The Daily - What Facebook Knew and Tried to Hide

Episode Date: November 16, 2018

The story of Facebook in the past few years has been that of a company slow to understand how powerful it has become. But an investigation by The New York Times finds that once Facebook’s leaders understood the problems they faced, they sought to conceal them. Guests: Nicholas Confessore and Sheera Frenkel, two of the reporters behind the investigation. For more information on today’s episode, visit nytimes.com/thedaily.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, the story of Facebook has been of a company slow to understand how powerful it has become. But an investigation by The Times finds that even once its leaders understood the problem, they then sought to conceal it. Two of the reporters behind the story, Nick Confessori and Shira Frankel, on what they found.

It's Friday, November 16th. Hello and welcome to today's Facebook press call. There will be prepared remarks and a Q&A to follow. Now I'd like to turn the call over to Karen Baroon from Facebook Communications Team who will take this off. Joining us on the call today, we have Mark Zuckerberg, Facebook's founder and CEO. We're happy to take a few questions on yesterday's news, but hope to focus the majority of the questions on the topic at hand. With that, let me turn it over to Mark to get us started.

Thanks, Karen. Hey, everyone, and thanks for joining us today. Before we get started, I want to take a moment to talk about yesterday's story. We published a response last night, but I want to be very clear about one thing up front. I've said many times before that we were too slow to spot Russian interference, too slow to understand it, too slow to get on top of it. And we certainly stumbled along the way. But to suggest that we weren't interested in knowing the truth,

or that we wanted to hide what we knew, or that we tried to prevent this assassination, is simply untrue. Shira, Nick, where does your reporting begin? So for us, it began in 2016. It's right after the presidential elections. And Mark Zuckerberg gets on stage and says, You know, personally, I think the idea that, you know, fake news on Facebook, of which, you know, it's a very small amount of the content, influenced the election in any way, I think is a pretty crazy idea.

And, you know, outside the company, I think reporters heard that and sat up and said, what? You know, voters make decisions based on their lived experience. And it turns out when we started asking people within Facebook that internally Facebook executives were also really surprised. There were people in his own company that heard him say that and realized that he himself didn't know what was happening within the company and specifically what the Russians were doing. He was also walking into this kind of a buzzsaw because outside the company in Washington and in public. Facebook now under fire. Critics say it allowed fake news to spread on the platform, potentially reaching millions of people, unfairly influencing the presidential election.

People were increasingly talking about the role of Facebook, how it shapes politics, how Trump himself. With Facebook, I have like close to 7 million or more than 7 million people. With Instagram, we have like... Had won the election using social media, and here was Zuckerberg saying, no, it wasn't us. So what do you learn that these concerned employees inside Facebook do after they hear Zuckerberg say that? So these employees, which include people on the security team led by Alex Stamos, he's a longtime cybersecurity executive, and they say we've got to let him know what's happening. And so they go over the head of their bosses. They go over the heads of their bosses' bosses and directly email Mark Zuckerberg and his chief operating officer, Sheryl Sandberg, and say, you guys have missed something huge here. We found activity and you don't seem to know about it.

And what kind of activity have they found that they are surprised that their own bosses don't know about? So at this point, they'd really found the tip of the iceberg of what Russia was doing. There were Russian accounts that they'd been following for a really long time. These accounts went back years. And they were connected to Russian troll farms. And they saw this really significant uptick in their behavior around the presidential campaign. And so they knew that there was something serious underfoot. They knew that this was a bigger effort, a bigger push by Russia than they'd seen in the past. So how do these two senior people at Facebook,

Sandberg and Zuckerberg, respond to this intervention by their employees? So you have to know a little bit about their personalities to understand how they responded. Mark Zuckerberg, you know, he's so closely associated with Facebook. It's his baby. Every time he talks about it, he talks about how he started it in his dorm room.

He's 34 years old. This company has been his whole life. So his immediate response is, well, what's the technical fix? What do we need to do? What team needs to be put in place? Should I throw engineers at it? I mean, that's the way his brain works. And then, you know, just next to him, Sheryl Sandberg, who's in charge of things like policy and ads.

You know, she's a political creature. She comes from D.C. She's immediately thinking, what risk have you exposed us to? What's the legal risk here? How much should we investigate? Is this really something we should take on as a company? Or are we going to find out things here that we don't want to know? going to find out things here that we don't want to know.

