How the Frightful Five Put Startups in a Lose-Lose Situation

Just because an app has only a slight difference (for now) doesn't mean they should be ignored or excluded. The technology of social communication today is akin to the printing press of the 15th century. We have thousands of years forward to be social, buy things, and enchant users... so why limit it to the early, myopic giants?

So are you basically just lumping "SnapChat and Whatsapp" into "all of these web startups". That seems terribly myopic don't you think?

They had a really rapid decline, eh?

Same with food brands - there are always new food companies shipping a single new product in a hot new market like kombucha, or kale chips, or iced coffee. They build a following and get bought, but new brands are incubating at the front of the trend curve.

The point is, there’s a steady state in some industries where start-ups are better at capturing trends and moving fast, while big companies have the expertise to scale and meet regulatory requirements. One side needs the other.

I see your point and agree that vertical integration is harmful. I would like to offer the automotive industry as an interesting comparison of an industry with similar compatability issues.

All of the major components produced by the big manufacturers tend to be incompatible (without heavy engineering effort). When parts on a car are compatible between many makes and models it tends to be a third party parts manufacturer that has made it but a concerted effort from the big manufacturer that allowed that to happen. Think brake pads, tires, air filters, spark plugs. In most cases engines, their computers, interiors, transmissions and so on, are all make specific and also usually model specific.

No one is compelling BMW to make sure their engine fits into a Jeep. When I buy a BMW I am locked into their infrastructure and without their parts and support I could find myself without a working vehicle.

While you can often mix and match manufacturers parts so long as you can wield a few tools and have time and knowhow, it's pretty rare that someone wants to. Similar to emulators or jailbroken phones, IFTTT, APIs and integrations, it's easy to see there is a desire for this kind of flexibility but again it's often only a particular type of individual with a particular desire that makes it happen.

I feel that this desire for interoperability is niche. My mother on her Windows phone has been perfectly happy. I have never met anyone who wasn't in tech that has complained about interop. So while I agree it would probably be a good step to introduce more flexibility there, I don't think it's critical to protecting consumers against monopolistic behavior. If you buy an iPhone you are locked into Apple for that device, but you can still buy an Android. Just like I am locked into BMW while I own their car, but could still move to an Audi.

(Hopefully this is enough specifics for you to find any sources that may be of interest to you.)

Well, when you narrow the scope to "obvious tech" and brand names end users recognize. However, Silicon Valley is still small compared to the influence of, say, Wall Street.

I guess what I'm saying is that some other institutions may benefit from letting them occupy the public eye.

The idea that startups "must" pay AWS or equivalent is the kind of idiotic junk that only rags like the NYT could come out with. Nothing stops you buying your own hardware and racking it. For many companies that's in fact a better option than paying for cloud services!

You may be right that there are millions of startups, but this particular test seems a little... speculative.

In principle they could grow into a Home Depot / McDonalds, but it is still strange to call them startups

https://www.facebook.com/workplace/

https://products.office.com/en-us/microsoft-teams/group-chat...

https://www.blog.google/products/g-suite/meet-the-new-enterp...

https://chime.aws/

That's a big theme lately. They all create copies of latest-billion-dollar business-targeted services, and release before they're fully baked. That's totally the startup approach, but it doesn't feel like an approach that works well when there's already a market leader doing the same thing but significantly better.

BI is another similar area. Quicksight and Data Studio are amazingly deficient compared to Tableau. Data studio can't join SQL tables, and Quicksight leaves you hitting bugs every other page and tried too hard to support fancy charts, but entirely forgot the basic "display some tabular data" option. (Power BI by MSFT does a bit better as I understand it, but is msft-tech-focused. Haven't tried it).

That Snap gets pegged as that, is a fake set-up to write articles that stick to a script that the writer wants to push. It's equivalent to asking someone's opinion when you've already entirely made up your mind, except in this case it has a particularly negative effect as it's being pushed out into the world as a form of media propaganda.

Here's how it works (to use a famous example of this setup): we expected flying cars and all we got was 140 characters. That's a bullshit setup, it fails to even question whether flying cars make sense, and then sets up Twitter as an ideal example of today's level of innovation (which it never was). While Thiel was pushing that bogus premise, incredible innovation (both hardware and software) had occurred in mobile all around the world in a mere ten years from 2007 to 2017. Drastically improved communication, as one example, is far more important than flying cars.

