METAstasis
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Audio Recording by George Hahn
Last week’s quarterly flogging of tech executives made for good theater. It’s a show meant to make us feel something before we return to our lives. American media soon pivoted to something more important and more American, money. Meta announced earnings on Feb. 1, posting one of the most impressive quarters in business history. Some year-over-year numbers, vs. last year’s 4th quarter:
In the past year, Meta has added three Netflixes to its market cap. On Friday alone, it added the value of Shell Oil — the biggest one-day increase in market capitalization in history.
When GPT-4 Is GLP1
The most impressive feature of the results isn’t the top-line growth, but the company’s headcount. Specifically, the reduction in headcount. Meta has laid off nearly one-fourth of its workforce, a disruptive and costly process. General Motors, in an effort to stave off bankruptcy in 2008, laid off a third of its workforce. Obviously, any firm laying off a quarter of its employees is desperate, right? Wrong. Instead of declining, Meta exploded, adding the value of 30 (2008) General Motors in one day. To the best of my knowledge, no business of this size has ever increased revenue by 25% while shedding 25% of its employees. As it paid only 17% in taxes on the quarter, the company’s earnings per share tripled from $1.76 to $5.33. Meta, suddenly having more money than management knew what to do with, announced a 50¢ quarterly dividend and a $50 billion stock buyback.
Meta was able to simultaneously slim down and muscle up in part because its pandemic weight gain was so large. The empty calories of 2020-21 resulted in fatty deposits forming firm-wide. That’s been obvious, but the more interesting question is whether we are witnessing Meta go Black Mirror. Is AI the firm’s Ozempic? Preorders of Nvidia enterprise GPUs are a decent proxy for a firm’s investment in AI, and Meta has ordered more than any company in the world. (Tied with MSFT.) Does this mean the companies in the chart below are about to shed 10% to 25% of their weight/workforce while maintaining revenue growth?
The Ozemping of Meta unlocked its operating margin, which increased from a respectable 20% to a staggering 41%. Meta exemplifies an “asset-light” model. Don’t own the car, apartment, chip plant, or content (the creators’ salaries) — build a thick layer of software on top of other people’s assets. Shein, which owns no stores, factories, warehouses, or even distribution centers, is using this strategy to become the fastest retailer to $1 billion in history. Meta speedballs this with an addictive product in an unregulated market. Now, years of investment in AI might be adding another leg to the stool — virtual workers who don’t expect pet-bereavement leave.
Hate Machine
However, there’s a glitch in the Matrix. At first unwittingly and then undeniably, Meta’s products have become the most elegant and powerful hate machine known to man. A machine unfettered by the friction of humans deciding if the firm should send images of nooses and razors to a 14-year-old girl consuming videos on self-harm. AI, as instructed by the Zuck, will likely make things worse, not better. Like by like, and comment by comment, the machine divides us and makes us despise others and ourselves.
The Wright brothers invented flight, but Boeing scaled it. Enragement was not invented by Mark Zuckerberg and Sheryl Sandberg, but they scaled it … to over half the planet. Nearly 4 billion people use a Meta service over the course of a month, so in any 30-day period, almost half the planet loses a friend over politics on Facebook, gets taken by a crypto scheme on WhatsApp, or learns how to induce post-meal vomiting on Instagram.
The negative effects of social media are well documented, and I’ve written about them before. The most concerning problem is what these platforms do to our children. When the mobile phone put Facebook and IG into every teen’s hands 24/7, loneliness and suicide data began a steady march upward. In a survey of 1,024 young people, almost half “have become withdrawn, started exercising excessively, stopped socializing completely, or self-harmed because they are regularly bullied or trolled online about their physical appearance.”
The suicide rate among 13- to 17-year-olds has doubled since the iPhone put social in their pockets. If Julia Roberts, one of the most beautiful women in the world, posts a picture of her with her niece and receives hundreds of comments disparaging her looks, what chance does a teen girl have to get through adolescence unscathed?
Apologists
A few days before Meta released historic quarterly numbers, Zuckerberg was in D.C. Social media CEOs on Capitol Hill are not the novelty they were a few years ago. So, to liven things up, Missouri Senator Josh Hawley asked Zuck to stand and face a contingent of grieving parents who’d come to the hearing, many holding pictures of their deceased children, and apologize.
It was a cathartic moment for anyone angry at Zuck, but the truth is, the wrong person was apologizing. Meta is a bad company run by amoral people who do strange things, but we keep hoping that shaming executives will force their better angels to show up and protect our children. They haven’t, and they won’t. The lion doesn’t care what the lamb thinks. That’s why we have laws and, ostensibly, lawmakers. Meta has done little to protect children from its products — but it’s done more than Congress, which has done nothing. Senator Hawley and his 99 partners in failure owe those parents the apology. The problem isn’t Meta, so much as our inability to do anything about Meta.
