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Comment by fullarr | Hacker News Reader

Big Tech needs a reckoning.

They are stagnant because they outsource almost all real R&D to startups they can buy only after they've done the hard work of proving success

I know it's not a monopoly per se, but it's anti-competitive and there's too many walled gardens

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Pushing these companies to return money to their shareholders instead of keeping it in huge war chests used for buying up any potential competitors would be a good first step. Maybe something along the lines of "any company whose average market cap over the course of a fiscal year exceeds 1% of GDP is automatically broken up". Companies that don't want to be split into pieces would need to find ways to reduce their market cap, one of the quickest being sending dividends to shareholders, who could then invest that money into other parts of the economy or even other potential competitors.

> Pushing these companies to return money to their shareholders instead of keeping it in huge war chests used for buying up any potential competitors would be a good first step.

Companies already do that with dividend payouts or share buyouts. Also, the shareholders control these companies. If they wanted the profits returned to then, they would vote for it.

> Maybe something along the lines of "any company whose average market cap over the course of a fiscal year exceeds 1% of GDP is automatically broken up".

I prefer over 33% market share. I think every market/industry should have at least 3 players. Any company that goes over 33% market share for X period of time gets broken apart.

> Companies that don't want to be split into pieces would need to find ways to reduce their market cap, one of the quickest being sending dividends to shareholders

Not necessarily. There are companies that don't have a profit or cash on hand with huge market caps. Amazon notoriously made no profit for decades. I think enterprise value is what you are looking for.

It would be easier to limit companies to fewer than 200 employees

Edit: just a passing thought, I don't advocate for any of these ideas. Just complaining, I have no answers

Would need a world government to enforce, else China would dominate with huge firms.

How many people do you think are involved in creating the phone or computer you are writing this on?

That's not an excuse to continue

I'm not even anti-corporation, but to pretend everything is fine seems silly

I find this "I don't feel good about X, so I am going to propose abolishing X without realizing all the consequences of that" vibe silly and dangerous. From my car to my computer to the clothes I wear, to the medical equipment for my kids' births, etc - everything was produced, sourced, and sold, by a fairly large organization that has optimized for delivering that thing to me. Both the necessities and the comforts of my life are powered by this - and same with you unless you're pretty much living off the land.

If you don't like Amazon having your data, or whatever your issue is, don't use Amazon.

I literally said I'm not in support of my own dumb idea

I know things are more complicated

You, however, need a mirror. Everything you just said is a wonderful display of willful ignorance. Your head in the sand does not protect you from the world

Big Tech, in 2023, is effectively a governmental body. I mean all 7 (or whatever) of the largest companies. They operate in a wildly anti-competitive and anti-free-market way, rivaling even the Railroad tycoons of a bygone era.

I'm not anti-corporation, but there needs to be some effort put into correcting this. It's not going to fix itself.

Our country would be a lot better off with a lot of small businesses rather than a few gigantic businesses.

// Our country would be a lot better off with a lot of small businesses rather than a few gigantic businesses.

Is that true? Plenty (in fact, arguably most) countries have a much smaller ratio of "big" to "small" companies and many of those are not "a lot better off" than our country and quite to the contrary. So I don't buy this assumption.

Fine if those investors put the proceeds into startups or their own R&D. It has no effect if those investors are largely giant institutions, pension funds, and university endowments that automatically reinvest buybacks and dividends into the same blue chips. That is just giving brokerages an automated way to passively skim profits. They get to just sit on both sides of the finish line with their hands out while money runs laps.

Many other countries would love if the US would break their Crown Jewels. The value they create is incredible, the whole market moves with them and USA owns the great majority.

I don't care what the rest of the world thinks or wants

Value created for whom is the real question.

For the customers in the first place. Then for the society through the advantages brought by those products/services. Finally for its investors - which may as well be us with how easy is to buy stocks nowadays.

The thing is half of those startups wouldn't even exist if it wasn't for big tech acquisitions.

The fact that a startup without a viable business model can still have a $1b+ exit simply for having good tech is part of the reason why startups attract so much capital and can afford to be innovative.

I guess just be careful what you wish for. It can be anti-competitive, but it's also in part what's driven a lot of recent innovation.

Do the big companies really use and develop the acquired technology though? It seems like most acquisitions end up being shut down and/or crappified within a few years.

Sometimes they do, sometimes they just buy companies to eliminate competition or future competition. Sometimes it's some of A, some of B. It really depends.

While innovation is very important, I think that there is an unhealthy obsession with it. That obsession has a great deal of harmful effects and is a part of why people are increasingly holding tech in a dim light. The extreme focus on innovation leads to companies being abusive. Being abusive is a thing that has become normalized in the tech industry.

largely true of pharma companies as well - they are largely big marketing organizations, where most of the real R&D is done by small startups that can be purchased when necessary.

