One of the things that social media companies like Twitter Inc (NYSE:TWTR), Facebook, Inc. (NASDAQ:FB), YouTube — a subsidiary of Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) — and any other social media outlet needs to understand is that with great power comes great responsibility. You are either committed to open and free speech, or you pretend to be but you really are not.
Unfortunately, what we are learning is that these operations are more interested in censoring the views of those who hold political opinions than senior management does not agree with. Companies like TWTR are, of course, free to do this because they are private businesses.
However, let’s not dodge the real truth here. The social media sites are effective monopolies by virtue of the fact that they’ve gotten so big and so dominant. Good for them. However, it’s bad for free speech, bad for America and most of all, bad for business — including TWTR stock in the long run.
The reason is that when TWTR stock, as a social media giant, or any other company, take a stand against a particular political ideology, you instantly alienate half your potential users.
While that may or may not translate into revenue losses in the near-term, over time, it does create risk. It is risk that matters in investing, not returns. It is inexcusable for TWTR management, or any company, to knowingly shoot itself in the foot and thereby create risks that otherwise wouldn’t exist.
It is not a fiduciary interest of the company or shareholders to do anything that unilaterally “Christmas” for your shareholders. Let’s look at Twitter stock and recent tweets by CEO Jack Dorsey.
On March 1, Dorsey issued several tweets, which made the following claims: “We’re committing Twitter to help increase the collective health, openness, and stability of public conversation …We witnessed abuse, harassment, troll armies, manipulation through bots, misinformation campaigns, and increasingly divisive echo chambers .… While working to fix it, we have been accused of apathy, censorship, political bias.”
Dorsey goes on to say that Twitter is coming out with algorithms that are designed to quote measure conversational health”.
We already know Twitter hates conservatives. James O’Keefe at project Veritas exposed this bias in a recent series of hidden camera exposes. We’ve seen countless incidents of conservative voices being silenced on Twitter, Facebook and most recently YouTube. YouTube also began a trend of de-monetizing voices that it didn’t agree with, and tried to cover for it with a lot of corporate communication gobbledygook.
Even if the intent of the social media outlets is genuine, there is nothing that any of them can do that will make speech more “virtuous”. The great thing about a free society is that people get to argue, present their point of view and speak freely. If it is civility that these outlets are hunting for, then they should just give up now. There are far too many users across the globe who are not about to stay silent, or be nice, but speak freely on things they’re passionate about.
But this brings us back to the stocks.
As investors, we should be screaming bloody murder over any company that gets political at any time for any reason. Investing is not about politics. Sure, policy is going to affect how businesses operate, but that is different from politics. We as investors want to reduce risk, and see a business grow. Anything that distracts from those mandates, by definition, increases risk.
At the moment, that risk cannot be quantified. But make no mistake, at some point someone in a position of power is going to try something crazy. They may try to introduce the social media equivalent of the fairness doctrine, and FCC rule that was originally designed to give parties equal weight and time in the media.
If the CEOs of these companies, who thus far appear to be Democrats who seem interested in censoring conservative voices, insist on this approach, how long before someone on the other side gives them a taste of their own medicine. Then we have government interference and free speech. And once again, more risks.
At the moment, I don’t see these moves as affecting the stocks themselves, but there’s a first time for everything.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns shares of FB and GOOGL. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
