Brain Drain

The Tech Reckoning Spreads to the Moneybags

The company is urged to study the use of phones on children's mental health, and the rest of the industry better check its pulse.
Photographer: Elijah Nouvelage/AFP/Getty Images
APPLE INC
-0.56
At Closing, February 16th
172.43 USD
FACEBOOK INC-A
-2.60
At Closing, February 16th
177.36 USD

When financial mercenaries start caring about the potential human harm of technology, Silicon Valley should be extremely nervous. 

There's been growing anxiety among journalists, researchers, lawmakers and even a few technologists about the ill effects of technology or the outsize power of the companies behind it. Smartphones are making kids depressed. Facebook and Twitter are fueling social divisions. Amazon is killing retail jobs in vulnerable parts of the country.

Mostly, the angst has been confined to power corridors in places like the Bay Area, Washington, Brussels and New York. If anything changed in how people feel about tweeting or surfing YouTube, it isn't very evident.  

For one day, at least, the tech reckoning has spread into the halls of financial power. If American technology superpowers haven't been worried about backlash, they should be now. 

Power Brokers

Seven of the world's 10 most valuable public companies are in the technology industry

Source: Bloomberg

Two investment firms, a public pension fund and a company known for agitating for financial changes at companies are pressing Apple Inc. to study the impact of smartphone overuse on children's mental health and create software that would help parents more easily limit phone use. As the Wall Street Journal reported, Jana Partners and the California State Teachers' Retirement System are concerned that Apple's share price could be hit if there is blowback from Apple not doing enough to curtail obsessive smartphone use among young people. 

I will say that one letter from a couple of stockholders doesn't make an anti-technology revolution. Calstrs has taken on companies in other industries over potential ill effects of their products. For example, the pension fund pushed one of the firms in which it invested, Cerberus Capital, to sell a gun maker it owned.

And while Jana isn't known for pressing companies over nonfinancial matters, it's entirely possible it cares less about smartphone addiction and more about the publicity advantage in taking on Apple over a hot-button topic. 

But it's certainly the case that the investment firms are capitalizing on a technology trend. There's been a mini-boom of technology executives' mea culpas about creating monsters that can't be controlled. Two people important in the early phases of Facebook Inc., Chamath Palihapitiya and Sean Parker, expressed guilt in recent months about Facebook use tearing apart society and harming children's mental health. (Palihapitiya later backtracked somewhat from his remarks.)

Even Facebook said recently that its research found using the social network can be harmful if people use it passively. And on Monday, former Apple executive Tony Fadell responded to the Jana and Calstrs news by agreeing that smartphone addiction is a problem. Fadell urged tech companies to give people more insights into how much time we're spending with digital tools, and opportunities to limit it. 

Shiny Apple

Apple shares have climbed nearly 50% in the last year. A group of investors worry that share performance could suffer if Apple doesn't tackle smartphone overuse

Source: Bloomberg

Apple itself has invited the type of criticism now coming from the two investment firms. CEO Tim Cook -- to his credit -- has tried to make Apple a more responsible company. He has sought to improve working conditions at the tangle of factories that make Apple's products, and he has said the company has a "moral responsibility" to help the U.S. economy grow and add jobs. When he takes that responsibility, Cook also opens Apple to criticism that it could be doing much more, including in areas like users' abuse of technology.

One letter from Calstrs and Jana may amount to nothing. It's becoming increasingly clear, however, that scrutiny over technology companies and their products isn't going away. Investors are now going to have to assess how to measure the potential financial impact of people believing companies' products -- or the companies themselves -- are bad for the world. 

There will be much discussion about whether technology companies, or people and parents, bear responsibility for limiting the harmful effects of technology. Even smartphone overuse isn't Apple's problem alone. Its gadgets are gateways to people hooked on Instagram, YouTube, Snapchat and much more. We are all the problem, and the technology companies are all the problem. The more the debate about harmful effects of tech spreads, the more technology companies have to urgently attack the downsides of their products. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Shira Ovide in New York at sovide@bloomberg.net

    To contact the editor responsible for this story:
    Daniel Niemi at dniemi1@bloomberg.net

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