The Vergecast - Why everyone hates Big Tech with Matt Yglesias of The Weeds

Episode Date: July 22, 2019

Vox Senior Correspondent and host of The Weeds Matt Yglesias joins Verge editor-in-chief Nilay Patel in this special crossover episode to explain what Section 230 of the Communications Decency Act, which allows platforms to circumnavigate liability for user content, really means. They also discuss Elizabeth Warren’s proposal to break up big tech platforms, and how it may or may not fix anything. Subscribe to The Weeds for free here Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Actually, it's a special crossover episode. I sat down with Matt Iglesias, one of the hosts of Voxes, The Weeds. This is the crossover people have been asking for the Weeds and the Vergecast together at last. Matt and I talk about everything policy-related in tech right now. We talk about Section 230. We talk about net neutrality.

We talk about antitrust breakups. We talk about the... We talk about fax machines, to be honest, for quite some time. And we talk about how we can fix it. Check this out. It's Matt Iglesias from the week. I'm Matthew Iglesias. I'm joined today by Nili Patel.

And this is a, it's really, it's a Vox Media podcast network crossover event. It's like the Avengers. It's the most. I would say I get asked on the Verge cast for this crossover more than anything. Because there we go. So Nile is editor-in-chief of The Verge. He is host of the Verge cast, which is a, I'm told it's the flagship podcast. Yeah, I firmly believe that you can make things true just by saying them over and over again.

And so I've said it over and over again, and now people think it's true. Okay. So speaking of things that people think they can make true by saying them over and over again, I have been hearing more and more from Republican members of Congress about something called Section 230, which they think is a big problem with technology companies, right? So if you've heard, right, it's like there's anti-conservative bias on the tech platform. platforms, according to many conservatives. But not according to any of the data. Well, but according to them.

And Section 230 has something to do with it. Yeah. So what is that? What is the section of? Section 230 is a section of the Communications Decency Act, itself a poorly named Bill. But it's the law that allows platform companies to moderate their platforms. Okay. And the thing about Section 230, in particular, that I think,

this audience will find interesting is it is really easy to read. Like if you have just a passing familiarity with how legislation is written, it is super easy to read. It's plain on its face. Okay. And then the people who wrote it are still around. Ron Wyden, who's a co-author, still in Congress. So he is very happy to tell you what he meant when he wrote these very easy to read words.

So the history of it and what it was meant to do was allow platform companies. to moderate their platforms, to take down things that they didn't want there to promote things that they wanted to see promoted. That is the heart. That freedom is the heart of how every platform works. And this was back in the 90s, right? Communications Decency Act. Yeah.

The instigating event behind 230 is a case called Stratton-Oakmont v. Prodigy. Straton-Okmont, you might remember, is the firm from Wolf of Wall Street. Yes. Prodigy ran a message board Did you have Prodigy? Were you on Prodigy? I was always an AOL person. I was a huge Prodigy guy in my day.

Prodigy was like the market leader from it. And then Sears bought Prodigy. I mean, we want to be in the weeds. I would say the Sears Prodigy deal did not go how anyone thought it would. Maybe an example of where the regulators should have stepped in. Anyhow. So Prodigy ran these message boards. There are users on the Prodigy Message Board who said Stratonoke-Ochmont is a

sham. This is a bad company. You shouldn't do business. It's all fraud all the way up and down. The movie hadn't come out yet, so I don't think the other people knew about it. And so Stratton sued Prodigy and said, hey, you guys, you moderate these boards. You remove some content that violates your rules. You promote other content. You are exerting editorial control over this information, and thus you're liable for it the same way a newspaper would be. So that's in like a liable context, right? So like if we at Vox write an article, that accuses Stratonokmont of being fraudulent, we are potentially legally vulnerable. Like, they can sue us.

Now, as it turns out, they actually were fraudulent. It turns out this was true. So, you know, truth is an absolute defense to libel. But in general. Again, the movie had not come out. Leonardo DiCaprio had not yet exposed Stradinocchmont for what it was. But so this is one of many reasons that we try not to publish inaccurate smears is. is that you could get sued for it.

You can get sued. We are liable for the content on our site. Liable for liable. And so their position was because Prodigy is maintaining editorial control over these message boards, the company itself, which presumably has deeper pockets than like random message board guy, is legally responsible for liable that occurs. Yep. And the court agreed with him, which was not an entirely expected result.

There is a lot of legal wrangling, and this phrase is going to come back to haunt us and maybe bury me personally. But there's a lot of legal wrangling over a platform versus a publisher. And if you exert this much control, are you a publisher? So the court said, okay, you are liable. 230, and this is the important point that everyone, I think, on the conservative side that is arguing about it right now, is intentionally missing. 230 was written to overrule that case. Okay. So the legacy of Stratton-Ok-Mond is twofold.

One, great movie. Yes. The emergence of Marco Rabe is a superstar. And two, 230. Right? 230 exists to overrule this case and say, platforms should not be treated as publishers. Right.

So if you allow users to publish content on your platform, you are not liable for that content at all. And it's just a flat rule. So only the person who actually writes the thing. Yep. Only the person actually makes content. So, for example, we publish Vox has a great YouTube channel. We have a YouTube channel.

It's also pretty good. YouTube, Google, is not responsible for what Vox video publishes on this channel. Right. So if I go up on Twitter and I libel people, the people who I have libeled can sue me, but they can't sue Twitter. Yep. Right. So what you hear, the rhetoric is, well, we have to recognize that. Sometimes I'll hear Republicans say, oh, no, these companies are acting as publishers, not as neutral platforms.

