1) In yesterday's e-mail, I shared Facebook's (FB) defense to the latest charges of bad behavior by whistleblower and former employee Frances Haugen, as articulated by founder and CEO Mark Zuckerberg, as well as a friend who knows the company well.

My take: I'm not buying what they're selling...

Zuckerberg's post is laughably bad. In the face of Haugen's compelling testimony and her release of thousands of pages of damning internal company documents – which has led to overwhelming, bipartisan criticism – Zuckerberg's 16-paragraph, 1,316-word post doesn't once acknowledge any problem, much less any contrition, much less any indication that he and his company might need to do even a few things differently. His tone deafness is matched only by his arrogance.

My friend, on the other hand, at least acknowledges that "there is a huge problem," but says, "I disagree Facebook is blind to it."

(Quick correction: I misquoted him yesterday here: "This extends to idiots on Facebook's board as well by the way." Here's what he wrote: "I have no opinion on FB's board – I was referring to board members at other companies who try to tell the CEO how to run a company when they have no idea what is really happening. That is why a board's role is to hire and fire the CEO, not to run the company.")

In most of his response, however, he criticizes Haugen, saying that she:

... had no direct reports, never met a senior executive at Facebook, started with extreme bias, and then only found/extracted information that confirmed it. She never worked in the areas she is "so knowledgeable about" – like teens – so has no idea what Facebook is trying to do...

... she is basically as knowledgeable as a tabloid – at best. It's like the janitor telling Zuckerberg how to run Facebook...

She's an idiot looking for five minutes of fame. Industry veterans are cringing.

I couldn't disagree more.

First, Haugen was hardly the "janitor." She's a Harvard Business School graduate with more than 10 years of experience in the social media sector, nearly two years of which was at Facebook (from 2019 to 2021 – see her LinkedIn profile) – plenty of time to see what was going on.

As for the argument that she wasn't a C-suite executive and therefore wasn't in the loop for high-level decisions, I'd argue the opposite...

She was perfectly positioned to be a whistleblower both because of the group she was in – the Civic Integrity unit, which was responsible for preventing the spread of election misinformation and addressing other bad behavior – as well as her level: as a Product Manager, she was senior enough to see what was really happening, but not so high up that she wouldn't know the details.

Moreover, Haugen's testimony, to both 60 Minutes and Congress, was compelling. I've been watching 60 Minutes since I was a kid in the 1970s, and she was one of the most impressive people I've ever seen on the show. And my opinion is widely shared: Senators on both sides of the aisle praised her, as did Mike Isaac of the New York Times, who wrote:

We're moving into hour three of Ms. Haugen's testimony and she hasn't shown any signs of flagging. Confident, poised, and accurate, for my money she is one of the most impressive critics of Facebook I've seen appear on Capitol Hill.

Lastly, Haugen's testimony is corroborated by: a) thousands of pages of internal company documents she copied... b) the long, sordid history of Zuckerberg and Facebook, dating back to the very founding of this company (for more on this, read this shocking article: How Facebook Was Founded) – also, note that my friend wrote that Haugen "said nothing we all didn't already know"... and c) many other former company insiders. For example, here's an op-ed in yesterday's New York Times by Roddy Lindsay, a former Facebook data scientist: I Designed Algorithms at Facebook. Here's How to Regulate Them. Excerpt:

Washington was entranced Tuesday by the revelations from Frances Haugen, the Facebook product manager-turned-whistle-blower. But time and again, the public has seen high-profile congressional hearings into the company followed by inaction. For those of us who work at the intersection of technology and policy, there's little cause for optimism that Washington will turn this latest outrage into legislative action.

The fundamental challenge is that Democrats and Republicans cannot agree on what the problem is. Democrats focus on the relentless spread of disinformation – highlighted, yet again, by the internal documents Ms. Haugen leaked to the Wall Street Journal – while Republicans complain about censorship and bias. This tension plays right into the hands of Facebook and the other social media companies, which continue business as usual.

Yet as Ms. Haugen proposed in her testimony before a Senate panel on Tuesday, there is a regulatory solution that addresses the key concerns of both parties, respects the First Amendment and preserves the dynamism of the internet economy. Congress should craft a simple reform: make social media companies liable for content that their algorithms promote.

