Tech’s ruling class casts a big shadow
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I found this an odd comment, because we don't have to "allege collusion". It's been documented and settled in court. It was wage fixing, not price fixing, but it's still clear evidence that the "Gang" is willing to work together against the market.
I didn't mean to attack Walt for saying "alleging", and I recognize he's talking about consumer-facing issues anyway, but I did think it was a relevant historical note that this was very recently more than an allegation.
I'm all for criticizing giant companies but can we at least get our facts straight and not sound conspiratorial about it?
[0] https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
Not defending google here, but there is some nuance to the issue.
The scummiest part to me is that they made "agreements that, when offering a position to another company's employee, neither company would counteroffer above the initial offer."
From https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
Apple - I'm writing this on a brand new Macbook Pro, and my iPhone is sitting right next to me. I have a $5/month subscription to Apple Music. It would be painful, but with a gun to my head I could easily switch to Windows, Android, and Spotify.
Google - I'm browsing HN in Chrome, by far my favorite browser. I use google search dozens of times throughout the day to figure things out, it's truly an extension of my brain. I could switch to a new browser, but I haven't tried Bing enough recently to know if it would compare to Google.
Amazon - I have a Prime membership, but I'm only a sporadic online shopper. That said, the Amazon shopping experience has provided me with a lot of value. No real alternatives here.
Facebook - I don't use Instagram, I don't use WhatsApp, I do have a Facebook but I don't use my real name and I have very few friends. I use the News Feed Eradicator extension to get rid of the Trending section and the News Feed. Of all of the companies, I consider Facebook the most dispensable from a personal perspective . The only features I regularly use are Chat, which is functionality that existed long before Facebook, and sometimes stalking people that I just met to see more pictures and get a "life resume" on them, which is a habit that I would rather not be able to indulge in to be quite honest.
Microsoft - My work computer runs on Windows, I use Office 365 at work, and of course tons of companies that I rely on in my consumption supply chain and infrastructure are dependent on Microsoft in some form or the other.
I'm truly shocked at Facebook's ascendance to the tech stratosphere. Obviously the numbers don't lie, but Facebook just seems like it has so much lower utility than all of the other companies mentioned here. Yes, it's younger and in a newer category, but all of the other companies provide fundamental building blocks to the modern technological experience. Social media seems so much more superfluous by comparison.
Apple with its reliance on child labour.
Amazon has been getting bad press for the way they treat their staff (suicides and whatnot).
Facebook & Google's blatant disregard for everyone's privacy.
Apple, Google & Facebook are all turning into awful walled gardens governed by some weird, moralistic principle where anything that might offend an advertiser is Verboten. Nipples be gone. You want to communicate with someone outside of our walled garden? Tough shit.
Microsoft seems to be the lesser of evils these days.
I fear you may just be fooling yourself.
https://www.theguardian.com/commentisfree/2013/apr/25/smartp...
>As Nokia, which seems to have done more than any other such firm to investigate its own supply chain, told me, "there has been no credible system in the electronics industry that allows a company to determine the source of their material".
http://www.apple.com/supplier-responsibility/labor-and-human...
Apple - I swore off apple after my terrible experience with the iPhone 1. I've never bought a product of theirs since. My only interaction with Apple products at all is asking users of my software to confirm that it works on OSX.
Google - I have an android phone, and I use gmail, that's about it? I mainly use it gmail due to inertia. I use android because it's the only real alternative to Apple's ecosystem. However android isn't that tied to google, e.g. I'd be happy switching to https://copperhead.co/android/ if my phone supported it.
Amazon - I haven't bought anything from amazon in ages. I don't use AWS.
Facebook - Facebook chat is the main way I keep in contact with non-tech friends. It's the only service where: 1. everyone has an account. 2. has a good desktop experience. 3. has a good mobile experience. I occasionally use facebook events. I don't even look at my "newsfeed"....
