Australian government has decided that big tech companies, such as Facebook and Google, must pay the news companies for any content that appears on their platforms. Af first, the tech giants tried to negotiate their way out of it. But the government didn’t budge and said that it will go ahead with the law.
Once it became clear that the changes to the law are going ahead, Facebook has decided to take a radical step. On the 18th of February 2021, Australian Facebook users woke up to find out that they can no longer share any content from mainstream news websites. Likewise, all Facebook pages belonging to Australian news companies were no longer there.
Instead of paying for the news content, Facebook has simply decided to block all of it.
There were mixed reactions to this. Some say that Facebook is wrong to do it. But I disagree. I think that what Facebook did was perfectly reasonable. It was absolutely the right thing to do under the circumstances. Here is why.
Every living entity acts in its own best interests
Pure altruism is exceptionally rare, if it exists at all. Every person (or a group of people) do things in their best interests. And it’s neither good nor bad. It’s simply a fact of life.
Even those things that may seem altruistic are almost always driven by real or perceived best interests. A religious person may be doing some sacrifices without asking anything in return, but this is primarily because such person believes that heaven awaits for them after they die, unless they stop making these sacrifices. A major corporation may donate millions for a good cause, but it does so primarily for a good PR.
And this is what competent governments should know. Whenever they introduce laws that go against someone’s best interest, they shouldn’t expect the affected parties just to sit there and do nothing. But despite this, governments keep making this mistake. They often treat living and thinking entities as if those are just inanimate objects.
For example, whenever a country tries to increase the amount of tax corporations must pay, corporations will respond. They will do anything they can to hide their profits and go through any available legal loophole to avoid paying extra tax.
If a law introduces penalties or causes any other inconvenience to any group of people, it will almost certainly backfire. And the law that compels Facebook to pay news corporations is no exception.
Facebook is open to anyone to create pages and post content on. And it’s Facebook who pays for the IT infrastructure to make it all possible. So why would the company want to pay those who put content on it’s platform if it didn’t explicitly ask for this content?
The most surprising thing is that anyone at all finds Facebook’s decision on the matter surprising.
The law that Facebook responded to is pure rent-seeking
In Economics, the term rent-seeking describes a situation where an entity is trying to gain added wealth without reciprocal contribution in productivity.
It’s not to be confused with renting something out. When Microsoft and Amazon rent out cloud resources in Azure and AWS respectively, they do provide value. First of all, nobody compels you to use these services. Secondly, these services make it cheap for clients to set up their cloud servers. So everybody wins.
Rent-seeking is when you must pay someone just to live your normal life. For example, when somebody places a chain across a river that flows through its land and then asks all boat owners to pay for raising the chain up, that’s rent-seeking.
And what Australian government has done with the law that compels big tech firms to pay for hosting somebody else’s content is nothing but rent-seeking. News companies don’t loose out if somebody shares a link to its website on Facebook. On the contrary, they want as many people as possible to share such links.
Does Facebook benefit from this content being shared? In a way, yes. But it doesn’t specifically benefit from news content. It benefits from people interacting with any type of content on its platform. It’s the quantity of this interactions that matter, not the type of content people interact with.
So, because news companies don’t loose out from being on Facebook, the proposed law is nothing but and example of rent-seeking. And it’s not a surprised that it was News Corp, Australian biggest news corporation, that aggressively lobbied for this law.
The only parties that would benefit from this law are news corporations and the government. The former would get another source of guaranteed income at somebody else’s expense. The latter would get more tax, as every commercial transaction is taxed. But there will be no other benefit from this law. It will not create any value to anyone else.
Why what Facebook did is not Orwellian
Some people have expressed the idea that Facebook, being a big tech firm, is acting as a dictator in this matter. People have been accusing it of “censorship” and “being undemocratic” for blocking the news content.
But it can’t be further from the truth. None of big tech corporations can be Orwellian by definition. This is because they all operate in free market.
The reason Amazon is so big and wealthy is because many people choose to buy and sell on it. There are plenty of other online shops that people cold have chosen instead. Google is not the only search engine out there. There’s also DuckDuckGo, which is, arguably, a much better search engine. And neither is Facebook the only social network out there.
