Companies such as Facebook and the like undoubtedly draw great power from their "social graph"; however, human interactions are subtle, complex, multifaceted and often contradictory.
Nothing good can come out of applying dumb algorithms (that is, any algorithm) to a sufficiently rich "social graph"; it will always lead to situations like that which are, at best, embarrassing, and at worst, dangerous, for whoever is in the system.
I don't think it's a matter of doing things the right way or fixing them- trying to put human relationships in a computer system will never reproduce the human experience (however, you may make marketers very happy). The best you can do is complete certain very focused subsets of it in an interesting way.
Zuckerberg's views on privacy and openness are laughable, and to be completely expected from someone of his background and world experience. If you think about who the average Facebook employee is, you'd realize that you probably wouldn't want them to be in charge of designing a system meant to model the intricacies of human interaction.