Yep, which is the old law, right? The thing that 230 was written to get rid of. Right. Okay. So because the idea there, the legal decision, I guess, was, okay, the platform could be held responsible because they were exerting editorial control. So you would need to say, no, well, we're not moderating this at all to obtain your immunity. But in fact, so like the new law says it doesn't matter. Yep.

Right. And so we ignore, and this is what I mean, you can just go read it. I encourage everyone to just read it themselves. It is not like a complicated thing. Do you want me to read it to you? Yeah, let's do it. Here's 230 C1. No provider or user of an interactive computer service platform shall be treated as the publisher

or speaker of any information provided by another information content provider. That's literally all it says. Okay. No provider shall be treated as the publisher. Okay. That's it. I don't know how we're, I don't know how everybody's getting it wrong, but that's all it says. So that's, so that's actually, that's pretty straightforward.

But what is the, like, like, what is the politics as going on behind this, right? Like, what, what is it that Republicans in Congress are trying to accomplish here? Like, what do they want? Total control of all information disseminated on the internet. As far as I can tell. But that might be the overread. That's just me. I live in a world where I talk about 2.30 literally every day.

But what they're after is there are only a handful of giant information platforms in the internet. We're rapidly approaching the stage where there might just be like six companies in the world. But if you look at Twitter, Google, and Facebook, they control a massive amount of information. Right. And they all have rules about how they moderate their platforms. Republicans think they are being over-moderated. And that is a rich argument for their base, mostly because the hard-right base engages in a lot of speech these moderation policies bans. So that's a lot of racism.

That's a lot of sexism. That's a lot of transphobia. It's just bigotry in general, hate speech and bigotry in general. Then there's harassment, which every platform wants to ban in one way or the other or moderate in somewhere or the other. If you are a Republican and you've got this base... where increasingly, it seems every day, there's a new scandal of racism or sexism or bigotry. I might add the president engaged in some overt racism just recently. Well, these moderation decisions are disproportionately impacting you.

And so you're like, you're biased against my speech. And this is a free speech area. I mean, I think, you know, this was the weekend before we recorded this, the president was tweeting about how various Democratic members of Congress. language should go back to their home country as most of them are American, native-born Americans, all are American citizens, very racist stuff. A little bit of an unusual day for Donald Trump, but not that unusual. Yeah.

And this is the essential problem, right? I mean, I think the progressive critique of the platforms on this score is that they don't apply these policies in a consistent way. They'll say, well, we're not going to have hate speech. We're not going to have racism on our platform. but then you can't, or at least quote unquote, can't kick the president of the United States off Twitter or censor his communications. And there just isn't a incredibly firm line between what I at least would consider racist speech and what I would consider mainstream Republican Party politicians saying things. Like Donald Trump is not a fringe figure.

Yeah. So, I mean, I think one thing everyone will agree on, just universally. is that these companies are not necessarily well run. Sure. Right. And even if they were perfectly run, the nature of writing and enforcing speech regulation is such that you're still going to do a bad job. Right. Like the United States has been trying to develop a free speech policy in our courts for 220 plus years and we're pretty bad at it.

But like four guys at Facebook aren't going to do a good job in 20 years. So there's that problem, right? Like, where does the line cross from being a pretty funny joke to being overtly bigoted? It really depends on the, we all understand. So it absolutely depends on the context. It depends on who you think you are speaking to, whether it's, you know, a group of your friends or whether suddenly Twitter's algorithm grabs you and amplifies you to millions of people. Like, how many little Twitter scandals are a throwaway comment that somehow went viral and now someone's crying?

Like, we understand. That happens every day. The other problem, and I think this is where I come back to, there's only this tiny handful of companies, these companies are monopolies in their space. Right. So you see Republicans saying that you're violating my free speech rights. The president is saying they're violating our free speech rights. Well, these companies, they're not the government, right? There's no, they're private companies.

They should be able to do whatever they want. By statute, they are allowed to do whatever they want. But there's nowhere to go. So if you feel like tweeting is important and the president feels like tweeting is important, and you're constantly being bombarded with moderation decisions for your base, it does feel like, okay, these companies are censoring us. And then you might say they're over-moderating, they've overset their bounds. So might as well just be liable for everything the way newspaper would be,

even though the statute doesn't say that at all. You know, we were joking around about Prodigy versus AOL, but it's true, right. In the 90s, you had a bunch of different sort of nascent Internet platforms, and you would dial into them, and there was prodig, and there was CompuServe and there was America Online. And I think there were a couple more. And I think the vision that people sort of had at that time of how this would evolve

is that this would continue to be a rich space of competition in which consumers would probably subscribe to one or two of these pick them. And so then different companies would have their own moderation policies. And, you know, they just, there would be a variation, right? And part of the basis of competition would be trying to pick an approach to moderation that people liked. And different people would have different tastes. Different people would participate in different ways. And it would be sort of all good, right?

But instead, we live in a world where there's a conversation on Twitter that does not have any close analogs any place else. YouTube is where people find videos, right? Like all people who get short Internet videos, like get it from YouTube. So if you can't publish to YouTube, you're kind of out of luck, right? It's like everybody cares a lot about these companies' policies. We see it as having big, systematic, social impact and not just being kind of like, well, I don't like this, so I'm going to go elsewhere. Yeah. If you're a heavy Twitter user, which press shouldn't be, you're probably more impacted day-to-day by a random Twitter policy decision than by any decision your local government makes.

Right. That is a crazy scenario to be in. But it's where we are. If you are a YouTube creator and, you know, The Verge covers YouTube creators very closely, they're always kind of mad at YouTube. YouTube is the gateway to their economic freedom. And YouTube is not great at handling its creator class. So you see the enormous amount of power these companies have.

