As the article points out, weak antitrust enforcement has allowed companies to become monopolies, or near-monopolies. It's not just "tech". Look at banking. The US is down to four big banks. Until 1995, US banks couldn't operate in more than one state.
Right after deregulation, there are new entrants. Twenty years later, there are a very few giant companies. See telecom, airlines, etc.
It's my biggest gripe with current society. It's everywhere, and it's not going away. Nobody is tackling it, or talking about it seriously. At some point I thought that companies would become more powerful than states, but I've changed my mind on that. Nations do retaliate hard if they feel threatened. Maybe I've just turned naive again. But when it comes to monopolies I just don't see them ever going away now. Too much globalization combined with lobbying power and corporate veils. People talk about companies and never about the people who make the decisions, and I feel like people have trouble with accepting that in the end nobody actually wants to be in a society where companies can do whatever they want and end up being a negative contributor to society.
Some of it is lack of antitrust enforcement. Something that isn't mentioned much, though, is that business IT technology reached the point that planetary-scale companies work well. Until the 1980s or so, big companies had scaling problems. Big companies developed huge internal paperwork operations, huge headquarters staffs, too much middle management, and were choking on their own operating problems. There were inherent limits on bigness, beyond those imposed by the cost of transportation. The classic example was General Motors, which had a long history of management problems from sheer scale.
That's been fixed. Amazon, Google, WalMart, Alibaba, etc. have worldwide operations without major scaling problems. Those companies can adapt and change reasonably rapidly. The knowledge of how to do this is widespread. This is new. An inherent limit on bigness has been eliminated.
I think you are mistaken. Big Tech has the same 'human' problems as classic companies- bloated middle management, fluff work, empire buiding, process, etc. They get away with it because they are growing and can increase prices right now. Sooner or later when the vast majority of companies realize they don't have to buy software at inflated prices- the house of cards will collapse. hypothetical e.g. GM will question if they should spend $1K/car sold on advertising, CRM and internal IT if their profit is $900/car.
I think an important thing is also using companies as foreign tools. The nsa would hate to see Google or Facebook broken up and supplanted everywhere by local companies. Or, worse, supplanted by a equally large Chinese monopoly.
That can be simplified even further, the NSA doesn't care about Google, Facebook, or any other specific companies, just the ability to extract data from them. They would truly hate if the Third Party Doctrine were overturned.[1]
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Unfortunately, I don't think that influence from NSA has had much to do with the reluctance of legislators to limit Big Corporations
I think we should all hate to see the latter. Unfortunately, it's already happening with TikTok, and with the rate of innovation in China, we'll see many more.
Perhaps if these companies were not such illegally large monopolies then they would have less perceived value as "foreign tools".
> But when it comes to monopolies I just don't see them ever going away now. Too much globalization combined with lobbying power and corporate veils.
Weâve been here before though, in the era of Standard Oil. They can be broken up, but it wonât just happen on its own. The government needs to take action.
> Weâve been here before though, in the era of Standard Oil.
If interested, Standard Oil was drawn as an octopus in Puck magazine (1904). The Library of Congress notes: "Illustration shows a "Standard Oil" storage tank as an octopus with many tentacles wrapped around the steel, copper, and shipping industries, as well as a state house, the U.S. Capitol, and one tentacle reaching for the White House." [0]
> The government needs to take action.
The government is taking action. The government is in on this consolidation via investments, contracts, preferential legal & tax treatment, etc. Think about this from the government's perspective. The government would rather govern a small number of large entities instead of a large number of small entities, thus the government is incentivized to favor monopolies/oliogopolies. The government itself is a monopoly of power in many domains.
Sure, the government may intervene with a company getting too big, but the intervention is so the government can gain a foothold with that company. e.g. any telecommunications platform will need to have back doors for the law enforcement agencies or said telecommunications platform will not be allowed to operate.
It's very beneficial to them for just a few companies to control everything. Then they can deperson you and say "It's a private company, not the government, they have to freedom to do business with whoever they want". That's quite a bit more difficult when there are thousands of equally viable competitors.
Globalization and Lobbying are not irreversible trends. The world is already starting to become less "global", with the Chinese belt-and-road initiative, Russian exclusionism, and the breakdown of NAFTA (among other things). Many world powers, including Russia, China, and the US (to some degree) want the world to be less open for trade and large corporations.
as for lobbying, America has been through this before. The Gilded Age saw lobbying to an even more extreme degree, with companies like US Steel and Standard Oil able to basically pay off senators. The same thing happened with slave plantations in the 1850s. After the great depression (and even before to some small extent; see the breakup of Standard Oil), laws were put into place heavily curbing lobbying, insider trading, among other things (like stock buybacks). Really, we're in another Gilded Age, and one day the balance of power between the individual, the state, and the industry will shift again.
This has had a big impact on the economies of regional mid-sized metros as jobs consolidated in coastal megacities. Arguably, this resulted in a lower quality of life in both classes of cities.
Good Atlantic article on the subject: https://www.theatlantic.com/business/archive/2016/04/how-ame...
