutions: The simplest, most straightforward solution is usually the best way to solve a problem.
In the U.S., social media giant Facebook Inc. has become a problem. It makes its money — $23.3 billion in 2017 adjusted earnings — by running roughshod over privacy concerns, selling users’ data to advertisers. Along with Amazon, Apple and Google, it has “aggregated more economic value and influence than nearly any other commercial entity in history,” as the marketing professor Scott Galloway wrote in Esquire earlier this year.
It’s a monopoly, having either bought or crushed most potential competitors. It stifles innovation; as my Bloomberg Opinion colleague Noah Smith noted recently, potential startups can’t get capital if venture capitalists think they might wind up as Facebook roadkill. (Such companies are said to be in Facebook’s “kill zone.”)
And then there are the issues that have emerged since the 2016 election: how Facebook looked the other way as Russian interests spread disinformation; how it was slow to act as its platform was used to foment murder and rape in Myanmar; how it turned over user data to Cambridge Analytica, the sleazy political data firm working on Donald Trump’s presidential campaign; and, in the most recent revelation, how it tried to discredit critics in the most odious of ways — by linking them to George Soros, the Jewish financier who has been demonized by the anti-Semitic right.
As more has emerged about Facebook’s business tactics, as well as its efforts to quash complaints, critics have come forth with lots of ideas about what to do about Facebook. Over 30 senators have co-sponsored a bill that would force Facebook to abide by the same disclosure rules for political ads as television and newspapers. The New York Times called for congressional hearings. Antitrust economists have come up with a number of intriguing ideas to rein in Facebook.
But the idea that makes the most sense — the one with the best chance to dilute Facebook’s power, spur innovation and insert competition into the social media industry — is the solution Tim Wu proposes in his new book, “The Curse of Bigness.” It’s the Occam’s razor solution: break Facebook up.
Wu, of course, is the Columbia University law professor best known for coining the phrase “net neutrality.” His short book is a plea to return to the day when antitrust enforcement meant something more than focusing on whether consumer prices might rise — which, he points out, was most of the last century. It’s only been the past few decades that the “consumer welfare standard” first championed by Robert Bork became the sole prism though which antitrust regulators looked at mergers. That misguided focus has helped bring about a concentration of power not seen since the days of John D. Rockefeller’s Standard Oil.
“Back then,” Wu told me the other day, “the general counsel of Standard Oil made a speech in which he said that trying to prevent corporate concentration was like trying to prevent the rain from falling.” Monopolies were viewed as the natural course of capitalism. But President Theodore Roosevelt believed that no company should be more powerful than the federal government, and that the drive to monopolize, as Wu writes, “seemed inevitably to come with its own morality.”
So in 1906, Roosevelt and his Justice Department brought an antitrust case against Standard Oil, won at trial, and saw the verdict upheld by the U.S. Supreme Court in 1912. Standard Oil was broken up into 34 parts.
When we spoke, Wu cited three other important antitrust cases where the goal was to break up an existing company: the AT&T lawsuit that resulted in the company spinning off the “Baby Bells” in 1984, the IBM suit that began in 1969, and the Microsoft trial in 1998.