And you see the sort of lack of market competition. So if you're a YouTuber and you're like, I hate YouTube, where are you going to go? Where's the other platform that's going to provide you a career the way that YouTube provides you a career? So then if YouTube says, hey, you cross this line, right? We made this moderation rule and six months ago we enforced it this way, but you know, times have changed, we're going to enforce it slightly tighter, we're demonetizing you now, we're deleting your channel, all of a sudden you're like, wait a minute, that was my livelihood. That was my business.

You just took it away from me because you decided to. And there's not, again, these companies are not well around. There's not a lot of transparency in that process. There's not an appeals decision. If the state did that kind of thing, we're looking at like a decade worth of lawsuits. When YouTube does it, you're just done. There's nowhere to go. And then conversely, if you think about, you know, how Google sort of ranks different articles and it searches or how things propagate on Facebook, right? Both if you, you know, we're writers.

So I want my articles to perform well on these platforms. But also just as somebody interested in public affairs, right? Like, there can be a big news event, you know. There's a Supreme Court Justice being nominated and lots of different people cover it. And which of those articles is widely disseminated and which aren't, you know, plausibly has a big impact. I mean, not just on the economics of the businesses that depend on these platforms, but on like society as a whole, right? The distribution of articles that are favorable or unfavorable to your point of view is something that, you know, people care passionately about with good reason, right? There's like a big social implication to what happens here. And it's really Josh Hawley, right, of Missouri has, I think,

been the sort of leading Republican guy on this. And his take, as far as I understand it, is that the big technology companies are suppressing conservative speech similar to a sort of classic Republican criticism of media bias, except now with maybe more sort of legal and regulatory teeth he can bring to bear. Yeah. So Holly was the attorney general of Missouri. one would assume he can read a statute and divine what it means. But he's insistent that the platform publisher dynamic exists for 230. He's called 230 a gift to big tech companies. That they get to build big advertising businesses based on user content and they're not fair to users.

I think that framing is a little wrong. I mean, it is a little bit of a gift. Don't get me mistaken. It is the thing that enables their business. You cannot run a user-generated content platform if you are liable for everything your users post. These businesses would not exist. So in that sense, yes, it is the enabling policy for Google and Facebook and Twitter and so on. Where his proposal, I think, goes completely off the rails, especially if you're a conservative, is his idea is if you are a company of a certain size, you're big enough.

You will then have to submit to the Federal Trade Commission every two years. years proof that you're moderating in an unbiased way, the federal trade commission will have to vote on a majority line. I think there's five commissioners. He wants four of them. So you want to peel one over from the other side to say that you're unbiased and then you get 230 protection. But if you don't prove that you're unbiased, the protection goes away.

So what would unbiased mean in that context? That's what's sort of, you know, this is one of these things. I mean, you know, if you know politics, right, nobody's going to stand up there and be like, no, bias is good, right? Because by definition, like, it's good to be unbiased. But also what? Right, so unclear, undefined. So that's some work they have to do.

The Federal Trade Commission, by the way, is not staffed to write a bunch of speech regulations and handle a bunch of complaints. So the next, you know, the next part of his bill is if any user has a complaint, they can take it to the FTC and say it's bias. rearing its ugly head, and the FTC will investigate, and the penalty could be pulling this protection away and holding them liable. If a moderation decision happens under the Hawley proposal that's wrong, the company gets a get-out jail-free card, if they name the employee who took the biased moderation decision and immediately fire them. So that raises the stakes in these

moderators, just like ever higher, because they will be publicly shamed and then fired. We've covered a lot of how moderation works. at the verge. Casey Newton has been writing a lot about Facebook moderators and the conditions they work in. These moderators make $15 an hour. They get nine-minute wellness breaks as they watch this flood of horrifying video that gets uploaded to Facebook. To hold them personally responsible on threat of the entire business collapsing, unless they are named and fired, is an insane policy outcome. But that's part of Holly's bill. And the whole goal here is, I think, a laudable one. I think he is not wrong in saying these companies are not transparent. We're going to hold them to a massive transparency standard. So we understand their rules. We understand how they're enforcing them. There's a check on

those rules that they're unbiased, however you want to define that. And if they make mistakes, they have to take these actions or face consequences. That all seems right. So this is about formal moderation, though. Like I look at this video and I say like, no, you can't have this on Facebook. It's not about the like out because there's an algorithmic waiting or of some kind. I mean, I don't understand what it is. But like clearly some stuff goes like higher in your search results. Other stuff goes lower. Some stuff is judged as more credible and not. But that's is like a different subject? It's all it's all part of the same litany of conservative complaint. So Trump just had the social media summit. If you read the remarks,

Godspeed. But in the middle of it, he goes, you know, I used to tweet and the number, I would watch the numbers like a rocket. And he just like rattled off a list of numbers. And he's like, but now I see these numbers. And he rattled off a list of slightly smaller numbers. There's some complaint there that they're being shadow banned, I think is a favorite term, that they publish and nobody can see them or that they're being diminished in the rankings. None of that has to do with moderation. None of that has to do free speech.

But it's all part of the same sort of litany of complaints. And so if you make it more transparent, if you make the algorithm is more transparent, the argument is, okay, well, you'll be forced to come clean about your horrible liberal biases and the fact that you're all just in big Democrats pocket. The notoriously well-organized, unified goals of the Democrats will come together. None of that is true. And if you – I just want to really state that clearly. If you look at the stats, if you go to CrowdTangle, which is a service that looks at Facebook, if you look at, if you look at, look at who the most important politician on Twitter is, it is not as though conservatives are being suppressed anyway or conservative speeches being suppressed anyway.