See "The Great Reversal: How America Gave Up on Free Markets", by Thomas Philippon [0]
[0] https://www.hup.harvard.edu/catalog.php?isbn=9780674237544
Many people erroneously equate Capitalism with Free Markets.
No, many people incorrectly equate a monopolistic, pay-to-play, regulation-captured plutocracy with capitalism.
Fundamentally, capitalism is about handling economic planning in an efficient way by free-market autoregulation and policy makers who nurture competition to ensure that process continues to happen efficiently.
> See telecom, airlines, etc.
Don't forget media companies. Everybody forgets media companies because media companies that have no qualms writing articles condemning mergers by Bank of America have a different incentive when it comes time to look in the mirror.
How many companies were started over the last 20 years where the expressed goal, the "win condition" in the founders minds, was a buyout?
The idea of building something neat is a lot more attractive than running a business that sells the neat thing to customers. The people who want to run businesses are in the lovely position (for them) of having more fresh, good ideas offered to them than they can review, much less use.
History repeats! 20 years ago, some business exit plans basically boiled down to "...and then we'll get bought by Microsoft!" Not too bad, at least for the founders.
Especially if your goal is to land a nice FAANG job anyway. It's gotten to the point where interviewing is so competitive, exhausting, opaque, and ultimately random, that it might actually be easier to do a bootstrapped start-up for a year and get bought by Facebook than it is to grind leetcode and interview-prep for a year and roll the dice on the interview circuit. I wish I were joking.
EDIT: Wow, no disrespect to founders, I did not intend to trivialize the work you do. Instead of "easier" I should have said something like "more controllable" or "less random".
> that it might actually be easier to do a bootstrapped start-up for a year and get bought by Facebook than it is to grind leetcode and interview-prep for a year and roll the dice on the interview circuit. I wish I were joking.
If you are not joking you are delusinal, this is not even remotly true.
You may not agree with OP, but I don't think this view is delusional. Starting a company is a lot of day to day work in terms of hours, but it's more rewarding than doing interview prep. If you spend weeks or months studying for interviews and don't land a job, you get nothing. If you start a business you generally get paid or make profit the whole time, you build relationships and end up with something tangible to show for the experience.
Personally, I would much rather be running a moderately successful business than studying esoteric programming questions full time. At the least, the relative "easiness" of starting a business vs the normal FAANG interview process is personally subjective.
I guess it depends on your previous experience. If you're familiar with actually building a software company, know good people to employ and know a problem that needs solving, it probably is easier to go that route than having to learn the whole interviewing-scam thing that is happening today, in order to just be employed.
Helps that building a company gives you real experience as well while prepping for interview just gives you that, preparation for the interview, while the real job is different than the interview.
OP is exaggerating, but Yahoo under Marissa Mayer wasn't far off. Nicholas Carson's 2015 book about their M&A during this era has lots of details.
> grind leetcode and interview-prep for a year and roll the dice on the interview circuit.
Or go to a serious CS/Engineering school and just take the Algorithm class.
This is not anywhere close to true. Have you built a bootstrapped startup from scratch and negotiated an acquisition? It's far, far harder than practicing a few leetcode Facebook problems and getting a referral.
Agree 100%. I've bootstrapped, I've been acquired, and I've gone through the FB/G/etc. interview processes. Going through those interviews took a few weeks of light prep, whereas bootstrapping to acquisition was a multi-year slog. Just the due diligence portion of the acquisition too many, many, many times the effort of job interviewing.
You don't even need the referral. Unless your CV only has farming experience or something :-)
Yep. Bootstrapping a startup is hard.
FAANG interviews are not even close.
If the acquisition is mainly about talent, and in many cases, even if it's not, FAANG will expect you to interview like everyone else.
Source: founder of a company which was acquired by a non-FAANG company, but talked to a few FAANGs as part of the process.
> Especially if your goal is to land a nice FAANG job anyway.
I wouldn't just say getting acquired by a FAANG company. I work for one of the biggest health care companies in the world. Last year they acquired over 200 companies with the goal of exceeding that this year.
They literally are buying companies whose technology they would rather buy then build themselves. If you knew what my company was looking for (machine learning, AI and automation) you literally could start a company with less than ten people, focus your work on one of the three areas and have a better than decent shot of being acquired by the company I work for in a span of less than 5 years.
What would take longer? Building that company with a singular focus on a singular product my company needs or achieving a senior level knowledge of Javascript for a full stack developer role? I would say at that point its a toss up.
Most of this tech has strong network effects. And while the marginal cost of shipping an additional unit tends to be close to 0 (creating the incentive to grow almost boundlessly), the costs of complying with regulation in dozens or a hundred countries is quite high.
Thus, it entirely makes sense for a founder want to build great tech and a great product, but NOT want to be in the business of complying with a dizzying array of local and international regulations, in a world where they effectively have to expand globally to "win".
Big companies aren't typically nimble enough to respond to the whims of consumer tastes or catch the latest fads.
So, it's a great symbiotic relationship between "big tech" and startups.
