(Drivebycuriosity) - It seems there is a crusade going on in the US. Politicians right and left, accompanied by powerful bureaucracies, are performing a crusade against Big Tech, the superstar firms which are driving the US economy. The Biden administration - supported by some populist Republican senators - seems to dislike Big Tech and big companies in general. President Biden signed an executive order allegedly aiming to encourage competition in the economy, but giving regulating authorities more power and expands their bureaucracies. Biden also appointed Lina Khan, a lawyer and well known anti-Amazon activist, as chairwoman of the Federal Trade Commission (FTC), a powerful agency who is supposed to enforce U.S. antitrust law and to promote consumer protection. Customers love Big Tech, Biden`s crusaders don´t.
The crusaders claim that the Big Tech companies - Amazon, Apple, Google & Facebook - are monopolies. They also declare that Big Tech is too powerful and that Amazon & Co. are harming the US economy & society. The trustbusters want to restrain Big Tech and maybe even break the big companies apart.
The crusade is based on false claims. Amazon & Co. are not monopolies. They are competing against each other - increasingly so - and against a legion of other firms. The Internet is intensifying competition because it makes it very easy to compare prices and services and to switch to other suppliers. Customers can choose the company
which has the best quality, the best service and/or the lowest price
which constrains the power of Big Tech. Amazon, Google, Apple & Facebook are big because they serve their customers well - otherwise these customers would shop elsewhere.
Amazon´s competition is increasing all the time. The success of the e-commerce pioneer has been
animating a legion of
copycats who also benefit from the ascent of e-commerce (and recently from the Covid-19 pandemic). Amazon is competing against huge traditional retail corporations like Walmart,
Target, Best Buy & Costco who all developed large online departments. There are also pure online companies like Overstock, Wayfair & Etsy who are copying Amazon`s success. They all are getting better
over the time, challenging Amazon more and more. The online sales by Walmart, Target, Best Buy, Wayfair and other competitors are growing faster than Amazon´s, a sign that the competition is getting stronger, not weaker as Biden and his trustbusters claim.
The crusaders dislike Amazon`s marketplace department, where others can sell, and they say
that Amazon treats these third-party-sellers unfair. But Amazon`s quarterly reports show that Amazon’s retail partners grow even faster than Amazon`s own online shops and more than 50% of the sales from Amazon`s website are from third-parties. Many of these sellers became large companies themselves. Obviously these third-party-seller benefit from Amazon, because Amazon´s platform gives them access to markets they could not reach otherwise or with much higher costs.
If these third-party seller would be unhappy with Amazon´s services they could switch to different platforms. Even traditional
retailers like Walmart have now their own third-party seller programs and compete with Amazon’s. The third-party sellers also could chose fast growing online platforms like Etsy & Shopify. Even Facebook (and their daughter Instagram) and
Google developed online platforms where companies can sell their products
& services, independent from Amazon.
Khan and her crusaders ignore that the society is benefiting from Big Tech. Even
in the peak of the pandemic Amazon has been capable to support millions
of customers and was able to deliver a huge amount of goods to everywhere in the
US in very short time. Amazon could fulfill the gargantuan task of
supplying America in a crisis because of her sheer size, a dense network
of fulfillment centers and a lot of experience in stocking goods and in
logistics.
Amazon
saved potentially many lives - especially elderly and
disabled individuals - by making it possible for them to
shelter at home during the current pandemic, shop online and receive necessary goods at their front door in a short time.
Amazon`s
success helped many other companies - including small retailers
(Amazon`s competitors) - to survive the crisis. Amazon offers a platform
for any company (or individual) to sell products online. The e-commerce
giant also supplies logistic services for them, including storage,
packing and transporting. The giant invested last year more than $18 billion to
help independent businesses grow their sales on Amazon. With
the help of Amazon other companies, including even small retailers, are
also able to sell products nationwide - and often globally. Many of these
retailers would not exist without Amazon’s platform.
Today Amazon accounts for less than 1%
of the $25 trillion global retail market and less than 4% of retail in
the U.S. More than 80 U.S. retailers have annual revenues of more than
$1 billion, including Walmart, whose revenues are more than double those
of Amazon. Online sales only account for about 20% of total retail
sales.
The trustbusters also dislike that Amazon`s AWS (Amazon Web Services) department is the market leader in the fast growing cloud business. AWS gives other companies, even small start ups, cheap access to huge computer power and artificial intelligence (machine learning). Amazon cloud enables companies worldwide to process a flood of data created and to deal with organizational problems. AWS - and other
Amazon services - helped many companies to stay in business during the
pandemic and to participate in the recovery. But AWS is
challenged by
Microsoft, Google, IBM, Oracle and other companies who also want to have
a large piece from Amazon´s pie and offer their own cloud services, and Microsoft`s & Google`s cloud businesses are growing even faster than AWS.
The other Big Tech companies aren`t monopolies either. Nobody is forced to buy Apple`s iPhones, iPads, iMacs, MacBooks and services. Customers can purchase similar products &
services from Microsoft, Google, Samsung, Huawei and a lot of other
technology companies. And customers can choose between Apple´s iOS and Google`s Android. Nobody needs to use Google services like search & maps. There are other search engines like Microsoft`s Bing, DuckDuck Go & WolframAlpha and people also can use Apple Maps. The Facebook/Instagram tandem competes against Twitter for users and advertiser dollars.