Fox News is routinely the most shared thing on Facebook. Breitbart is still routinely cited across the conservative universe on the social platforms. You just see over and over again evidence that conservative speech is actually being amplified by these platforms, not suppressed. Right. So the read of truth in all this is that these companies are incredibly powerful. And they're not facing the kind of market competition that we might have, you know, maybe originally thought that like online bulletin boards were going to face.

And that seems like, you know, beyond this like esoterics of this Communications Decency Act rule, nobody understands or has heard of, like this is what we traditionally had antitrust policy for, right? Yeah. So antitrust, I think, is the next big sphere of regulation. And I think it is just, it's extremely related to sort of the Holly proposal. So if you look at Josh Holly's proposal, he wants to make the FTC in charge of content moderation for big platforms. He wants there to be a compliance regime, regular votes by unelected official, the whole thing.

That is a lot of regulation. It is not what you would expect from a conservative. Then you have Elizabeth Warren saying, well, these are just too hard to regulate. Let's just break them up. Let's just make them smaller. And then they'll compete with each other. And, you know, maybe Instagram will be better at privacy than Facebook. or, you know, WhatsApp will be better at messaging than Instagram, instead of having these sort of

world-scale companies that even like a $5 billion FTC fine seems like a drop in the bucket for them. So you just see those two arguments. Like, either you can have a bigger government or you can have smaller companies. And I think the antitrust argument is, well, we should just have smaller companies. Right. I mean, this is like for big fans of American economic history. This was like disagreement between Teddy Roosevelt and Woodrow Wilson. 100 plus years ago was like, do we need to have an intensive, do we need to accept that the

modern economy just requires these kind of big, sprawling trusts and then regulate them intensively? Or do we say, no, we can't trust the government to basically tell companies how to run their businesses. What we need to do is break the big companies up and then let them slash force them, compete with each other. And so Warren has a proposal to do this that has some. I guess she brought some specificity to this conversation, which had been percolating around in a slightly vague way.

Although it's not totally obvious to me how it would address these speech concerns, right? Because her big thing is a kind of like vertical separation of the elements of a tech conglomerate. Yeah. So I interviewed her at South by Southwest right after she rolled out this proposal. her proposal has effectively like one big rule that's important and then let's break up Facebook. Right. And they're not necessarily related, but they're all part and parcel of the same thing. So the big rule is if your company over a certain size and you operate a marketplace,

you cannot put your own products in that marketplace. Right. So if you're Amazon, you cannot preferentially treat Amazon products in the Amazon store. If you're Apple, and I think it's very interesting that in all of her messaging about this proposal, related to this rule, she doesn't talk about Apple. When I sat down with her, I said, you know, there's one company you don't name. And before I'd even finish the question, she's like, Apple, they're in. And I think that has to do with how popular Apple is among sort of the general population

and how medium unpopular is with, like, say, it's developers and companies like Spotify. But so Apple runs the App Store. Apple routinely gives preference to its own products in the app store. Or routinely says there are kinds of things you can't make that we're going to reserve for ourselves in the app store. Warren went beyond actually saying neutrality, right? So her proposal is that you actually wouldn't be allowed to participate at all in that kind of marketplace. So if you're talking about, so Amazon, right, make stuff, like Amazon essential stuff. They have these like fake clothing brands, all these other things. And also obviously, like it's a big store, right?

Yeah. So this would essentially say like Amazon can't make first party stuff at all, right? Yeah, which is confusing. I mean, the history. history of house brands is very hot, like, very long, right? Like, that's a weird situation to be in. But yeah, Amazon store and it's sort of like Kindle business would have to get split up. Now, that is a big remedy. It is, again, like, if you just think about the Kindle business, okay, you can't sell Kindle hardware in the store because Amazon owns both. But the Kindle is tightly integrated with a bookstore. Right. Right. That's what you're really buying is access to this bookstore. That's why the Kindle is so cheap. Are you going to break that up to, like, how does

the mechanic of that work is really hard in sort of the modern digital economy? Apple has a great argument with the App Store, which is we need to tightly control this store because it keeps our users safe. And we keep malicious software out of this store. Just last week, we use a video conferencing app at Vox Media called Zoom. Zoom had this like crazy security hole where they were installing a web server on Macs that you sent at the right request that will just light up your camera, which is the disaster scenario. You can't do that on iPhone. Like, it just can't be done. So, like, that's Apple's, like, winning argument. It's like, we tightly control this platform because people want us to because they don't want their cameras to turn on the middle of the night.

Right. I mean, when I talk to Apple executives, I mean, this is what they were, like, really, really vehement on that we sell the phones, right, and we want people to like the phones. And to that end, we want to make sure that they're not accidentally exposing themselves to different kinds of things on the store. And that's why we need to own the store. But at the same time, she doesn't name Apple because Apple's not a strong argument, I think, for her particular point of view on this. But I think you have heard a lot of complaints that Google, right, would sort of start as, okay, this is a great tool to search the Internet, but then starts moving into kind of like squeezing out. its own information providers. So now you're getting, you know, you go to Google search and what you get is Google Maps

and you get Google reviews of things. The Europeans have fined them a bunch of times for this idea that they are like loading the dice against other technology companies, which I guess you would think could like squelch innovation deprive people of choices, stuff like that. The key example there is Yelp. Yelp and Google hate each other. Or at least Yelp hates Google and Google is indifferent, which is maybe worse. So, you know, Google had had some listings for restaurant reviews and things like that.