It feels like part of it is a cultural issue. People in the startup space largely seem uninterested in starting companies they will run their whole life

They just want the fun of experimentation and a payday

And like that's fine whatever, live your life, but it's creating a really crappy feedback loop of monopolization and buy outs

Different stages of the corporate life cycle require different skills and attract people with different temperaments; someone who launches a startup is not necessarily going to be great at running it for their whole life, nor feel fulfilled by doing so.

I prefer to work for startups whether they yield a "payday" or not - they usually don't - because huge organizations and complex bureaucracies leave me feeling miserable and demotivated.

Any single Nx buyout results in N additional startups being funded. This is how VC culture operates and grows. It’s one of the main ingredients that build Silicon Valley’s success. Other countries are desperate to copy this model.

I'm not arguing that it doesn't work and create a feedback loop

I'm arguing it's destructive long-term by creating a Goliath no one can compete with

Or several Goliaths in this case

Consolidation leads to stagnation

Goliaths were and will always be around. But as long as there is an unregulated, free market - there will always be startups competing. It’s not easy, but it’s doable through innovation and creativity. The Goliaths are always more conservative, slower and less agile.

In the absence of regulation, goliaths will inevitably become monopolies and startups have no real chance to compete. The best a startup could be is to hope to be bought by the goliath.

How exactly will startups will have “no real chance to compete”? What is the mechanism that will stop them?

Unless prevented by governmental regulation or similar (like patents) startups move faster and are more innovative and creative. They are not the cheapest but competing on price is not a good idea for a startup anyway, and the monopoly cannot be the cheapest possible since that would diminish profits - then what would be the advantage to be a monopoly?

A monopolised market is ripe for disruption and VC are dying to fund startups who can claim a chunk of that market. Any startup bought out by a Goliath will fund another 10 in its stead.

I know zero cases of unbeatable monopolies in a free market. All monopolies had government support. Do you have any examples?

> How exactly will startups will have “no real chance to compete”? What is the mechanism that will stop them?

The established monopoly company will, either by strong-arming suppliers, service providers, and marketplaces into not doing business with the startup, or by just buying them.

At least, that's how it's traditionally been done.

> strong-arming [...] into not doing business with the startup

Isn't that illegal already?! I don't see how extra regulation can change anything. Any company is liable to try anti-competitive behavior and that is why it's illegal, monopoly or not.

And even if the government fails to stop Goliath from doing illegal stuff, a free market will route around it. See how Microsoft/Intel - monopolies in the 90s got out-innovated and made irrelevant by pure market forces while the anti-trust government action merely delivered a slap on the wrist.

Free markets work. Unless we regulate them to discourage startups.

Example of highly regulated markets: health care, energy, transport, education, telecoms. The result? It's almost impossible to compete, prices are high and products crappy.

> or by just buying them

Thus funding 10 new startups in the field since it's now known that the Goliath is exiting newcomers. Gold rush for any VC!

> Isn't that illegal already?! I don't see how extra regulation can change anything

I'm not sure what you mean by "extra regulation" here. Yes, it is illegal, and that's an example of appropriate regulation. I had the impression you were arguing against regulation, though. I think I don't understand your stance here, so my responses may be off the mark.

> Free markets work.

They do, although they aren't a magic panacea. And a free market cannot exist in the absence of appropriate regulation.

> Unless we regulate them to discourage startups.

I agree. Appropriate regulation is not intended to discourage startups.

Rule of law stays at the base of any civilized society. Contract law, antitrust, anti cartel and the like are necessary to simply establish the rules of the game. It is the government’s role to implement them, together with taxing externalities. Simple and clear. I am not contesting that. I am not an anarchist.

What I am against is crap like “don’t bundle a browser in your OS”, “you must have an USB-C port”, net neutrality, “censor your users”, “your cars must have backup cameras” and even “you’re too big so we’ll call you a monopoly and split you up” or “you’re a billionaire we should tax your wealth. These regulations (even if well intended) will always have unintended second order effects and a significant chilling effect on startups. Compliance costs add up and are much easier supported by incumbents. Startups are fragile and founders easily discouraged.

I want competition and startups and looking around us and at history it is clear to me that the less regulated (freer) a market is, the healthier it is. Just look at computing and the Cambrian explosion of hardware and software we enjoyed during the years governments were too surprised to wreck it.

Reversely, I look at heavily regulated markets (against, with good intentions, I am sure) and I see huge market failures. Take housing for example: countless rules, zonings and regulations - it takes years before you can even start building. The result? People are paying through the nose to live in places that are illegal to build today.

