Silicon Insider: How Facebook Took Down a Giant

Sept. 6, 2007 — -- One of the most important phenomena of the 21st century is that technological breakthroughs will increasingly come from the most unlikely places.

And I think I just saw one happen here, in London, if you can believe it.

Here's the background: HSBC, which used to be called the Hong Kong and Shanghai Banking Corporation, is the most ubiquitous bank in England. Go to any small town in the U.K. and somewhere on the main street you'll see the familiar hexagon logo and ATM.

In London, HSBC branches are everywhere, as is the corporate headquarters building, a big gray slab on Canary Wharf.

Being the "World's Local Bank," with 100 million depositors, HSBC goes to great lengths to be a good community citizen -- especially in its home country. One of the most celebrated of these programs, part of HSBC's initiative on education, was one that allowed recent college graduates to pay off their "overdraft" debts without having to also pay any interest charges.

Now I'm not a big supporter of teaching new grads and graduate students to be even more irresponsible than they already are. Frankly, one of the biggest problems with the U.K. (and the United States) is that our brightest young minds are too long insulated from the realities of supply and demand, savings and debt, and fiscal responsibility in general. So, as benevolent (and shrewdly self-promoting) as the HSBC initiative was, it was also pretty damn stupid.

But that's neither here nor there. What's interesting about this story is what happened when HSBC finally got in its right mind and decided to quietly kill the program.

That was in June. By early August, HSBC formally began applying a 9.9 percent interest to the debts of nearly 250,000 British students. Here in the land of genteel socialism, the response was predictable: fury.

But students are always angry about something. But that is counterbalanced by the fact that they are also usually powerless. The result is typically a whole lot of sound and fury, signifying nothing.

But this time, something changed. And that change may prove to be very significant. What happened was that 4,000 of those angry students went on to the online community site Facebook, which is especially popular with college students, and joined a group dedicated to getting HSBC to reverse its decision.

The group, created by Wes Streeting, vice president of the National Union of Students (NUS), was entitled "Stop the Great HSBC Graduate Rip-Off" (a classic example of hubris: only postadolescents would characterize the end of a charity as a "rip-off.")

Literally within days the group had 4,000 members, all loudly demanding a return of their preferential treatment. And then an amazing thing happened …

HSBC, the world's fourth largest corporation, with assets of nearly $2 trillion, caved. In a press release, the company told the Guardian newspaper that it wasn't too large to ignore the needs of its customers -- and that it would immediately freeze its graduate interest charges.

"We are a service-orientated organization and we have to listen to our customers -- that is a priority for us," the HSBC statement said.

Even the British media noticed, suggesting -- and I believe they may be correct -- that this was the first time that an online community had ever self-organized to bring about a political goal.

Not surprisingly, Streeting and the NUS exulted. "Running the campaign through Facebook has been tremendously successful," said Streeting. "I think it's tremendous that such a huge amount of pressure has resulted in a change of policy for HSBC."

But, in fact, it is much more than that. Futurists have long wondered when the Web 2.0 revolution would evolve into the Web 3.0 economy -- that is, when the online community world of meet-and-greet and sharing embarrassing photos, would finally organize its millions (MySpace now has more members than the population of Japan) into a marketplace, a distinct culture and -- least discussed -- an advocacy group.

Well, it looks like we may get the last, first. Obviously, a single case of a group of angry students intimidating a publicity nervous corporation is hardly a movement. But one of the features of our Web world is that new ideas and new techniques, especially if they are easy to imitate, can proliferate around the planet at lightning speed.

Had the student campaign failed, or HSBC shown a little more backbone, the adoption of the idea may have been delayed for a few years. But this was a big win on the very first try: College kids, the very people who characterize Facebook and most other online communities, threw an organized tantrum and one of the world's biggest financial institutions cowered and begged for forgiveness.

That's power, baby, and just the kind of meme that will proliferate to every corner of the Internet.

And indeed, it has already begun. A couple days ago, London had one of those absurd British strikes (as opposed to absurd French strikes) in which some thuggish-looking local union leader calls a wildcat strike -- even though brother unions, and even management, are all in happy accord -- just to show he's got the power to do so. In this case, it was the Rail Maritime Transport union (RMT), which called for a 72-hour shutdown of the London subway system because it hadn't received "unequivocal" guarantees of everything it wanted regarding pensions, benefits, etc. At least that's what the Tube strike was ostensibly about, but more likely it was RMT Secretary General Bob Crow flexing his muscle and showing he could shut down London anytime he felt like it.

It was all pretty stupid and pointless (well, perhaps not to those thousands of London commuters who walked miles to work or crowded bus stands). When even the equally absurd Marxist mayor of London, "Red" Ken Livingstone, calls the strike "bizarre" and "inexplicable," you know you've gone right over the edge. Apparently even the union finally realized that, too — or Bob Crow felt he had sufficiently flexed his muscle -- and the strike was called off after a single chaotic day.

But before that happened, Facebook was already filling with dozens of groups, all spontaneously organized around their mutual hatred of Crow and the mess the RMT strike was creating. Clearly, hundreds of people, enlightened by the experience of the HSBC campaign, had now quickly put it into action once again, this time directed at a different target. You can be sure that this will be happening again and again in the months ahead, with ever more campaigns and growing numbers of participants. And if it can happen this quickly in the U.K., imagine what will happen when the idea catches on in the United States.

The implications of all of this are as unknowable as most every other hybrid of society and technology. On the one hand, it could represent a welcome return to the old idea of grassroots politics -- not the ersatz grassroots of well-organized political campaigns co-opting the Web for their own purposes, but rather the old-fashioned democracy of people rushing to the town square to voice their opinions, gain adherents and pressure leaders for change.

On the other hand, that old-time grassroots politics also sometimes led to lynch mobs, riots and demagoguery. It's not hard to imagine millions of angry people, operating from little information and even less thought, coalescing in a matter of hours over some perceived injustice and egging each other on to mayhem -- only to scatter to private, and anonymous, regret soon afterwards.

Friction is a friend of good government; that's why the founders intentionally designed the legislative branch to be deliberate and contemplative, and to resist acting in a white heat. But the Web is all but frictionless -- and when the Internet really meets politics (everything up until now has just been a warm-up), who knows what will happen. Right now, what is going on in the U.K. on Facebook is thrilling. Tomorrow may be a different story.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the bestselling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com Silicon Insider columnist since 2000.