They were scraping Yelp's data. Yelps said, don't do that. Like, just point to our pages. After a while, Google just started promoting its own listings, however, it got them over Yelps listings. And Yelps business went down a little bit. That's not a great outcome. It's not great for Google to say, okay, we can see the most popular categories of searches. We can see the providers our search engine is sending people to.

we can just integrate whatever information that is and point them to our own product, right? And now we're going to destroy this business. Now, on one sense, if there were a million competitors for search engines, you would say, who cares, right? Like, okay, Google's competing. They're differentiating. There's one. And so, like, that one company is in charge of, like, this massive set of, like, interlinked

economic engines, and that's not great. And so you shouldn't have the restaurant review. views industry should not really be a Google search optimization industry. And yet that's where we've arrived. I mean, I'm sure you've heard the phrase that competition is just a click away. Yeah. And I, I mean, that is Google's argument to Europe. I think Google employs like 100 lawyers who just wander the streets of European

capitals saying competition is but a click away. But like when it was last time... Because you go to Brussels. Everything is French fries and Google lawyers say. It's true. It's very strange. It's really changed the tenor of the European community. But is it? Like, when was the last time you used Bing? Like, is it really a click away?

We have in our 12th floor kitchen here in the DC office, we have a couple of the old scruggled mugs that Mark Penn made when he was working for Bing. Yeah. So, you know, it's out there. That was our, if Microsoft, and so the underlying technical argument there, by the way, is not so hard to understand. It's Google has such a commanding store of data. about user intent, that it is impossible to build a new competitor.

You cannot build a better Google at this moment because Google will do a better job of searching because that store of data is actually the valuable asset. Right. So the search algorithm is not the asset, the massive amount of data that they have collected over the years about user intent and what user wants is the asset. You can't buy that asset. You can only collect it over time. Right.

So Google continually optimizes it. results based on its backward analysis of users' behavior, right? Because they see what you click on to try to understand, like, what it is people are really searching for with particular phrases. And so the argument is basically the more people Google, the better Google is. And you can't compete with that, right? It has such a big first move in renders. And of course, like, they do a good job, right? Like a lot of smart people work at Google. They're not fools or anything. But that there's no way to beat them because you would be switching off to an inferior product unless everybody switched off.

And so this is like network effects is the, I guess the economic C word. Not only everyone switched off, but everyone switched off and somehow switched off for 10 years. Right. Right, or whatever it is. Or you could move your data and you can't. So how are you going to do that? So I think that network effect, that is the underlying economic concept that we haven't reckoned with in society.

These are all absolute winner-take-all markets. There are not a lot of other industries, like big American industries that have been winner-take-all markets like this, unless you go back to railroads and oil companies. And so Ben Thompson is a really smart analyst. He writes a blog called Stratory. He has a very smart riff on this called Aggregation Theory, which I'm sure you are familiar with. Yeah, I never understand why he calls it that instead of network.

effect, which was the official name from my economics textbook and other things. Is the network effect? So the network effect, I'm sure everybody, the weeds at smart listeners. Network effect is the idea that the product gets more valuable, the more people that use it. So you buy one fax machine, this is a classic example. You buy one fax machine, it's useless. You know, one other person in a fax machine, it's moderately more useful. You know, a million people with fax machines.

Now your fax machine is incredibly valuable. Right. And then just like that, the fax machine goes away. That's the classic example of the network effect. Well, I mean, you know, it's actually interesting. Let's talk about fax machines, right? Looking back, the crazy thing about fax machines is that they were interoperable. Right?

So the more people who own fax machines, the more valuable the idea of owning, quote, unquote, a fax machine became. But nobody actually monopolized the market by saying, no, right, like this one particular company sells the something machine. and you need another one from that brand to interconnect with it, right? If you had done that, you could have this, like, powerful fax machine network locking type thing. But instead, it was like, we were all just faxed into each other, like, like, willy-nilly. It was having a good time. Well, it was like email, right? Like, a sucker's game.

Like, nobody makes money off email. Yeah. And so, you know, if you look at fax machines, I mean, it really, the podcast is called The Weeds. I feel very comfortable going here. You look at fax machines, it's exactly the same as any other standard with an extension on top of it. So you have two fax machines from Panasonic. They might transmit and receive a little bit faster than the standard. You might get color capabilities a little bit faster, but you always fell back to total interoperability.

That is just the same right now as AirPods. Right. Apple makes AirPods. They're very popular. They're Bluetooth headphones that can work with anything. But if you happen to have an Apple phone, they work a little bit better than the next set of Bluetooth headphones. If you happen to have an Apple watch, now you can sort of like easily connect to everything. If you have an Apple laptop, it gets even better.

And you keep going and going and going. And then by the time you want to buy a new car, you're like, shit, I have to buy a new watch, headphones, phone, and laptop. And that's like, I don't know if that's a good outcome, right? Like you take that fungibility out of the market. Anyway, the reason Ben calls it aggregation theory is it's a riff on network effects such that he's saying the power in the market is no longer demand. aggregating supply. So like most things aggregate demand, right? Everybody wants to buy the new Ford. Like Ford has a lot of power in the market because they control demand. He's saying Google controls supply. Right. Right. So if you want to get to a consumer,

Google has all the consumers. So now we're operating, we've inverted the market. We've aggregated supply. That is, it's a powerful theory. He's written about it a lot. I think that's one an excellent framework for understanding this modern moment. Like, why can't there be a competitor to Google? Well, Google already has all the people. So you're not adding a new product to market. You're trying to get all the suppliers, all the people who are already optimizing their businesses

to reach people through Google. You've got to move them. That's a really hard thing to ask. Then there's this like just very obvious, okay, well, what if we do have a bunch of winner take all companies? What if we are in this moment where there's only ever going to be an Uber and a lift and no third competitor. There's only going to be a Google and Bing, I guess.

