Nov. 3, 2011: George Soros smiles before a speech at the Central European University in Budapest.
Further adding fuel to the fire that is currently engulfing social media and the tech sector, billionaire investor George Soros has slammed Facebook and Google, calling them a “menace” and “obstacles to innovation.”
Soros, often a target of conservatives for many of his views, including those on immigration, attacked the two companies in a speech at the World Economic Forum in Davos, Switzerland.
“But as Facebook and Google have grown into ever more powerful monopolies, they have become obstacles to innovation, and they have caused a variety of problems of which we are only now beginning to become aware,” Soros said in a speech.
Though Soros is no longer involved in the day-to-day operations of his family fund, Soros Fund Management, the asset manager did own shares of Facebook and Google parent Alphabet as of Sept. 30, according to SEC filings reviewed by Fox News. Soros Fund Management, which has approximately $18 billion in assets under management, also owns positions in many companies, including Comcast, Microsoft and Amazon, often a target of President Trump.
He likened the platform companies, including Facebook and Google to casino companies and gambling, saying they may damage society irrevocably.
“Something very harmful and maybe irreversible is happening to human attention in our digital age,” Soros said. “Not just distraction or addiction; social media companies are inducing people to give up their autonomy.”
He continued: “The power to shape people’s attention is increasingly concentrated in the hands of a few companies. It takes a real effort to assert and defend what John Stuart Mill called ‘the freedom of mind.’ There is a possibility that once lost, people who grow up in the digital age will have difficulty in regaining it.”
Attacks on social media companies and technology companies in general have increased in recent months. Companies such as Twitter, Apple and the aforementioned Facebook and Google have been the subject of ire from consumers, lawmakers and investors for the roles they are playing in shaping society.
Soros also noted that Facebook, which has grown to a market cap of over $500 billion by creating one of the biggest advertising platforms built on a wealth of data and knowledge about its user base – which has surpassed 2 billion – would soon run out of users to add.
“The network effect is truly unprecedented and transformative, but it is also unsustainable,” Soros continued. “It took Facebook eight and a half years to reach a billion users and half that time to reach the second billion. At this rate, Facebook will run out of people to convert in less than 3 years.”
In addition to the 2 billion monthly active users on Facebook, Facebook also owns Instagram and WhatsApp, which have more than 800 million and 1 billion monthly active users, respectively.
Google and Facebook did not respond to requests for comment from Fox News.
As these companies continue to grow richer and their dominance increases, Soros said that regulation and taxation would soon crimp their efforts, with European Union competition chief Margrethe Vestager becoming “their nemesis.”
Here is the part of the speech where Soros discusses technology in its entirety:
The IT monopolies
“I want to spend the bulk of my remaining time on another global problem: the rise and monopolistic behavior of the giant IT platform companies. These companies have often played an innovative and liberating role. But as Facebook and Google have grown into ever more powerful monopolies, they have become obstacles to innovation, and they have caused a variety of problems of which we are only now beginning to become aware.
Companies earn their profits by exploiting their environment. Mining and oil companies exploit the physical environment; social media companies exploit the social environment. This is particularly nefarious because social media companies influence how people think and behave without them even being aware of it. This has far-reaching adverse consequences on the functioning of democracy, particularly on the integrity of elections.
The distinguishing feature of internet platform companies is that they are networks and they enjoy rising marginal returns; that accounts for their phenomenal growth. The network effect is truly unprecedented and transformative, but it is also unsustainable. It took Facebook eight and a half years to reach a billion users and half that time to reach the second billion. At this rate, Facebook will run out of people to convert in less than 3 years.
Facebook and Google effectively control over half of all internet advertising revenue. To maintain their dominance, they need to expand their networks and increase their share of users’ attention. Currently they do this by providing users with a convenient platform. The more time users spend on the platform, the more valuable they become to the companies.
Content providers also contribute to the profitability of social media companies because they cannot avoid using the platforms and they have to accept whatever terms they are offered.
The exceptional profitability of these companies is largely a function of their avoiding responsibility for– and avoiding paying for– the content on their platforms.
They claim they are merely distributing information. But the fact that they are near- monopoly distributors makes them public utilities and should subject them to more stringent regulations, aimed at preserving competition, innovation, and fair and open universal access.