Acquisition, cash out, bolt on regulatory and legal framework, wash, rinse, repeat.
Oh my, after all these years I finally understand in what way Google actually is like a startup :D
Google was acquihired by DoubleClick.
Its a no-brainer for most. Put in a couple years of work, cash out big, go live the dream. Every incentive aligns with this though process so why stop doing it now?
Why would you want to cash out out of something you love? These kind of businesses struggle. But when you have a rich parents, they you come up with some start up idea, hire a team of people to make it - then yes cashing out is a win. But those people don't look at it as business, as a real thing that adds value for other people, but pure selfishly as showing themselves they can pull this off. These people also often steal ideas from people who care and love what they do. Often those people become wage slaves in those rich daddy companies.
Then don't cash out. But that's usually a fantasy. Nobody is really "passionate about enterprise saas" or whatever the marketing says.
Founders are interested in control and eventual (financial) freedom, and tend to like building an organization in general. An acquisition provides that freedom while allowing them to build something else in the future with even better circumstances.
Because you might love security for your familyâs future more than your work. A bird in the hand is worth two in the bush. You can always start another company.
At any given time, there are founders in the "sprint-to-buyout" camp and those in a "build to own" camp. In any given year, there are many founders who hold to their principle and those who change their minds.
People make choices. Nothing is deterministic. That said, the number of companies founded, run or exited with a buyout win condition mentality is governed by price economics. FB, Google, etc offered a very high price for Android, Instagram, etc. because those M&As were worth a lot to them. Given this, a lot of M&As are going to happen.
The interesting question, to me, is "why is the price so high?" It's silly to get all huffy about M&As and ignore the consequences of M&As.
My understanding is that the vast majority of these M&A destroy capital. The reason to own dividend stocks is not because they pay dividends but because they don't have tons of cash lying around to spend on low value projects or M&A.
It would be a lot more insightful to discuss the aquisitions that have a known positive impact. The truth is probably that each company had just a few very important acquisitions (that should be more closely scrutinized).
Our current tax laws make vertical integration or even conglomerates more tax efficient. Greater scrutiny of anti-competitive mergers is needed, but we should also make separate companies just as tax efficient (VAT tax, etc) and otherwise closely examine how we can change economic incentives here.
> My understanding is that the vast majority of these M&A destroy capital.
I think this would be very difficult to tease out of the data. Many acquisition are de facto defensive, even if they or not anti-competitive from a legal monopoly perspective.
How could one measure the the loss of brand value if the acquired companies were allowed to mature or be acquired by a competitor?
It's also a 'number of acquisitions' vs. 'value of acquisitions' argument.
If you had to guess the 'value' of TurboTax, The Microsoft Office Suite, Macromedia, Instagram, YouTube, NeXT, Pixar, VMware, etc. etc., you'd probably find that the good M&A outweighs bad.
It's just that bad M&A happens a lot can be really bad (AOL Time Warner).
>Our current tax laws make vertical integration or even conglomerates more tax efficient. >...we should also make separate companies just as tax efficient (VAT tax, etc) and otherwise closely examine how we can change economic incentives here.
related:
"Biggest companies pay the least tax, leaving society more vulnerable to pandemic â new research (2020)" -- https://theconversation.com/biggest-companies-pay-the-least-... -- (https://news.ycombinator.com/item?id=22786371)
"Destroy capital" is unavoidably speculative, I think. I'm not sure it's the most useful frame. No need to be abstract if we're referring primarily to a few large companies/conglomerates.
Instagram, Whatsapp, Youtube, Android, Doubleclick, etc.. Those acquisitions are undoubtedly a major part of how Google & FB got to here... and here is a good place for shareholders. IMO, it's hard to argue management destroyed value, but we don't ever know alternate realities.
Either way, I think there's a strong case that "competition for monopoly" is the key dynamic here. A business similar to adwords-google but with only 1% of the market share is worth way less than 1% of adwords-google. Think of Yahoo/MSFT's attempts at adwords' runner ups. How much is reddit worth, relative to FB? There are lots of examples. Even if the market does have multiple contenders, the power curve tends to be mighty in modern, software-centric economics.
For a variety of reasons, strong pressure to consolidate appears to be the case often. Whatever those reasons, this creates/describes a strong incentive to consolidate. We know empirically that consolidation happened, and acquisitions played a role. Consolidation also happened in cases where acquisitions didn't play a major/obvious role.
Tax laws are one of those reasons, but not the only ones. There's low interest rates, the laws of other countries, the business cycles, financial markets, etc. It's financial markets that have the operative say on capital creation vs destruction. They value FB highly, and have usually seem pleased with M&A in terms of demand for the stock.
There are also "natural" reasons for M&A, and consolidation more broadly. Software is cheap to replicate/scale and is often winner-take-most. Media is similar. Ad markets (and marketplaces generally) exhibit network effects. Networks (like social networks) exhibit network effects.
IMO the whole theoretical/legal framework of antitrust is quite bougus, in 2021. Monopoly isn't just about pricing power, and whatever else ancient economists observed in previous centuries.
