That’s how Big Tech’s standout should decrease


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U.S. House Antitrust Subcommittee published its findings last week after a a year and a half of research Big Tech companies Google, Apple, Facebook and Amazon. At the beginning of the report, which was over 400 pages long, the committee did not say a word about it conclusions:

“Simply put, companies that were once boring, underactive companies that challenged the status quo have become the monopolies we last saw in the days of oil barons and railway tycoons.”

Those of us in Silicon Valley who worked closely with these firms were not surprised to be surprised not only by the fact that these companies in particular became de facto monopolies, but also by the fact that they use their monopoly powers to deter competition and violate antitrust laws. In fact, I do wrote only last month about how Apple has abused its monopoly power in the App Store for many years. Apple’s multiple roles as the only authorized app store for the billions of devices it sells, operating system provider, curator, and gatekeeper, not to mention its app developer, are a great example of how today’s “digital monopolies” are similar and different from a century ago. industrial monopolies.

Since the late nineteenth century, industrialists such as John D Rockefeller, Andrew Carnegie, JP Morgan, Cornelius Vanderbilt, and others have built companies that were initially innovative, helping America rise to become the dominant economic superpower in the world. These companies have become incredibly profitable precisely because they have been able to tilt their markets and crush competition through a combination of bullying and buying from competitors. Theodore Roosevelt broke these monopolies in the early 20th century, using the 1890s. Sherman Antitrust Act.

We have since seen antitrust law used in one-off lawsuits (such as Ma Bell and Microsoft), but there have been no similar trust-destroying efforts for more than 100 years. In the 1900s, the robber barons were born not in a single company, but in many practitioners who made the founders of these companies the richest people of the word.

Those companies started by innovating and benefiting society, but their power and profits grew where they were seen as a threat to democracy and our free business system. Today’s Silicon Valley environment is similar to the past, when venture capitalists and investors tend to build another monopolistic company that can dominate a new emerging market. Peter Thiel, known for his investments in Facebook and other businesses, highlights this point in his bestseller Zero to One, which has become an unofficial monopoly play.

Every “digital monopoly” today operates in a slightly different market. Amazon dominates e-commerce, Google dominates search and advertising, Facebook dominates social networks, and Apple dominates both mobile content and apps. Nevertheless, the committee found that they all engaged in very similar anti-competitive practices, including the acquisition of potential competitors (Facebook’s acquisition of WhatsApp and Instagram and Google’s acquisition of Android) or the use of its anti-competitive platform to control access, and prioritize its products (such as Apple’s controlled App Store or Amazon’s ability to reduce third-party retailers ’use of its platform).

Last week’s subcommittee report made a number of recommendations, including: a) strengthening antitrust laws, which were last updated in the 1970s and do not reflect the current reality of digital monopolies, b) additional FTC oversight of large mergers and acquisitions. and (c) split up some large technology companies in order to foster competition.

The last recommendation is the most controversial. I think that’s also the most important thing. The report did not address how to dismantle large technology companies, probably because it is also the most difficult to implement and agree on (members of the minority committee, Republicans, disagreed on this one recommendation).

This does not mean that every big technology company has to be fragmented – there are reasons why the government allows monopolies in certain areas, such as utilities. Even in the days of the robber barons, when Rockefeller’s standard oil was broken down, US Steel (created by JP Morgan by buying out an almost Carnegie steel monopoly) managed to avoid breaking down. challenging his case in the U.S. Supreme Court.

However, where Big Tech poses a clear and obvious threat to competition and consumers, the problems are more complex today than in the early twentieth century, as the definition of a monopolist is not limited to the market share of the raw material. . To achieve the desired result without causing irreparable damage, we need to look at how these companies are organized, how technology works, and what can be easily distinguished.

Here’s what the best Big Tech standout would look like:

  1. Apple should be fragmented, so its hardware and OS divisions are separate from the app store. This means that other app stores could compete with Apple on Apple devices, and competition would be restored in the mobile app market, allowing, for example, game developers like Fortnite to decide which app stores they want to use to achieve consumers. It’s not as crazy as it seems – for example, you can set a default browser, so you should be able to set a default app store just as easily.
  2. Google’s Android OS and Search should be categorized so that Google cannot use its mobile OS dominance and ownership to dominate search. Much has been written about how Google’s algorithms can be used to influence users and make or win winners in almost any industry, so in addition to stand-alone, additional work should be done to ensure that search algorithms are not favorable to any particular player but create equal treatment. To some extent, when Google renamed its parent company to Alphabet, it acknowledged that it was no longer just a search engine company, but also a conglomerate competing in many different industries, some of which would be a good way forward.
  3. Facebook uses its user data logger and the dominance of social networks and messages to not only dictate advertising terms, but also to direct users ’attention to its other services (such as WhatsApp and Instagram). Here are some natural drawbacks that need to be addressed: the two huge acquisitions – WhatsApp and Instagram – remain separate applications and could easily be translated into separate businesses that are allowed to compete with motherhood.
  4. Amazon may be more difficult to break down by natural flaws. Except for a large portion of its business, with the exception of AWS (its cloud-based infrastructure division that manages many other Internet companies such as Netflix). It would be difficult to separate Amazon’s first-party sales from third-party vendors (because they are both on the same site), but more work could be done to ensure fairness and transparency between third-party vendors and how Amazon uses the huge amount of data it has, so Congress and the Department of Justice may have to rely on other policies and new laws to treat third-party platform users fairly.

The splitting of these companies would not only create more democratic conditions for smaller competitors. This can have another benefit: slowing down what Harvard Shoshana Zuboff called “observational capitalism” is a way to make money using data from consumer behavior. As 20th-century industrialists created monopolies by acquiring more physical wealth, today’s robber barons create monopolies based on information, the vast amount of data they have already gathered from consumers. They incorporate this data into their algorithms, which in turn provides more behavioral data.

There will undoubtedly be strong resistance from the companies themselves, who have struggled hard to secure their monopoly positions. Since the report was published, each has responded cautiously, giving priority to corporate statements sent via email. Mail to journalists, or short blog posts, not statements from CEOs. These answers are predicted to be variants of the arguments used by baron robbers 100 years ago, but in two or two ways: we are not a monopoly (Google, in a public blog post), we protect third-party retailers (Amazon, in a public blog post), we innovate and protect consumers (Apple, statement) and the classic Facebook is America’s success story ’(Facebook, as well as in the statement). Since several of these companies offer free products to consumers, namely Facebook and Google, to make money from advertising, and Amazon can maintain low prices due to its dominant position, each company argues that its fragmentation would actually harm consumers.

However, the dismantling of Big Tech does not mean that wealth will automatically be more widely distributed. Rockefeller, for example, who was already among the richest men in the world, became even richer when he partially controlled companies such as Exxon and Mobil, which were split from Standard Oil.

The opportunity for new competitors to come up with innovation and succeed is the lifeblood of the American capitalist system. Without competition, today’s dominant companies will remain the dominant technological versions of historical aristocracies, using their vast reserves of money, data and influence (not to mention anti-competitive behavior) to choke on and gain any future innovation, which is a bad thing for consumers.

To paraphrase a former senator Al Franken since 2017, antitrust investigations are not just about protecting competitors from each other, they are, after all, about protecting the public.

Rizwan Virk is a venture capitalist, founder of Play Labs @ MIT and author of the book Startup myths and models: what you won’t learn in business school and Modeling hypothesis. He was one of the developers of Tap Fish, one of the first successful games on the Apple App Store. Follow him through his website at www.zenentrepreneur.com or Twitter @rizstanford.


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