What I said when DC came calling.

Last Sunday was Father’s Day, and I never thought I’d say this, but I was glad to get a tie, because my wife knew I would need it (it’s been literally over a decade since I’ve worn one). Today I was called to testify before a Senate Commerce committee hearing on Facebook and the role of data in society. Apparently they’ve been reading my work and, well, that landed me in DC. My full written testimony, replete with dozens of links to my previous work and coming in at 2500 or so words, is published on Searchblog. Below is what I read into verbal testimony before the Senators got into a couple hours of questioning, which, by they way, I found to be well informed and enlightened.

Cambridge Analytica and Other Facebook Partners: Examining Data Privacy Risks

U.S. Senate Committee on Commerce, Science, & Transportation

Honorable Committee Members –

I appreciate the opportunity to submit this testimony to your committee.

In the past five, Facebook has come to dominate the public square — the metaphorical space where our society comes together to communicate with itself, to debate matters of public interest, and to privately converse on any number of topics. As a publisher myself, I became increasingly concerned that Facebook’s appropriation of public discourse would imperil the viability of independent publishers and cause the kinds of externalities with which we now struggle.

Facebook employed two crucial strategies to grow its service in its early days. The first is the News Feed, which mixed personal news from “friends” with public stories from independent publishers. The second strategy was the Facebook “Platform,” which encouraged developers to create products and services inside Facebook’s walled garden.

The potent mix of News Feed, Platform, and a subset of bad actors leveraging both, combined to deliver us the Cambridge Analytica scandal. But it is important to remember that Cambridge Analytica was a predictable outgrowth of the governance decisions taken by all parties, including our government.

Facebook’s business model is driven by its role as the largest data broker in the history of technology. To understand Facebook, we must understand the business model of online advertising. The technology infrastructure that allows companies like Facebook to identify exactly the right message to put in front of exactly the right person at exactly the right time is, in all aspects of the word, marvelous. But the externalities of manufacturing and selling attention have not been fully examined.

The Cambridge Analytica scandal has finally focused our attention on these externalities, and we should use this opportunity to go beyond the specifics of that incident, and consider the broader implications. The “failure” of Facebook’s Platform initiative is not a failure of the concept of an open platform. It is instead a failure by an immature company to properly govern its platform, as well as a failure of society to govern the environment in which Facebook operates. Truly open platforms are regulated in a way that allows for economic and social prosperity for all.

The wrong conclusion to draw from the Cambridge Analytica scandal is that entities like Facebook must build ever-higher walls around their data. The conclusion should be the opposite. A truly open society should allow individuals and properly governed third parties to securely share their data so as to create a society of what Nobel laureate Edmond Phelps calls “mass flourishing.” The Cambridge Analytica scandal may seem to be entirely about a violation of privacy, but to truly understand its impact, we must consider the implications to future economic innovation. Facebook has used the scandal as an excuse to limit third party data sharing across its platform. While this seems logical on first glance, it is in fact destructive to long term economic value creation.

While I understand the lure of sweeping legislation that attempts to “cure” the ills of technological progress, such approaches often have their own unexpected consequences. The EU’s adoption of GDPR, drafted to limit the power of companies like Facebook, may only strengthen that company’s grip on its market, while severely limiting entrepreneurial innovation. Instead, focused regulatory efforts to insure secure and viable data portability, as well as a rethinking of core antitrust principles, are sorely needed.

Another mistaken belief to emerge from Cambridge Analytica is that any company, no matter how powerful or well intentioned, can alone “fix” the problems the scandal has revealed. Facebook’s impact on our society outstrips its ability to manage the externalities it has created. Fortunately, in recent months Facebook has begun to reach out to the outside world, with programs like the Election Commission and others that bring the outside in. These efforts should be praised and encouraged.

We should strive to create a flexible, secure, and innovation friendly approach to data governance that allows control by all affected parties, including the beneficiaries of future innovation. To play forward the current architecture of data in our society — where most of the valuable data is controlled by an oligarchy of massive corporations — is to imagine a sterile landscape hostile to innovation.

Most observers of technology agree that data is a new class of currency. The manufacturing of data into currency is the main business of Facebook and many other large information age businesses. Currently the only participatory right in this value creation for a user of these services is to either engage with the services offered, or purchase the stock of the company offering the services. Neither of these options affords the user — or society — compensation commensurate with the value created for the firm. We can and must do better as a society, and we can and must expect more of our business leaders.

Thank you very much.

When Called to A Senate Hearing, It’s Best to Wear A Tie was originally published in NewCo Shift on Medium, where people are continuing the conversation by highlighting and responding to this story.