Microsoft - I don't interact with any microsoft products. I guess my work's email server is exchange?
I know I'm not the typical end user, but I don't see any of the companies having real utility except facebook.
also i think its pretty short sighted to say android isn't really tied in with google. that phone sends an insane amount of data back to google, right down to the keys you press on your keyboard.
Sounds like you're confusing Android/AOSP with GApps.
A big chunk of the web does, so you're using it indirectly.
Did you go back to dumb/feature phones?
When did you start using Android, and with which phone?
> I use android because it's the only real alternative to Apple's ecosystem.
Apple did not even have much of an "ecosystem" at the time of the first iPhone, and if you didn't use iPhones since 2007, which experience are you comparing Android with?
Yes for a little while: I was happier with my Sagem myx6 + my Sharp Zaurus C3200.
> When did you start using Android, and with which phone?
With the HTC Magic.
> Apple did not even have much of an "ecosystem" at the time of the first iPhone
It seemed to have a more active one than now! I remember when Cydia first came out and hundred of applications got ported each day.
> if you didn't use iPhones since 2007
I have seen iphones since: friends, family and coworkers have them. I've been extremely unimpressed in the software (though I don't mind the hardware).
As you say you are "sporadic online shopper" in what sense are there no "real alternatives" there? You can get all the things you can find on Amazon on tons of different e-shops...
the key seller for prime for me was, I am already paid up so I can just be lazy and impulse buy without too much concern.
So? Instead of visiting ONE website, you might need to visit 5 or so.
We visit 100s of sites everyday for pleasure, and in any case, when you buy you also usually check all kinds of reviews and competing products to come up to one.
Plus, there are well known established websites in all categories Amazon competes -- e.g. Best Buy for electronics, Applestore for Apple stuff, Barnes and Noble (I'd guess, not American) for books, etc, so it's not like one is directly into some huge large web market of rip-off sites if they stray off of Amazon.
You also don't have to "play the game of best price" -- just go for any website/price that looks legit even if it's not the absolute best (unless you're penny pinching). After all just shopping at Amazon doesn't guarantee the best price either.
All of those given that you are, as you said, a casual buyer. If you were heavy into Amazon and buying stuff every week or so, that advise might change, but seeing that you're a casual Amazon customer, switching to a third party web shops is at best a marginal first world problem.
Yeah I have tried replacing various things but Google's best product IMO is Google Maps (and Waze of which they acquired) and I haven't found a suitable replacement.
Search tied with location with directions is my favorite technology. It is so awesome to instantly get directions, traffic, know what is nearby with reviews, hours, phone numbers, etc.
Apple - using an iMac in work. My phone is an iPhone and I use an iPad for all my non-work and most of my non-games computer use. However, I only converted to Apple products 1.5 years ago and while I would miss the iPad experience, wouldn't have any great problem switching away again. I also pay for additional cloud storage space for my phone and photo backups (0.99/month I think)
Google - I use Chrome. I've already migrated away from gmail and other google services other than search (I do use DuckDuckGo, but Google still works better). While I prefer Chrome to other browsers, I do use Safari on my iPad and could switch without too much trouble.
Amazon - I have a kindle and use their cloud storage thing for my books. Other than that, I occasionally buy from them and have always loved their store and support. However, lately the store quality has been getting worse and worse (impossible to know if you're buying from amazon or a third party, lots of fake reviews and scores etc). I could live without Amazon. I've also used AWS (but don't use it for any personal projects right now). While I quite like AWS, I'd be able to get by just fine using their competitors.
Facebook - I use it but don't enjoy it. Mainly on it because I use it to talk to a few friends. I have an Instagram account but barely use it. I use WhatsApp, but only because its convenient for the few people who use it and refuse to use something else. I could move away from Facebook, but it would cause a bit of a social disruption in my life. I'd survive it just fine, but it wouldn't be fun, at least, for a while. After that, I'd probably be happier and waste less time. Hmm.
