In a letter to portfolio companies shared with the New York Times, BlackRock CEO Laurence D. Fink said, “Companies must ask themselves: What role do we pay in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?”
“Companies must,” indeed. Except historically, they didn’t must. Andrew Ross Sorkin’s discussion of the BlackRock decision in the Times quickly arrives at the inevitable compare-and-contrast with Milton Friedman, who was adamant that the only job of a corporation is to generate profits for shareholders.
“’What does it mean to say that ‘business’ has responsibilities? Only people can have responsibilities," Friedman wrote, almost rhetorically, back in 1970 in this same newspaper. "Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.’”
Harsh. But BlackRock is only the latest in a string of entities, institutions and individuals that are starting to think otherwise.
Last week, the New York State Common Retirement Fund and Arjuna Capital “filed shareholder proposals pushing Facebook and Twitter to take more responsibility for managing content on their platforms, including mistreatment of women, fake news, election interference, violence, and hate speech,” according to a Wired report.
A few days earlier, California State Teachers’ Retirement System (CalSTRS) and the hedge fund Jana Partners had sent Apple a letter about “a growing body of research that smartphones can harm children’s mental and physical health.”
A couple weeks ago, early Facebook investor and former Mark Zuckerberg mentor Roger McNamee published a long-form piece in Washington Monthly describing what he sees as the many ways Facebook is failing society, and proposing a series of interventions to address the problems. Among his many regulatory recommendations: that platforms be transparent about their algorithms and equitable in their contractual relationships with users (when’s the last time you actually read a EULA?), and that consumers should own their own data.
McNamee’s biggest bombshell was that we need to revise our approach to monopoly. Platform monopolies can be damaging even if, unlike traditional monopolies, they produce lower prices.
“Addiction to Facebook, YouTube, and other platforms has a cost. Election manipulation has a cost. Reduced innovation and shrinkage of the entrepreneurial economy has a cost. All of these costs are evident today. We can quantify them well enough to appreciate that the costs to consumers of concentration on the internet are unacceptably high.”
The pushback is starting to yield results. Facebook had already announced plans to add more security staff after the congressional hearings in November. Last week Mark Zuckerberg wrote that one of the company’s big focus areas for the year is making sure that time on Facebook is good for people’s well-being. (Although Ben Thompson makes a cogent argument that Facebook’s move is totally self-serving.)
There is no doubt that companies like Facebook, YouTube, Google, and others have provided tremendous benefits to billions of people. Suggesting that there should be a limit to their power isn’t a denial of these benefits. It’s an awareness that the pros have started to stagnate while the cons pile up. Milton Friedman, you’re outta date: It’s time for change.