> Monopoly isn't just about pricing power, and whatever else ancient economists observed in previous centuries.
This understanding of monopoly has only existed since the mid-20th century. Prior to that, the definition of a monopoly was more expansive and included analysis of market & industry structure.
The start of this line of thought was Robert Bork in 1978: https://en.wikipedia.org/wiki/The_Antitrust_Paradox
> we should also make separate companies just as tax efficient
Corporation taxes should be progressive too. Huge corporations are harmful to society, we should incentive many small ones to take their place.
>Huge corporations are harmful to society,
Can you tell me who kept your packets coming during the covid lockdowns?
Huge corporations are important. They possess the capital, logistics and capacity and institutional knowledge, as well as the resources to absorb shocks during crises. They are able to operate society at scale.
On average big business pays higher wages, provides better benefits, is more productive. Monopolistic competition is more dynamic and delivers better outcomes than highly competitive small-business.
> Can you tell me who kept your packets coming during the covid lockdowns?
Mine? Mostly a government company. But secondly a specialized logistics one that outsources last mile delivery almost everywhere. I'm impressed by how many places decided to concentrate shipping on that one, and how well it works.
Anyway, if size is that important for logistics, it's not some progressive taxation that will change things. On semiconductors, for example, it will certainly not make any difference. And if size is not that important, then not having one or two companies killing every competitor due to concentrated power overwhelms any possible loss you may come out with.
>Huge corporations are harmful to society
Not necessarily disagreeing but I am curious how you ultimately came to such a general conclusion. I can see both sides: E.g., Walmart may be good for many in society by offering lower prices, while simultaneously being bad by putting smaller, better paying jobs out of business
Big Tech got so big because digital technology is different from preceding industries in that increasing (not decreasing) returns to scale prevail. In particular, in software where marginal costs are near 0. It's a different ballgame. I think regulators have figured this out but for the most part it appears that they don't know how to act upon it.
Um, the concept of "econommies of scale" is something that has existed since the start of the industrial revolution. This is nothing new to Big Tech.
Traditionally, you had _decreasing_ returns to scale. What's new with digital technologies is _increasing_ returns to scale. Very counter-intuitive for traditional economists - or even business people. People like Gates, Bezos, Brin & Page, Zuckerberg and so on have ridden this for all its worth. Let's out distance them as much as we can before they figure this out. Whether competitors or regulators.
That said, I like the story about someone observing Gates at, I think, a graduation ceremony where Gates had brought along a biography of Rockefeller (John D.). Did Gates know before or after the fact that MS had in fact used a competitive strategy comparable to Standard Oil?
Meaning, unlike increasing returns to scale that was something for which there was an historical precedent. The basic idea being: when my competitors revenues go up, my revenues also go up. A fatal long-term proposition for those competitors.
I'm very skeptical of this "decreasing returns to scale" thing the traditional economists do being true in either era.
The GP is talking about the second derivative of the price, not the first one.
What he talks about is new. And I believe he is wrong, it's just a negative value very close to zero, not positive.
GP is talking about the marginal benefits of scale. In manufacturing, there is a floor at which increasing scale doesn't decrease the cost of making each additional unit. No matter how much a widget company automates their factories, they can't bring down the cost of a widget below the cost of the raw materials. At some point, investing into making widgets becomes a negative ROI.
That often never happens with software because network effects allow each unit of raw material (servers, data, etc.) to produce more value as part of the whole. It would be as if a widget factory could make 2 pounds of widgets out of 1 pound of raw material when it double its sales.
This is a strange analysis. "Number of acquisitions" seems like a weird metric, without accounting for their significance (in purchase price, impact on the business, or any other real-world metric).
facebook buying Instagram was probably more significant than all the other acquisitions combined.
> "Number of acquisitions" seems like a weird metric, without accounting for their significance (in purchase price, impact on the business, or any other real-world metric).
This comment sounds like the nirvana fallacy striking again.
There is no perfect metric for measuring something like overall market dominance.
Thanks to a series of supreme court rulings, the traditional approach has been to look at consumer harms. But that metric alone fails to account for the way modern large conglomerates make money: not by gouging the consumer, but by dominating entire industries.
So how else can you look at it?
Acquisition are just another lens. Is it an imperfect lens? Yes, of course. I challenge you to find an analysis that isn't.
But is it still meaningful? Yes, I absolutely think so! It is undeniably the case that these tech giants have used acquisitions as a way to protect their market position. So it absolutely makes sense to analyze their behaviour from that perspective.
Furthermore, this is a news article not a whitepaper. Yes, there is an enormous amount of nuance in this kind of argument, and if you were prosecuting these guys for antitrust violations in a court of law, you'd probably do a deeper dive.
> facebook buying Instagram was probably more significant than all the other acquisitions combined.
How do you know that? There's simply no way to know how some of these companies would've fared because these anti-competitive practices have ensured that promising startups are smothered before they become a threat.
> How do you know that? There's simply no way to know how some of these companies would've fared because these anti-competitive practices have ensured that promising startups are smothered before they become a threat.
