Sen. Elizabeth Warren argues that if Washington breaks up Big Tech — and more aggressively reviews acquisitions going forward — the result will be more competition and thus more innovation than would occur otherwise. Just look at history. As the Democratic presidential candidate explains in a blog post:
The government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge. The story demonstrates why promoting competition is so important: it allows new, groundbreaking companies to grow and thrive — which pushes everyone in the marketplace to offer better products and services.
It’s a superficially compelling argument at times like this: Demographic challenges mean the American economy will need to become more innovative if it’s to grow anywhere near as fast in the future as it did in the past. From this perspective, Big Tech is now a big problem.
But this isn’t obviously the lesson that history teaches. It’s not at all clear the Microsoft, if not distracted by its antitrust fight with the feds over the now infamous 1990s “Browser War” with Netscape, would have mercilessly squashed Google and Facebook. Nor is it clear that the American software industry owes its existence to the government’s distracting 13-year pursuit of IBM born out of the last official act of LBJ’s Justice Department in January 1969.
Certainly, both claims are bandied about bulletproof explanations, such as in the Axios story “For tech, antitrust is a fatal distraction.” Let’s focus on the case of Microsoft. Was the software giant distracted by its conflict with Washington such that it let Google become a search superpower and missed the industry move to mobile. Perhaps. But maybe simpler and more common explanation is the correct one: A big, bureaucratic, slow-moving incumbent failed to adjust to a secular business shift.
Here’s what Steve Ballmer, Microsoft CEO from 2000 to 2014, said when he departed the company: “If there’s one thing I regret, there was a period in the early 2000s when we were so focused on what we had to do around Windows that we weren’t able to redeploy talent to the new device form factor called the phone.” And Vic Gundotra, a former head of Google’s mobile division, left Microsoft after it became clear “the company could not accept the reality that Windows was no longer the center of the universe,” according to “In The Plex: How Google Thinks, Works, and Shapes Our Lives,” a 2011 biography of the company by tech journalist Steven Levy.
More on this from Stratechery tech analyst Ben Thompson: “In short, to cite Microsoft as a reason for antitrust action against Google in particular is to get history completely wrong: Google would have emerged with or without antitrust action against Microsoft; if anything the real question is whether or not Google’s emergence shows that the Microsoft lawsuit was a waste of time and money.”
It’s also worth noting this analysis on Twitter by Andreessen Horowitz’s Benedict Evans on how regulators and other policymakers miss out on how markets and technology evolve when doing antitrust analysis:
When a market is being created, people compete at doing the same thing better. Windows versus Mac. Office v Lotus. MySpace versus Facebook. Eventually, someone wins, and no-one else can get in. The market opportunity has closed. … Monopoly! … But then the winner is overtaken by something completely different that makes it irrelevant. PCs overtook mainframes. HTML/LAMP overtook Win32. IOS & Android overtook Windows. Google overtook Microsoft. … Tech anti-trust too often wants to insert a competitor to the winning monopolist, when it’s too late. Meanwhile, the monopolist is made irrelevant by something that that comes from totally outside the entire conversation and owes nothing to any anti-trust interventions. … None of this is to say regulation is a bad idea. It’s often very necessary. But historically that has not been where generational changes came from in tech.