Microsoft - don't currently use any Microsoft products or services.
It's a really nice way to handle a loose network of acquaintances like this. You don't have to give out your phone number, you get Event pages, it's pretty resistant to Spam, etc.
Google - I make heavy use of Google's services. Maps, YouTube, Search, probably a few more I can't think of right now. I guess I could use Bing for Maps and Search if I really had to (it would pretty much take a gun to my head to make me do it, though), but I don't think there's any suitable replacement for YouTube. I'm -- grudgingly -- using Chrome, as much as I dislike it (I still miss Opera 12). One of these days I'll dump it entirely in favor of Pale Moon. All my TV/movie purchases and half of my book purchases are on Google Play. I can get them from other sources, but I'd be pissed if I had to re-buy all my stuff because I abandoned Google. I have an Android phone. I guess I could use an iPhone if I had to (like Bing, it would take a gun to my head to make me actually do so), but I already paid for a ton of apps and I'd hate to re-buy them. I wish Maemo was still around because I still miss my Nokia N900; a return of Maemo on cutting-edge hardware is the only thing that could get me to voluntarily leave Android. I have a Nexus 5X and use Project Fi; switching to another carrier would suck, but I could do it. I make extensive use of Project Fi's SMS-via-Hangouts, so I'd only leave Fi if I had no other choice. My company is a G Suite shop, so even if I got Google out of my personal life, I'd still have to use it at work. I wouldn't be surprised if some services I use make use of Google Cloud.
Amazon - I'm a Prime member, I prefer Amazon when I buy stuff online, but I only shop online sporadically. I could shop somewhere else, though I like the convenience of just going to amazon.com and typing in what I'm looking for. I buy stuff on Kindle occasionally (which I read on my Android phone, not on Amazon hardware), but I actually prefer Google Play Books. I tried Amazon Eats once: the driver got lost, he was a half hour late, and my food was cold; I'll stick to Eat24 and DoorDash. I deal with AWS at work; that's going to be harder to replace, but it's not my call. Lots of services I use make use of AWS as well.
Facebook - This is how I keep in touch with most people in my life. There's no suitable replacement. Messenger has become the only instant messenger outside of work (mostly Slack, occasionally Hangouts in G Suite) and talking to my parents (Project Fi's SMS-over-Hangouts). I have an Instagram account, and I've tried to use it, but I'm just not interested, and all my friends who post on Instagram have it set to auto-crosspost their photos to Facebook, so I'm not really missing out. I have never touched WhatsApp and never will.
Microsoft - I own a Surface Pro 3, and I enjoy the Windows 10 experience on it. I have an Office 365 subscription, but I don't really use it (it came with my Surface, and I renewed it last year because why not). My desktop dual-boots Linux and Windows, but I only boot into Windows for games, and a lot of the games I play are either cross-platform or on consoles, so I don't boot into Windows often. I used to use Skype, but that was mostly for work; I don't work at that company anymore, and I use Facebook Messenger to talk to anyone there I still want to keep in touch with. I use LinkedIn as an online resume. I personally don't care much about it, but it might hurt my career if I had no LinkedIn profile at all (this is purely speculative). I wouldn't be surprised if some services I use make use of Azure.
Even if I replaced them all directly, I'd still have to deal with compatibility issues for browsers and software, and it's hard to beat AWS. Switching to a more traditional hosting setup is s nightmare by comparison.
Can anyone here easily escape all of the "gang of 5"?
They really nailed it: a big roadblock to people shopping online was returns. It's easier to return something to amazon than it is to a local department store now. A few clicks, print label, take to UPS store.
For pro services AWS is great, really nails the secret sauce. But for individual citizen consumers who want to vote with their wallet, odds are they can divest themselves of much of Amazon if they really want.
But as you say, it allows you to indulge in a habbit you wish you didn't have. It's addictive, and there's always money to be made off of addicts.