Exactly, and adding to that: what about the tons of smaller companies/startups bought for a unique technology that was implemented under the hood across major products of the tech giants? We don't know about them except if some former employee leaked it, most projects will be private/secret and the public at large will never heard about the impact.
Think lots of small "Doubleclick"-ish companies that were bought for a small set of features that were then transferred to major products.
Alot to agree with here - how would Google have faired without being able to strategically acquire companies that made specific tech for ads and search?
Google buying Doubleclick helped them crush the ad market for publishers.
Number of acquisitions is interesting, though, because you can also phrase it as "number of potentially viable independent companies that no longer exist". We are better off with more independent companies.
They all learned from MS. MS tried to buy Netscape but didn't offer enough and got turned down. So MS set out to use its position to boost its own browser instead, anti-trust followed because it was obvious MS was using its position to muscle out an independent company.
For the big Tech companies now, small acquisitions are win win wins, they get the people, they get whatever was developed and they permanently avoid Microsofts Netscape situation.
That being said, I'm guessing no small number of these startups were setup with the express purpose of being bought out like this.
> For the big Tech companies now, small acquisitions are win win wins, they get the people, they get whatever was developed and they permanently avoid Microsofts Netscape situation.
I have a theory that this is why MS treats its research division staff and interns so well. It reduces the amount of competitive pressure MS would face if they were all working elsewhere/on their own startups.
Many corporate acquisitions have the sole purpose of killing off/absorbing companies early, before they gain traction in the market and become viable competitors.
Focusing on real world metrics will give a very incomplete picture of the impact acquisitions might have had on the market.
> facebook buying Instagram was probably more significant than all the other acquisitions combined.
Deja News was probably the biggest tech acquisition by a FAANG company. The average white collar worker spends ~6 hours a day in their Gmail, and about 5 min a day using search.
I'd have estimated more like 10x that on search and around 1/4 of that in gmail.
How did buying Dejaâs hard drives â they did not acquire the company, only âsignificant assetsâ â lead to Gmail?
IIRC their email parsing code became the basis of Google Groups, which then became the basis of Gmail.
The thing thatâs missed is that vertical Integratron is far more efficient for core products than relying on third parties.
Apple won out over Microsoft in consumer electronics because they were able to make decisions up and down the stack as a unit whereas Microsoft had to deal with layers of device makers and consortia.
All the talk of breakups and âbig is badâ ignores the fact that vertical works better.
I donât think it has to be this way. I think itâs entirely possible that a network of companies can outperform a monolith with the right kind of coordination.
This would be a new, evolutionary strategy, and would be good for everyone.
It wonât however, emerge if we roll the clock back to the late 90âs by force.
> All the talk of breakups and âbig is badâ ignores the fact that vertical works better.
That's not even close to being universally true, and good/bad are in the eye of the beholder. Is it better or more efficient for the people who assemble the phones? Is it better or more efficient for the retail employees making minimum wage? Is it better or more efficient for app developers who lose 30% of their revenue to private taxation, or the businesses that never reached their potential because a BigTechCo launched a competing product at a loss?
> It wonât however, emerge if we roll the clock back to the late 90âs by force.
It might, but I can absolutely, guarantee, beyond a shadow of a doubt that we don't get a more democratic solution if we leave the current stakeholders in their current positions of immense power.
> Is it better or more efficient for the people who assemble the phones?
yes. Factory work is better than subsistence farming. And big tech has done 100x more than anyone else in the consumer electronics supply chain to push for better working conditions in those factories.
>Is it better or more efficient for the retail employees making minimum wage?
Yes. Improved margins are what allow wages to rise. Inefficient businesses donât have the money to pay employees more. Apple retail stores pay on average 18$/hr vs the 10.50 a mom and pop might be able to afford to pay someone.
>Is it better or more efficient for app developers who lose 30% of their revenue to private taxation, or the businesses that never reached their potential because a BigTechCo launched a competing product at a loss?
Yes. Software distributors used to pay 50% to retailers.
> Factory work is better than subsistence farming.
Working in a 1900's Chicago meatpacking plant may have been better than subsistence farming too, but the alternative to working in bad conditions isn't going back to farming, it's improving the working conditions. Big tech has NOT done 100x more than anyone to push for better working conditions. If they really wanted to provide good, first-world working conditions in their factory, they could do so. Yes, their costs would go up, that's what happens when you stop subsidizing consumer products with labor abuse.
> Yes. Improved margins are what allow wages to rise. Inefficient businesses donât have the money to pay employees more. Apple retail stores pay on average 18$/hr vs the 10.50 a mom and pop might be able to afford to pay someone.
Is the Apple store representative of all retail? And further, with Apple's massive stack of cash in the bank, shouldn't they be paying their workers even better? Are they not a big part of getting that premium margin for apple?
Further, that doesn't seem like a better or more efficient deal for entrepreneurs. Should we be happy that most independent electronics stores have been replaced by branded stores and Best Buy?
> Yes. Software distributors used to pay 50% to retailers.