And in Bing doesn't count. What if there are only ever going to be two operating systems? Like, where do the challengers come from and how do they win? I've yet to see an answer to that question. It doesn't... We cover a lot of consumer products. There are not a lot of new consumer products in the market that are not extensions of an existing ecosystem.

Right. So consumers are just getting locked more and more into the products they have. We're going to take a quick break for an ad. We'll be right back. Support for this show comes from Shopify. Starting something new isn't just hard. It can be really scary, too. So much work goes into this thing that you're not entirely sure will even work.

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Amazon. By Amazon and Nest got bought by Google. And that feels like the inevitable outcome, right? Like that's what success would have to be for a technology product these days. People like it. And they're like, okay, there's a good team behind this. They're good at designing things. And so therefore, some kind of conglomerate is going to buy them up because otherwise it wouldn't work.

Right. Like everything is built around extensions. of these platforms because you want your stuff to work with the other stuff you use. Yeah, so we are recording right now on the first day of Amazon Prime Day. Prime Day is now two days. And then you can buy on sale from Amazon today like an Echo device for like $22. Nice. It's like no, it's nothing.

It's like the Amazon's like marginal cost of Echo devices is probably 20 bucks. They're not making any money that's thing. But they get one in your house. And then it is way more likely that the next smart home thing you buy is going to work with that Alexa. a device. Right? So now you're like, which light bulbs should I use? I got to get some Alexa ones.

Which door locks? Well, I guess they make those two. Which video cameras are we put at the door? Now you're just like fully into this Amazon ecosystem because you bought one $22 speaker. And that's going to affect your purchases on an infinite timeline is remarkable. I'm not saying that needs to like, you know, Google's in good competition with them. Apple has a competitor in that ecosystem. I'm not saying like, you know, the government should send its lawyers right away.

I'm saying that is, that is not what happened when you bought a Ford in like 1975, right? You were not like, okay, every purchase I buy related to transportation for the next 10 years, like has to be reproved by Ford. That was not the case. And I think removing that fungibility from the market has led to some extremely distorted effects. And then the power of these companies to not only drive what you buy, like drive your purchase decision, but affect what you see is where you get the Republicans, the conservative sides. We need to regulate these companies. Right.

And so that's what's interesting to me is that there seems like not just two different diagnoses, right? It's not just like Wilson and Roosevelt trust busting or regulation. But there's an interesting like disconnect, right? So it's like Warren's antitrust idea would do a lot to this kind of like interconnectedness and how do the different levels of vertical integration. relate to each other. But I think not address at all, at least it sounds to me, this kind of basic concern that it's like, look, people go to Google and they want to search for like news articles

about something, right? They want, you know, Trump's tweets, right? And what people see and like how the Democratic dialogue moves forward is heavily shaped by which articles Google, you know, chooses to make available to people. And that's like just a lot of power to concentrate. in a kind of black box algorithm, some guys in Mountain View or wherever. And even the Warren's proposal seems like so dramatic in some ways. It doesn't really address that core source of power, it seems to me.

It doesn't. And I think that's the key criticism of the proposal. If what you're trying to solve for is Facebook should do a better job at privacy, Google should be more transparent in how its search results are put forth, YouTube should have a better harassment policy. There's nothing specific connecting breakups to those policy outcomes, right? There's just a belief in the market that if Facebook screws up, people will switch to an independent Instagram or that independent Instagram will remain beloved while Facebook's

series of scandals will lead its user base to decline. Or an independent WhatsApp will not put advertising in WhatsApp, which is, you know, Facebook has talked about doing or not read your messages or whatever nonsense Facebook wants to do with WhatsApp, they'll go back to charging a $2 fee to use WhatsApp and it will remain private. But so just to clarify this, right? So this is like the other side of Warren's proposal, right? So one is like the separation of marketplace owners from marketplace participation. And the other is like very specifically, Facebook now owns Instagram and also owns WhatsApp.

And I think a lot of people, I think Ben Thompson, we referred to before, right, as like, I think called letting that Facebook Instagram merger go through, like the biggest, you know, anti-trust policy mistake generation. No one thinks it was a good idea, except for Mark Zuckerberg. Like even the founders of Instagram who quit were like, we got rich, but like, are we happy, right? This is what so, you know, setting to me, right? I remember when Facebook bought Instagram. I was more of a business columnist for Slate at that time. And people were incredulous about the amount of money that the Instagram guys made. Whereas in retrospect, it looks like it was like a joke, right?

Yeah, deal of the century. They got a billion dollars. Ha! It's nothing. I mean, and Google bought YouTube for far less than that. Deal of the century. Right. So, you know, the theory here is that you could have, if YouTube was spun off, if Instagram was

spun off, if WhatsApp was spun off, then you would have more sort of competition between these companies, even though they don't quite do the same thing. Yeah, what's the first thing YouTube would do? YouTube right now is the second largest search engine on the internet, right? The first one is Google. You spin off YouTube, what's the first thing they do? They expand the nature of their search engine. What's the first thing Google does? They build a video business. Right. So now they're directly in competition with each other. You're an unhappy YouTuber. Well, there's a big company there that's trying to rebuild YouTube.

Maybe you go there. You spin off WhatsApp from Facebook. What's the first thing they do? They build a photo sharing service. What's the first thing Facebook does? It invests in Messenger instead of trying to shuffle people around its three platforms.