Even more damning are the comments of Alex Stamos, the director of the Stanford Internet Observatory and a former head of security at Facebook: Brazen Is the Order of the Day at Facebook. Excerpt:

I think the overall theme of the leaked documents and the Wall Street Journal series is that since 2016 Facebook has built teams of hundreds of data scientists, social scientists and investigators to study the negative effects of the company's products. Unfortunately, it looks like the motivational structure around how products are built, measured and adjusted has not changed to account for the evidence that some Facebook products can have a negative impact on users' well-being, leading to a restive group of employees who are willing to leak or quit when the problems they work on aren't appropriately addressed.

When we rank these issues, I think it's important to focus on the situations in which Facebook's leadership made an intentional decision to not address a harm or to prioritize economic factors above doing the right thing. We want this kind of research to happen – we want it to be replicated at other tech companies. The scandal should be the executive decisions, not the existence of research.

On that scale, I would put the stories about the "Meaningful Social Interaction" change to newsfeed algorithms and the under-enforcement of policies outside the United States as the worst. The former demonstrated how product leadership, led by Zuckerberg himself, prioritized growth metrics over known negative effects of the quality of content and political polarization.

The latter story is one I am well aware of both from my time there and the research my team does: A huge amount of effort at Facebook is aimed to responding to political and media pressure in North America and Europe, while areas with massive Facebook usage, like Africa and Southeast Asia, get a tiny fraction of the attention. Combined with the fact that vulnerable people can't rely upon their government to protect them against organized abuses like human trafficking or professionalized child exploitation, this leads to Facebook being used to support incredibly harmful enterprises. This is just a matter of investment; there are no countervailing privacy or free-expression equities to weigh against doing a better job.

The allegation made by Haugen on 60 Minutes that the Facebook leadership inappropriately took a victory lap after the 2020 election and did not keep the pressure up on political disinformation before Jan. 6 rings true to me. Our experience at the Election Integrity Partnership studying election disinformation in this period and the private Signal messages I have gotten from old colleagues at Facebook tell the same story.

I agree with Stamos' recommendation:

I think Zuckerberg is going to need to step down as CEO if these problems are going to be solved. Having a company led by the founder has a lot of benefits, but one of the big problems is that it makes it close to impossible to significantly change the corporate culture.

It's not just Zuckerberg; the top ranks of Facebook are full of people who have been there for a dozen years. They were part of making key decisions and supporting key cultural touchstones that might have been appropriate when Facebook was a scrappy upstart but that must be abandoned as a global juggernaut. It is really hard for individuals to recognize when it is time to change their minds, and I think it would be better if the people setting the goals for the company were changed for this new era of the company, starting with Zuckerberg.

With new leadership, you could see the company adopting safety countermetrics on the same level as engagement and satisfaction metrics, and building a product management culture where product teams are not only celebrated for their success in the marketplace but held accountable for the downstream effects of their decisions.

Zuckerberg is, of course, never going to step down voluntarily, and given that he controls 58% of the voting shares, how could he ever be removed? Here's how: the U.S. Securities and Exchange Commission ("SEC") – which, thanks to Haugen, is now investigating Facebook for misleading investors – could force him out. I don't think it's likely – but it's not impossible. I think there's a 25% chance that Zuckerberg is no longer CEO within two years...

2) I received huge amounts of feedback in response to my open letter to Facebook COO Sheryl Sandberg. Below is some of it, with my responses in some cases...

"Instead of lambasting Sheryl and Mark (unfairly in my eyes), you should have sent your letter to Congress. Congress (and then the courts) has full responsibility for regulating our communication systems. All best (& I love reading your newsletter – I really do & enjoy pics also)." – Paul B.

My reply: Thanks for your feedback, Paul. In fact, I sent my letter to a dozen members I know in the House and Senate, one of whom replied: "Wow, wow, wow. Thanks for sharing. I hope it is read." Another replied: "A powerfully written letter. I agree with every word of it, although I doubt that Facebook will find the wisdom to follow your advice. I am going to sign up for your newsletter."