Innovation is so terrible today! Then hold up mediocre examples of innovation while ignoring the vast, extraordinary innovation going on (from quantum, to crispr, to AI).

It definitely wouldn't add up to $400MM.

Sure you can start up in the US, but just getting in the country is already hard. And why should this be the only option for poor startups!

First, I want to point out that you're right. It is true when you say, "Companies aren't public to be nice." That's true and I'm not going to argue that. The fact is, they aren't.

However, that's not how it has always been. I'm not really able to find any good citations so I'm taking a little time to make something for you.

It's important to understand the history of incorporation. To be incorporated (thus traded publicly) confers certain rights to a body of people.

I know, people complain about Citizens United and how "corporations are people." But, that's actually pretty much always been true.

"Corporations are invariably classified as "legal persons" by all modern systems of law, meaning that like natural persons, they may acquire rights and duties." [1]

Because of this notion, once upon a time, the right to incorporate was controlled by the State.

"At the Declaration of Independence, corporations had been unlawful without explicit authorization in a Royal Charter or an Act of Parliament of the United Kingdom." [2]

In other words, the State controlled the ability to incorporate - in this case it was the monarchy. You needed a royal charter, at the least. (We still use the word charter.)

Now, here's the kicker... We wanted to establish the right for a group of individuals to incorporate. We'd already decided that representative groups were a right (the right to peacefully assemble is a good indicator) and so we decided that we wanted to allow more freedom to incorporate.

But, we knew that incorporation could lead to some negative consequences. The founders were pretty smart, in some ways.

We also knew that the Federal Government was capable of being too large. This is a subject of great depth and we'll not get into it. Suffice to say, people aren't actually always being racists when they assert the importance of State's Rights.

One of the earliest concerns about State Rights was actually about incorporation. The Feds had decided that a group of people had a right to incorporate without actually residing in the State they'd chosen to incorporate in.

So, this led to many things but we're only concerned with one aspect. (I'm trying to be brief.)

Namely, we didn't just want people to have the ability to incorporate without any controls. We still wanted government oversight and we still wanted to ensure that incorporated entities were a benefit to the public.

So, back then - and in certain States (I'm unable to find an exact number in the time I've allowed myself to make this post), to incorporate actually required both introduction and vote on the Senate floor.

"Prior to the late 19th century, most companies were incorporated by a special bill adopted by legislature." [3]

By now, you're probably wondering what the whole point is of this wall of text, seemingly from a mad man. Well, I'm getting to that.

So, way back then, we had the legislature approving of each individual group that sought to incorporate. On top of that, they were very willing and able to revoke their charter and to dissolve their corporation.

"Early state corporation laws were all restrictive in design, often with the intention of preventing corporations for gaining too much wealth and power." [4]

In other words, one of the absolute principles for founding a corporation was that it must be of benefit to the public. A corporation had to start and maintain their good to the public. A corporation had to provide a public good, they had to benefit the public, they had to be good stewards and citizens. That was explicitly what they had to do.

So, you're right. Corporations don't have to be "nice." However, they used to have to be "nice." They used to have to be beneficial to the greater society. They had an obligation - because they were conferred rights they'd not normally have. To incorporate absolved the individual, and the shareholder, from many legal responsibilities and, in exchange, we (via our elected representatives) insisted that they provide a benefit to society as a whole.

I'd think that qualifies as "nice." Don't you?

Anyhow, we maintained this for quite some time. We enforced this with things like the Sherman Antitrust Act [5] and other such legislation. The Sherman Antitrust act is an important indicator of the obligations of corporations. This was better explained in 1993 in Spectrum Sports v. McQuillan [6] which explained it thusly:

"The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself." [7]

Again, you're right! I'm absolutely not arguing with you. A company isn't public to be nice. However, it doesn't have to be that way - and it hasn't always been that way. There's absolutely no reason why a corporation should be allowed to exist if it is not, in fact, benefiting the public good.

Deals can be mutually beneficial -- my point is exactly that allowing them to partially cash out while remaining in control leads to stability and earlier cashing out, both of which help the public.

The suggestion I replied to was bad for everyone, because it forcibly negates a deal that's good for everyone.

Probably the nearest thing in the capitalist world is the German approach of worker's councils: https://www.german-way.com/german-workers-councils-demystifi...

Mandating transfer of power from the owners to the workers is, very literally, Communism. A description without implying value judgements of the relative systems.