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  • Writer's pictureBarie Carmichael

Inherent Negatives: A Strategic Wake-Up Call for Tech Companies?

Updated: Jan 16, 2018

The radical transparency of the new social landscape has empowered 24/7 auditors of corporate behavior, disrupting business with an astonishing velocity and creating a degree of angst for many c-suites and boards of directors.

Ironically, many of the enablers of these disruptions — social media giants like Google, Facebook, Twitter — are themselves now reckoning with the negative social impacts their own inventions have created, as Roger McNamee explains in his Washington Monthly article, “How to Fix Facebook Before it Fixes Us.” The unprecedented growth of these new business models has enabled management to outdrive their own headlights. Their businesses have grown faster than their ability to anticipate and mitigate the negative social impact of their business models. Nor have regulators been inclined to impose any rules of the road. Today these business models are operating largely without regulatory guardrails.

To exhaust the metaphor, this has become an accident waiting to happen.

As introduced in RESET: Business and Society in the New Social Landscape, every business, including social media companies, has inherent negatives: an element embedded in a business model, strategy, policy or governance whose negative impact, if left unaddressed, grows as the business expands. As United Parcel Service (UPS) expands, for example, so does its carbon footprint, an inherent negative. UPS has applied its engineering expertise and technology to mitigate the impact of this inherent negative, reducing its annual carbon dioxide emissions by 100,000 metric tons. More than a discreet sustainability initiative, UPS’ actions to mitigate its inherent negatives are a way of doing business.

Unlike social media giants, businesses like UPS have more conventional business models with traditional supply chains and precedents to anticipate their inherent negatives. In fact, some are trying to flip a negative into a positive through collaborative solutions. Low cost textiles, for example, have made clothing a disposable downstream commodity, with an estimated 85% of post-use textiles going into landfills. As the textile industry grows, so do the inherent negatives of their growing waste stream. Beyond initiatives to recycle and reuse clothing, the apparel industry is collaboratively exploring new technologies to generate new apparel using fiber recovered from used apparel, reducing waste and consuming less water to grow cotton.

Social media companies also have inherent negatives. Unlike the more familiar manufacturing business models, however, social media companies are implementing new age business models without the benefit of precedents. They make money from advertisers attracted by the traffic and engagement data coursing through social media companies’ servers, allowing advertisers to micro target their advertising, with algorithms fundamentally running the show. For social media companies and their advertisers, viral is good for business. The reality, however, is that negative or provocative content increases traffic. As a result, the business model itself creates an incentive for things like fake news or hate speech. With no cop on the beat like the Federal Communications Commission (FCC) governing radio, television, wire, satellite and cable, social media companies operate in a new age wild west. Governance of their models is left to the companies’ voluntary policies and strategies to recognize and remedy their negative social impact.

The new social landscape, however, has seen a rising public expectation on a global scale for businesses to be socially responsible. Ironically in the absence of an FCC-like authority, the social media ecosystem itself has created the only guardrails for their business models: a web-enabled watch dog public whose visible criticisms are not constrained by geography or time. The notion that these companies cannot be held accountable for profiting from the negative social impact their business models create is now past its expiration date.

To date, legislators have been flirting with intervention. They have also, however, seemed to recognize the political hazards of imposing a regulatory solution on a business model they do not understand. Nor are they anxious to own responsibility for the inevitable unintended consequences their intervention might cause. So far social media executives have resisted any whiff of regulatory intervention. Eventually, however, the industry will likely recognize their enlightened self-interest in collaboratively creating a regulatory solution that will provide freedom in a common framework and a common rulebook.

The solutions are not simple. But the need is pressing. As the Internet of things merges more everyday products into the global internet, finding the remedies is not going to get any easier.

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