More bad faith arguments huh? I guess you mean before the internet, when they actually had to ship physical medium and deal with retailers? Keystone pricing is pretty standard in that setup, and at least you had a broad choice of distributors to pick from. There is no justification for the high fees or the lack of distribution options in 2021. It's almost pure profit for the landlords.
> That's not even close to being universally true, and good/bad are in the eye of the beholder. Is it better or more efficient for the people who assemble the phones? Is it better or more efficient for the retail employees making minimum wage? Is it better or more efficient for app developers who lose 30% of their revenue to private taxation, or the businesses that never reached their potential because a BigTechCo launched a competing product at a loss?
Yes. It works better for making technology.
Nothing you have said contradicts that.
Every single one of the indicators you mentioned is better now than it was in the 90s.
What you are calling for is more opportunity for all these people to build wealth.
Making existing industries work less well is not going to achieve that.
Things that might: universal health care, student loan easing, increased investment in impoverished communities.
Blaming things that work well and breaking them is silly.
Making new things that work better is not.
> Yes. It works better for making technology.
You haven't proven that at all. You took one instance of Apple disrupting Microsoft's PC dominance and seem to have extended it to an entire worldview (which clearly ignores the entire MS antitrust saga that took place a couple years before Jobs reinvented the company).
> Making existing industries work less well is not going to achieve that.
You haven't proven that. When AT&T was broken up, it unlocked a host of new technologies (answering machines, modems) that Ma Bell was blocking to protect their existing revenue model.
I like Microsoft's approach more though. It makes the market more modular, since other companies have access to the same resources.
You can say "Apple's machines are easier to work with because better integration". But I'd say that's only a small convenience which doesn't stack up against the huge downsides of this non-modular approach as seen from the societal/economy perspective. My mom and dad can work with a Windows laptop just fine.
> My mom and dad can work with a Windows laptop just fine.
Mine canât. All I know is I spend many fewer hours, near zero, doing tech support for my parents on macOS/iOS than when they used Windows.
Mine too. But it has nothing to do with the hardware or software (I'd argue that for many things the Apple ecosystem makes things harder due to its inflexibility) and everything to do with the fact that whenever they have a problem they can walk to an Apple Store (or call Apple Care) and they are able to help without having to work around my time constraints (job, family, etc...) I suppose that's a type of integration too (the fact that Apple has retail stores and a Genius Bar that for "normal" people works well to solve "normal" problems) but it has nothing to do with pure technological innovation.
> I like Microsoft's approach more though. It makes the market more modular, since other companies have access to the same resources.
Microsoftâs approach failed against Appleâs when it came to product innovation. Thatâs why Apple is now dominant.
The downsides from a societal perspective are imaginary. Things simply werenât better in any way when Microsoft was dominant.
Having said that, I agree with you - modular could make things better.
This is what I mean by a network of companies.
We need a new model of modularity - not microsoftâs variety.
Apple isn't even close to dominant though. Mac market share is less than 10%. Microsoft is around 90%.
Vertical doesn't unequivocally work better, there's a high external cost.
None of Apple's "stack" is available to other companies because they have no incentive to sell components. The reverse happens, they buy up independent companies (like the touch id folks) and prevent anyone else from using a given piece of tech.
Same problem with Amazon and shipping. Regular schmoes are limited to USPS/Fedex/UPS for shipping in the US. Amazon opting out of the "market" for shipping limits the quality of the shipping services I have access to.
We need to role back to something closer to the 1970s, really. The 90s were ok in tech company terms (at least when the DoJ slowed Microsoft's monopoly) but that was already a full decade into the big-ification of companies.
There's no real alternative but force. You can't evolve from big monopolies into smaller companies, the smaller companies can't even exist in most cases.
>None of Apple's "stack" is available to other companies because they have no incentive to sell components. The reverse happens, they buy up independent companies (like the touch id folks) and prevent anyone else from using a given piece of tech.
As Apple's sales success allows them to invest even more in R&D, their tech stack become an even bigger moat. Competitors are going to find it increasingly difficult to create products that can compete with Apple's tech stack on a technological basis.
I'm less worried about moats (although we should be wary of anticompetitive moats) and more worried about an ecosystem where the already successful companies monopolize access to innovations.
Forget competitors, you can't buy the touch ID tech to create things like door locks. Big companies locking up access to markets means big companies are the sole arbiters of what even gets sold.
> Competitors are going to find it increasingly difficult to create products that can compete with Apple's tech stack on a technological basis.
No one is stopping anyone (outside of US economic sanctions) from getting an ARM architectural license and designing their own CPUs to compete with Apple. There are countless vendors to choose from if you don't have the experience to do yourself, there are IP cores for everything from battery management over memory to AI available on the market.
The problem is that, rather than go the expensive Apple route, most seem to be content to pay top dollar to Qualcomm (or for lower classes, Mediatek) and get buggy hardware and BSPs in return, instead of pushing Qualcomm to deliver better quality.