Guns, Cars, and Social
The two leading reported causes of death among young Americans are guns and cars. You can make the argument that social is more dangerous to our children than guns or cars. Since 2007 the suicide rate among young Americans has gone up by 60-70%, meaning an additional 2,000 lives lost annually in the social media era. That approximates, and overlaps with, the 2,571 young people killed by guns in 2021. And suicides are just the tip of the social media spear. Most kids negatively affected by social media will survive, but they’ll suffer to varying degrees. Millions of children are bullied online, develop eating and/or sleep disorders, suffer academically, engage in self-harm, and sequester from friends and social events. These are all human costs, in the shape of a profound public health crisis.
Yet social media doesn’t appear on this chart because its harms are more diffuse, and its causality harder to pin down. Zuck can tell Congress, “Mental health is a complex issue, and the existing body of scientific work has not shown a causal link between using social media and young people having worse mental health outcomes.” Which is not true, but just defensible enough that Meta’s comms army can coach their CEO to repeat it without their boss committing a clear felony. Whereas gun violence is widely recognized as a national scourge, even by people who think the answer is more guns.
Of these three public health threats, we’ve made large strides against just one of them. Car accidents now kill fewer people under 18 than guns. Just 25 years ago, three times as many kids died on the roads as from guns. What’s changed? Cars. Airbags, crumple zones, and electronic stability control have reduced crashes and serious injuries. (Note: Cars still kill far too many pedestrians and cyclists.)
Car companies didn’t upgrade their product with safety features out of concern for our well-being — airbags were commercially viable in the 1970s, but automakers lobbied against requiring them for decades, until Congress mandated them in 1991. Cars are safer and kill fewer people, in substantial part, because government regulations, government safety standards, and exposure to personal injury litigation forced manufacturers to make changes.
The same is not true of guns or social. Both industries are insulated from the dangers of their products; they haven’t been forced to adopt available technologies equivalent to air bags and antilock brakes: trigger locks and safe storage requirements for guns, age limits and proper moderation on social.
Limits on social media would in fact be a Buy One Get One Free deal. The gun lobby has a point that “guns don’t kill people, people do.” Gun control puts more barriers between intent and weaponry. Regulating social media would reduce intent, as it increasingly plays a central role in the shooter’s path to murder and suicide.
Look in the Mirror
This Congress has been historically unproductive, but when it comes to regulating social media, inaction is par. In the late 1990s, before tech had a major presence in D.C., Congress established limits on online services to children under 13 and the distribution of potentially harmful content. Those days are gone. Since 2017, Congress has held 40 hearings on children and social media and passed nothing. Democrats and Republicans have introduced legislation, including to age-gate social and to reform Section 230 (which immunizes internet platforms from most litigation), but nothing gets done. Senator Durbin had it right: “The tech industry alone is not to blame for the situation we’re in. Those of us in Congress need to look in the mirror.”
What Is Money?
Money is a mechanism for the transfer of time, work, and services. It’s a wonderful thing. You can pay your kids with housing and food so they are freed up to go to school and play. You can pay for your husband’s living expenses so he has the time to take care of the kids. And you can pay someone to do things that would take you more time to do yourself. Meta and the rest of the Big Tech companies create extraordinary economic value. This is important and can justify some externalities. Some. In America, however, we have chosen prosperity over progress.
Meta’s earnings last week were singular, as is the platform. Unlike the rest of Big Tech, however, Meta is a net negative for the world. Depression and despair are costly, and we are spending more time worrying about our kids than a $200 billion increase in market cap can assuage or buy back. Many equity analysts argue that at $470/share, META is too expensive. They miss the larger point. Meta Inc. has become too costly.
Life is so rich,
P.S. Every Wednesday on the Prof G Pod I answer your questions. This week: job hopping, paternity leave, and starting a business. Listen here.
P.P.S. Join a free event, Where’s the Money in AI?, featuring Exponential View’s Azeem Azhar.
