Moderating Within the Tech Industry
Today I want to talk about a different means to approach looking at tech companies. Since the emergence of Donald Trump, we have faced a question about moderation and censorship of certain groups on tech platforms.
These questions were present before then, but now that there is reason to believe advertisers were able to influence election outcomes using platforms like Facebook, it has become much more real. Even the words “moderation” and “censorship” betray a fundamental problem here: Words that are similar in meaning can put different spins on the same issue. Censorship has a negative connotation, whereas moderation sounds completely logical.
Tech Approach to Moderation
In examining tech companies and how they approach these issues, it is important to realize a few things about why they do it. Some would say it is because they are left-leaning and trying to enforce their own politics, but it is a matter of legality first-and-foremost.
It is constantly in the interest of service providers to over-censor rather than under-censor, because of the way the legality of moderating is structured. Moderating at all is acceptance of a level of responsibility over the content being provided on that particular platform. In that sense, once you start moderating, you almost can’t stop.
Additionally, being a platform that hosts content (WordPress, CloudFlare, etc.) is different from when there is an algorithm amplifying content for the benefit of user experience (Twitter, Facebook, Youtube, etc.). By providing this service, additionally liability is accepted by the provider.
Bets Based On Competition
So now we can discuss the competitive aspects of moderating content. A level of game theory emerges regarding how much or how little it makes sense to moderate. Depending on the “stickiness” of the platform, users may leave if they feel that free speech is being stifled too much, or if there is too much “hateful” content.
And from the perspective of those being moderated, being banned on one platform doesn’t stop them from going to another. It also becomes a question of whether users would follow content creators to another platform out of loyalty.
For example, Gab is a free speech enabled equivalent of Twitter, but free speech is not enough to attract users and build a network effect that is competitive with a goliath like Twitter.
From an investor’s perspective, it is difficult to determine when it makes sense to put funds into a competitor of a dominant player. As occupiers of an industry of one with an effective monopoly, they have more to lose than to gain.
There are two approaches I would advise here. First, for companies that are leaning towards over moderation, be ready to invest small sums in competitors that seem to have a better system. There are blockchain companies that are working on solutions like Basic Attention Token, as well as free speech supportive companies like Gab.
Secondly, if a company has the potential for massive lawsuits related to copyright infringement (Google and Youtube), make strategic bets as the tension starts to build. Europe is becoming increasingly unfriendly to tech players who don’t follow the rules, and it is almost impossible to fully prevent copyright infringement on these platforms. It won’t be a long-term hindrance, but it could result in a large settlement. You could either short them before a lawsuit, or purchase after a settlement. Both could be profitable.
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