How Big Tech Got So Damn Big
wired.com
wired.com
1. They all came about when the Internet vastly increased the size of markets. The article makes good points about how many industries only have a few big players - that's kind of a natural consequence where when there is a low barrier to entry, the best only have to be a little bit better than everyone else to win out. Before the tech giants there were very few companies like Google and Facebook that were dominant in so many countries around the globe.
2. The discussion of changes to antitrust law was a good one, but I think what also happened was that tech giants were able to take advantage of entirely new business models to "confuse" how antitrust rules were targeted. E.g. even if you go by the "must improve consumer welfare" rule of antitrust law, many of the tech giants won because regulators were (at least originally) confused about who "the consumers" were. E.g. for Google and Facebook, as is often widely pointed out, "the consumers", i.e the people that are buying a product, are the advertisers, not the end users. Antitrust enforcement made the major mistake of only considering welfare of the end user.
3. Related to the first two, it is nearly always the case that when there is a big, transformative new technology that comes out, a few players are able to win, partially by moving faster than they can be effectively regulated by government, and which point the government is wary of doing too much harm to them because so many people and businesses depend on them (they become "too big to fail"). Just look at the early years of the auto business - there were a plethora of auto companies in the early 20th century, and after the dust settled we were basically left with 3 in the US: GM, Ford and Chrysler. And even then GM and Chrysler both eventually only survived through government bailouts (at least 2 government bailouts in Chrysler's case).
> Excerpt adapted from The Internet Con: How to Seize the Means of Computation, by Cory Doctorow.
I also felt like the adaption wasn't perfect, but this excerpt had me hooked enough to convince me to buy the book when it comes out.
Google and Facebook substantially decreased the price of advertising and greatly improved its effectiveness. Antitrust law seems to be moving towards a more competition-focused approach, at least in Europe, so maybe the legal system will push them towards higher prices and more competitors.
Indeed. The internet hasn't been regulated in the same way as other mediums. Expanding into it had a low bar of entry and these "heroes" were the best executions. This was mostly luck, as if google didn't exist, we might well all be saying Yahoo founders were geniuses for getting the same engineers and product people pushing the same goals instead.
People forget that in the 1700s-1800s that industry was typically very small. Once the engine was created and we moved 'power' from animals and humans to machines, companies began to grow huge.
Tech companies are doing this with information. Where in the past information was hard to transmit and computers were expensive, tech has capitalized on the lowered costs of processing and transmitting information.
Basically, on a linear scale, "nothing" happened in all of human history until the industrial revolution.
Probably close to $50 billion or more in tax abatements and other tax incentives over the years went to Amazon.
The "OpEx vs CapEx" difference in tax laws, between running your own on-prem datacenter vs. putting the same services on AWS.
And don't get me started on the difference between what Amazon pays the USPS vs. what other businesses have to pay...
Google: should never have been allowed to acquire DoubleClick; clearly this consolidation of online ads resulted in a near-monopoly for Google.
Google also "gave away" their Gmail service for a long time, destroying the many mail services that ISPs and others were doing as part of their offered services.
This is akin to "dumping", since of course, there never was a way that a free service could make Google money. Google now reserves the right to build more information in their profiling of you, by scanning your emails.
And they did a similar thing with Chrome, while paying Mozilla enough money to serve as a foil for Google to say that they were not monopolizing browsers. Now, they are pushing the "attestation" WEI stuff, since they have captured enough of the market.
While it is more of a nuisance to be compliant it is definitely not impossible or even very hard. For our small company's home rolled e-commerce system (long story) I researched and then implemented tax estimation, collection and reporting to accounting down to the zip+4 level in a week or two.
It does involve buying a subscription to jurisdiction level tax data and ingesting it regularly, but I don't recall it being expensive.
In addition, many states are part of a uniform system which makes the estimation easier.
Back in 2000, I signed up for several web based email services including excite, yahoo, hotmail, and a few others I can't remember. This was well before gmail and none of them required me to have an invite to even sign up like gmail did. Other than hotmail, and yahoo, none of them are still around today despite the fact that they were giving away email services like gmail did a few years later.
That kind of strategy seems to be prevalent in the industry now, and it also explains the seemingly contradictory attitude of AI company execs to drone on about the world ending. Acting like a larger than life genius conjuring up an existential crisis disempowers the public and gets attention away from talking about labor or IP rights or stuff that actually matters.
Doctorow hits an important point here. Rather than creating panic about tech the first thing that needs to go away is this historically false exceptionalism. It also reminds me of Yuval Noah Harari, who expressed surprise that tech companies still invite him, despite his criticism. But given that he elevates tech companies to demigod status and strokes their egos, it just makes sense. Whether they're evil or not, they don't care.
1. labor intensive 2. capital intensive
Since these challenges don't exist for a company like Google or FB, these companies can scale faster. This also means they don't need to raise as much capital as other types of company to reach massive scale. This leaves the founders (and early investors. There's a reason VCs focus on internet companies) with a much larger slice of the company than would be the case for an industrial company. It's really just simple economics and not in any way profound.
Note that "tech" companies like Amazon and Apple, which do face those challenges to a degree took much longer to scale than Google of FB. And Apple really didn't reach massive trillion dollar scale until it was able to effectively outsource all of the capital intensive manufacturing and focus on the high value add "tech" components.
Take the biotech industry for example. There are also plenty of acquisition and consolidation, but even the biggest top 5 biotech companies combined cannot match the size of one Apple or Microsoft. This is mostly because biotech is so much riskier and a failed product is extremely punishing. At any stage a drug can fail. Even after commercialization and release, a drug can be removed for plenty of reasons. One drug can cost hundreds of millions of dollars to get to market and years and years of R&D by hundreds of scientists going from discovery to production, validation, scaling up, and QC, and marketing. None of the steps can be skipped because the FDA breathes down their neck in every step. People will also sue the company to death if some fuckup happens.
