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Now It’s Esquire’s Turn to Make the Case for Busting Up Big Tech. It’s Not Strong
The March issue of Esquire gives Scott Galloway, an NYU marketing professor, nearly 7,000 words to make his case for dismantling Apple, Amazon, Facebook, and Google. Galloway scare-quotes them as “the Four,” while the headline writer refers to them as “Silicon Valley’s Tax-Avoiding, Job-Killing, Soul-Sucking Machine.” (As a long-winded sobriquet, the latter really doesn’t have the oomph or stickiness as when Matt Taibbi famously referred to Goldman Sachs as “a great vampire squid wrapped around the face of humanity.” But a solid effort, I guess.)
So what is Galloway’s argument? Patient readers must plow through nearly half the essay — though many lovely charts will aid the journey — to find out. Before getting to his casus belli against the SVTAJKSSM, Galloway first runs through a series of “valid concerns” to whet the appetite for antitrust destruction: The Four are really, really big. The Four are addictive. “Google is our modern day god.” The Four don’t pay enough taxes. The Four are destroying massive numbers of jobs. Government has surrendered before the Four like the POTUS before Zod in “Superman.”
All worrisome factors, but Galloway concedes that “none of them alone, or together, is enough to justify breaking up big tech.” So what is his justification if not the Four being a SVTAJKSSM? Well, I think it goes something like this: Inequality is rising. The middle-class is failing. Market forces are creating a “winner take all” economy and a society that is “bifurcating into those who are part of the innovation economy (lords) and those who aren’t (serfs).” And the Four are both a cumulative result and an accelerant of these forces through their monopoly-like, competition-squashing powers. Galloway:
Why should we break up big tech? Not because the Four are evil and we’re good. It’s because we understand that the only way to ensure competition is to sometimes cut the tops off trees, just as we did with railroads and Ma Bell. This isn’t an indictment of the Four, or retribution, but recognition that a key part of a healthy economic cycle is pruning firms when they become invasive, cause premature death, and won’t let other firms emerge. The breakup of big tech should and will happen, because we’re capitalists. It’s time.
Well, I’m not going to write a 7,000-word blog post responding to Galloway’s essay. I have already addressed many of these issues in the past on the AEIdeas blog. But here are a few thoughts and observations:
— If you are going to make a job-killing case against the Four, then you have to contend with a macro environment where unemployment is headed below 4% and jobless claims are near a 45-year low. Or maybe tackle how e-commerce, supposedly killing retail, is actually generating gobs of jobs.
— And has government surrendered to the Big Four? If so, then why are the Four dramatically ramping up their lobbying efforts? They seem worried. One could also point to the competition for Amazon HQ2 as an example. But there is nothing new about states and cities offering tax breaks to lure company headquarters. Usually it’s a bad idea, but in this case, there might be a rare opportunity to create a legit tech hub. So maybe not so dumb this time.
— Google is not my god. Also not Amazon, Facebook, or Apple. Not even Twitter!
— Are the Four a group of forever-dominant, big data controlling, “winner-take-all” companies that are killing America’s competitive dynamism? This is Galloway’s core complaint. But I don’t think the evidence is there. These companies are certainly acting like they are under severe competitive threat. I mean, they know the history of supposedly impregnable market positions. They don’t last. Anti-tech activists often presume history is over, to paraphrase tech analyst Ben Evans.
There is, as David Evans and Richard Schmalensee write in the must-read Winter issue of Regulation, a
collection of dead or withered platforms that dot this sector, including Blackberry and Windows in smartphone operating systems, AOL in messaging, Orkut in social networking, and Yahoo in mass online media. . . . The winner-take-all slogan can claim to be based on the simple theory of network effects. One can’t claim any theoretical foundation for the new slogans around ‘big data.’ . . .
Like the simple theory of network effects, the ‘big data is bad’ theory, which is often asserted in competition policy circles as well as the media, is falsified by not one, but many counterexamples. AOL, Friendster, MySpace, Orkut, Yahoo, and many other attention platforms had data on their many users. So did Blackberry and Microsoft in mobile. As did numerous search engines, including AltaVista, Infoseek, and Lycos. Microsoft did in browsers. Yet in these and other categories, data didn’t give the incumbents the power to prevent competition. Nor is there any evidence that their data increased the network effects for these firms in any way that gave them a substantial advantage over challengers.
The data-driven case — as opposed to the emotional, lizard-brain, “Google is our modern day god” case — for busting up Big Tech just isn’t there, at least not yet.
Published in Economics
It is always something or someone in power now who is scary.
Regulatory rules always lead to regulatory capture. Spot on Walton
Michael Walsh is always hammering on about this over at PJ Media and elsewhere. The case against breaking up Apple seems particularly stupid; they don’t have a monopoly and have encouraged innovation among competitors, but sure, bring in the anti-trust guys.
As for Facebook, I think it has the same problem as print media: its customers will age, and will not be replaced. For kids today, it’s a Mom thing.
The reason for break up is simple. There is a pool of money in those corporations. Money that can be better used by politicians and their cronies. Money that needs to be harvested by lawyers, lobbyists, and SJWs. Money that needs to be spent on PR campaigns to shape public perceptions. The money in these corporations make the owners falsely believe they have power via their creations. These owners need to be taught that true power lies not in creation but in destruction. And the ultimate master of destruction is the government. Thus why these companies need to be broke up.
If we just wipe out enough winners we’ll have the losers ‘n’ mediocrities society that socialists dream of.
Yep.
James, you actually mean “the case for breaking up Apple….” is weak, etc. Fifteen years ago, Microsoft was the bugaboo, in exacvtly the same position.
The only one here that actually may be like Standard Oil is Google, not because of size, but because they censor content. I never use Google myself, solely because I like competition. Bing works just as well.
Joel Kotkin paints a slightly different (and more alarming) picture.
Eh. A bit much.
Oh no, no no no no – Amazon knows I set timers between 6:30 and 7:30, play Jeopardy with my Daughter, and occasionally need the living room lights turned on? AND I listen to Chopin? It’s worse than Orwell! It’s worse than Huxley! It’s Orhuxleian!
He’s on firmer ground when he describes the tech companies’ plans to build developments that have tracking and data collection built into the fabric of the place, but no one will be forced to live there, and signing an EULA as a condition of taking an apartment will not usher in “an era of mass serfdom.”
Let me put it another way: I don’t care if Amazon knows I have a dog and like Bach. Just like I don’t care that Target knows I buy 2% milk instead of skim. I just don’t.
The problem isn’t Big Data in corporate hands….. it’s what happens when Progressive regulators, Progressive Bureaucrat Rulemakers & Progressive business owners collude to make sure you are living exactly the life they think is best for you….
Having worked in tech for 20÷ plus years what worries me is NOT the data that exists about the general public. It’s what a misguided if well intentioned self-appointed savior is likely to do with that data.
On one of your Podcasts – during an ad for security products – I believed you quipped that you were always worried about Big Brother coming to power…. you “just didn’t expect it to be a D.I.Y. project”.
It’s one of my favorite lines and an incredibly insightful – albeit perhaps unintentional – observation of the modern erosion of privacy.
Thanks! And I meant it. We’re the ones installing the cameras in our house, not Big Bro. But I’m in control, which is the big difference.
Agreed, that’s a concern. Regulators and Rulemakers, for example, would prefer that I live in dense areas of the city, and take public transportation. But they don’t need data to justify their actions; their ideas are, for them, justification enough. Whatever they try in the city simply drives people elsewhere.
*snork*
In one paragraph you have made me feel a lot better @jameslileks. Thanks