And for what it's worth, there are serious competitors to every Apple product. There have been Windows laptops with 32 and 64 GB of RAM years before Apple finally updated their line. Samsung puts up a diverse lineup of phones and tablets that definitely compete with iDevices. Sony has AirPod clones (admittedly they're bulkier, but have more selection in earbuds). There are a number of Apple TV competitors - Roku, Amazon's TV stick, Chromecast to name the most popular ones.
Environmental pollution also "works better" for companies and yet we regulate it. I don't think this is a false dichotomy, the role of government in business regulation is to modify business practices that are contrary to the best outcomes for society. Not what is more efficient for businesses.
It is a false dichtotomy.
Inefficient decision making creates environmental pollution.
Regulating to make companies less good at decision making under the belief that this will increase opportunity is literally making society stupider. It is the path to idiocracy.
Iâm not against government intervention.
Letâs invest in alternatives, and letâs invest in making peopleâs lives less precarious.
Software had the promise of massively decentralizing business; anyone with a computer and a bit of knowledge could start hacking away at a new product. It is a bit sad to see big tech becoming a way of even more centralization of power. I guess it had the potential for either; individuals being able to easily capitalize on it, or businesses being able to replicate infinitely and have huge margins from very little input capital. But maybe both are happening at the same time. A double edged sword, like so many other things.
That's the myth we were sold. It's the myth many of us believed. I certainly did.
In truth, greater efficiencies don't decentralise, they centralise. The market area expands. Suppliers or vendors, rather than competing locally, compete regionally or globally. In winner-take-all markets, there is only one winner, worldwide.
There are some twists on this, having to do with regional customs, language, and law, mostly. There's also the time element, where tech monopolies tend to be ascendent, then (often but not always) replaced. Still, a technological advantage can last a very long time, as with IBM and AT&T. Two of today's FAANG date from the 1970s, another two from the 1990s. Dominance can be long-lived.
There were some who saw this coming. Andrew Shapiro's The Control Revolution (1999) kinda-mostly saw this coming, and certainly called out the major aspects. Shoshana Zuboff recognised at least some of the potential in the 1970s and 1980s.
The crowd still believes the lie, for the most part.
In biology we understand fairly well that environmental complexity leads to greater biodiversity. If the Earth's environment were entirely uniform there would probably be only a few species and nothing would ever change.
Global highly efficient markets are like a polished flat globe with a uniform climate everywhere. Evolution would produce only one or two species in permanent equilibrium.
The more I think of it, the more I realize, biology is very much unlike the market in such analogies.
In a way, the market is biology flipped on its side, like a transposed matrix - where in nature, life forms mostly cooperate within their species (or at least ignore each other) and prey on other species, on the market, companies of the same type fight it out, while ignoring or cooperating with companies of different types.
But I think the main difference is scale. The area of influence of a life form - where they live, hunt, reproduce - is very limited. Same is true with companies serving local markets. A local glass factory. A corner market. You say:
> Global highly efficient markets are like a polished flat globe with a uniform climate everywhere.
But it's not just a flat globe. It's a globe with a surface of couple dozen square kilometers! It's literally a single niche. Not even that - it's a cage. Imagine a zoo that decided to put all its animals in a single, large cage. You won't have to wait much before there's only one big animal standing (and a bunch of insects scattering about).
On a more general note: biology is a good example that you can make a complex and robust system by giving imperfectly-self-reproducing agents a lot of space to play in, and then throwing calamities at them to keep things interesting. But I honestly don't like using it as a recipe for designing systems, because of all the waste that's involved. Waste of effort, waste of resources, waste of life. I feel we should avoid this kind of hard self-regulation whenever we can.
This sounds unlikely; even with just one species sooner or later a random mutation would give some individuals an "edge" over others in some area, and others would get an "edge" in some other way. Different strategies will evolve, especially if we consider the hunter/prey arms race.
Less biodiversity? Sure. But one or two species? Probably not.
Island vs. mainland evolution is probably an apt comparison.
On a mainland (a region with widespread intercommunication within a species), speciation is relatively rare (baring catastrophic events). On an island, any given mutation is proportionately a larger share of the genome already, and has an opportunity to take hold even if there is little or no relative advantage.
(Evolution is a case of natural selection, with the presumption being that that selection is itself beneficial. In truth, "benefit" can be wide-ranging, and genetic drift where a set of equipotent or merely latent advantages occur and are distributed are frequent. There's also the distinction between what I call exogenous and endogenous selectors. The former are imposed by the environment, the latter from within the social behaviour of the species itself (assuming social behaviours). There are also purely random events --- getting hit by an asteroid or consumed by a volcano, say --- though one might argue that vigelance plays a role here.)
But yes, a globally-interconnected world with common trade interests, exchange, languages, etc., is one that's been flattened and made uniform. One suspects that disuniformities may eventually appear and change the economic calculus.
