Clubhouse Says it Won’t be Attending SXSW 2022 Because of Texas’ Trans Rights (March 2022)

 Company Background

Clubhouse is a social media app iOS and Android where users can communicate in audio chat rooms that accommodate groups of thousands of people. It was released in March of 2020 so it is still relatively new. Clubhouse differs from other audio chat apps because you are not always directly chatting with others, you could be listening. It is described as listening to other people’s live conversation. This sounds a little weird, but these users are willingly being heard. The app made an appearance during COVID-19 where many people were using their phones more than normal. The company behind Clubhouse was Alpha Exploration Co. Clubhouse received a $12 Million from Andreessen Horowitz only 2 months after being released with only 1,500 users at the time. The began to grow and reached its peak in April of 2021 where it was worth about $4 billion (Griffith). There are no video chats and the only form of photography comes from each profile’s 1 profile picture. It is available for free in the app store and can be downloaded within seconds. There have been over 8 million downloads and is in the top 10 of social media apps downloaded through iOS (Fitzgerald). Clubhouse has been growing at a fast pace for the last two years and is expected to continue growing despite this case. 

March 18, 2020           April 14, 2020             April 5, 2021 March 2, 2022

Clubhouse was created         Received $12 Million Investment  Worth Approximately $4 Billion Decided against attending SXSW 2022

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March 11, 2022 March 2022 - Present

Held “Power of Voice” Panel       Business Continues 

Case Controversy

The South by Southwest (SXSW) is a conference that takes place annually in Austin, Texas. It was created to celebrate the blending of many aspects of society including tech, film, music, education, and culture. In the, since past, March 2022 convention, Clubhouse, an app designed to let you listen in on other people's live, knowledgeable, conversations, declined its invitation to SXSW. This decision came about due to the state of Texas attempting to restrict the transgender youth from receiving the care and assistance necessary during their transition. Clubhouse came out with a statement via Twitter writing “We realized we wouldn't feel comfortable asking LGBTQ+ voices from the Clubhouse community to come to Texas...and if we feel that way, we shouldn't be there at all” (Franklin 2022). It is important to note that Clubhouse's issues were not with the SXSW conference itself. It was instead a boycott of the state of Texas. This was a powerful statement that drove SXSW to condemn the Texas Governor, Greg Abbott, themselves. "The governor's latest directive puts trans children in harm's way once again, and we unequivocally condemn this action.” As an up and coming business in the music world, this was a very high risk/high reward decision from the company. Not only did Clubhouse choose to not attend the music festival, but they decided to create their own panel at the same time as the conference. This was seen as very bold but quite moving at the same time. They were focusing more on their core values above anything else. 

The controversy did not last long as Clubhouse took the negative attention and turned it into a positive. They launched their own panel on their own platform called “The Power of Voices” while also starting a number of conversations that were used to support transgender speakers and creators. This was a pivotal moment in the case and it really took everything to the next level. The more support that the opposition began to receive, the more people became involved and started to result in a possible change being made. The bottom line and main reasoning that started this debate was people having their freedom stripped away from them based upon the state that they were living in. We can already assume that transgenders that live in the state of Texas are uncomfortable and stressed enough living with themselves based off of all of the hardships they deal with on a day to day basis. Clubhouse made a statement in this situation that let all people know that they stood against laws that held trans people back. Regardless of how this decision would turn out for their business, they were standing by the LGBTQ+ community and that is what is most important to them. With big names such as Drake, Chris Rock, Mark Cuban, and Oprah Winfrey (Fitzgerald) still using the app after this dispute, it is safe to say the business side of things is still in good shape for them. They not only saw this law as something that was put in place to prohibit trans people from receiving the benefits they need to feel comfortable in their sexuality, but they also saw it as an unnecessary way to make the lives of trans people harder. Clubhouse believes that trans people deserve the same rights as everyone else and that in no way should they feel uncomfortable with who they are as people. They have morals as a company and that should be noticed by all of the people who use their app. It should be a priority in any state to make the people that live there feel welcome and comfortable no matter what their personal beliefs or interests are. They consider themselves on Twitter as “a more human place than the internet.” In simpler terms, they are trying to create an atmosphere in which their users feel comfortable. By doing what they did with regards to the SXSW situation, they are showing all people around the world that no matter who they are or what they believe in, Clubhouse stands with them.

