Welcome back to the Phineimize Modern Investor Summit. I'm honored to be hosting the closing keynote conversation, and what a keynote it is. We've heard multiple times over the last two days that we're at an inflection point. AI is reshaping everything. Tech platforms face unprecedented scrutiny, and therefore the question of whether and how governments should shape markets is a fiercer and more hotly contested question than ever. Now, Chris Hughes has a unique perspective on this. He helped build Meta back when it was still Facebook from a dorm room project into the global platform we all know today. And since then, he spent the last decade studying how American policy makers have shaped the economy over a hundred plus years. And in his new book, Market Crafters, he argues that we need to rediscover the art of market craft, the deliberate act of shaping markets for public benefit. Now, for investors positioning for 2026 and beyond, understanding how policy can and will shape innovation is essential. So, it's a conversation I cannot wait to explore. Chris Hughes, welcome to the Phineimize Modern Investor Summit.
Thanks for having me, Carl. It's great to be here.
Fantastic. Now, Chris, we've got to start with Facebook. You were there at the beginning, literally in the dorm room. Now, Meta has grown to be a $1.6 trillion company, sitting across AI, VR, advertising. And all of that happened with relatively little if any government intervention compared certainly to previous ways of innovation. So maybe just to start, as you look back, was that the right approach for government, or did the US government miss opportunities to really shape how that platform developed?
Well, I think Meta as a company has exploded dramatically, not just the social media capacities that are synonymous with the brand, but also real-time messaging, group messaging, obviously the AI revolution. They've spent a lot of money in the virtual reality landscape. So as a company, its value has meaningfully expanded over time. The way I think about the government relationship with Meta and social media more broadly is one where a key decision in the late 1990s really enabled the growth of the social web, and that was part of the DMCA, specifically Section 230. We don't have to get into all the legal details, but it's a key idea that Meta, like other social media companies, was shielded from liability for whatever anyone posted on the platform. For some, that might have made sense in the late 90s because message boards were out there, and it was like, how are you going to police everything everybody posts? But the key difference is that with the social media revolution, algorithms began to review much of that information and then boost some of it. There was a sense of a normative decision being made by the platforms, and all of a sudden we become addicted to the most outrageous content or the most lascivious content or the silliest content. The more the eyeballs are there, the more the company grows. So even though Meta rose significantly and didn't rely on government revenue or contracts for much of its success, there was still important public policy that made it so that these companies could grow so large. All other industries, whether you're a mall or a plane manufacturer, have robust liability expectations. The fact that we don't have that is one of the key reasons Facebook has become as large and successful as it has commercially.
That is the million-dollar question: What was so different about Facebook or tech platforms in general that gives policy makers pause? Because if I think about railroads, telecoms, banks, even as those industries scaled and evolved, regulation was heavily present.
Yeah, I feel like as a community, as a country, we haven't figured out what we actually want the platforms to do. There are so many different public policy concerns. I'm a parent, I have two young kids, and my seven-year-old is already dying to get an iPhone and asking when can he be on Instagram or social media. So there are concerns around our kids, how they interact with the platforms. We have privacy concerns, misinformation concerns in the political space, antitrust. There are so many different concerns that policy makers have gotten swamped by them. None of them has had really meaningful work happen except for antitrust. Maybe we'll talk more about that. That one is unique because there were already rules on the books that prevented the abuse of concentrated power. Google's been declared a monopolist twice, and there was a suit against Meta. Antitrust might be the exception. So I don't know if that's going to change at the national level, but I know there are a lot of states prioritizing it. In New York State where I live, a recent law makes social media companies have a different set of expectations for users under 18. There's been talk about doing something similar from a hardware perspective—should Apple sell a different kind of phone by default to younger kids? So the ideas are coming, the momentum is building, and the political interest is there, but we still have a long way to go. It's less about regulation for the sake of regulation; it's really making sure these platforms are working for us, rather than just for the CEOs who run them.
Gotcha. Okay, so let's spend a bit of time on Market Craft and your book, which I think is fantastic. I've bought a copy, I'm not just saying that. It's part of why we wanted you to join us today. But it tells the story of how American policy makers have deliberately shaped markets over the last hundred years, give or take—the New Deal under Roosevelt, financial regulation being a couple of famous examples. But for investors watching right now, their starting point is probably something like free markets work best, markets are by and large efficient. So, are they wrong? And what do you actually want them to take away from this conversation about how markets actually function?
Well, they're not wrong. Markets do work very well much of the time. Over the course of human civilization, no system has pushed humanity forward with health outcomes, convenience, and richness like market-based systems. Some people will say it's capitalism versus socialism, but there are many varieties of capitalism and many different ways to shape markets. If there's one idea this book hopes to land, it's that markets, particularly in the United States, are very rarely free, unregulated, or self-regulating. When you open up the history books, what you see is a dance where private investors seek profits and make bets, and government says, 'We want pharmaceutical drugs to be abundant, but we want to make sure they're safe,' or 'We want steel tubes to fly through the air so we can go from LA to New York in a few hours, but we need to make sure those markets are safe and competitive.' So you can look at pharmaceuticals, aerospace, energy, healthcare, banking and finance. Once you start listing the industries in the American economy, well above half have a deep relationship with government, where government is often trying to craft and harness them for the public good. That isn't good in and of itself—government regulation can be good or bad—it really depends on how you're doing the market craft. The book looks at history to understand when we have crafted markets successfully, so that investors have been able to benefit from their willingness to take a bet and people have been able to enjoy the fruits of innovation, and when we failed—why things went wrong.
Absolutely, that's a very good explanation. I guess why this matters for investors is that policy shapes earnings and valuations, maybe policy shapes valuations more than earnings at times. If we rediscover market craft, are there sectors or companies that could be overvalued or undervalued because investors are assuming the status quo continues? Tech's the obvious example where market craft has maybe been lacking versus other industries. On balance, is it a net positive or net negative over time?
Well, it's fascinating to watch tech in particular and what market craft is happening right now. Let's take AI, since it's very relevant to investors. We've seen an explosion of interest and investment capital over the past several years, and there have been multiple moments where government, under both the Biden and Trump administrations, Republicans and Democrats, are asking what do we want to actually do here? Is this something we want to support or regulate? For the moment, I think we have a fragile consensus that there is enough private investment flowing into this sector that we don't need additional public money, although there is some on the chips front for national security. We're not seeing an industrial policy for AI right now, and I don't think legislators want that. When it comes to regulation, we're leaning heavily on traditional tort law and liability law, which is the inverse of Section 230 in social media. If an AI model helps you do something illegal, they'd likely be held liable because it's original content the companies produce. So we're relying on that so we don't need an omnibus regulatory bill. There are also conversations around privacy, facial recognition, and surveillance capitalism. The upshot is that for the moment, we've decided we don't want to craft this market; we think it's headed in a direction that is experimental, interesting, and promising, and the state doesn't need to point it in a particular direction. I think that may be the right conclusion. However, we do see early signs of private sector entities seeking a government guarantee. If big banks go belly up, there's a sense that if it's systemically important, it can't just go up in smoke. And you see AI companies, particularly OpenAI, flirting with that same idea. I think that's the first sign of a desire for market craft of a kind of public-private partnership, saying AI has become so important commercially and for national security that we need government to be there in case things go south. I don't know if that'll happen, but it's something we should all monitor closely.