One force that seems highly potent at present, and underappreciated, is the reliance on energy (oil) and strategic minerals, both either only or highly preferentially accessible in specific locations. My view of the post-WWII global dynamic is that it makes far more sense to consider it as an interplay between three major oil-producing regions: the Soviet bloc which was both a largely self-sufficient producer (Baku) and exporter, the Western bloc (NATO, ASEAN, Japan, South Korea) which was a major producer, but relied increasingly on imports, and the swing bloc of the OPEC states (notably Saudi Arabia, though also Iran, Libya, Iraq, smaller Gulf states, and others). The US/NATO posture of protecting and defending global oil production and transport emerges in this context. The Soviet bloc could rely on land-based pipeline transport to a far greater extent.
Strategic minerals, largely derived from Africa, spell out much the rest of this story.
There's more explanation in this to my mind than many of the ideological explanations. My sense is that ideology itself more likely flows from the geopolitical dynamics.
As relates to future geopolitics: the general sense is that oil will diminish in signficance (probably, though not certainly). But an advanced electrified world relies increasingly on exotic elements either not widely available (e.g., coltan), or which, whilst not rare per se, have exceedingly messy extraction processes (the so-called "rare earths", actually reasonably abundant but not ore-forming, meaning that even "rich" deposits are actually low concentrations, requiring much overburden removal, processing, and tailings.
Lithium already appears poised to be the next energy storage medium, and is similarly to oil nonuniformly distributed globally. Seawater extraction seems one possible way around that limitation, though at 1ppm concentrations, that's a challenge. Possibly if integrated with other seawater-based activities (desalination, seawater-based fuel synthesis, etc.).
Software doesn't favor decentralization at all... at least not the current software and Internet ecosystem.
The complexity of software coupled with its absolute rigidity makes it hard to build systems that talk to each other even when specifications are public. When things are proprietary take the difficulty of making software interoperable and add a total lack of documentation and a possibly adversarial relationship with the vendor where they'll try to deliberately shift things to keep you out. (There could also be legal barriers, but I'm just talking about technical ones.)
Then consider the added difficulty of opening systems to interoperability with other systems while maintaining security. If you allow connections from untrusted systems, now you have to be particularly meticulous in the design of your software to ensure there are no exploitable bugs, undefined behaviors, or holes in your permission system. We still mostly program in language that are "insecure by default" and make this hard.
Then there's the Internet itself which is intrinsically hierarchical. DNS, BGP, and the hierarchy enforced by NATs and firewalls that separate endpoints from the "real" Internet all make the network favor a "feudal" client-server model. We shouldn't be surprised that the Internet produces a lot of monopolies and closed silos; software built around the Internet takes on its shape.
Last but not least there's the use of cryptography to enforce walled gardens: certificates, code signature requirements, closed app stores, etc. This adds an artificial barrier on top of everything I mentioned above.
Compare this with older mechanical and analog systems. Even complex mechanical and analog electronic systems are straightforward to examine, measure, characterize, and understand. Ignoring patents and other legal restrictions it's straightforward to build replacement parts or interoperate with physical systems.
People didn't think well about the other side of the coin: if anyone can hack away a product, then what you need to make a lot of money is somehow gather the best minds that can make this machine work for you and monopolize their ideas. This is exactly the strategy behind the FAANG.
It depends on the product. But software has stronger the ecosystem effect and data lockin more so than any previous technology. Think facebook, youtube, Windows, office, apple ecosystem of products. They have two market characteristics: 1. People need to be on the platform that others are in 2. Once you are in you it's hard to leave. Both creates tendency for winner takes all economics. And I think many people knows this. Part of the reason why software companies since the 90s have higher valuation than other industries.
This goes both way: founders create start ups with the idea that being acquired is a valid exit strategy. It's hard to quantify but perhaps not that many start ups would have been founded if they didn't see as many valid options to exit, and a founder wouldn't have created the next big thing if his previous company didn't get acquired.
> and a founder wouldn't have created the next big thing if his previous company didn't get acquired.
Hershey (of Hershey's Chocolate) failed multiple times and went bankrupt each time before finally making his Chocolate company. Repeated failures are absolutely an option.
Anecdotal stories of the survivors from 100 years ago when you could work a bottom of the barrel job for 1 week and cover a months living don't apply today. In order to insulate yourself from failure, you need wealth today to draw upon and cover your cost of living. Many americans don't have a spare $400 (1), they can't quit their job to tinker with a perennially failing side business without ending up risking living on the street. Many americans are trapped.
1. https://www.cnbc.com/2019/05/23/millions-of-americans-are-on...
Hershey was pretty well connected. I'm pretty sure his family bankrolled a lot of his early ventures. This wasn't a "by his own bootstraps" story. But its absolutely a "try try again" story.
Today, there are more "by their own bootstraps" stories. Steve Jobs was the adopted. His original father was a Syrian immigrant, for example. If we go back to the 1800s, the "Gilded Age", the oppression of the "robber barons" was obvious: they destroyed small companies before the invention of antitrust laws.
Maybe we'd like more "by their own bootstrap" stories today, and I'd support implementing policies that make it more possible. (including a new antitrust review of today's companies, to see if they're bad for the economy, like the 1800s robber barons were). But lets not pretend that the 1800s were easier than they actually were.
That sounds like a survivor bias story
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