In the brilliant 2006 cult movie “Idiocracy,” a man and woman are accidentally “hibernated” to the year 2505, into a society that is a stumbling, foolish remnant of our own. Over the centuries, the bulk of the economy and government have been assimilated by a single giant corporation: a sports drink named Brawndo.
Our society is not yet this moronic nor monopolistic, but there are structural attempts by some of our industry giants that remind us what ultimate monopolization might look like.
In June, Facebook announced the formation of a global digital currency based on Blockchain to be called Libra. The initiative seemed like a done deal, given its support by global payment leaders like eBay, PayPal, Visa and Mastercard, and Silicon Valley transactional powerhouses like Uber, Lyft, and Spotify.
Libra’s proposed creation felt a bit tone deaf, given the regulatory scrutiny that Facebook attracted these past several years. As recently as last month, attorneys general from seven states and the District of Columbia announced an investigation of whether Facebook is violating antitrust law by “endangered consumer data, reduced the quality of consumers’ choices or increased the price of advertising.”
With respect to Facebook, it would take some combination of arrogance and willful ignorance to think that consolidating global payments on your platform is a good idea in the face of coming antitrust storms, essentially supported by both parties in the U.S.
Two weeks ago, days before the founding members were to meet and kick off the initiative, the major financial institutions (eBay, PayPal, Visa, Mastercard and Stripe) stepped away from the initiative.
Their reason for leaving was simple. Payments are not a secondary aspect of their business model that they have an interest in disrupting; it is their core business. Visa, Mastercard and PayPal already answer to intense global regulatory compliance.
How does it serve their purposes to drive the creation of a digital currency that disintermediates the currencies of national governments, leaving the companies completely responsible for money laundering, crime and terrorist support on Libra? Additionally, how is it in their interest to participate in an initiative so closely associated with Facebook, with its aggressive expansionism and long-term regulatory challenges?
Libra for now will continue with Facebook and its Silicon Valley cohort, though without the payment-processor partners it is far less of a safe bet to get traction. Don’t be surprised if Mark Zuckerberg sacrifices Libra under pressure the next time he is testifying before Congress.
There remains the larger question of what role the Superplatforms — Google, Amazon and Facebook — will play in the economy of the 21st century, and whether the culture that drove their explosive growth the past 20 years is capable of making balanced decisions about their role in the global economy, or will simply attempt to grow at maximum speed until curtailed by government, or not curtailed at all.
Isaac Cheifetz is an executive recruiter and strategic résumé consultant based in the Twin Cities. His website is www.catalytic1.com.