NEW YORK (TheStreet) --Facebook's (FB) fake news problem is the polarizing topic responsible for you clicking on an article with a catchy headline, only to be left uninformed and possibly lied to. The issue illustrates a broader problem regarding the social media giant's platform.

"I think a big challenge Facebook faces is that the underlying principle it uses to run its algorithms, is that your friends are the best source of information," Founding partner of the venture capital firm Elevation Partners Roger McNamee said on CNBC's "Squawk Alley" Monday.

This model has become the catalyst for reaffirming people's beliefs just because their news feed is filled with posts reiterating their views.

"That would be true even if your point of view is about something demonstrably false," McNamee added.

Consequently, Facebook has opened the door to an influx of misinformation, flooding users' timelines based on the premise that they agree with the content.

"[Facebook] is reinforcing the enclaves of common views and then making those views more extreme by essentially filtering out everything that didn't conform to your friend's point of view," McNamee explained.

"That's a fundamental problem much bigger than fake news," he cautioned.

However, Facebook has not stood idly by. CEO Mark Zuckerberg had addressed the issues of false news on the site and is taking steps to monitor content further.

"But, even if you tag all the miss-information you can't get away from, the principle that Facebook's economic model is built around re-enforcing people's biases," McNamee said.

Shares of Facebook were higher in mid-morning trading on Monday. 

(Facebook is held in Jim Cramer's charitable trust Action Alerts PLUS. See all of his holding with a free trial here.)

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

TheStreet Ratings team rates Facebook as a Buy with a ratings score of A-. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that the team rates.

You can view the full analysis from the report here: FB


More from Markets

Dow Slips 178 Points; S&P 500 and Nasdaq Also Decline

Dow Slips 178 Points; S&P 500 and Nasdaq Also Decline

Legal Weed Sales in California Are Off to a Less Than Smokin' Start

Legal Weed Sales in California Are Off to a Less Than Smokin' Start

Owner of Moviepass Sees Stock Plummet

Owner of Moviepass Sees Stock Plummet

Ford, GM Gain as China Slashes Auto Import Tariffs

Ford, GM Gain as China Slashes Auto Import Tariffs

U.S. Crude Oil Hits Fresh 3-Year Highs as Gasoline Heads to $3 a Gallon

U.S. Crude Oil Hits Fresh 3-Year Highs as Gasoline Heads to $3 a Gallon