The outrage over Facebook data leak is sending regulators 'a dangerous message' - From CNBC

Published in CNBC

I'm worried. As we all know, Facebook has a massive scandal on its hands with the Cambridge Analytica data leak. It's not clear the company knows what actually happened or how to handle it. There's a tremendous amount of untapped anger out there heading Facebook's way (what we've seen so far is just the beginning). And the message that anger, that outrage sends to politicians and regulators is very dangerous: "Tech can be very, very bad. Don't trust them. Go ahead and regulate extensively."

And whether Facebook likes it or not, regulation is coming. The California state senate is already debating legislation that would determine how "Big Tech" companies can collect and use consumer data. On the federal level, senators are calling for probes, the FTC is considering the same. And this is just the beginning.

But just because Facebook has a lot of coming scrutiny and regulation doesn't mean we should throw out the tech baby with the bathwater.

Saying that tech is good or tech is bad is like saying people are good or people are bad. It's not a one-size-fits-all definition. Either out of convenience, laziness or an unassailable love for a pre-set narrative, there's a danger that we will lump in anything that uses a semiconductor, a platform or an app as "tech" and then try to create laws and rules to govern it.

That's why the risk the Facebook scandal poses is far broader than just what happens to Facebook or how we regulate platforms in elections. It's that Facebook's sins of either omission or commission (probably some of both) can become an excuse to crack down on innovation – a way for politicians to do the bidding of their donors and get away with it.

We need to figure out what happened at Facebook. We'll likely need regulations to ensure it doesn't keep happening. But just as important, we need to make sure that Facebook's investigation and punishment doesn't become a justification to stifle competition and kill new ideas across the board.

Facebook has as much in common with a startup created last month as the Yankees do with my son's little league team. How each "tech" company impacts society is radically different. The way we regulate and talk about them should note the radical differences too.

Facebook is a massive company, who, like any massive company, uses its wealth, influence and market power whenever possible to curb regulation, deter competition and grow unabated – even while maintaining the brand's patina of reform, tolerance and concern for social good. This is how the world works – people with power want to stay in power.

Other than a hoodie or two, Mark Zuckerberg no longer has anything in common with your average startup founder. His job – his fiduciary duty to his shareholders – is to keep growing and to take out anything in his way. That's no different from John Rockefeller or Andrew Carnegie or Sam Walton.

Facebook has a lot more in common with the mega industries fighting disruption – casinos, hotels, hospitals, car dealers, electricity utilities – than it does with a company raising its seed round. Facebook's role in monetizing people's data or failing to respect their privacy or allowing interference with the 2016 election has nothing to do with a new startup offering a better way to provide birth control or sell cheaper insurance or allowing people to use the blockchain to transmit their legal documents.

Whatever happens to Facebook cannot be used as an excuse to clamp down on innovation broadly, to stifle competition, to allow elected officials and their staffs to do the bidding of their campaign donors and justify it with "Look at what Facebook did! We can't trust tech companies!"

Every new startup is labeled "a tech company." But there's no such thing as a new product or service that isn't tech-enabled in some way (technology was used to manufacture the paper cup I'm drinking coffee out of right now).

And the vast majority of startups are new ideas, platforms and approaches that take an existing product or service and make it a little better, a little cheaper, a little more convenient – they're not massive technological innovations. That effectively makes every single new company a tech startup in some way – and it also makes every tech startup a regular company in some ways.

Regulation of any new company should be designed to protect the public and allow the economy to grow and the market to function. Startups shouldn't be free from any regulatory scrutiny just because they have venture funding. And regulators shouldn't be free to deny permits and licenses just because they play golf with the incumbents facing disruption or because they don't like change.

Bradley Tusk