Facebook and the dawning of a new age in capitalism
- 14th January 2018
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founder Mark Zuckerberg has proved adept at anticipating
and dealing with mortal challenges facing the social
has been described as the "greatest cash machine
in its march towards a $US1 trillion ($1.26 trillion)
market cap, the company has at times been a victim
of its own success.
2013 activist hedge fund managers Carl Icahn and David
Einhorn successfully pushed for Apple to return some
of its $US100 billion cash pile to investors
a recognition that it had reached the end of its innovative
Apple is the subject of an altogether different activist
campaign, one that could elevate the responsible investment
movement beyond those concerned about climate change
to those fearful about the mental wellbeing of their
week, hard-nosed New York activist fund Jana Partners
and the $US220 billion institution Californian State
Teachers Retirement System (Calsters) penned a letter
to the Apple board at 1 Infinite Loop, Cupertino.
five pages they outlined their concerns about the
unintentional negative consequences of smartphone
use, particularly among kids, citing several academic
and anxiety was on the rise, while attention spans
and empathy were falling. Parents and teachers were
worried, and as holders of $2 billion of stock they
wanted Apple to do something about it.
urging Apple to act on their concerns, Jana and Calsters
took aim at companies whose practices made "short-term
sense" but were "undermining their own long-term
Facebook founder Mark Zuckerberg is to be taken at
face value, that sentiment was behind his Friday bombshell.
social network said it would change its algorithms
so that user feeds were populated more with posts
from friends and family than news, entertainment and
changes would promote "more meaningful interactions",
Zuckerberg said, and were about his "legacy"
which he had become more concerned about since his
two daughters were born.
emphasising content generated by family and friends,
rather than news (real, fake or otherwise), clickbait
and content created to go viral, the changes would
have a positive impact on the wellbeing of its users,
the company said.
Facebook, and Google, which are advertising companies
their incentive is simple, keep users online
for as long as possible. But the changes would reduce
potentially addictive content.
share price stumbled on the announcement, declining
almost 5 per cent, as the market determined the impact
on revenues would be more negative than positive.
suggested the decision was a pre-emptive one to avoid
oversight, after so-called "fake news" proliferated
on the platform and profoundly influenced voters around
users will be subjected to less "fake news",
they'll also receive less news, so the impact on the
media industry and broader society as a whole is not
of us already know it, but the extent to which Zuckerberg
can play God is mildly terrifying. If tweaking a few
lines of code can alter the welfare of two billion
people, maybe it's time shareholders had a duty to
look beyond quarterly revenue beats.
should be noted that Zuckerberg has a commendable
record in making critical long-term decisions to protect
shareholder wealth, such as overseeing the transition
to mobile and buying Instagram.
however, may not be all that powerful. A year ago,
The Australian Financial Review interviewed the chief
executive of US mutual fund T Rowe Price, Bill Stromberg,
who expressed his displeasure with the shareholder
structures of tech firms coming to market.
the fund manager moved quickly to clear up any suggestions
they would contest the decision by Snap's founders
to give themselves disproportionate rights ahead of
its initial public offering.
remains to be seen if Jana and Calsters will enforce
desired change at Apple or if Facebook's algorithm
tweaks will make the world a better place and enhance
its long-term value.
it's a clear sign that these tech giants' social licence
to operate is under review.
changes may also spark a greater appreciation of environmental,
social and governance investing frameworks and the
concept of universal ownership. The push by large
institutions to embrace ethical investing is being
influenced by their younger investors.
hedge fund managers and chief investment officers
that may not have felt the immediate urge to divest
their coal stocks to save the planet, or push for
equal representation on boards because the impact
on society was too gradual to notice.
as more of them deal with teenagers at the dinner
table, depressed and disconnected from reality, they
too may rethink their priorities as owners of these
Australian Financial Review)