*I say while compulsively using HN at work.
Apple: Currently using an iPhone 6, though that's pretty much it at the moment.
Google: I find Google Search and Gmail indispensable, and haven't found a better alternative to Google Maps.
Amazon: Sometimes buy stuff on their site, but don't really interact with the company that much overall.
Facebook: Use WhatsApp and (sometimes) check Facebook.
Microsoft: Use a Windows 10 computer with Microsoft Office programs.
Based on that, I could probably drop Facebook and Amazon without too many issues, and finding an iPhone alternative wouldn't be too difficult either. However, I'm not sure I'd be able to easily escape Google or Microsoft, which is worrying in of itself.
On a different note, it's interesting how the presence of the giants affects the startup world. I am reminded of a passage from No Exit by Gideon Lewis-Kraus [0]:
'All the while, Martino’s ultimate warning—that they might someday regret actually getting the money they wanted—would still hang over these two young men, inherent to a system designed to turn strivers into subcontractors. Instead of what you want to build—the consumer-facing, world-remaking thing—almost invariably you are pushed to build a small piece of technology that somebody with a lot of money wants built cheaply. As the engineer and writer Alex Payne put it, these startups represent “the field offices of a large distributed workforce assembled by venture capitalists and their associate institutions,” doing low-overhead, low-risk R&D for five corporate giants. In such a system, the real disillusionment isn’t the discovery that you’re unlikely to become a billionaire; it’s the realization that your feeling of autonomy is a fantasy, and that the vast majority of you have been set up to fail by design.'
If you consider markets to be an optimization strategy for resource allocation, I think an industry being owned by a small number of successful companies represents a signal that a local maximum has been reached. That's assuming there aren't artificial barriers put up to prevent competition--there often are and I consider a patent an artificial barrier.
If your mission is to generate billions of dollars of value where there was none before, a mature industry is not where you should be looking. "The next google" is not a search engine company as we understand the concept today.
It's not that consolidation makes it hard to compete, it's that the value has fundamentally been wrung out already. In fact, that "value being wrung out"/profit-growth-at-the-top-of-the-sigmoid-curve is what drives consolidation in the first place.
It isn't.
Briefly, with (textbook) perfect competition, profit maximising firms will price their goods at marginal cost and produce a socially optimum amount.
A company with a monopoly will sell at a higher price and sell less than the socially optimum amount.
There are also dynamic effects:competition acts as a spur for innovation.
This is the text book argument against monopolies.
But if everyone is essentially running the same strategy, the biggest player will win by force of momentum. (See also the reasoning behind dozens of copycat food delivery startups trying to "growth hack".)
Either way, you end up with a few players dominating the market with their locally optimal resource allocation.
This model is called "dominant firm with competitive fringe."
Like in many technology fields, you have high fixed costs that are distributed over all of your customers, and economies of scale. It is much cheaper for Google to add 10 000 new servers to their datacentres, compared to starting up a new hosting company, building small datacentres on five continents, and rewriting all the software that Google Cloud offers on top of servers.
So seems plausible that a highly concentrated industry with a few big companies each having >10% market share is more efficient (and can offer lower prices) than a market with thousands of small artisanal hosting companies with <0.1% market share.
2 There are lots of businesses with high fixed costs and low marginal costs - tech is not that different from others in that regard.
3 Tech, does have one key difference - the network effect. In other words, a company's history in building up a large network of customers may matter more than how efficiently it operates today
4 The dynamic effects of concentrated industries (as I mentioned earlier) are complicated. There is no guarantee at all that the result will be optimal.
5 We have nice examples of this in collusive behaviour by the major tech companies in their hiring policies.
6 There are other alternatives to the status quo than, as in your example, of reducing companies to one hundredth of their former size.
> That's assuming there aren't artificial barriers put up to prevent competition
Me> If you consider markets to be an optimization strategy for resource allocation ...