Once again, parents are exonerated from responsibility on monitoring their childrens’ activities online. Yes, Zuckerberg apologized and expressed sympathy. However, the antecedent story of a 14-year old repeatedly accessing texts whereby a male whom she thought was her age started sending explicit imagery. Where were the parents? Why did the young girl go back to the texts repeatedly? Why didn’t the young girl alert her parents? Nope, they blamed Facebook or Meta or Instagram or Messenger….why not check their daughter’s phone? Why not ask her point blank is there is anything she needs to tell them? Of course, big tech has responsibility to monitor their imported content and Congress has responsibility to foster laws governing the industry. Children have the responsibility to share with their parents behavior they find threatening or scary. However, it is clear from the gross inaction of all concerned that no one nor any institution takes their responsibilities seriously enough to do something absolutely the issue of harmful behavior regardless of the manner in which it may be delivered!
1. Correlation does not imply causation (suicide).
2. Holding Meta responsible for individual actions is like holding the phone company liable for conversations.
3. Why must a private enterprise be expected to enforce our laws many of which are unclear at the margin?
4. META does not get credit for all of the value it provides. Why are the positives ignored? They are numerous.
5. Many people value their individual liberty above the onerous rules and regulations you suggest.
6. Congress’s inability to generate more laws is a feature, not a bug.
I opted out of Twitter and Facebook. Facebook years ago, Twitter after the platform got so toxic that it was virtually the only thing happening. Consumers have always had the power and they express it with their dollars (or attention). Eventually, there will be a revolt, but the damage will have been done, just as oil changed our climate and tabaco led to lung cancer. Our portfolios love the Facebooks of the world, and if you look at Exxon’s market cap, it’s a fraction of what it once was. But markets are NOT that efficient because we’re really slow learners, so unfortunately, we do need to regulate ourselves and hope that the legislation doesn’t throw off too many unintended consequences, canceling the benefit out. The world used to be pretty simple, because it was very local. Now that it’s connected, the complexity far exceeds the abilities of our traditional systems and institutions.
Please do NOT forget Fentanyl & Drugs – over 100K last year, I believe !!
Scott, this piece is spot on! But as an ex-equity investor, no PMs are interested in the social costs of most of the social media services, nor the political ones nor soon the electricity needed to deliver them. With politicians ineffective, there can only be three other options …1) consumers must leave these services 2) investors must attack the Board as they do oil companies 3) advertisers must be shamed to align with such malign algos …then the politicians can awaken !
but good luck till after the next election
No matter how busy you think you are, make time for your kids. Give them the attention they seek.
What parents do not realize is, they’re in a serious competition with others outside of the family unit, for their kid’s attention. Whether you know it or not, or like it or not, you’re competing with other people for your kid’s attention.
Too busy for your kids? No problem! This people will be more than happy to take your place. Facebook is but one of them.
Pay attention to your kids, even if it sounds like it’s a waste of your time. Don’t, then you’re effectively turning your kids to anyone of this people who will gladly give him the attention that you’ve been denying him. In this case Facebook.
Scott blames Mark Zuckerberg like Zuckerberg is forcing anyone to log on to Facebook. Scott wants Zuckerberg punished for providing a service that anyone is free to opt out of. Scott wants Facebook to make some changes to its services for the sake of kids whose parents are too busy to take personal responsibility and accountability for their own kids, thereby pushing the burden of raising their kids to Facebook. Scott rightly attributes the success of social media like Facebook and Instagram to mobile phones. In other words mobile phones made Facebook and Instagram very easy and convenient to access. So Scott, my question is, why are you not blaming mobile phone companies for their own part in the rise in loneliness and suicide among teens?
Exactly. This is a slippery slope. Adults must be responsible for their actions. More government is not the solution.
You’re very fond of layoffs, and they do have a role in bloated companies. But there are good layoffs and bad layoffs. No prizes for guessing that Elon falls into the latter basket, having immediately shed himself of the Moderation function that made the site just barely acceptable to advertisers. They left, pay-for-checks failed, and now it’s not at all clear what’s holding the sewer up.
Must be that dating app and financial services he promised.
With Meta, weren’t a lot of the layoffs simply a result of abandoning the foolish dream of a Metaverse in which we could all work but in comic form with big heads and no legs? THAT is a strategic layoff. What Elon did was just a temper tantrum.
On the harms of social media, I think you got the comparison wrong. While some would argue, guns in private hands don’t have much utility even when used properly. Cars, on the other hand, do — and that’s what makes it worthwhile to invest in making them safer. And that, in my opinion, is where we are with Facebook.
I’d love to hear you talk about WHY use of social media is leading to an increase in youth suicide. I lean towards the idea that if it’s people saddened that everyone else seems to be living a better life, the solution actually lies in parenting and explaining that one photo doth not a lifestyle make. But if the leading cause is bullying, Zuck knows what he’s got to do.
And speaking of doing things, thanks for you doing yours.
