2018-2-15 Tech

The Four have so much power over our lives that most of us would be rocked to the core if one or more of them were to disappear. Imagine not being able to have an iPhone, or having to use Yahoo or Bing for search, or losing years’ worth of memories you’ve posted on Facebook. What if you could no longer order something with one click on the Amazon app and have it arrive tomorrow?

we’ve handed over so much of our lives to a few Silicon Valley executives (Apple, Facebook, Google, Amazon) that we’ve started talking about the downsides of these firms. As the Four have become increasingly dominant, a murmur of concern—and even resentment—has begun to make itself heard. After years of hype, we’ve finally begun to consider the suggestion that the government, or someone, ought to put the brakes on.
So, yes, the Four do avoid taxes . . . and so do you. They’re just better at it. Apple, for example, uses an accounting trick to move its profits to domains such as Ireland, which results in lower taxes for the most profitable firm in the world. As of September 2017, the company was holding $250 billion overseas, a hoard that is barely taxed and should never have been abroad in the first place. That means a U. S. company is holding enough cash overseas to buy Disney and Netflix.  Apple is hardly alone. General Electric also engages in massive tax avoidance, but we’re not as angry about it, as we aren’t in love with GE. The fault here lies with us, and with our democratically elected government. We need to simplify the tax code—complex rules tend to favor those who can afford to take advantage of them—and we need to elect officials who will enforce it.

Anyone who doesn’t believe these products are the delivery systems for tobacco- like addiction has never separated a seven- year-old from an iPad in exchange for a look that communicates a plot to kill you. If you don’t believe in the addictive aspects of these platforms, ask yourself why American teenagers are spending an average of five hours a day glued to their Internet- connected screens. The variable rewards of social media keep us checking our notifications as though they were slot machines, and research has shown that children and teens are particularly sensitive to the dopamine cravings these platforms foster. It’s no accident that many tech companies’ execs are on the record saying they don’t give their kids access to these devices.

The following are reasons I believe the Four should be broken up.

Since the turn of the millennium, firms and investors have fallen in love with companies whose ability to replace humans with technology has enabled rapid growth and outsize profit margins. Those huge profits attract cheap capital and render the rest of the sector flaccid. Old-economy firms and fledgling start-ups have no shot.

The result is a winner-takes-all economy, both for companies and for people. Society is bifurcating into those who are part of the innovation economy (lords) and those who aren’t (serfs). One great idea will make a twenty- something the darling of venture capital, while those who are average, or even just unlucky (most of us), have to work much harder to save for retirement.

It’s never been easier to be a billionaire or harder to be a millionaire. It’s painfully clear that the invisible hand, for the past three decades, has been screwing the middle class. For the first time since the Great Depression, a thirty-year-old is less well-off than his or her parents at thirty.

How do they do it? It’s useful here to remember how Microsoft killed Netscape in the 1990s. The process starts innocently enough, as a firm builds an outstanding product (Windows) that becomes a portal to an entire sector—what we’d now call a platform. To sustain its growth, the company points the portal at its own products (Internet Explorer) and bullies its partners (Dell) to shut out the competition. Even though Netscape had the more popular browser, with over 90 percent market share, it couldn’t compete with Microsoft’s implicit subsidies for Internet Explorer.
It’s happening everywhere across the Four, whether it’s the slow takeover of the entire first page of search results that Google can better monetize, substandard products on your iPhone’s home screen (like Apple Music), coordinating all assets of the firm (Facebook) to arrest and destroy a threat (Snap), or information-age steel dumping via fulfillment build-out and predatory pricing no other firm can access the capital to match (Amazon).

Maybe the consumer is better off with these “natural” monopolies. The Department of Justice didn’t think so. In 1998, the federal government filed suit against Microsoft, alleging anticompetitive practices. During the trial, one witness reported that Microsoft executives had said they wanted to “cut off Netscape’s air supply” by giving away Internet Explorer for free.
In November 1999, a district court found that Microsoft had violated antitrust laws and subsequently ordered the company to be broken into two. (One company would sell Windows; the other would sell applications for Windows.) The breakup order was overruled by an appeals court, and ultimately Microsoft agreed to a settlement with the government that sought to curb the company’s monopolistic practices by less stringent means.
The settlement was criticized by some for being too lenient, but it’s worth asking whether Google—today worth $770 billion and the object of affection for any free-market evangelist—would exist if the DOJ hadn’t put Microsoft on notice regarding the infanticide of promising upstarts. In the absence of the antitrust case, Microsoft likely would have leveraged its market dominance to favor Bing over Google, just as it had used Windows to euthanize Netscape.
Indeed, the DOJ’s case against Microsoft may have been one of the most market-oxygenating acts in business history, one that unleashed trillions of dollars in shareholder value. The concentration of power achieved by the Four has created a market desperate for oxygen. I’ve sat in dozens of VC pitches by small firms. The narrative has become universal and static: “We don’t compete directly with the Four but would be great acquisition candidates.” Companies thread this needle or are denied the requisite oxygen (capital) to survive infancy. IPOs and the number of VC-funded firms have been in steady decline over the past few years.
Unlike Microsoft, which was typecast early on as the “Evil Empire,” Google, Apple, Facebook, and Amazon have combined savvy public-relations efforts with sophisticated political lobbying operations—think Oprah Winfrey crossed with the Koch brothers—to make themselves nearly immune to the scrutiny endured by Microsoft.

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