Stakeholders

As a relatively new company in a technology based system, the stakeholders in Clubhouse will have a crucial impact on their future. All current and future consumers will need to not only trust the product that the company puts out, but the company as a whole. This includes their beliefs, morals, and any controversial decisions that they make that could possibly impact any and all stakeholders. All the stakeholders in the situation surrounding Clubhouse’s decision to not attend the SXSW conference were affected. Some of their stakeholders consist of employees, customers, and all people who use the app. People like Paul Davison and Rohan Seth, the founders of Clubhouse (Shead), were impacted the most. Davison and Seth knew prior to not attending that it could possibly affect the organization in a negative way. With an app like Clubhouse that users join rooms to chat with others, (Shead) it is important that people feel safe. The customer relationship is what is most important and not taking part in the SXSW shows their consumers that they really practice what they preach as a company which is to make everyone feel comfortable. LGBTQ+ is a very touchy subject in the world today and everyone has different opinions about this subject. The goal is to maintain all stakeholders and with this sensitive topic, some stakeholders may be in jeopardy. As CEO of Clubhouse, Davison was sure that when he decided to pull the company from SXSW that he was putting the consumer first. 

Individualism

An individualistic approach to this particular situation would not necessarily be the first ethical theory that Clubhouse used when making the decision to not attend the 2022 SXSW. Due to the lack of statistics that were turned in the last two months that are relevant to Clubhouses’ profits as a business, I do not believe that the choice not to go to the SXSW Convention was made with the intention to maximize their earnings. Their reasonings for not going seem to be much more based on principles and morals surrounding human rights. Clubhouse is not collecting any revenue at this point in the app's development and so on the surface it seems unlikely that they made this decision for business maximization. With that being said, the individualism theory does have a direct impact on Clubhouses’ decision, despite their intentions. 

Clubhouse may have known what they were doing when implementing individualism. Clubhouse is a generally new app that is growing as previously mentioned. Much like all other start-up social media, they have no revenue to show within their first year. Their intentions as a new company is to build a brand so they can eventually turn a profit. As they are building their brand they are looking for supporters who will generate this profit for them in the long run. By not attending the SXSW for reasons that show support and give the LGBTQ+ community a platform, they are showing an effort to reach out to this community. From an individualistic perspective, it can be interpreted that by Clubhouse showing these values to their audience, their audience will grow. In addition to how much profit they will eventually make with a larger audience, the larger their audience becomes the quicker the company will begin profiting. In this case, perhaps Clubhouse was using individualism for long term reasons rather than short term, as seen in the individualistic views of  libertarian Tibor Machan. 

Utilitarianism

In terms of utilitarianism, the long term is very focused on. However, contradictory to individualism, business actions are aimed to maximize the happiness of all stakeholders rather than maximize profits. Clubhouse may have followed this ethical principle more than any other. As discussed earlier, stakeholders include anyone who is affected by a business. For Clubhouse to not attend the SXSW Conference in support of LGBTQ+ rights they are attempting to maximize the happiness and support they receive from the LGBTQ+ community as well as LGBTQ+ allies. Utilitarians such as John Stewart Mill and Peter Singer were two people that initiated the social activism that goes hand in hand with utilitarianism. Although social activism is important in making the majority of the general public shareholders happy, Clubhouse also had to make other shareholders, such as investors, happy. Clubhouse must turn a profit or have a profit coming soon in order to make shareholders from the business side happy. By speaking up on these social issues, it is reasonable to believe that much of the public was attracted to the company. Similarly stated when discussing individualism, the rise of supporters for Clubhouse will cause a larger profit to come quicker. This profit is where the happiness of investors comes in.

Kantianism

This ethical theory pertains much more to moral reasoning and has little to do with the business side of ethics. A large part of this theory revolved around honoring individuals and their choices as well as not using manipulation or inflicting harm on others to get your way. It is very evident in the case of Clubhouse that this ethical theory is used. The issue of Texas’ laws trying to prohibit transgender youth from receiving the necessary medical assistance they need to fully transition is the exact opposite of this theory. Not only are they not honoring individuals rights to choice, but the State also used manipulation tactics to prove that these medical necessities are “child abuse” (Lampen, 2022). Clubhouse’s decision to not attend the convention was taking a stand and fighting these anti-kantianistic views. Clubhouse showed their belief in honesty, freedom and autonomy of individuals, all primary values of kantianism.

Virtue Theory

Virtue theory as we learned was a theory developed by Aristotle long ago that in simpler terms describes the attributes that encourage the well being of others. This is very important in business, inside and outside of the workplace. As explained by Aristotle, people must be rational to live virtuously (Salazar,23). In order to do so, the 4 main virtues must be followed: honesty, courage, temperance, and justice. 

In this particular situation pertaining to Clubhouse, they handled the 4 main virtues very well. As soon as the decision to not attend SXSW, they were honest and announced it with their reasoning. They let supporters, stakeholders, and anyone who had meaning towards the company know that they were doing this and why. This was a very courageous decision because it was unsure how people would react. Clubhouse was doing this to show their concerns for trans people, regardless of the backlash. They restrained themselves and their business from attending something in a place in which they did not agree with what was happening there. This choice was made to bring attention and hopefully justice to something that Clubhouse felt strongly about. Virtue theory as a whole is an effort to promote the wellness and flourishing of others in society. By standing up for the LGBTQ+ community, Clubhouse did exactly that.