Being the harm to youth clear and key, things are even worse. Social networks and others have figured out a new kind of addiction that they are exploiting ruthlessly. And that addiction and its consequences are being paid by a huge (if not almost the majority) of the world population. Alcohol, cigarettes, drugs, and others were controlled and made difficult to get once understood the effect they have. It is about time regulators look into these algorithms that exploit addictions
Thats why I bailed on America too: to save my 3 young Alphas.
“Most kids negatively affected by social media will survive, but they’ll suffer to varying degrees.” The epigenetic impact of social media is only now coming becoming apparent. The hate machine will have generational impact.
Thanks Prof G!
The solution is to legally declare that any company that delivers 3rd party content to the public is a publisher, with all the responsibilities and liabilities. To say that they are not is like saying the pipe has no responsibility for delivering the water to your home.
Do that and the only people that will benefit will be the trial lawyers. These leaches will tie up these companies in one law suit after another, basically crippling the whole industry. Tech companies need to provide a self filtering option to all users. Letting people decide what they want and don’t want to see in their feeds. Parents can also use the option to filter out content for their families. No doubt that social media has had a huge negative impact on younger adults, but don’t throw the baby out with the bathwater. Solutions less invasive than a total ban are available.
Hahaha because when my parents threw out the TV in the ninety’s we for sure stopped watching the x files… I still have paranojas from those shows when I reflect where it comes from.
This is so one dimensional.
The kids are so much further with the tech then the parents and the kids are not able to reflect on why they get addicted to hate messages…
Hi Prof. G, always enjoy your posts and analysis. The challenge with ever regulating Meta (or other social platforms) is that the political world has long since recognized what an effective tool these are in manipulating public opinion. Zuck admitted that FB censored truthful content during Covid….why? Because the WH, slavishly supporting big pharma, used the FBI to pressure them to do so. This is not opinion but fact, as Matt Taibbi and Michael Shellenberger’s work clearly revealed. How many lives might have been saved if highly credentialed doctors and researchers who had shown other treatments as effective against Covid been listened to? How many vaccine injuries might have been avoided? Instead, the majority of people drank the “safe and effective” Koolaid which turned out to be largely BS….and if I recall correctly even you were among the Koolaid drinkers (all of whom seem not to want to acknowledge where and how drastically they were wrong). When politicians can leverage these platforms to force behavior on their citizenry and make billions for those who are lobbying them, why would they ever give up such a tool??
I can only say, keep fighting the good fight, Prof G!
It’s become too easy for minority groups to spread discourse through social media. Many of us see through the noise and view it as entertainment. Unfortunately, a small but politically significant number don’t. That’s why our representatives are too scared to act. We need to demand better and stop voting for them.
It’s become too easy for minority groups to spread discourse through social media. Many of us see through the noise and view it as entertainment. Unfortunately a small but politically significant number don’t. That’s why our representatives are too scared to act. We need to demand better and stop voting for them.
So well said.
Excellent insightful per usual, Scott. It is why I follow you.
Scott is almost right. Except it’s not Congress that should look in the mirror; it’s us. Hate machine is an accurate depiction of 21st century American society. The fault, dear Scott, is not in our media, but in ourselves.
Every organisation should know and understand its purpose. Making money should not be the purpose, but the result of great execution in pursuit of its purpose.
The results are clear, Meta is best-in-class at propagating all the ills you describe in this post and we reward it by pumping its value.
Meta’s business model is clear, their product is a drug and their purpose is addiction. We know how to legislate for this business model.
Please, Please drive this home on a Face the Nation or 60 minutes piece. I don’t have the connections that could help but Kara (THE KRAKEN) might be able to help. At least a You tube slice of time where this is delivered like the Tequila shot of truth. I appreciate the honesty, but would love to see you back in the states running for a meaningful office or hosting/commenting on The Daily Show like Lewis Black. I’m f sure Jon Stewart would oblige your comments.
I don’t use social media but during my career as a doctor I learned to be cautious about conclusions based on reports that the rate of some bad thing had “doubled”, as in “The suicide rate among 13- to 17-year-olds has doubled since the iPhone put social in their pockets.” (See above.) The statement begs the question, what was the baseline incidence of the bad thing (teen suicide) that doubled? It looks like it went from about 5 to 7 per 100,000 (is that actually doubled, or am I missing something?). The next question is, how does this epidemic of teen suicide compare to other deadly scourges that plague humanity. If you look at the arguably worst, 100% fatal cancers that people can be stricken with, glioblastoma and pancreatic cancer, their incidences run at about 6 and 13 per 100,000 annually in the USA. They are considered mercifully rare. Research is certainly being done to cure them, but it’s not a hair-on-fire public health menace. Teen suicide is about at the glioblastoma level of incidence. I get it that any teen suicide is one too many, and that there are also the issues of teen depression and self-harm. But is it necessary to cast this problem as a spiraling pandemic? Can some problems be worth discussing without couching the discussion in terms of doom?