So the optimistic story about that would be that you would then have a stable basis of competition, right? That Instagram would add features beyond photo sharing to its basic social graph, while Facebook would also try to do, you know, photo sharing. And then you would have these two different companies. And YouTube would have non-video stuff in it.

And Google would build a second video platform. And of course, Instagram, it would be natural to expand into video. And so you might have like five or six different companies kind of all in. But then the experience of Snapchat, like, makes me sort of dubious about this, right? Like, Facebook did not buy up Snapchat and eliminate a potential competitor there. Instead, they just sort of, they copied the basic, some of Snapchat's major basic functions, and then took advantage of the fact that they both, like, employ a lot of smart engineers, and they already had this huge user base, and they just kind of, they just kind

of crushed them. Yeah, and Snapchat famously rebuffed Facebook. So, first of all, the competition point, it really relies on the notion that the people in the market are going to choose privacy. Right. Which is not true. Like, people often pick convenience over privacy. It happens every day. Like, they use Google. They continue to use Facebook.

They're not switching away. Like, the absence of competitors is but one factor. But then we are all installing microphones and cameras in our house, like, left and right. So, like, the idea that the market will reward the. privacy signal. It's a little bit unfaith, but it's there. The second part is Snapchat, and that is really an advertising dilemma, which is, okay, Snapchat exists. It's ad targeting is not as good as Facebook's or YouTube's. Its audience isn't as big, and its audience is very young. So they don't have the money yet. They will have the money someday, right? So you got to,

they got to hold on to all these teenagers. They got to grow up with Snapchat. They got to get some disposable income, and then you can, like, sell in a car. Okay, that's a long curve. Snapchat is successful. They're just not successful on the scale of Facebook. And I think that is another distortion in the market, right? Where, you know, Apple is spending, what, $15 billion an episode for this TV show it's making where Aquaman is blind.

It's very confusing. They could make 100 episodes of that show at $15 million a piece. They wouldn't take a percentage off their cash reserve, right? Like, that's crazy. That's an incredible scale, and it distorts everything. It makes everything else feel small when if you just took that stuff off the Y axis, you would see there's actually this incredible variability. Right. And if you believe in aggregation theory, if you believe in the power of network effects, then I think you're going to think that these mergers that happened in the Facebook universe are sort of incidental, right?

that the marketplace just tends toward a winner-take-all dynamic and that you are going to have because Facebook knows so much about so many people already, it is going to be an optimal targeting platform and you sort of can't beat that, right? Just like Microsoft was not like a helpless little guy when it tried to get into web search, but it just doesn't work anyway, right? And that's a, like, that's a tougher question. Right. Like if the basic economics of the situation tend toward monopolization, like, I think they do with electrical utilities, right? I think we've just given up on the idea. Like, there's not going to be seven different companies running power lines down your street connecting to every single person's house. And then you pick which utility you're going to use, right? Like it's called a natural monopoly and either they are owned by the government or they're regulated by public utility commissions. And, you know, people complain about it a lot. But that just kind of. is what it is and you need to learn to accept it. Yeah, and we had that same sort of natural

monopoly conversation around broadband lines, right? Should they be regulated the same as phone lines under Title II? Should we impose net neutrality? It, yes, you know, it's like one good argument. That's an argument I make a lot. The argument for no is, well, look, the physical infrastructure here doesn't matter. Eventually, wireless will overtake it anyway, so on and so forth, everything is fine, right? And then you look at the internet access companies, and they are, they're not, they're not rolling out like tons of new access products. They're busy buying content. Right. So like AT&T owns Game of Thrones now is a very strange outcome in this world. Well, that kind of loops us back to where we started, right? That if you go back just a few

years ago, right, there was a big conversation about network neutrality. And it was like liberals really, really wanted this. And conservatives were saying this was a bad idea. And, And it feels like we're now having the same argument about digital platforms, except somehow the sides have gotten reversed. It is deeply confusing, right? So the conservative position on the lines in the ground. So think about the classic way to think about networks is in layers. It's like a weedsy engineering thing.

But you've got your physical layer, you've got your network layer, you've got your application layer, and on and on goes. So the conservative position, Ajit Pai, who's the Republican chairman of the FCC, says the physical and network layer should be totally unregulated. We can trust the ISPs. Don't worry, AT&T and Verizon. They're never going to block or throttle or prefer their own services and send, you know, AT&T is not going to send you Time Warner content faster than it sends you Disney content. That seems fanciful, but okay. But trust them.

They're good, even though there's not a lot of competition here. And you go one layer up into the application layer where Google and Facebook Live. And you have conservatives saying they're biased against us. We must impose fairness regime on them to make sure they're transparent. The FTC has to monitor them every two years. And you're like, wait a minute. Like if you think monopoly at this layer is bad, most Americans have one or two access layer choices. Why don't you think it's bad there?

And I've never, there's not one place where even Pai, again, the chairman of the SEC is like, don't worry about the broadband providers. The real problem is Google. And it's like, no, they're all probably up and down the stack. That's a problem. Okay. But if I could summon Ajit Pai here, I think what he would tell you is that we have plenty of experience with the network infrastructure. And they are not in fact like favoring liberal or conservative news sources. Whereas the reason we have these complaints about YouTube is that, like, they really are.