The business model of social media companies is based on advertising. Their true customers are the advertisers. But gradually a new business model is emerging, based not only on advertising but on selling products and services directly to users. They exploit the data they control, bundle the services they offer and use discriminatory pricing to keep for themselves more of the benefits that otherwise they would have to share with consumers. This enhances their profitability even further – but the bundling of services and discriminatory pricing undermine the efficiency of the market economy.
Social media companies deceive their users by manipulating their attention and directing it towards their own commercial purposes. They deliberately engineer addiction to the services they provide. This can be very harmful, particularly for adolescents. There is a similarity between internet platforms and gambling companies. Casinos have developed techniques to hook gamblers to the point where they gamble away all their money, even money they don’t have.
Something very harmful and maybe irreversible is happening to human attention in our digital age. Not just distraction or addiction; social media companies are inducing people to give up their autonomy. The power to shape people’s attention is increasingly concentrated in the hands of a few companies. It takes a real effort to assert and defend what John Stuart Mill called “the freedom of mind.” There is a possibility that once lost, people who grow up in the digital age will have difficulty in regaining it. This may have far-reaching political consequences. People without the freedom of mind can be easily manipulated. This danger does not loom only in the future; it already played an important role in the 2016 US presidential elections.
But there is an even more alarming prospect on the horizon. There could be an alliance between authoritarian states and these large, data-rich IT monopolies that would bring together nascent systems of corporate surveillance with an already developed system of state-sponsored surveillance. This may well result in a web of totalitarian control the likes of which not even Aldous Huxley or George Orwell could have imagined.
The countries in which such unholy marriages are likely to occur first are Russia and China. The Chinese IT companies in particular are fully equal to the American ones. They also enjoy the full support and protection of the Xi Jingping regime. The government of China is strong enough to protect its national champions, at least within its borders.
US-based IT monopolies are already tempted to compromise themselves in order to gain entrance to these vast and fast growing markets. The dictatorial leaders in these countries may be only too happy to collaborate with them since they want to improve their methods of control over their own populations and expand their power and influence in the United States and the rest of the world.
The owners of the platform giants consider themselves the masters of the universe, but in fact they are slaves to preserving their dominant position. It is only a matter of time before the global dominance of the US IT monopolies is broken. Davos is a good place to announce that their days are numbered. Regulation and taxation will be their undoing and EU Competition Commissioner Vestager will be their nemesis.
There is also a growing recognition of a connection between the dominance of the platform monopolies and the rising level of inequality. The concentration of share ownership in the hands of a few private individuals plays some role but the peculiar position occupied by the IT giants is even more important. They have achieved monopoly power but at the same time they are also competing against each other. They are big enough to swallow start-ups that could develop into competitors, but only the giants have the resources to invade each other’s territory. They are poised to dominate the new growth areas that artificial intelligence is opening up, like driverless cars.
The impact of innovations on unemployment depends on government policies. The European Union and particularly the Nordic countries are much more farsighted in their social policies than the United States. They protect the workers, not the jobs. They are willing to pay for re-training or retiring displaced workers. This gives workers in Nordic countries a greater sense of security and makes them more supportive of technological innovations than workers in the US.
The internet monopolies have neither the will nor the inclination to protect society against the consequences of their actions. That turns them into a menace and it falls to the regulatory authorities to protect society against them. In the US, the regulators are not strong enough to stand up against their political influence. The European Union is better situated because it doesn’t have any platform giants of its own.
The European Union uses a different definition of monopoly power from the United States. US law enforcement focuses primarily on monopolies created by acquisitions, whereas EU law prohibits the abuse of monopoly power irrespective of how it is achieved. Europe has much stronger privacy and data protection laws than America. Moreover, US law has adopted a strange doctrine: it measures harm as an increase in the price paid by customers for services received – and that is almost impossible to prove when most services are provided for free. This leaves out of consideration the valuable data platform companies collect from their users.
Commissioner Vestager is the champion of the European approach. It took the EU seven years to build a case against Google, but as a result of her success the process has been greatly accelerated. Due to her proselytizing, the European approach has begun to affect attitudes in the United States as well.”
Follow Chris Ciaccia on Twitter @Chris_Ciaccia