Can you trust big business? Written 27/11/2016

News that European governments were starting to investigate Whatsapp on the use by Facebook of its customer data reminded me of the mystery of “ethics”.

Facebook, when they acquired Whatsapp a few years ago, promised they would never use Whatsapp customers’ data. It was definitely the thing to say in order to get the deal approved by lawmakers. Last august they told the world otherwise: they would now use customers’ data. Whoever believed in the first promise was ingenuous. And ignorant of what a listed company’s first commandment is: shareholder value.

Facebook board’s duty is to serve shareholders, i.e. the stock exchange (and Mark Z) – who appoint them. The choice facing Facebook’s board at any time is to know what will make most profits, make the share price increase and maintain the company alive (for the foreseeable future). Two years ago the choice was: make a promise (or a lie) or lose the deal that was going to add lots of value. Earlier this year their choice was different: exchange information and increasing the accuracy of advertising, maybe face an a temporary image problem or fines or legal costs, or abide by their word? Obviously they found that the former was the most sensible thing to do. So in the world of capitalism, where a shareholder could fire you for not maximising shareholder value, the board did the right thing.

Value of a word or freedoms of customers are secondary to primary values they are rewarded for. Do we live in a world of gentlemen where a company’s (or for that matter a chairman/founder/owner’s) word is its tie? No. We live in a world of perpetual value optimisation.

What is true for Facebook was true for all electronics companies when the delocalised from the US or Europe to China or India, and will be true again when they move from China to Vietnam because Chinese people cost too much; or for all steel corporations for that matter; or for their clients, employees etc.. The logic is there and we won’t stop its consequences unless we change the logic. 

All of us in our own environment invariably try to optimise our choices to get better rewards: social prestige, power, money, love – mostly love. People used to accept the dominance of their barons when they were gentlemen (there were no e-mails or cameras to check on). Now we accept their dominance when they are rich and famous.