Action Plan

The main concern that was endured by Clubhouse with not attending the 2022 SXSW was the sacrifice of publicity that would have come with it for the app’s growth. After the event took place, many possible consumers that were present at the event may be unaware of what Clubhouse has to offer. As a rebuttal, they held the panel “The Power of Voice '' to address their beliefs on LGBTQ+ rights and show the people their ethical beliefs and reasoning for the boycott. I believed this resolved the issue because it brought publicity to the company that they missed out on at the event. Clubhouses’ mission is to give consumers a unique outlet through socializing. One that lets them do it in a private aspect while making them feel completely safe when meeting new people. The internet can be a scary place at times but Clubhouse is committed to keeping all consumers sheltered while they enjoy social media. This differs from their current mission statement because it brings about the problems with cruel people on the internet while encouraging social contact through music and technology. A great core value that Clubhouse should focus on is customer safety. They need to make sure that Clubhouse is a safe app for all types of people to interact on. They can do this by monitoring cyber bullying and hate messages throughout the app. Swearing and other forms of poor language should not be allowed. Also, age restrictions should be in place. Young people who want to use the app should have parental supervision. Another value that is key for Clubhouse should be connecting with customers. In order to grow the app, they must continue to put out what the customers enjoy. They can learn this through surveys or other forms of feedback via email or the app itself. Lastly, they must keep the app creative. New ideas are always important to keep the customers interested. They need to set themselves apart from other similar apps. Examples of this can be new features, chat settings, and even game modes within the app.

In order to ensure that the company keeps their ethical standings, they must continue to stay true to their claims. After the dispute, Clubhouse supporters are aware of how the company feels about certain issues. There is a sense of trust that has been built and it is crucial that Clubhouse focuses on keeping this relationship. Any possible decisions that will lose this trust will hurt Clubhouse as an organization. Employees must be trained in the same way. They should have similar beliefs to ensure the ethics of the company stay intact. Policies should remain constant from the top to bottom. This means entry level workers all the way up to the CEO.

When Clubhouse is hiring employees after this situation, all possible candidates should be aware of the situation. They should be looking to hire people who agree with the decision to not attend SXSW and firing those who dispute their choice. This will confirm that all workers within the company are on the same page ethically. I think it would be a great idea to hire not only one, but multiple members of the LGBTQ+ community. These workers can help create a safer app for the members of this community that may not feel safe on social apps.  Marketing should stay the same in this case. Their target market should still be people who are looking to enjoy music on a social platform. Anything that differs from this could create mistrust with their current consumers. This new and improved plan has the potential to take the Clubhouse app to the next level for years to come. It has already come a long way and it will continue to grow with a better ethical standing. Connecting with customers and making sure that they are safe, happy, and having fun with the app will directly result in more profit and efficiency. If they stick to their 

mission and values, customers will be delighted to use the app on a daily basis.

Vincent S. Caccavale

Resources

Fitzgerald, Quinn “Clubhouse Statistics 2022: How Many People Use Clubhouse?” Quantum Marketer. Quantum Marketer, 22 April 2022 https://quantummarketer.com/clubhouse-statistics/

Franklin, Jonathan “Clubhouse says it won't be attending SXSW 2022 because of Texas' trans rights” 02 March 2022 https://www.npr.org/2022/03/02/1084063758/clubhouse-sxsw-conference

Griffith, Eric “What Is Clubhouse? The Audio-Only Chat App Explained” PC Mag. PC Mag, 18 Nov 2021 https://www.pcmag.com/how-to/what-is-clubhouse-app

Lampen, Chris “Texas Is Once Again Framing Trans Health Care As Child Abuse” The cut. The Cut, 02 March 2022 https://www.thecut.com/2022/03/texas-still-trying-to-criminalize-health-care-for-trans-kids.html

Lukes, Steven “Individualism: Politics and Society” Britannica. Britannica, https://www.britannica.com/topic/individualism

Nash, Elizabeth “2022 State Legislative Sessions: Abortion Bans and Restrictions on Medication Abortion Dominate” Guttmacher Instituite, Guttmacher Instiutue, 06 May 2022 https://www.guttmacher.org/article/2022/03/2022-state-legislative-sessions-abortion-bans-and-restrictions-medication-abortion

Salazar, Heather. The Business Ethics Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the Ethics of Any Business. Print.

Shead, Sam “Clubhouse co-founder opens up on growing pains: ‘It’s been quite an 18 months’” CNBC. CNBC, 09 Nov 2021 https://www.cnbc.com/2021/11/09/clubhouse-co-founder-opens-up-on-growing-pains-over-last-18-months.html