In a few hours, the chief executives of four major technology companies — Amazon, Apple, Facebook, and Google are going to be hauled up in front of our politicians. I am surprised to see Microsoft omitted from this list, though they should be in here with the big four. They will have to defend themselves from the charges that they stifle competition as a result of their market dominance.
What do I think about the whole brouhaha? The short version (in case you want to skip reading the piece) — all sizzle no steak. In other words, you could (and should) avoid even thinking about it. You are not going to see the four chieftains say anything that damages their business or upsets the status quo. It is not going to impact the employees or the stocks of these companies. Hell, it is not even a photo-op: the whole non-drama is going to play out on Zoom.
But it will keep a lot of reporters, opinion writers, and television hosts busy. It will keep Twitter humming. It will allow politicians to score some points in the court of public opinion. And yes, it will allow politicians to get more money from lobbyists who represent these companies.
The big tech is going through the great American ritual — the making of stars, the praise of the stars, and then the tearing down of the stars. We do it to our celebrities. We do it to our sports stars. And we do it to our technology companies. It is not a judgment on the cause or the punishment. I am merely pointing out the pattern of our media-saturated society. We may not manufacture a lot of things in America, but we produce new heroes and newer villains quite well in America.
At some point, we sour on the success we once celebrated. That is why we have this constant need for new heroes. Frankly, we could use some new heroes in technology. It is hard to romanticize the big tech. It was not always that way.
In my lifetime, I saw them all as startups (except Apple.) Amazon was a baby when I first wrote about them, dismissed by many when compared to their then-rival, Barnes & Noble. I wrote about Google when it was just a mere sapling. I remember their deal with Yahoo and their accidental business model. I had a front seat to Apple’s flirtation with disaster. And I remember Facebook when it used to be all about college campuses on the east coast. In other words, I saw them struggle, make mistakes, stumble, and be mocked.
And yet here they are — big trillion-dollar companies (except Facebook.) Together, they are the new American brands to be exported around the world. They might as well be the last stand of the American Brand on the global stage. And at the same time, they have become the vanguard for all things evil that is tech. It is hard to argue against their tactics.
- Facebook has created a worse addiction than tobacco companies, and it doesn’t take any accountability for its actions.
- Google’s gone from being the company that wanted to offer search results fast on a page uncluttered by advertising to becoming advertising posing as search results.
- Apple that once needed a $200 million bailout from Microsoft, then labeled a monopolist, now charges an ungodly 30 percent cut of subscription fees. It is as if it is still 2008 in Cupertino, and the App Store is selling 3-dollars-a-pop apps.
- Amazon’s tales of ripping off rivals, using the advantages of data and its distribution platform to create its products. Not only are companies paying them to stock products in their warehouses, but these same companies have also given them access to all the relevant data to copy those products. And if that was not enough, like Facebook, Amazon repeatedly fails to police its platforms for fakes, scams, and ripoffs. It is ruthless capitalism at its very best.
To give their immense power some context, here are some numbers that Axios put together.
- Their combined market capitalization is 5 trillion dollars.
- Their total revenues for 2019 were roughly $773 billion.
- They have over $420 billion in cash.
These four companies (along with other technology companies) are helping the stock markets stay flying high during this pandemic. Stock markets are often a bet on the future. What the markets are saying — the future is going to be shaped by technology.
As I have written about in the past, our relationship with technology is getting increasingly complicated. Weirdly, the pandemic has only exposed our need for these platforms.
Whatsapp is a crucial part of global communications. I was reminded of that this past month when I tried to manage my parents’ health situation without Whatsapp. Amazon has delivered necessary (and sometimes not so essential) items. YouTube brings me entertainment and edutainment. Apple is a platform that I use for pretty much everything – reading, writing, viewing, and creating.
Like I said — it is complicated.
The bigger question we need to ask is, what does breaking up these companies mean? How can it be achieved? What is the real outcome if the politicians get serious about it? Perhaps this is an opportune time to take a step back and see how we have landed here and what gives these companies an edge. And interestingly, not all of them can be lumped together.
Apple is a device maker. Its core advantage has been the ability to use its size and scale to build better devices. It has used the money to lock up component supplies. By using the strategy of vertical integration to extract profits, it is either the most or the second most valuable company in the world — depending on which side of the bed, the stock markets wake up on any given day. And that’s despite Apple’s data-incompetency.
Amazon, Facebook, and Google, on the other hand, are three companies that are “data native” and use data as a strategic advantage to drive network effects. Their lock on the future is tied to the data they gather on an ongoing basis. About four years ago, in a piece for The New Yorker, I wrote about the advantage of bigness — the advantage that came from them being platforms.
“A platform is essentially a business model that thrives because of the participation and value-added from third parties with only incremental effort from the owner of the platform. The way I see it, the bigness of today’s Big Five gives them an opportunity to keep building larger moats around their platforms. For starters, these companies are able to hoard data, which allows them to become smarter in learning about their customers. Because of their leviathan-scale operations, they have the infrastructure and resources to write algorithms and make their platforms more effective. As I pointed out in an earlier post, this amalgam of algorithms, infrastructure, and data is highly potent.”
Technology’s domination of our daily lives has been like that of a frog on a slow boil. Every year, year after year, we became willing adopters and customers of companies whom we describe as “big tech.” If you took the time and looked at the businesses of these companies, you could see it plain as a day that they were going to become more significant because of the compounding advantage of their scale. The more aggressively they accumulated data, the better their machine learning models worked, which would allow them to meet their business models more effectively. This is an invaluable edge.
Amazon can use data it has accumulated and continues to collect as a way to get smarter about market demands. They can predict trends and have the ability to do dynamic pricing. Their rivals — Walmart and Target, for example, have always had access to a lot of data, and also have developed their own “in-house brands.” Amazon is just able to ride the demand curves faster and more efficiently, whereas the offline retailers are still pondering in their responses.
What makes big tech effective is their ability to take advantage of one aspect of their business and apply it to another market segment. For instance, data collected by Google Android and Google Maps allows the company to jump-start its self-driving ambitions by offering different inputs. Those inputs make Waze indispensable. Google Photos gives it an advantage in crafting and tweaking its visual algorithms, much like how YouTube itself provides the company with vital insights into sentiment, interest, and also help along the path of better multimedia algorithms. Google Voice has helped give the company a leg-up when it comes to building Google Translate and offering Google Home Voice Assistant. How do you rip out all those things? The only thing to do is chop up Google into smaller pieces that make the whole company worthless.
Sure, you can chop off Amazon Web Services from Amazon, but it will be hard to slice and dice the company without killing the company. Warehouses, the distribution network, the sales front end are all part of the intricate system that informs Alexa, Echo, and whatever else they are cooking up.
So any solution to wrangle these giants has to go beyond the traditional notion of what is a monopoly. That means work. And that means rethinking the whole idea of monopoly in the intelligence age. If anything — all attention should be paid to reigning in the ability of these companies to expand into new markets using data collected from their current systems. For me, that is the 5 trillion dollar question.
As I said, don’t expect anything real to happen tomorrow, or anytime in the future. It is politicians looking to get paid – one way or the other. I hope you don’t spend time thinking about CEO-in-Washington Circus.
July 28, 2020, San Francisco