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Big banks vs big tech: Gary Cohn's comments about Facebook spark debate about lesser of two evils
Gary Cohn, the former Goldman Sachs President, reportedly believes banks were more responsible in 2008 before the financial crisis than social media companies are today.
Facebook has served as a lightning rod for anger and mistrust towards social media firms ever since the revelations that 87 million users might have had their data shared with Cambridge Analytica.
Banks, meanwhile, are still struggling to regain public trust after helping instigate the financial crisis 10 years ago. Risky assets like subprime mortgages led to large losses and many crisis-stricken banks, including the Royal Bank of Scotland, had to be bailed out by governments.
Speaking at a benefit event at the weekend in New York for the Breast Cancer Research Foundation, the former economic adviser to Donald Trump referred to the other controversy plaguing Facebook: the spread of misinformation and fake news.
"It's very interesting how the world turns," Mr Cohn was quoted by Bloomberg as saying. "In '08 Facebook was one of those companies that was a big platform to criticise banks, they were very out front of criticising banks for not being responsible citizens. I think banks were more responsible citizens in '08 than some of the social media companies are today. And it affects everyone in the world. The banks have never had that much pull."
'Tone deaf, laughable'
Tech and finance experts winced at the comparison.
Fergus Ryan, an analyst working with International Cyber Policy Centre, described his comments as "tone deaf, laughable and, of course, very convenient for him".
"As recently as December 2017, Cohn told the media that neither Wall Street nor the tech companies deserve the criticism they’re taking right now.... But now it seems he’s happy to let the big tech companies be the whipping boy.
"Neither the banks nor social media platforms deserve to be let off the hook for their actions. Comparing how irresponsible the banks were in the lead up to the global financial crisis with how irresponsible social media platforms are now is a bit like comparing an oil spill with a dumpster fire – albeit a very, very, big dumpster fire."
Richard Holden, a leading economist at UNSW Business School, said "it was a bit rich" from Mr Cohn, but he played down the impact that Facebook has had compared to the big banks, which "nearly caused the great depression".
"If I was being asked for a horse race of whose bad behaviour has had the worse effect, I'd come down on the side of the banks and mortgage brokers."
'The public hate the banks'
Mr Ryan said Facebook's "naivety" was partly to blame for their failings.
"Facebook executives were too rosy-eyed about the role of their platform as a source of good in the world. They were not clear-eyed about how malign actors could use it for bad ends," he said.
Professor Holden agreed that Facebook was more naive than the banks, who "knew they were selling stuff that was, if not worthless, were worth vastly less than what they were selling them for".
He said companies such as Facebook should learn from the anger caused by the banks, who have yet to regain the public's trust in the decade following the crisis. "Getting out in front of it is really important," he said.
"The public just hate the banks, the public are willing to tolerate all kinds of punitive behaviour ... Facebook doesn't want to go there."
Some lawmakers in the US have suggested regulating social media, adding they hope the companies will become more transparent and proactive in countering foreign meddling.
For its part, Facebook appears to be making efforts in that area. Last week, it announced it had uncovered a covert campaign to use its platform to exacerbate US political divisions ahead of the mid term elections in November.
Facebook said the unknown actors behind the latest campaign “went to much greater lengths to obscure their true identities” than Russia-linked groups had in the run-up to the 2016 presidential election.
A lack of trust
But it is the issue of privacy that has particularly angered ordinary users, with the Cambridge Analytica scandal prompting a "delete Facebook" campaign.
In March, a Reuters’ survey found that most people in the US used Facebook throughout the day more than they used Twitter, Instagram, Pinterest, Tumblr, Snapchat, or Google+. But although people were more likely to be on Facebook, 51 percent either said they didn’t trust the platform at all or didn’t trust it very much.
Banks have also failed to regain the trust of US customers. In 2009, a Gallup poll found 49% of respondents had "some" confidence in the institutions, while 26% had "very little" confidence. Fast forward nine years, and those numbers have barely changed.
Unsurprisingly the news on Monday that Facebook was reportedly in talks to deepen links with banks and financial institutions to improve their customer service raised eyebrows.
"I could not believe that. As if that would make them more trustworthy....", said David Kinley, who holds the Chair in Human Rights Law at the University of Sydney.
Professor Kinley, author of "Necessary Evil: How to Fix Finance by Saving Human Rights", said there were some big similarities between the two industries.
"Banks and financiers are now huge IT employers .... They also do mess with our privacy.
"There is no doubt that the details that are held by banks are used in a way that will benefit them and indeed their clients to whom they choose to share the details, and of course that's the same as the social media platforms."
Banks 'have been screwing with out privacy'
However, there is one big difference.
"[The banks] have the temptation, and have yielded to the temptation, of screwing with our details, with our privacy. The banks have not only screwed with our details but they've financially benefited from that at our expense.
"They've been using what details they have on us to enrich themselves whereas I think the social media have done less to thieve financially from us. What they have done is broken the trust by selling them on."
Janna Thompson, Professor of Philosophy at La Trobe University, has written extensively on corporate ethics.
And when it comes to choosing between the lesser of two evils, she has slightly more sympathy for the social media firms, whom she likens to "Frankenstein and his monster".
"[The banks] were engaged in an unbridled quest for profit and did not care if they did it by engaging in dodgy behaviour. They should have known that things would end badly for a lot of innocent people.
"In 2008 when Facebook was criticising the banks I don't think Zuckerberg and others knew, or could have known, how some people would later use this platform.
"The relationship between them and their creation is rather like the relationship between Frankenstein and his monster. I don't think they really know how to control it. I am not saying that they are blameless. Just that the banks are more blameworthy for the GFC (great financial crisis) than they are for what happened (on social media) during the US election, etc."