Meta Is Kind Of A Tragedy
What Mark Zuckerberg's astronomical climbdown says about corporate America
It’s been a rollercoaster ride, and Mark Zuckerberg has finally decided to get off. After shunning shareholders and Wall Street last month by warning that his company’s huge losses to metaverse investments would continue for the foreseeable future, the Meta CEO announced this week he would lay off 11,000 employees to reduce costs and restore investor confidence. Shares rallied a little after the announcement, but there’s still a long way to go:
In the meantime, it’s worth reflecting on this sorry saga. What have we learned? First, and most obvious: no one except Zuckerberg seems to believe the metaverse is the next major frontier for human innovation. For normal people, this isn’t a surprise. No one wants to live, work and play in a virtual reality that looks like Wii Sports Bowling. It’s weird, and it sucks. Sure, the technology’s in its infancy, but if you’re laying the cables you need to make that clear in a way that doesn’t make everyone laugh and think you have a god complex.
There’s a more important lesson, though. Relative to its potential, the tech sector’s post-GFC record on innovation has been utterly poor. After the smartphone, the most disruptive innovations have been clever ways to circumvent labour laws, squeeze the working class and surveil employees. A 14-year period of low interest rates could’ve been used to solve the myriad crises humanity is in the midst of or sleepwalking into. Instead, they were used to inflate share prices, enrich corporate managers and help the ultra-wealthy avoid tax.
In which case, there was actually something kind of interesting about Meta in comparison. After years of ballooning equities and corporate debt, with comparatively little to show for it bar entrenched inequality, one of history’s cartoon villains walks in and says he’s going to do something new and sink all his shareholders’ money into it (much to their horror and the horror of the banks). Obviously, no one believed a man with Zuckerberg’s record would be bothered about contributing to the social good. But the metaverse was a moonshot from a guy with an actual ideology beyond (as proven by the collapse of his company’s stock) immediate monetary gain. That’s why it’s interesting.
Unfortunately, what makes Zuckerberg’s vision interesting also makes it a tragedy. At its peak last year, Meta had a market cap of more than a trillion dollars. If it were a country, it would have been among the 20 richest on the planet. That’s a lot of resources to waste on a project that was doomed from the outset, with no tangible interest among or benefit to the public. And this is a problem that pervades the billionaire class. Jeff Bezos’ and Richard Bransons’ trips to the edge of space; Elon Musk’s rapidly unravelling purchase of Twitter—more money than most people would make in a hundred lifetimes pissed away on vanity projects while the planet cooks. What does humanity gain?
In his 2014 paper ‘Profits Without Prosperity’, William Lazonick argues that stock buybacks cannot be justified by a lack of profitable investment opportunities because that’s supposed to be what corporate executives are hired to do. If they can’t find them, they’re bad at their jobs. Obviously there are caveats: C-suite pay structures incentivise value extraction and share price manipulation over reinvestment of revenue. In some cases, that can have lethal consequences. But Lazonick’s point can easily be extended from public companies to the ultra-wealthy writ large, in that these are not good uses of the enormous amounts of capital these companies and individuals have at their disposal. And that, in a sense, undermines one of the foundational arguments for the continued existence of private capital itself.
All this is part of the reason I’m unconvinced by the COP-precipitated leaders in the small-L liberal press. The Economist thinks governments must mobilise private investment because there’s no country on earth with the resources to fund the green transition. I’m sorry, but look at the private sector’s record already! No: it should not be government’s responsibility simply to de-risk private companies, protect them against losses and allow them to reap the gains of success. These companies, and their owners, cannot be trusted with their own money, even when the planet itself is at stake. In the hands of governments, at least, that capital could be allocated by democratic mandate—and we wouldn’t need to worry about the collective action problem quite as much.
Zuckerberg’s endeavour may have come to a screeching halt, but the damage is already done. Musk’s Twitter will likely go next. How many more examples of gargantuan waste will it take to convince our leaders to chart a new course?