Optimization strategy as mathematicians use it means something similar to "optimal resource allocation" as economists use it, but the tools and thought processes are very different. For instance, economists are often not aware of the concept of "local maximums" vs "global maximums"--that in large state spaces, like an economy, there probably is no globally optimal allocation. They're mostly not aware of what "state spaces" are or what logistic regression is. But yes, I think of markets as an optimization algorithm for resource allocation, not dissimilar to gradient descent.
Me> ... an industry being owned by a small number of successful companies represents a signal that a local maximum has been reached. That's assuming there aren't artificial barriers put up to prevent competition
For my specific point of "concentration points to an industry local maximum", "law of diminishing returns" is probably the most applicable concept taught in econ 101, but I'm saying more than that. "Law of diminishing returns in mathematical optimization" is a real thing, I didn't make it up. It applies to many complex systems, an economy being one.
So yeah, I stand behind what I said; I think I understand econ just fine; maybe in the future you can just open with your point instead of being a dick, it saves time.
Companies with monopoly power do not allocate resources optimally (for society) because they choose to optimise resources optimally for themselves.
Because they have pricing power, profit maximising behaviour does not allocate resources optimally.
Why do you think that?
I mean, easiest example is probably cars. Sure, Elon started Tesla, but they're tiiiiiny compared to other auto manufacturers. They're also doing some things very differently, so it's not quite the "same industry" now. In 1908 there were 253 auto makers, in 1929 only 44, and now there are ~10? So what happened?
There was an initial boom (lower half of the sigmoid curve/hockey stick), followed by lots of competition from startups (because they can compete on method there's some nice profit margins there), followed by brutal competition and diminished profit margins (as best method is adopted and firms sell against each other, things get cheaper), followed by consolidation (because when profit margins are shrinking, next step is consolidation and "belt tightening"), followed by an industry no one wants to touch anymore (because it's run by a bunch of idiot middle managers). If you wait long enough, those idiots eventually miss some major developments and this creates a new opportunity to do things very different (eg Tesla). Or nothing really changes, as in the case of air travel.
Also, history of all kinds of consumer electronics.
Also, how many companies on the fortune 100 50 years ago are still on it? Nothing lasts. If you're lucky and successful, you eventually hit the top of the sigmoid curve.
Also, software (yes, it's true)
What industry does this trend not apply to? What's the argument for "I think an industry being owned by a small number of successful companies represents a signal that a local maximum has NOT been reached (there's tons of opportunity there, just have to unlock it!)"?
Back before Google became Alphabet, they made a huge decision to realign themselves around Machine Learning as the core of how they do business in all aspects [1].
It could do that because 1. Their services could benefit from the improvement directly and 2. it didn't need to build a new machine factory, or assembly line like GE would have had to, if it wanted to completely realign themselves to eg. solar production or a 21st century technology.
It sounds trivial and obvious but Google, Amazon, Facebook, Microsoft and Apple are all information management companies. They are all trying to become the central nervous system for consumer behavior in all aspects. That means collecting ungodly amounts of data, having a dense psychometric profile of users and then feeding users what they want to feed them. The better data they have the more locked in people become and there are fewer sources of data available for other people.
So they most important thing is to get users to become part of their ecosystem - that means having some kind of insight into every digital system that a user interacts with. Unless you can create a new ecosystem that people interact with at such scale (Snap is probably the closest) then you can't compete with them. Also notice that Snap is still relying on Google Cloud [2] so Google wins either way.
The fact that the top 5 have so much money, talent etc... also means that any company that isn't a leap beyond in user interaction, can be easily wooed through a lucrative acquisition and access to user data at massive scale.
It's only going to get more consolidated because the average person only cares about usability and interoperability - so even if you aren't locked into just Apple, or Google, they all touch each other in some way that you are going to be part of the big 5 ecosystem no matter what.
[1]https://www.wired.com/2016/11/google-facebook-microsoft-rema...