Meanwhile, Microsoft can churn out a new software or product in a year from a team of 20 engineers. And if a fatal error happen, no biggies. Patch incoming and that is that. Lawsuits from bad codes aren't as severe as lawsuits from bad drugs. Leaks and exploits and all the "huge" issues get solved and the product continue to stay on market. A drug fuckup and it is very likely to be scrapped along with all the investments that went into it.
And so big tech continue to grow unchecked because they are just that: unchecked.
The rest is psychology, ignorance and money.
Significant experience - e.g >15 years across various projects/companies/teams
Mature
Responsible
Curious
Reasonable - uses pros and cons when evaluating solutions, not the latest stuff on his favourite software evangelist's blog
Coupled with the genius of some regulatory capture with their acquisitions not being challenged for decades until recently and... We got these behemoths that swallowed most of the innovation produced to become ad-infested bullshit.
Yes, I'm jaded by this fucking industry after 20+ years working in it, it's all becoming bullshit with different flavours.
The monopoly standard of current harm, in the age of internet-speed growth, is laughable.
The standard should be "Is this merger likely to create concentration that will lead to less competition in 5 years?"
Also the standard you propose is ridiculous because you can't predict the future even close to 5 years out. Do you think that the owners of Instagram would have sold for $1 billion if they knew what the next 5 years of growth would look like? Would the owners of Android have been willing to sell for $50 million?
Do you think regulators could have predicted that Facebook buying Instagram would lead to less competition in 5 years?
Do you think regulators could have predicted that Google buying Android would have led to less competition in 5 years?
In both cases, yes.
But they had to prove a higher standard under the law.
See perhaps Technological Revolutions and Financial Capital by Perez:
* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...
* https://www.e-elgar.com/shop/usd/technological-revolutions-a...
* https://www.pwlcapital.com/investing-technological-revolutio... (via)
A 2021 summary:
> What was especially remarkable about Carlota Perez’s Technological Revolutions and Financial Capital was its timing: 2002 was the middle of the cold winter that followed the Dotcom Bubble, and here was Perez arguing that the IT revolution and the Internet were not in fact dead ideas, but in the middle of a natural transition to a new Golden Age.
* https://stratechery.com/2021/the-death-and-birth-of-technolo...
> Perez’ theory describes the path a technological revolution, like the Industrial Revolution, takes and the social, economic and institutional changes that go along with it. The jury is still out on the theory, and there are plenty of reasons to doubt it. But if it successfully predicts what happens over the next ten years it will have in good part proved its power.
* http://reactionwheel.net/2015/10/the-deployment-age.html
A list of the top ten companies in the S&P 500 going back a few decades:
* https://awealthofcommonsense.com/2017/07/the-biggest-stocks/
* https://www.finhacker.cz/top-20-sp-500-companies-by-market-c...
Sector breakdown:
* https://www.qad.com/blog/2019/10/sp-500-companies-over-time
> In the 19th century, American robber barons got together and formed trusts: For example, a group of railroad owners could sell their shares to a “railroad trust” and become beneficiaries of the trust. The trustees—the same robber barons, or their representatives—would run the trust, deciding how to operate all these different, nominally competing railroads to maximize the return to the trustees (the railroads’ former owners).
> A trust was a way of merging all the dominant companies in a single industry (or even multiple related industries, like oil refineries, railroads, pipelines, and oil wells) into a single company, while maintaining the fiction that all of these companies were their own businesses.
> Any company that didn’t sell to the trust was quickly driven to its knees. For example, if you owned a freight company and wouldn’t sell out to the trust, all the railroads you depended on to carry your freight would charge you more than they’d charge your competitors for carrying the same freight—or they’d refuse to carry your freight at all.
> What’s more, any business that supplied a trust would quickly find itself stripped of its profit margins and either bankrupted and absorbed by the trust, or allowed to eke out bare survival. If you supplied coal to the railroad trust, all the railroads would refuse to buy your coal unless you knocked your prices down until you were making next to nothing—or losing money. Hell, if you got too frisky, they might refuse to carry your coal from the coal mine to the market, and then where’d you be?
When it finally gets around to its core thesis, it says this:
>> Not only do those explanations [like exceptionalism and genius] stretch the imagination, but they also ignore a simpler, far more tangible explanation for the incredible die-off of businesses in every industry. Forty years ago, countries all over the world altered the basis on which they enforced their competition laws—often called “antitrust” laws— to be more tolerant of monopolies. Forty years later, we have a lot of monopolies.
>> These facts are related.
The article even speaks to the divide between those who believe their genius is good and evil. But, be it good or evil, is not fair to say that they are a powerful influence?
They _may_ very well be geniuses by your measure, but I have no way of accurately assessing that from here, and I'm uncomfortable with using sheer scale as a proxy.
What is in question in this thread is whether or not the assertion that they are geniuses is true. With that, what reason is there to think that they are not a powerful influence?
As for the Android purchase, the feds aren't going to look at $50 million deals because $50 million deals are so tiny they just don't have monopoly concerns. And this was pre Iphone by a couple of years. Smartphones were barely a market at the time.
FB acquiring Instagram was the same. Social media was a new market and this was a smallish acquisition with no monopoly concerns. All the growth came after FB acquired them. Also, FB isn't a monopoly even today. The emergence of Tiktok proves that.
All reduced competition and juiced markets with predatory pricing