So immediately there is a division in the way that they are thinking about this and responding to this alarm bell being rung by the security team at Facebook saying, we have a Russian problem. Yeah, they're such different people. I mean, the way they handle the company is very, very different. But Cheryl, who's also kind of seen as the adult in the room, is very much thinking about what are the consequences going to be. So what does she do as a result of that? So they yell at the security team and Stamos a little bit and say, you know, you shouldn't have looked for this without letting us know. You shouldn't have put together a team to look at this without letting us know.

You shouldn't have investigated Russian meddling on Facebook. Right. You should not have done it without letting the bosses sign off on it, I think was the sentiment. And then they basically put together their own team, which is broader, but tries to mimic what Alex Stamos' team was already doing, just kind of seeing what more can we find? What other Russian interference can we possibly find? And as they start to find stuff, they immediately start to ask themselves, what is going to be the response? How is the American public, and especially conservatives, going to respond to this evidence that they have? That Russians not just formed Facebook groups and accounts,

but really seemed to have a wide-ranging influence campaign that was affecting U.S. voters. And remind us, why are they concerned about the response of conservatives in particular? So at this moment in time, Washington is a Republican town, and their fate is in the hands of the conservative party in the U.S. And the entire thing has been a witch hunt and there is no collusion. Right now, Mueller investigation has become a partisan food fight. If the president tries to fire special counsel Robert Mueller, the bill would provide some speed bump. Congressman, why, first of all, are you calling this a witch hunt? Well, because it's clearly careened way out of control. President Trump is saying it's a witch hunt. He's got more and more Republicans in Congress saying it's a witch hunt. So now,

all of a sudden, Facebook is finding evidence that, in fact, it's not a witch hunt. And all that can do is throw them on the wrong side of power in Washington with a party that already thinks they're a bunch of liberals and hippies on the West Coast. So their investigation decides that or announces to them that they want to put together a public post, essentially saying we found evidence of this and here's the beginning, the sort of the tip of the iceberg of what we found. And they get told not to do that. They get told that it's too early, it's too soon, they should spend more time investigating, and it's not the role of Facebook. They get told very, very clearly that they should leave it to intelligence agencies,

to the government to announce that sort of thing. And Shira, who tells them not to disclose this publicly? Executives like Sandberg and people involved in Facebook's policy wings sit them down and they say, we don't want you guys to write this big public post naming Russia. It's just going to get us in trouble. If you have to write a white paper, just talk broadly about kind of what security Facebook has and what our security concerns are and don't mention Russia. Not a single word can be in that paper that points back to Russia.

And that's what we saw published. But Facebook has another problem. A lot of these posts from the Russians were basically appropriating conservative themes and memes and ideas and arguments. And they were using the most vitriolic conservative content they could find and reflecting it back into American politics on Facebook. And so now, if Facebook takes action, it's going to look as though they're taking action against conservative ideas. And they already have a bunch of conservatives who feel like Facebook and Twitter and other platforms are censoring them, blocking them from speaking on their platforms. And so Facebook makes a fateful decision.

Which is what? They decide not to take down the Russian accounts. And we know Sandberg herself decides to sign off on that decision. So they sort of enter a holding pattern at this point. They don't want to take down the accounts. They don't want to say anything more than this broad, very vague paper that they've published. And what's interesting during this time

is that Mark and Cheryl get really, really busy with other projects. Now we're a long way from the Harvard dorms where Mark Zuckerberg created Facebook, but the multi-billionaire looking to drop the book and come face-to-face with the people who have made the social network giant what it is today. He's traveling the United States and milking cows and she's promoting her book. He's milking cows. He's milking cows. Zuckerberg got the full farm experience feeding a calf, even taking out the family's 70-year-old reconditioned

tractor. I think he fed a goat. We are just over 100 days into Donald Trump's presidency, but some people already have an eye on 2020. There's even rumors at this point that he's going to run for president. My next guest is Facebook's chief operating officer and founder of the Lean In movement, Sheryl Sandberg. So Sandberg, meanwhile, has her own brand thing going on. Women, raise your hand if someone's told you you're too aggressive at work. And what's going on inside the company during this time,

now that this investigation has shown them that they do have a real problem? So inside, there's a sort of slow reckoning. There isn't one moment, but bit by bit, as they start to find more and more, they realize they're going to have to go public with it. It's just too much to continue hiding. And so through the summer and the fall, we see these meetings kind of amp up until we get to

August. And August, they start meeting almost every single day. They're going to go to the board. They're going to have a big board meeting, and they're going to let those guys know what's happening. And they're going to go public with a blog post and let the U.S. public know exactly what's happened. But Facebook is already backing itself into a corner because the Senate Intelligence Committee is zeroing in on Facebook. And Facebook has been telling people on the Hill, no, there's nothing to see here. There's no big Russia problem here. But the Senate Intelligence Committee, which at this point is the only remaining public investigation, right?