[2] http://www.recode.net/2017/2/2/14492026/snap-ipo-2-billion-c...
https://www.theguardian.com/technology/2014/apr/24/apple-goo...
and collude:
https://www.theguardian.com/technology/2016/mar/07/apple-450...
...and collude:
http://www.billboard.com/articles/news/6590827/apple-music-m...
Those companies have had a decade at the top with all the money and talent in the world. Has tech gotten that much better since 2007? Has Apple's hardware gotten better relative to the competition? Has your web experience gotten remarkably better? Do we prefer Allo or Hangouts or x, y, or z to Google Talk?
With the clout they have you have to innovate some and they certainly have. The question is whether they have innovated substantially. It doesn't seem like it.
Yes
> Apple's hardware gotten better relative to the competition?
"Relative", explain why you put that qualifier please beyond not having an argument. Also yes.
> Has your web experience gotten remarkably better?
Yes
> Do we prefer Allo or Hangouts or x, y, or z to Google Talk?
Hangouts, what's your point here?
You really don't remember what tech was like 10 years ago.
(Actually I have one from work, but I only seem to use it as a wireless hotspot.)
I used Vista until 7 came out. I usually upgrade Windows versions rapidly. Linux too, I usually jump into the Fedora betas. I haven't been sorry yet.
Anyway, your own statement is contradictory. From what you said 10% is not "no one."
But XP was very good for its time -- it brought in the big menus and (quasi?) full-screen stuff which later metastasied in Win 10. Though those menus were also a throwback to the good old DOS text-mode menu systems.
Win7 was of course another good one, a few years later. But note: the difference between Win7 and Vista was not the UI design -- it was the performance and other aspects of technical execution.
> Do you think there would be more or less innovation with more smaller firms?
Likely less, I do not think that private space exploration or self driving cars would be possible without the massive accumulation of capital enabled by tech giants.
Now let's look at the counterfactual, the US has massive tech giants and the majority innovation comes from or to the US. Other countries don't, other countries don't have nearly as much innovation bar a few exceptions.
And truthfully, I find people that are anti capitalism to be far more interesting. It's amazing that people can convince themselves that private ownership is wrong while living in the most prosperous time in history and also believing that stripping those better off of their wealth will somehow lead to a more prosperous society when every time it has been done it has lead to disaster.
Yet people are building self-driving cars as a hobby project. Sure, the whole topic would not progress that fast, but that statement is a bit overblown. (Same for private space exploration to a much more limited extent.)
Also, they're building these systems using tech that has been developed and open-sourced by the big players.
Yes Capitalism and Liberal Democracy is the most powerful system man has ever created. Hopefully we don't screw it up by giving all the credit to the guy handing you the apple from the orchard we call the "western world"
Football is an awesome game but without the guys in the black and white uniforms it would be nothing but chaos.
The future isn't bright for companies that just "have" technology.
I have a tough time seeing the new three, Google, Amazon and FB going away. I can see it with MS and Apple.
Good luck with that.
If we're going to see a sixth player, it will be someone who can get massive, hard-to-threaten control over some major part of the web ecosystem. Data access sounds like a winner to me, especially if net neutrality crumbles.
This happens whenever an industry has a dominant player with deep pockets. For example, back when telecom was a much healthier industry, the main reason why anyone would start a telecom startup was to get acquired by Cisco.
Should society be concerned with the flow of money out of the local economy? Isn't it a idea (for the companies) to move hundreds of billion dollars out of the economy their customers need to make a living?
I wonder if these companies should offer low interests loans to people to buy their products in much the same way that China buys US treasury bonds.
Maybe there should be limits to how much a company should be allowed to save and it should return the rest to investors.
China is the most obvious example (Alibaba, Taobao, Weibo) but there are also some European and Indian companies worth paying attention. If Asian growth takes a hold on this century and if Europe keeps getting freaked out about American espionage then this "Gang of five" will face some tough competition.