Why Sheryl Sandberg cannot be treasury secretary

It has been repeatedly rumored over the last couple months that Facebook COO Sheryl Sandberg is under consideration for a top job in a hypothetical Hillary Clinton administration — possibly treasury secretary. Given that she is best known for writing a book about how women might best achieve success at the top levels of business, it makes a certain kind of sense.

However, there are big reasons to be wary about a tech baron approach to American economic policy — starkly demonstrated in a recent report by ProPublica, which found that Facebook allows its advertisers to target certain ads to certain ethnic groups. The story raises troubling questions about Facebook and Sandberg's running of it. More broadly, it also demonstrates that tech companies need more rigorous government oversight — and there is every reason to think that a Secretary Sandberg would not want to closely regulate her fellow tech billionaires.

ProPublica's Facebook story prompted widespread confusion among tech-minded sorts, and it's easy to see why. Demographic targeting for certain products — hair treatments or sunscreen, say — isn't too objectionable. But for things like jobs, housing, or banking, it very much can be. There is a long and very dark history of baldly racist housing covenants, federal home loan guarantees, employment offerings, and so on. Therefore, a targeting mechanism that allows a housing ad to be restricted to a specific racial group is a prima facie violation of the Fair Housing Act.

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I would guess that this didn't even occur to anyone at Facebook, because Silicon Valley is generally staggeringly ignorant about everything but coding, hardware, and public relations. How else can anti-government libertarianism thrive in a place whose foundational architecture was built with enormous government subsidies and where government contracting is one of the biggest sources of business?

Such ignorance among people obsessed with their own intelligence is comical, but it also serves an important social function. Some tech products — Google Maps, for instance — are unquestionably innovative. But others are merely end-runs around legal rules, sometimes called "regulatory arbitrage." They create profits through unfair advantage, often by violating regulations which were generally put there for a reason.

Amazon, for example, got a tremendous head start on its brick-and-mortar competitors due to not having to pay sales tax for years. Similarly, a great fraction of Uber's market share surely comes from straightforwardly violating local taxi regulations (as well as anti-trust ones) across the entire world. And while it's unknown how extensive this Facebook discrimination mechanism has gone, it would surely be highly profitable to be able to quietly purchase racist housing advertising in violation of laws protecting black Americans.

As chief operating officer of Facebook, it beggars belief that Sandberg did not know about this mechanism. It suggests either she has a grossly inadequate knowledge of history and law, or does have that knowledge and simply doesn't care. Either way, such a person should not be placed in charge of the Treasury Department, with the large influence over economic policy such a position brings — especially given that Sandberg is virtually certain to want to return to a hugely lucrative tech job after her time in government service.

More generally, what this research shows is that big tech companies cannot be trusted to act in a socially positive fashion merely by virtue of being tech companies. They will seek profits by any means to hand, fair or foul, just like the robber barons of old. "We tamed those corporate behemoths once, but the government's regulatory function has been allowed to atrophy," Marshall Steinbaum, an economist at the Roosevelt Institute, told The Week over email. This has enabled "the business models that have made Facebook, Google, and Uber a ton of money and astronomical financial valuations, and underpins their dominance with an ideology that validates regulatory arbitrage as socially beneficial creative destruction."

Only government — with regulations on monopolies, labor, civil rights, and so on — can keep the tech barons on the straight and narrow. Unfortunately it is unlikely that Clinton will accept this advice, because the Democratic Party is largely taken in by Silicon Valley hype. A great many Obama administration staffers have gone into tech firms, and Google has become all but another branch of government.

But if Silicon Valley is to become part of a healthy America, and not just a Wall Street-esque parasitic profit center for a few, the federal government must force it to compete on the same playing field as every other business. Would a Secretary Sandberg really ensure it?