The free market mechanisms work and they are incredibly powerful. We should be extremely reluctant to mess with them every time we feel something is not quite right in the world and just a little regulation would fix it - the odds are we’ll do more bad than good. Free markets are after all the best wealth creation engine we know and we owe it the incredible abundance we are living in right now.

That’s libertarian religious scripture that needs to be backed up by solid facts.

the only solid fact that you need is that tech giants of the past are not tech giants today, and the same way MS missed mobile market, Nokia failed with touchscreen smartphones, atnt and its parts failed to innovate, ibm lost and left pc/x86server etc, current giants are likely to loose. The only difference now is that the biggest competition today is from foreign companies that leads to them being able to get support of government and therefore compete not on the basis of merit, but in a political way.

> the only solid fact that you need is that tech giants of the past are not tech giants today

That's far from the only solid fact you need to know, though. You need to know the conditions and circumstances around it all.

well, there is an assumption, that the circumstances are a political/economical system which is the same one. But there is an argument to be made about deterioration of institutions

And it's a huge assumption. To the level of "you can ignore friction" for middle school physics class.

You need to look no further back than the robber barons to see "tech" (yes they were tech, not in the modern sense but industrial) and how it required massive political mobilization to get rid off. It wasn't "free market" that did it, in matter of fact it perpetuated the monopolistic behavior.

We can cherry pick history all day. The point is that "only required argument is historic" is stupidity, and often requires assumptions, cherry picking and nitpicking

> no further back than the robber barons

The fact that you have to dig back to the 19th century speaks volumes.

And if you knew your history, you'd know that, for example in the case of Standard Oil competition and free market already broke their monopoly before any government intervention.

And there are many other closer examples where free markets brought wealth and prosperity together with competition and innovation while turning away from them only brought poverty and authocracy.

My favorite example I actually lived through was the incredible success story of Eastern Europe after getting rid of communism. From cold and hunger to high-rises, iPhones, luxury cars and city breaks. All thanks to a minimally regulated free market.

> where most of the real R&D is done by small startups that can be purchased when necessary.

Or by governments.

Maybe that’s fine? A company that can do cutting edge research and a company that can manufacture and market at scale don’t have to be the same company.

There is a invisible incentive filter though- nobody will create a startup that is not worth buying for a large company - or whos product would cannibalize somebody elses product in the oligopoly.

I am not sure that's true (is it?) but more so, don't see how that follows from Pharma's alleged focus on acquisition. Can you give me an example where in a different world something good would happen that isn't happening now and why? I am not trying to be difficult just genuine don't see it yet.

You're right. More and more pharmaceutical manufacturing is contracted out to CDMOs. So one day big pharma might only do marketing.

This has a practical aspect that is different from software though. Bringing a drug to market requires a huge amount of capital and very specialized manufacturing. It’s very difficult for a small company to do that.

I’m not saying it’s a good system necessarily, but it’s a big factor worth acknowledging and different from a tech start up.

How do you expect more competition when most people in tech support more government regulation that inhibits smaller firms to compete?

Serious question.

I don't expect anything to improve at all, TBH

I would like to see the government break up a lot of these mega corporations, but it's not a great solution

Our global economy just means overseas companies will buy them, or they will move offshore and compete where we can enforce anything

I don't have any answers, but I think we can all recognize something's not working here

I think you're absolutely right there's something extremely wrong going on.

My point was the people who supported the policies that got us into this mess need to recognize that the solutions they want don't exist with what they supported in the past. So sacrifices need to be made.

More government regulation doesn’t automatically mean it’s harder for small companies to compete.

It depends on the regulation.

To regulate something is to restrict it by very definition. If something is less accessible how exactly does that make it easier for smaller companies to compete and navigate the new regulations?

You can have regulations only apply to companies that operate in multiple states or countries, that are based on cash-on-hand, number of employees, amount of revenue, etc.

Not every rule need apply to every business.

Regulation is always favoring the incumbent. Always. The mere act of acknowledging, studying and respecting regulation (even if favorable) is a discouraging factor for a beginner founder.

I think if studying the rules of running a business is enough work to discourage you from founding a business, then it’s probably not the right path for you anyway.

Who would you rather have building businesses? Those good at creating, innovating and leading? Or those good at studying and following rules?

“Here's to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They're not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can't do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”

― Steve Jobs

One has to go back decades to a time before this sort of stifling M&A activity began. Looking at the innovation that occurred in the era before zero interest rates and so-called "Big Tech", it blows away what people call "innovation" during the period of "tech startups" and mega-sized websites.

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