The House investigation has gone south. It's fallen apart. But the Senate Intel Committee is really breathing down their necks and getting closer and closer. And Facebook has already been telling them it's not a big deal. There's not much to see here. Let's move on. And so we're getting into September. They know the Senate investigation is coming.

They've got questions coming in from senators. And they gear up for this board meeting. But first, they decide to send Alex Demos to brief the audit committee. And it's just a small group, three members of the board. And they figure that he can give them some technical details about what he's found. This is the head of the security division of the company. Yes. He's been kind of leading the security investigation, and he knows the most probably from a technical point of view of what Russia has been doing. So he sits down, and according to,

you know, multiple sources we've had who've talked to us about this meeting, he ends up saying a lot more than they thought he was going to say. And so hours later, when it comes time for Mark and Cheryl to sit down with the board, they lay into them. And there's cursing and they're shouting and they're being asked, how could you have waited until now to tell us? And how could it have taken this long for you guys to find this? And they're floored. I mean, they did not expect this kind of reaction from the board. And just keep in mind, right, Charles Sandberg and Mark Zuckerberg are icons. They're celebrities. They're billionaires. They're on magazine covers. They're innovators. They're celebrated. And here they are being yelled at, called on the carpet by their board for a major screw up that could

endanger their company. And what is their reaction to that humbling experience? that could endanger their company. And what is their reaction to that humbling experience? So their reaction the very next day is to call a meeting in Facebook. There's this glass room. It's called the Aquarium. And it's Mark's office. It's in the middle of the building.

Anyone can walk by. And they hold this meeting there with dozens and dozens of people. And in front of all these dozens of people and untold other numbers of people who have called in, Cheryl just loses it at Alex Stamos. And she starts screaming at him and saying, you threw us under the bus. And it goes on for a while to the point where people in the room are uncomfortable. And according to the people we spoke to who were there, they said, you know, Alex really didn't say much and nobody else in the room knew what to say. And eventually Mark just kind of says, OK, well, let's move on from this. Let's talk about what the next steps are.

I mean, it's really amazing, right? This moment has come. And what is she mad about? She's mad at the security chief for finding the problem and telling the board about it. And is it our understanding here that Alex Stamos did indeed throw the top executives, including Sheryl Sandberg, under the bus, that it was an intentional outing of them to the board? Carol Sandberg, under the bus, that it was an intentional outing of them to the board? So the people we spoke to thought it was really specific things that he said to the board that had angered her, and namely that it was he hadn't briefed her fully on what he was going to say. And he made it seem like there was still going to be more Russian stuff to come,

that there was probably still stuff that they hadn't found. And that it was likely Russia was going to try and do this again. And we were told that she was really upset about those kinds of things that he said, that he made it seem like they hadn't fully gotten a grip on the problem, which we now know is true. What would be your interpretation of why Alex Stamos chose to share that with the board? Perhaps he was concerned that Sandberg and Zuckerberg were not being forthcoming enough, that they were hiding this.

I don't know if that was his motivation, but I do think that, you know, historically he's been someone who, at companies he's worked at before, in public speeches he's given, he's always kind of held to this notion of utter transparency. And it's gotten him in trouble in the past, and it's obviously gotten him in trouble here.

But I think that his version of radical transparency was not something that Mark and Cheryl were expecting. We'll be right back. Okay, so that was September of 2017. Summarize for me, what is Facebook's message internally and externally during this time when the public and the federal government are talking more and more about possible Russian interference and exploitation of Facebook to do it. Now, while I was out on leave, I spent a lot of time with our teams on the issue of Russian interference in the U.S. elections.

We're on top of it. I don't want anyone to use our tools to undermine democracy. We're going to fix it. We've been investigating this for many months now. The problems will be fixed. You don't have to investigate us. You don't have to sue us. We are actively working with the U.S. government on its ongoing investigations into Russian interference. That was their message. Yeah, they just told people to hold tight and don't worry, we're going to get over this one.

And so this is the state of things for months and months until what? Things get even worse. Cambridge Analytica, the data privacy scandal which has created a nightmare scenario for Facebook. Last March, the Times and The Guardian prepared to publish a joint investigation into a small political data firm that had worked for President Trump and had somehow gotten its hands

on the personal Facebook data of tens of millions of users and possibly helped Trump win with that data. And now Alex Samos, Facebook's chief information security officer, will reportedly leave the company by August. He urged for more disclosure over Russian activity on the site. And now all bets are off. Meaning what? They're in crisis mode again. So this was a major breach of trust.