Just brilliantly stated, thank you.
Excellent article, thank you. As a parent of a 12 year old debating when they get a phone this is much food for thought
Don’t cave! Wait until your kid is 16. You won’t be popular but you’ll be doing your kid a favor.
Regarding guns: Trigger locks won’t help. Bad guys use old guns. Storage laws already exist (strict liability of parents for death caused by ward). Red flag laws, well-administrated, might help, but the government struggles with fair administration. Background checks are necessary but also not terribly effective. Maybe AI can help with red flag and background.
The only thing I can think of is a voluntary buy-back retail window where you can sell your gun to the government for $1000, and buy it back for $950 (as a normal gun sale). That would register a lot of guns, which would give enforcement better knowledge, but more importantly it would remove a lot of guns from poor communities. Good guys would get $50, which is just enough to make it worth while. The numbers would need to be adjusted over time to drive engagement.
Just allow tech companies to be sued.
When tech starts losing big lawsuits, their behavior will change.
just, thanks, once again.
Great article, and well-placed blame all around. I agree with another commenter that parenting is also to blame, but it is hard to restrict a patently addictive and overly available social media company like META. Thank you for bringing real issues to the surface and looking at them from multiple points of view.
Excellent article with solid data. This message needs to be more widely socialized. Thank you Prof G
One thing that has been overlooked in Zuckenberg’s dramatic ‘turn-around’ apology. is that it wasn’t one.
“I’m sorry for everything you’ve all gone through.” It is an avoidance of taking any responsibility for META and Zuckenberg’s own actions that lead to the suicides of these kids. Congress? It’s the sociopaths who run these outfits that couldn’t give a damn about anybody else, and feel – if they have the ability to feel at all – they have a right to change humanity without our consent.
The best thing we could do for our teens is ride that money wave and get these social companies to contribute an ongoing percent of their revenue back to our high schools. Fill kids’ lives with art, music and extracurricular activities and a happy byproduct is they’re online less. Not unlike what the casinos do in Vegas – forget the penalties! Take the cash! You cannot deprive kids of their online drug without replacing it with something even more powerful – IRL experiences.
Take. The. Cash.
Great post @Scott, I stopped myself from buying Meta beginning of last year for these reasons and I still think that was the right choice for me.
SAME. 🙌
Same.
“Meta has done little to protect children from its products — but it’s done more than Congress, which has done nothing. Senator Hawley and his 99 partners in failure owe those parents the apology.” Smartest thing I’ve read in a while. Nice work.
Part of the reason for the rise in suicide rates should be placed on bad parenting. To place most of the blame on social media is wrong and absolves society from the responsibility of good parenting.
I would be glad to share the 100 Meta emails form their “support” who could not fix a simple issues with 80Bites FB. after there months I sent via FED EX a letter to Zuck and his eight top Executives. No response even though I explained I am 82 and just finished chemotherapy and need to get this issue resolved. But after this experience, I am no longer seeing the benefits of AI. It its too dangerous. Ozempic has drawbacks but it is the only hope of saving our heath care system. And reducing LYING. Dieting and Lying go together like Love & Marriage.
Very interesting analysis. Which leaves me with two questions:
1. What does Meta exactly do with all these NVIDIA chips?
2. What is, economically speaking, the difference between a product -or a stock- being costly as opposed to expensive?
Thanks for the clarification
Michael Esser
On 1. Optimizing your feed for Maximum user time (eyeballs) on platform (ie. rage machine), and then deploy the world’s best targeted advertising capability onto FB and Insta users. Also, software development, maintenance, and marketing.
Too expensive vs too costly. The clarification you highlight is crucial. It’s a great point that applies to so much in our lives. This was a thoughtful essay and time well spent reading it. Thank you.
Scott, what role do you think we parents working in the tech industry can play in protecting our kids from our own industry?
Hi Scott – I enjoy your writing style and topics. One question I have is regarding the “Common application” for applying to universities. Have you done any research on how this has changed the landscape? Students used to self eliminate schools and only apply to 3-6 schools. Now it seems like students are applying to 15-30 schools as the application cost has declined. Has this resulted in more students getting deferred “waitlisted” or rejected to schools that they would have been accepted to prior to Covid? I wonder what your thoughts are on this changing dynamic. what does this do to the supply/demand equation?