"I agree with your assessment of Facebook (and your letter to Sheryl Sandberg), but your recommendation for them to rehire Haugen will never happen. She is considered a traitor by Facebook and they will never rehire a traitor. Based on Zuckerberg's reply, I'm skeptical that they are willing to address and fix the issues until the government force them to do so." – Sid

My reply: I agree.

"I'm so glad you compared them to the Sacklers. I hope this wakes them up." – Alex B. [But another reader disagreed...]
"Good email but would recommend not equating people with Sacklers in the future unless they are literally killing people by knowingly promoting something dangerous (like Oxycontin). To me, the Sacklers fall into a group of historical miscreants that can only be used narrowly for an analogy – otherwise, it's overkill and can dilute from your point. Sandberg may read your email and dismiss it, saying to herself, 'We are not the Sacklers.' You could also substitute Hitler for the Sacklers and you can see my point. I'd only use Hitler as an analogy for a leader who is mass killing people, like Pol Pot. My two cents. Always enjoy your daily email!" – Bruce Z.

My reply: Hi Bruce, to be clear, I didn't say they currently are equivalent to the Sacklers, but rather they "are on a trajectory to have legacies that rival the Sacklers." To understand why I say this, read the following articles:

Facebook Admits It Was Used to Incite Violence in Myanmar
Sri Lanka: Facebook apologizes for role in 2018 anti-Muslim riots
Hate Speech on Facebook Is Pushing Ethiopia Dangerously Close to a Genocide
NGO: Facebook approved ads inciting violence in N Ireland
Bangladesh: Fake news on Facebook fuels communal violence
When Social Media Fuels Gang Violence
Civil rights leaders condemn Zuckerberg, Facebook for fueling racial hatred and violence
Domestic violence and Facebook: harassment takes new forms in the social media age
"I really do not understand what the fuss is about. If I hear or see something on radio or TV that I find to be dangerous or offensive I turn the channel. Nobody is forced to use Facebook or Instagram, or Snapchat or any of the other social media platforms. Just delete the apps. If you don't want your children to use them, then delete them from their phones. Take some personal or parental responsibility. I truly do not want someone else deciding what I can listen to or watch. Let me decide." – T. H.

My reply: Hi T.H., in a perfect, rational world, I'd agree with you. But in the real, messy world, I can't.

"I have found it very hard to get anyone who works at Facebook to engage openly about anything at the company, even in a social/casual off the record context. I can't think of another company whose employees are so unwilling to speak off the record. It makes me wonder if they really know deep down how bad what they are doing is." – B.B.
"Thank you Whitney for sharing a BIG story of our time. I agree with some of the defensive remarks – the issue of 'bad actors,' misinformation, and hate speech on social media is not unique to FB, but FB is certainly guilty of providing a platform that has allowed all of the above to be promoted on its platform.

"It took the World Jewish Congress five years of complaining to FB to finally get them via Sheryl Sandberg to put in more strict algorithms regarding Holocaust denial and misinformation on FB – five years of effort! Now, FB users are directed to factual information when they make up falsehoods about it. But this only pertains to the U.S. and U.K., so the fight continues with FB to get them to implement this in Arabic and other languages and countries. This is incredibly frustrating and hurtful.

"Why are the Mullahs in Iran permitted to use Twitter (TWTR) to spread Islamist and hate speech, for example? So as much as I dislike government interference into business practices, I do see a necessity given the extent of damage being done.

"Thanks for all you do to share carefully researched information that provide opportunities to empower our lives." – Andrea L.

"I spent 15 years in the Valley, much of it in the same orbits as the leadership at Facebook (I'm being vague purposefully). I actually can't say for sure they are well-intentioned." – Matty G.
"Thanks Whitney on behalf of the multitudes who have truly mixed feelings about Facebook. We're thrilled about the connections we relish with wonderful people, but deplore the damage it has done to our society and body politic." – Andrew S.
"I'm on board with [your] evaluation and solution 100%. Let's hope they both have the courage to right the ship. The country that I love and have fought for is losing its grip. Let's show some respect. Thank you very much." – Ken J., former Ranger
"Zuck and the rest knew what they were doing. They were complicit in all of it in order to rake in ad revenue. Wall Street Capitalism only measures 'good' in terms of money. I think you are right: they will do a PR apology tour and that's all." – Grant P.
"Isn't Zuck a bit too narcissistic to care? The company was born in betrayal. Ironic that such a complete asocial person is in charge of the way we socialize in this country. I think he'll do anything he can get away with and is too arrogant to think there will be consequences." – Leigh S.
"Hello Whitney... I am one of those folks who believes when someone does something good, it should be recognized. You and I are very different in our perspectives about most subjects. I read your letter to Facebook just a few minutes ago.

