Subscribe to our updates


  • October 18, 2021
  • Chuck Osborne

Blowing the Whistle

Frances Haugen has blown the whistle. Facebook and all its subsidiaries dominate the social media landscape, which has done real harm to our social fabric. Haugen claims they have known it all along – known what it is about their product that is harmful – and have decided to keep doing it anyway. It is a serious allegation and seems to ring true. 

Several years ago, I had the opportunity to work in Poland. I never officially moved as I still had responsibilities at home, but I would spend weeks at a time in Invesco’s Poland office. During one of those trips, I got a chance to tour the Nazi concentration camp, Auschwitz. It is estimated that more than 1.1 million people died there. Most were Jews, but the Nazis also killed Polish intellectuals and anyone they thought might challenge them. This I knew, but what I learned was even more horrifying. 

The Nazis turned death into an industry at Auschwitz. It started when they told their victims to pack one suitcase to take to their new home. The Germans knew that most would pack their most prized possessions, and the suitcases were confiscated immediately. There are storage rooms packed with them on display when one takes the tour. Hair was cut and used to make uniforms, and fillings were extracted from teeth for gold. Being there in person drove home just how evil people are capable of being. 

What does this have to do with Facebook? People who forget their history are doomed to repeat it. The lesson we should learn from the horrors of Auschwitz is that people can be convinced to do unspeakable things. People don’t just wake up one morning and decide to be evil; they have to be moved slowly but steadily in that direction. In 1924, nearly 20 years before Auschwitz, Hitler wrote, “Propaganda is a truly terrible weapon in the hands of an expert.” Joseph Goebbels was just such an expert, and for nearly two decades he and his Reich Ministry of Public Enlightenment and Propaganda slowly and steadily moved what many believed to be Europe’s most sophisticated society into a group that would create a place like Auschwitz. 

As Carl Jung so famously said, “People do not have ideas, ideas have people.” This brings us back to Facebook. When the company went public in 2012 it had one small problem: it was not a business. There was no method for actually making money. A business cannot survive if it can’t make money, so it started allowing advertising. Because Facebook had tons of personal data, it could tailor advertising like never before. Companies could target only those most likely to want their products. Content could be pushed to a user based on Facebook knowing who that user was and what she was most likely to click on. 

Facebook developed algorithms to push information their users were most likely to click on so they could maximize those advertising dollars. As a result, if one started out as a normal, right-of-center Republican, then he would be sent a steady diet of progressively more right-wing content. Conversely, if one started out as a normal, left-of-center Democrat, she would be sent progressively more left-wing content. This process may not be masterminded by any puppet master like Goebbels, but it works the same way nonetheless. 

So, otherwise intelligent people start to believe that a Russian plot put Trump into the White House, and four years later a massive fraud kicked him out. President Biden has claimed that the retreat from Afghanistan was a success and our border with Mexico is closed. Maybe he is crazy, or maybe he is not. Maybe he knows that half of the people will now believe anything he says no matter how crazy, and that the other half will not believe him no matter what he says. This is the damage that social media has done. 

So, what to do about it? Most now agree that social media needs to be regulated; the problem is what economists call rent-seeking. Each side wants their particular propaganda to be seen, and want the other guy silenced. Or, at least they want the other guy’s propaganda labeled as such, while their propaganda is labeled “news.” 

The ultimate problem with Facebook is the same today as it was in 2012. It is the fundamental reason we have never invested in the platform: There is no ethical way to make Facebook an attractive business. It was supposed to be a place where we could communicate with relatives and friends who no longer live down the street; where I can know what one certain friend has for dinner every single night (you know who you are); where people who care can learn that my son, Charlie, made his school’s basketball team – Go Cavs! It should be taken back to what it was. 

The algorithms need to go. Pushed content needs to go. Everyone has a right to free speech, but there is no entitlement for one’s speech to go beyond his friends who happen to know him, love him, and realize that he is an idiot who has no clue what he is talking about. In other words, the online neighborhood should reflect the actual neighborhood. 

If we do that, Facebook’s stock price will plummet. They can still sell advertising, but it won’t be as tailored. It is a solution that is simple and would work, which makes the likelihood of Washington doing it very slim. So, we will simply need to arm ourselves. What we see online is not news, it is propaganda. It is a terrible weapon whether in the hands of an expert, or the inner workings of a computer algorithm. At least that is my perspective. 

Warm regards,

Chuck Osborne, CFA
Managing Director