Contributor Post Created with Sketch. Elizabeth Warren’s Wrongheaded Plan to Break Up Big Tech

 

An encouraging result of Sen. Elizabeth Warren’s mega-ambitious plan to break up Amazon, Alphabet-Google, and Facebook is her interview with The Washington Post tech reporter Cat Zakrzewski. At the end of the Q&A, Zakrzewski asked the Democratic 2020 contender, “How do you avoid unintended consequences on innovation if you break the companies up?” To which Warren replied, “I think what we have right now is the unintended consequence. The giants are destroying competition in one area after another.”

This is good. Warren allows for unintended consequences when implementing public policy. Little of the activist feverishness about a Big Tech breakup has acknowledged their existence or that of trade-offs. More should be expected of policymakers. Conceding the reality of both provides a starting point for debate. That said, Warren seems oblivious to the potential unintended consequences or trade-offs of her proposal.

For instance: Amazon — with a five percent market share of US retail overall — does exactly what many buyback-hating Democrats have been insisting the rest of Corporate America do more of: invest bigly. Amazon is a massive R&D spender. Would it spend nearly as much if it had to shutdown as much as half its business, as Warren’s plan seems to suggest? Aren’t the very companies she wants to break up also America’s innovation leaders, spending not just to better their current businesses but also on potential future businesses such as autonomous vehicles and space commerce? Might banning new Big Tech acquisitions reduce venture capital investment by denying an off-ramp to the early investors in promising, high-impact startups? By the way, a quick visit to Alphabet’s X research group might be a worthwhile campaign trip for Warren.

A more basic point of concern is that Warren assumes everything changes but nothing changes, at least not the stuff consumers value. Warren: “You’ll still be able to go on Google and search like you do today. You’ll still be able to go on Amazon and find 30 different coffee machines that you can get delivered to your house in two days. You’ll still be able to go on Facebook and see how your old friend from school is doing.”

Seems like a huge assumption. As tech policy analyst Neil Chilson tweets: “But don’t worry, government restructuring these companies won’t affect all the things you love about them: IF YOU LIKE YOUR INTERNET, YOU CAN KEEP IT.” Indeed, at the heart of much of anti-Big Tech activism is a desire to kill the ad-driven business model that allows for all those free services consumers love.

What explains the misguided nature of Warren’s proposal? First, she concedes she doesn’t care about economic arguments, such as how network effects help create dominant tech firms and how these firms generate huge consumer welfare. Second, she has a poor sense of history, pushing the dodgy idea that the “government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge.” Third, she ignores the dynamic nature of these firms, which behave like paranoid competitors rather than complacent monopolists. Fourth, the desire of 21st century progressives to see antitrust as a way of energizing the movement as it did for 20th century progressives might play a role here.

There are 5 comments.

  1. DonG Coolidge

    She should stick with fighting faceless banks, rather than taking on companies that are reasonably popular brands. She will never get a better gig than one she has now.

    • #1
    • March 11, 2019, at 5:51 PM PST
    • Like
  2. James Lileks Contributor

    Chilson’s tweets have some interesting observations.

    First, this isn’t just about tech. Warren’s target is any company that operates a marketplace, platform, or distribution channel and also sells or moves its own products in that market, platform, or distribution channel. Problem: That business model exists everywhere. Every retailer with a home brand, aka every department store, gas station, and 7-11. It includes grocery stores, as reporter points out. 

    The genius of the progressives on display: ban house brands. In other words, Target couldn’t sell its Market Pantry line, which is low-priced, because it owns the marketplace. Warren et al would be pleased to see this competitive advantage removed, and if people are required to pay more for staples, so what?

    The winner would be the brand names, of course, but we’d all be super-big winners because Target wasn’t able to use its crushing power to force us to buy the lower-priced items. 

    Her plan “only” targets companies with more than $25B in sales, but companies below the threshold are subject to regulation as well, because statists gotta state. 

     

     
    • #2
    • March 11, 2019, at 6:05 PM PST
    • 4 likes
  3. MarciN Member

    My biggest concern with Amazon, as I’ve written elsewhere on Ricochet, is its Amazon Web Services (AWS), which currently controls 34 percent of the cloud market. No single company should be storing that much data. It’s simply too easy to access way too much information on Americans and businesses.

    • #3
    • March 12, 2019, at 12:57 AM PST
    • 1 like
  4. EtCarter Listener

    idk. I’m reading Survellience Capitalism by Shoshana Zuboff, and something smells fishy to me. Suspending judgment till better informed.

    • #4
    • March 12, 2019, at 5:26 AM PST
    • Like
  5. Old Bathos Member

    Warren wants to be the new Mussolini. Corporations can stay in existence but only if they serve the interests of the state. Wealth generated must be made available to the political class or otherwise directed to approved ends. Media power must serve the messaging needs of the state. The presumption of property rights of any kind must be reversed such that all forms of private ownership is at the pleasure of the state.

    Inequality, environment and any other excuse for unbridled power must be treated as an unchallenged narrative unless and until a revised narrative is implemented as needed.

    Threatening to break up big corporations at the moment is (a) a populist stunt and (b) an extortion measure–donate, conform and submit or you die. The ultimate goal is to make the entire economy a network of regulated utilities.

    • #5
    • March 12, 2019, at 7:04 AM PST
    • 2 likes