The trust busters claim that Big Tech companies "have hurt small
businesses and stifled innovation". Really? Did they ever hear of Uber, Lyft,
Arbnb & Pinterest? These so-called unicorns came out of nowhere. They were founded just years
ago and are already valued $80 billion and more (nypost).
Contrary to the claims of the trustbusters Amazon did not stop the growth of new online sellers. The Canadian e-commerce platform Shopify, founded in 2006, reached a market capitalization of about $180 billion, Wayfar, an e-commerce site for home supplies, started in 2002 and reached a market capitalization of around $30 billion and Casper, launched in 2014, who sells mattresses online, became a brand name almost over
night.
Amazon, Facebook & Google are not harming the US economy, quite the opposite. Th Covid-19 pandemic with
lockdowns & quarantines would have been even less bearable without cheap
& fast deliveries by Amazon, useful information provided by Google
search & maps and powerful but affordable devices like iPhones,
iPads & Macbooks. Big Tech`s services - often free - helped people to stay at home in the pandemic and to avoid infections. Big Tech`s saved lives and made the recession less harmful.
The enormous success of Big Tech is
stimulating talents to start new & disrupting (innovative)
businesses (me-too effect) and animates huge venture capital funds to
invest massively in newcomers, fueling competition & innovation. It
seems we are experiencing a Cambrian explosion. According to Benedict Evans, "Tech startup creation has risen by three to four times in the last decade" (ben-evans ). There are so many new
& rising companies which are changing society & economy - on the
coat-tails of Big Tech.
The trustbusters want to throw sand into the gears of successful companies, which are the engine of the US economy. The crusade leads to more bureaucracy which " is the death of any achievement” according to Einstein. New regulations and inquiries reduce the productivity & efficiency of Big Tech companies; they shrink their abilities to further innovate because they are occupying management capacities and are slowing decision processes, making business more complicated and costly. Big Tech`s strategic thinkers
will be preoccupied with new regulations & inquiries and will have
less time & energy for innovations. Instead of thinking about new
products & services for their customers and to improve existing ones
the strategists will have to think about new laws and how to comply
with external bureaucrats and investigations. The attacks of the trustbusters cause huge costs for Big Tech and may force them to hike their prices and/or reduce their services, which would harm the consumers and the US economy. They also will reduce the capabilities to hire new
talents, they also will curb salaries of the employees and translate
into higher prices for the customers. Costs & bureaucratic frictions
create headwinds which will slow growth of innovative & successful
companies and with them the global economy.
Lina Khan, Tim Wu and other professional trustbusters don`t care that Big Tech create a lot benefits for their customers and the society. Khan & Co. want to
implement more bureaucracy and foster their own careers. Politicians, like Republican Senator Josh, are notching up
their career wins by targeting the Big Tech bogeymen (washingtonexaminer).
More regulation encourages corruption because powerful politicians
& bureaucrats can blackmail corporations by threatening them to
regulate them more (ssrn.com).
Politicians from both parties want to profile themselves. Their crusade
gets a lot media attention which might attract potential voters and
impress political leaders. The trust busters also want to gain
more power and acquire more access to tax payer`s money. Lina Khan & Co. seek to expand their budgets and demand more onerous
reporting requirements, so they can expand their offices and hire more
people which in return gives them more political influence, prestige and
higher incomes. "All of
this is coupled with an oversized federal presence for enforcement, from
greater congressional oversight to enhancing the powers of both the
Department of Justice and the Federal Trade Commission through expanded
budgets, more onerous reporting requirements, and an invigorated use of
merger retrospectives" writes Wayne T. Brough (aier.org ).
Washington`s anti-Big-Tech crusade employs thousands of high paid
lawyers - and Biden´s executive order will expand their number. These brigades are burning a lot of tax payers money which could be used
for education or health care. The anti-tech crusade creates a lot of
highly attractive job opportunities for anti-trust lawyers like Lina Khan and
university employees which attracts many young talents. Instead moving
into technology, medical research and other sciences, which would
benefit the
society, these people are wasting their talents in unproductive
skirmishes. As a result the anti-tech crusade will slow down economic
growth and harm everybody who
does not live from the money of the taxpayers
Did Washington´s trust busters ever notice that there is a world outside of
the US?
If the US government curbs the American tech giants ore break them up they
would support the global competitors. China already has fast growing tech giants
like Huawei, Alibaba, Baidu & Tencent; Latin America`s e-commerce
is ruled
by Mercado Libre and Russia´s Internet is dominated by Yandex. The
foreign
giants would be happy to inherit the turf of Google, Amazon & Co.
and to overtake the global markets. America`s anti-tech crusade is
giving China, Russia and other countries a huge advantage.
Antitrust law is designed to protect the consumers but Washington`s trust busters want to create a bureaucratic world as described by Franz Kafka. The uncertainty of political demands, let alone new regulations imposed
through antitrust enforcement threats and action, amounts to an
enormous cost passed directly to American consumers through higher
prices and reduced economic dynamism (insidesources).
Big Tech are serving the consumers, the society, by spurring price
reductions, delivering better quality & innovation. US politicians
are making the world a poorer place by fighting the quartet of Google,
Amazon, Facebook, and Apple that have helped so many Americans make 2020
a little more bearable" ( twitter)
The crusade is harming companies which are popular with their customers - the majority of the Americans because their services are either for free or cheap. Big Tech is doing a great service to the society the US economy and the US consumers. The crusade is irresponsible and moronic.
