(Bloomberg Businessweek) -- Is it time for the Googles and the Facebooks and the Twitters of the world to be regulated?
Well, it's certainly time for these incredibly successful companies to take on additional responsibilities for how they interact with our society. I think it may be time for firms to create a set of ground rules to make society more comfortable with what they're doing.
So why look to the financial industry for examples?
Search and social media in a way are brokers in an information marketplace. If you think about the regulatory structure of the financial marketplace, I see analogies to Finra, the Financial Industry Regulatory Authority. It's essentially an industry consortium that is sanctioned by the government to provide investor protection and promote market integrity. When you have that kind of trust, then the businesses thrive and make a lot of money.
But some might say, “OK, we have these rules and regulations in place in the financial world, and yet we have problems.” We had the financial crisis, most people remember that.
Absolutely, these are very hard problems. You're not going to have a group of people sitting down, spending an hour saying this is how it should work, these are the rules, we're done. Even with speed limits on highways, you can have bad accidents.
Safe to say, though, that the big players would dominate this process and that some of the smaller players would get hurt. How do we make sure that doesn't happen?
That was the problem with the predecessor to Finra. You have to design this entity in such a way that the interests of small and large firms are balanced. A lot of innovation occurs in smaller firms. I think the government should reserve the right to take additional action if they think the regulatory body isn't doing a good job.
If you think about these companies, there's not a lot of transparency about what they're doing with the information they're gathering, how they're using it.
And the lack of transparency creates problems beyond the most obvious ones. Imagine if financial firms could disclose their financial information any way that they wanted to. There's a lack of trust and confidence.
With Europe getting out in front of the U.S. in trying to define anticompetitive practices, especially trying to define privacy, how soon does this kind of self-regulating body have to come together in the U.S.?
Well, I think now would be a really good time to start. These firms are now really important and critical infrastructure to the global economy, and the process of trying to better understand ways that they can operate that would truly promote trust and confidence is not easy. So let's get going.
Interview has been edited for length and clarity.
To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net, Jeff Muskus
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