The New York Times Offers Another Underpowered Case for Breaking Up Big Tech

 

Former Alphabet Executive Chairman Eric Schmidt speaks to Sundar Pichai, Chief Executive Officer of Google.

Hot on the heels of Esquire’s 7,000-word argument against Big Tech comes the New York Times Magazine’s 8,000-word argument against Big Tech. Hed: “The Case Against Google.” Dek: “Critics say the search giant is squelching competition before it begins. Should the government step in?”

The piece’s author, Charles Duhigg, answers in the affirmative: “If you love Google, you should hope the government sues it for antitrust offenses — and you should hope it happens soon, because who knows what wondrous new creations are waiting patiently in the wings.”

So this is probably theoretically the strongest argument for antitrust action — especially given the massive consumer benefits that AmazonAppleGoogleFacebook are providing — although its inherent forward-looking nature is a novel attribute. (And as far as the bigness issue goes, note that these companies aren’t nearly as valuable as corporate behemoths of the past such as General Motors in the 1920s or General Electric in the 1930s.)

But the Duhigg essay, like so many before it, fails to make the data-driven case for the sort of significant or systematic suppression of competition — leading to less innovation — that might justify some sort of new rationale for broad action. For instance: US productivity growth downshifted before the Era of the Megaplatforms. Many new fast-growing tech firms continue to be created, thanks in part to the services these digital platforms provide. And even in the area of search, Google has competitors, including Amazon’s 50 percent share of all shopping searches.

What’s more, we have no idea how the emergence of new technologies will affect business models. In “Debunking the ‘Network Effects’ Bogeyman,” David Evans and Richard Schmalensee note “the 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.” (Indeed, when the media isn’t describing how all-powerful these firms are, they are hyping various existential threats to them.) Why take preemptive action, with little evidence of current harm, against companies that the EU and China would love to call their own? Remember when we were supposed to break up forever-dominant Walmart?

Not unexpectedly, the essay also claims that if not for past antitrust actions against IBM, Microsoft, and AT&T, Google and the internet as we know it would not exist, a theory about which I have also expressed skepticism. Perhaps also not surprisingly, Duhigg takes a pass on policy action: What would action against Google actually look like? How do you split this firm or other tech titans? Or is the aim to just distract it with lawsuits, as supposedly happened with Microsoft in the ’90s? These are hard questions!

The idea of breaking up or heavily regulating Big Tech is being asked to carry a lot of weight, from battling inequality to improving our democracy to restoring our innovative oomph. But so far the argument seems underpowered for these tasks.

Published in Economics, Technology
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  1. I Walton Member
    I Walton
    @IWalton

    “and you should hope it happens soon, because who knows what wondrous new creations are waiting patiently in the wings.”

    Like new firms that compete with them? or replace them entirely? And we know the future how?  We do know the past and it’s all about industry capture.

    James P is right across the board on this issue?

    • #1
  2. OccupantCDN Coolidge
    OccupantCDN
    @OccupantCDN

    I agree, the big tech firms should be allowed to get as big as the market allows from organic growth, but should not be allowed to control the start ups that are looking to replace them. Facebook lives in fear of becoming MySpace or google becoming AltaVista.

    The really scary part of this thought process, is that much like the tax code, the left is contemplating using all forms of law enforcement as tools to socially engineer the economy. Using anti-trust to address inequality can only end in destruction.

    • #2
  3. Bryan G. Stephens Thatcher
    Bryan G. Stephens
    @BryanGStephens

    AT&T was a government supported deal. These things are not. James you are spot on here.

    • #3
  4. OccupantCDN Coolidge
    OccupantCDN
    @OccupantCDN

    Bryan G. Stephens (View Comment):
    AT&T was a government supported deal. These things are not. James you are spot on here.

    The difference being that AT&T got to its market dominance by government intervention. Once customers had a choice of not using AT&T boatloads chose not too.

    The government did not force anyone onto google or facebook – I agree that the market growth of successful companies should not be hindered – but buying up the start ups that might some day challenge them, should not be permitted.

    • #4
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