"Your letter to the COO was simply and completely what they needed to hear. Although I still have a FB account, I have not actively used FB in over three years. It seemed the vitriol just got worse and worse, regardless of the subject matter, but especially politically. I decided I would not be a part of that, as it can consume you, if you allow it to take up your time. You have to realize that every person has a viewpoint, and it is not likely you will be successful in changing someone's mind, although it does happen on an infrequent basis.

"I commend you for reaching out to them, as I am sure others will do. I have a concern that the size of this organization will make government intervention likely. I am not a fan of big government, big brother, as it were, but this situation, if they do not turn it around on their own, government may be the only answer. All the best." – Larry F.

"You said everything I was thinking, but ever so much better. I will hope the letter is taken to heart and sweeping changes made so FB can continue to be the great business that it COULD be but has failed so badly to be." – Stacey G
"I think you nailed it, my friend! Well, reasoned and direct, to the point, your letter will hopefully bring the FB team and Ms. Haugen together again to make a better, stronger company that serves our social interactions in an honest and forthright manner." – Chuck M.
"After reading Zuckerberg's lengthy response I am more convinced that he and the FB team know exactly what they are doing and the harm they are causing. A CEO that wants to be regulated rather than taking the necessary steps to clean up their business strategies is only creating cover for themselves. Unfortunately FB is not only damaging to young girls but to our society as a whole. Through their technology and algorithms they easily manipulate the masses of uniformed customers to be persuaded in any direction they chose. Unfortunately this is like leading blind sheep to slaughter. Yes FB needs to be regulated but not in a way Zuckerberg would approve of. He knows Congress isn't capable of passing any type of regulation to make FB clean up its act and this gives him plenty of cover to continue their unethical business practices." – David L.

3) Lastly, here is one reader's response to Zuckerberg's post:

Here are some questions that came to mind when I read Zuckerberg's message:

He wrote: Many of the claims don't make any sense.

My reply: Which ones don't make any sense? And which ones do make sense?

He wrote: If we wanted to ignore research, why would we create an industry-leading research program to understand these important issues in the first place?

My reply: Because you need to do the research to maximize 'engagement.' This is clearly consistent with profit maximization.

He wrote: If we didn't care about fighting harmful content, then why would we employ so many more people dedicated to this than any other company in our space – even ones larger than us?

My reply: Is this demonstrably true? What companies in your space are larger?

He wrote: If we wanted to hide our results, why would we have established an industry-leading standard for transparency and reporting on what we're doing?

My reply: What is this "industry-leading standard for transparency and reporting?" Where can I learn more about these standards?

If FB transparency standard is so high, then where are the reports of your research?

He wrote: And if social media were as responsible for polarizing society as some people claim, then why are we seeing polarization increase in the U.S. while it stays flat or declines in many countries with just as heavy use of social media around the world?

My reply: Which countries are not becoming more polarized? Excluding authoritarian regimes, are there any?

Just saying things doesn't make them true – though if we've learned anything in recent years, it's that saying things over and over again can convince large numbers of people that they are true. Prime examples – claiming rampant election irregularities when none exist; vaccines are the government's plots to control the population; pizza-gate. – Randy J.

Thank you, as always, to my readers for sharing their insightful and provocative thoughts!

4) Susan and I did a 10-mile hike along Spain's spectacularly beautiful Costa Brava yesterday. Here are pictures:

Today, we're heading into the Pyrenees for four days of hiking in the mountains!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.

P.P.S. My colleague Enrique Abeyta is looking to hire a junior analyst to help him launch his upcoming newsletter, Empire Elite Crypto, later this fall. If you geek out on cryptos and enjoy writing, we'd like to hear from you. Send us your résumé and a one-page write-up of your favorite crypto investment idea right here.