And I'm really sorry that this happened. So suddenly they have a second scandal. And in some ways, it's worse than the first scandal. Because everybody is mad at them. Mr. Zuckerberg, would you be comfortable sharing with us the name of the hotel you stayed in last night? The Democrats are mad at them. Let me ask the question again. Does Facebook consider itself to be a neutral public forum?

And representatives of your company have given conflicting answers on this. Republicans are mad at them. Their users are mad at them. Facebook stock plummeted yesterday, closed down nearly 7%, losing $36 billion in shareholder value. They are in deep trouble, and it's only getting worse. Zuckerberg and Chief Operating Officer Sheryl Sandberg have both promised to prioritize the safety of user data going forward and limit what information is available to third parties. — So this time, in this second round of controversy, Facebook is feeling like it's facing a more existential threat.

— Right. So now they have investigations coming at them in Washington, in Brussels, and in London. The Federal Trade Commission has decided to reopen a probe into Facebook to see if they violated a consent decree with the federal government. But it's more serious than that, because the Cambridge scandal suddenly makes people look at Facebook's business model, and their business model is surveillance. It's collecting data on you, watching what you do on Facebook and around the web, making inferences and selling ads on that. And all of a sudden, people are saying, well, wait a second. I think that might be a little creepy. And then some people are saying, and if that helps elect President Trump, I am not OK with it.

Right. I mean, this is a scandal that undermines their entire business. If they don't have your data, they can't sell ads. your data, they can't sell ads. And they realize really quickly that if people are stopping to use Facebook or going into their privacy preferences and limiting the amount of data they give Facebook, that's a huge threat to the company. And of course, back in Silicon Valley, where the egos are as big as the fortunes, there is some sniping and some backbiting. The truth is, we could make a ton of money if we monetized our customer, if our customer was our product. We've elected not to do that.

Tim Cook, the CEO of Apple, he goes on MSNBC. We're not going to traffic in your personal life. And he basically castigates Facebook for their business model. He says, well, Apple doesn't sell your data. Privacy to us is a human right. It's a civil liberty. I would never be in this position. And it's basically kind of a pointed jibe at Mark Zuckerberg, his fellow tycoon. There's a longstanding rivalry here between companies like Facebook and Apple and Google, for that matter.

And this is really seen by Mark, especially as Tim Cook trying to kick him while he's down. And a decision gets made around that time. And Facebook executives get told, hey, you know, we don't really want to see iPhones around here. If you guys can start using Android phones, that would be a lot better. What else do they do? Well, a couple of things. But what's fascinating here is that Facebook starts to adopt a public approach and a private approach. In public, they're very conciliatory. Zuckerberg is apologizing. He says, you know what, I'm going to come testify before Congress. I think it's time for some kind of a regulation. I'm open to it.

They start laying plans to have an advertising campaign to apologize to their users. From now on, Facebook will do more to keep you safe and protect your privacy. So we can all get back to what made Facebook good in the first place. Friends. Because when this place does what it was built for, then we all get a little closer. But in private, Facebook is going on the attack. And what does that look like?

They start to use the full toolbox that big companies, hedge funds, activist investors, telecoms, use when they're in trouble in Washington. And one thing in particular, they go to a Republican PR firm, activist investors, telecoms use when they're in trouble in Washington. And one thing in particular, they go to a Republican PR firm, Definers, that specializes in part in campaign style, political campaign style, oppo research, and the kind of tactics you see in a presidential campaign. And they say, Facebook, we can offer that to you. And what do Facebook and Definers start to do together? So partly what they're doing is organizing press calls and doing research on people on the Hill, the kinds of things that PR firms will always do for big companies.

But they have something else in their toolbox, too, something else in their quiver. They have essentially a fake news site that they own called the NTK Network. And they write their own stories on this thing, and the stories blast their clients' enemies and support their clients. The stories themselves, I think, are mostly factual. It's not like fake news, but it is propaganda. So what's amazing here is confronted with a scandal that they have enabled propaganda to overrun their platform, they turn to a PR firm to generate propaganda for them. And what does that propaganda look like?

Well, like all good propaganda, it's believable. It's things like, let's not ask questions about Facebook. Let's ask questions about Apple. What's Apple doing? Is Tim Cook a hypocrite himself? What's his stance on privacy? And there's enough truth there. There's enough basis in reality

that these stories get picked up by a number of other sites. And we start to see other conservative websites and blogs running these stories. So this is kind of underhanded and yet just factual enough to generate interest. Exactly. I think what's interesting here is it's not that these tactics are so completely unusual, right? Like the world's a hard place and Washington's a tough place. But Facebook had held itself out, like Google, like Twitter, as this different kind of company.

