Is Elizabeth Warren Really an Existential Threat to Facebook?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Senator Elizabeth Warren, a leading candidate for the Democratic presidential nomination, has made Big Tech a major target of her campaign. Breaking with more moderate Democrats, Warren has called for the outright breakup of large tech companies, including Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) and Facebook Inc. (NASDAQ:FB). As we have discussed in previous research notes, the potential for antitrust action against these companies represents a serious black swan risk for investors.” data-reactid=”11″>Senator Elizabeth Warren, a leading candidate for the Democratic presidential nomination, has made Big Tech a major target of her campaign. Breaking with more moderate Democrats, Warren has called for the outright breakup of large tech companies, including Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) and Facebook Inc. (NASDAQ:FB). As we have discussed in previous research notes, the potential for antitrust action against these companies represents a serious black swan risk for investors.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="While all the tech giants could find themselves in Warren’s crosshairs post-election, Facebook appears to be the most vulnerable. The social media behemoth has earned plenty of negative political and media coverage for its perceived laxity in managing "fake news" and other perception-manipulating posts and ads. Heading into an election year, these threats will only mount.” data-reactid=”17″>While all the tech giants could find themselves in Warren’s crosshairs post-election, Facebook appears to be the most vulnerable. The social media behemoth has earned plenty of negative political and media coverage for its perceived laxity in managing “fake news” and other perception-manipulating posts and ads. Heading into an election year, these threats will only mount.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Existential threat” data-reactid=”18″>Existential threat

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Warren may not win the Democratic nomination, but her call to break up Big Tech will not die with her candidacy. While more moderate Democratic hopefuls like former Vice President Joe Biden are not likely to follow her lead, other left-leaning candidates will. Indeed, some already have, including Senator Bernie Sanders.” data-reactid=”19″>Warren may not win the Democratic nomination, but her call to break up Big Tech will not die with her candidacy. While more moderate Democratic hopefuls like former Vice President Joe Biden are not likely to follow her lead, other left-leaning candidates will. Indeed, some already have, including Senator Bernie Sanders.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Facebook CEO Mark Zuckerberg believes the threat is serious. In a leaked recording of a speech to employees on Oct. 1, Zuckerberg said Warren’s efforts represent an existential threat to Facebook:” data-reactid=”20″>Facebook CEO Mark Zuckerberg believes the threat is serious. In a leaked recording of a speech to employees on Oct. 1, Zuckerberg said Warren’s efforts represent an existential threat to Facebook:

“You have someone like Elizabeth Warren who thinks that the right answer is to break up the companies…if she gets elected president, then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge. And does that still suck for us? Yeah. I mean, I don’t want to have a major lawsuit against our own government…But look, at the end of the day, if someone’s going to try to threaten something that existential, you go to the mat and you fight.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="That was the first time Zuckerberg was caught speaking about Warren as a credible threat. The presidential hopeful was quick to capitalize on the leak, taking to Twitter to further beat the drum of anti-Big Tech sentiment:” data-reactid=”24″>That was the first time Zuckerberg was caught speaking about Warren as a credible threat. The presidential hopeful was quick to capitalize on the leak, taking to Twitter to further beat the drum of anti-Big Tech sentiment:

“What would really ‘suck’ is if we don’t fix a corrupt system that lets giant companies like Facebook engage in illegal anticompetitive practices, stomp on consumer privacy rights, and repeatedly fumble their responsibility to protect our democracy. I’m not afraid to hold Big Tech companies like Facebook, Google, and Amazon accountable. It’s time to #BreakUpBigTech…If Facebook finds my scrutiny uncomfortable, here’s what Mark Zuckerberg and his team could work on: Ending his company’s illegal anticompetitive practices; Protecting consumers’ privacy instead of Facebook’s profits; Ensuring Facebook isn’t undermining our election security.“

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Danger of isolation” data-reactid=”28″>Danger of isolation

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="One problem facing Facebook is that, despite her antipathy toward Big Tech, Warren is quite popular in Silicon Valley. According to Vox Recode’s October canvass of Silicon Valley fundraisers, the senator from Massachusetts remained highly regarded, and has even gained ground among liberal tech grandees:” data-reactid=”29″>One problem facing Facebook is that, despite her antipathy toward Big Tech, Warren is quite popular in Silicon Valley. According to Vox Recode’s October canvass of Silicon Valley fundraisers, the senator from Massachusetts remained highly regarded, and has even gained ground among liberal tech grandees:

“Warren is making significant inroads with some of tech’s wealthiest Democrats. That progress would have been unthinkable just six months ago after she called for the industry’s iconic companies to be split asunder. Warren has not moderated her at times vitriolic rhetoric toward Silicon Valley. But tech elites are not, as often caricatured, single-issue voters driven by tech policy. And the two dozen tech executives, investors, and veteran fundraisers who spoke with Recode outlined three key reasons why their industry is making this unexpected shift toward Warren: They say they respect her policy rigor. They see her as less radical than once imagined (and especially when compared to Bernie Sanders). And perhaps most importantly, she has a reasonable path to winning the nomination, and there’s nothing Silicon Valley loves more than a winner.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Silicon Valley’s desire to ingratiate itself with Warren is understandable. However, as Vox’s Teddy Schleifer has pointed out, these efforts have largely failed to alter Warren’s political position:” data-reactid=”33″>Silicon Valley’s desire to ingratiate itself with Warren is understandable. However, as Vox’s Teddy Schleifer has pointed out, these efforts have largely failed to alter Warren’s political position:

“Silicon Valley has developed some strange new respect for Elizabeth Warren. The only problem? Warren absolutely refuses to play the Silicon Valley donor game. At all.”