Google has demonetized certain people's shows, right? Facebook does kick certain content off, right? And if Comcast did that, right, there would be like a huge hue and cry if Comcast made certain websites suddenly inaccessible. So there would be, hasn't happened yet, so Net neutrality went away about a year ago. it's amazing we started at 2.30 and got to net neutrality, but I promise the audience. It's all the same sort of confusing fight. Comcast, when they bought NBC, by the way, Comcast is an investor in our company. I feel like we have to disclose it. I disclose it on the Verstcast every time. They don't like me very much, but I'm disclosing. So Comcast, when they bought NBC, they made a deal with the FTC and the FCC. You cannot favor NBC's content on your services, which they would have done. They absolutely would have made it so that a Comcast subscriber could have streamed MSNBC, and that would have been free from the data cap, but Fox News would have hit the data cap, right? That's putting a toll on Fox News. Well, AT&T just bought Time Warner, Time Warner owns CNN. You don't think every AT&T phone is going to come with CNN app that doesn't hit

your mobile data cap, like within minutes? Like, it's obviously going to happen. There are, definitely going to do it with HBO. So now you're, now you have an immediate sort of information bundling with access. And that is the net neutrality problem. CNN will be free on AT&T devices and Fox News will not. You've arrived at the nightmare. That doesn't sound so bad.

Right. It doesn't. But isn't that the nightmare? Isn't that the thing that they're like liberals were saying with net neutrality, they will favor some viewpoints over others. And then they bought a viewpoint and they're going to favor it. And the only reason it hasn't happened yet is that there was a lawsuit

filed against the FCC for repealing net neutrality rules that is still pending before the D.C. circuit. And everyone's waiting for that to hit. And no one knows. And the second, you know, the rules for or against, you'll begin to see this bundling happen. Okay. So, but then this seems to be like the shoes on both feet, right?

That, like, I hear liberals saying, well, we want more aggressive sort of moderation. I think a lot of times from these technology platform companies. It's like, why aren't you getting rid of the harassers, Twitter, you know? Why aren't you, like, getting disinformation off Facebook, things like that? But these are the exact same people who were warning about, you know, violations of net neutrality. And so it feels in my bones, right? The difference is, is that when people are thinking about the physical infrastructure companies being non-neutral, they are assuming business strategy, non-neutrality. Right?

So it's like, we are going to give preferential access to HBO and to CNN because that is the content. that we own, right? Or Comcast is going to give preferential access to Vox Media websites because we're an investor in Vox Media, full disclosure. Yeah, that'd be great for us. I just like full transparency. That would be awesome. Pick us and not buzz – well, I guess you invest in BuzzFeeds.

But whatever. We're better. We're still better. But whereas what's being envisioned with Facebook is like not that Facebook will or should favor like properties that Facebook owns, but that's the – that Facebook should do essentially editorial judgment, right? And like should promote like good, reliable news sources and not bad ones. But theoretically, the broadband companies could do the same, right?

Like, I'm on T-Mobile. T-Mobile could maintain like a blacklist of like unreliable disinformation websites and block them from me or something. Absolutely good. And I don't know. So like I both feel uncomfortable with that idea of like, a broadband infrastructure company censoring websites, but also kind of feel like it's bad that Facebook promotes a lot of disinformation.

So I guess I'm the hypocrite. I agree with you. It is terrifying. I'm a hypocrite. The question, yeah, I agree. Sorry, well, my work is done here. No, it's, the question is where does the regulation lie? Where is the check on the power?

Right. And it's the same question for net neutrality. It's the same question for platform moderation. decisions. It's the same question for should we break up Amazon. Who's going to check the increasing power of these companies? With net neutrality, the answer generally is, well, the government should regulate these companies, right? There are natural monopolies. You're not going to lay more fiber on the ground. Even if you had 15 companies digging up the city to lay fiber, that's probably a bad outcome for a variety of reasons. I know you're a proponent

of zoning conversations. There's probably going to tell local zoning debate to be had about that. Like, that's inefficient. We kind of recognize it's inefficient. Let's just lay one set of fiber and regulate it heavily and make sure that has access to all. You get to the platform level, it gets, it's way harder. I think it's just way stickier, right? Who is going to regulate the platforms?

Is the platforms themselves, are they competitive enough? We could break them up. Maybe they'll be more competitive. They'll be better at moderating. Should we impose some sort of privacy law like the GDPR here to say this is how privacy should work? There's some massive fines associated with it because you are so big. Should we just admit?

that the network effect slash aggregation theory has created a new kind of economy in total and just let me, Neil Patel, write rules for it because I come into it with fresh eyes. That's a good idea. Where is a check on this power? And I think the answer is these companies are now so big and so powerful that everybody feels it. And I think on the conservative side, what they feel is their base regularly engages in toxic speech. and so they complain about it so they can constantly throw them this bone.

And that's just reality. Like there's a lot of racism on the hard right. There's a lot of sexism on the hard right. There's a lot of bigotry in general. And then on the left, what you see is, hey, we'd like less Nazis, please. Right.

And there's an incredible, I mean, I hope everybody reads Casey's stories by Facebook moderators. That has a cost, like actual human cost. These people get PTSD. They are permanently stressed. They're not paid very much.

They should get paid more. They're not even, They don't even work for the companies or contractors. So if you want them to fix it, you are going to incur some escalating unscalable cost. And that's a really hard problem. All right. Thank you very much, Nilla Patel, theverge.com, Vergecast on the Fox Media Podcast Network. Thanks for this flagship.

Flagship. Absolutely. All right. My thanks to Matt Iglesias from the weeds. That was a really fun episode. We got to do that more often. I want you to listen to a bunch of other stuff. I want you to listen to Why'd you push that button.

They got a new episode this week about Snapchat. Ashley and Caitlin are just doing a great job with that show. Go check it out. We'll be back on Friday. The Verge chat show. It'll be a good time. And then next Tuesday, big guest on the interview show. Mark Cuban joins me and tells me basically everything that's on his mind.

There's an incredible conversation. It's coming next Tuesday, Mark Cuban on the Verge cast. See you then.