Taken together, the largest ten tech companies, including the Chinese giants, Alibaba and Tencent, enjoy a market capitalisation of $9 trillion, or around 10% of the total world stock market. Their revenues amount to just over $1 trillion, or around 1% of world GDP. Apple revels in 21% net profit margins, which for a computer manufacturing company is insanely high; while Amazon makes just 4% net profit margin, which is the secret to its own success. 

The collective secret lying behind the exponential success of these companies? Screen time.

According to a recent global survey by GlobalWebIndex, on average we spend 6 hours 42 minutes of each day looking at a screen (and this was before lockdown). South Africa is barely believable at around 8 hours 25 minutes per day. The Philippines is worst at over 10 hours per day, with the Japanese the sanest at 3 hours 45 minutes.

While the significant market cap of these tech goliaths is not in dispute, the question of how they actually make their money is less clear. And the role of us, as end-users, in helping monetise their models is even less so. The top-performing tech stocks, the so-called FAANG stocks (Facebook, Amazon, Apple, Netflix and Google), are all very different companies with very different business models and motives. 

Unregulated influence

However, their extraordinary success has seen the rise of a number of questionable issues. The recent Netflix documentary, The Social Dilemma, raises the alarm over the rampant and unchecked influence that social media platforms are continuing to have on our lives, with this set to explode into the future. These companies are affecting every aspect of our lives, they are completely unregulated and enjoy power over societies (and elections) unparalleled in history. 

When considering these stocks from an ethical perspective, let’s look at some of these issues more closely.

1. Privacy

In the 2016 US election, the now infamous Cambridge Analytica harvested – without our consent – millions of psychological profiles to identify those users with a predilection towards Trump so that we would receive targeted election adverts accordingly. These profiles were established using Facebook data on every aspect of our private lives, leading to a profile that was almost 100% accurate. A shocking statistic. Privacy abuses are an issue particularly prevalent among the dominant social media companies, but the risk remains across all of the major tech companies that collect data on their users.

2. Manipulation

Humans are treated as products to be sold, with their daily behaviour deliberately manipulated to tie them to their phones so they are more profitable to the corporate. Again, a shockingly dystopian reality.

3. Monopolies

Facebook owns the top four of the five largest social media apps, while Amazon owns 44% of US online e-commerce. Google owns 92% of US search activity and Netflix dominates TV streaming services (though competitors are catching up). Apple acts like a monopolist, recently strangling the Spotify app on its platform, and ensuring (allegedly) that our phone speed fades around two years into ownership, prompting a profitable upgrade. Would this be tolerated in the traditional corporate space where company activity is more closely regulated?

4. Tax

These companies have used offshore tax techniques extensively to actively reduce their tax bill. So not only do their outsized, unregulated profits accrue to a very small collection of employees, shareholders and billionaire founders, but their give back to society through taxes paid is well below where it should be.

5. Polarisation in society

This is probably the worst problem. It is a hard to believe the statistic, but 67% of people in America get their news from social media. In other words, predominantly from Facebook and Google. Now, Facebook and Google will tweak your news feed based on your personality assessment and ongoing interests and preferences (not as stated by you but as gleaned based on your online browsing). That news feed will feed your biases, so if you are right wing in politics, for example, you will get a lot of Fox News type right wing “news’ and opinions, feeding your existing biases. As such your views will harden as your existing views get reinforced. Again, this is done deliberately because we enjoy having our views validated, therefore will spend more time on the platform. Political views get entrenched on each side of the divide and society becomes polarised. Intelligent discourse between opposing groups gets crushed. We are seeing the effects of this right now across America.

Such a level of public hostility across society is truly alarming, and is being fed at scale by these platforms. With no regulation. Fake news becomes real news and any view becomes acceptable and entrenched. To top this off, malign forces such as Russia can influence an election outcome (2016 Trump); not by hacking Facebook but by simply using its platform. 

It is a problem in plain sight, yet the influence overall of technology can be confusing. This is because, as The Social Dilemma documentary points out, technology can be viewed as simultaneously utopian and dystopian – a car, information or social connections are just a click away, but at the same time we don’t realise how we’re being manipulated. 

The road ahead

This issue will have to be addressed and, I suspect, the election victory for Joe Biden may be the trigger. He has been publicly more critical of the tech companies, calling for more regulation and breaking up of monopolies. A day of reckoning is most likely is at hand.  Ultimately, it is our youth who are being damaged by this technological phenomenon. Another important matter, the focus on a ‘perfect’ online presence, is harming our children. The incidence of suicide in America of 10 to 14-year-old girls is up 190% in ten years. Intervention is becoming increasingly urgent.

Looking at these stocks from a pure investment perspective, they have their good points and their bad; they are strong and growing organisations, but they are expensive. However, from a responsible investment perspective, some are more bad than good. They have evolved from modest and erstwhile beginnings to, in some cases, a business model that actively does harm in order to keep the profits flowing. This is a completely unsustainable model for society as a whole. I suspect Joe Biden, when he takes over office, will bring change in this area, and much needed it will be too.  BM