Cory Doctorow (7:41)
I was going to say Facebook. Amazon's fine, too. Facebook's really a great case study. Here, because they really do fit the template so perfectly. And my argument is that this is a template that it's not exactly followed by everyone. There's differences of degree, but those don't amount to a difference in kind. So when Facebook launched, the first thing it did was be good to its end users. That's stage one of insidification. So Mark Zuckerberg, his initial pitch to all those MySpace users was, sure, all your friends are on MySpace, but has it occurred to you that MySpace is owned by an evil, crapulent, senescent Australian billionaire named Rupert Murdoch who's spying on you with every hour that God sends. If you come to Facebook, I will run a Service much like MySpace, with the exception that we will never, ever spy on you, and we'll only show you the things that you asked to see. So you tell us who your friends are, who you want to follow, and when they post something for consumption by the people who follow them, they. You're going to see it. And while Facebook was doing this, they were also finding a way to lock in their end users. And this is part of phase one, a way to keep end users from defecting. And with social media, you kind of get that for free through something economists call the collective action problem and also switching costs. So the collective action problem, you experience it all the time. You're in a group chat with six mates, and you want to figure out where you're going to go for drinks on Friday or what board game you're going to play, and you just can't agree. It's really hard to get people to agree on stuff. And. And it's much harder when we're talking about Facebook because then we're talking about hundreds of friends who have a lot of reasons to be there. So some of them are there because, you know, they move from another country, and that's how they stay in touch with their friends at home. And some are there because they have a rare disease, and that's where the other people who have that disease gather to talk about it and offer mutual aid. And some are there because that's where their customers, their audiences are. Some are there just because, like, their kids are in a little League, you know, five aside game. And the way they organize the carpool with the other parents is by being on Facebook. And so not only do you have to convince your friends who you care about to leave, they have to convince all those other people to leave. And so it becomes kind of paralyzing, a kind of mutual hostage taking. And at the same time, the fact that we get all of these communities and all the value of these communities from Facebook means that if you just say stuff it, I'm leaving, you lose all that value. That's what economists call the switching costs. And so, so long as you love your friends more than you hate Mark Zuckerberg, you're going to stay, right? So Mark Zuckerberg, he's looking for this equilibrium where he doesn't make you hate him more than he loves your friends. So that's where stage two comes in. He starts reducing how much you love Facebook in order to make some of his business customers love Facebook more. There's a bit of wisdom from MBA programs that goes, if your customers are too satisfied, you're leaving money on the table, right? So he goes to the publishers and he says, do you remember we told these numpties that we were not going to spy on them and that we weren't going to show them things that they didn't want to see? Well, we will actually show them your stuff. Just put short excerpts of your content from your website, which you're monetizing in your own way on Facebook and we'll just like cram it non consensually into the eyeballs of people who we promised we would only ever show the things they asked to see. And if some of them click the link, well, that's a free traffic funnel for you. And so the publishers pile in, become very dependent on the audience, and they go to the advertisers and they say, hey, do you remember we told these rubes we weren't going to spy on them. We are spying on them from asshole to appetite. And for a remarkably small amount of money, we will target ads to them with exquisite fidelity. And because we are so committed to your business success, we've got whole buildings full of engineers who do nothing but police ad fraud. And so we'll make sure that if you give us money to show an ad to a user, that that's the user who sees it. And they really do see it. And so the publishers, the advertisers, they get locked in too. And you know, when we talk about competition, we usually focus on monopoly powerful sellers. But monopsony is also very important. Powerful buyers. You know, once, once like 20% of your income as a business is coming from one source. If that source goes away overnight, you are in really deep trouble. You probably can't make payroll or the rent and you need to go to your bank manager and try and get a bridge loan while you try to scramble for Another customer. So monopsonies are actually much easier to form and much more durable than monopolies. And now Facebook is really powerful buyer in the market for ads and publishing, and they become locked into Facebook too. And that's phase three where Facebook claws back the value from them. And so, you know, advertisers suddenly discover that the rate for ads is double or triple what they used to pay, the fidelity of the ad targeting is very low, and ad fraud goes, you know, bananas. Procter and Gamble, they zeroed out this $200 million a year ad spend on programmatic ads. That's the euphemism Facebook uses for surveillance ads. And what they found is that when they eliminated that $200 million spend, they saw a zero dollar drop in their sales because to a first approximation, no one saw the ads. They were just, it was just pure ad fraud, just being skimmed off in this, you know, crooked casino. Publishers, meanwhile, found that they couldn't reach their audiences of their subscribers, much less people their content would be recommended to, unless they put the whole article up, not an excerpt, something that was fully substituted for their own website. And then for good measure, Facebook started to punish anyone who put a link off the platform into a post because maybe that's a quote unquote malicious link. And so the publishers are locked to those end users, the advertisers locked to the end users, the end users locked to each other. The quantum of material in your feed that consists of people that you've asked to see things from has dwindled to a kind of homeopathic residue. The resulting void is being filled with slop and bad ads and political disinformation that they're being paid for and stuff that publishers are desperate to get you to see and that they're losing money on besides. And everyone's just kind of locked in, in this like, brittle equilibrium where not one penny of surplus is being left on the table, where there is no customer who is too happy for Facebook and Facebook is clawing all that back. And the problem with that equilibrium is it's really brittle, right? The, the difference between I hate this but I can't bear to leave and I hate this and I'm not coming back. It just takes one little push to tip it over, right? Live stream, mass shooting, whistleblower, Cambridge Analytica style scandal and people bolt for the. Since when that happens, the market stops treating Facebook like a firm that's growing and starts treating them like a mature firm and starts to do mass sell offs like we saw in January 2022, when Facebook experienced just slightly fewer new American users than they'd projected. And they lost a quarter of a trillion dollars in 24 hours when the market sold them off. You know, Facebook doesn't like this. And they don't like it for lots of reasons, but one is that Facebook's top managers and executives, their stock portfolios are stuffed full of Facebook shares because that's where much of their compensation comes from. And so when these sell offs happen, when the equilibrium tips, you get these platforms that go into a panic, although in Silicon Valley they use a euphemism, they call that a pivot. And so this is why a few years ago, Mark Zuckerberg kind of rose from his sarcophagus one morning and said, friends, I have had a vision in the night. I know that I told you that from now till the end of eternity, you would be doomed to arguing with your, you know, racist Facebook uncle using a primitive text interface that I designed in my dorm room so that me and my creepy friends could non consensually rate the fuckability of our fellow Harvard undergraduates. But the reality is that your future is then I'm going to convert you and everyone you love into a legless, sexless, low polygon, heavily surveilled cartoon character and I'm going to imprison you in a world I stole from a 25 year old satirical cyberpunk novel called Metaverse. Right? And that's when it turns into a pile of shit. And platforms have turned into piles of shit before, but then they died. And the difference between then and now, because of the external factors, because of the way markets are structured, because of the way our policy environment works, is that even after these platforms become monumentally unfit for purpose, they retain their lock in and they stay alive. They live to fight another day and do another grift. This time it's AI.