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There they go again. Yet another commentator has relied on economic and regulatory myths as bases for a call for more regulation of tech companies. This time it was Robert VerBruggen seeking protection from what he feels are “digital overlords.” Others recently embracing such myths include a Yelp executive calling for regulation of his company’s rivals, a Washington Bytes contributor arguing that tech companies know too much, and a former head of the Annenberg Innovation Lab pressing for the breakup of Google, Facebook, and Amazon.
I won’t repeat here the rebuttals of these calls for regulation. You can read Iain Murray’s dismantling of VerBruggen’s arguments here and my responses to the others here, here, and here. Instead, I describe below five myths that cloud people’s thinking and the consequences of widespread belief of these myths.
Myth: Tech companies control their markets
Reality: Customers are in charge
Successful tech companies become large because customers choose them. Facebook does not compel anyone to sign up, Google does not divert searches from Bing or DuckDuckGo to www.google.com, nor does Amazon block people from driving to Books-A-Million. In fact, at least two of these companies became successful by surpassing other companies that pundits once described as controlling their markets — namely Myspace and Yahoo!. And the National Retail Federation ranks Amazon as only seventh in the US in retail sales for 2017.
Why do people embrace the myth? People think past the sale. It is hard, if not impossible, to make a substantive case that enduring tech monopolies have finally arrived. So writers and publishers leverage (perhaps unwittingly) an availability cascade by using words that trigger ominous visions, including “digital overlords,” “monopolize,” and “online trust,” encouraging readers to simply assume that successful companies are villains and customers are victims in need of a hero — namely the government.
Myth: Tech companies are monopolies
Reality: Rivalry is intense in tech
Murray addresses this issue, as have I in previous blogs, so I will limit myself here to the contradiction regulatory advocates embrace. On the one hand, the writers hold that each of the major firms is a monopoly (i.e., a firm that has no competitors). Yet they also talk about the companies competing with each other — such as Google’s competition with Facebook for social media content and advertisers. And they talk about the companies’ rivals, such as Yahoo! and Yelp.
For example, here is a paragraph from VerBruggen:
And today, an incredible proportion of the information driving public discourse runs through Google and Facebook. To be clear, this does not pose any sort of First Amendment issue — these are private companies, and the Constitution does not dictate how they program their search algorithms or decide which stories appear on users’ news feeds. But the potential for political meddling is substantial and troubling when a single company controls a key way that Americans across the political spectrum find their information.
Notice how seamlessly his narrative moved from two companies — Facebook and Google — to an unnamed single company controlling everything. And CNN, Fox, The New York Times, The Wall Street Journal, etc. are completely absent.
Myth: The EU is a good example to follow on antitrust
Reality: The EU is motivated to favor its own companies
This is not a widely believed myth, but the advocates of tech regulation often mistakenly cite EU actions against tech companies as evidence that regulation is needed.
American antitrust practices are driven by customer welfare. EU antitrust is driven by many factors, including a desire on the part of EU officials to replace US tech companies with European ones. Here is text from a 2015 speech by Günther Oettinger, EU’s digital commissioner at the time, at an industrial fair in Hannover, Germany:
A great challenge is also Europe’s position in the development of the next digital platforms that will gradually replace the current Internet and mobile platforms. We have so far missed many opportunities in this field and our online businesses are today dependent on a few non-EU players world-wide: this must not be the case again in the future.
Myth: Regulators are well positioned to decide what companies should do to serve customers better
Reality: Even the best regulators know less than market players and face many political pressures
Knowing what customers want and are willing to pay for is hard. Just ask Yahoo! and Myspace. They didn’t give up their customers willingly. Nor are Best Buy and Walmart losing sales to Amazon because they don’t care. Companies try many things that fail — Google+ comes to mind — and the experimentation and the learning it provides are important. So are the economic incentives: Companies suffer the financial risks of failure.
Regulators experience none of this. Federal Trade Commission commissioners are not living day to day with customers, engineers, company financial managers, and the like to understand what is working or not. Nor did Federal Communications Commission commissioners bear the financial costs of ramping up regulation of the internet in 2015.
Myth: Tech companies are meddling in elections and censuring content
Reality: Okay, so this isn’t really a myth, but it isn’t a reason to regulate
It appears to be true that Facebook’s and Google’s algorithms tilt liberal: A study published in Science showed that conservatives on Facebook were more likely to see liberal-oriented items in their newsfeeds than liberals were to see conservative-oriented items. And some of Google’s search features and YouTube policies have been harder on conservatives than on liberals. It also appears to be true that their platforms were used by Russians and others to grow the political divide we have in this country.
But this is not a reason for regulation. Almost all major media outlets that tilted Democratic in the 2016 election did so for many elections before that and will do so for many elections to come. It might be unfair to Republican politicians and frustrating to their voters that so many of the most prominent voices in broadcast media, in print, and online are against them, but the effectiveness of the bias is underwhelming.
The battle of ideas appears to be happening elsewhere. President Trump won the election and is keeping campaign promises despite the strong opposition. Republicans have majorities in Congress, hold the majority of the state governorships, and hold majorities in most state legislatures.
There are many more myths that cloud thinking, but I’ll stop here. I have come to appreciate David McCullough’s observation: “Writing is thinking. To write well is to think clearly. That’s why it’s so hard.” Perhaps if we embraced fewer myths, we would think more clearly and have better policy.
(Disclosure statement: Mark Jamison provided consulting for Google in 2012 regarding whether Google should be considered a public utility.)
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