Let me return for a moment to the monopoly beat.
This time it’s a book recommendation and some brief ruminations on the topic of tech monopolies.
The book is Move Fast and Break Things by Jon Taplin. (Description here, buy it here.) It’s a big look at the monopoly age but specifically the topic of tech monopolies, or what are properly called platform monopolies. Who are we talking about? Facebook, Amazon, Google and a few others. There’s a lot here but the big picture is how the rise of platform monopolies has led to a staggering concentration of wealth, corporate power and now political power. It is also the story of how platform monopolies have engineered the massive engrossment of wealth and income from creative industries like music, books, movies and journalism and redirected that money toward the tech sector.
After I wrote this post about monopolies a week ago, I had a couple emails from people who completely agreed with me about monopolies like the telecoms but said it was misleading to apply the same terminology and conceptual framework to tech giants like Google.
Here’s part of an email I received from TPM Reader SS …
I think you need to make a distinction between different kinds of monopolies (and maybe use the term a bit more judiciously, since you seem to be calling big companies monopolies just because they are big).
Your experience with cable companies results from one type of monopoly. Cable companies are monopolies because of the government. The government allowed, almost surely incorrectly, cable companies to obtain local monopolies by charging really high franchising fees and imposing substantial costs on companies that wanted to compete in the market. As a result, it was really only feasible to have one company per municipality, with the exception of some really large cities, where you get two competitors in the market. The same is true with electricity, water and until two decades ago, telephone service as well.
Those monopolies are terrible, and they fight tooth and nail to maintain those regulatory barriers to stop competition from springing up against them. They fight innovative companies like Solar City – who started up with differentiated distribution methods as a way to sidestep these regulatory barriers. What was the result? The local electric monopolies did everything they could to stop Solar City from growing. The same is true in the taxi business, where taxi companies fought tooth and nail to stop ride sharing companies like Uber and Lyft from getting traction in their locations. The media, pre Internet, is largely the same. The FCC handed out licenses to operate and they didn’t hand out enough. It resulted in a very concentrated media market that nobody was happy with. Only after people found other ways to reach customers did the media market become competitive.
Again, these are examples of monopolies created by government regulation, and I think it is one reason to be suspect of any government policy that attempts to regulate companies, rather than allow competition to stir up the market in a way that is favorable for consumers. Uber, Lyft, Solar City, Tesla, and others are successful because people LIKED what they had to offer because it was different and better than what these monopolies previously offered. When you have no competition, you don’t really need to have a product or service that people like if they need it (e.g., cable, phones, electricity). Same is true in media when Amazon and Netflix started distributing content (and original content), without the need to get FCC licensing.
I don’t think it is fair to conflate those monopolies with companies like Amazon, Google, Apple and Facebook, which are not definitionally monopolies. Those companies are large because people like their services. If you don’t like an iPhone, go buy one from Samsung. If you don’t like Facebook, use Google Plus. If you don’t like Amazon, there are a host of places to purchase products on-line. If you don’t like Google, use Bing. The fact is, though, that people like their iPhones. They like Facebook. They like the ease of purchasing on Amazon. And Google returns better search results. They have high share of use because their products are better than the competition’s products.
There is quite a bit here. There’s quite a bit that tracks with the evolution of legal scholarship on anti-trust over the last half century. But to respond, I should say first that while I deeply disagree with this distinction, there’s part of it that is true. Google is awesome. It completely revolutionized search and in some key ways created the Internet we know. (Taplin would say in a lot of bad ways, which is right. But in a lot of great ways too.) Gmail is pretty awesome. TPM uses various services from Google. We’re sort of like an assimilated borg. If you removed the implants we likely wouldn’t survive. Amazon has also kind of revolutionized my life. I have immediate access to a kabillion things and I can get them delivered to my apartment quickly. Facebook has brought me back in touch with people I probably never would have spoken to again for the rest of my life.
With these three, I would say Google is the one I would point to as having vast monopoly power to a great degree because they originally invented amazing things. But none of this is incompatible with these companies being monopolies, even if they first came to their position ‘fairly.’ At least at the start.
Where I see this most closely is in the business I work in: journalism and publishing. Here I’m most aware of it where we actually participate in it, with Google. Google particularly has built a vast concentration of power in the digital advertising business which I think few people outside of the advertising and publishing businesses even understand. Both Facebook and Google are working to deepen their hold on and their profit extraction from the publishing industry. I plan on writing more about this soon. Because I have a front row seat on it. For right now, check out Taplin’s book. Whatever the policy tools and correctives we think are appropriate or whether we should as a society take a hands off approach, you need to understand the reality of these companies’ power. Because it is a big, big part of the world we live in and it will get even bigger.
[Disclosure: Taplin’s a friend of mine. But friends of mine write a lot of books. I seldom read non-history books and I almost never recommend them.]