It was even in their securities filings. Like, we exist to bring people together. Right, baby photos, bar mitzvahs, weddings, community building. Yeah, and so in some ways, they set themselves up as a different kind of company. And what they're showing now is they're just like every other big company.

And in some ways, worse. Because then they went down a totally different road. The exceptional profitability of these companies is largely a function of their avoiding responsibility. A big critic of Facebook when this all began was George Soros, the billionaire. And he had given a speech at Davos where he really lit into Facebook and Google. To maintain their dominance, they must expand their networks and increase their share of the user's attention. He called them monopolists who had no responsibility to the society around them and destructive. So he really laid down a marker. And what they did next was,

definers started looking into George Soros. And they eventually were circulating documents that basically suggested that if you looked at the criticism Facebook was getting from civil rights activists and some consumer groups, you should also look at the funding those groups were getting from civil rights activists and some consumer groups, you should also look at the funding those groups were getting from Soros. And the implication was that Soros was kind of masterminding this whole anti-Facebook push that appeared to be a grassroots push. And there are two things about this. First of all, there is some truth to it because some of the groups that are in

these anti-Facebook coalitions do get some grant money from the Soros philanthropies. The problem is they are now moving into a different kind of conspiracy theory world. In taking on Soros, they are tapping into a well of... The leftist Jews have completely met an alliance with radical Islam. Rumor and smears and anti-Semitic conspiracy theories. And just like Soros helped round up Jews for Hitler, he's doing it again today. I just like Soros helped round up Jews for Hitler, he's doing it again today. I mean, Soros is literally the number one living Nazi. That they themselves are not peddling,

but that other people are going to bring to that discussion, and that is dangerous territory. So, Nick and Shira, what are we to make of everything that we have just talked about here? Our reporting over the last year has been about this idea that Facebook was in over its head, that it had grown to be something uncontrollable, but it needed to be controlled, and they weren't equipped to do that. But this latest reporting from you both and our colleagues seems to suggest that there may be a larger problem of knowing what's going on and

spending more energy inside Facebook trying to protect the company than perhaps protect the country. I think this is a story about a company that built something incredibly powerful, didn't realize exactly how it worked even though they had built it. And when they started to discover the dark side to the thing they had built, they did everything they could to keep people from knowing. And when people started to find out, they tried to solve the problem by pushing back, by shifting attention to other people, by deflecting, denying, and delaying.

In every era, there is some new big industry that grows faster than it should. It was true with the food industry and the meatpacking plants. It was true with standard oil and the oil industry. And what happens is there is always a moment when journalists and the public begin to understand what is behind the product they are consuming. And this seems to me, for Facebook, for big tech, this is their Upton Sinclair moment. This is the moment when people around the world see inside the sausage factory and see what is there, and they don't like it. Shira, Nick, thank you both very much. It's great to be here.

Thank you. On Thursday, Facebook ended its relationship with Definers Public Affairs, the firm that had spread negative information about Facebook's critics and competitors. In Washington, both Democratic and Republican lawmakers responded to the Times investigation by calling for stronger regulation to restrain Facebook's power. Representative David Cicilline, the top Democrat on the House Antitrust Subcommittee, said, quote, Facebook cannot be trusted to regulate itself. Here's what else you need to know today. Florida has ended the first phase of its recount of last week's elections with Ron DeSantis, a vocal conservative and enthusiastic ally of President Trump, holding his lead in the governor's race over Democrat Andrew Gillum. But in Florida's contested Senate race, state officials have now ordered a manual recount,

with Rick Scott, a Republican, holding just a 12,000-vote lead over the incumbent Democrat Bill Nelson, a lead of 0.15%, a tenth of a percent below the margin that triggers a manual recount. The Daily is produced by Theo Balcom, Lindsay Garrison, Rachel Quester, Annie Brown, Andy Mills, Ike Sreeskanarajah, Claire Tennisketter, Michael Simon-Johnson, Jessica Chung, and Alexander Lee Young, and edited by Paige Cowett, Larissa Anderson, and Wendy Dorr.

Special thanks to Sam Dolnick, Michaela Bouchard, Stella Tan, and David Krakos. That's it for The Daily. I'm Michael Barbaro. See you on Monday. Daily listeners often ask how they can support this show. The answer is through a subscription to The Times,

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