As a matter of fact, the success of big tech companies is driven by the processes that are way more democratic than those that put any democratically elected government in power. The reason big tech companies are big is because many people have voluntarily chose to use their services. And there is absolutely nothing that stops people from leaving if they wish to do so. People vote by selecting a preferred band out of many competitors.
So, Facebook can’t really censor anything. It neither owns nor regulates the internet. If any type of content is not available on its platform, there is nothing that stops you from accessing this content elsewhere.
And, for your own good, you probably shouldn’t be relying on social media for your news content anyway. It’s especially true if you want to be informed about important topics, like science. If you are not careful, the manipulative mechanisms of social media will drag you into an echo chamber that you didn’t ask to be in.
Why didn’t Google act alike
One argument that people might use to say that Facebook didn’t have to act the way it did is that Google didn’t resist the new law. But it’s doesn’t really disprove the fact that every company acts in its best interest.
Sometimes, you have to manage your losses and this is what Google did. Google can try to negotiate against the new law, but it doesn’t hold any legislative power. The government always has the final word. In case of Google, the choices it had was either to leave Australia or agree to this law. It has probably calculated that the latter would be cheaper.
Google could remove suggestions with the names of Australian news corporations from its search queries. But if it tries to fiddle with its search index and the displayed results, it will quickly loose its reputation as a provider of a reliable search engine. And this would be worldwide reputation loss, not just in Australia. But if Google doesn’t do this, then the links to the news articles would still appear on its platform and it would still be liable to pay.
Facebook is different though. It’s a social media platform and it’s not primarily intended for sharing news. So, in this case, if the company blocks news in a country with a relatively small population, it will lose only a small fraction of the content that it can generate advertisement revenue from. And it will lose a relatively small number of users who will disagree with the decision and leave the platform. It wouldn’t lose anything else.
So, both Google and Facebook acted in their own best interests. The difference in approach comes from the difference in freedom to maneuver.
The consequences to Australian consumers
If this matter between Facebook and Australian government doesn’t get resolved, the only party to lose would be the Australian consumers. If reliable sources of news are removed, their place will be taken by fake news, wild conspiracy theories and other types of misinformation.
And if a large proportion of population are misinformed, it’s the government who will lose out by proxy. It’s the government that will have to deal with the consequences of people burning 5G towers and refusing vaccination.
Facebook, on the other hand, wouldn’t be affected at all. It doesn’t matter whether people on its platform are well-informed or not. What matters is that these people see as much contextual advertisement as possible. So, misinformation is the headache for the government, not Facebook.
However, the contrary might happen. News corporations might be replaced by high-quality independent newsmakers.
Even though major news corporations rarely put unverified and false information out, they are very selective about what they report on. First of all, they have to be politically correct. So they may not report on some event that cannot be reported on in a politically correct manner. Secondly, what they decide as noteworthy events is not necessarily what’s the most relevant to the majority of its audience. News corporations focus their reporting on what their stakeholders believe to be the most profitable topics.
Independent bloggers don’t have these restrictions. They can talk about anything they want. And they may choose to focus on only those events that are definitely relevant to their core audience. This is what many YouTubers specialize in. And some of them are doing well indeed.
So, if the news content moves off the platform, it won’t necessarily be replaced by junk. It may instead be replaced by something better and way more relevant.
Lessons for tech entrepreneurs
News expire quickly. This is why I don’t often comment on them. But this particular event shows a lesson on general principles that will always be relevant.
If you are a tech entrepreneur, you don’t have to do anything that’s not in your own best interests. If there is any law that will only bring you losses, you don’t necessarily have to quietly accept those losses.
Laws to regulate the tech sector are often written by people who don’t have any idea how tech actually works. Use this fact to your own advantage.
Sometimes you don’t have a choice but to take damage. If this is the case, then at least try to minimize your losses.
You don’t have to think in a linear fashion. And you don’t have to do what’s expected of you if this action will not benefit you. Thinking in a non-standard way, like a hacker does, is what will make you successful. And this is especially relevant to IT sector.