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A public policy blog from AEI
As Tony “Iron Man” Stark once said, “Actually, [Captain America] is the boss. I just pay for everything and design everything and make everyone look cooler.” In a way, that is how I think about America’s tech giants. All they do is bring us great products and services while creating lots of jobs and wealth. That’s all. Europe would love to have them.
Of course, that doesn’t mean they didn’t mess up this Russian election interference thing. Nor does it mean they shouldn’t be regulated or reviewed by antitrust officials. Not at all. It’s just that they remain tremendous economic assets. Sometimes it’s easy to forget that, I guess.
So I was happy to see this piece by Farhad Majoo of the New York Times, “The Upside of Being Ruled by the Five Tech Giants.” Manjoo, by the way, typically refers to Alphabet-Google, Amazon, Apple, Facebook, and Microsoft as the Frightful Five. From his recent column, which tries to look at the upside of Big Tech:
Over the last few weeks, several scholars said there are good reasons to be sanguine about our new tech overlords. Below, I compiled their best arguments about the bright side of the Five. One benefit of having five giant companies in charge of today’s tech infrastructure is that they provide a convenient focus for addressing those problems. … Because Facebook, Google and Twitter play such a central role in modern communication, they can be hauled before Congress and either regulated or shamed into addressing the problems unleashed by the technology they control. This does not mean they will succeed in fixing every problem their tech creates — and in some cases their fixes may well raise other problems, like questions about their power over freedom of expression. But at least they can try to address the wide variety of externalities posed by tech, which may have been impossible for an internet more fragmented by smaller firms. “This is new stuff everybody is dealing with — it’s not easy,” said Rob Atkinson, president of the Information Technology and Innovation Foundation, a think tank, and co-author of “Big Is Beautiful,” a coming book that extols the social and economic virtues of big companies. (The foundation is funded, in part, by donations from tech companies.) “So when you discover a problem, scale makes that easier. You’ve got one or two big firms, and they have a lot of public pressure to be a responsible actor.”
My take: This does not strike me as a strong reason, more like cronyism where fewer players make it easier for government to strike deals or manage.
As an outsider to these companies, I tend to worry about the collective power of the Five, especially the way they have managed to control the fortunes of innovative start-ups. But none of the Five see themselves as part of a group — each of them worries about the threat posed by start-ups and by the other four giants, which means that none feels it has the luxury to slow down in creating the best new stuff. This dynamic — where each company competes mightily against the others — suggests some reason for optimism, said Michael Lind, who wrote “Big Is Beautiful” with Mr. Atkinson. “As long as their innovation rents are recycled into research and development that leads to new products, then what’s to complain about?”
You can see this in their product road maps. None of the Five has slowed down investing intended to further expand its area of control — for instance, Google keeps investing in search, Facebook is still spending heavily to create new social-networking features, and Amazon remains relentless in creating new ways to let people shop. At the same time, they are all locked in intense battles for new markets and technologies. And not only do they keep creating new tech, but they are coming at it in diverse ways — with different business models, different philosophies and different sets of ethics.
My take: Better. One reason to look at market dominance is if it is slowing innovation. We don’t want firms resting on their laurels. And the Fantastic Five are not.
The Five achieved their dominance because they operate in areas that provide massive returns to scale. Thanks to economic dynamics like network effects — where a product, like Facebook, gets more useful as more people use it — it was perhaps inevitable that we would see the rise of a handful of large companies take control of much of the modern tech business. But it wasn’t inevitable that these companies would be based in and controlled from the United States. And it’s not obvious that will remain the case — the top tech companies of tomorrow might easily be Chinese, or Indian or Russian or European. But for now, that means we are dealing with companies that feel constrained by American laws and values.
Yes, this is jingoistic; the idea of a handful of American tech giants controlling much of society has helped push regulators internationally to try to limit their power. But we would almost certainly do the same if a bunch of foreign companies attempted to take over our economy. At least it’s our own giants that we have to fear.
My take: Not bad. I would add that these firms also make America a magnet for global talent, and help keep us at the technological frontier. I think that matters for economic, cultural, and military reasons. They also add to our ability to model democratic capitalism for the rest of the world.
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